MPs Criticise HMRC on High Senior Staff Numbers

Despite receiving substantial funding, HMRC continues to be dogged by declining productivity, an excessively high ratio of senior staff, and doubts regarding special treatment for the rich.

MPs have criticised the taxman on all these fronts, especially as frozen thresholds pull more pensioners into the tax net, leading to a flood of queries.

Rising Tax Burden on Pensioners

The result of the frozen tax thresholds has been to drag millions of pensioners into the tax system for the first time or into higher tax brackets. In a Public Accounts Committee hearing, Labour MP Clive Betts questioned why the issue had worsened when an impact assessment in 2022 had predicted the reverse.

HMRC chief executive Sir Jim Harra stated the threshold freeze has drawn more taxpayers into the system, and a number of them now require tax code amendments due to bank and building society interest. He conceded this has increased customer enquiries.

As more pensioners are now paying tax, Betts feared that HMRC's waiting times for calls may worsen. Harra admitted that around 26% of new tax codes for state pensioners result in calls to HMRC, placing the system under incredible pressure. In response, the taxman has added 1,600 additional customer service advisers to its PAYE helpline over the past year.

HMRC's Preferential Treatment for Rich Taxpayers

Labour MP Lloyd Hatton protested at HMRC's special helpline for high-net-worth individuals with over £2 million in assets or over £200,000 in income a year. He complained that they are attended to quicker than ordinary taxpayers, who struggle to get through to HMRC.

Harra defended the high-net-worth unit, explaining that it falls within HMRC's compliance division because with rich individuals there is a greater risk of tax avoidance. But Hatton argued that a comparison should be made between the level of service provided to rich and average taxpayers.

Adding fire to the criticism, Labour MP Nesil Caliskan pointed out that working taxpayers lose money when they are compelled to take time off work to call HMRC. Harra conceded that the taxman has not met its service standards in recent years.

Fears Over HMRC's Senior Staffing Levels

Caliskan also questioned why HMRC has so many senior staff compared to other government departments. HMRC spends £100 million annually on senior positions, with 54% of its workforce at higher executive officer (HEO) and senior executive officer (SEO) grades. This is compared to the Department for Work and Pensions, which has just 20% at similar levels, and the 45% civil service average.

Harra defended the organisation, stating that skilled tax professionals must be compensated more to be competitive in the field. But Caliskan rejected this defence by asking why productivity levels have declined even while compliance teams have grown. Harra attributed the decline in efficiency to time necessary for recruitment, training, and retention of staff.

Conclusion

In taking on board the criticisms, Harra upheld that the organisational design of HMRC was necessary to manage tax compliance effectively.

Nevertheless, MPs continue to demand better value for money and improved levels of service for the typical taxpayer.