The impact of cuts on Revenue & Customs’ ability to collect tax and support the government’s Universal Credit programme are uncertain, auditors warned today.
The National Audit Office’s report on R&C’s savings plans found the department had maintained its performance in 2011/12 while reducing its costs by £296m. This amount is almost a third of the total savings R&C needs to make over the government’s Comprehensive Spending Review period, which ends in 2014/15.Revenue & Customs: progress on reducing costs concluded this meant the agency had improved its value for money,
However, auditors said it was ‘too early to tell what the long-term impact of cost reduction will be on R&C’s performance’. The department has a further £585m in cuts to find while also meeting targets to collect more tax. It aims to collect an additional £7bn and improve customer service.
Auditors also warned that the savings target could hit changes needed to support the introduction of the Universal Credit, a merger of government benefits. In particular, the department is introducing real-time information into its tax system. This ‘major technology change’ would allow employers to report their employees’ income tax and National Insurance deductions as they pay them rather than at the year-end, to provide information for the Universal Credit programme.
‘It will be challenging for R&C to make more and deeper reductions and maintain customer service, especially as it introduces real-time information,’ the report warned.
The IT system is also unlikely to make all the savings originally planned.
R&C is spending £376m on real-time information and other projects across the four-year Spending Review period. The improvements are intended to bring ‘sustainable savings’ of £411m a year by 2014/15, as a result of fewer staff and greater efficiency. However, this estimate is £162m less than when the NAO last examined the plan in July 2011.
Although this is partly because R&C’s forecasts are now more refined and realistic, auditors said, it is also because some projects have taken longer than expected to start.
This reduction in planned savings means that R&C needs to find £66m more than originally planned from other areas. As of July 2012, it had not fully worked out where these would come from.
Auditor general Amyas Morse said that R&C had managed to deliver a third of its savings total in one year, ‘at the same time as maintaining performance in key areas such as maintaining tax collection and reducing tax debt’.
He added: ‘Revenue & Customs is moving from making tactical efficiency savings and quick wins towards a more strategic approach to managing its resources. We recognise the importance of this change and note that R&C is addressing Public Accounts Committee and NAO recommendations in the process. The big challenge ahead will be to make more and deeper spending reductions without impairing its performance.’
Responding to the report, an R&C spokesman said: ‘We are now taking a more strategic approach to managing our resources, resulting in us answering phone calls faster and turning post around more quickly than ever before.
‘The NAO have recognised how well R&C manages change, and how cost reduction and reinvestment plans are aligned with long-term plans to maximise revenues, and improve customer service.’
