MR PAUL GRAY CB

1 MARCH 2007

  Q60  Mr Walker: Could you give us a brief case study for the record of when it would not have been reasonable for that person to have spotted that mistake? Would you give us some examples of where you and HMRC would review the case and say, "Yes, we hold our hands up. This was our mistake. We are sorry we tried to pursue you for the money. We should not have done it. We made a mistake." Could you give us some examples of where you are willing to take responsibility for an overpayment?

  Mr Gray: I see these examples myself day-by-day and I am happy to give you a couple of generic types. The first would be if somebody has given us information, let us say, in a telephone call to one of our contact centres and we have failed to act on it. In reviewing complaints in cases of that sort, we keep tapes of all the telephone calls made to our contact centres. If somebody says, "I told you this" and we appear to have no record of it in our written systems, we will go back, we will review the tapes, and if we find in a telephone call we were told something and we had completely failed to act on it then that is the sort of circumstance in which we would say, "Okay, we will write that off." A second example, which is again relevant to telephone tapes, is where it is clear from one of those telephone callers that one of our members of staff had given clearly incorrect guidance to the person about the circumstances they were facing. As I say, I probably myself look at and sign off letters to your parliamentary colleagues 30 or 40 times a week in relation to tax credit cases. Of the ones that come to me, I am personally making sure that I am satisfied from that sample that we are operating the test in the way it is intended.

  Q61  Mr Walker: I do not have the paperwork with me. I could be mistaken, and if I am, I apologise, but I am pretty sure I have had correspondence from HMRC where it is clearly stated that, while HMRC accept that they were informed of the change of the individual circumstances, that individual should have realised the necessary amendments had not been made to their tax credits. That seems to contradict directly what you have said.

  Mr Gray: It depends, in cases of that sort, on what is subsequently happening. If, for example, somebody has told us that they have had a significant increase in income and then week in and week out, month in and month out they are continuing to receive the same higher levels of tax credit based on their earlier income, in those circumstances we would think it was reasonable for them to know that the adjustment had not been made. Crucially, it depends on phone calls of that sort what the information is that they have given us and what action we either have or have failed to take.

  Q62  David Heyes: I would like to ask you about something I thought I heard you say earlier in relation to the consultation that is going on with a view to closing a significant number of your local offices. That consultation has not formally happened in the Ashton under Lyne area in my constituency, but it is heavily rumoured that it is imminent. Of course the local staff are greatly concerned about it but, even more importantly, the public of Ashton under Lyne are concerned about losing their local access to the tax system, the face-to-face access. Having that office available in the heart of the constituency, right next to the transport network, really proved its value during the very difficult times with tax credits when the only way we could get people through some extreme hardship was by getting them cash payments directly from the office. That really came into its own on that occasion. I would be greatly alarmed at the thought of that office being removed and that kind of facility no longer being available. I wrote down what I think you said—and it is important, because I want to get this on the record—that you have made a commitment that there will be comparable face-to-face services in all locations where they presently are. Is that what you said?

  Mr Gray: Yes. When I said locations, I did not necessarily mean the same building; I meant the same area of the location. It might be in the same building, it might be in a building in very close proximity to it. It may or may not be one of our buildings, if I may put it that way. It might be that we were operating in partnership with other parts of government, the voluntary sector, local authority. It is the availability of a face-to-face service, not necessarily in exactly the same building but in the location in a geographic sense.

  Q63  David Heyes: I would like just to tease out the example. I am sure colleagues have very similar circumstances in their own constituency, but in Ashton under Lyne, for instance, the likelihood is that if our local office was closed completely Manchester would become the nearest centre to which people would have to go, and then there are all sorts of transport issues and so on. You are saying—and I do want to get it on the record—that that Ashton under Lyne office, although it might be replaced elsewhere, would be in the close vicinity of the present office.

  Mr Gray: There will be the facility for people to have face-to-face contact. That does not mean that we will have the same number of staff doing back office work in that location.

  Q64  David Heyes: Would you describe to me what would remain.

