What next for HMRC?
The Department needs to be more imaginative about hanging onto its scarce professional resources.
We are now some months beyond the Regional Centre location announcement and plans are being put into effect to begin the transformation. The announcement itself held very few real surprises; most of the locations were entirely predictable and for many the news was a dud – but not for everyone.
It came as a heavy blow to those who have built their careers at a considerable distance from the United Kingdom’s major urban centres. What has shocked them most is not the planned locations, those had an inevitability about them, it is rather that a lot of offices will close sooner than expected and there remains a lack of clarity around how those dates were arrived at. Furthermore, although closure years have been announced, the actual dates themselves have not. ARC understands the need for commercial decisions to remain in confidence but from the point of view of someone sitting in say, Inverness, it looks like the timing of the withdrawal and the lives of people working there are being used as bargaining chips. HMRC must be clearer on that point; in those offices where closure is set for 2016-17 people are asking for certainty about dates and it has come as a surprise to some that one-to-ones will also soon start for people working in offices set down for closure in 2017-18. People are now facing life changing decisions and they want to make plans.It is not at all unreasonable to want answers to those questions and colleagues are asking ARC what support they can we expect from us. The answer to that final point is straightforward. I have given undertakings to our members, here and elsewhere, that we will support them through whatever the changes throw at them.
We know that one-to-ones are to begin in February; that’s just over a month away as I write. Decision makers are being appointed and it doesn’t help that one-to-ones are running ahead of business plans on where work will be located. Our members want to know if it is better for them to look for external options now or to wait for greater clarity on HMRC thinking. It is not at all unreasonable to want answers to those questions and colleagues are asking ARC what support they can we expect from us. The answer to that final point is straightforward. I have given undertakings to our members, here and elsewhere, that we will support them through whatever the changes throw at them. We are working on guidance to support individuals through the one- to-one process and will continue to make the case that no one at the grades we represent should be obliged to leave HMRC if they want to remain. I stand by that undertaking.
What is ARC’s reaction to the future shape of the business and the withdrawal from so many areas?
This is a question I am asked often and I have to say at the outset that HMRC is entitled to organise its business within the envelope set by the Government of the day; it will do that. ARC’s job is to ensure that every decision is taken with eyes wide open and with an understanding of the impact on our members and the communities they serve. We also know well the contractual obligations that exist between our members and their employer and we will hold HMRC to those obligations. But I can’t help but digress for a moment to reflect on my personal experience of many years working as what used to be called a Tax Inspector, a chunk of which was spent in the far north of this island.
The first thing I ask myself is: has the nature of non-compliance in a local context really changed and does the work that is currently being done in SME and Mid-size still need to be undertaken close to the non-compliant, wherever they may be? I cut my teeth in Local Compliance as an investigator many years ago where the lessons were: know your businesses, know your community, get your hands dirty and get out there. Review records on the business premises and understand the trade. Meet the traders and directors and get under the skin of what they do. Don’t be baffled by science, understand the bookkeeping and accounting but keep it simple, because in very many cases the evasion is simple.
I have not seen any real empirical evidence to say that there has been a step change in the nature of evasion and, although the technological capacity to organise and brigade work has improved over the years, fundamentally much of human nature has not. HMRC may reorganise but in many respects the world stays the same. Those who would seek to bend or break the rules will keep trying to do so and if I have learned anything, it is that people who are determined to be non-compliant will keep on looking for ways to do so and will change their behaviours to take advantage of whatever new opportunities come along. But does that mean that HMRC’s BOF plans are going to change? The honest answer is that no, they won’t and so we need to deal with how the Department has set out its stall while HMRC itself has to understand the continuing need for the people who can use the skills and knowledge I have set out above; I will return to how I believe that can be done later.
So what is to be our approach on behalf of ARC Members?
We need to deal with the restructuring plans at every level: At the national level we must ensure that HMRC captures and acts on the knowledge and impact of the decisions on our members and the consequent impact on business delivery. At the Regional level to make the transition work for as many of our members as we can; and at the personal, where we need to support our individual members who are directly affected on a one-to-one basis. This is an enormous task for a small union but we will grasp it.
On top of all of that we need to remind HMRC that they have a suite of tools to help our members, and the businesses they work in, to find the flexibility to get from our current structure to the one that is being put in place. Each ARC member is a highly-skilled professional and collectively we make up a resource that HMRC damages, or casts aside, at its peril.
How scarce and valuable are we and how much does HMRC depend on what we do?
At the summer 2015 budget the Chancellor invested £800 million to pay for additional work to tackle evasion and non-compliance in the tax system. The expected outcome is to deliver an additional £7.2 billion over the next five years; that is a big ask.
It takes four years and more than half a million pounds to train a G7 tax professional.
NAO has identified that on average the cost/yield ratio of compliance is 18:1, that’s about £1m each year from each of our members working in that field.
