Examination of Witnesses (Questions 1-19)|
MONTAGU KCB, MR
MONDAY 18 MARCH 2002
1. Welcome to the Committee of Public Accounts.
Welcome, Sir Nicholas Montagu, it is nice to have you back with
us this afternoon
(Sir Nicholas Montagu) It is always a
great pleasure to be here.
2.to talk on the subject of e-Revenue,
which may seem quite esoteric. We have a very interesting Report
in front of us, with a lot of potential for the future. Could
you start by introducing your colleagues?
(Sir Nicholas Montagu) On my right is Barry Glassberg,
who is our Director of e-business, and on my left is Terry Hawes,
who is Head of Business Management and Service Development.
3. They are very welcome too. Perhaps you can
start with the take-up, the paragraph is paragraph 2.6 on page
13. We know that there are about 9 million people who have self
assessment, we know that at least 60 per cent of them, and going
up all of the time, are on the internet, why is it that two years
after the scheme was launched, namely you can do your self assessment
on your computer, out of 9 million potential customers you only
(Sir Nicholas Montagu) We are a bit above that; it
is about the 80,000 mark. It is not high, but it is a 94 per cent
increase from the first year. I think the reason is that experience
in other administrations and in much of the private sector as
well is that initial take-up is slow, as Sir John's Report acknowledges.
We hope that it will be steady. I would be pleased with a further
94 per cent increase next year. Again, as the Report recognises,
there were some teething troubles with the first year: some people,
like Mac users, were unable to file electronically. Again, the
Report gives a number of examples where take-up has been similarly
slow to get off the ground.
4. You say there has been a very high increase,
let us go straightaway to the relevant paragraph 2.14 on page
16 and 3.15 on page 22. Let us go straightaway to the teething
problems you talked about, shall we? Was it about 120,000 who
attempted this? Only 39,000 succeeded. Four out of five attempts
failed. Is this the right way to launch a high profile project
if four out of the five attempts by people who are, after all,
higher rate income taxpayers, people who are pretty bright as
it is, cannot succeed?
(Sir Nicholas Montagu) Not all of them will necessarily
be higher rate taxpayers; you are talking about one particular
5. Let us not quibble about that.
(Sir Nicholas Montagu) It is relevant, Chairman. The
question is, how at ease with e-filing are these people? I want
to make two points. First of all, as you rightly said, we are
talking about four out of five attempts failing. We have completely
reversed that now: four out of five attempts succeed. As far as
the figures are concerned, about 119,000 people registered; in
the event about 38,000 actually filled in year one. I think there
were a number of reasonsagain Sir John's Report touches
on thesea lot of them, I suspect, being from the fact that
the C&AG constantly recognises the Inland Revenue was ground-breaking
in offering this sort of e-service.
6. Did you have to go live too early because
there was a Ministerial commitment in the Budget of 1999 which
said that within a year you would go live on the scheme?
(Sir Nicholas Montagu) I do not think we had to go
live too early. Our business is to deliver Ministerial commitments.
What is certainly true is that we introduced it to a very tight
deadline, not only because of the Ministerial commitment but because
our discussions with software houses indicated that they were
ready to go, and I think it would have let them down if we had
not gone live then. What is certainly true, as I indicated, is
in the first year a number of things were not as good as they
should have been. Equally, again as Sir John's Report notes, we
have learned from those mistakes and we have substantially improved
matters and are continuing to do so.
7. Were you consulted before the Ministerial
decision was given?
(Sir Nicholas Montagu) Chairman, I do not talk about
discussions with Ministers, as you know.
8. I have to ask the question, why did you decideand
you have admitted the launch was a disaster
(Sir Nicholas Montagu) No, I have not admitted that
at any stage.
9. I think it is a disaster if four out of five
attempts fail. Why did you launch the scheme before you were ready
to get it right?
(Sir Nicholas Montagu) We were ready. We were ready
with a scheme which was less than perfect and which we were confident
of improving after introduction. Sir John's Report rather vindicates
that. The modern approach is what is called `build and learn',
particularly appropriate to use of the internet, which is a process
of constant and iterative improvement. Chairman, I must emphasise
it again, you may view it as a complete disaster, but I certainly
did not say that.
10. Let me ask you about this very important
point, I refer you to paragraph 3.25 on page 25, and I will deal
with that now. If you are going to have a build and learn system
you presumably want to learn from what you are building, I think
that is the point of it, why is it that 13 of the products delivered
since June 2001 have still not be properly evaluated?
(Sir Nicholas Montagu) Again, you have to distinguish
between formal evaluation at the close of a project, which is
when an evaluation review would be expected to take place, and
continuing evaluation. The essence of build and learn is you learn
and you enhance as you go along. That is exactly what we have
done with filing for self assessment, and Sir John's Report acknowledges
11. I have been a bit critical so far, if you
were in the private sector you would be launching many projects,
and I understand that the private sector typically in this sort
of field might expect two out of five projects to fail. What I
am slightly concerned with is, why was there not more piloting?
Why did you try to launch a national scheme before it was entirely
ready? Would piloting having helped you?
(Sir Nicholas Montagu) Chairman, you keep on saying,
"before it was entirely ready". It was ready. It was
not perfect, but it was ready. It would, I think, have been wrong
to hold it up. There was the Ministerial commitment, there were
the software houses ready to go. I am interested that you mentioned
private sector experience. About three weeks ago I was talking
to the chief executive of a very big energy retailer with about
7 million to 8 million customersbroadly comparable with
self assessmentthey had all products available on-line
with only 10,000 taking it up. Against that kind of background
and against some of the international experience, which Sir John
quotes, I do not think we did too badly. I do not think we are
doing too badly by increasing by 94 per cent in year two.
