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Economy

Capability reviews for HM Treasury and HMRC published

Monday, 17 December 2007

Executives at HM Revenue and Customs should be more courageous in communicating tough decisions and HM Treasury has a pressing need for greater humility in dealing with others, according to new capability reports.

Cabinet Secretary Sir Gus O'Donnell announced the publication of two more Capability Reviews alongside a 'Progress and Next Steps' report which focuses on follow-up actions made by all the departments assessed in the first tranche of Reviews.

The 'Progress and Next Steps' report looks at improvements made within the departments reviewed in the first round of Capability Reviews in July 06 - Department for Children, Schools and Families, Home Office, Ministry of Justice and Department for Work and Pensions.

The Report also highlights common themes emerging from the Reviews and looks towards the future of the Capability Review programme.

Sir Gus said that the purpose of the Capability Review programme is to see how well prepared departments are to deliver a civil service fit for the 21st century and to ensure they make improvements where necessary.

"The challenge now is to ensure that the programme maintains momentum and that departments continue to take action and build on initial successes. As a result we will be able to support the wider reform agenda and successfully meet the challenges of the future," he added.

Inject much greater pace into decision making and implementation

HM Revenue and Customs (HMRC) was established in April 2005 by the Commissioners for Revenue and Customs Act 2005, bringing together the Inland Revenue and HM Customs and Excise. HMRC is a non-ministerial department, accountable to the Chancellor of the Exchequer for the discharge of its functions.

As of November 2007, the Department had 85,000 staff (full-time equivalents) which represents nearly 20 per cent of the entire Civil Service, occupying 600 offices across 300 locations.

The day-to-day operation, however, of HMRC’s information technology services and the majority of the estate is outsourced. In 2006/07, HMRC’s budget was £4.5bn, representing less than one per cent of government expenditure.

The review of HMRC concluded that the organisation’s top team should inject much greater pace into decision making and implementation, particularly around the transformation plan for the department, and be more confident in taking some calculated risks within the political and financial constraints.

Change initiatives

It recommended that HMRC executives should be ruthless in reviewing and cutting back the number of change initiatives, to focus on those which contribute most to the achievement of its vision.

The report says that change initiatives that remain should be drawn together into a coherent and realistic change programme which fits with the vision, establishes a clear critical path and can be communicated and easily understood by all parties involved.

The HMRC review concluded that senior management should discuss with HM Treasury options for greater flexibility for HMRC in delivering its overall targets.

“The top team should also take the opportunity presented by its Comprehensive Spending Review 2007 settlement to present HM Treasury ministers with more radical options to transform the business,” according to the report.

It adds that a very clear framework of personal accountability would allow HMRC to remove unnecessary levels of management structure and simplify over-engineered processes, thereby shortening chains of command within the department. The report recommends that HMRC should empower its middle managers to make appropriate decisions.

Tough decisions

The review found that senior leadership had not been successful in injecting pace, confidence and dynamism throughout the department.

“The top team has shown an awareness of the key issues and challenges facing HMRC, and a willingness to address them, but has more to do to demonstrate that it can take the tough decisions required to set priorities and to bring about organisational clarity,” the report says.

“The senior leadership should be honest and courageous in talking about the difficult decisions that must be made, aligning the expectations of those inside and outside HMRC with reality,” it concludes.

Underestimated the drive, stamina and commitment needed

The Capability Review of HM Treasury found that the Department’s senior leadership team has a clear understanding of its future challenges and a strong vision for the future. The report says that the department attracts high-calibre, talented and motivated people who demonstrate pride and excellence in their work.

It concludes that it is working to improve the skills, expertise and overall professionalism of its workforce, but that the board and executive management group (EMG) have underestimated the drive, stamina and commitment needed to change the culture, behaviours and diversity of the department and to secure the skills needed for the future.

“The Department is not driving change with sufficient passion and pace,” the report says.

Some stakeholders and government departments are looking for a clearer framework for consultation, according to the report. Whilst they understand the proper constraints of formal consultation in areas such as tax policy and financial services, the review found that there is scope for improved dialogue in other areas.

“Stakeholders and government departments believe that the Treasury is over-reliant on some individuals who, through shortness of time in post, have less depth of experience,” the review concludes.

Pressing need for greater inclusiveness and humility

It adds that the department has to reconcile its monitoring role with the need to build productive partnerships, and develop ownership and commitment to HMT’s agenda.

“Other government departments’ finance directors, in particular, are looking for greater collaboration and support in capability building, joint problem solving and sharing best practice,” the report says.

In the words of the Capability Review, the department needs to take early steps to tackle what is perceived by many to be “a pressing need for greater inclusiveness and humility” in its dealings with others.

It also recommends that HM Treasury should address staff concerns about fair career progression and deal with the continuing perception that extremely rapid progression through posts, with policy excellence and individualism, are valued over knowledge and experience, management competency and teamwork.

The publication of the HM Treasury and HM Revenue & Customs Reports means that 17 Whitehall departments have now undergone a Capability Review.

Capability Reviews were announced for Government departments in October 2005 and are robust, evidence based assessments of departments capabilities to meet significant future challenges.

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