Thursday 2 November 2017
[Philip Davies in the Chair]
[Relevant document: Fifty-third Report of the Public Accounts Committee of Session 2016-17, The HMRC Estate, HC 891.]
I beg to move,
That this House has considered HM Revenue and Customs closures.
It is a pleasure to serve under your chairmanship, Mr Davies, and I thank the Backbench Business Committee for allowing me to open this hugely important debate. I also thank more than 20 colleagues from different parties for their support in making the debate happen—including you, of course, Mr Davies. Thank you very much indeed for your enthusiastic support.
We need this debate first and foremost for the sake of hard-working staff at Her Majesty’s Revenue and Customs, who face massive change and uncertainty. I know that many Members present represent HMRC employees in their own constituencies. I put on record my thanks for everything that those workers do, and I also highlight the hard work done by the local shop stewards in the Public and Commercial Services Union. The Government are fond of saying that there is no magic money tree, but there is the hard work of tens of thousands of public sector workers who are putting up with what has become years of uncertainty, thanks to endless change programmes.
This debate is hugely important for towns such as Cumbernauld in my constituency, which seem set to lose major employers.
The HMRC office in Coventry is going to close very soon, costing about 300 jobs. People will be expected either to travel into Birmingham or to use modern technology. We all know that at least a third of the population is not familiar with modern technology, so they will have great difficulties in terms of travel, expense and inconvenience.
The hon. Gentleman makes a series of valid points, and they are valid for the whole range of sites affected by the “Building our Future” agenda. In Cumbernauld, for example, HMRC is the largest employer, providing about 1,500 good-quality jobs. I am not making the argument that once a Government Department opens in a particular location, it must stay there forever. What I am saying is that, first, the implications for that town should form part of the Government’s thinking and, secondly, there should be very good reasons for closing any such office. “Building our Future” fails on both counts.
I am grateful to the hon. Gentleman for securing this important debate on a subject that matters to many people in many of our constituencies. Does he agree that surely it makes sense for HMRC to put high-quality, high-wage jobs into areas where there is a deficiency of those jobs? In my district of Bradford, two thirds of the civil service jobs—more than 2,000 of them—are with HMRC. Putting those jobs at risk surely makes no sense whatsoever.
Indeed. That is the argument that I will come on to make. Centralising those jobs in city centres, which are already in many cases doing very well in terms of employment, makes absolutely no sense at all.
This debate is also important to the public and taxpayers generally. When it was formed in 2005, HMRC had 96,000 full-time equivalent members of staff and 593 offices. Less than a decade later, staff numbers had fallen to below 50,000, in fewer than 190 offices. “Building our Future” sets out to close 137 offices and centralise even fewer staff in 13 large regional hubs, with between 1,200 and 6,000 staff. Some 38,000 staff are either going to have to move or leave HMRC. From any perspective, that is a massive and radical change to how our taxes are collected to pay for the services that we all use and rely on, so it deserves the closest of scrutiny.
Does the hon. Gentleman agree that it would help if, at the very least, some research was done into those areas that have already lost offices through the previous NOS programme, of which new Labour was monumentally supportive? We should look at the impact on those areas that have no tax office and rely entirely on phone lines or email, where lots of people cannot get any satisfaction from HMRC at all now. Would he support such an investigation?
I agree entirely. In a nutshell, that is the point of my speech. We have an opportunity now to pause and look at what has happened and the impact it has had. When the proposals come under scrutiny, the business case for change looks decidedly dodgy, and it is also proving something of a moveable feast.
Does my hon. Friend agree that it is extremely disappointing that the UK Government decided to relocate HMRC services from west Lothian to a regional centre in Edinburgh, affecting potentially 1,200 local jobs, without proper parliamentary scrutiny and despite concerns raised by the National Audit Office about the financial integrity of such a move? Although I hope that the Government will seriously reconsider their position, if it is their intention to press ahead regardless does he agree that they should at least consider west Lothian as a centre for a mini-hub, so that we can retain the skilled, experienced staff who would not otherwise transfer to the regional centre, and support a key part of the local economy? I hope my hon. Friend will join me in calling for the Minister to address that point.
I happily join my hon. Friend in making that call of the Minister. In essence, there are strong reasons for a moratorium on further implementation of the “Building our Future” programme, while HMRC, Parliament and the public can take stock, scrutinise what has happened in areas that have already experienced change, and consider whether all the further moves make sense. Since the last time we had the opportunity to debate the changes, we have had reports from the National Audit Office, as my hon. Friend has mentioned, and the Public Accounts Committee.
The National Audit Office noted that HMRC now accepts that its original plan was unrealistic. Little more than one year on from submitting its original business case, when the NAO report was published in January, HMRC’s estimate of the costs over the next 10 years had risen by £600 million—more than half of which was due to higher than anticipated running costs for new buildings. Similarly, estimated cumulative efficiency savings to 2025-26 had fallen from £499 million to £212 million.
I cannot honestly say that I am surprised. I was astonished to learn that the Government Property Unit is in negotiations for some of the most expensive commercial properties in Scotland in Glasgow’s international business district. It may pay the market rate for those properties, but it will certainly be a far higher rate than it would have to pay for the same capacity in Cumbernauld. As the Public Accounts Committee said, HMRC
“has yet to demonstrate that it has a realistic and affordable plan to deliver such a radical change to its estate, and we do not believe that it needs to be based in expensive cities across the UK.”
To cut to the point, with the original business case inaccurate to the tune of hundreds of millions of pounds, is it not time to halt the signing of new leases and deals, take stock of what has happened so far with those hubs that have been established and revise the plans accordingly?
In the case of Cumbernauld, and I have no doubt many other offices, HMRC’s rush to closure is simply incomprehensible. One of the biggest frustrations felt by staff in Cumbernauld is the fact that, to all intents and purposes, the site already meets the criteria that HMRC are looking for in a regional hub. It is a large, easily accessible site that will be nowhere near as expensive as the equivalent space in Glasgow city centre. It is situated between world-leading universities in Glasgow, Stirling and Edinburgh, in the heart of Scotland’s central belt, with all the accompanying digital and transport infrastructure of that region. Why close it and move, as it is rumoured, to somewhere that is currently no more than a car park in Glasgow’s financial district? Just how sure is HMRC about that being the right model for the future?
There are also very real concerns about capacity. The Government are opting to buy into inflexible situations, with 25-year leases apparently signed without break clauses. In the case of Glasgow, if the capacity is wrongly assessed, the office block next door cannot just be demolished, nor is it possible to just build into the Clyde—and requirements do change. Brexit will apparently require HMRC to recruit thousands of additional workers. Brexit post-dates “Building our Future”, so, again, “Building our Future” requires revisiting.
Finally, let us not forget that in 2015, HMRC suffered from the lowest staff morale in the civil service survey. In 2016, it climbed five places to 94th out of 99. That impacts on the Government’s goals for maximising revenue and efficiency. It also impacts on the workforce turnover rate. The chief executive officer of HMRC stated in September 2017 that even he found the level of turnover at HMRC surprisingly high.
There can be costings, revised costings and even more revised costings for brand new governmental hubs, but HMRC will never operate efficiently if it does not invest in its staff and its workforce. There is no point in centralising and saying that the opportunities for staff to progress are being maximised, if staff and their expertise do not stay in the organisation long enough, due to low morale and high turnover.
I know from my discussions with staff that those who have worked diligently for many years distrust the management and its agenda. Members will be aware that support for relocated staff has been reduced from five to three years. The mismatch between the capacity at the new sites and the existing workforces, the lack of clarity, the redundancies and many other factors have contributed to the lack of trust between the staff and HMRC, and the low morale, which is clearly documented in civil service surveys.
In September 2016, the then Chair of the Treasury Committee wrote to HMRC’s chief executive and pointed out:
“There appear to have been over a dozen major reorganisations in HMRC since the merger in 2005. There is a trade-off between stability and what may work better on a management consultant’s whiteboard”.
That, in a nutshell, is why I fear “Building our Future” will be proved wrong: the management consultants’ nice ideas will prove to be drastically different in reality, and when we look back, stability will appear to have been the better option. We have a chance to stop and reflect on whether what was envisaged for the first couple of regional hubs really happened in reality, so let us not waste this opportunity. Let us do what is right for staff, our communities and taxpayers. Let us halt the “Building our Future” programme.
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) on securing this important debate.
This reform of the HMRC estate takes place against the backdrop of large organisational changes in HMRC and the drift towards a more digital economy. The changes, some of which are being made in the Finance Bill, are about making tax digital. People’s interaction with tax and HMRC services online is becoming increasingly important. That change, combined with the change in footfall on the high street and accessibility reviews carried out across the HMRC estate, led the Minister and the Government to make these changes.
Making tax digital is a key part of these changes. Although slightly delayed, it is still in line with the timeline for some of the individual office closures. Combining our staff and skills resources in regional hubs will enable us to improve customer support, which, as hon. Members have said, is allegedly poor, by clustering skills together, and technology will enable us to deliver a better service for our constituents.
