HMRC: Customer Service

House of Commons Committee of Public Accounts

HMRC: Customer service

Thirty-sixth Report of Session 2012–13

HC 869

House of Commons Committee of Public Accounts

HMRC: Customer service

Thirty-sixth Report of Session 2012–13

Report, together with formal minutes, oral and written evidence

Ordered by the House of Commons to be printed 11 March 2013

HC 869 Published on 18 March 2013 by authority of the House of Commons London: The Stationery Office Limited £10.00

Committee of Public Accounts The Committee of Public Accounts is appointed by the House of Commons to examine “the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit” (Standing Order No 148).

Current membership Rt Hon Margaret Hodge (Labour, Barking) (Chair) Mr Richard Bacon (Conservative, South Norfolk) Stephen Barclay (Conservative, North East Cambridgeshire) Guto Bebb (Conservative, Aberconwy) Jackie Doyle-Price (Conservative, Thurrock) Chris Heaton-Harris (Conservative, Daventry) Meg Hillier (Labour, Hackney South and Shoreditch) Mr Stewart Jackson (Conservative, Peterborough) Sajid Javid (Conservative, Bromsgrove) Fiona Mactaggart (Labour, Slough) Austin Mitchell (Labour, Great Grimsby) Nick Smith (Labour, Blaenau Gwent) Ian Swales (Liberal Democrats, Redcar) Justin Tomlinson (Conservative, North Swindon)

The following Members were also Members of the committee during the parliament: Dr Stella Creasy (Labour/Cooperative, Walthamstow) Justine Greening (Conservative, Putney) Joseph Johnson (Conservative, Orpington) Eric Joyce (Labour, Falkirk) Rt Hon Mrs Anne McGuire (Labour, Stirling) Matthew Hancock (Conservative, West Suffolk) James Wharton (Conservative, Stockton South)

Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk.

Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/pac. A list of Reports of the Committee in the present Parliament is at the back of this volume. Additional written evidence may be published on the internet only.

Committee staff The current staff of the Committee is Adrian Jenner (Clerk), Sonia Draper (Senior Committee Assistant), Ian Blair and James McQuade (Committee Assistants) and Alex Paterson (Media Officer).

Contacts All correspondence should be addressed to the Clerk, Committee of Public Accounts, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5708; the Committee’s email address is [email protected]

Contents

Report Page

Summary 3

Conclusions and recommendations 5

1 HMRC’s current performance and its commitments to improve 7

2 Challenges for the future 10

Formal Minutes 12

Witnesses 13

List of printed written evidence 13

List of Reports from the Committee during the current Parliament 14

Summary

HM Revenue & Customs (HMRC) spent approximately £900 million on customer service in 2011-12, around a quarter of its £3.7 billion total expenditure. It received 79 million phone calls and 25 million items of post in the year. People contact HMRC because they want to get their tax right and HMRC is obliged to make sure they get a good service. However, in recent years the standard of HMRC’s customer service has been unacceptable. For example, in 2011-12 20 million of the 79 million telephone calls made to HMRC went unanswered and customers incurred costs of £136 million while they waited to speak to an adviser.

In the past HMRC has considered it too difficult to implement the recommendations we have made to improve services and reach standards that are commonplace elsewhere. We are pleased to report signs that HMRC is now changing its attitude. The Department seems to be realising that good customer service is not a ‘nice to have’ feature that can be sacrificed when resources are tight and workloads high, but an essential part of any strategy to collect revenues while also reducing costs.

While there is much to be done, we welcome the commitments HMRC has now given us to improve the service taxpayers receive. Planned changes include the introduction of a call-back service for customers whose queries cannot be resolved first time, resolution of more queries first time round, and the replacement of all 0845 numbers with cheaper 03 numbers.

HMRC has now set itself a target to answer 80% of calls within five minutes. While achieving this target would be an improvement on current performance, it remains unambitious and woefully inadequate. It will still leave 16 million people waiting more than five minutes and is far below the industry benchmark of answering 80% of calls within 20 seconds. On quality of service, HMRC meets its internal standards but many are still not happy with the standard of advice they receive.

