Helplines U-turn prompted by stakeholder reaction, HMRC boss tells MPs

The exchanges took place at a House of Commons Treasury Committee session on 24 April, at which MPs questioned HMRC bosses, including chief executive and First Permanent Secretary, Jim Harra, on a range of issues including the high income child benefit charge and R&D tax credits, as well as customer service and the helpline closure U-turn.

This preliminary report on the session focuses on some of the issues raised around the helpline closures and HMRC’s digital strategy. 

Helpline closure March announcement and U-turn

Dame Harriet Baldwin (Con), Chair of the Treasury Committee, began the session by asking whether the decision to switch HMRC’s helpline on the 19 March was purely an ‘operational decision’ and had not been presented to ministers.

Jim Harra, HMRC’s Permanent Secretary, said that the decision was shared with ministers. He explained that HMRC decided to close the helpline based on the results of last year’s trial helpline closures.

Baldwin asked which stakeholders had caused HMRC to reverse their decision on 20 March. Harra responded that HMRC received an ‘immediate’ reaction from a range of stakeholders, including tax professional bodies, that expressed concern that, despite the trials last year, “we were moving too fast”. He added that the stakeholders did not have the assurance they needed that HMRC would be able to provide services to those customers who could not do things online.

Baldwin asked whether HMRC had run this decision with their stakeholder before 19 March. Harra confirmed that that HMRC informed professional bodies. “We knew that they would have preferred us not to proceed with it. Frankly, they would prefer us not to make these significant changes at all but to be resourced to do things in the way that we have always done them.” He believed that HMRC had done the necessary ‘work’ to demonstrate that these changes could be implemented ‘safely’.

The chair asked Harra who the “new stakeholders” who contacted them following the helpline's closure announcement were. Harra clarified that there were not new stakeholders, it was that there was “a strength of feeling from stakeholders that we had not been expecting”.

Asked about HMRC’s board’s involvement in the U-turn decision, Dame Jayne-Anne Gadhia, Lead Non-Executive Director at HMRC, said that the board reviewed the trial results and found them to be ‘strong’. She suggested that the board was supportive of the decision, but was not aware of the exact date of the implementation. Gadhia also said that the board found out about HMRC’s “change of heart” from the newspapers and she spoke to Harra after that. She said the board had not heard directly from stakeholders.

Asked whether the Chancellor or Prime Minister influenced the decision to cancel the helpline closures, Harra said that ministers “conveyed their concerns”. He had spoken with his departmental minister.

Harra said that ministers expressed their concern about the “strength of the reaction and about the fact that the reaction was not just political reaction, it was actually a genuine concern about how this was all going to work. We quickly agreed that the right thing to do was not to proceed with it and to listen to the concerns to make sure that we had addressed them or, if we had not, to take them on board and replan. That is why we decided not to proceed.”

Moving forward / lessons from March

Asked whether HMRC’s strategy would remain the same, Harra said that the strategy is still “digital first”. However, he explained, HMRC would not be proceeding with the three changes announced on 19 March. Instead they will engage with stakeholders further on how “we can safely implement our digital first strategy. That may mean doing it more slowly than we originally planned.”

Baldwin suggested that the stakeholders’ concerns may remain unchanged, to which Harra replied: “A lesson for us is that we did an extensive evaluation of the two trials, but we only published that on 19 March so people externally had not had the opportunity to absorb that in the same way as we had and ministers had”. He reiterated that they would now implement their strategy more “slowly than we said we would on 19 March”.

Later in the session Harra elaborated on this, suggesting that “some of the speed of the stakeholder reaction indicates that they did not have the time to digest the evaluation that we had published. So in the department we have to reflect on not just the pace at which we want to move, but how effectively we are engaging with stakeholders and explaining and informing.”

Dame Angela Eagle (Lab) questioned whether the adverse reaction to their 19 March announcement had ‘knocked off’ HMRC's strategy. Harra responded that while their strategy remains intact, the “implementation course” has been disrupted. He acknowledged a short-term impact on the services and emphasised the need to replan.

Harra emphasised that HMRC will continue to invest ‘heavily’ in digital services and encourage customers to use them as their first port of call if they possibly can.