It is important that we strike the right balance between cost savings and the accessibility of services. I am sure the Minister appreciates that HMRC is a vital public service, so it is important that we ensure that there is access in smaller towns and cities throughout Scotland and the rest of the United Kingdom. Although the closures in Scotland are proportionate with those in other parts of the United Kingdom, it is important that HMRC proactively looks at outreach schemes to ensure smaller towns and villages still have access to HMRC facilities and services. That is very important to many of my constituents in South Perthshire, Kinross-shire and Clackmannanshire.
I will close on this point. I want to be very brief, because lots of other Members want to speak. The closures are taking place in the context of massive change in our economy and our society as a whole. They are not just about cost saving, but about looking at how our constituents engage with the Government. If this were just a stand-alone measure without the other Government initiatives to make tax digital and increase online accessibility and interaction with constituents, I would stand firmly against it. However, because it is part of a suite of options, HMRC services and investment in digital infrastructure, I believe that some of these measures can and should work for our constituents.
I reinforce the point I made earlier. Many smaller towns and villages in rural parts of our country will need accessibility, especially if their broadband connectivity is not as good as it is in other parts of the UK. We need to ensure that HMRC is proactive in reaching out to those communities and ensuring that they can still access the services they require. The Government want them to engage with the cost-saving initiatives over the next five to 10 years, as outlined in the paper under discussion and others.
I want to make one central point, which is to do with the eight location principles that the Revenue used to decide where the regional hubs should go. All of the proposed regional hubs will be in big, successful cities, such as Leeds, Glasgow, Birmingham and Cardiff. One could argue that, in those cities, a big HMRC office will crowd out private investment. Alternative choices would have been a lot cheaper and would have pump-primed the local economies. In west Yorkshire, if the regional centre had gone to Bradford, rather than Leeds, where there is a severe danger of crowding out, it would have acted as a pump-primer, boosting the local economy.
I do not know whether management consultants or HMRC bosses thought up the eight principles, but they include sustainable large sites, a talent pipeline, single location career paths, a catchment for a mix of business activity, digital infrastructure, facilities for HMRC’s people and robust long-term infrastructure. Only one of the eight—market rates—has anything to do with cost and savings to the HMRC. Obviously, in some of the smaller towns, rents are a lot cheaper. Given that the driving force of the review is meant to be to reduce costs, that seems odd.
Does the hon. Gentleman agree that there should have been an assessment of the social and economic impact that the office closures will have on the local economy? In many towns and cities in the UK, the HMRC office is the largest employer.
That was going to be my next central point. It seems very negligent that such social and economic impact assessments have not been carried out. It is no secret that one of the long-standing offices is in your constituency of Shipley, Mr Davies, which neighbours my constituency of Keighley. When we met the bosses of the Revenue, we were shocked that no such assessment had been made.
I have studied the eight points carefully, and there does not seem to be any rural proofing, which one would expect of this exercise.
There is a relatively new boss at HMRC. It will be interesting to see how much the Government will own this process and how much they will say that it is all to do with HMRC. I think the call for a moratorium is very reasonable, as it would allow us to go back and carry out some economic impact assessments. If the Government press ahead with the broad policy of regionalisation—there are many question marks against that—at the very least they should locate these offices, which are big economic drivers, in areas that would benefit from the boost that they would bring.
I join many other Members in saying that there is still time to halt this process and in asking HMRC to look again. That needs to be done, and only the Government can give those instructions to HMRC.
It is an absolute pleasure to serve under your chairmanship, Mr Davies. I am extremely grateful to my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) for securing this important debate through the Backbench Business Committee. He made a thorough and detailed analysis of what is an appalling situation for our constituencies—particularly in Scotland. Many thousands of people face losing their jobs at HMRC, in a significant blow to local employment and our local economies.
Before the debate, I looked at some of the points made by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East in his speech, and I discussed them with HMRC staff. We wrote a letter to the Minister’s Department about the closure of Centre 1 in my constituency and the associated tax offices. The talent pipeline cuts very deep, despite the suggestion that we do not have one, and I assure the Minister that there is an extraordinarily skilled and talented workforce in my constituency and throughout the other centres that are being cut.
My constituency is home to one of Scotland’s best known tax offices, Centre 1, which we want to keep there. It is named Centre 1 because it was to be Scotland’s centre for tax collection. In my constituency, it is synonymous with tax affairs, our skilled workforce and our families’ livelihoods. Like most local people, I have friends and family members who work for HMRC in the tax office. It is vital to my constituency, and the very idea that it could leave is absolutely devastating to all.
Staff members to whom I have spoken have voiced real concerns about the closures. They worry about the impact of staffing reductions on their ability to do their job well. They worry about having to travel to a new and unknown site, and about the difficulty of finding childcare or disability parking, given increased time away from home for part-time workers and others. They are also significantly concerned about the lack of consultation.
When the proposals were first mooted in the previous Parliament, I met the Treasury and was reassured that I would at least be kept up to date with what was happening about lease proposals. I have heard nothing since and have had to submit parliamentary questions to tease out the information, which I continue to chase. It feels as though my constituency and our workers are being ignored. They do not deserve that, because they have served the United Kingdom in terms of tax revenues so well for so many years.
I entirely agree with the comments of the hon. Member for Keighley (John Grogan) about impact assessments, which are crucial. I cannot understand why such assessments have not been undertaken. In the previous Parliament, I asked the Secretary of State for Scotland about them, but he would give me no reassurances that they would ever be conducted. We are now in the process of conducting our own assessments. That is appalling—surely it is incumbent on the Government to look at the impact that closures and plans might have on communities.
Our HMRC staff are specialists in their field and take great pride in their roles. As has been mentioned, decisions such as the ones we are discussing have a detrimental impact on morale, creating stress, anxiety and sickness absence. HMRC staff should be supported because they do such vital work and the tax income is vital to our public services in general. There is a knock-on effect; we cannot think that lower morale and productivity might have a positive effect on our constituents. We have to invest in the staff, make them feel important and listen to their concerns about what the closures mean for them.
We do not want to see staff uprooted from their established bases and communities and centralised in city-centre offices, which surely cannot be more cost-effective than those in the outskirts of towns. I have yet to hear about lease agreements and arrangements—no update—so it is difficult to make any comprehensive analysis.
My constituency has a “Stay in EK”—East Kilbride—campaign, which is supported by just about everyone locally, whether the media, me, the MSP, local councillors from all parties, the public or HMRC staff. The issue is fundamental for us. I urge the Minister to pause, to have a moratorium, to look at impact assessments and to think about the constituencies that will be devastated by the proposed closures.
This is a really important debate. To provide some context, the HMRC office in my constituency closed in 2014, with staff relocated to Manchester, so I can give the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) two ends of the perspective: I can tell him about the conversations that took place before the closure and about the impact on the town, after the closure.
If the plans are about value for money, we have to ask ourselves why HMRC head office still occupies some of the most expensive real estate in Europe, at the Treasury. That building would make a fantastic five-star hotel, I am sure. The plans are not about value for money but about a fixed view of government, which is, “To hell with towns!”
If all we do is focus on our city centres, we will not be able to realise the true potential of our country. If all we do is to think that what matters is to have our cities thriving, at the expense of the surrounding towns, this country will not move on and make progress—we will not address that very real anger that I felt during the Brexit campaign. People were saying that they were sick of the settlement they have been given, they are sick of industry and well-paid, decent jobs going, and they are sick of seeing their town centres in decline. Those who are in a position to do something about that seem completely indifferent to the impact on their communities.
My hon. Friend makes his point, as always, very eloquently. He mentioned Brexit, and another angle of that is that many of the HMRC proposals were decided before the European Union referendum. Does he agree that once the Brexit negotiations reach a settlement—if we ever get one—that will inevitably cause issues for HMRC, not least the customs union and related areas? Is that not enough to put the HMRC proposals on pause at least until we get to that stage?
That is a good point. One of the biggest gaps in the whole Brexit conversation is not only the transactional relationship with Europe and what our future relationship will be but the biggest deficit in all our debates—what type of United Kingdom will we be at the end of Brexit? What type of Britain do we want? What will our communities look like? How will our economies be framed in the future? It strikes me that there is a complete absence of a direction and a vision for what type of Britain there can be after Brexit. I feel that in Oldham.
The frustrating thing about the HMRC relocation from Oldham to Manchester is that there was no value-for-money assessment. A wider review was done, which said, “If you close x number of offices, you will save money for the public purse”, but no financial assessment was made of the decision to relocate from Oldham to Manchester. That was admitted by the Minister in a February written answer to me.
Let us think about this: if the relocation was meant to be about value for money and about saving money for the taxpayer of this country, why would HMRC relocate from a town where the average office cost is £70 per square metre to a city centre where the average cost is £120 per square metre? Why would HMRC not do an assessment? If we need to rationalise the number of offices in a conurbation, surely we assess the cheapest and most efficient place to put the ultimate office when all the others have been merged into that one. However, that did not take place.
