Friday, July 06, 2007

HMRC Turkey Factory

Lean and mean
Look, let's be clear: nobody likes paying tax, certainly not Tyler. But if we have to, then at least our tax collectors should be competent. We honest schmucks get very upset when the collectors turn out to be taking more than they should, or when their incompetence is letting other less fastidious citizens off the hook. That means the rest of us have to pay even more to make up the shortfall.

So I've been grinding my teeth reading today's National Audit Office report on HMRC's accuracy (or rather inaccuracy) in processing income tax.

The bottom line is that in 2006-07, 1.6m people were over or undercharged income tax as a result of processing errors at HMRC. The total sum involved was £0.6bn, or around 400 quid each. And even after corrections (with the bulk of errors only ever picked up by beady-eyed taxpayers themselves), a million people still ended up paying the wrong amounts.

And remember, this is just one part of a much bigger problem. According to their own internal auditors (reported here):

"HMRC may not be pursuing some £1 billion of income tax due, taxpayers may have overpaid around £500 million and consequently 5.7 million taxpayers may not be paying the right amount of tax. These figures suggest an overall net under collection of tax revenue of some 0.5 per cent of the £114 billion collected through PAYE in 2005-06."

Added to that we've got the losses from wholesale error and fraud in the Tax Credit system, officially put at around 10% of total payments, or £1.25bn pa (see here).

Not forgetting of course, the losses on so-called Missing Trader VAT fraud, last officially estimated at up to £1.9bn pa (see previous blogs, eg here and here).

Tot it all up, and this particular seam of incompetence is running at £5bn pa.

How can such a shocking situation have arisen? Well, for one thing, although they perform a key function of Big Government, HMRC actually operates through a ramshackle organisation with hundreds of disparate local offices and over 250 separate "major" computer systems. For another, Gordon Brown has made the tax system far more complex- far too complex for even his own tax collectors.

And then there's the inevitable Gershon-style "efficiency" programme, with its top down mandated cuts. In HMRC's case the programme is called Pacemaker... sorry, Pacesetter, and it's aimed at cutting 8,500 jobs soonest. The mandarins reckon they will achieve that through better IT sytems (haven't we heard that before somewhere?), and through the introduction of "lean production" methods.

Lean production?

You may have thought lean production was confined to Bernard Matthews turkey factories, but you'd be wrong. It was invented to manufacture Toyotas, so the mandarins reckon it must be just what they need to manufacture tax demands.

Actually, of course, what they're attempting isn't lean production in the post-modernist 21st Century Toyota sense at all, but good old mass production Henry Ford style. They're simply trying to standardise tasks, breaking them down so they can be performed by a small number of cheap deskilled drudges.

As taxpayers we ought to be saying hurrah. We could do with saving the money. But needless to say, the implementation of this brilliant wheeze is proving a tad trickier than drawing up the original fag packet idea.

To start with, the whole thing has been dropped on the workforce from on high. And for some reason, they don't like it: staff morale has plummeted to rock bottom. According to the NAO (para 3.17):

"The staff described themselves as demoralised, bored, deskilled and felt that they were not getting the necessary training to do a quality job processing a tax that is very complex."

Staff are going sick in droves, with some areas now suffering annual sick leave averaging 23 days, or nearly five weeks pa (the private sector average is just 6 days pa). And so many people have left, that some offices are 25% staffed by temporary contractors. Worse still, staff are simply not cooperating, with frustrated office-Hitler managers resorting to desperate last-ditch measures like the notorious, and always inflamatory, Clear Desk Policy (see this blog).

And the results? According to the NAO (para 3.15):

"The introduction of Lean in individual offices was accompanied by a slight or no improvement in monthly accuracy rates in Self Assessment. On PAYE [the vast bulk of income tax] it was accompanied by a significant reduction in monthly accuracy rates."

So the net result so far is that things have got worse.
And our guess is that we ain't seen nothing yet. British workers were never much good at Fordist mass production, and there's no reason whatsoever to think it will be any different with tax returns.

No, we all know there's only one real solution. The only sure way of tackling this mess is to drastically simplify the tax system. Oh, and cut the overall level of taxes so there's less incentive to cheat.
What's that? With our dysfunctional first-past-the-post centrist political system, it ain't never gonna happen?

Don't be so defeatist.

You'll be telling me next Bernard Matthews' Twizzlers will never fly.


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