Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 160-179)



  160. I understand.
  (Sir Nicholas Montagu)—by internet not about filing. Essentially what this is saying, I think—I do not know if Sir John wants to amplify it—is that payment by internet is a very cheap way of us receiving payment and that essentially it has cost just over £700 to bring in that figure.
  (Mr Gibby) If I may add, we added the two figures together—you mentioned this—that is the total cost of making payments by internet whether it is from employers or from self assessment taxpayers.

  161. Sure.
  (Mr Gibby) The cost comes from Bill Pay which is a contracted out organisation.

  162. When I did accounts and economics, which I did at a very primitive level and decades ago so no doubt the world has changed, when the context was fixed costs and marginal costs, I presume the transactional cost was the additional cost which was involved in bringing in the three and a half million pounds, is that right?
  (Mr Gibby) There is a cost charge per transaction by Bill Pay.

  163. It seems to me that really is like the tip of the iceberg, the visible part but the total cost of the system is the kind of submerged part to which we do not refer. I am not quite sure exactly what all this information is giving us in terms of the cost. One might say the Government has set itself a target of creating accessibility for filing and paying to the whole population and we have achieved that but I do not find it plausible at all, either the answers which have been given or the report, in arguing that there are savings being made on an ongoing basis and on a straight line basis. I do not think this report justifies that. I wonder if anybody wants to comment on that before I shut up? I am just not convinced at all.
  (Sir Nicholas Montagu) I am not sure, Mr Trickett, what either Sir John or I can do to convince you. So far as payment is concerned, what I think the report shows is that by paying Bill Pay, as our agent, to get in payments in this way electronically it is extraordinarily cost effective compared with the traditional way of processing cheques.

  164. My riposte to that is if you exclude all the development costs and establishment costs of setting the scheme up in the first place. Let me move on to the incentivisation thing and then I really will draw my questions to a close. In the first year there was a £10 and £50 incentive offered. How many £10 and how many £50 did we pay out then?
  (Sir Nicholas Montagu) Of the 38,981 taxpayers—very precise figure—who sent their tax return over the internet 31,000 qualified for the £10 discount. Of the 2,700 employers 1,400 qualified for the £50 discount.

  165. One final question—this is really my last one—how many people who filed in the first year then filed in the second year? What kind of capture have you got? I do not mean the numbers, I mean the proportion, was it 50 per cent, 90 per cent, can you give me an approximation?
  (Sir Nicholas Montagu) I do not know if we have those figures.
  (Mr Hawes) No.
  (Sir Nicholas Montagu) We do not know.
  (Sir John Bourn) Perhaps I could, Chairman, if I may, pick up a point that Mr Trickett made. I think the contrast that Mr Trickett drew between the road construction projection that he talked about and what is being talked about here is the difference between what you might call a cost benefit analysis where you do set out to show the costs and benefits and see whether on a discounted basis the result is positive or negative and this which is seen as more of a cost effectiveness analysis where you say "This is what we want to do" and work out the cheapest way of doing it and then you decide as a matter of policy, if Ministers decide as a matter of policy, to do it. Then of course what this report is about, the extent having done it, what take up rates you get, what some of the aspects of costs of various incidental transactions are. It would not be right to say that the report ever pretended or set out to attempt to say whether this system on a cost benefit analysis was positive or negative.

  166. You have said it much more eloquently than I could have done. I think that the whole report really, if you do not mind me saying this, is an attempt to provide a justification really for a political decision. I think on that basis it does not provide an economic or financial argument in favour and I think Sir John is indicating that is a correct position.
  (Sir Nicholas Montagu) If I could just comment on that, Mr Trickett. I do come back to the point that I made before that we are talking about putting in large scale long term investment. Certainly I can testify to the rigour and challenge of the National Audit Office in conducting this investigation.

  167. I have already said finally five times but I just want to ask what is the prognostication in terms of the length of life? If you build a new motorway, the motorway is there forever but if you put in new technology, as we know, in 18 months it is already way out of date and has to be replaced. What is the obsolescence prediction in relation to the technology?
  (Sir Nicholas Montagu) Again, sorry to be imprecise, Mr Trickett, there is no simple answer. Some bits of the system will need modification or replacement in a matter of two to three years others will still be going after ten years. There is not a straight answer to that.


  168. So to sum up this discussion, what you seem to be saying, Sir Nicholas, is that if you take into account the set up cost, it has probably cost you more than you have got back so far but it is a price worth paying.
  (Sir Nicholas Montagu) I think that is right, Chairman. It is a long term investment. Certainly it has not broken even so far, but it is a long term investment to put in place the infrastructure to deliver the Government pledges and a better service to taxpayers and tax credit claimants which offers the potential as take-up increases—and take-up, the experience of public and private sector shows will increase—does offer the scope for considerable long term savings.