I am pretty sure that part of the reason why that did not take place is the same reason why we have seen the county court closed and relocated from Oldham to Manchester, and why we have seen our magistrates court closed too. It is because the people doing the assessment, or the people who are making the decisions, do not live in Oldham; they do not even live in the north of Greater Manchester. The people making the decisions live in the affluent suburbs, closer to where the offices will ultimately be located when the decision is made. That is fundamental: what voice did staff have in the conversation?
The hon. Gentleman makes a very fair point. The relationships among other local service providers are equally important—the local authority and the local police in Oldham know what is going on in the community. Those localised conversations can no longer take place because the facility is not in the town as it used to be. It is ridiculous that Phoenix House, where HMRC was based in Oldham, is right outside the Oldham Central stop of the Metrolink tram line that takes just 18 minutes to get to Manchester city centre. It would have been very easy to make Phoenix House the new regional hub if there was a desire to do that, but the truth was that it was not even on the list for consideration because it was assumed that the regional hubs had to be in the city centre, at the expense of the town. That is shameless.
The Government tell us that times are hard, austerity bites and we have to live within our means, so surely there is a greater onus on them to maximise every bit of public investment where there is capital or revenue, and to provide proper scrutiny of where the investment goes, to make sure that the money is spent in the most efficient way for the taxpayer. The Government themselves have said that they did not do that. At best, that is approaching bad administration. The very basic things that I would expect a Government to do when spending public money—ensuring that it has the best effect—have not taken place.
What does that mean for a town such as Oldham? The loss of 2,000 staff by the local authority, on top of staff losses at the county court, the magistrates court, the police service and a range of other public institutions in the town, means that there are fewer people going out at lunchtime to buy a sandwich and supporting the local retail environment. There are fewer people going out shopping and using the bars and restaurants after work. There is less footfall in the town generally of people supporting the local economy. None of that was taken into account. We ask what was the local economic impact assessment; the answer is “there wasn’t one”.
If the Government are serious about having a stronger Britain after Brexit, about ensuring that public money is used to the best effect and about ensuring that our towns can be as strong as our cities, it is important to have a new approach. That new approach has to be to ensure that central Government decisions take into account the economic decisions at a local level. We also need to ensure that there is joined-up government. Government Departments that do not talk to one another are doing estate reorganisations in HMRC, the Department for Work and Pensions, local authorities and sub-regional government. No one has asked the basic question, “If we’re being forced to reduce staff and to reconfigure office accommodation, would it make sense to come together in Oldham and share office provision in that town, to support the local economy?” The conversation is not taking place.
It is too late for Oldham. That callous, reckless decision has been made; it has not provided value for money to the taxpayer and it has kicked Oldham when it was already struggling to get up from the ground. But there is still a chance to do the right thing for the towns that have not yet seen their office closed. I urge the Government to do the right thing.
It is a pleasure to serve under your chairmanship, Mr Davies. I thank the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) for securing this debate—I hope that I have pronounced his constituency correctly.
In my constituency, 800 people are employed in HMRC offices in George Stephenson House. In neighbouring Middlesbrough, there are more than 100 people employed in HMRC offices. These people have been told that they can keep their jobs on the condition that they travel to Newcastle each day to work; the “Building our Future” programme consolidates HMRC in the regional centre in Newcastle. If anyone from London looks on a map, they will see that Teesside and Tyneside are not too far from each other, but the reality for these 900 people is that their travel time to work in the mornings, during rush hour, will be at least an hour and a half longer, and it will also take them an hour and a half longer to get home in the evenings.
In Teesside, where the average commute is around just 20 minutes, there is no culture of travelling for an hour and half to get to work. Having spoken with most of the people who work in those offices, the overwhelming feeling is that the choice of a job in Newcastle is not really a choice at all. Having to add three hours to their day is incompatible with their family lives. They are not highly paid workers; the average wage is less than the national average wage. There is also a cost impact; they would pay an additional £400 a month for the privilege of having to work in another town, although they have been offered a package to ease that cost for the first couple of years.
The combination of the time and money that this will cost in the long run has led most people to say that, in effect, they will lose their jobs. That is bad for the staff—for their finances and their time—and it is bad for HMRC. These are hundreds of experienced workers who have a track record of being able to collect taxation. As my hon. Friend the Member for Oldham West and Royton (Jim McMahon) said, these people know the local economy. They have relationships there, and they understand where to look for the people who do not pay the minimum wage and the places that might avoid or evade tax. Loss of experience is bad for HMRC, and this is also bad for the local economy. To add to what hon. Members have said, Stockton-on-Tees is a town, and the 800 people who work in George Stephenson House go there each lunchtime and spend about £1.7 million a year in the local economy. To a small town such as Stockton, that is a lot, and there will be knock-on effects of losing that £1.7 million a year.
Those job losses are happening at a time when HMRC is taking on 5,000 extra staff, according to reports—presumably not in small towns such as Stockton—to cope with Brexit, rather than collect taxes. “Building our Future” is intended to deliver a better service for taxpayers; I understand that. I understand the need to digitalise and reduce phone calls and paper. We have to allow HMRC to make changes, but we also have to consider people and the unintended consequences of the changes.
As far as I can see, the only successful reduction that has occurred as part of the programme is a bit of a reduction in staff numbers. Service quality has deteriorated. Hon. Members will all have constituents talking to them about the amount of time that they have to wait on the telephone to get through to HMRC. In 2005, it was an average of 15 minutes, but in October 2015 it took people an average of 47 minutes to get through. HMRC has responded by hiring more call handlers on short-term contracts, but because those people have so little experience, I am told that the people with more experience spend a lot of their time supporting the people on temporary contracts, and overall that puts an already overstretched workforce under more pressure. Quality is absolutely central to the taxpayer, but it is also really important to the people who work at HMRC; they take real pride in their work. Sadly, 70% of HMRC workers have said that the changes have had a negative impact.
There are falling standards and falling morale, all at a time when there are billions of pounds of uncollected taxes.
Different people have different estimates; some say that £37 billion of taxes are avoided or evaded every year, and some even say that it may be up to £120 billion. We can ill afford to lose people, such as the experienced 800 workers in Stockton and 900 workers across Teesside, who have expertise and a track record in helping us to collect the taxes that we need to run all our services.
Looking up from London, the distance between Teesside and Tyneside may look, on a map, like a short distance for people to travel, but in reality travelling for three hours a day means that they are either not there to take their children to school or not home from work in time to read their children a bedtime story before they go to bed. Will the Minister pause and reconsider whether this change is really necessary, and really in the best interests of HMRC and the people who work there?
It is a pleasure to serve under your chairmanship, Mr Davies. May I put on the record my appreciation of your work in this area? You, like me, have made a case for Bradford, and you continue to do so.
I thank the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald)—I have failed miserably to pronounce that—for securing this important debate. Hon. Members from across the House have made forceful and persuasive arguments, and I hope that the Minister really listens and tries to understand Members’ genuine concerns about these ill-thought-out proposals. I am also grateful to my hon. Friends the Members for Keighley (John Grogan), and for Oldham West and Royton (Jim McMahon), both of whom made very good points, some of which I will try to elaborate on. In particular, the point about value for money that they both made eloquently needs to be looked at much further, certainly in the case of the Bradford district and the negotiations that have led us to where we are.
Let me set out the impact of the proposals for the Bradford district. The closure of the HMRC offices would have huge financial consequences for Bradford. As well as potentially putting 2,300 high-wage jobs at risk, it would mean a £110 million reduction in the district’s gross value added, and the loss of around £10.5 million of district retail spending. The local authority would lose out on £1.2 million in business rate receipts, and there would be a £2.5 million increase in public spending costs. Put together, those things would be disastrous for the Bradford district.
I mentioned fairness and inclusion in an intervention. Two thirds of our civil service jobs come from HMRC. The Bradford district is already at the bottom end of comparable towns up and down the country in terms of high-wage, high-skill Government jobs. It really is unfair to impose this closure on the district. I absolutely accept that Leeds, where it is proposed the regional hub should be, is a great place for business, but my hon. Friend the Member for Keighley made the pertinent point that there is a real danger that putting more civil service jobs in Leeds will overcrowd the private sector there, so this may not be a good thing for Leeds, either.
Let me come back to value for money and the economic case that hon. Members eloquently set out, and use Bradford as an example. The case put forward by Bradford would have saved £30 million, compared with the current proposals. That is a huge figure. As my hon. Friend the Member for Oldham West and Royton pointed out, there would have been lower accommodation costs per square metre, shorter commuting distances and lower redundancy and relocation costs, so why was that case not considered?
As always, my hon. Friend is absolutely right. These issues are arising with increasing consistency and, frankly, I believe that more needs to be done about them.
I come on to the workforce. The hon. Member for Ochil and South Perthshire (Luke Graham) made the good point that these decisions have to be about more than just value for money; they have to be about community, too. That point should not be lost. In Bradford, we have one of the most diverse and vibrant workforces, and one of the youngest populations. We have 84,000-plus work-ready people with degrees. We have Bradford University, which is a centre of excellence for MBAs. We have many things to offer, and those frankly have just been ignored.
