The FT has repeated HMRC's justification for announcing the close of 281 tax advice centres, saying:
HMRC blamed a lack of demand from taxpayers for the enquiry centre closures. It said customer demand had halved, from 5m visitors in 2005-06 to fewer than 2.5m in 2011-12.
It said each appointment costs the tax authorities £152 on average, compared with a cost of dealing with a taxpayer on the phone at £3 per call, or an online transaction that costs just 9 pence.
Bet as they also note, the closure will save just £13 million.
So let's do some maths here.
There are 2.5 million visits a year (hardly no demand, but let's leave that aside). They cost an average of £152. So the apparent cost is £152 x 2.5 million = £380 million.
Wow! That's a lot. But let's check that for reasonableness. HMRC's accounts for 2011-12 (yes, they have them) show (page 25) that it cost £3,705 million to run HMRC that year of which the biggest cost by far was people, at a cost of £2,371 million.
There were (page 30) 67,000 staff. So average cost of employment including pensions and employer's NI was £35,388, although that, of course, is not what people saw on their payslips.
But let's use this data to look at HMRC's claim that these 2.5 million visits cost £380 million, or 10.25% of all HMRC costs. First that means, if true, that because staff costs dominate 10.25% of all HMRC staff must be involved in this activity. That's 6,700 people. Which is 373 visits each. Allowing for holidays, bank holidays, sickness and training I suspect each HMRC staff member has about 210 'customer facing' days available a year. That's 1.77 visits a day.
Now I have a feeling that may be right: it takes time to find out what a customer wants, sort their paperwork, find out what's missing, work out what the question is, show them how to put it on the tax return if that is what they're asking, tell them what the law is, check that if necessary and then note what's been done. On average (and I stress that point) I can see that this is plausible, based on my own experience as a tax practitioner.
None of that, of course vaguely translates to a phone enquiry, where the caller can not show any paperwork and is almost invariably read an answer from a script which leaves many frustrated, and far too often making tax mistakes. And an online transactions, which assumes the taxpayer knows what they're doing, is no comparison at all.
But let's now assume demand for such help does not fall, much - and with the massive impact of changes in the benefits and tax system coming up, many of which are inter-related, such a fall is very, very unlikely to happen - not least because it's estimated that well over a million more people will need to do tax returns as a result of the changes in child benefit alone - then HMRC people will still have to spend time with taxpayers.
Only now they will be travelling to meet them. And that takes time. Which is why accountants don't visit. doctors don't visit and lawyers don't visit, because time is money. It also imposes a very high cost in wasted visits where you get there and the person has forgotten the appointment. In the office you use that time productively; on the road it's lost. which is again why professionals don't visit: you go to them.
And in the office you've got back up, and people are safe from attack (oh, yes, it happens). But they're not when they're out.
Nor do they have colleagues who they can just pop out to talk to for a moment just around the corner: they have to call when out, and that's much harder in a person's home.
So efficiency of these personnel will decline dramatically under the new plan. It's a guess what this loss of efficiency would mean, but purely on travel time I suggest if they do 1.77 now it's optimistic to think they'll do 1.25 a day in the future. So, to meet the existing demand will require not 6,700 staff but 9,500 staff. That's a cost increase of £99 million bringing total labour cost to £336 million. And they're all running a car, Let's assume they do 1,000 miles a month on average for visiting (hardly a lot) then at HMRC mileage rates that's £5,000 a year each or a cost of £48.5 million. Now the service costs £384.5 million to get people in front of the same customers as they did before in HMRC offices, but now in their own homes.
You'll now note direct costs, before overheads, of meeting existing demand are higher than they are now when these people are office based. However, there's assumed to be an implicit £143 million of overhead cost in current costing of the service. Not only do all of these have to go to make the savings HMRC claims, there have to efficiencies on top to cut £13 million.
Cutting all those overheads is not going to happen. Not in a month of Sundays. Most of them are called premises and a lot of them are fixed costs.
