21 May 2004
The man charged with overhauling the merged Inland Revenue and Customs & Excise, David Varney, faces a 'major challenge' in simultaneously slashing the number of jobs under his remit and ensuring the smooth collection of complex tax regimes.
That is the view of the senior civil servants whom Varney will entrust with carrying out his future plans for Her Majesty's Revenue and Customs, as the new department will be known from next year.
The FDA union, which represents 11,000 senior Whitehall managers, welcomed Varney's appointment as the HMRC's executive chair, announced by Chancellor Gordon Brown on May 13.
But FDA general secretary Jonathan Baume warned: 'Merging these two key departments is a major challenge and it is critical that it is undertaken without any disruption to the vital work that they undertake.
'The smooth collection of revenue is essential to the work not only of central government, but of all of Britain's other public services.'
Varney, current chair of private sector telecommunications giant mm02, takes the reins at the new department in September. Previous Revenue chair Sir Nick Montagu retired in March.
Varney said: 'This is one of the biggest delivery jobs in government and I am very excited about the challenge.' One of his first tasks will be to cut 14,000 posts across the two departments – 8,000 from the Revenue, 3,000 from Customs and a further 3,000 as a result of merger efficiencies – as part of the government's wider Whitehall efficiency drive. He must also make 2.5% budget savings at the department by 2008.
This must be achieved during a period when the department will attempt to rebuild reputations following a series of critical reports on the Revenue and on high-profile operational failures at Customs. Business leaders have already expressed concerns over the level of disruption that the merger could cause.
Varney has begun the public relations offensive. He is reported to have turned down an offer to make him one of the highest-paid Whitehall mandarins at a time when many of his staff face job cuts, by refusing a pay package totalling £250,000, and instead settling on a £130,000 basic deal.
If the figures are correct, Varney has accepted a 75% reduction in basic pay. mmO2 paid him £517,000 during 2003.
Latest rules aim to tighten avoidance loopholes
Treasury officials this week stepped up their campaign to ensure that revenues earmarked for the public purse reach the Exchequer, by tightening the rules on tax avoidance schemes and advice provided by accounting firms and lawyers.
Chancellor Gordon Brown released on May 17 draft rules introducing an 'obligation on promoters and users of certain tax avoidance schemes and arrangements to disclose details to the Inland Revenue' within five days of their provision.
The new schemes relate to a variety of remuneration packages and financial instruments and are likely to come into force in August. They will allow Revenue officials to close what they view as unacceptable schemes swiftly.
This follows growing concern within the Treasury and among senior MPs and finance academics that vital public revenue is lost every year to corporations and individuals taking advantage, albeit legally, of loopholes in tax rules to ensure they contribute the bare minimum to the Exchequer.
Classic avoidance schemes targeted include those involving remuneration related to shares, trusts, loans or derivatives. Such 'abuse' is estimated to cost the Exchequer in excess of £30bn per year and the figure could be as high as £85bn. The initiative is another example of Whitehall's drive for improved efficiency and delivery through better use of public finances.
Prem Sikka, head of accounting at Essex University and one of the academics to attack widespread tax avoidance, told Public Finance: 'The Treasury needs to do more – for example, by limiting the use of offshore tax structures – but this sends out a clear message that the government will not tolerate losing vital cash.
'This is a crucial issue for the public services because tightening these loopholes could bring enormous benefits to Whitehall.'
Forensic service votes for June strike
Employees at the Forensic Science Service have voted to strike after being offered a below-inflation pay rise of 1.1% for 2004.
A ballot of more than 1,300 members of the Prospect union at the FSS supported industrial action after management refused to raise their pay offer following a nine-month standoff.
Members voted three to one to walk out on June 2, followed by an overtime ban and work-to-rule practices. This will affect the FFS's seven sites in England and Wales. Members of the Public and Commercial Services union, which represents FSS administration staff, also voted to join the strike.
The FSS, which has been earmarked for privatisation by Home Secretary David Blunkett, is an executive agency of the Home Office and provides forensic services to all police forces across England and Wales.
Prospect general secretary Paul Noon said: 'Management is sending a clear message that [FSS staff] should be refused a reasonable wage. This is a further blow to dedicated public servants who are already demoralised by the home secretary's announcement that he plans to sell off the FSS.'
PFmay2004