Much has been made of the argument that Bradford is not the right location and does not have the same connectivity as Leeds. We may not have the same connectivity, but we have suitable connectivity. We have real proximity to the M1 and the M62. Although we may not be where Leeds is, we are certainly not far away from connections, so that argument does not persuade me.
The powerful business case for Bradford was completely rejected. We have heard from hon. Members from across the House that all the cases that have been put forward have fallen on deaf ears. We have shown today that no economic case—no value for money case—has been established for these proposals. That makes me wonder whether they are the result of decisions by individuals sat in ivory towers, who chose places that were better for them to work and live in. That is the real question, and I urge the Minister to answer it.
The hon. Gentleman talks about people in ivory towers. Is it not ironic that people who are made redundant as a result of their town or city losing its HMRC office will find that they do not have a Department for Work and Pensions office or jobcentre to go to in their town either?
As the hon. Gentleman mentioned, connectivity is key. I represent a constituency that is not so well connected, so I certainly empathise with some of the challenges that his constituents face. Will he join me in asking the Minister whether, if the Government do not change their position on some of these closures, we can do as Opposition Members have mentioned and use Brexit as an opportunity to look at moving Departments outside London and other key cities, to ensure that our towns and secondary cities—especially those that have already faced closures by other Departments—are just as well connected?
Absolutely; I agree. I was coming to that very point and to the point made by my hon. Friend the Member for Oldham West and Royton, who I thank for giving us a perspective from a place where closure has already happened. He showed us the failures there, and made the plea that we should learn from that lesson and not do the same in other places.
My final point, which is related to the point made by the hon. Member for Ochil and South Perthshire, is about the northern powerhouse. If we are serious about these things—certainly in the case of Bradford—the economic distribution must be fair and equitable, but again the distribution is swinging to the major city in the region. With respect to Leeds and everyone there—my point is not against Leeds—it is the northern powerhouse, not the Leeds powerhouse. We must have equitable distribution in our economic welfare. I urge the Minister to listen to all Members today, and to use this opportunity to pause the proposals. I have already made the point around Brexit, and I think the Minister has scope to pause the proposals and give further time for consideration.
It is a pleasure to see you in the Chair, Mr Davies. Like other hon. Members, I thank you for your guidance and support and your interest in this area. First, I refer the House to my entry in the Register of Members’ Financial Interests and my position as chair of the Public and Commercial Services Union parliamentary group. As you are aware, Mr Davies, we have been here debating HMRC office closures many times, and each time I and other Members have asked HMRC to think again and pause for thought.
The debate was opened superbly by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald), who rightly thanked HMRC staff for their contribution. I will give some statistics to back that up. He rightly mentioned the low staff morale in HMRC as a result of the way in which management have handled the issue.
What was most telling in the contributions so far—it is the common thread—was the social and economic impact that the closures will have in towns and cities across the UK. We heard from the hon. Member for Keighley (John Grogan), and my hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) talked about East Kilbride being Centre 1 for tax collection services in Scotland and the UK, and the lack of consultation by HMRC with parliamentarians. We also heard from the hon. Members for Oldham West and Royton (Jim McMahon), for Stockton South (Dr Williams) and for Bradford East (Imran Hussain), who continued the theme of the social and economic impact that the closures will have in their communities.
The starting point was 12 November 2015, when HMRC announced plans to close nearly every office—approximately 170 in the HMRC estate—and replace them with 13 regional centres and four specialist sites, mostly based, as we have heard, in major UK cities. The plans were titled “Building our Future” and if implemented in full would involve vast areas of the UK being left with no local HMRC office, including restricting the department to two offices and one specialist site covering the entirety of Scotland; two offices and one specialist site covering the entirety of the midlands; two offices and two specialist sites covering the entirety of London and the south-east of England; two offices covering the entire north-west of England; two offices covering the north-east of England and the great region of Yorkshire, Mr Davies; one office covering the entirety of Northern Ireland; one office covering the entire south-west of England; and one office covering the entirety of Wales. Like many hon. Members, I am gravely concerned that, if the plans are not halted, they will leave vast areas of the country with no nearby HMRC office. I am also concerned that, more than 15 years on from the troubled private finance deal that HMRC entered into with the contractor Mapeley, significant risks remain in the handling of the contract. The Department has learnt nothing. A National Audit Office report draws attention to the fact that HMRC has not negotiated
“any break points in the 25-year leases it has signed so far for regional centres in Bristol and Croydon.”
Of course, there have been some changes to those plans—not all of them for the better. Let us go through them in turn. The original proposals meant there would be no physical presence in East Anglia. HMRC has subsequently decided to retain a presence in Ipswich, first as a specialist site but potentially to include broader work streams. Plans to close the only Welsh-language unit have also been dropped, with staff now co-locating with the Department for Work and Pensions—that is a point I will develop later in my contribution.
The estate negotiations on the location and buildings for the proposed Manchester regional centre are taking longer than HMRC initially anticipated, meaning that the regional centre will now open at least a year late, and possibly even later than that. When it eventually opens, it will do so in two phases. The overall capacity of the regional centre is in a state of flux, forcing the Department to extend the existing leases of three major sites in Manchester.
There have also been problems in Northern Ireland; the opening of the Belfast regional centre has been subject to significant delay. In other areas, closures have been brought forward, including at Blackburn, Bolton, Netherton and St Helens in the north-west; Derby, Worcester and two sites in Solihull in the midlands; and York in the north. Those closures, with point-blank notice, cause significant stress, upset and practical difficulties. That is not an efficient way to run a Department.
As a direct result of staff leaving the Department because of the office closures, HMRC is losing a vast amount of irreplaceable experience. Based on data provided to the Public and Commercial Services union by HMRC, in 2017 alone the Department will lose the equivalent of more than 17,000 years of staff experience, and the vast majority of that comes from customer compliance work.
We believe that the “Building our Future” proposals are completely driven by the deadlines within the STEPS contract of 2021 and that those are flawed. The existing proposals should be put on hold until appropriate parliamentary scrutiny, public consultation and socio- economic impact assessments are carried out.
I do, and I think it has been driven by cost. One other area is that while I and my hon. Friends were campaigning in our constituencies to get re-elected, HMRC, during purdah, was signing contracts, and it did not wait until after the election to inform the House of those changes. I sympathise with the point that the hon. Gentleman made. Of course, during the process, we had the Concentrix disaster. HMRC had to terminate its contract early because Members of Parliament from right across the House had major complaints about how Concentrix was dealing with its business.
In the National Audit Office’s report, the key findings stated that:
“it will be longer until HMRC starts to realise savings. In the long term, it still expects its new estate to reduce its running costs. It now estimates cumulative efficiency savings by 2025-26 of £212 million, reduced from the £499 million estimated in its strategic outline case in November 2015. By 2025-26, HMRC expects its annual running costs to be £83 million lower than they are now”.
Whether it is £83 million, £212 million or even £499 million, those are drops in the ocean compared with the Government’s own accepted figure for the tax gap of £36 billion. The figure researched by the Tax Justice Network and PCS puts the tax gap at £119 billion. A major reorganisation and rationalisation of the most vital Government Department, putting at risk the very ability to carry out the tax collecting function for savings that are not properly costed, is irresponsible management and governance.
The Scottish Government are consulting today on the Scottish approach to taxation, to accompany gradual increases in its taxation powers. HMRC’s plans could well result in the severe limiting of HMRC expertise based in Scotland, which will become even more important as the Scottish Parliament debates increases in taxation.
Does the hon. Gentleman agree that recent figures show that unpaid tax is at a record low, so some of HMRC’s performance has improved and it is actually doing quite well? Will he join me in asking the Minister to give assurances that that performance will continue, even with the closures and movements going forward?
I will meet the hon. Gentleman halfway. I do not believe that unpaid taxes are at a new low. In fact, I think the report I referred to earlier, published by Tax Justice Network and PCS, showed a gap of £119 billion. That certainly suggests to me that one of the major focuses of HMRC should be collecting tax and going after the rogues who are registered in the Cayman Islands and other places, shuffling money. I will meet the hon. Gentleman halfway on that.
HMRC faces a number of challenges requiring investment in offices and infrastructure, and no one from HMRC or from the Treasury has so far explained what changes they will make in the “Building our Future” programme to meet these challenges. I will not avoid saying, “We told you so,” because we did, time after time, in this place and elsewhere. We know that UK overseas territories are used to avoid billions of pounds of tax. We know that the uncollected tax avoided by these high-rolling spivs runs into tens or even hundreds of billions of pounds. It beggars belief that, at a time when there is more focus than ever on tax dodgers and their theft from public services, HMRC are shuttering dozens of offices across the country, losing staff and skills that could otherwise be used to target the high rollers who cost our hospitals, infrastructure and schools billions each year.