So, let's get real. To make this work HMRC are actually going to cut staff costs, and to save £13 million at the new efficiency rates the staff and travel budget combined must come to £224 million in order to save £13 million, with each staff member now costing £39,888 including their car. This reduces available staff from 6,700 to 5,615. But since they now only do 1.25 visits a day each total visits are cut from 2,500,000 in house to 1,475,000 in future to make the books balance.
Over a million people are inconvenienced and may get their tax wrong as a result. That's a dire situation likely to lead to massive loss of confidence in the tax system.
Over 1,000 people lose their jobs.
HMRC don't save overhead.
And HMRC's reputation is shred to pieces.
All to save less than Starbuck's are voluntarily paying in extra tax over the next two years.
Staggering. And incompetent. These are the only words to describe this.
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I thought it might all be a plot to drive people to use private sector accountants.
I can’t fault your figures and wouldn’t begin to try, but they look resonable to me. However, I would add this. If anyone thinks this is really about home visits then they are deluding themselves. For the last few years all government departments and agencies, as well as local government, have been urged (ordered would be the more accurate term in most cases) to go ‘digital by default’. In plain English that means a presumption that services are provided online as the dominant (and eventually, only) mode of delivery.
If a face to face, peripatetic service, is to be offered that will be on a exceptional basis, I’m sure. And I’m also sure that plans already exist to phase it out within a few years. Probably when demand has fallen even further due to most ‘customers’ having to seek (paid) assistance from their local accountants.
Your logic is impeccable
I agree, and I’m sure that they are also calculating that very few people are likely to want to ask the tax inspector to visit them at home (or at Starbucks) and so demand will prove to be minimal. As Richard remarks earlier, having the taxman in your home, putting you under pressure to make the decision, or produce the document could be very intimidating for a private individual bemused by the system.
Also, isn’t it about time tax offices accepted emails when they bully people to do everything online (sometimes with the need to buy commercial software) and are not beyond mislaying post or failing to answer the phone?
Should have been: local accountants.
I think that the costs HMRC estimates for phone calls may also miss hidden costs. I regularly answer the phone, to be greeted by a caller who tells me that I am the fourth person they have spoken to and I must give them an answer. Clearly, the first three calls represent wasted time to everyone, and I’m sure it isn’t factored into HMRC’s calculations.
The move also makes a mockery of HMRC’s ‘customer-centric’ strategy. If 2.5M taxpayers want to visit an enquiry centre, the Department should try to accommodate this insofar as possible.
I wonder if it makes a (big) difference if we read the text of the press release in a different way?
This seems to be careful to distinguish between visitors and appointments. If we then note that the HMRC line is that each appointment costs £152, then the total cost is £152 @2.5mn @ 0.16, or about £61mn. This level of cost would better fit with their statement there are about 1,300 staff employed and Richard’s calculation of the average staff cost.
So if HMRC says it will “save” £13mn, this means they think they can run the new system for £48mn.
Where goes 0.16 come from?
Are you making this up?
The figure is taken from the official announcement, specifically
“HMRC’s 281 Enquiry Centres have seen customer demand halved, from five million visitors in 2005/06 to fewer than 2.5 million in 2011/12. Some centres are now open just a day a week as a result of the sharp drop in demand. Of the customers using an Enquiry Centre in 2012, just 16 per cent needed a face-to-face appointment.
The cost of Enquiry Centre appointments is also high: the average cost was £152 per appointment last year, and in one centre the cost reached £500 per appointment. In contrast, the average cost of serving a customer by phone is £3 per call, and an online transaction costs just 9 pence.”
https://www.gov.uk/government/news/home-visits-for-customers-who-need-extra-help
That’s HMRc’s view
2.5 million thought they did need an appointment
Isn’t that more important?
It doesn’t seem plausible that 2.5m people decided to go out, perhaps in the cold & rain, to go to a HMRC enquiry centre, when they could easily have achieved the same results sitting comfortably at home, sipping coffee, using the phone.
My assumption would be that they had good reasons to go to that trouble, meaning that they didn’t think a phone call would be sufficient.
Why are HMRC’s management so convinced that those 2.5m people were deluded ?
