UK tax dept's IT savings created 'significant risk', technical debt as it faces difficult conversation with Chancellor

Pry open that weird little red suitcase and give us a few quid, would you?

Cost-cutting at UK tax ministry HMRC has resulted in IT systems that “constitute a significant risk to the department”, according to national spending watchdog the National Audit Office (NAO).

As the holder of the keys to the UK's treasury, chancellor Rishi Sunak, prepares his Spending Review for 25 November, the NAO said the need for HMRC IT investment should be recognised by the Treasury when it comes to dishing out dosh to major government departments.

In his write-up of Her Majesty’s Customs and Revenue’s annual report and accounts (PDF), NAO comptroller and auditor general Gareth Davies said: “HMRC has recognised that, due to the need in the past to forgo operational maintenance and upgrades to its systems to secure cost savings, its IT systems now constitute a significant risk to the Department. This will require significant investment and will need to be at the heart of any future Spending Review settlement.”

The report said that HMRC IT systems will become increasingly vital to HMRC’s ability to perform functions as it continues to aim for a fully digital tax system.

The HMRC annual report said a programme dubbed Securing Our Technical Future (formerly known as Columbus Cloud) would help address the technical debt it inherited.

“This programme is focused on remediating high priority technical debt and migrating our services out of existing data centres. However, it is acknowledged that there remains significant work to do to if we are to address the levels of technical debt identified across the estate and create a more flexible, secure and scalable IT environment,” HMRC's annual report said.

A review by consultants Deloitte recommended a 12-month “Rapid Remediation Programme” to focus on the most critical priorities.

“We continue to mature long term plans [for more than five years], initially focused on our most critical services, but [we are] ultimately seeking the fundamental transformation of our remaining core services. This will include setting out well-evidenced options for investment at the next Comprehensive Spending Review,” HMRC's accounts said.

Other plans include a new Child Benefit IT system to replace the existing one.

Meanwhile, HMRC said it has been expanding its supplier base to “take better advantage of technical innovations and keep pace with technology trends in order to support HMRC’s digital transformation and move to lower cost and highly resilient cloud services”, achieving an additional £30.7m saving by the end of June 2020.

While admiring HMRC’s cost-saving vigour, the Chancellor may be left footing the bill if he plans to ensure the agency can continue to collect around £636.7bn in tax without undue IT-related risks.

As if recognising the need for investment, HMRC is currently having nice chats with IT suppliers to reboot its technology supply chain by opening up its entire £900m annual IT budget via a new Technology Sourcing Programme (TSP), according to a September tender. According to the latest accounts, the total value of IT contracts currently comes to £661m annually.

While addressing technical debt, HMRC must also cope with the challenge Brexit is throwing at it, including running the new Customs Declaration System alongside the old ChIEF system beyond the end of December 2020.

HMRC has been planning to replace CHIEF since 2013 and the new system from IBM was supposed to be up and running by January 2019. Last month, it awarded Fujitsu a £168.8m contract without competition in part to ensure CHIEF — once part of the Aspire programme — could keep running beyond the January 2021 Brexit transition deadline. ®