Trusted and modern: HMRC’s vision for the future
Delivered by Lucy Frazer, Financial Secretary to the Treasury
Good morning to everybody, both those who are here in person, and those who are online. Jim, thank you very much for inviting me today. I am really delighted to be joining you in Stratford this morning. And I’m very pleased to be attending my first HMRC Stakeholder event. I know this is an important event in the organisation’s calendar and it’s a great opportunity for the team to learn more about your priorities.
I wanted to talk today about some of the issues Jim has raised. The digital modernisation work that’s underway at HMRC. But before I get into that detail, I also wanted to share some reflections on my first few weeks in the job and how I hope we can work together. I’m also going to touch on the important issue of customer service.
When I started in September, I knew I had to hit the ground running. Because there was a Budget, a Spending Review, preparations for the Autumn Tax Administration and Maintenance Day, as well as starting to take the Finance Bill through the House of Commons. And all of that within the first two months.
Then there were many other aspects of my brief: The details of our tax system, HMRC’s digital modernisation programmes – which I’ll be discussing later - and trade and customs policy.
What I honestly didn’t expect, though, was that I would spend my first weeks in the job learning quite a lot about false teeth! That’s not because I’m expecting some bad outcome from my next trip to the dentist. But it’s because, as some of you will know, there’s a measure about the tax treatment of dental prostheses in this year’s Finance Bill.
The point I’m making is that I’ve learned very quickly how HMRC’s work makes a difference to every single bit of our daily lives. As a result, I’m very aware that you, the people who support and guide taxpayers, have an incredibly important role – both for your clients and also for the wider economy.
I also wanted to say that I’ve been extremely impressed with all the HMRC teams I’ve worked with so far and their efficiency, their responsiveness and commitment to their roles.
I know that there is some very productive work taking place between stakeholders and HMRC, through organisations like the Representative Body Steering Group, the Administrative Burdens Advisory Board and the Employment and Payroll Group. I’ve no doubt that these close relationships are going to become even more critical, as we continue our national recovery from Covid and make our way outside the EU. Because now, more than ever we need to develop the services that will support people, businesses and the wider economy. So I wanted to particularly thank you for all you’ve done – particularly over the past 19 months and all that you continue to do.
As I mentioned, I wanted to touch on customer service, because I know that this is an issue that you, and others, have raised with us.
My first point here is that it’s been very apparent to me that HMRC workers care deeply about the people and businesses they serve. I’ve also seen how this is a highly innovative organisation brimming with creativity and technological expertise. And we can use this ingenuity to improve HMRC’s customer experience.
But it’s also clear that HMRC needs to get the basics right. People need to have confidence that their calls will be answered promptly and their letters will get a timely response. And recently HMRC hasn’t achieved its usual high standards.
The past months’ events have played a part: HMRC had to get the Government’s Covid-support schemes going in double quick time and keep them running until the end of September – with all the specific customer support work that was involved. And, of course, while the pandemic was unfolding, HMRC was also supporting businesses through the EU Transition Period.
These were challenging and fast-moving situations. And they meant that HMRC had to make choices about the work it prioritised to protect people’s livelihoods and to continue vital services, like dealing with self-assessment returns and tax credits.
As HMRC’s Deputy Chief Executive Angela MacDonald said at last week’s Public Accounts Committee – this is not an excuse. I know that HMRC is very conscious that you quite rightly expect and deserve better service. And as Angela said last week, HMRC is making progress, with service levels expected to reach pre-pandemic standards in Spring. And I know HMRC is focused on making sure you see change, as soon as possible. For me this is also critically important.
Of course, over the longer-term HMRC’s digital modernisation programmes will help improve service levels and in so doing build greater trust.
There’s further benefits too - enhanced resilience, readiness to support future crises and greater compliance.
I am delighted to be taking up office at a time when much of this work is already in train as I believe that no company and no part of government can ignore the technological innovations that are taking place across the globe.
As you may know around 85% of HMRC’s customer service contact is now digitalised and 15% carried out by post and over the phone. And while it’s right that HMRC keeps these forms of communication as an option for those who need them – Covid-19 has underlined the need to keep up the modernising momentum.
A clear example is the Self Employment Income Support Scheme. I think we would all agree that it was a lifeline to millions of people during an immensely difficult period. But with more timely data about people’s income, we could have targeted help more precisely and provided it more rapidly.
I want to update you on three key areas: Making Tax Digital, Real Time Information and the Single Customer Account, that all fall within HMRC’s digital modernisation work. Then, I’ll talk about a few other initiatives as well.
So turning to Making Tax Digital. As I’m sure you’re aware, this is the first phase of HMRC’s move towards a modern, digital tax service fit for the 21st century. I’ve no doubt it will be a real gamechanger, helping businesses to reduce errors, giving them greater interaction and guidance and providing the digital experience many have come to expect in their everyday lives.
There are some longer-term advantages for businesses too – because the integration of tax management with other business processes can contribute to productivity gains.
