HMRC - the Gradgrind approach to numbers?

Thomas Gradgrind, in Dickens's novel Hard Times, is obsessed with unambiguous facts and numbers. When I asked a press officer at HMRC for an estimate of how many "open cases" it plans to write off, the spokesman replied: “We...

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Thomas Gradgrind, in Dickens's novel Hard Times, is obsessed with unambiguous facts and numbers. 

When I asked a press officer at HMRC for an estimate of how many "open cases" it plans to write off, the spokesman replied: 

“We don’t do rough numbers on anything. We subscribe to the 'Gradgrind School' of thought when it comes to numbers.”

Compare this press officer's comments to those of Dame Lesley Strathie who is Chief Executive and Permanent Secretary of HMRC. She told MPs of the Public Accounts Committee during their inquiry into HMRC’s accounts, including its IT problems and open cases:

“We have made assumptions, based on the test run, about how many of those cases will produce an under or overpayment and how many will just go through as completely balanced and not produce either. 

"Each time we run a batch, we test our assumptions against reality and judge what we think is in the rest of the mix. So 7 million came down to 6 million, came down to 5.9 million, and could even be 5.8 million.”

Hardly the Gradgrind school. 

I mention the press office’s Gradgrind remark as an indication of how difficult it can be to get straight answers to questions put to HMRC. I doubt it’s the fault of the individual press officers. What they tell journalists reflects a culture among HMRC’s hierarchy that resents external challenge. 

It's clear that HMRC has lost its reputation for efficiency: MPs from all parties have, for many years, rightly or wrongly, condemned the organisation for failing to manage the nation’s tax affairs competently. And today’s report of the Public Accounts Committee which examines HMRC’s introduction of the ASPIRE-delivered National Insurance and PAYE Service - NPS IT system - is excoriating. 

Having lost its reputation for efficiency, does HMRC have anything further to lose by telling the whole truth about its open cases? 

Open cases are a big part of HMRC’s work. No private company could operate efficiently with millions of unreconciled customer accounts on its files. An HMRC open case is when taxpayer records cannot be reconciled automatically by the PAYE IT systems at year-end because of a discrepancy, or discrepancies,that need manual intervention. The number of open cases has increased nearly ten fold over the last decade.  

I put my questions to HMRC on its open case plans at the beginning of January. To its credit, the PR department has given me repeated assurances that my questions will be answered. 

But perhaps it won't get around to doing it this tax year. 

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Some excerpts from today's report of the Public Accounts Committee on HMRC are below. The Committee's reports are drafted by the National Audit Office. 


The implementation of the NPS [National Insurance and PAYE Service] was deferred twice and even then did not go smoothly. Problems with the software and issues with data quality delayed the processing of 2008-09 PAYE returns by a year and resulted in large numbers of incorrect tax codes being issued.

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The Department has failed to tackle a backlog of 18 million PAYE cases from 2007-08 and earlier, affecting an estimated 15 million taxpayers. The exact amounts of tax involved are not known, but estimates suggest £1.4 billion of tax was underpaid and there is £3.0 billion of overpaid tax to be refunded. 

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The Department failed to understand the risks of poor quality data, which undermined the effective operation of the NPS. The Department plans to have stabilised the NPS and PAYE processing by 2012, and to have completed the 2008-09 and 2009-10 PAYE reconciliations by January 2011; but a key risk is the 10 million cases still outstanding where there are issues with data quality that require technical or manual intervention. 

We look to the Department to be able to clearly demonstrate that it has resolved systemic data quality issues by the end of 2011 and that NPS is delivering the benefits that it was itended to bring - including improved accuracy and speed of processing, and prompt processing of under and overpayments.

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We do not yet know the full cost of the problems with NPS implementation...The Department should provide a comprehensive statement of the costs of the NPS ...

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The Department re-employed its Acting Chief Information Officer on a three months contract, equivalent to £600,000 per annum, around four times his previous salary. This was after he had been unsuccessful in the competition for the permanent post. The Department should make succession plans for the replacement of senior staff well in advance of their departure dates, particularly when such dates are plainly known in advance due to fixed term contract arrangements, as was the case here.

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Backlog of Open Cases.  By allowing a backlog of 18 million PAYE cases affecting 15 million people to build up, the Department has delayed the repayment of overpaid tax and put at risk the recovery of an estimated £1.4 billion of underpaid tax. It is unacceptable that so many people have had to wait so long for their tax affairs to be resolved. If the Department had processed PAYE promptly, it should have been able to collect nearly all of the estimated £650 million underpaid tax for 2004-05 to 2006-07. The Department should now set a clear operational standard to process all PAYE cases within 12 months of the end of the tax year.

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Problems with data severely disrupted the Annual Coding exercise. In January 2010, the
Department used the NPS to generate the tax codes for 2010-11. The Department expected to issue about 13 million coding notices, 10% more than usual, but found it would be issuing up to 25.8 million notices.

Although the Department knew that it had produced more coding notices than it had predicted, it did not realise that some of these were incorrect or duplicates until customers started to query their codes.

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The Department has undertaken a review of the implementation of the NPS to try to understand what went wrong. It has yet to conclude that review, but attributes most of the problems to the quality of the data and the complexity of delivering a system with significantly higher levels of automation. It also acknowledges that there was insufficient involvement of end users in the design and testing of the system at each stage of its development.

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Dame Lesley (CE of HMRC): ...it is absolutely critical to us that we restore confidence in our payment-on-account system, and the customer’s understanding of it, if we are to restore confidence in HMRC’s reputation...

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