Challenges for HMRC will increase as the new Real Time Information System, the introduction of Universal Credit, and changes to Child Benefit are likely to lead to more phone calls. At the same time, the Department’s cost reduction plans include having a third less customer-facing staff. HMRC expects to maintain customer service with fewer staff by reducing avoidable contact and using staff more flexibly, but recognises that it needs a ‘Plan B’ if things go wrong. If there are significant increases in customer contact, HMRC may need to put in additional resources to avoid its performance plummeting, as it has in the past, let alone improving as it should.

On the basis of a Report by the Comptroller and Auditor General, 1 we took evidence from HMRC on its customer service performance.

1 C&AG’s Report, HMRC: Customer Service Performance, HC 795, Session 2012-13, 18 December 2012

Conclusions and recommendations

1. HMRC has an abysmal record on customer service but has now given us welcome commitments for how it plans to improve. In addition to maintaining its recent performance of answering at least 90% of calls, HMRC’s plans include: offering a call-back service so that customers do not have to wait when lines are busy; introducing more online self-service; resolving more calls first time; replacing its expensive 0845 numbers with 03 numbers during 2013; and publishing more detailed information on its performance. It has also set itself a target for call-waiting times. HMRC should now set out a clear plan for making these changes, including delivery dates and more detailed metrics for measuring and publishing performance, and report back to the Committee on progress in six months.

2. We welcome HMRC’s decision to move away from 0845 numbers which are much more costly for HMRC’s customers. HMRC should inform other government departments and agencies of its plans to move away from 0845 numbers and the costs and benefits associated with this change.

3. HMRC’s target of answering 80% of calls within five minutes is woefully inadequate and unambitious. While HMRC told us that 80% is more than it is achieving at present, it is still not sufficiently ambitious, particularly in the medium and long term. It falls well below industry standards. HMRC should set a more challenging short-term target for call-waiting times, and a long-term target that is much closer to industry standards, and give a timetable for reaching its long term target.

4. The prospects of fewer staff and more calls are a real risk to HMRC being able to improve standards of customer service. In the past, customer service has suffered when workloads increased. HMRC now plans to reduce the number of customer- facing staff by 8,500 (about a third) by 2015. At the same time, the introduction of Real Time Information and Universal Credit could lead to extra calls, and changes to the Child Benefit system may also increase workload. HMRC should develop a contingency plan for how it will make sure customer service is not sacrificed, in the event that its plans to reduce avoidable contact and deploy staff more flexibly do not work.

5. Too many customers are not satisfied with the quality of service they receive, despite HMRC meeting its own internal quality standards. HMRC meets its internal targets for phone and post quality but 29% of tax agents do not think that HMRC is good at getting things right. HMRC tries to deploy its staff flexibly, but does not always have specialist skills available to deal with more complex queries. HMRC needs to improve how it deals with more complex queries and should distinguish between simple and more complex queries when it measures the quality of its advice.

6. Until recently, HMRC did not know how much revenue and profit Cable and Wireless made from providing HMRC’s telephone services. When the NAO carried out its work HMRC did not have access to information on how much

revenue and profit Cable and Wireless made from customers’ calls to 0845 lines. Between the NAO’s report and our hearing, the Department discovered that Cable and Wireless’ profit from these calls was up to £1 million a year. If HMRC, or other government departments, enter into contracts where service providers get a share of revenues, they should insist on open-book accounting, and put in place transparent arrangements for sharing benefits if revenues are higher than forecast.

1 HMRC’s current performance and its commitments to improve

1. HMRC spent around £900 million in 2011-12 serving its customers, around a quarter of its £3.7 billion total expenditure. It received 79 million phone calls and 25 million items of post in the year. HMRC’s 'customers' do not have a choice about whether they interact with HMRC. This obliges HMRC to make sure that customers get a good service. Good service also makes economic sense, as poor service imposes costs on HMRC and its customers.2

2. In 2011-12, HMRC answered 74% of the phone calls it received. While HMRC exceeded a low target of 58% this still meant that 20 million calls went unanswered. Customers also incurred costs of £136 million while they waited for their calls to be answered.3 HMRC responded to 66% of post within 15 days, against a target of 80%. HMRC recognised that its performance has been unacceptable and it needs to do better.4

