Campaign group accuses HMRC office of chaos

Jan 23 2008 by William Green, The Journal

BOSSES at HM Revenue & Customs are facing damaging claims it was in “chaos” even before the loss of 25 million personal records from a regional office last year.

The Government has confirmed to MPs that hundreds of jobs have been axed at the Washington office of HMRC – where the information disappeared – since 2005 and 179 staff in the North-East have been dismissed in the past three years.

Private postal contractors have been paid £226m to handle the organisation’s mail since 2005, with 300 million pieces of outgoing post dealt with by HMRC in 2006-07.

Ministers have refused to say how much consultant PricewaterhouseCoopers is being paid to review HMRC’s data handling, saying it is a “commercially confidential” contract.

The developments come after The Journal last week revealed it has cost £2.25m to send letters of apology to those affected by the loss of the data on computer discs from HMRC’s Washington offices.

The password-protected details were lost after two discs were sent by a junior official to the National Audit Office via delivery firm TNT on October 18, but never arrived. Chief executive of the TaxPayers’ Alliance campaign group Matthew Elliott said: “HMRC has clearly been operating in a state of chaos, apparently staggering from one mistake to another.

“Given this sorry tale of mismanagement, poor morale and shoddy data practices, it is no wonder that they ended up making such a disastrous error.

“With such systemic failings, they were an accident waiting to happen. Taxpayers have a right to expect their money is spent competently and their information is protected – HMRC has failed on both counts.”

TUC regional secretary Kevin Rowan said HRMC staff were committed, but it was “inevitable” that cutting staff and leaving the rest to deal with the same amount of work or more would increase the risk of the service being jeopardised.

Newcastle Central Labour MP Jim Cousins, who raised several questions with ministers about the issue, said it was an “extremely serious situation” with a muddle over the relationship between HMRC’s private contractors and its own staff. “The pressure from outsourcing to private contractors and to reduce the number of staff – and they are ahead of schedule in their job cuts – I think has produced a chaotic situation,” he said.

The Commons Treasury Committee member also expressed concern that the HMRC was trying to separate job cuts and farming out work from the loss of the data, even if those changes could not be proved to have a direct link.

Hexham Conservative MP Peter Atkinson said staff reductions were expected as part of efficiency savings, but questioned the value for money of postal services if important data was lost.

“I have no objection to outsourcing postal and courier services, but if they are going to have an outsourced service, they should at least make sure it is a secure service.”

Berwick MP Alan Beith said he remained extremely concerned at the lack of proper security for personal data exposed at HMRC and that the Commons Justice Committee, which he chairs, would continue to take an interest in the issue.

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Timeline

March 2007: A junior official at HM Revenue and Customs provides the National Audit Office with a full copy of HMRC’s child benefit data, in breach of security procedures. The information is later safely returned.

September: Records of 15,000 people’s details are lost after being sent by HMRC to Standard Life. In the same month, an HMRC laptop containing 400 ISA customers’ details is stolen.

October 18: A junior official again sends child benefit data to the NAO via courier TNT, which runs HMRC’s post system. The package, containing two CDs with details of 25 million individuals, is not recorded or registered and fails to arrive.

October 24: The NAO tells HMRC it has not received the data. The HMRC official thinks the package is delayed by postal strikes or in NAO’s office move. A second copy is sent by HMRC to the NAO, again breaching procedures. But it is registered and arrives safely.

November 8: Senior HMRC management are told the October 18 package is missing.

November 10: Alistair Darling is told about the missing data and informs Gordon Brown. The Chancellor orders an investigation, office searches and action to prevent a repeat.

November 12: HMRC says evidence has been found that might lead to the package.

November 14: Darling instructs Revenue & Customs chairman Paul Gray to call in the Metropolitan Police. Police start search of HMRC and NAO premises and interview staff.

November 15: Darling discusses the incident with Information Commissioner Richard Thomas, who agrees remedial action must be taken before any public statement. The Met is asked to take over HMRC’s probe.

November 15: HMRC seeks advice of the Financial Services Authority and Serious Organised Crime Agency.

November 18: Scotland Yard takes complete control of investigation.

November 19: Banks and building societies are given details of affected accounts to detect suspicious activity.

November 20: The Chancellor makes a Commons statement and announces an investigation of HMRC security procedures by PricewaterhouseCoopers chairman Kieran Poynter, in consultation with the Independent Police Complaints Commission. Mr Gray resigns.

January 16 2008: The Journal reveals it cost £2.25m to send letters of apology for the missing discs to parents.

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Agency denies being in state of chaos

HM Revenue & Customs says it is carrying out its key functions and leading the way in several fields.

A spokesman said: “The merger of Inland Revenue with Customs and Excise has enabled HMRC to rationalise its workforce needs and to focus resources on key areas such as preventing tax fraud and improving customer service.

“We employ some 83,000 people overall – down from 97,000 in 2005 – and there have been no compulsory redundancies in achieving this.

“Our policy is to achieve the staff reductions through natural wastage or by retraining people to work in other Government departments.

“HMRC is not in a state of chaos. We carry out our key functions, including last year collecting £423bn in tax and paying out £18.5bn in tax credits supporting millions of families and working people.

He said: “We also lead the way in the delivery of online services and our highly successful policing of the national minimum wage is widely recognised.

“It’s only right that we deliver value for money to the taxpayer. Nonetheless, we only consider outsourcing when a service provider can demonstrate they will deliver a safe and professional alternative to the existing arrangements for a competitive price.”

Acting chairman Dave Hartnett has appointed a data security director to ensure HMRC keeps confidential information secure.

The causes of the Child Benefit data loss are under investigation by PwC chairman Kieran Poynter, who will report his findings to the Chancellor later in the year.

TNT declined to comment.