A matter of tax: HMRC's Angela MacDonald on hubs, fraud and why she'd never leave Yorkshire

More than 20,000 civil servants went into lockdown working in one HM Revenue and Customs building and have emerged from lockdown into a different one. It is six years since the department announced plans to consolidate 170 smaller offices around the country into 13 regional hubs, but it is in the last 18 months that the department’s estate has really begun to look very different as offices have closed. 

“You can imagine the sheer logistics of inducting those colleagues and the change for those colleagues – their lives have altered. For some of them, they might have been working around the corner and now they’ve got to get on a train. There’s quite a lot of change which we would have gone through anyway, but lockdown put rather an interesting break in the middle,” MacDonald says.

The second perm sec – who is based in Leeds – sounds genuinely thrilled when she talks about her visits to Birmingham and Liverpool to see the new and “incredibly magnificent government hubs, all now teeming with life as people are returning into offices”.

But the hubs programme has had mixed reactions from staff and the communities that have lost HMRC branches. There has been grumbling in small towns like Shipley – a 10-minute train ride from Leeds – for which HMRC has been a major employer for many years. The small West Yorkshire town had, until recently, been home to hundreds of HMRC jobs, most of which have moved to Leeds. The town’s councillors have fought the office closure since it was announced in 2015.

CSW wonders if there is a risk that moving jobs to already-thriving cities might harm, not help, local communities. MacDonald responds by framing the move as a continuation of a long-running trend: HMRC, and its predecessors HM Customs and Excise and Inland Revenue, have been “gradually shrinking for 40 or 50 years”, she says. Even before the hubs programme began, technology had meant there was no longer a need for a revenue office where people could see their local taxman in “every small town and every port”.

Some “very deliberate choices were made” about what the consolidation would look like, MacDonald says. “That meant understanding that we would be moving some roles from smaller towns, but trying to look forward to the circumstances that would give our people the biggest career opportunities, that would allow us the best flexibility, but also trying to make sure that we were in places where commuting would be the easiest.” 

The regional centres are typically within a few minutes’ walk of a train station. The Wellington Place hub is ten minutes from Leeds station – a simple move for many of those being displaced from Shipley, MacDonald says. But not all: last year, HMRC offered voluntary redundancy to 227 staff whose branch closures meant they were beyond reasonable daily travel of an office. Some of those staff worked in Shipley.

Overall, however, there have been fewer redundancies than expected – remote-working arrangements introduced during the pandemic helped save around 490 jobs, according to HMRC’s latest annual report. That also coincided with a long-running effort to reform staff contracts, which came to fruition at the beginning of last year. The deal entitled staff to work remotely at least some of the time, as well as standardising working hours and annual leave.

In the last couple of years, the deputy chief exec says HMRC has had growing interest from other departments as the government’s levelling up agenda and the Places for Growth programme, which aims to move more civil service jobs out of London, gather steam. A number of its centres have become cross-government hubs, housing staff from several organisations. “The fact that we were already there and on that journey is a wonderful coincidence of us being able to facilitate and support those [organisations], because they would have had to go and find different buildings anyway,” she says.

“I think for other departments, there are big ambitions from the centre to move [roles out of London], but we were doing levelling up before any of this started; that’s been the nature of our organisation for many a year,” she adds. Having policy and delivery teams in several regions makes HMRC more accountable and “better informed by people who work, live and connect locally”.

Unusually for a central department, more than 50% of HMRC’s senior civil servants are already based outside London. As the government’s most visible non-London-based perm sec, MacDonald feels it is “absolutely vital” that top officials are seen basing themselves elsewhere because “an enormous chunk of what we do as civil servants is to lead our people, and our people are spread over the country”.

It’s significant, too, that MacDonald’s ascension to second perm sec in 2020 came after a career spent in operations – including two decades in the insurance industry and stints at the Department of Work and Pensions and the Child Maintenance and Enforcement Commission. The majority of government’s perm secs have come from the policy profession, and her promotion shows a different career trajectory is possible.

“I have spoken to colleagues over my years as a civil servant who say, ‘I’m not going to get promoted because I don’t want to go to London’. What a waste of talent that is"

“I have spoken to colleagues over my years as a civil servant who say, ‘Well, I’m not going to get promoted because I don’t want to go to London’. But what a waste of talent that is, for people who could aspire to the most senior ranks but whose ‘life wants’ mean that they don’t want to up sticks and go and live in the southeast. So if we’re going to make the most of all of our talent, then we need to bring those job opportunities.”

When she talks about “life wants”, she’s not being flippant; she was born in Hull, grew up in Leeds and has “never moved very far”. “It’s where I’ve grown up, and where my family is – that’s a big part of it. It is part of our identity as well. But also, you live a very different lifestyle in a less urban environment. It’s a lifestyle thing, isn’t it?” 

The self-confessed “passionate Yorkshire person”, who says she’d never live outside God’s own country, gushes about the countryside, the towns, and the rail links – “I can be in London in an hour and 15, which is probably a faster commute than somebody who lives in Kent. So, you know, what’s not to love?”

She says much of this is possible because of timing; advancements in technology and the normalisation of widespread flexible working means “physical place becomes less of a barrier” to certain jobs.