12. Let us look to the future then, if we look
at page 14, paragraph 2.9, the first bullet point, you will see
there the key potential barrier to take-up is user access to the
internet. You have done work with the Citizens Advice Bureau,
can you tell us a bit about that and how you can help people gain
access in the future?
(Sir Nicholas Montagu) Absolutely. I need to start
by the development of a customised portal for corporation tax.
It is the first customised portal, I believe, for any public service
anywhere in the world, certainly for tax administration. The importance
of this is that we have developed it extremely quickly and we
are extending it to self assessment and we will also extend it
to new tax credits. The essence of this approach is that, instead
of having what is essentially a paper form transferred to the
screen however much you pre-populate and improve, it actually
brings up data about you from a variety of systems; it masks the
complexity, and it has the potential to make it the easiest and
quickest way of doing business with the Inland Revenue, the preferred
method. I think that has great potential for bridging the digital
divide. Even people who do not at present have access to the internet
can go into or will be able to go into relevant government offices,
local authority offices, Citizens Advice Bureaux, public libraries;
and in due course it is extremely possible the majority of them
may have digital televisions from which they can access the net,
plus, of course, the new generation of phones.
13. Okay. Still looking to the future, if you
turn to page 11 and look at paragraph 1.8, these are the commitments
we have, by 2005 to achieve significant business transformation.
Can you give us a bit more of a feel about how confident you are
that you can deliver these changes, these commitments can be met
and the kind of improvements customers will see in service by
(Sir Nicholas Montagu) I am entirely confident of
our ability to deliver 100 per cent e-availability in line with
the Government's undertaking by 2005. What that means is that
by then all of our customers will be able to file their returns,
access their data, make payments and communicate with us electronically.
Where I am not confident, again as we discussed with the National
Audit Office, and Sir John recognised, is I do not believe that
we will reach the original target of 50 per cent take up across
14. Lastly, I am quite excited about this, I
think it is a very significant and useful development. Certainly
one has to take risks to get something like this on board. Give
me a feel from the general customer of how it is working now and
how it is going to work? I understand one of the problems when
you started was that you literally downloaded the whole of the
form, which was impossible. Give us a feel for how it is developing
now? Is it going to be quite easy? Are we looking at a system
where you can switch on your computer, your basic salary will
be flashed up fairly quickly, it will ask very simple questions
about how many shares you have, what are your interests, is it
a deposit account, so it would be something you could do within
(Sir Nicholas Montagu) I certainly hope so. I will
try and give you a feel. You go in through the Government Gateway
using your secure ID. 98 per cent of entries through the Government
Gateway are already to the Inland Revenue. You put in your data
and up on the screen comes "Hello, Mr Leigh", or if
we were in Australia it would say, "Hello, Edward",
(we are a little more formal in this country), then essentially
I visualise you will get a menu. These are the things we know
you are interested in, is that still it? Yes. Which of them would
you like to talk about? Self assessment. Then I think you will
get screens pre-populated with your data, your relevant number,
your address, possibly even earnings data from last year, etcetera,
so you will only need to change it if it has changed. Already
we are moving towards this approach this year. There will be much
more pre-population, there will be page by page error checking
and there will be an on-line calculator to help you do it. What
we are really aiming at is something very customised to you and
very easy to use. As I say, not just to you but critically for
our new groups of customers, like the tax credit claimants, who
are almost by definition likely to be on the wrong side of the
digital divide for as long as it exists.
15. It will be so easy I can sack my accountant!
(Sir Nicholas Montagu) Chairman, I would not like
to say that in public. If I went public on that I think I would
have the six Institutes at my door tomorrow. I think it is certainly
easy enough for you to do it yourself.
Chairman: Thank you very much, that is a good
positive note to end on.
16. It is clear from the Report and from what
you said that you have, in fact, put in place a tremendously impressive
e-infrastructure for delivery service to customers but at the
same time you are really now being beaten by your own targets.
Do you now agree in hindsight that the targets that have been
set for people to engage in the system were much too ambitious?
(Sir Nicholas Montagu) I think I would put it slightly
differently. As I said to the Chairman, we will meet our targets
for e-availability. We are already up to 40 per cent, we will
be at our target of 50 per cent by the end of this year and 100
per cent by 2005. What I think we need to refine is the overall
50 per cent take-up target. When we accepted that it was something
that we knew was, in a sense, crude, it was challenging, which
was what we wanted. We were venturing into an untried market.
What I am talking about with Ministers
17. The answer is "yes".
(Sir Nicholas Montagu) No, the answer is not "yes".
The answer is that it is too crude and undefined. A key part of
our activity at the moment is segmentation. I think it is likely
that by the target date we will not have hit 50 per cent with
some unrepresented, self-employed people, but I think it is very
possible that we will have exceeded that target with others. I
think Sir John mentions large business as a possibility.
18. I will not dwell on all of the figures.
We know for instance in 2000-01 only 39,000 people submitted their
tax return for 1999-2000 electronically compared to the projection
(Sir Nicholas Montagu) Can I be clear about what that
19. That is self assessment taxpayers.
(Sir Nicholas Montagu) This projection and the figure
that refers to it does two things. First of all, we deliberately
had a high projectionand it was not a prediction. We wanted
to come to a figure that we thought was the absolute maximum of
who might want to file electronically. What we did not want was
to hit 31 January, with loads of people trying to file electronically
and then have the system crashing. So that was not a projection.