"Unprecedented challenge" was the phrase which kept being repeated in a recent Treasury Select Committee hearing regarding Brexit, the customs union and HMRC.
The department is already undergoing the “largest transformational change in Europe,” with plans to digitise the tax system, while simultaneously untying itself from the £800m per-yer mega IT contract. And that’s before Brexit.
“There is an unprecedented level of technological change in HMRC, we are attempting to digitise the entire tax system at the moment [with Brexit] added on,” Jon Thompson, chief exec of HMRC recently told MPs.
However, the biggest question currently facing HMRC’s operations is whether we stay in the customs union and what that means for trade deals.
Currently the department is halfway through its plans to overhaul the clunky Customs Handling of Import and Export Freight (CHIEF) and replace it with the Customs Declaration Service (CDS), underpinning £34bn in tax at the border.
Thompson said current delivery timetable is tight, but the programme remains on track to be complete in August 2018 and transition users onto the new system by January 2019. “While there are always risks that the programme might encounter unforeseen problems later, there is currently nothing to suggest that this timetable will not be achieved.”
But even if the new customs solution is delivered without a hitch, something that in itself remains highly questionable, it will not have the scalability to deal with the huge increase in traffic.
CDS is intended to handle 150 million declarations each year, up from the current volume of 55 million. That system began several years prior to Brexit due to EU policy changes. Post Brexit, the volume of declarations is expected to increase by up to 300 million, as 130,000 traders will have to make declarations for the first time.
CHIEF's great (though there are 'few alive' who can use it)
Thompson said: “The UK needs to reach a decision with the European Union on its future customs arrangement with the trading bloc within seven months” in order to have the infrastructure and resources in place.
He said the department is working on a contingency plan to run and scale-up CHIEF alongside CDS.
The Register has heard rumours that the incumbent provider, Fujitsu, has put in a bid to be able to scale up the 30-year legacy system CHIEF to potentially handle the exponential increase in declarations. “CHIEF could carry on for another 30 years; it can be scaled. The problem is, it is very old and there are few people alive that can use it still.”
Some kind of contingency plan at least seems sensible, as CDS was designed several years before Brexit, prompting a number of insiders to observe its current set up is simply “not fit for purpose”.
One insider said that a possible option could be a long transition period, with CHIEF being prepped to take the grunt for the duration. He added another alternative could be to look again at the scope and figure out a smarter way of doing it, with far less scope and lots of shortcuts.
From a technocratic perspective, the current problem facing HMRC - and indeed the rest of government - is the sheer complexity it faces.
That is something Thompson acknowledged just in regard to the current CDS system: “Technology projects are complicated by nature… unforeseen things can happen,” he added: “[So] I’m not prepared to commit to everything being fine and dandy.”
Given the problems arising at HMRC when tax credits were introduced under Gordon Brown, it’s certainly hard to imagine a scenario where Brexit won't pose an "unprecedented challenge" to its IT systems. Not least given its woeful track record. Or to use another phrase, "cause a massive clusterfuck". ®