Tuesday, November 20, 2007

HMRC Catastrophe


Once upon a time Chancellors took responsibility


Just imagine that Lloyds TSB had loaded all its customer records onto an unencrypted CD and then lost it. What do you think would happen?

First off, there'd be a huge public outcry, led by the media but with our name and shame politicos tut-tutting loudly from the grandstand.

The share price would tank.

Shareholders would insist that the CEO and half the board resign (that is, if they hadn't already gone on the announcement). No way would the sacking of a departmental manager be enough.

The regulators would send in a hit squad.

Customers would queue round the block to get their money out.

Competitors would say thank you very much, while frantically checking their own procedures to make sure it couldn't happen to them.

And Lloyds TSB would get taken over by a bank with credibility.

Compare and contrast that with the catastrophe at HMRC. 25m Child Benefit records lost, including parents' and children's names, addresses, dates of birth, child benefit and national insurance numbers and in some cases, bank or building society details. Two unencrypted computer CDs, downloaded by an office junior, and sent through the post unregistered. Millions of people exposed to financial fraud and possibly worse.

And yet the Chancellor- who is already presiding over one catastrophe- remains in post. He fires a departmental manager, claiming that the tax department is in fact independent and nothing to do with him. And he remains in post.

And for the next two years there's absolutely no way he can be ousted. Unlike shareholders we can't insist on it, and unlike customers, we can't take our business elsewhere.

And that's really the nub of the issue. Yes, the public clamour may sink Darling, but do we really think that would improve matters?

HMRC- Her Majesty's tax collectors and once the epitome of dependable, responsible government- is fundamentally bust.

As was pointed out in the Commons this afternoon, this is the THIRD such loss of confidential personal records by this dysfunctional department in just over three months. And each time we've been assured procedures were being changed to ensure it couldn't happen again.

Just two weeks ago, we learned of a virtually identical case:

"Around 15,000 Standard Life customers could be at risk of fraud after their personal details were lost by HM Revenue & Customs (HMRC).

The data was on a CD sent from the Revenue office in Newcastle to the company's headquarters in Edinburgh. But the disc containing names, national insurance numbers, dates of birth and pension data never arrived at its intended destination."

We've blogged the massive problems at HMRC many times before (eg see here ). To recap:

  • Tax credit fraud- officially put at around 10% of total payments, or £1.25bn pa (see here)
  • Missing Trader VAT fraud- last officially estimated at up to £1.9bn pa (see previous blogs, eg here and here).
  • Incorrect tax assessments- 1.6m people 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
  • Inadequate accounts- HMRC accounts qualified by NAO for the last five years
  • Hopeless IT systems- over 250 separate "major" computer systems
  • Ramshackle organisation- hundreds of disparate local offices
  • Wildly unrealistic Gershon staff cuts- Pacesetter programme cutting 8,500 jobs soonest
  • Half-baked management- introducing "lean production" methods, originally designed for car manufacturing, and including whacky rules for positioning bananas on desks
  • Rock-bottom staff morale- some offices now suffering annual sick leave averaging 23 days, or nearly five weeks pa (the private sector average is just 6 days pa); so many people have left, some offices are 25% staffed by temporary contractors

HMRC is now a complete and utter shambles.

Just like the Home Office.

Just like DEFRA.

And just like any number of other government departments.

How dare these people tell us how to order our lives. They are incompetent, irresponsible, and treat our interests with utter contempt. Why should we ever trust them with anything important, like our personal financial information?

Surely nobody will now want to go ahead with that crazy and insecure £20bn ID cards project.

And if you've been claiming Child Benefit in the last five years, our strong advice is to switch your bank account.


PS Darling tried to suggest in the Commons that he somehow isn't responsible for HMRC. According to him, HMRC is "operationally independent of government". This takes us right back to Tesco Government, and it is total rubbish. As the Treasury website records, Darling's junior Jane Kennedy, Financial Secretary to the Treasury, has "overall responsibility for HM Revenue and Customs". Maybe Darling should read it.

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