PAC attacks HMRC's plans for regional office restructure
HMRC’s plans to shut down most of its local offices and move staff into large regional hubs has been attacked by the public accounts committee (PAC) as unlikely to save as much money as predicted and is likely to have a negative impact on customer service levels
28 Apr 2017
PAC’s inquiry has established that HMRC does not yet have a final business case for its estate strategy, which is scheduled to take place over the next ten years and will see a move from a current estate of 170 offices to 13 regional centres, supplemented by four specialist sites and a headquarters in central London.
The committee’s report points out that HMRC’s forecasts of the costs and savings from implementing its estate strategy have fluctuated and remain ‘fluid’. In HMRC’s spending review bid in November 2015, it forecast over the next 10 years a total cost of £2.65bn, and cumulative efficiency savings of £499m in running its estate.
In September 2016, HMRC updated those figures to show a 22% rise in total costs to £3.24bn, and reduced its forecast savings to £212m. HMRC has now told PAC that it has refined its forecasts and is expecting costs to be £2.8bn, or £150m over the original estimate, while cumulative savings are put at £300m and there is an expectation that the department will save £80m a year thereafter.
The PAC report notes: ‘While HMRC was reasonably confident that these figures were more realistic, it highlighted that its forecasts were still fluid. It maintained that it would consider the programme worth doing, even if it made no savings.’
However, the committee is concerned that the move carries a high risk of disrupting services, because staff will leave rather than have a long commute to work. Around 38,000 of HMRC’s employees will need to move to a different office when their workplace closes.
HMRC expects around 5,000 will leave because of its relocation programme. PAC’s inquiry found that while it accepts that this loss of staff will drain corporate memory and expertise HMRC does not yet have a solution, and warned that it will take time to recruit and train staff in the new regional centres.
The report states: ‘HMRC has not demonstrated how moving to major city centre locations will achieve its intended benefits, given its strategy is to transform its services to mainly digital channels.
‘It has not adequately explained why offices in such expensive locations are necessary to serve customers better or increase the efficiency and effectiveness of its tax compliance work.
‘For example, HMRC has chosen to locate its Yorkshire office in Leeds, despite being more expensive than Bradford, where many HMRC staff already work.’
PAC is critical of HMRC’s existing 20-year outsourced contract for its estate, which it says was too large and left the department with no control, so that it ended up with properties which were too big for its needs.
However, it points out that HMRC has gone on to sign lease agreements in Croydon and Bristol, without any break clauses, for its first two regional centres. But it does not know if these properties will match its needs beyond 2026. It has negotiated conditions which would enable it to sublet any surplus space to other government departments but has no further flexibility in the leases, and the committee warns that changes in technology or practice could leave HMRC with surplus capacity once more.
HMRC orginally planned to have 8,000 of its staff at a Stratford regional centre however, HMRC has confirmed its plan has changed and now expects to have 5,500 but has not made any final decision on the location for east London and told PAC that the site for this regional centre would be the last decision HMRC would make.
MPs expressed concerns about the impact on local economies of closing down offices. PAC says the government property unit is developing a network of 200 ‘mini hubs’ and says HMRC has failed to investigate whether it could make use of some of these as a way of retaining experienced staff or for maintaining a physical presence in some communities.
The report concluded: ‘We do not believe that it will save as much money as HMRC has predicted and we are concerned that it has not thought through all the negative costs to the wider economy of its approach and the impact on local employment.
‘The fact that it has already changed its plans to set up a large office in Stratford, east London demonstrates that.’
The committee has asked HMRC to write by the end of June 2017 identifying the costs and benefits of the options it has considered in its revised business case, the risks it will need to manage, and what contingency plans it has in place.
A spokesman for HMRC said: ‘We are considering the committee’s report and will respond in due course.’
PAC’s report The HMRC Estate is here.