It is therefore somewhat ironic that Mapeley, to which HMRC’s office estate has been outsourced, is based in Guernsey, a notorious tax avoidance hub overseen by the UK Government. Downing Street confirmed yesterday that HMRC will need up to 5,000 new staff as a direct consequence of Brexit and the UK leaving the customs union.
Does the hon. Gentleman agree with me that, with the combination of Brexit and the devolution of increased powers over tax and income bands to Scotland, it is exactly the wrong time for HMRC to consider scaling back its operations?
I agree with the hon. Gentleman. The next question is rather obvious: “Where are all these staff going to go?” Some will be deployed at the new hard border, which those on the Government Benches seem to believe will have virtually no impact on our economy. At least, I can only assume that they believe it will have zero impact; that can be the only reason for yesterday’s refusal to publish 58 impact assessments that they commissioned. Some will be based in HMRC offices, but what offices? Where in the country will these new recruits be based? Over the last two decades the number of HMRC offices has gone from 700 to, under the Government’s plans, just 13.
Where exactly are the HMRC staff tasked with border duties in the north of Scotland going to work? They cannot work at the Lerwick office, because it is closed. They cannot work at the Ullapool office, because it is closed. They cannot work at the Wick office, because it is to close. They cannot work at the Peterhead office, because—guess what?—it is closed. The only offices left in Scotland will be in Glasgow and Edinburgh. We will have legions of new HMRC staff, tasked with policing the customs border that it appears to be the Government’s wish to create, with nowhere to carry out their office role, in an area of work that is guaranteed to involve more paperwork, more deskwork and more IT skills. I mention those offices in particular because each of those towns is a port, importing and exporting on a daily basis—the very places where, one would assume, HMRC staff are needed most. The lack of joined-up thinking on the issue would be laughable were the consequences felt across the country not so serious.
We also found out in July this year that only 399 staff are employed by HMRC in enforcing the national minimum wage, less than one full-time staff member for each constituency represented in this House. I simply do not believe, and neither do HMRC staff members, that the number of exploitative and criminal employers is so low as to allow for that low level of staffing. Indeed, the Government confirmed to me in a written answer in June that it would not, and had no plans to, fill the 83 current vacancies in the HMRC minimum wage compliance unit.
In the last financial year, HMRC closed 2,600 cases of non-compliance with the national minimum wage. That such a small staff team managed to bring so many criminals to book is incredible, and a tribute to their tenacity and hard work. However, I simply do not believe that that is even the tip of the iceberg. There are many thousands of other criminals out there, exploiting low-paid staff and pocketing profits for themselves. These individuals must be rooted out and dealt with, but what hope do 399 staff have of policing the full gamut of employer exploitation when 2.67 million businesses are registered for VAT or pay-as-you-earn? How can an office in Edinburgh properly and sustainably investigate employer criminality in Islay or Caithness? HMRC’s cuts agenda is putting the poorest and most vulnerable employees at risk of exploitation by crooks and gangsters the length and breadth of these islands.
The hon. Member for Ochil and South Perthshire talked about the closures in the round. I mentioned earlier that the proposal for the Welsh language unit in Wales means there will be a relationship with the Department for Work and Pensions, but what is that relationship? It is time for the Government to produce a map of office closures for all Government Departments, because we will find ourselves in the farcical situation of an HMRC employee having to take redundancy because they cannot travel hundreds of miles to the new regional centre, only to find that the jobcentre has been removed from their town as well and they will have to travel further to sign on, never mind go to work at HMRC. I hope that the Government will produce a map of office closures across the United Kingdom.
I will touch on the roll-out of universal credit and HMRC’s role in how this is paid to claimants. Universal credit fundamentally depends on the ability of HMRC to provide real-time information to DWP about an individual’s earnings from work. The entitlement to UC for the following month is calculated from that, based on the Government’s own formula. It is therefore vital that the information provided by HMRC is 100% correct and accurate. Any errors in the processing or transfer across to DWP of the employee’s salary information could be catastrophic for someone relying on universal credit to top up their low salary.
We all know the carnage being wrought by the roll-out of universal credit; but I fear that the cuts to HMRC’s capacity could result in further devastating implications for people receiving in-work benefits. If things go wrong with the flow of real-time information to DWP, if errors are not identified before universal credit payments are calculated or if the data is provided to DWP late, the consequences for the worker pile up, with fewer staff and fewer offices within HMRC to correct these errors and ensure that the correct payments are made.
Improvements in digital services are welcome, but not at the expense of the capacity for human intervention and expertise to fix problems and resolve issues. I fear that the Government have not properly recognised these new, massive interactions between DWP and HMRC in its “Building our Future” programme, and that the price to all of us, particularly those who need help the most through universal credit, will only become apparent when people’s finances and lives are devastated through no fault of their own. The landscape has changed immensely since the “Building our Future” programme started. Customs barriers could be erected in a little over 18 months. Thousands of new HMRC employees will be recruited, after years in which we were told that job losses were the inevitable result of progress. I hope that the complexities of universal credit, with all the potential for human disaster that they entail, are now becoming apparent to those on the Government Benches.
There are growing demands for tax justice from across the political spectrum. It is surely time for HMRC and the Treasury to hold their hands up and admit that they got this one wrong. It is time to admit that the world has shifted on its axis since “Building our Future” commenced and that the burden on HMRC staff, both current and future, represented by the programme is unsustainable, unjust, and cannot be a rational way to run a taxation system. It is time for HMRC to go back to the drawing board and begin planning the next generation of accommodation for HMRC staff and services, serving communities and the people in them, rather than the bureaucratic nonsense that my constituents and others have to endure.
The plans to close HMRC offices will be extremely damaging to HMRC’s operations. They fail to understand or take into account the diversity of the needs of the Scottish or, indeed the UK, economy and have the potential to seriously compromise the ability to collect tax, enforce compliance and close the tax gap. They also create massive uncertainty about jobs and locations across Scotland and the UK. With Brexit looming on the horizon, the Government must now urgently review their plans for the future of HMRC and ensure that it is fit for purpose.
It is a pleasure to serve under your stewardship, Mr Davies. Where do we begin with this situation? It is an absolute dog’s dinner. The Minister has inherited a number of dogs’ dinners since coming into post and I almost feel sorry for him.
My hon. Friend the Member for Bradford East (Imran Hussain) talked about the need for human intervention, but I think we need divine intervention. St Matthew is the patron saint of tax collectors, and he will have to be prayed to an awful lot for this particular mess to be put right. We all sit up when somebody talks about modernisation, because we know what it means: job cuts and closures of this, that and the other. And this is a classic case of modernisation.
I met senior HMRC officers to discuss the criteria used for the decisions. I declare an interest: HMRC is a significant presence in my constituency and well over 2,000 of my constituents work there. Members will, therefore, forgive me if I spend a little time on Bootle, because it is an exemplar of the problems facing other places.
The officers told me that one of the criteria is that offices need to be near a city centre, but Liverpool city centre is closer to my constituency of Bootle than it is to parts of Liverpool itself. They also said that they need to be near a university, but the situation is exactly the same: Liverpool University and Liverpool John Moores University are closer to Bootle than they are to the proposed new Liverpool site. The officers talked about transport and infrastructure access, but the HMRC offices in Bootle are literally surrounded by stations, including a railway station. In fact, a bus station right next to my office is literally a minute’s walk from the HMRC offices in the Triad building and the new St John’s House.
We were told that we needed to maintain staff retention, but the turnover at HMRC in my constituency is negligible. They are high-skilled, high-performing, loyal staff, so that criterion does not apply. There has been no impact assessment. Nipping back to the transport situation, no assessment was made of the transport links. Mersey Travel, the Cheshire transport authority and the Welsh transport authority were not contacted, even though they will also be affected by the proposals. The way in which this has been dealt with has been an absolute dog’s dinner.
My hon. Friend the Member for Wrexham (Ian C. Lucas)—he apologises for not being here—has written to the Chancellor, because the issue affects his north Wales constituency, which is virtually on the border. The letter mentions the proposed closure of the Wrexham HMRC office, which will result in the loss of 350 jobs, as part of the proposal to centralise Wales staff in Cardiff. It states:
“I am incredulous that the Government is continuing to propose a policy course of moving staff away from the regions to centralised city centre locations and it seems to me that the new political environment created by Brexit allows us to pursue a new regional policy by maintaining jobs in, for example, Wrexham, the largest town in North Wales.”
That is a very good point.
I apologise for only mentioning this now, but I am pleased that the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) has brought this issue to our attention again. How many times have we discussed this matter without ever receiving any proper answers from the Government? Interventions from my hon. Friends the Members for Coventry South (Mr Cunningham) and for Bradford East made a compelling case for why it needs—at the very least—to be looked at.
My hon. Friend the Member for Oldham West and Royton (Jim McMahon) graciously shared with us his experience of the heart-rending closure process in his constituency. I thank him for bringing that to our attention, because, if the proposals go ahead, that will be the future for communities right across the country, including mine. Thousands of people who work in my constituency will be moved to the iconic but very expensive India Buildings—car parking is at an absolute premium—in Liverpool. Why do they have to move three miles up the road when it is going to cost more money? There will be a net cost to the taxpayer in my constituency—but not, apparently, to the so-called national envelope—as a result of those offices being moved. That is dreadful.
