MPs have slammed HMRC over its levels of customer service, and warned that cutting costs will lead to further lowering of standards.
The Public Accounts Committee (PAC) said in a report today that customer service levels "collapsed" to such a degree last year that at one point in October the average time taken for HMRC to answer the phone peaked at 34 minutes for taxes calls and 47 minutes for self-assessment enquiries.
"The decline in HMRC’s customer services occurred at the same time as it reduced its headcount in personal tax services," said (PAC).
HMRC reduced spending on personal tax by £257m over the 2010 spending review period, exceeding its cost reduction target of £193m by one third, and leading to the loss of 10,800 staff between 2010 and 2015. Over half of these staff reductions came in the last year, causing a "huge spike" in customer waiting times - HMRC put this down to "teething problems" with new internal systems.
The committee said HMRC had "released too many staff too soon because it was over-optimistic about how quickly the demand on its call centres would fall", and said in future the department must test whether its demand forecasts are realistic and "be prepared to flex its resources as necessary to ensure service demand is met".
Waiting times recovered towards the end of 2015 after the recruitment of 2400 new staff, the PAC said, but it warned: "HMRC’s plans to cut the cost of its personal tax services by another 34 per cent in the next five years raise the risk of another collapse in service levels. HMRC needs a clear understanding of customer behaviour to estimate how demand will change and must be confident that it can maintain service levels at an acceptable level before it releases further staff."
The PAC released a critical report on HMRC last year in which it recommended the government body look into how its poor level of service affects tax revenue.
"HMRC agrees that the level of customer service it provides is likely to affect tax revenue in some way; for example, a customer’s attitude to compliance is likely to be affected by the quality of their interaction with HMRC," the committee said. "HMRC recognises that its existing analysis, which suggests that a one percentage point improvement in customer satisfaction might lead to increased annual income tax revenue of £43m, is ‘highly speculative’ and based on poor data."
The group of MPs has told HMRC it must make "significant progress" in understanding and measuring the relationship between customer service and revenue, and report back to the committee by the end of this year.
Earlier this year HMRC said it had made a dramatic improvement in its call handing processes, with 90 per cent of calls being answered.
HMRC was also previously censured by the PAC over its handling of tax fraud.