As you know, Making Tax Digital for Income Tax Self-Assessment was due to launch in April 2023. However, whilst the pandemic has revolutionised the way businesses use technology – it’s also been immensely challenging for many firms. So, when you told us, this was the wrong time to impose a big change to the way businesses deal with their tax affairs – we listened.
As a result, it’s postponed this phase’s introduction until April 2024, with general partnerships joining the following April. This extra time will help businesses prepare, allow HMRC to test the pilot further and allow it to deliver the most robust service possible.
HMRC is also pressing on with rolling out Real Time Information – another central plank of its modernisation work. Just like Making Tax Digital, Real Time Information will bring the tax system into the iPhone age – giving people more up to date information about their tax affairs and cutting the chance of mistakes.
Beyond this, Real Time Information has a part to play in addressing a long-standing problem. Right now, many people pay their tax long after the income was originally received – making it harder for them to manage cash flow.
This year HMRC has started the conversation on this issue with a call for evidence on timely payments and it’s just published those responses. Again, any future changes here will be made in close collaboration with you and with plenty of warning.
As I mentioned earlier, HMRC is innovative, however there are still some areas of its online experience that customers can find frustrating. And I know HMRC is working hard to eliminate these issues, through its plans for the Single Customer Record and Account. The ambition for this work is to provide a single point through which taxpayers can interact with HMRC. In effect, this will mean that HMRC advisers can see what the customer is seeing – allowing them to give tailored support.
The Single Customer Account will also help to tackle the issues some people say they experience when trying to pay their tax online, like being able to find log-in details for different Government Gateway accounts. Or working their way through pages of information that doesn’t relate to their circumstances and which can make it harder to understand what they owe. And I’m pleased that HMRC secured funding at the Spending Review to get this valuable initiative off the ground.
Single Trade Window
Finally, I’ll talk briefly about some of the other digital initiatives underway. These include plans to save businesses time and energy, when conducting their affairs at the Border through a cross-government initiative known as the Single Trade Window.
Similar schemes have already proved successful in places like Singapore, Sweden, the USA and New Zealand. And we think that the Window will be a great advance for businesses here. Essentially, it will create a single-entry point, allowing firms to lodge all their documents and information needed to meet their import, export and transit requirements in one place.
Ultimately the digital initiatives I’ve mentioned will boost efficiency through fewer errors, less duplication and by improving communications between different parts of the organisation. At the same time, they will make it easier for those who need most to speak to HMRC to get in touch. Of course, some of these initiatives will require data. And, as Jim has acknowledged, part of the future challenge for HMRC will be to make the case of how it can harness this information to help people and make their lives easier and to do that safely.
Tax Administration Framework
As a final point on modernisation – the work of building an HMRC that’s fit to meet the challenges of the 21st century, needs to start at the tax system’s foundations.
As we all know, the tax administration framework is the bedrock of that system. The framework plays a critical role in how people experience it and in turn the trust they place in it. Clearly, if HMRC is to deliver the projects I’ve just mentioned, that framework needs to change substantially.
In March, HMRC published a call for evidence on how this legislation could be updated. I know many of you have since responded with your thoughts and last week, at the Autumn Tax Administration and Maintenance Day, the Government published a summary of those responses – along with a range of other measures that will help build a better tax system.
As I’ve outlined today, there are some great strides being made towards creating a modern and more trusted HMRC. But digitalisation on its own can never be the full answer. HMRC will also have to stay true to its values of professionalism, integrity, respect.
Nor can HMRC achieve its goals alone. It needs you, its stakeholders, to continue to share your expertise, continue to hold it to account and continue to help it create more effective services. I’ve every confidence that HMRC will play its part in that conversation, by listening to you too. And as a minister I will do that as well.
Let me conclude by saying that I know that over the last few months, I know that your interactions with HMRC have been not up to the usual standard. As I explained earlier there are reasons for this. But I know that Jim’s team is determined to fix these as rapidly as possible. And for my part, I can assure you that I take a personal interest in this matter.
However, given our subject today, I wanted to end with a few words about HMRC’s vision for the future. In my mind, that’s a future where it’s easier to pay and collect tax because the system works for all.
A future where people and businesses trust HMRC – to provide them with the service that they need and that they deserve.
And a future where HMRC’s modernisation work means the organisation is ready to deal with the demands of the modern world.
I’m pleased that at the Spending Review, HMRC secured funding to turn this vision into reality. That includes money to extend Making Tax Digital, over £136 million to deliver the Single Customer Record and Account, and £468 million to continue modernising the tax system.
And I’ve every confidence that this modernisation work, combined with HMRC’s immediate focus on improving customer services, will create an organisation that can better serve this country today and tomorrow.
So I look forward to working with you and the HMRC team to achieve all this. My door is always open to you, so don’t hesitate to get in touch. And I’m very sure that together we can make a real difference.
Thank you very much.