Source · Select Committees · Public Accounts Committee
Recommendation 20
20
Acknowledged
Increased senior staff recruitment drives higher salary costs for HMRC compliance.
Conclusion
The Spending Reviews in 2020 and 2021 enabled HMRC to increase its compliance staffing. In 2021–22, CCG recruited mainly senior staff to undertake compliance work. Around the same time, HMRC was reducing its frontline customer service workforce, most of whom were in lower grades. These two changes were the main factors which led to the proportion 32 C&AG’s Report, para 2.22 33 Q 37: C&AG’s Report, para 2.26 34 Qq 12, 38 35 Q 56 14 of HMRC’s staff in more senior grades increasing from 41% to 53%.36 This change in grade mix increased HMRC’s salary costs by over £100 million over the period 2019–20 to 2023–24. We challenged HMRC about the increase in its staff costs. It said the grading of compliance staff “reflects the challenges we have in recruiting, training and retaining the staff that we need to do that work.” 37
Government Response Summary
The government acknowledges the context of compliance staffing by detailing record compliance yield, plans to recruit an additional 5,500 staff by 2030, and expected productivity increases, implicitly justifying the investment in staff despite increased costs.
Government Response
Acknowledged
HM Government
Acknowledged
3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 HMRC has written to the Committee alongside this Treasury Minute response. 3.3 In 2023-24, HMRC secured record compliance yield of £41.8 billion compared to £34 billion in the previous financial year. This exceeded the annual target of £40.5 billion and was higher than pre-pandemic levels of compliance yield performance. Pre-pandemic productivity in 2019-20 was impacted by two specific very large cases, which resulted in an uplift to performance. HMRC are on track to achieve the 2024-25 end of year compliance yield target of £45.4 billion, a further improvement in performance and productivity. Final figures for 2024-25 will be released within the Annual Report and Accounts. 3.4 HMRC set stretching annual compliance yield targets in accordance with a methodology agreed by HMRC, HM Treasury and the Office for Budget Responsibility (OBR). 3.5 As announced at Autumn Budget 2024 and Spring Statement 2025, HMRC will recruit an additional 5,500 compliance staff by March 2030. This investment, alongside other measures to close the tax gap (such as investing in modernising systems, delivering policy reforms and tackling tax debt) will deliver £7.5 billion of additional tax revenue per year by 2029-30. 3.6 This commitment alongside investing in improvements in HMRC’s systems risking capabilities is expected to increase productivity over the Spending Review 2025 period. 3.7 The average rate of return of compliance activity to yield is just one factor HMRC considers when deciding how best to deploy its resources. HMRC will aim to increase productivity, while optimising deployment across compliance priorities.