In a report published today, the spending watchdog advised the department to adjust the scope and timings of the project, in order to reduce the risk of service disruption.
HMRC is undergoing a major change programme to reduce the scale and cost of its estate. As of November 2016, HMRC was responsible for one million square metres of buildings across the country, making it the fourth-largest estate in central government. Annual estate running costs stood at £269m in 2015-16, which pays for the accommodation of 58,600 staff, according to the report.
Under the programme, HMRC will transition from 170 widely dispersed offices to 13 regional centres, with an additional four specialist sites and a central London headquarters. This will see 137 offices close by 2021 and involve 38,000 employees moving to the regional centres or leaving the department altogether.
HMRC believes that moving to regional centres will give it more flexibility to modernise, paving the way for a transition to a mainly digital service, as well as reducing costs.
Auditors found that outlays for HMRC have already fallen by 30% since 2010-11. The department expects to reduce this by a further 31% by 2025, with costs over the period estimated to be around £3.2bn.
However, the scale of the savings that HMRC can make is limited by its Private Finance Initiative contract with Mapeley, which does not expire until 2021.
Under this deal, HMRC sold its freehold properties, which amounted to two-thirds of the estate, to Mapeley for £370m, then immediately leased them back, with Mapeley providing facilities management and maintenance services.
Pressure to finalise estate plans with Mapeley before the end of the contract meant compromises were being made over costs and quality, the report found.
In addition, attempting to move or replace too many staff members too quickly, at the same time as delivering 14 other major change programmes, posed a “high risk” of disruption to its business, HMRC admitted, leading it to acknowledge that the original plan was unrealistic.
The watchdog advised HMRC to amend its programme timetable and potentially reconsider the location, size and function of the regional centres.
Commenting on the report, Amyas Morse, head of the NAO, said: “HMRC has improved the handling of its current contract with Mapeley and achieved better outcomes, though significant risks remains.
“Looking ahead, HMRC has acknowledged its original plan for regional centres was unrealistic and is now re-considering the scope and timing of the programme.”
He advised the department to “step back and consider whether this strategy still best supports its wider business transformation and will deliver the sustainable cost saving it set out to achieve in the long run”.