No happy returns for the Revenue robots

Far from cracking down on fraud, the taxman is actually allowing the practice to flourish

Nick Cohen
Sunday December 30, 2007
The Observer

This Christmas, millions of people will have had the festivities interrupted by glum thoughts of the warnings on their uncompleted tax returns. If they miss the 31 January deadline, they will be fined. If they give false information, they will be liable for prosecution.

However much they disliked it, the British once accepted the Revenue’s stern tone. Of all government institutions, it relied on a reputation for probity. If there was the smallest excuse to fiddle taxes, many people would be happy to take it, so the Revenue not only had the law on its side, but the moral argument that it was a respectable institution working to the highest standards that could be trusted to take money from all who owed it.

I don’t think it can trumpet its integrity any longer. Her Majesty’s Revenue & Customs’ reputation has been hit by every punch the political class can throw. To date, only one of the business fads its masters have embraced has received national attention: an efficiency drive to cut 25,000 of the service’s 94,000 jobs between 2005 and 2011. The unions blamed the cuts for the loss of the nation’s child benefit records and I guess that ingenues who know nothing of modern management would have assumed that although their bank details may be in the hands of identity thieves, at least the job losses would have saved them money.

Not so. In the 2005/06 financial year, the Revenue found £105m by making 4,000 workers redundant and then spent £106 million on management consultants. In return, they sold the government a ‘Lean Production’ programme – or ‘Lean’ as they insisted on calling it – and have been congratulating themselves ever since. In the 2006, Management Consultancies Association awards, for instance, PA Consulting was named best performer in the ‘Change Management in the Public Sector Category’. The compere told the audience that consultants had effected a miraculous transformation and reduced the time the Revenue took to process a tax return from five weeks to five days.

Stripped of the jargon, the apparent miracle was achieved by turning Revenue staff into robots. They were divided into teams and each member was given a tiny task to do again and again, day in day out. One would work solely on page 3 of a tax return, another on page 4 and so on, while supervisors strutted round the office chalking up each team’s progress towards its targets. Lean has provoked strikes and public sector union PCS plausibly argues that the splitting up of work into tiny bits was a prelude to tax returns being farmed out to India.

Sceptics who know the history of management consultancy will have noticed something else. Lean is not a brilliant 21st-century breakthrough, but a repackaging of the ideas of Frederick Winslow Taylor (1856-1915), the world’s first management consultant and inventor of time and motion studies. In the words of his biographer, Robert Kanigel, Taylor introduced ‘a clockwork world of tasks timed to the hundredth of a minute, of standardised factories, machines, women and men. He helped instil in us the fierce, unholy obsession with time, order, productivity and efficiency that marks our age’ – and marks the new lean Whitehall, too.

Although Taylor is largely forgotten now, he was one of the most famous and feared men of his time. The Bolsheviks seized on his ideas to control Soviet workers, while Charlie Chaplin’s Modern Times was an attack on Taylorised factories. Then as now, the argument against his championing of repetitive standardised work was that what succeeds on a car assembly line fails in any enterprise that requires staff to show initiative.

So it has proved at the Revenue. Modestly paid employees who are told they can only look at one page of a tax return are unlikely to care overmuch about fraud. Indeed, they may not notice suspicious patterns because Lean mandates that they cannot see the full picture.

Although the unions have been unable to prove the loss of the child benefits records can be explained by staff cuts, they can argue convincingly that the downsized, streamlined Revenue is unable to cope with fraud on an epic scale. To take the latest figures: the gap between what Alistair Darling expects to collect and what he receives now stands at £25bn; VAT revenues have fallen for the first time since the tax was introduced in 1973; and the National Audit Office estimates that about 10 per cent of tax credits have gone astray. As one man’s tax dodge is another man’s tax burden, the shortfalls are being met by those who obey the rules and pay what they owe.

The chaos would be bad enough if the fraud were confined to the outside. But earlier this month, Richard Bacon, a Conservative member of the Public Accounts Committee released Treasury figures that showed that half the money lost in fraud across government departments was taken by Revenue employees.

Fewer than one in six cases resulted in prosecution. Dave Partridge was merely asked to leave after auditors accused him of ‘gross misconduct’. He had hired his wife, Michaela, as a consultant and directed £97,000 of business her way. His case caught the eye because Partridge was the chief operating officer of the Revenue & Customs prosecutions office and was responsible for taking legal action against fraudsters. Managers who impose ever leaner regimes on ever fewer workers allowed him to start sending fees to his wife within weeks of his appointment.

But they might have reflected such double standards are in the very fabric of the buildings they work in. As Private Eye revealed in 2001, the Revenue sold and then leased back its properties to Mapeley Steps, a firm of venture capitalists which operates out of the Bermuda tax haven. While demanding that British taxpayers pay what they owe, it colludes with a company that has fled to the Caribbean to escape British taxes.

I could make some flippant comment about those knuckling down to their returns demanding the same rates as Mapeley Steps or the same favours as Mrs Partridge, but what has happened to the Revenue is too serious and too grotesque. If the reputation of the tax collection system goes, then the reputation of the whole of government will eventually follow. Labour’s infatuation with management faddism is turning Britain into an Italy without the sunshine.