3. We have examined HMRC’s customer service performance on two previous occasions. We previously recommended that HMRC: introduce a measure of how long people wait to have their call answered, stop using telephone numbers with an 0845 prefix, and pilot a call-back service for more vulnerable customers.5 HMRC did not fully commit to implementing these recommendations at the time.6

4. During our hearing HMRC told us that it was making a number of changes based largely on recommendations we had previously made. HMRC acknowledged that some of these changes may not have occurred as quickly as the Committee would have wanted.7 HMRC told us that the improvements it was making included: setting a target for call waiting times, reducing avoidable contact, offering a call-back service for customers whose queries can’t be resolved immediately, introducing more online self-service, replacing all its 0845 numbers with 03 numbers, and publishing more detailed information on its performance and why people are calling.8

5. As a first step, HMRC told us it needs to maintain its recent performance of answering 90% of calls which it has achieved through October, November and December 2012.9 It estimated that if it achieves this level of performance consistently, call waiting times, which currently average 4 minutes and 42 seconds, will halve. At present, HMRC’s measure of waiting time does not include the time customers spend listening to the automated

2 C&AG’s Report, para 1 3 Q 1, C&AG’s Report, paras 8 & 12 4 Q 1 5 HC Committee of Public Accounts, HM Revenue & Customs: Handling Telephone Enquiries, 24th Report, 2009-10; HC Committee of Public Accounts, HM Revenue & Customs: Helping individuals understand and complete their tax forms, 20th Report, 2007-08. 6 Treasury Minutes for the Tenth to Eleventh and Fourteenth to Thirty Second Report from the Committee of Public Accounts 2009-10, July 2010, CM 7885 7 Q 72 8 Qq 13, 30-36, 41-45, 48, 86 9 Q 1,95

introductory message which can be between one and two minutes.10 However, the overall waiting time is what is important to the customer. HMRC is going to change how it measures its performance to reflect this.11

6. HMRC told us it has undertaken surveys which show that its customers think it is acceptable to wait five minutes to have their call answered. HMRC told us that currently it takes an average of six minutes to answer calls. From April 2013, HMRC will start to measure whether it answers 80% of calls in five minutes. While this may be an improvement on current performance it still means that 20% of callers (an estimated 16 million people based on current call volumes) would wait over five minutes to have their calls answered.12 The industry benchmark is to answer 80% of calls in 20 seconds and some organisations aim to answer 90% in 10 seconds. HMRC said, as a starting point, it needed to introduce a performance measure that reflected the scale of calls it received. Once it reaches this level of performance it will look at how it can improve further.13

7. In 2011-12, 42% of the calls HMRC received were from customers who should not have needed to phone HMRC at all.14 For example, customers telephoned because they were chasing HMRC for not doing something or because they had been sent a confusing letter. HMRC has analysed the calls it receives and is making efforts to reduce the number calls that are unnecessary and can be avoided. For instance it told us that it had made changes to the letter sent to people about their tax code so that it was less confusing and as a result it reduced calls about this letter by 1 million compared to the previous year.15

8. HMRC told us that it wanted to resolve queries first time so that it could reduce call demand and offer the customer a more efficient service. While HMRC told us that it preferred “first-contact resolution” it said that where this was not possible it was planning to offer a call-back. HMRC said that it would start offering this service on the Child Benefit line in April 2013 and that once it had a better understanding of how the service will work, it would roll it out more widely.16

9. As part of its digital strategy HMRC told us that it plans to introduce a secure message service. HMRC explained that it currently prefers not to deal with e-mail as it is not secure. Instead, it will introduce a new system so that customers can log onto a secure area and communicate with HMRC online. For some small businesses this service will be available from April 2013. HMRC expects all businesses and individuals to have their own secure account during the 2015 financial year.17

10. The majority of HMRC’s helplines are 0845 numbers, which if called from a mobile can cost up to 41 pence a minute to call. HMRC is currently renegotiating its telephony