Responding to Conservative MP Stephen Hammond Harra emphasised that the helpline closures “are cancelled”. However he did not rule out returning to this: “It is part of implementing our strategy and we do think it was effective last year. But we are not just pausing to try again; we have stopped those changes, and we will reflect with stakeholders and we will replan the implementation of our strategy. That may or may not include this type of measure in the future.”

Service levels and funding

Drew Hendry (SNP) enquired about HMRC's current service delivery. Harra responded by outlining the pressures that HMRC is facing, arguing that while the customer base and demand are growing, the resources available to manage them are ‘diminishing’. “Over the spending review 2021 period—from 1 April 2022 to the end of the current financial year—we expect to have to reduce the size of our customer service group by about 5,000 staff,” he told the MPs.

Hendry asked about the effects of not implementing the changes announced on 19 March. Harra replied that “the key pressure point is in our helpline service, where we are giving a service to customers well below the service standard that we want to give them, whether that be wait times or whether that be the proportion of calls that succeed in getting answered by an adviser”. He suggested that now a lower proportion of those calls is being answered than “would have been the case if we’d been able to implement these changes”.

Harra emphasised that HMRC had to ‘re-plan’ to get service levels back up as high as it could. Asked about HMRC’s backup plans, he responded that the only alternative plan has to be to deploy additional resources on the helplines. He acknowledged that HMRC currently does not have the funding to do so, however, he reported that he had had ‘constructive’ discussions with ministers. “The question is whether that involves reprioritising what the department does—so reprioritising from something else—or whether we can get additional funding for that additional resource. That is what we are in discussion with ministers about.”

Hendry asked Harra if he was worried that things would get ‘worse’, in particular if they did not receive additional funding. Harra answered that, “in the short term I think that we are in for a very difficult first quarter. I would hope that going into the second quarter that we will be able to make improvements with additional resources as well as continuing to push our digital first strategy at every opportunity.”

Angela Eagle asked if, because of the U-turn, HMRC is expecting customer service to ‘go down’ in the short term. Harra argued that, “if we had been able to proceed, the evidence from last year’s trials indicates that we would have been able to help more vulnerable and digitally excluded customers because the route through to an adviser for them would not have been blocked by other callers whose calls could have been more effectively dealt with online.”

Responding to Stephen Hammond, Harra said he was “sorry for the experience that our customers get”. “[O]n phone self-assessment, during the peak, people had to wait about 38 minutes on average to get through to us, and that is far, far too long. There are really only two ways of addressing that. Either we reduce the demand on the helpline by deflecting demand online, where it can be adequately dealt with online, or we increase the resources on the helpline to meet that demand.”

Pressures on HMRC

Asked about increasing pressures on HMRC, Harra explained these came from a combination of factors: “Policy decisions like thresholds bring more people into the tax system, and that combines with inflation and wage growth, also bringing people over thresholds. That is a key reason.” Additionally, he said, “a growing number of our customers are moving into more complex ends of the tax system where they are more likely to want to contact us.” He also mentioned increases in interest rates pushing more people who have investment income into tax.

“In addition,” HMRC’s chief executive continued, “the cost-savings pressure on the department has grown as well. When we settled the spending review in 2021, it assumed that we would have to make £500 million a year annual savings by the end of the spending review period, but some of the pressures on our costs—like inflation—have pushed that target up to about £770 million. So whilst we were on track to deliver the original £500 million, there is at the moment a gap in delivering the £770 million, which is reflected in the customer service we can offer.”

Harra said that, in terms of simplification, there are things that HMRC can do to try and make things simple for people and to reassure them. “For example, one of the main causes of calls to the pay-as-you-earn helpline is from people who don’t understand their pay-as-you-earn tax code, which is unsurprising, and if they have more than one source of income, don’t understand how their tax-free personal allowance has been allocated among them; so we are working on producing an online tool that makes that clearer for people and simplifies their ability to understand their code.”

You can watch the full session and read the transcript. 

You can read our report covering exchanges during the second half of the House of Commons Treasury Committee hearing here.