Committee of Public Accounts House of Commons, London SWlA OAA Tel 020 7219 4099 Email pubaccom@parliament.ukWebsitewww.parliament.uk/pac

Jon Thompson Chief Executive and Permanent Secretary HM Revenue & Customs 100 Parliament Street London SW1A 280

6 June 2018

Dear Permanent Secretary

HMRC performance: progress review Thank you for giving evidence to the Committee on 30 April. This letter summarises our concerns on issues discussed at the session, although does not cover online VAT fraud on which we will publish a formal report.

Customs Declaration Service The replacement of HMRC's existing customs system CHIEF with a new Customs Declaration Service (CDS) is vital to the effective operation of the UK's customs regime following Brexit. You told us that the new system would be fully functional by July this year, that you would start to move traders from CHIEF to the new system in August and that this would be complete by January 2019. You stated you were as confident as you could be in implementing a new system of this scale, and that the CDS programme continues to perform well. You recognised that there were still risks to manage, and we remain concerned about how these may impact upon the already tight timetable. We still consider that you have not done enough to communicate the change to existing users of the system and to those traders who may, depending on the outcome of Brexit negotiations, need to use the new system in the future.

Brexit and the UK border On progress with Border preparations, you told us that you continue to plan for all scenarios, but your focus is on compliance under the various scenarios that may be negotiated and agreed. You told us that the Secretary of State for Exiting the European Union has said that the chances of 'no deal' were fairly small. In the event of 'no deal', you stated a choice will need to be made between the free flow of trade, the security of the United Kingdom and the raising of revenue, and there would not be an optimal system in place in April 2019 across those three objectives. We have previously reported that the Border Planning Group's assumption that the risks to border activity remained unchanged immediately post-Brexit is a risky approach, and this remains a concern. We are also not convinced that HMRC is sufficiently prepared for the different possible Brexit outcomes, for example in terms of the potential new infrastructure that might be needed at ports.

Transformation HMRC is currently mid-way through a major period of transformation which is intended to transform the tax system and create one of the most digitally advanced tax systems in the world. We were encouraged to hear that you had carried out a

prioritisation exercise which recognised our previous concerns that you would find it difficult to deliver your original plans and deal with the additional demands of Brexit at the same time. You told us that, after careful review, you had made substantial cuts to the number of projects in your transformation plans and still managed to retain most of the benefits, in terms of efficiency savings and additional tax revenue. We remain to be convinced that you can deliver your reduced transformation programme and keep the intended benefits.

Customer service On customer service we are disappointed that you rejected our recommendation to include within your response target the time customers spend going through your automated system before they speak to an adviser. The time customers spend in the automated system is an important aspect of their experience and, in our view, you are therefore not reflecting the full picture of customers' experiences by omitting this. You told us that you did not think that including the automated time in the target was the way forward, and that it would be better to develop a more rounded basket of customer indicators to measure your performance. At the very least we would expect you to be more transparent in reporting, and to be making efforts to improve customers' experience of the automated system and the quality of advice when they do speak to an adviser. The Committee will continue with its interest in HMRC's customer service performance, including any impact on customer service of your prioritisation exercise.

Estates Your plans to rationalise your local office network into 13 regional centres will have a major impact on your staff, through redundancies, disruption from relocation and possible loss of vital expertise and experience. You told us that you assumed 90% of staff would be able to travel to one of the new regional centres and everyone had a job guarantee as long as they went through retraining in some particular cases. We remain concerned about the effect on staff and the potential loss of knowledge, and are not convinced that you have clear plans for managing the extra staff demands arising from Brexit. It also remains to be seen whether the deals you have struck for the new regional offices will give you sufficient flexibility to cope if your plans do not work out as intended. ·

We will publish this letter on the Committee's website, and l am copying it to the Comptroller and Auditor General and the Treasury Officer of Accounts.

MEG HILLIER MP CHAIR OF THE COMMITTEE OF PUBLIC ACCOUNTS