The FT has reported this morning that:
The decision to scrap paper tax discs from British cars cost the government more than £400m in its first year, in another expensive experiment in moving bureaucracy online.
As the article notes:
In the 12 months that followed the move, from October 2014 to September 2015, the DVLA collected £5.71bn in vehicle excise duty, some £412m lower than in the previous 12 months.Vehicle tax revenue figures obtained by the Financial Times with a freedom of information request show tax revenues plunging following the abolition of the 93-year-old paper tax disc system in October 2014.
So, a change that cost £1 and which was intended to save £10m in administrative costs has actually in net terms cost £400 million. In fairness, the DVLA claim that some of this is due to the introduction of a monthly direct debt option but it seems that few are convinced by that.
This is worrying then, but not just because of the potential lost revenue on an incredibly simple tax. The implications for HMRC, where the same logic of digitising everything for the sake of saving admin costs, has to be considered.
What the DVLA experience proves is that this is a false economy. Firstly, paper still works: people need tangible reminders of their obligations. I hardly think this to be rocket science, especially given the ease of missing electronic communications amongst the plethora of data many people are now bombarded with.
Second, evasion goes up with digital systems and a smaller investment in staff. Again, this is hardly rocket science: just about anyone would reach this conclusion without expending a lot of effort.
Third, and here I extrapolate, if this is true of such a simple tax then what is the likelihood of an even higher failure rate in the more complex environment HMRC manages, where non-compliance rates are already very high (maybe 20% of all corporation tax returns are not submitted at present, with almost no follow up happening, for example)? I'd suggest that they are very high indeed.
Or to put it another way, the absurd idea that costs must be saved, come what may, in revenue raising departments can only ever be accompanied by considerable risk of massive tax loss to the government.
If there was anyone with any sense on the Board of HMRC the warning from the DVLA should be enough to suggest that now is the time for them to go back to ministers and say the move to a wholly digital, and remote, tax system staffed by many fewer people than at present should be stopped. But I will not hold my breath: when HMRC's senior management match their objectives to those of ministers determined to shrink the size of government, whatever the cost, I am not expecting any such response. And we will all pay the price for that incompetence.
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I don’t disagree with what is said wrt cost saving vs losses. Other countries seem to do Ok with using the license plate as the tax disk. Belgium for example. Many/most police cars have ANPR systems which auto check that a given plate has tax paid. It seems to work. Was it worth it for the UK to save £10m on a belgium-like system – whilst losing £400m – probably not. Change for change sake? always carries unforseen costs.
Have you checked the figures for direct debits? It’s only ~7% down and it doesn’t seem implausible that much of that could be accounted for by DDs replacing full payment in advance. Paper is far more hassle and DDs are much more easily affordable.
Much like the ludicrous claims about the 50p tax rate, I think this might be one where you need more than a quick snapshot of year 1 to say anything meaningful. Data on the DDs are the minimum you need to say anything at all.
The NAO does not seem to be convinced
And reported evasion is much higher
DDs do not explain that
This is a monumental disgrace. There is no other way to put it.
And to top it all, if you are a ‘hardworking family’ and find it easier to spread out the cost over 12 months, the ‘hardworking family’ has to pay interest on this!!!
There are also problems with the system not picking up MOT certificstes when you try to pay on the phone too.
The Swiss system works. If you do not have the vignette stuck in your window you are pulled off the road and not allowed to proceed until you pay up.
As you say, an electronic system needs to be backed up by hard evidence. The abolition of the tax disc was a big mistake.
I don’t think there’s a deeper agenda behind this. Partly there is the goal of reducing costs but I don’t think that’s wrong per se – obviously if you reduce costs by effectively not doing your core activity for which you exist then it’s self-defeating, whether you are talking about a government agency or a private entity but that doesn’t mean you shouldn’t look to do things in a more cost effective way. The real underlying problem in this and many other cases is the notion that IT and digitalisation is a painless way to reduce costs and increase efficiency. This is a notion that has become pervasive in both the public and private sectors and simply isn’t true. I forget the exact figures but something like 80%+ of government IT and digitalisation schemes either fail completely or end up costing money net rather than saving it. The private sector isn’t much better – the figure there is 60% not working. Moreover in many cases there’s a concealed cost inasmuch as the moving of things online and into digital format actually means that somewhere forgotten human beings actually have to spend more time doing stuff than they did before so there isn’t any real labour productivity gain (or it’s much more limited). I don’t think there’s a political agenda behind this as such, there’s a widespread fascination with IT on the part of people who don’t really understand its limitations.
