Source · Select Committees · Public Accounts Committee
Recommendation 22
22
Accepted
HMRC attributes decreased compliance productivity to onboarding new, less experienced staff.
Conclusion
As its compliance productivity had fallen, we asked HMRC whether it could reassure us that it was delivering value for money. It said when it brings in new compliance resource it expects to see a dip in productivity before recovering. HMRC told us this was because new staff are not as productive as experienced staff; it has to move existing staff away from frontline work to mentor and support new staff; and every time it adds compliance resource, the marginal rate of return of the new resource will probably be lower as it is already working the cases that have the most potential to generate yield. HMRC acknowledged that it has to get productivity “back up to the levels that our experienced staff have had before”.41 HMRC’s legacy IT systems and systems for interacting with customers
Government Response Summary
The government agrees with the implicit recommendation to improve compliance productivity, detailing record compliance yield, recruitment of an additional 5,500 staff by 2030 to generate £7.5 billion in additional revenue, and plans to increase productivity over the next spending review period.
Government Response
Accepted
HM Government
Accepted
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.