Charlene Young, pensions and savings expert at AJ Bell, comments on today’s Treasury Committee meeting with HMRC officials on its phone line policy reversal:
“Millions more people have been dragged into paying new taxes since most allowances have been frozen or even cut in recent years. But now the taxman has admitted they are feeling the pinch too.
“HMRC leaders faced a grilling from the Treasury Select Committee on Wednesday afternoon, being summoned to explain the reasons behind their poor service performance and the announcement to close HMRC helplines on 19 March that was subject to a ‘screeching U-turn’ the very next day.
“Whilst acknowledging that HMRC slowed the pace of changes, it doubled down on its ‘Digital first’ strategy as the solution to improving service standards. Blame was also laid at the door of tax professionals and industry groups – as, according to Jim Harra, ‘modernisation isn’t always in the interests of some stakeholders’.
Why the move to digital?
“HMRC has seen a huge increase in its customers base – with officials admitting that frozen tax thresholds and allowances are the factors most to blame. The OBR forecasts millions of new taxpayers due to the ongoing freeze on income tax thresholds (see table), with HMRC expected to deal with them without any increases to budgets.
“Inflation and Treasury Spending Review cuts were the reasons given for continued poor service. Having agreed to find cuts of £500 million per year since 2021, soaring inflation means HMRC’s cost saving target has risen to £770 million a year. To deliver these savings, they had planned to reduce staff numbers by 5,000 in the face of increased demand for services, including telephone helplines.
Despite the U-turn, there’s no new money
“Despite what have been described as constructive ministerial discussions, HMRC finds itself in a Catch-22 situation with the same ministers wanting to see service improvements and safeguards for vulnerable people and the digitally excluded in place before they’ll hand over funds.
“Jim Harra’s call was for taxpayers and stakeholders to effectively brace themselves in the short term as HMRC faces a difficult first quarter. Even if HMRC does manage to get its hands on more helpline staff, they need time to be trained up and deployed before they can speak to customers and alleviate some of the helpline pressure.”
Background:
HMRC wrote to the Committee on 19 March confirming plans to reduce access to helplines, including a closure of the self-assessment helpline from 8 April to 30 September 2024.
Following significant public concerns and representations from stakeholders, HMRC reversed the decision within 24 hours.
Witnesses in front of the TSC:
- Jim Harra, Permanent Secretary
- Angela Macdonald, Second Permanent Secretary
- Dame Jayne-Anne Gadhia, Lead Non-Executive Director
Tax threshold freeze creates millions of additional taxpayers:
Source: OBR, March 2024 Economic and Fiscal Outlook