“But it is going to be a mindset. We will need to try very hard to make sure that as we come back out into the ‘real world’ that we don’t slip back,” she cautions. “There’s no point in me living in Yorkshire if I spend five days a week living in a hotel in London… you’ve defeated the object. It’s not just about where you are, it’s where you do your business.”

MacDonald is still in the minority, with many of her colleagues still firmly affixed to Whitehall. Can she foresee a time where half of government’s perm secs are based outside London? “It’s definitely our ambition to be there,” she says, but stresses: “We need to be realistic.”

“There’s no point in me living in Yorkshire if I spend five days a week living in a hotel in London… It’s not just about where you are, it’s where you do your business”

“I’m busy going, ‘this is all fantastic, out you come,’ but there are a whole load of incredibly capable, London-based civil servants for whom this will feel worrisome,” she says. Ensuring there continue to be strong career paths for them is as important as it is for those in the regions. “So this is definitely going to take us some time to achieve… but the momentum has started.”

As other departments move in next door, does MacDonald ever worry about losing staff to rival organisations? “Oh, gosh, no,” she says animatedly. “I’d love to believe that the only magnificent people in the civil service work for HMRC but really, that’s not true.

“Those colleagues who get a variety of experience – who spend time in different departments, seeing different agendas, working with different leaders, speaking to different people – grow, and eventually become the kind of senior leaders that we need,” she says. “So no, for me, that’s not a risk; it’s one of the massive opportunities of why we should do it. Of course, people will move out of HMRC. But great people will also move in, and that will be fantastic.”

She says that as an operational delivery leader, she spends a lot of time thinking about who will lead government’s “massive organisations” in future. With 65,000 staff, HMRC is bigger than many businesses, and “it’s really hard to get people who have the skills and experience to do some of the really challenging jobs that we have,” she says.

The nature of the challenges HMRC faces means not everything has gone to plan over the last few years, and there have been compromises. “There have definitely been things that we’ve had to pull back on and deprioritise – where we’ve asked ministers, ‘you can have one of these, or one of these, which would you like to have?’, and ministers have made those choices,” MacDonald says.

“But priority one has been about supporting what the government needed on the pandemic; priority two has been about making sure that we played our vital role in the EU transition; and wrapping round both of those has been ‘and something needs to pay for all this, so the tax system still needs to keep running’. So much of that is hidden from the world but actually, we’ve pretty much managed to achieve all three of those. The tax world did not fall apart.”

She notes that dire predictions that the customs system “would fall over” when Brexit hit did not come to pass – partly because of a herculean effort to get new systems in place. When the 2016 referendum happened, HMRC was in the middle of a long-running project to replace its old customs system, CHIEF, with a new Customs Declaration Service as part of government plans to operate a “fully digitised border”. That project began in 2013 and “started as solving a particular problem in a particular set of circumstances; when we voted to leave the European Union, that threw the environment of customs completely into a different universe,” MacDonald says. CDS was designed to handle 100 million declarations annually – comfortably more than the 55 million made by traders in 2015. Brexit meant it would need to be ready to handle 255 million declarations a year.

The urgency and magnitude of work needed to get it ready meant HMRC had to stop, suspend or scale back more than 100 digital and transformation initiatives. “The team did remarkably to pivot both of those – a programme which was already in flight, and the legacy system, CHIEF, which was never designed to have the scale that it had,” MacDonald says. The full rollout has been delayed several times, but last year HMRC announced CHIEF would finally be phased out in 2023.

As it emerges from crisis mode, MacDonald says HMRC is starting to move “in a future-facing direction, whilst recognising we’ve got a big chunk of current – and urgent – things that we’ve still got to hold on to”. Last year’s long-anticipated Spending Review brought new priorities – among them, delivering the National Insurance rise that will fund the new social-care levy, and supporting net-zero initiatives. These will run alongside major programmes to modernise the mechanisms of the tax system and improve digital services.

There is also still a “big chunk of Covid work to do”, MacDonald says. One of its urgent priorities is clawing back some of the £5.8bn lost to fraud and error on three Covid support schemes it administered: furlough, self-employment income support and Eat Out to Help Out. The National Audit Office has said HMRC could have done more to mitigate the risks.

“Fundamentally, we’ve managed to do the job, which was already a full-time job, plus two extra major full-time jobs as well”

HMRC set up a Taxpayer Protection Taskforce last March, which had recovered £800m by November, when HMRC chief exec Jim Harra said the department was on track to recoup two-fifths of the cash that had gone astray by March 2023. But this month, HMRC revised down its estimate, saying it only expects to recover £1.5bn by that time. It has not said whether it will be able to recoup any of the remaining £4.3bn, but Harra has already acknowledged the department won't recover it all.

MacDonald says her department put in an “immense amount of effort” early on that prevented a “significant amount of loss” to fraud and error. She notes that claims that fall under this category haven’t all been malicious, and that thousands of businesses have contacted the tax agency to correct mistaken claims. “Quite a lot of money has been repaid as a consequence,” she says.

Whatever else has happened over the last couple of years, MacDonald says there is no denying HMRC’s achievements. “And I accept completely that there are some challenges in some aspects of our service delivery at the minute,” she says.

“Fundamentally, we’ve managed to do the job, which was already a full-time job, plus two extra major full-time jobs as well. I couldn’t be more proud of what we’ve managed to do.”

This interview originally appeared in CSW's January 2022 issue. Read the digital issue

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