Colleagues have made those points time after time, but let us hear what other people are saying. In a report on professional bodies, Accountancy Live noted:
“HMRC reorganisation risks pushing tax authority to breaking point. Tax advisers and professional bodies are sceptical about…HMRC’s plans to close 137 offices”.
Those are not our words, but those of professionals who work on these issues every single day.
The Institute of Chartered Accountants in England and Wales said it was staggered by the argument that HMRC will actually be adequate to provide any sort of service to 5 million or 6 million taxpayers in the London area, notwithstanding what reconfigurations may be made to the service. The word “disastrous” has been used and I agree that the situation is and will be disastrous. I ask the Government to take a step back and reconsider.
On Mapeley, something does not smell right, to be frank, about the deal for the India Buildings—to which HMRC will be moving—prior to HMRC’s involvement. People are coming to me all the time about that, so I am going to have to look in much more detail at the proposal. I have no doubt that in due course I will have to either come back here or write to the Chancellor, although I hope that I will not have to do so.
Opposition Members have raised the social and economic impact, but I do not think that any Government Members have done so, with the exception of the hon. Member for Ochil and South Perthshire (Luke Graham), whom I thank. It is symptomatic of the debate that only one Conservative Member is in attendance. Others do not appear to be in the least bit interested in the impact that the proposal will have on whole swathes of the nation, including Scotland, as the hon. Member for Glasgow South West (Chris Stephens) has said, and Wales, which will have one office. There will be 10 or 11 offices in the rest of the country and possibly one in Northern Ireland.
This is a pretty grim situation. To add insult to injury, some of these deals were signed de facto during purdah. If a Labour Government had done that, there would have been absolute screeching from the press, the media and the Conservatives about how we were trying to tie the hands of a subsequent Government. We would have been pilloried for it and—do you know what?—rightly so.
The issue of making decisions during purdah has already been raised. It is right and proper that those decisions were made because, as the hon. Gentleman will know, under the appropriate arrangements, the Government should never act such as to incur costs through delay. Furthermore, those decisions were signed off in entirely the right manner by the Cabinet Office.
I listened to the Minister’s intervention. Does the shadow Minister agree that it is somewhat ironic that during purdah, some of these contracts—for example, the contract signed in Edinburgh—were signed on some of the most expensive buildings in Scotland?
The hon. Gentleman is absolutely right. Some of them cost an arm and a leg. The Minister should take on board the question of perception. In a democracy, when we are in the middle of an election, it might be technically, legally and administratively okay to do this, that and the other.
I am afraid that I do not buy the Minister’s explanation at all. The delays to the lease being confirmed for the Manchester office meant that additional costs were already being incurred. The incurred costs for one scheme were because of commercial and development reasons. The Government say that they could not wait for purdah to complete, but that would have given a new, incoming Government the freedom to change that decision. The situation is very odd.
My hon. Friend makes an excellent and valid point. The Government should think those sorts of things through.
As I was saying, there is, at the very least, an issue of perception about whether this is all above board. Even if it is above board, it has to be seen to be above board. The issue is that people do not feel that that is the case. We all feel that something is not quite right. In a democracy, we have to be seen to be above board. That feeds into the concern that some of us have that Parliament is being ridden over roughshod on a whole range of issues. For example, we did not have Opposition day debates for months on end. When we did get them, the Government virtually did not turn up to respond, and they continue to take that approach. It feeds into the perception that they are developing contempt for the views of Members in this Chamber and, specifically, the main Chamber.
There is a perception—and in this case, it is a reality—that the Government treat people with contempt. A briefing on the civil service compensation scheme feeds into that narrative:
“On 18 July 2017 the High Court held that the Government had failed to comply with the duty to consult prior to amending the CSCS, in that it had imposed conditions on union participation in the consultation process.”
That seems to be saying, “You either agree with us in advance what we want you to discuss, or you’re going to be brushed aside and not considered.” The briefing continues:
“As such, the 2016 amendments were unlawful.”
There is getting to be a pattern of unlawfulness with the Government—for example, the issues on tribunal fees and in relation to social security. It goes on:
“The Court’s decision is at the time of writing subject to appeal to the Court of Appeal.”
I have no doubt that the Government will do that. That is dated 26 October—just a few days ago.
We are not the only ones making this argument. The Public Accounts Committee said:
“We do not believe that it will save as much money as HMRC has predicted”—
that is the understatement of the decade—
“and we are concerned that it has not thought through all the negative costs to the wider economy of its approach and the impact on local employment”.
That is another understatement, if ever there was one. Many people and communities will be dreadfully affected by this.
Let us talk about service issues. The Institute of Chartered Accountants in England and Wales said:
“Service standards are deteriorating with taxpayers having to spend longer and longer on the phone trying to get through or waiting for their letters to be answered.”
My hon. Friend the Member for Stockton South (Dr Williams) alluded to that. To boot, the National Audit Office says that this has cost £600 million more than first thought. That is the situation we are in. Why the Government are persisting with this dog’s dinner is absolutely beyond me.
Members today have made fantastic contributions that were forensic, surgical, factual, objective and mixed with a bit of humanity, which seems to be completely missing from the Government’s approach. I ask the Government to take these proposals back, give them further consideration and think about the communities and people affected.
May I say what a pleasure it is to serve under your chairmanship, Mr Davies? I know this is an important subject to you, so if I hear any stifled gurgling or funny sounds, I will put them down to your general condition, rather than to you expressing an opinion on the matter at hand.
I thank the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) for securing this very important debate. We are talking about very important matters—people’s jobs and local communities. Of course, the overarching matter we are talking about is the efficient collection of tax. We all know why that is extremely important.
Before I get into the specifics of the plans we have been discussing, perhaps I could make some general points that will be useful. HMRC’s work is fundamental to that of the Government. It provides the funds for the public services on which we all rely. Every pound we raise through taxation is another pound we have to support our nurses in the NHS, keep our police force functioning effectively and support our armed forces. In other words, HMRC is not engaged in some kind of theoretical exercise. One of the most important functions Government have is to bring in the money to support public services. Taxpayers expect and demand that the money be spent responsibly, with good reason.
I think all Members here would agree that it is vital that HMRC can deliver value for money and maximise the tax it collects, relative to the tax due. It follows from that that we must have a tax authority that is fit for the modern age. I make no apologies for using that expression.
I do not think anybody disagrees with the Minister on the collection of tax, but that is all the more reason for the Government to get their facts right about the places where tax will effectively be collected from, and to not revise the costs time after time. This has now cost an additional £600 million. Is it not incumbent on the Government to get those figures right before they come to Parliament and wave these proposals through?
A number of Members in the debate raised the costs mentioned in the National Audit Office report, the Public Accounts Committee report and so on. Certainly, the business plan has gone through various iterations, but where we are is quite clear: the total investment over the next 10 years will be £552 million. The NAO has disputed some of our figures, and the Government’s view is that the NAO has looked at those figures on a different basis—for example, over a 10-year period, whereas we were initially looking at figures over five years.
We have some cost avoidance of £75 million per annum from 2021 through getting out of the private finance initiative arrangement—which, incidentally, we entered into in 2001, which was of course under a Labour Government. On top of that, we will have £300 million-worth of savings over the next 10 years, and we will have annual cost savings of £74 million in 2025-26 compared with 2015-16, rising to around £90 million from 2026-27. The savings are ongoing and will be long standing.[Official Report, 27 November 2017, Vol. 632, c. 2MC.]
On value for money, I happen to agree with a number of points made about the opportunity here to rebalance the economy, but I do not understand how it can be any more cost-effective to relocate these major tax offices to very expensive city centre locations. The issue of future-proofing was raised by the hon. Member for Glasgow South West (Chris Stephens). The Government have signed, through HMRC, a number of long-term leases on large offices in Croydon and Bristol without break clauses. Clearly it is essential that the capacity of HMRC to collect taxes is not impeded, but is it in our long-term interest to sign such long contracts for very expensive city offices?
The hon. Gentleman makes two points. One is a general point about the economic sense, or otherwise, of locating the services in larger hubs. The arguments on that are, broadly, extremely strong. They are that we can have larger groups of people and more collaborative working and can ensure that the infrastructure and technology are there. HRMC operates very differently today from how it operated some decades ago. We take a risk-based approach to chasing down tax that should be paid and is not being paid. That involves a lot of data and analysis. Frankly, the idea—if anyone here is entertaining it—that for the last few years people have been able to walk into their local tax office or have appointments there is just not correct. We need centres of excellence that can work in the manner that I have described.
The hon. Member for Easington (Grahame Morris) raises the issue of long-term leases, and he is right to say that in some cases there are no break clauses. I make three points on that. First, we get a much more competitive rate if that is the basis on which we enter into a lease. Secondly, that of course does not mean that leases cannot be broken at some future point by way of negotiation. That is quite typical in the commercial property market. Thirdly, we have flexibility within those leases, such that other Government Departments and employees would be able to use the buildings as well. There are therefore at least three very good reasons why that approach has been taken.
