HM Revenue and Customs permanent secretary John-Paul Marks has told MPs that he does not expect increased use of artificial intelligence to lead to headcount reductions at the department over the coming years.
Marks’s comments came at a session of parliament’s Treasury Select Committee earlier this week, when the perm sec was asked about HMRC’s use of technology and recruitment plans.
He told MPs that he expects HMRC to be “broadly the same size in 2030 as we are today”, with AI increasingly deployed to assist the work of officials rather than to replace them and some staff retraining.
In July last year, the Cabinet Office’s annual statistics for the civil service showed HMRC was the-third largest department in government, trailing only the Department for Work and Pensions and the Ministry of Justice.
According to its most recent transparency data, HMRC had a full-time-equivalent headcount of 66,952 – including non-payroll staff – in November. The Valuation Office Agency, which is being merged into HMRC from April, had a further 4,313 FTEs.
Speaking to the Treasury Committee on Tuesday, HMRC perm-sec Marks said AI is already embedded into the department’s risking tools and data to enable the organisation to target compliance risks effectively.
“We think that we can use AI to augment our agent experience and improve outcomes,” he said. “The example which we’ve been testing at the moment is around telephony summarisation. As I am taking the call, the system is summarising for me what the call outcome was and the next-best step. So it’s still led by the agent, but augmented by AI.”
Marks said that while AI offered potential for savings, there is no projected downturn in HMRC headcount over the coming five years.
“As an organisation overall, we are broadly the same size in 2030 as we are today,” he said. “So we onboard a lot into our front line for compliance and debt. A bit more now for customs and valuation.
“At the same time, we have quite stretching efficiency targets to reduce the size of our core operation to balance the books. So there will be both on-boarding of new resources and retraining of capacity within the organisation.”
Marks added: “Of course, AI offers efficiency, but for those colleagues working in the organisation, we think it augments their experience rather than replaces them.”
As part of last year’s Spending Review, HMRC agreed to cut its administration costs by 17% by 2029-30. It also agreed to deliver overall resource-spending efficiencies of 13.1% by 2028-29 as part of the multi-year settlement.
Earlier this week, the Institute for Government think tank predicted that the over-arching efficiencies targets that Whitehall departments have signed up to could require 40,000 job cuts.
Perm sec acknowledges recruitment challenges
In recent years, HMRC has been awarded additional funding to recruit thousands of extra staff, including plans for 5,000 new compliance staff and 1,800 additional debt staff over the current parliament.
Marks said that measures introduced at November’s Autumn Budget, including the new high-value Council Tax surcharge for homes worth more than £2m and the end of tax exemption for “low value” imports, would result in the recruitment of around 1,000 extra staff.
At Tuesday’s session, the HMRC perm sec was asked about progress with recruitment for the roles.
Marks said HMRC’s headcount had increased by “just over 2,000” in the current financial year and that the department had established a “Compliance Academy” for training and is ahead of schedule for its “compliance build”.
However he acknowledged that hiring new compliance staff was a challenge.
“I have to be honest, we’re having to work hard across all regions of the UK to fill our recruitment,” he said. “We are managing to do it, but we’re not doing it by a big margin, if I can be transparent about that.”
Committee chair Dame Meg Hillier asked Marks what the issues appeared to be.
Marks replied: “It’s quite high volume. It’s a commitment to come in and take on tax training and go through our training process. I think we’ve just got to keep making sure we’re looking at our recruitment process, we’re reaching all corners of the labour market and being an attractive employer.”
Marks said there was a need to “keep up velocity” in any situation where departments have to “climb a mountain on capacity-build”. He said there had been similar issues at the Department for Work and Pensions with its programme to recruit 13,500 work coaches five years ago.
Between April 2019 and the end of 2021, Marks was director general for work and health services at DWP. After the first wave of the Covid pandemic, a major task for that department was the recruitment of work coaches to help people get back to work.
Marks said the recruitment for the new roles that will result from November’s Budget would not get up to full speed for another two years.
“I know that 1,000 sounds a lot, but that’s over the SR period,” he said. “I think it peaks in 2027-28, 2028-29. Those are the two peak years.”
He added that the Customs and Excise roles dealing with duty on low-value imports would be at AO and EO grades – the two lowest in the civil service – and would be concerned with customer-service support as the new system goes live.