A Public Accounts Committee report published today slammed HMRC for its previous failures, which involved huge delays for customers phoning its helplines.
This was the consequence of a major round of job cuts undertaken by the department after it was told to reduce its spend by the government.
The committee expressed concerns about the future plans of the tax-collection organisation to reduce the costs of these services by a third in the next five years.
Customer service levels collapsed in 2014-15 and early 2015-16 due to HMRC underestimating demand for its telephone services and cutting 5,600 staff.
During this period, average waiting times tripled compared to previous levels, and only recovered when 2,400 new staff were recruited.
However, the 2015 Spending Review commits HMRC to further reduce costs by 2019-20, which it plans to do by digitising its services.
In the report, the committee said that during the previous round of staff redundancies, HMRC did not consider the costs to customers of “providing a sub-standard service”.
It advises HMRC to clarify its understanding of customer behavior to estimate how demand will change. It must also be confident that it can maintain service standards, the PAC said.
The committee found that for every £1 saved by HMRC by cutting telephone services staff, the additional waiting times and call charges cost customers £4.
It suggested the government should carefully estimate the financial costs of people using its services, and use this information when allocating resources. An optimal balance needed to be struck between the government’s needs and that of customers.
Meg Hillier, chair of the PAC, said: “The prospect of HMRC making further cuts to spending on customer service will chill the blood of many taxpayers.
“HMRC’s recent performance in this area has been appalling for long periods and left members of the public counting the cost in time and money.”
The long waiting times and costs to customers sent a “dismal message” to small businesses, the self-employed, and people simply seeking advice, she said.
Hillier also stressed that government spending targets “must not come through ill-conceived measures that effectively penalise the people departments are intended to serve”.
She observed that HMRC was now aiming to reduce call waiting times to five minutes or less, and said “we will be holding senior officials to account on this target”.
Also in the report was an analysis of the tax office’s current plans to change its IT contract with Capgemini, which provides its major tax collection systems.
This has been the government’s largest IT contract and accounted for 84% of the HMRC’s total spend on technology between 2006 and 2014.
The committee agreed that the HMRC was in a better place to make this significant change than it was in 2015, but stressed the next two years would be crucial in delivering it successfully.