10 Qq 2, 8, C&AG’s report para 1.12 11 Qq 10-11 12 Qq 7, 11-17,95 13 Qq 9, 14 14 C&AG’ report, para 1.32 15 Q 48, C&AG’s report, para 1.10 16 Qq 30-33, 48 17 Qq 32-36

contract, but told us it was going to make amendments to the types of prefix it uses before the renegotiations were completed. By the end of summer 2013 it plans to have replaced all its 0845 numbers with ‘03’ prefix numbers which are cheaper for customers to call 18

11. HMRC also explained that there are still improvements it could make to its management information, which is difficult to use when the system is working to capacity. Once it introduces its new voice recognition system it will be able to obtain much more detailed information about why people are calling. It plans to publish this information, so that it is easier to measure how well HMRC is doing and so that Parliament can have a greater understanding of the impact on HMRC’s customers of tax and benefit changes. 19

18 Q 86 19 Qq 41- 45

2 Challenges for the future

12. HMRC aims to improve its customer service while reducing its costs by 25% and increasing the amount of tax revenue it collects by £7 billion a year by 2015. The savings HMRC are planning to make mean it will reduce the numbers of customer-facing staff by 8,500 (about a third) by 2015. As part of this reduction, HMRC currently expects the number of contact centre staff handling telephone calls to almost halve from 6,900 in 2011- 12 to 3,700 in 2014-15.20

13. At the same time, the introduction of Real Time Information and Universal Credit could lead to extra calls, and changes to the Child Benefit system may also increase workload. HMRC has been pursuing a strategy of reducing calls for some time and while it has had some success, the total number of calls it receives has not gone down significantly.21 HMRC is deploying 1,000 extra temporary staff until March 2014 to achieve its target of answering 90% of calls but accepts that it faces some big challenges in the future. 22

14. Alongside its plans for reducing the number of telephone calls it receives, HMRC also wants to improve productivity by using introductory automated messages more effectively so that it can get customers through the system more quickly. Around one third of contacts by phone and post could be removed if customers had greater access to their records and could check and amend them if necessary.23 HMRC also plans to deploy its staff more flexibly so that it is better placed to respond to peaks in demand. This will involve using its processing staff to answer telephone calls at peak times.24

15. HMRC's plans to improve customer service have previously been blown off course when unanticipated events have increased phone call volumes. HMRC acknowledged that while it expects its plans to work, it may need to deploy more staff to answer phones than it currently anticipates. HMRC told us that it would scrutinise its plans and in particular whether the proposed number of staff answering phones was sufficient. It recognised that it will need to develop a ‘Plan B’ if its current strategy does not deliver what it hopes.25

16. HMRC undertakes checks to monitor the quality of the responses it provides by post and by phone. For example, it reviews a sample of phone calls to check that staff have performed the necessary security checks, given advice in line with internal guidance and undertaken all necessary work after the call. HMRC aims for 96% of its phone calls and 90% of post answered in 15 days to pass its quality checks. In 2011-12, 98% of phone calls passed checks and 92% of post were considered to meet the standard.26

20 Q 92, C&AG’s report, paras 5& 2.2 21 Q 92 22 Qq 28, 94 23 C&AG’s report. para 2.19 24 Q 94 25 Q 94, C&AG’s report, para 2.10 26 C&AG’s report, para 1.20 and Figure 1

17. However, HMRC does not undertake any external validation of the quality of its work and its current measurement may not accurately reflect the quality of service because it does not distinguish between simple and complex queries. 29% of tax agents do not think that HMRC is good at getting things right.27 HMRC told us that 80% of the customers it surveys consider that the service they get is good once they get through. Once it has made it easier for people to get through, HMRC said it would look at improving the quality of its answers further.28

18. HMRC’s telephony contract is being renegotiated in 2013. The contract HMRC signed in 2008 included the use of 0845 numbers which generate revenue for HMRC’s telephone provider, Cable & Wireless. When the NAO was undertaking its work, HMRC did not know how much revenue Cable & Wireless was getting as a result of the contract, and said it did not have contractual access to this information.29 At the hearing HMRC said that it had been prompted by the NAO’s report to push harder for this information than it had done in the past. HMRC told us that the profit Cable & Wireless make from operating its 0845 numbers is under £1 million a year.30

27 Q 9, C&AG’s report, para 1.22 28 Qq 18-19 29 C&AG’s report. para 1.34 30 Qq 20-26

Formal Minutes

Monday 11 March 2013

Members present:

Mrs Margaret Hodge, in the Chair

Mr Richard Bacon Fiona Mactaggart Guto Bebb Austin Mitchell Jackie Doyle-Price Ian Swales Meg Hillier Justin Tomlinson Stewart Jackson

Draft Report (HMRC: Customer Service), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 18 read and agreed to.

