Conclusion 3

HMRC’s compliance productivity has declined, despite its increased focus on prevention and investment in digital systems and higher–skilled staff. HMRC’s compliance work offers high returns and good value for money but its compliance returns have declined from over £1.4 million per compliance worker prior to the COVID–19 pandemic, to £1.27 million per worker in 2023–24 (both values expressed in 2023–24 prices). The decline has taken place despite: HMRC investing in digital systems; focusing more on upstream compliance to prevent problems before they happen; and employing more higher–grade compliance staff. The latter, contributed to an increase in the overall seniority of HMRC’s workforce, which added over £100 million to HMRC’s salary costs over the period 2019–20 to 2023–24. The government is providing HMRC with resources to recruit 5,000 additional staff to achieve £2.7 billion of additional tax revenue a year by 2029–30 (a productivity level of £0.55 million per additional compliance worker). HMRC considers that raising the average return across all its compliance staff is difficult, but it acknowledges that it needs to return productivity to the levels its experienced staff previously achieved. recommendation HMRC should write to the Committee alongside its Treasury Minute response, explaining the steps it will take to return compliance productivity to pre–pandemic levels as soon as possible and seek year– on–year improvements thereafter.