Hopes were high, but people were expecting the worst (namely, a number of extensions to the already 10+ year old deal that has cost more than £11bn+ to date).
However, this week HMRC revealed that an agreement has been reached with the two main suppliers, Capgemini and Fujitsu, and that as of next year the department will move from a single, over-arching outsourcing agreement to a “series of smaller, more flexible contracts with existing and new suppliers”.
HMRC has said in the past that the deal will likely be spread across some 400 suppliers, with no one agreement costing more than £100 million. The idea is that this will introduce some agility, innovation and allow HMRC to respond quickly to changes in the technology market.
The department said this week that it expects the contracts to be of interest to both large and small and medium suppliers, and will take advantage of both cloud and open source technologies.
Liz Homer, HMRC’s chief executive, said:
HMRC’s ambition is to be one of the most digitally-advanced tax authorities in the world, and the agreement we have reached to exit the Aspire contract brings that a huge step closer.
Our new approach enables HMRC to secure the adaptable, cutting-edge IT services we need to transform our services to customers and modernise the way we work, at much better value for money for the taxpayer.
HMRC said that it expects to save around 24% (£200 million) a year by 2020-21 on the provision of like-for-like IT services, against a £54 million total IT spend in 2014-15.
The department added that it will also be brining some existing IT services and staff in-house before the end of the contract in 2017 - something I’ve been told that it has wanted to do for a while, but was struggling to get approval for.
Just the beginning
Whilst reaching an agreement is favourable, it’s worth highlighting that the success of the agreement itself does not automatically equate to a successful transition. This is just the beginning of a very long process towards HMRC managing a digital estate, made up of hundreds of contracts and suppliers, both in-house and external.
Given that HMRC has outsourced its IT capability for the last ten years, this is a challenge that shouldn’t be underestimated.
In fact, not too long ago government watchdog the National Audit Office said that the phasing out of the outsourcing agreement presents “significant risks” to the tax authority’s strategy, pointing to the fact that it will have to prioritise building up the right commercial and technical capabilities to manage the shift.
Finding the right skills is indeed going to be a big challenge here, but as we know, the Government Digital Service is working on ways to improve the recruitment process for digital and data specialists into government. It wants to make the public sector more attractive to private sector employees and to introduce some flexibility that allows them to come into government to work on interesting projects when they are needed.
The National Audit Office said at the time:
The transformation will be complex, and more radical than HMRC’s previous change programmes. HMRC already has an ambitious timescale to phase out the tax return starting in 2016, and this is just one part of its transformation plans. HMRC will need to balance ambition with realism about its critical assumptions and contingency planning.
It also has to manage significant operational change while it changes how it procures and manages its IT (including digital) services. Implementation problems are inevitable and HMRC will need commitment and resilience if it is not to be deflected from the delivery of its strategic vision, paragraph.
The news of the agreement with Fujitsu and Capgemini comes shortly after the Chancellor of the Exchequer George Osborne announced a whopping £1.3 billion for HMRC to transform itself into “one of the most digitally advanced administrations in the world”.
The fully digital tax system will mean:
- bureaucratic form-filling is eradicated — taxpayers should never have to tell HMRC information it already knows;
- unnecessary time delays are eliminated — the tax system operates much more closely to ‘real time’, keeping everyone up to date and removing the risk of missed deadlines, unnecessary penalties, debts arising and errors in the system being carried forward from one year to the next; and
- taxpayers have access to digital accounts — with the information HMRC needs automatically uploaded, bringing an end to the tax return.
HMRC has said that by 2020 it believes that most businesses, self-employed people and landlords will berequired to keep track of their tax affairs digitally.
HMRC outlined how it is joining up its internal systems and it will populate the digital accounts with the information it holds, removing the need for users to collate information from a bunch of different places and inform the department about details it already holds (albet in silos). This means that when taxpayers log on to their digital account, web forms should already largely be populated with the details HMRC has.
Glad an agreement has been reached, but 2020 doesn’t seem that far away and there is a hell of a lot to do.