DEPARTMENTAL REPORT Expenditure Plans May 2004 Spring Departmental Report The Government’s Expenditure Plans 2004–2006 Cm 6225 Departmental Report 2004 This document is part of a series of Departmental Reports (Cm 6201 to 6231) which, along with the Main Estimates 2004–05, the document Public Expenditure Statistical Analyses 2004, and the Supply Estimates 2004–2005: Supplementary Budgetary Information, present the Government’s expenditure plans for 2003–2006. The complete series of Departmental Reports and Public Expenditure Statistical Analyses 2004 is also available as a set at a discount price. Spring Departmental Report 2004 1 Departmental Report 2004 Inland Revenue Presented to Parliament by the Paymaster General and the Chief Secretary to the Treasury by Command of Her Majesty May 2004 Cm 6225 £14.85 2 Spring Departmental Report 2004 © Crown Copyright 2004 The text in this document (excluding the Royal Arms and departmental logos) may be reproduced free of charge in any format or medium providing that it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown Copyright and the title of the document specified. Any enquiries relating to the Copyright in this document should be addressed to The Licensing Division HMSO St Clements House 2-16 Colegate Norwich NR3 1BQ Fax: 01603 723000 or e–mail: licensing@cabinet–office.x.gsi.gov.uk Spring Departmental Report 2004 3 Contents Introduction 04 Medium Term Strategy 08 Delivering Better Public Services PSA Targets 1 to 5 10 Modernising Government 24 Valuation Office Agency 32 Annexes 1 to 6 34 4 Spring Departmental Report 2004 Introduction This year’s spring report sees the Department in the midst of huge changes. In his Budget statement on 17 March the Chancellor of the Exchequer announced the outcome of the O’Donnell Review of the Revenue Departments. He accepted its recommendations to create new responsibilities for tax policy with the Treasury taking the lead on tax policy development, and to join together the Inland Revenue and the bulk of HM Customs and Excise to form a new integrated tax Department. The Departments have long and proud records of successful public service delivery and by bringing them together into a new organisation we will be aiming to improve customer service, increase efficiency and reduce compliance costs as well as improve compliance with the law. We will also be making plans to move some more of our people out of London and the South East as a result of Sir Michael Lyons’ review and to make further efficiency savings as a result of Sir Peter Gershon’s review. All this amounts to a substantial agenda for change, but because of our track record with change, I am confident that we are up to the challenges of the year ahead. In the last year we have achieved an enormous amount – a few examples: • Provisional figures show that we collected net tax of around £156 billion and NICs of £72 billion, and we paid out Tax Credits gross of over £13 billion and Child Benefit of over £9 billion. Our National Minimum Wage compliance teams established minimum wage failures in 40% of the cases investigated during the year, identifying wage arrears of over £2.5 million for nearly 10,000 low paid workers. • Over 1m people are now filing their Self-Assessment tax returns with us electronically. Since SA online was launched three years ago we have made many improvements to our product in response to customer feedback and these are clearly paying dividends. 490,471 people claimed their new tax credits on line with a further 6,714,453 carrying out entitlement checks via our website. The speed and efficiency of our e service mean that it is now rapidly becoming an increasingly popular contact channel for large numbers of our customers. • We continued our work on better understanding our customers so as to enable us to make it as easy as possible for them to fulfil their obligations. At the other end of the spectrum we continue to refine our methods for tracking down those Spring Departmental Report 2004 5 people who still aim to cheat or avoid the system. • As a result of the ASPIRE competition we have entered into a contract with CGEY to provide technology services over the next 10 years. I am confident that in CGEY we have found a partner that can help us fulfil the Government’s objectives on modernising public services, welfare reform and the expansion of e service. We look forward to working with CGEY but we thank EDS and Accenture (our previous suppliers) for their support and positive approach to partnership working over the past ten years. Due in no small part to their efforts we have achieved huge improvements in our IT systems and services. • We started making tax credit payments on 7 April, with more than 1 million payments