We had the local DVLA down the road, all gone and staff as well. Then it was Swansea, once centralised then digitisation was always going to happen, all those consultants and systems whizz boys would enforce it along with the lobbyists. A few weeks ago there was a DVLA checking van by the roadside, but how many it caught was a question. I always liked my disc on the windscreen so now I have put my old 1958 one there as an ornament. But the trouble with digitised stuff is that the experience and basic knowledge is in the software and hardware. If that goes and stays down then the whole system will be a dead loss. Anyone taking bets?
Would it not be easier to scrap the tax and increase the tax on fuel? The more you drive and the worse the performance of your vehicle, the more tax you pay.
This seems too simple; are there externalities I’m not considering?
The there is no regime to check MOTs and insurance….
Except, you know, Traffic Police, speed cameras, ANPR cameras… all could be used to check MOTs.
Insurance is hard to check anyway – cars can be driven under other policies. So there may not be a policy for that particular car, but the driver is insured. That’s when a producer could be issued.
All systems have exceptions: this one works
Dear Richard,
I thought you might find it useful to have DVLA chief executive’s comment.
Oliver Morley, DVLA Chief Executive said:
“It is completely wrong to say there has been a £412million loss in revenue from vehicle tax.
“It is not correct to compare the 2015/16 revenue with the previous year. This is because from 1 November, 2014, customers could choose to spread their payments over 12 months with Direct Debit. Previously all vehicle tax would have been paid up front which is why there is a difference in the monthly cash receipts year on year.”
Might you please provide the data to support that argument i.e. how much precisely was foregone because of the deferred payments under the new regime
It should be easy to do: the DVLA prepares accrual accounts for the government so the systems to do this must be to hand
If you did this the matter could be put to rest, maybe, or at least the true loss assessed
Without that easily provided data we cannot know that what you are claiming is true.NB: for other users Helen is from the DVLA
NB For other users Helen is from the DVLA
Any of the systems I mentioned could be used to check all 3 (Tax/MOT and insurance) – and in the case of Traffic Police, already are.
Moving the tax to fuel makes it almost unavoidable (unless you have access to red diesel).
It also means the user will be paying the equivalent of some road tax for those journeys where Tax and MOT aren’t a current legal requirement.
Removing the tax disc and automating the system benefits the consumer – it allows the taxing of a vehicle without the hassle of going to a post office, queuing and having to deal with unhelpful staff.
The driver doesn’t have to mess around changing them and it can’t be stolen and put on another vehicle to give the impression that said second vehicle is taxed.
As with any system, I would expect a cost in the first few years while loopholes are found and closed and the system generally improved.
Once the system is running nicely in the long run, the burden on the consumer and taxpayer will then be lightened and we could lower taxes to make people’s lives easier.
So, next problem
No registration and how do we know who owns a car?
And trace them when it comes to liability for their actions?
All other systems rely on the DVLA
I’m not sure I understand your point here. Could you elaborate please?
“No registration and how do we know who owns a car?”
Are you saying how do we know who owns a car if the registration plates are removed?
Or how would we know who owns a car if we do away with the registration process and the DVLA?
No-one is suggesting that we do away with the DVLA or number plates, we need to know and be able to trace drivers/owners for liability purposes. Having or not having a tax disc has very little effect on this – that’s what Number plates and VIN numbers are for.
So you want un unfunded DVLA?
Inetresting
Why do you put in snide insinuations instead of facts? I have always found post office staff helpful. Am I a solitary exception?
How many cars are our there without tax and insurance? Present company accepted but in my experience if you let accountants run things then there is a desaster you need a people person to run a company or country, one who can balance all the areas from their experience,