  Mr Gray: A range of things. It could be an enquiry centre very similar or even identical to what we have at the moment, possibly linked with fewer members of staff actually being located there. In most of our buildings and locations that have face-to-face inquiry centres, a relatively small proportion of the staff in those locations are dealing with face-to-face queries. We have back-office staff doing a whole range of other functions. It is in relation to those back-office functions that we see significant scope for doing a better job and doing it more efficiently by pulling into a fewer number of locations. In relation to the face-to-face service, it might be the same relatively small number of people who service the current inquiry centre doing it in the same place. It might be—and this is an issue which I am exploring with my DWP colleagues—that we will look to share premises, either in current HMRC premises or current DWP premises. It might be that we will come to an agreement with the relevant local authority that we share premises. Something I am particularly keen to explore—going back to comparisons with DWP, it is something where DWP have done rather more than we have in HMRC at this point—is looking at innovative ways of working with voluntary sector bodies: a different model could be for some of our staff to be based in voluntary sector premises in order to provide the same kind of support as we do at the moment. Another advantage, as I see it, of these partnership options is that a significant proportion of the people with whom we are dealing also wish to deal with those other organisations. The phrase "one-stop shop" is probably slightly overused in this context but the notion of making our services more customer centric by not just looking at how we are providing our services to them but how linked parts of government are providing their services may offer a genuine improvement to customer service.

  Q65  David Heyes: That is helpful. I would like to go back to the complaints handling issue. You touched on it peripherally. The process is that the initial complaint is made; there is then a director level complaint that can be dealt with; and then the Adjudicator. Not mentioned here is the role of the MP's office. We could probably reduce our staff numbers by at least one if the problems you generate for us were taken away. A hugely demanding amount of work comes into my office and to my advice surgeries every week, and it is the same story over and over again. I think you said that you sign yourself something in the region of 2,000 plus letters a year. Do you have any feel for the number of complaints that go to MPs? MPs cannot produce the stats because we all operate as individuals. Do you have any idea how many complaints you get from MPs each year?

  Mr Gray: Quite a number of the aggregate number of complaints that we have logged in the annual report and in the material that I have let you have reflects things that have had some involvement with an MP. In aggregate, the position is that we received something like 105,000 complaints in the 2005/2006 year, which was about a 14% increase over the previous year. I am pleased to say that for the year 2006/2007, in which we still have a month to go, it looks like we are heading for a figure of about 90,000, which is a 15% reduction.

  Q66  David Heyes: It is pretty disastrous, is it not?

  Mr Gray: That is still a huge number. It is far too many. I am not remotely complacent about it. I would put it in context, not to say that we should not be doing a lot better but to recognise the sheer volume of people we are dealing with: we are dealing with 20 million, 30 million, 40 million people a year. The number of transactions in which we are engaged is massive. I know there are 50 million phone calls a year to our contact centres, for example. It is still too high but as a proportion of the amount of business we are doing it is relatively small. I am not saying that because I do not want to do a lot better, but in a big business like ours any line of activity will always generate a very big absolute number.

  Q67  David Heyes: It is the repetitive nature of the complaints that is so frustrating to us. There seems to be no learning taking place. We will resolve some ourselves, as MPs, and then ultimately they get referred on to the Ombudsman. The casework MP helpline facility is good but I do not get any sense that there is any kind of feedback for the organisation to learn from what takes place there, the admission of failing. You have talked in general terms about the need to make things better, to get more systematic. You have said you have improved procedures in place. I do not have any sense of what that is. What things have you been doing that are going to have a really dramatic impact on this still appalling figure of 90,000 you just mentioned?

  Mr Gray: Could I give you two or three examples, and I can give you some more later if you want, of the sorts of things we have done, largely in response to complaints—and of course complaints are not the only feedback we are getting, but where complaints have played a significant part. We have now introduced a much simplified, two-page version of the tax credit award notice, reflecting a lot of the concerns we have been having. We have introduced a much shorter tax return for self-assessment taxpayers. We had a lot of complaints that everybody was getting the 40-page version, that this was unnecessary for large numbers of people and could we not think of a way of introducing something for people whose circumstances required self-assessment but were relatively straightforward. We introduced a two-page version which is now getting a 95% positive rating in our research. We have introduced a simplified statement of account for self-assessment once an assessment has been made and, again, that has had a very welcome response. On telephone lines, for example, we do of course have quite a lot of people dealing with us phoning from overseas. Our standard phone lines, 0845 numbers, were not readily accessible to people calling us from overseas, so we have now introduced a dedicated phone line there. These are the sorts of things we have been doing.