in the first week. We all know the introduction of tax credits did not go smoothly. The early months brought frustrations and difficulties for some of our customers and many of our staff. By July we had overcome the systems difficulties and now six million families are now benefiting from tax credits. I would also like to recognise the personal achievements of two of my Board colleagues who retired this year. Michael Johns CB, Chief Executive of the Valuation Office Agency and a Commissioner of the Board of Inland Revenue, retired on 31 March 2004 after 6 years serving on the Board. Michael’s wisdom, intellectual skills and commitment to the highest standards of public service will be greatly missed. And, of course, Nick Montagu Chairman of the Board of Inland Revenue since July 1997 retired on 19 March 2004. Nick provided the Department with strong leadership through a period of unprecedented change. He was instrumental in embedding diversity into the business of the Inland Revenue and championing business-based diversity across the Civil Service. He led the Inland Revenue to the front of the Government’s ‘e’ agenda and championed the ground breaking customised Corporation Tax portal which was itself the inspiration for the equally ground breaking set of online services recently rolled out to self–assessment customers. Nick also put the Department on a world stage by fostering links and sharing best practise across international tax administrations. We wish Nick and Michael all the best for the future. The Departments achievements over the past year prove that we have the skills and attributes to work alongside our colleagues in HM Customs & Excise to make the new integrated tax Department a real success. We have already started to do so. It is a privilege and a pleasure to fill the chairman’s role at this time and help the Inland Revenue successfully close one chapter of public service history and play its full role in opening another. Ann Chant CB 6 Spring Departmental Report 2004 Purpose of the Report This report summarises the strategy and plans of the Inland Revenue and reports progress on its objectives and performance. The report sets out the main changes in spending plans, compared with those in the 2003 Report (Cm 5925). Status Policy advice and services in relation to the valuation of land are provided by the Valuation Office Agency, an Executive The Inland Revenue is a Government Department managed Agency within the Inland Revenue, managed by a Chief by a Board of Commissioners appointed by Royal Warrant. Executive who is accountable to the Chairman of the Board, The Board consists of: and through the Chairman to the Chancellor of the Exchequer. Chairman Ann Chant CB The 2002 Spending Review set new plans for public spending Deputy Chairman Dave Hartnett CB for 2003–2006. The chart below shows how we will be Director General Helen Ghosh spending our budget for 2004/05. Corporate Services Director General Steve Heminsley IR Funding for 2004/05 (£3.3 billion) Strategic Service Delivery 8% The Chairman of the Board is directly accountable to the 2% Chancellor of the Exchequer for the Department's performance 8% and expenditure. 3% The Board is assisted by a Departmental Board comprising Operations Policy the statutory Board and non–executive members, Kate Owen Corporate Services (Vice President, BP Amoco), Pat Stafford, and Rene Carayol Main Projects - E Services 18% (CEO, Voodoo group). Main Projects - NTC Modernisation of PAYE The Inland Revenue is responsible for: Other projects 3% 58% • collecting income tax; corporation tax; capital gains tax; petroleum revenue tax; inheritance tax, stamp duty, and National Insurance Contributions; • paying tax credits and child benefit; • providing valuation services for rating; council tax; Inland Revenue and other public sector purposes; • providing policy advice to Ministers in all the above areas; • administering Oil and Gas Royalties and enforcing the National Minimum Wage on behalf of Department of Trade and Industry; • collecting student loan repayments. Spring Departmental Report 2004 7 Organisation Chart ANN CHANT CB CHAIRMAN STEVE HEMINSLEY HELEN GHOSH DAVE HARTNETT CB ANDREW HUDSON PHILIP RIDD Strategic Service Corporate Services Revenue Policy Chief Executive VOA Solicitor Delivery (from 7 June 2004) Service Delivery Business Services Marketing & Personal Tax Local Taxation Legislation Support & local services John Yard CBE Communications Tory Orhnial David Park Steve Bousher Marjorie Williams Ian Schoolar IR Southern England E Business Better Guidance Business Tax Finance, Technology Taxes Keith Cartwright Barry Glassberg Roger Hurcombe Mary Hay and Planning Ebrahim Ali John Keelty IR Central England Accommodation Capital and