Both John Manzoni and Matt Hancock have recently recognised the significant pay gap between specialist skills in the public and private sectors. Nationally a Grade 6 or 7 earns about two thirds of their counterpart in the private sector – in London it is a half – and when HMRC recently looked to recruit 95 experienced tax professionals; they got 18. Meanwhile we have promised to increase the number of compliance posts.
HMRC has an aging workforce leading Lin Homer recently to re-commit to the use of partial retirement in areas where key skills are short. Furthermore, in common with other parts of the civil service, consideration is being given to offering short-term posts to those who have already retired.
To exit a Grade 6 or 7 costs more than double what it costs to relocate them and the skills they have are gone.
Against that background HMRC has to think very carefully before it sees any of our members go.
The Nature of the Work we have to do
When I began in the Inland Revenue more than 30 years ago, carbon paper was common and computers were not. Not too many years ago, a Google (actually a googol) was a big number and Clouds delivered rain. Who had heard of Facebook or Twitter five years ago? And less than twelve months ago Yammer entered our vocabulary. I attended BOF 2 last year and, like most people at that time, was struck by the narrowness of imagination being applied to the examples of the taxpayer journey. Given the pace of change over the last few years we can have very little idea of what technology will do for us; other than the fact that change will accelerate. In that context we have to help HMRC see how to make the most of the skills we have.
Last month I wrote about The Way We Work (TW3) – if you haven’t Googled it yet then you really should now – and just before Christmas I met HMRC’s TW3 champion whose job it is to take that work forward. There is no doubt that HMRC is at the forefront of the digital revolution; we are fast becoming a digital department and are racing ahead of much of the rest of the public sector. We are rolling out tablets and taking away workstations at a phenomenal pace and I have to ask; what is the point of a tablet if it is not to allow people to work in a non-traditional way away from their current base?
HMRC works on an accommodation ratio of eight desks for 10 people and we now have a model office in Nottingham based on six for 10. In other words, on any given day 20% to 40% of our people are not in the office. Setting aside sick and annual leave it means that a significant number of people are doing their work somewhere else, and yet the message that keeps being received is that there is to be no home working. We are investing in Cloud technology and the infrastructure to work efficiently everywhere but are still tied to old “bricks and mortar” thinking. We are getting the technology but simply don’t seem capable of grasping how to use it yet.
Squaring the Circle
So let’s go back to the HMRC challenge: another £7 billion in yield over the life of this Government, an aging professional staff profile and a looming retirement bulge, commercial pressure from the private sector siphoning off staff and a developing skills gap, all coupled with a shrinking estate and key skills in the wrong place. Meanwhile the country remains in straightened times and we know that Government needs every penny it can get. Against that background, and knowing that the business will get back £18 for every pound it spends, failing to do all that you can to keep the people who deliver you a return on your investment verges on the criminal. I have what I believe is an elegant and simple solution to that dilemma; do everything in your power to keep those people producing for HMRC by making a modest investment in them and keeping them here. When you consider what it costs to compensate senior professionals exiting the organisation, it makes very good economic sense to allow them to remain.
Some examples: If someone is outwith the limit of Reasonable Daily Travel then pay them DTA or allow them to move house if that is what it takes; at worst the cost of such a move is capped at about £40k. That’s about half the exit cost and on average reflects the return on about a fortnight’s work. Or better still, use the technology HMRC has invested in properly. Allow those specialists who cannot move to work at a distance from their core office. For example, use them as a field force akin to what happens in other areas of HMRC. Subcontract work that has to be done at a distance to those professionals who live at a distance. Or what about policy jobs? We already have people capable of doing all aspects of policy at a distance. I know of colleagues working on policy from the North East who travel to London a few days a week where it is required. They get the continuity they need and the access to fellow professionals combined with a work life balance (and here is a secret: this is not new thinking, it has been happening for years). If policy work, requiring a couple of days a week in London, can be done from Newcastle then it can be done from Norwich.
I worked in Inverness in 1999, literally last century! I remember well wondering what it was that people did on the remote islands and tiny crofts and communities on the North West coast of Scotland, the last great wilderness in Europe. I was pretty sure that not much of it was crofting. The answer was often that they were highly skilled and professional people working in IT, or in the law, on writing, accountancy and a myriad of other technical and professional subjects. TW3 is about capturing the best of both the private and the public sector; if it works then HMRC should use it.
To be honest it is time for HMRC to catch up and to stop the “bricks and mortar thinking”. It is time to join the modern world, so that the technology it is investing in can deliver. The future means concentrating in a smaller estate with access to an educated workforce but, in the meantime, it’s worth remembering that those urban centres do not hold the monopoly on brains. You have invested in the IT, now invest in the people with the skill to do the most with it. And just in case anyone is wondering how to pay for all of this, surely the answer was in the spending review. The Chancellor delivered £1.3bn to transform HMRC, a tiny fraction of that would be all that is required to keep those valuable skills in the organisation.
One-to-ones have to be about all of the options; we know that some of our senior, and eminently able, professionals will be outside of RDT. But that does not mean they should be out of HMRC. Use a little imagination and you will find that the business will be the better for it.