ICAS raises concerns about potential impact of Chancellor’s announcement to cap civil service numbers

Although not a fiscal event, Chancellor Jeremy Hunt addressed the Conservative party conference in Manchester on 2 October 2023.

Aside from the party political aspects of his speech, we note the announcement to reduce the civil service numbers to their pre-pandemic levels. This is expected to save £1 billion a year.

It’s not clear the extent to which the policy will impact on HMRC. However, our members are increasingly telling us that they face severe delays and frustration when dealing with HMRC. Poor HMRC service levels are having a significant impact on taxpayers and businesses. And in his party conference speech, the Chancellor gave no reassurance that this would change. In fact, if HMRC is impacted and there is not an accompanied investment in technology, this is likely to exacerbate problems.

Our members are generally willing to use HMRC’s digital services, indeed this would be preferable to spending hours waiting in queues for telephone helplines. ICAS believes that digital facilities should be accessible to all, on the terms that they want. As a means of encouraging the uptake of HMRC’s digital services, we would suggest that these need to be so good that everyone wants to use them.

We are supportive of taxpayers and their agents being able to deal with more matters electronically with HMRC. However, our members regularly provide us with feedback that HMRC’s current electronic services are inadequate and don’t work as they should, with taxpayers and/or their agent are currently required to revert to paper based communications. There have been longstanding issues with the Trust Registration Service, Employment Related Securities reporting and Capital Gains Tax returns for the disposal of residential property.

An investment in HMRC’s existing digital services will help ensure that taxpayers and their agents can have confidence in those systems as part of a move towards a more ‘digital first’ approach. More effective digital services, which take account of the needs of both taxpayers and their agents, could be a positive step forward. However, lessons need to be learned from the rollout of the VAT registration service, which resulted in significant delays in registration and a reduction in service levels. In some cases, the inadequacy of the VAT registration service has resulted in some of our members reverting to paper based forms, which isn’t desirable.

So, while an ever growing civil service may not deliver value for money for taxpayers, reducing HMRC staffing (if this is the outcome of the Chancellor’s announcement) without investing in technology would result in a further reduction to the service our members and the public are receiving. The recent reduction in the service levels on the agent dedicated line is an example where HMRC has cut back its services in view of reduced resources. Without the correct safeguards, the Chancellor’s party conference announcement has the potential to result in other cutbacks impacting the efficient operation of the tax system.