£1.1bn less tax recouped after HM Revenue and Customs job cuts

 

Job cuts among revenue officials meant £1.1 billion less unpaid tax was recouped than could have been, a public spending watchdog said.

The influential public accounts committee praised an HM Revenue and Customs crackdown which has brought in an extra £4.32 billion in five years - 11 times what it cost.

But it said the decision to axe 3,300 posts at the same time appeared to have undermined its effectiveness and urged caution over further reductions.

"We are not convinced that the decision to reduce staff numbers working in this area in the past represented value for money for the taxpayer," it said.

HMRC failed to be "sufficiently clear about the marginal rate of return it could achieve from different levels of spending" in budget discussions, it suggested.

The MPs welcomed HMRC's move to reinvest £917 million of the savings in boosting staff numbers to step up its enforcement operations but said lessons had to be learned from the previous experience and benefits better calculated.

"It is essential to take on board the lessons so far if the return on this new investment is to be maximised," the Labour chair of the committee Margaret Hodge said.

"In particular the department needs to be much clearer about the marginal rate of return it could achieve from different levels of spending."

Mark Serwotka, general secretary of the Public and Commercial Services union, said: "The effort to ensure people pay the taxes they owe will continue to be seriously undermined by job cuts.

"The case for investment in our public services could not be starker or more obvious than it is in HMRC, yet the Government is actually planning to cut 10,000 more jobs from the department in the coming years."

The committee also expressed shock today at reports that HMRC officials authorised tax avoidance by senior public sector employees.

MPs said it was "incredible that the department could under any circumstances advise that this was acceptable behaviour for a public servant".

The criticisms by the influential Commons public accounts committee came as the Government launched a crackdown on off-payroll salaries.

A review identified more than 2,400 cases of public sector staff being employed indirectly - some potentially avoiding full income tax for a decade or more.

Since January, 350 such contracts have been ended.

In a report into HMRC's tax compliance regime, the committee said it had been inconsistent in deciding on the appropriateness of allowing such arrangements.

"For example, the department ruled in one public sector case that the use of a managed service company (MSC) was an allowable exception, even though a leading accountancy firm had advised the individual concerned that it was not," it said.

"The department should have a clear and coherent approach to all forms of tax avoidance."

An HMRC spokeswoman said: "PSCs (personal service companies) can be legitimate commercial arrangements, which means we have to consider the details of the arrangement in each individual case.

"However, we are very clear that the use of MSCs are only for the purposes of tax avoidance and are always unacceptable which is why Parliament brought in legislation to prevent this tax avoidance.

"Where PSCs are used purely as tax avoidance vehicles it is always unacceptable and when we have evidence it's happening we stop it."

The HMRC spokeswoman said: "The Government made £917 million available to us in 2010 to target avoidance, evasion and fraud.

"This has been used in part to boost the number of jobs in our enforcement and compliance work.

"The development of e-services, allowing us to move staff into compliance roles, together with new computer systems such as Connect and more effective use of risk profiling, has resulted in a doubling of our compliance take since 2005 to £13.9 billion last year.

"We are set to increase this by a further £7 billion a year by 2014."

The HMRC spokeswoman said: "The Government made £917 million available to us in 2010 to target avoidance, evasion and fraud.

"This has been used in part to boost the number of jobs in our enforcement and compliance work.

"The development of e-services, allowing us to move staff into compliance roles, together with new computer systems such as Connect and more effective use of risk profiling, has resulted in a doubling of our compliance take since 2005 to £13.9 billion last year.

"We are set to increase this by a further £7 billion a year by 2014."

The Association of Revenue and Customs (ARC), the union representing senior HMRC staff, said the report did not go far enough.

President Gareth Hills said: "The PAC is right to say that job losses at HMRC undermine its ability to collect tax. But it is a shame that PAC has not gone further and echoed the consistent and credible arguments put forward by ARC throughout its Defeat The Deficit campaign about the need to invest in HMRC to collect more tax.

"The PAC report says that a further £1.1 billion taxes could have been collected but for job losses at HMRC. ARC has shown that investing in professional staff could generate many times that amount - money desperately needed to ease the pain of deficit reduction and to encourage much needed growth."

PA

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
An asteroid is set to pass so close to Earth it will be visible with binoculars
news
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Austen Lloyd: Private Client Solicitor - Oxford

Excellent Salary : Austen Lloyd: OXFORD - REGIONAL FIRM - An excellent opportu...

Austen Lloyd: Clinical Negligence Associate / Partner - Bristol

Super Package: Austen Lloyd: BRISTOL - SENIOR CLINICAL NEGLIGENCE - An outstan...

Recruitment Genius: Sales Consultant - Solar Energy - OTE £50,000

£15000 - £50000 per annum: Recruitment Genius: Fantastic opportunities are ava...

Recruitment Genius: Compute Engineer

Negotiable: Recruitment Genius: A Compute Engineer is required to join a globa...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project