Sir George slams Government over missing discs
28 Nov 2007
Speaking in an Opposition Day Debate on HMRC mislaying the child benefit discs, Sir George laid the blame at the door of Ministers - (see below)

Sir George Young (North-West Hampshire) (Con): The hon. Member for Broxtowe (Dr. Palmer) will forgive me if I do not follow his argument, but a number of hon. Members have been in the Chamber since the debate began and deserve an opportunity to be heard. I speak as a former Financial Secretary, like my right hon. Friend the Member for Charnwood (Mr. Dorrell), and it is difficult to avoid a twinge of sympathy for the Chancellor of the Exchequer, who finds himself carrying the can for something that happened a few weeks after he entered the Department. In the narrow sense, the Chancellor clearly is not culpable in that he did not put the discs in the envelope. However, the House is interested in the broader questions that have been touched on during the debate and for which Ministers are responsible.

Ministers are responsible for the additional functions that they have placed on the department and the resources that they have given the department to perform those functions. Ministers, who sit at the top of the management chain, are responsible for sending down that chain the right signals to influence morale and performance—a job that they ignore at their peril.

On the first point, Ministers took two decisions. The first was to transfer to HMRC responsibility for child benefit. That responsibility originally rested with the Department for Work and Pensions. The decision gave the Inland Revenue a substantial new management
challenge, as well as a cultural shock, because it found itself paying out money instead of collecting it.

Secondly, Ministers merged the two arms of HMRC: the Inland Revenue and Customs and Excise. My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) and I looked at that option in the 1990s and rejected it. The client base and the culture were different, and we were not convinced that the economies were there. The Government came to the same conclusion in 2000. In response to the Treasury Committee’s first report on the matter in 2000, the Government said that they believed that the synergies could

“be achieved without the risks, upfront and opportunity costs and structural upheaval which merger would inevitably entail.”

The response continued:

“Thus, while the Government accepts that merger might bring some of the benefits outlined by the Committee, it believes that they can be achieved without the disbenefits of merger through a dynamic and focused programme of closer working.”

In other words, the Government did not think that it was worth the gamble, but four years later they changed their mind.

The Chancellor and the Prime Minister have asserted that my party is somehow implicated in the rushed and botched merger of Revenue and Customs. I have looked at the record of the debates we had when the relevant Bill was going through Parliament. My hon. Friend the Member for Chichester (Mr. Tyrie), who was the spokesman at the time, said:

“Although we did not oppose the Bill on Second Reading, we had a number of major concerns about it. Merging the departments involved is a major change, and we are not convinced that it was given enough consideration by the Government or that its implementation was properly thought through.”

He went on to say that he was

“worried that the measure might prejudice taxpayer confidentiality.”—[ Official Report, 6 April 2005; Vol. 432, c. 1520.]

He said that

“the retention of at the heart of safeguarding...people’s right to privacy and, therefore...their trust in the Revenue service.”—[ Official Report, 26 January 2005; Vol. 430, c. 396.]

So when the Bill that merged the two departments went through the House, the Government had been warned that confidentiality was an issue.

The tax credit ingredient was then thrown into the pot, on top of the merger and the additional responsibilities. The Revenue had to run the most complicated financial interface between citizen and state—the tax credit system, which has displaced the Child Support Agency as top of the problems that MPs deal with in their advice bureaux. Ministers must take responsibility for the consequences of new responsibilities and the merger.

That leads me to my second point, which is on resources. In the 2004 spending review, the administration budget for all the Chancellor’s departments was flat in nominal terms. A saving of 16,000 posts was pencilled in. Under the 2007 comprehensive spending review, departmental expenditure limits will decline by 5 per cent. a year for the next three years. That is a challenging settlement. The Chancellor had to pencil in those savings to make the sums add up, but I wonder whether they were thought through, and whether they are really
deliverable. The Treasury Committee, which undertook a report on the efficiency savings in the Chancellor’s Budget, concluded:

“Evidence received...shows that the indicators measure the quality are not adequate to assess the experience of service users, and in particular are not adequate to measure the extent to which its services meet the...needs of its...client groups”.

That leads on to my last point about management and morale. There have been all sorts of warnings on that score. The tax faculty of the Institute of Chartered Accountants said:

“We are concerned that post merger the overall management structure of HMRC lacks clarity and focus. The lines of management accountability and responsibility are not always clear, either it seems to HMRC staff or to external stakeholders.”

The Chartered Institute of Taxation gave evidence to the Committee in January, and said:

“we do have concerns about the current position of HMRC and their progress. We see them as an organisation that is under considerable pressure.”

In my view, there is an audit trail involving policy, resources and leadership that leads back to Ministers. They cannot divorce themselves from the consequences of what happened down the line in the post room in Washington.

Finally, what conclusions should we draw? We need to await the inquiry, but I think that we can anticipate what it will say. It will be like other inquiries, such as those on transport or social services: it will say that primary responsibility rests with the individual who breached the regulations, as with the engine driver who went past a red signal, or the social worker who did not insist on seeing for herself the child on the at-risk register. However, those other reports went on to say that the signal was in the wrong place and the driver was not trained properly, and that the social worker had too many cases, but that their manager did not pick up on that. In that way, the trail goes up the management line. My money is on the same type of conclusion being reached in the case that we are considering. The Government have to be cautious about grandiose schemes, pencilling in large savings, major reorganisations, and ignoring warning signals—of which there were many. At the end of the day, the buck has to rest with Ministers, who should not resile from their responsibilities.

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