Summary agreed to.

Conclusions and recommendations agreed to.

Resolved, That the Report be the Thirty-sixth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Written evidence was ordered to be reported to the House for printing with the Report (in addition to that ordered to be reported for publishing on 6 March.

[Adjourned till Wednesday 13 March at 3.00 pm

Witnesses

Monday 28 January 2013 Page

Lin Homer, Chief Executive, and Ruth Owen, Director General, Personal Tax, HM Revenue and Customs Ev 1

List of printed written evidence

1 HM Revenue and Customs Ev 13

List of Reports from the Committee during the current Parliament

The reference number of the Government’s response to each Report is printed in brackets after the HC printing number.

Session 2012–13 First Report The Government Procurement Card HC 1915

Second Report Mobile Technology in Policing HC 1863

Third Report Efficiency and reform in government corporate functions HC 463 through shared service centres

Fourth Report The completion and sale of High Speed 1 HC 464

Fifth Report The Regional Growth Fund HC 104

Sixth Report HM Revenue & Customs: Renewed Alcohol Strategy HC 504

Seventh Report Immigration: The Points Based System – Student Routes HC 101

Eighth Report Managing early departures in central government HC 503

Ninth Report Preparations for the London 2012 Olympic and Paralympic HC 526 Games

Tenth Report Implementing the transparency agenda HC 102

Eleventh Report Improving the efficiency of central government office HC 288 property

Twelfth Report Off-payroll arrangements in the public sector HC 532

Thirteenth Report Financial viability of the social housing sector: introducing HC 388 the Affordable Homes Programme

Fourteenth Report Assurance for major projects HC 384

Fifteenth Report Preventing fraud in contracted employment programmes HC 103

Sixteenth Report Department of Health: Securing the future financial HC 389 sustainability of the NHS

Seventeenth Report Department of Health: The management of adult diabetes HC 289 services in the NHS

Eighteenth Report HM Treasury: The creation and sale of Northern Rock plc HC 552

Nineteenth Report HM Revenue & Customs: Annual Report and Accounts HC 716 2011-12

Twentieth Report Department for Energy and Climate Change: Offshore HC 621 electricity transmission–a new model for infrastructure

Twenty-first Report The Ministry of Justice’s language service contract HC 620

Twenty-second Report British Broadcasting Corporation: Off-payroll contracting HC 774 and severance package for the Director General

Twenty-Third Report Department for Work and Pensions: Contract HC 744 management of medical services

Twenty-Fourth Report Nuclear Decommissioning Authority: Managing risk at HC 746 Sellafield

Twenty-Fifth Report Funding for local transport: an overview HC 747

Twenty-Sixth Report The Department for International Development: The HC 660 multilateral aid review

Twenty-Seventh Report HM Treasury: Annual Report and Accounts 2011–12 HC 659

Twenty-Eighth Report Department of Health: The Franchising of Hinchingbrooke HC 789 Health Care NHS Trust and Peterborough and Stamford Hospitals NHS Foundation Trust

Twenty-Ninth Report Tax avoidance: tackling marketed avoidance schemes HC 788

Thirtieth Report Excess Votes 2011–12 HC 959

Thirty-first Report Department for Transport: Lessons from cancelling the HC 813 InterCity West Coast franchise competition

Thirty-second Report Ministry of Defence: managing the defence inventory HC 745

Thirty-third Report The Work Programme HC 936

Thirty-fourth Report Managing Budgeting in Government HC 661

Thirty-fifth Report Restructuring the National Offender Management Service HC 717