Let me now make some progress. We need a tax system that offers digital services in an age in which people increasingly expect and rely on them, that makes use of technological developments to deliver as efficient a service as possible, and that is suited to the dynamic and fast economy of today.
[Graham Stringer in the Chair]
I hope that the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East would agree that just dispersing employees across a wide area is not an efficient way to run any organisation, let alone one with responsibility to the taxpayer.
I am not sure whether the Minister’s tactic is to talk at length about matters on which there is agreement. There is agreement on the move to digital services, the need for those to be fit for purpose, and the need to take as much tax as possible to fund decent public services, but the majority of today’s debate has been about the financial assessments of the deals done and the decisions on the locations of the head office and the regional hubs. I would appreciate it if the Minister would focus on that, because as far as I can see, the evidence base to support those decisions is at best very weak.
The hon. Gentleman is right: much of the debate has focused on the matters to which he refers. I am not seeking to avoid those other elements of the debate at all and was coming on to them, but I shall deal with them now, as he has raised them. HMRC has had eight very sensible criteria by which to judge where to locate the new hubs. He will know that we are looking at sustainable large sites, with the capacity to hold all HMRC’s requirements for the region in a single building. The talent pipeline, which has been mentioned, is extremely important.
Everyone in the Chamber is in favour of much of the approach to digitalisation of the tax process, but does not that process itself undermine the case for saying that everyone has to be in one location? The fact that everything is being done digitally means that folk can stay in the offices that they are in currently and we can get on with it.
I do not accept that point. We could take it to its logical conclusion and assume that everyone could work from home, and we could then have a very disparate workforce. There may be some attractions to that, but there is huge value in bringing people together in a single building, where there is a critical mass of individuals: collaborative working and the sharing of experience and ideas can take place, meetings can be held, and the technology is all in one place. I would have thought the hon. Gentleman would recognise that. Let us face it: if we went back to 2005, we might be debating whether we should shrink the number of offices from 600, which is what it was at that point. There will always be arguments about whether we should do things and the local impacts and so on, but this overarching direction of travel, it seems to me, has to be right.
Could I ask the Minister two questions, then? First, on the criteria for where to locate the offices, was a social-economic impact assessment made for the towns and cities whose HMRC offices are closing? Secondly, given that he has mentioned homeworking, can he confirm whether the Department has published the information from the homeworking pilot in Wick?
On the latter point—the specific query— I will have to get back to the hon. Gentleman, but on the general point about impacts, HMRC has looked extremely closely not just across the eight criteria, which I was working my way through, but at the impact on the individuals working at the existing offices. I know for a fact that that has gone right down to literally every single employee, plotting where those people live, and working out travel-to-work times and so on.
Could I just make one other point? The relocation does not necessarily mean that all the employees who worked at the previous office, for want of a better expression, will no longer be working for HMRC. Many of them—about 90%—will either work through to retirement at that office or migrate to working at the new hub.
I thank the Minister for giving way again. Can he confirm whether the Department will publish an economic impact analysis of staff moves? If people based in, for example, Inverness or Wick will be working in Glasgow or Edinburgh, I would think it would be very difficult for them to travel to their work every day.
We are not publishing the kind of impact assessment that the hon. Gentleman suggests, but my point is that it is not the case that HMRC has not very carefully looked at those individuals who will be affected—at where they live, the travelling issues and so on—to ensure that it is as helpful as it possibly can be to all the employees in those circumstances. We heard in the debate about providing assistance with travel costs, for example. There is also relocation assistance. All that is being very carefully looked at and engaged with by HMRC.
Is the Minister seriously suggesting that Manchester city centre, 7 miles away from Oldham town centre, meets the criteria relating to the talent pool, throughput of staff and the economic case any better than Oldham town centre would have done? If it does, why do the Government refuse to publish the internal documents that would make the case?
The hon. Gentleman will appreciate that I have not come here prepared with all the precise details of exactly how that decision was arrived at, but I am confident that HMRC has, with due diligence and in a very objective and dispassionate—no, objective—way, looked at which locations meet the eight criteria, and made a balanced decision at the end of that. I am very confident that it has come to the right conclusions.
No. I am not going to commit to bringing forward all sorts of reports and things that various hon. Members may or may not call for. I understand why the hon. Gentleman may call for those things, but I can reassure him that we have published the criteria on which the decisions were made. They are in the public domain. There are eight criteria, and they are very clearly available.
Does the Minister agree that one of the most important areas that needs an assessment in these processes is the economic impact on those areas where the regional hub is not based? That information, in my view, is vital when we are looking at the holistic picture. Does the Minister accept that that information is important, and was it obtained in every instance?
That prompts the question of what the overarching purpose of HMRC is: to provide customer service efficiently to those who need access to it, and, at the end of the day, to bring in tax. We have a tremendous record, and it has a tremendous record, of doing exactly that. The main thrust of these decisions has ultimately to be about having a 21st-century organisation for a changing environment, and that means the kind of model that this process is driving towards.
The criteria are there to allow a balanced judgment across the eight criteria as to where the best place is for the regional hubs. That is exactly the approach that HMRC has taken. I fully appreciate that there are Members here who are very unhappy with the fact that there may be some closures in their constituency, but that does not necessarily mean that the criteria are being inappropriately exercised.
The Minister’s colleagues in Departments such as the Department for International Development feel that East Kilbride in my constituency is an excellent place to have a hub and digital and new services, and has a great talent pool. How does this make sense, because there is surely a contradiction? We do not fit the eight criteria, but for other Departments reaching out and doing excellent work in East Kilbride in the modern age, we meet all the criteria. It simply does not make sense. Why is it more fitting to be in Glasgow than in East Kilbride?
As the hon. Lady knows, a transition office will be kept in East Kilbride; it would certainly not have been there had many of the strengths to which she alluded not been present in the local community. On balance, it has been decided that it is better to go to Glasgow with a hub than to have a similar arrangement in her constituency, but that is not to suggest that there is not a great talent pool in her constituency. It simply means that on balance, under the eight criteria that we reviewed, the best solution we have come to is Glasgow.
The Minister is being extraordinarily generous in giving way. Is he not at all concerned about crowding out private sector investment in some of the big cities? To follow on from the powerful speech of my hon. Friend the Member for Oldham West and Royton (Jim McMahon), is the Minister not in danger of putting himself on the side of big city United Kingdom and ignoring smaller towns and cities? Is that not a bad political move to make?
The hon. Gentleman raises the issue of crowding out private sector investment, but I am primarily concerned about the possibility of crowding out tax collection. If we do not have hubs that are fit for the 21st century, that are bristling with new technology, talent, and well-qualified, well-trained individuals working collaboratively from those units, we will be less effective at bringing the money in.
The tax gap was mentioned; it stands at 6%, a record low. Under Labour in 2005 it was around 8%. If it was 8% today, we would have £11.8 billion less coming into the Treasury, which is enough to pay for all the police forces in England and Wales, so these things matter. I understand why Members here are vexed about their constituency—I totally get it—but we cannot allow that to trump the really important job of bringing our tax collection into the 21st century, and making sure that it is effective, so that we keep our public services going.
The corollary to that argument is that we might better close the tax gap by opening another several hundred offices. I do not think anyone would argue with that. It does not necessarily follow that more offices mean more tax collected. I think quite the reverse, as I have explained. We need centres of excellence with a critical mass of people who are well trained and where there is good access to the labour market and the skills that we need; where people work collaboratively and all the technology is right; and where they operate, as we do in this country, a risk-based approach to clamping down on tax avoidance, which involves a lot of data and analysis from the centre. That is much better done from a well-resourced organisation of critical mass than by a larger number of smaller offices, many of which operate in a manner that is more manual, for example, than computer-driven, and that needs to be changed.
The Minister is being very kind with his time today. He talks about the need for regional hubs and centres of excellence, which we all accept. The argument is not about collecting tax and whether we should have centres of excellence and the best facilities, but about where they should be located. That is the point we are making. In my case, an office based in Bradford would be considerably cheaper. Is the Minister saying that Bradford cannot provide a centre of excellence?
The answer is similar to the one I gave the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) a moment ago. Nobody is suggesting that Bradford is not a superb location in many different ways for many different business activities—absolutely not. I do not have the figures to hand, but I would probably agree with the hon. Gentleman that in terms of office space, the cost per square foot is probably less in Bradford than in Leeds. However, we have a series of criteria, and the overarching objective of those criteria is to collect tax and to have access to the best available within the region—the best talent pool and the best digital and physical connectivity. On balance, the decision is that Leeds fits that bill better than Bradford, but that is not for a moment to suggest that Bradford is not a wonderful place to run businesses.