  Q68  David Heyes: In broad terms, those are improvements aimed at improving the service for taxpayers rather than tax credit beneficiaries. I am not hearing an awful lot about what you did to impact on the tax credit system. You said yourself that you would like to see the Ombudsman's percentage of adverse findings down to the 20 to 30% range. It is not unreasonable to have that as a target, in my mind. By what date will you have got to that figure?

  Mr Gray: I will be very disappointed if we have not got to that in the next two or three years. We have to bear in mind the system operates at a little bit of a lag because cases that have got as far as the Ombudsman will have gone through our internal procedures. The data we are seeing now in the current year reflects earlier this year and the tail end of last year, but, allowing for that lag in the system, I would be very disappointed if in two to three years we are not down to that target range. Can I be sure we will be there? Obviously I cannot, but that is the aspiration I am setting for the organisation.

  Q69  David Heyes: Okay. That is now on the record.

  Mr Gray: I know.

  Q70  Paul Flynn: When you and your colleagues were here before, I think we gave you a fairly hard time on tax credits. From the position of my office, there has been a perceptible improvement. How do you apportion the blame for the problems that have arisen with tax credits? It seems to me that part of the fault was in the original legislation, in that it was a system that was bound to overpay and bound to result in a large number of complaints. If the roles were reversed and this was a committee of civil servants and the people sitting on your side were legislators, would you have some complaints to make about the original legislation in a way that would have avoided the volume of complaints?

  Mr Gray: I think you put me in a slightly difficult position, Mr Flynn, in inviting me to comment.

  Q71  Chairman: You can speak quite openly.

  Mr Gray: I know I can—and it will be duly noted on the record, as Mr Heyes has just observed. On the issue of overpayments, it was entirely clear—nobody kept a secret of the fact when the legislation was going through the House, and many of you would have been involved as part of that process—what the design parameters of the scheme were. With the attempt given to make this a highly responsive, highly flexible system, no secret was made of the fact that this would generate substantial numbers of overpayments. The job I inherited two and a half years ago when I joined HMRC was to make sure that we administered that system just as well as we possibly could. I think there were some things about the way in which we initially sought to administer that set of policy guidelines on which we can and should improve and we are set on the process of doing that. For example—and I think we touched on it in your earlier hearing—in a one-size-fits-all administrative system, for particularly disadvantaged groups, when you are dealing with six million claims, with almost 20 million people represented there, we need to have more differentiation in the way in which we are dealing with different types of case. That is what we have been trying to do and maybe that lies behind your remark at the outset.

  Q72  Paul Flynn: On the question of the scrutiny before legislation that takes place, where do you think, in this case, it might have been improved if you and your colleagues at the workface had a larger voice in this and future legislation as well? Do you think you should be more involved in the pre-legislative scrutiny?

  Mr Gray: Could I take an example of what happened in the series of changes that were introduced in the Pre-Budget Report in 2005, 17 months ago. As you are aware, a number of detailed policy adjustments were made to the parameters of the scheme at that time. I was extremely pleased in the way in which myself and my team in HMRC, the official team in the Treasury and the decision-making process brought together the operational implications as well as the desired policy outcomes. In that package of changes that was introduced, the timescale for the implementation was staggered. There were a number of things we felt we could introduce safely quite quickly; there were other things that we thought would take two or three years to implement. That was reflected in the decisions that were made about the implementation of that package. I am very comfortable with where we have got to on the integration of policy design and operations.

  Q73  Paul Flynn: I do not want to stir too much complacency in you. Problems still exist in tax credits, without any doubt.

  Mr Gray: I am not remotely complacent and we need to do a lot better still.

  Q74  Paul Flynn: Could I go on to the reorganisation that is taking place at the moment, for understandable reasons. I understand that when Customs and Inland Revenue go together, you have a great deal of space that is unused or underused and there is pressure on you, quite rightly, to have some kind of rationalisation. Are you concerned that by centralising so many of your operations you are going to increase the number of complaints and going to see a deterioration in the service? If I can take complaints at random, the suggestion that jobs from Newport and Pontypridd be centralised in a remote northern suburb of a place called Cardiff is likely to cause a few problems as far as the customer relationship is concerned! Because if people want to talk to local people, people that they can access, people who speak with a local accent they understand, a move of this kind would almost certainly raise complaints. Where do you add these things up about saving money on a more efficient use of space and the element of service you provide which might well deteriorate?