Mr Gardiner

  169. Finally, Sir Nicholas.
  (Sir Nicholas Montagu) There is still Mr Williams to come.

  170. I was starting as I meant to go on after Mr Trickett. Sir Nicholas, you said you do not use e-lodgement yourself.
  (Sir Nicholas Montagu) Yes.

  171. Can I ask your two colleagues do they use e-lodgement?
  (Mr Glassberg) Yes.

  172. You do, Mr Glassberg. Mr Hawes?
  (Mr Hawes) Yes.

  173. When the report tells us that one of the vital good practices for the roll out of e-services is clear active and visible leadership from the top, we can put in the word "almost" top?
  (Sir Nicholas Montagu) I think, Mr Gardiner, you can put into the definition of "leadership" that my personal financial affairs do not come into it.

  174. Indeed. Can I ask you, Sir Nicholas, which of the constraints in paragraph 2.9 that are identified as the constraints that might deter taxpayers from using the Inland Revenue's e-services do you think are most deterrent?
  (Sir Nicholas Montagu) I think probably the lack of value added. Certainly I would agree strongly with Sir John that we need to make the electronic way of doing business the preferred method, and that is why we are working so hard with customers in the way that I have described and why, for example, the self assessment return for the year 2002-03 will be a lot easier to use.

  175. Earlier on in the questioning you said that a 50 per cent take up by 2005 would—I think you said—be unlikely, you do not think it will?
  (Sir Nicholas Montagu) Yes, so far as self assessment is concerned.

  176. What do you think is likely?
  (Sir Nicholas Montagu) I do not know, and that is why we are working with Treasury colleagues to try and come up with figures for each different segment which might be more realistic and that, I may say, should be turned into targets. Because if we have done finer analysis and have come up with something that is more precise and more evidence based than that initial blanket 50 per cent challenge then I think that it is right that we should accept those as actual targets. Also, of course, by then there will be other facilities for self-assessment, like the facility I mentioned repeatedly for people to access their data. At the moment, if somebody files on-line they cannot actually view their own record. By 2005 they will be able to do so and indeed to communicate with us by e-mail.

  177. Maybe I should be addressing this to Mr Glassberg. In paragraph 3.12—this is in the context of talking about need to be part of wider business change and having a customer focus—it says, "The Inland Revenue has made progress in re-fashioning its business structures and processes, for example, by introducing Business Streams and a Customer Service champion, but has decided that a strong regional structure is appropriate to business delivery and in relation to local points of presence which now take many forms." It seems to me that that paragraph implies at the very least a tension between these two aspects. Why, first of all, do you believe it is appropriate to maintain the strong regional structure?
  (Sir Nicholas Montagu) I think actually, if I may, it is for me rather than Barry, as this is a wider issue of Revenue organisation. What we are trying to do is provide, as the Report notes, genuinely customised services but also with a strong local presence. I think all of the evidence is that people like to be able to do business with their local Revenue office. What we have done, and we did this last year, is we have restructured from 600 offices, each of which had a Manager, to 60-plus areas, each of which has two Area Directors, one dealing with compliance and one dealing with services; and there will also be an Area Manager for corporate services, which would cover such things as the IT. We did this to give a sharper local focus but at the same time, where it makes sense, to develop the particular stream of activity as a business stream. Contact centres are one example. It does not make sense to have a contact centre in Peterlee managed quite out of sync with one in Peterborough, in the sense that one can see a case for organising the two local offices separately. But we have also, after a study involving a lot of other tax administrations and the private sector, put all our debt and recovery activities into a single business stream, receivables management, and that works alongside our area structure and it is working well. Although they are managed nationally, they will work in locally with their colleagues in the particular area.

  178. I take it from all you have said, Sir Nicholas, that you do not accept there is a tension between the customer focus and the regional structure. The thing I stick up against, I suppose, is the word "but" used in this paragraph; ". . . but has decided that a strong regional structure is appropriate." That implies to me there is a tension here and that it is one that both you and the C&AG have acknowledged in agreeing this Report.
  (Sir Nicholas Montagu) I do not think there is a tension.

  179. Could I ask the C&AG if that was the understanding from their side of this paragraph?
  (Sir Nicholas Montagu) If I may say, Mr Gardiner, I do not see any conflict between Sir John and me in this. What it is saying is this: in some areas we are introducing business streams. We have a Customer Service Champion. I may say that she is actually my deputy on the operational side who sits over the regional structure. What we are saying is that we have decided it is appropriate for some things but not for local service delivery. It is drawing a contrast between those two things, not between customer service and that. Indeed, a part of the reasoning behind the restructuring has been to give a sharper customer focus. I have made it very clear to my Area Directors, for example, that I expect them to get stuck in with their local representative bodies.

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