Public Services

NAO backs HMRC's cost-reduction achievements

David Bicknell Published 08 February 2013

Watchdog applauds improved project governance but warns of challenge to make deeper spending reductions without impairing performance


The National Audit Office (NAO) has commended HM Revenue and Customs (HMRC) for maintaining its performance in key strategic areas at the same time as reducing its staff and spending in 2011-12.

In a report published yesterday, the NAO said it acknowledged HMRC's achievements, but warned that it is too early to tell what the long-term impact of cost reduction will be on HMRC's performance.

According to the report , HMRC made £296 million of savings in 2011-12, exceeding its target by 19 per cent. One of the drivers for the savings included reducing the price it paid for IT equipment, such as laptops, and services such as IT support helplines by £74 million.

The challenge for HMRC, the NAO said, will be to make more and deeper reductions over the spending review period while increasing tax revenues, improving customer service and introducing its 'real time information (RTI) project' - required to enable the Department for Work and Pensions to introduce Universal Credit - and changes to benefits and credits.

The NAO pointed out that HMRC has strengthened how it manages its change programme to address both NAO and Public Accounts Committee (PAC) recommendations on governance and contingency arrangements.

NAO had recommended that HMRC ensure its governance arrangements were working effectively to provide early sight of under-delivery and that it identify contingency arrangements. HMRC has improved how it manages its projects as a portfolio by more regularly reprioritising, accelerating or cancelling projects according to need, the NAO said.

It added that HMRC has identified the key projects which enable cost reduction activities and it has identified and apportioned costs to its key, organisation-wide processes. However, the NAO said, it is not yet ready to act on this analysis by identifying further opportunities for cost reduction or performance improvement.

While HMRC continues to strengthen its analysis, its understanding in these areas remains immature, considering that HMRC is almost halfway through the spending review period, the NAO pointed out.

It added that HMRC is now managing its change programme 'robustly', saying it agreed with findings from a Major Projects Authority review of the change programme which found that the programme's management arrangements and committee structure were comprehensive and proportionate to its scale and complexity.

Amyas Morse, head of the National Audit Office, said: "In one year, HMRC has managed to deliver a third of the savings it is required to deliver over the four years of the spending period, at the same time as maintaining performance in key areas such as maintaining tax collection and reducing tax debt.

"HMRC is moving from making tactical efficiency savings and quick wins towards a more strategic approach to managing its resources. We recognise the importance of this change and note that HMRC is addressing PAC and NAO recommendations in the process. The big challenge ahead will be to make more and deeper spending reductions without impairing its performance."

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