HM Revenue and Customs (HMRC) is still grappling with the challenge of “losing people who have good local knowledge”, its chief executive Jon Thompson has said, as he defended the tax authority’s plans to close the vast majority of its local offices over the next five years.
Under its "Building Our Future" programme, HMRC will close 137 offices by 2021, and move its employees into just 13 new regional sites. The move is partly prompted by the end of HMRC’s 20-year PFI deal with the firm Mapeley, and puts the department at the forefront of government organisations making the shift from a broad national presence to regional hubs.
The department expects to lose around 5,000 staff as part of the process, and a recent report by the National Audit Office (NAO) said that HMRC now expected the programme to save £212m by 2026, down significantly from the £499m it originally forecast during the 2015 Spending Review process.
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Appearing before MPs on the Public Accounts Committee (PAC) this week, Thompson predicted that the programme would eventually save the department “significantly more” than the £212m in the NAO’s report, pointing out this figure had been based on “very early” analysis of the plans conducted “well before the maingate business case is approved”.
“You are seeing a project here between the Spending Review bid and a business case to be approved by Treasury ministers,” he said.
Thompson said the latest available HMRC data pointed to savings on “the other side of £300m”, but he acknowledged that the “business disruption, in particular the impact on staff” was one of the “big risks” of the Building Our Future programme.
Although the HMRC chief said the average move facing staff was just 18 miles, he acknowledged that one potential move — from Redruth to the new Bristol regional centre — would mean officials relocating more than 150 miles.
“That is a risk and we have to deal with the corporate memory, losing people who have good local knowledge,” he said. “That will be lost in this, yes, I agree.”
Asked how the department would try to mitigate the risk of a brain drain, Thompson admitted he was “slightly struggling with how we ask people to give us that corporate memory" and said it was "definitely something we have to solve".
He added: “If you've been working in Redruth for 32 years and you're not going to go to Bristol, and meanwhile we're going to recruit more people in Bristol, we have got to find some way in which the knowledge you've built up about how we've worked over the years can be translated into systems or the wisdom of giving it to other people. At the minute we do not have a solution, that I'm aware of, for that risk.”
"Welfare of staff ignored"
The hearing came as PAC published fresh evidence on the Building Our Future programme from two trade unions whose members will be affected by the moves.
The Public and Commercial Services (PCS) union, which represents rank-and-file staff, questioned the rationale for the move, saying it believed the relocation plans were driven not by the need to boost tax collection but “by the need to meet […] spending cuts targets and issues which arise from the non-renewal of the Mapeley PFI estates contract in 2021”.
"We believe that the proposals should be put on halt whilst proper parliamentary and public scrutiny takes place" - PCS Union
They added: “PCS are opposed to the current ‘Building Our Future’ plans and we believe that the proposals should be put on halt whilst proper parliamentary and public scrutiny takes place and whilst meaningful socio-economic impact assessments are conducted to examine the likely effects on local communities of the loss of good quality local jobs.”
Meanwhile, the Association of Revenue and Customs, which represents senior tax officials, said that while it would remain “a critical friend to HMRC”, it agreed that the “main driver” of the programme was the looming end of the Mapeley contract, and warned that the welfare of staff “appears to have been ignored until recently”.
“Engagement with the project is patchy and, in areas where there are few able to travel to the target Regional Centre or transitional site, it is difficult to see how this engagement can be improved,” the union added.
The ARC said it would “continue to push for improvements” to the Building Our Future scheme, and called on the tax authority to “consider further the long term effect on the staff, who remain their most valuable asset”.
"Realistic"
HMRC has also faced some criticism for opting to relocate to major cities in each region, and, during the PAC hearing, committee member Charlie Elphicke asked Thompson whether the department should instead have opted for cheaper sites.
The HMRC chief said the organisation needed to be “realistic” about its plans and consider a broader range of factors, including transport links, whether sites could “support the necessary digital infrastructure we need” and what the changes would “mean for staff in terms of their career paths and so on”.
“We evaluated 42 locations against those eight criteria and that was narrowed down to 15 locations fo the Spending Review and in the end that was further refined to the 13 here,” he said.
“So cost is a factor. But it's not the only factor. We need staff to be able to get there, and we need the digital infrastructure to be able to support them and so on.”
Thompson was also pressed on another of the key questions to emerge from the NAO’s report on the programme — namely, whether HMRC should be embarking on a big relocation “while delivering other major change programmes in parallel”.
The tax authority’s chief described the Building Our Future scheme as “an essential element” of its wider reform plans, which include a major restructuring of its compliance work and the ongoing switch to a digital-first tax system.
But he acknowledged that such a wide-ranging shake-up could prove particularly risky.
“Various commentators have claimed that it’s one of the biggest organisational transformations in Europe,” he said.
“I can certainly tell you it feels pretty enormous from this perspective.
“And there are a number of key interdependencies between these various programme which combine into an all-round very substantial and risky programme, yes, I would acknowledge that.”
According to Thompson, HMRC will submit its final business case for the Building Our Future programme to Treasury ministers in April.