Government plans to save public money by closing dozens of tax offices are unrealistic and will cost almost £600m more than first estimated, Whitehall’s spending watchdog has found.
The National Audit Office said HM Revenue and Customs officials were now re-evaluating a scheme to shut 170 offices and open 13 regional centres instead. The government estimated that the plans would save tens of millions of pounds.
The NAO report concluded that HMRC’s costs for the original plans have risen by £594m in 14 months, more than half of which is the expense of running new buildings.
Auditors said the original plans would mean an increase in job losses without any understanding of the effect upon the collection of taxes.
In a single year, HMRC’s executive have had to downgrade their expected efficiency savings by more than half to £212m by 2026, the report said. HMRC “has yet to demonstrate how in practice the regional centres will help its employees provide a better service” and tackle tax evasion and avoidance, it added.
The findings come after Theresa May pledged to do more to tackle tax avoidance and evasion as part of an appeal to those who are “just about managing” in the UK.
More than a year on from the plans being announced, and with the contract signed for its first regional centre to open this summer, HMRC “does not yet have an agreed programme business case”, the report said.
The NAO said HMRC had underestimated the scale of the disruption involved, with up to 5,000 staff expected to leave as a result of the proposed move, while it had been unable to find suitable properties in some of its chosen locations.
“During the transition to regional centres, HMRC must ensure that its service to taxpayers and its ability to collect tax revenue are not impaired,” the NAO said.
The timetable for closures has been driven by a 20-year private finance deal HMRC has with the contractor Mapeley which concludes in 2021. More than 15 years on from this being signed, “significant risks remain” in the handling of the contract, auditors concluded.
The NAO said HMRC was now reconsidering the scope and timing of the move to reduce the costs and the risks of disruption.
Options include changing the timetable for opening regional centres, reconsidering the location and size of some of them, and reassessing how and when to introduce flexible working practices.
The NAO findings have prompted deep concern among MPs and unions. Meg Hillier MP, who chairs the public accounts committee, said: “The government’s early overoptimism is once again going to increase costs to taxpayers, by £594m over 10 years, and impact their own staffs’ livelihoods.
“As HMRC decides what actions to take in the short window it has before the Mapeley contracts expire, I urge it to heed lessons of the past before signing more long-term lease agreements, or letting experienced people go.”
Lady Kramer, the Lib Dem economics spokeswoman, said: “How can the public have confidence in our tax system when the organisation charged with bringing in money it so utterly reckless with how it spends it?”
Reacting to the NAO report, Mark Serwotka, the general secretary of the the PCS union, said it was now imperative that HMRC halted these plans and allowed MPs and the public to have their say.
“Cutting thousands of HMRC staff in recent years has hit the services it provides to the public, yet the department and this Tory government are ploughing ahead with poorly thought through plans that would mean thousands more job cuts,” he said.
An HMRC spokesman said: “Our 13 new regional centres are an essential part of our work to modernise HMRC and provide an even better service for our customers, while delivering annual savings to the taxpayer of over £80m from 2025-26.
“It also means modern offices for our staff, with the latest technology, better collaboration between teams, local training and wider career opportunities.”
