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22 March 2024

HMRC’s phone fiasco shows the problem with the “self-serve” state

Government efficiency savings won’t be as easy as Jeremy Hunt and Rachel Reeves think.

By Will Dunn

Like a fat-handed man attempting to free a crumpet from a hot toaster, HMRC was this week forced into an abrupt and painful retraction. On Tuesday, the Revenue announced a bold new plan to close its self-assessment phone lines (which were already the subject of considerable public anger over waiting times) for six months of the year. The idea was that this would push large numbers of people to “self-serve”, as the Revenue puts it, using online alternatives that are “quicker and easier”.

On Wednesday, U-turning faster than Dominic Cummings in the car park of an English Heritage attraction during lockdown, the Revenue announced that this initiative had been cancelled in favour of a bold new plan to be shouted at less on Twitter.

In recent months I’ve spoken to a lot of people who are strongly critical of HMRC’s practices, and with good reason. But the helpline fiasco is in my opinion something different: it is not just an isolated example of a government department having a bad idea.

This is a symptom of a wider trend towards a “self-serve” state – a trend that could create significant problems for the government, whichever party forms it. It shows that one of the biggest promises being made by both Jeremy Hunt and Rachel Reeves could be very difficult to fulfil.

Britain has very little space to pay for new policy. A small correction in the UK’s productivity growth (a quarter of a percentage point, according to Goldman Sachs Research) would cause the government to miss its fiscal target by around £10bn. However, the National Audit Office says there are £20bn of savings to be made each year by just wasting less money. It’s for this reason that Jeremy Hunt launched a “public sector productivity plan” just before his Budget earlier this month, and why Rachel Reeves has promised to “go through every pound” of government spending to find the efficiency savings to pay for Labour’s manifesto promises.

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Both parties are looking at doing more with less, a phrase you may recognise from your last pay review. As you probably know, it translates as: “You’re not getting a raise, but we do expect you to do more work.”

Much of the talk around government efficiency savings involves the assumption that technology will help this to happen. This rests on the assumption baked into government thinking about the economy that technology makes workers more productive by doing some of the work for them. This was the principle that powered the Industrial Revolution, but it has become less true since then.

As the brilliantly original economist Paul Donovan pointed out recently, when you’re in the self-checkout queue at the supermarket, what you’re seeing is not technology removing work, but transferring it from paid employees to unpaid shoppers. “When I go shopping for food today,” Donovan writes, “I work for the supermarket for free.” The same is true of Amazon, eBay and other platforms on which you, the shopper, take on unpaid work in administering consumer services: “Labour that commanded a salary and pension scheme when taking place in a department store is now provided gratis. It is only the warehouse staff who remain as paid employees.”

The sharpest example of this is probably social media, in which the real wizardry is not in building some fairly conventional websites, but in persuading hundreds of millions of people to work for free on behalf of the companies that monetise them through advertising.

This was also the real point of the HMRC plan for “seasonal” availability of self-assessment helpline: getting people to “self-serve” online transfers the work from government employees to taxpayers. Last year, a trial reduction of the helpline reduced the total number of calls dealt with by advisers over the summer from 864,000 to 357,000.

The pay-off in the quality of service was already evident, however. In October of last year the Chartered Institute of Taxation gave evidence to the Public Accounts Committee in which it warned that “HMRC’s service levels are having a significant detrimental impact, not just on tax matters, but on the wider economy”, and that the “radical strategies, such as the closure of telephone lines”, were being pursued despite “a lack of understanding” of how and why people depended on the phone lines remaining open.

The real mistake was in accepting the delusion that “UK plc” exists and that anyone outside Westminster thinks of the state in this way. People accept doing free work for Tesco or Amazon because these are businesses that offer some incentive to do so, and over which they can exercise some consumer choice. When it comes to the government, a different contract exists. These are services for which the taxpayer has already paid (in the case of HMRC, they’re actually trying to pay more tax) and they want things to be done properly.

By asking the government to do more with less, politicians are also outsourcing their own work to the departments they’re supposed to manage. The real answer to HMRC’s woes, without a funding boost, is for ministers to take on the difficult business of simplifying our arcane tax system. If the rules aren’t straightened out from the top, departments will have to trial their own measures as HMRC has, and that £20bn will prove very difficult to find.

This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.

[See also: Rachel Reeves buries New Labour economics]

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