If it is a specific department—I am sure it is—I am happy to get back to him on that point. I will move to another point relating to what the hon. Gentleman said earlier in his speech. When he talked about clamping down on tax avoidance, he very much started to drift into—understandably so—complex tax avoidance. He mentioned the Cayman Islands. I do not think he mentioned trusts specifically, but I suspect that would be a part of the mix of his thinking, which is exactly my point. If we are going to start targeting that kind of tax avoidance, it is far better to be in a well-resourced hub, the nature of which I have described already, rather than to have myriad other offices around the place. That is the nature of the tax challenge, so we have to have a configuration that is appropriate to meet it.
I thank the Minister for giving way. According to my time, we have an hour and 10 minutes of interventions if Members have questions to ask. The Minister is being generous with his time. Let us stop this dance that we are taking part in here. The truth is that no assessment was made of the suitability of sites for the relocation. Oldham was not considered as a site for the relocation, but Manchester was. That is the truth. If I am wrong, simply publish the assessment of sites that shows that Oldham was considered at the same time as Manchester. Ultimately, it is not protected under any of the exemptions in the freedom of information legislation. Let us cut out the time delay that would be initiated by our making that request under the Freedom of Information Act 2000 and let us have it here today.
That is the third time that basic question has been asked, and I am not going to give a different answer from the one I gave first. Perhaps I could make a little progress.
HMRC will move to new regional centres, which will serve each and every region and nation in the United Kingdom. The first of them opened in Croydon in July, and has been designed specifically to help staff work together and change the way HMRC operates. The building is modern and is located in the heart of the community; it is a modern, environmentally friendly workplace. The other centres will open over the coming four years and have been designed with the future needs of HMRC and the taxpayer in mind. In addition, HMRC will keep open a limited number of transitional sites, as I have suggested, for several years, to help retain key staff during the period of transition, as well as five specialist sites for work that cannot be done elsewhere, such as the site at Dover.
The locations of the regional centres were selected with a number of criteria in mind, such as cost and wider facilities for HMRC staff. They ensure that HMRC has a presence in every region of the UK. The programme will, as I have indicated, deliver savings for the taxpayer of about £300 million up to 2025, plus annual cash savings rising to more than £90 million by 2028. HMRC has structured support in place to help its staff during the move. For example, it will support staff in moving, by helping with additional travel costs for up to five years after the move. It is working with other Departments to identify opportunities for those unable to move to regional centres. The Department has already supported about 100 people into new roles in 2016-17 and 2017-18. However, we need to remember that the vast majority of HMRC employees are within reasonable daily travel distance from a regional centre, specialist site or transitional site. The locations of regional centres were chosen with the whereabouts of existing staff in mind.
I shall give the hon. Gentleman the same answer I gave to the hon. Member for Stockton South (Dr Williams); I am certainly happy to look into it—although I have now had some divine inspiration, and I believe that the criterion is an hour’s travel time. St Matthew has come to my aid.
Let us not lose sight of the bigger picture. As I have said, the programme is underpinned by the aim of making HMRC a more efficient and effective tax authority. I want to dwell briefly on our record in that area, because what we are doing is part of a broader drive to transform HMRC that has been going on for some years. Its performance has been improving considerably. I have already mentioned that the tax gap is the lowest in our history; it is also one of the lowest tax gaps in the world.
The hon. Member for Bootle bemoaned the Mapeley PFI deal. As I said, it was a Labour Government who put us into that deal, but he is right that there will be considerable savings from not having to continue with the deal, as a consequence of pursuing the current programme.
HMRC has improved customer service. Almost all its business customers now choose to deal with it online, and more than eight out of 10 self-assessment returns come in digitally.
The cost savings are for an investment of £552 million over 10 years. Firstly, they arise through the avoidance of future costs that would be incurred in the event of our not going ahead with the programme. Those would be the costs of the PFI deal, were we to continue with it. That cost is £75 million per annum—obviously from 2021, when the contract for strategic transfer of the estate to the private sector comes to an end. There is a cost saving of £300 million in the 10 years to 2025. That gives an annual cash saving, as compared with 2016-17, of £74 million in 2025-26, rising to about £90 million in 2026-27.[Official Report, 27 November 2017, Vol. 632, c. 2MC.]
On cost savings, can the Minister provide an explanation of why, during purdah, a contract was signed in relation to an office in Edinburgh, which was the most expensive office to rent not just in Edinburgh but in Scotland? How does that lead to cost savings?
As the hon. Gentleman knows, the criteria applied in taking the decision were not simply about cost. As to his assertion that the decision that has been taken is an exceptionally high-cost option, I cannot comment, because I do not have access to that level of detail at this precise moment; but the decisions are taken in the round, using eight different criteria, of which cost is but one. As I have repeatedly stated, the overarching objective must be the effective and efficient collection of tax, which provides all the funding for our public services. That is the basis on which the decisions are taken.
HMRC is now open to take calls from customers and engage in webchats seven days a week, so people can contact the Department at times to suit them. This year, more than 987,000 tax credit customers renewed online using the digital service. It would simply not be possible to continue to drive improvements without transforming the offices from which HMRC staff work.
The changes are an integral part of HMRC’s transformation into a smaller, more highly-skilled organisation—one that has modern digital services and a data-driven compliance operation, which will deliver more for the taxpayer, at lower cost.
The Minister is being incredibly generous with his time. The question of the criteria goes to the heart of the matter, Mr Stringer; incidentally, I welcome you to the Chair, and am delighted to see you. The Minister persists with the issue of the criteria, one of which is the ability to get to a particular site via transport mechanisms and infrastructure. The problem, however, is that in many situations there has not even been an assessment of how the particular criterion applies to particular sites. I understand what the Minister says—the criteria exist. They may do, but does he agree that if they are not applied, that shoots a hole through the whole process?
Thank you, Mr Stringer. I should agree with the hon. Member for Bootle if the premise of his assertion were true. In reality there has been an assessment. Of course, in each and every case, HMRC looked at the criteria and applied them to the various options in the various regions, and came to a conclusion as a result of the assessment. That is the logical and sensible way in which such matters move.
I shall write to the Minister about this; but the bottom line is that when I asked senior officers about the criterion on transport access, I asked them if they had spoken to the transport authorities for the areas affected, and they told me they had not. It is an important point. If an assessment relating to the transport authorities was not done—if the officers did a desktop assessment—that is not proper consideration of the criterion.
We can go round and round this for some time, but HMRC has a very clear set of criteria. It has looked extremely carefully. As I explained earlier, when it comes to travel distances to work and journey times it has mapped every single employee within its employ, to make sure that that aspect of that particular decision is taken as rigorously and robustly as possible. I am afraid I do not recognise the hon. Gentleman’s suggestion that this is somehow just a case of putting a finger in the air and a pin in a map. It has been well thought through.
To conclude, raising taxes is vital to our public services.
It is the duty of HMRC to ensure the minimum wage is adhered to and that it is rigorous and robust in its approach to that. It does not hesitate to go after those who break the law and do not pay the minimum wage. It has the ability to go after those companies or individuals for back tax and penalties, and it does that with vigour. I would argue that under a more modern system with large numbers of people working collaboratively in the way I have described, it would be even more effective in doing that.
I think we have given this matter a good, broad and wide airing. I am grateful to all hon. Members for their contributions. I take all the issues raised seriously, even though we disagree on a number of matters, and I am particularly grateful for what is probably a record number of interventions in a Westminster Hall debate.
It is a pleasure to see you in the Chair, Mr Stringer. I thank all hon. Members for their contributions. They have been surgical in their analysis of the situation, as well as powerful and passionate.
It has been a frustrating debate, to an extent. We have, as has been said, been here before. The Minister expressed his confidence in HMRC, in its forecasts and assessments, but I gently suggest that the Minster should start challenging what HMRC officials are telling him. After all, the starting point for all of this was a business case that has been shown to have been inaccurate to the tune of hundreds of millions of pounds, so he should not just listen to what HMRC is saying. He should challenge everything that it is coming to Ministers with.
I ask the Minister to listen to the concerns that have been expressed by hon. Members across the House: about Brexit; about devolved taxation; about tax credits; about reaching out to areas remote from HMRC offices, including rural areas; about the bizarre siting of offices in expensive city-centre locations and the lack of value for money that that represents; about the impact on the town and city centres that have been left behind; about the loss of local knowledge, experienced staff and local contact; about the impact on staff and families; and about the lack of consultation and lack of care for too many HMRC workers.
We have two simple asks. The first is for a bit of openness and transparency. Publish those assessments. There is no excuse for hiding them away from scrutiny. Secondly, stop and assess what has already happened. If HMRC and Ministers are really that confident in their case, stop and prove it. Show us that the first couple of regional centres are a roaring success, that everyone is happy and that they prove to be value for money. Show us what has happened in the towns where the tax offices have closed. Prove it with facts and not just a dodgy business case. If, as most hon. Members here expect, what HMRC has forecast does not turn out to be the case, the Minister can be a hero and save the rest of us from experiencing what has happened in Oldham. He would then be able to send HMRC back to the drawing board. Again, I thank all hon. Members for their contributions.
Question put and agreed to.
That this House has considered HM Revenue and Customs closures.