Excellent question
HMRC decided a long time ago that they didn’t want enquiry centres. They’ve just spent the past 7 years pretending that they don’t want to get rid of enquiry centres because of how unpopular that will be with the public, but now they’ve come up with some stupid statistic around how much an EC appointment costs, the writings on the wall.
Based on HMRC’s flawed costings for an IREC appointment, perhaps I should suggest that each announcement cost £47,000 because they had to wheel out a Grade 7 puppet to make such an announcement more than once in a year.
i am sure the costs per phone call have not factored in the
massive costs of the translation service.
Agreed that it is hardly serving the “customer”, or providing a customer service, by trying to set aside the 84% who did not qualify as needing an appointment.
I was just trying to work out how the costs of the system had been presented and how that reconciled with the figure of 1300 staff.
Shouldn’t we challenge HMRC’s view that only 16% who sought help deserved it? Do they think you have to be too doddery & confused to know how to ask for help before you are allowed to have any? Tax is necessary, but it is still a bit of an imposition, & the least HMRC could do is help those who want to get it right.
Why shouldn’t an office worker who is ot sure whether he needs a tax return for letting out a room go into her local tax office and ask? Or do the Tories just want us all to get it wrong and face penalties?
BTW HMRC staff in enquiry centes earn less than HMRC average as all apart fro their managers are in the lower paid AO or AA grade, while investigators are mostly higher grades.
I thought that pay point was the case – but you have to start somewhere…..
AO grade earns under £ 20,000 many are part time, they do
other work when closed so the fixed overhead can be shared as can
their wages . They are saying face to face as it is reaches only
400,000 and they want to reach 1.5million who need f2f service
…that all requires a recalculation of the costing and may well
bankrupt the country!!! Thats if they were telling ths truth…but
we all know that is,as far fetched as their figures.
“It said each appointment costs the tax authorities £152 on average”
Said by who? Whoever’s saying that should in no way be in charge of any kind of maths based work. What a load of old cobblers.
My mother used to work in a tax office before she retired and they saw a decrease in walk in appointments, because that office stopped doing them there so people had to drive 30 miles for face contact.
Is that how they’re working out the decrease in numbers?
They stopped offering the service and chanelled to the
phone it wasnt offered as a choice in a recent Survey total
misrepresentation of what the public want.
One other aspect is that in many cases HMRC seems to have deliberately placed many Enquiry Centres in awkward to reach places for those relying on public transport and heavily restricted opening hours so that many working people cannot visit. In addition the remaining centres in some cases have been under-resourced in terms of skills and knowledge. No wonder the numbers have dropped.
Lastly, I have been trying to find details of the public consultation so i can register my complaint. I can’t find it! Perhaps that is deliberate too. That said, HMRC have told their staff that the results of the consultation are extremely unlikely to alter the outcome, so in effect, the consultation is a sham.
The vast majority of public consultations of this type are, as you say ‘sham’. Their purpose is to provide a veneer of legitimation to what are almost alway ‘done deals’. 20-30 years ago they had some currency but that has diminished steadily and consistently ever since. Now they are simply an element of the PR of contemporary politics.
The consultation is about the way the new service works not about the closures its in the
small print
“…meeting people in coffee shops…”
Maybe Starbucks do have a role in tax compliance after all.
Maybe they could be co-branded with the HMRC
Seems like a plan to me. ,
What a crazy dysfunctional UK Government.J
`Of the customers using an Enquiry Centre in 2012, just 16 per cent needed a face-to-face appointment.`
Lies and damned lies.
Of the customers using phone lines and internet, how many needed a face-to-face appointment?
The script didnt offer one
This is all about shrinking the footprint of Government.
Nothing more and nothing less.
What will happen is that those that cheat the system will find that there is more scope for them to do so, while those that honest and need help won’t get it in any more. They’ll make mistakes and will be penalised.
The neo-liberal numpties that have invaded politics and the Civil Service wish to return us to a form of “laissez faire” government. This will be one where the life, liberty and property rights of the wealthy and the multi-nationals only are protected, because they’ll be the only ones able to buy these rights!
We truly are on the “Road to Serfdom”, but not as Hayek envisage it!
The only way this is going to be stopped is if EVERYBODY writes to their MP. NOW.