HMRC – Efficiency or ‘Stealth Cuts’?

In the ‘2004 Spending Review: final report on the efficiency programme’ (published Nov last year) the government claimed that the Chancellor’s departments – including the mammoth HM Revenue & Customs (HMRC) had allegedly ‘saved’ £680m (against a target of £550m) and cut 16,000 jobs (mostly from HMRC).

This might sound quite impressive, until you look at some other rather disturbing news…..Last week however the Public Accounts Committee had reported that over the past 4 years HMRC had overpaid £7.3bn in tax credits and had written off, or was unlikely to be able to recover, a total of £2.8bn. The net loss to the Treasury – minus efficiency savings – was thus over £2bn. Hardly ‘efficient’ by anyone’s estimate.

And it might just be that the one had something to do with the other.

Might it just be that  efficiency savings, including 16,000 net cuts jobs and a ruthless set of so-called ‘lean’ production technique reforms might have been at least part of the cause of the overpayments problem – and the £2bn underpayments of tax credits to the most needy too?

“Some claimants” the PAC reported “have found dealing with the Department sufficiently difficult not to claim the tax credits to which they are entitled.” Anything to do with staff shortages, perhaps? The PAc did not look at the relationship between the tax-credit fiasco and the HMRC’s efficiency programme, but it seems highly unlikely there is not a relationship between the two, even if other policy errors were also involved (as they certainly were).

This may be an example of what Peter Riddle has called ‘stealth cuts’ – efficiency “savings” that really just reduce the levels of public services. We can probably expect many more as the public finances worsen.

In this particular case it is even worse than ‘stealth cuts’, because HMRC has not only provided appallingly bad service to the most vulnerable groups in society, but it has also managed to lose the Treasury billions in the process.


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