  Mr Gray: I think it is crucially important that in making these changes we do two things simultaneously: we do reduce our costs—that is a target I have been set fairly recently—but at the same time we need to at least maintain and hopefully improve the service. There was some horribly long word I used just now about differentiating our service and recognising that different customers have different needs is absolutely at the heart of resolving that dilemma. Certainly I do not intend to be in the position where you invite me back here in 18 months or two years and tell me that the outcome has been the one you feared. We are looking to balance those two things consistently, which we are doing, and that lies behind the exchange I had with Mr Heyes about making sure we keep the right balance of access to face-to-face services for those people who need them. I repeat what I said to the Chairman earlier, the evidence that we are consistently collecting is that not all our customers in today's society do want to do their business with us face-to-face, it has become a minority of our customers, so I think the dilemma is resolvable.

  Q75  Paul Flynn: I am sure that is true, that is the general trend, but there are certain customers, particularly in Newport where a very large proportion of customers are people whose first language is neither English nor Welsh and, in fact, many of them are recent migrants. They are the ones who probably do not have access to the internet as readily as others might have. Is there not a powerful case for ensuring that the local offices are there and people do have access, at least in the last resort, to having a face-to-face interview?

  Mr Gray: I think that is absolutely the issue we are looking to address and Newport is not the only part of the country where a significant proportion of our client base is migrant workers. One of the roles that our individual customer units are undertaking is to make sure we have a much deeper understanding than we do now of the needs of particular segments, to use another horrible word, of our customer base. Migrant workers is an area we are increasingly focused on; recognising the need to identify whether there are differential requirements that they have. We then need, as I think you are suggesting we should do, to map that assessment onto different parts of the country where there may be significant concentrations of clients of a particular type.

  Q76  Paul Flynn: I am sure you recognise the morale of the staff is a very key factor in making sure there are not too many complaints. Again, a large proportion of the staff in my experience, in my constituency are part-timers, who, if they are asked to move even a relatively short distance in travelling terms of, say, 16 or 20 miles or so, would find it impossible because of their domestic commitment, they are mostly women with young families. Is this a major factor for you?

  Mr Gray: It is absolutely a major factor. We are trying to balance quite a number of things here and you rightly have been pressing me so far on are we being sufficiently thoughtful about what our customers need. It is equally important for us and we are committed to doing this and taking into account our staff needs. As an employer, I am proud of our record of being very responsive to different working patterns, part-time work is one you mentioned there, and in each of the reviews that we will be undertaking of possible location moves, looking at the implications for the groups of staff concerned is going to be another key consideration. At the end of the day, can we produce an outcome which is absolutely perfect for every member of staff and every customer? I think that would be an aspiration I am not going to achieve, but we need to get pretty close to that outcome.

  Q77  Paul Flynn: We have a figure here for the number of complaints about the contact centre and the helplines, it is 3,111, which is 4.6% of the total number of complaints, that people ring and then 4.6% have a second complaint about the contact centre. This seems a very high figure and does seem to reflect, while we accept the general point you are making about people are accepting this with great openness, it is something that is higher than it should be and it is reflected in evidence we have had from tax agents and so on.

  Mr Gray: It is higher than it should be. Again, at the risk of implying I am complacent when I am not, 3,000 complaints when we have 50 million calls a year is quite a small percentage. I regret the fact that of those 3,000 complaints 2,000 we found in our internal procedures were justified complaints and we then sought to remedy the situation. We are doing quite a lot of things within our contact centres to seek to improve our training procedures and our processes generally to drive down that level of complaints.

  Q78  Paul Flynn: What are those things? What are you doing?

  Mr Gray: There is improved training.

  Q79  Paul Flynn: In what way? Can you give an example?

  Mr Gray: Of trying to get more accurate advice given. We have introduced improved quality checking of calls as well as recording our calls so that, if need be, we can go back and interrogate what happened. We are increasing the extent to which managers review a selection of the calls that all our call agents manage and they are then given feedback on any areas where we feel they can do a better job.