HMRC perm sec details £400m cost pressures in regional centres rollout

HM Income and Customs perm sec Sir Jim Harra has informed MPs that funding prices for his division’s Places Programme have elevated by simply over £400m over the previous eight years however the challenge’s whole-life prices stay “steady” at £2.88bn.

Harra was quizzed about HMRC’s long-running workplace consolidation programme, which is shifting operations from round 170 small workplaces to 14 regional centres, at a current assembly of parliament’s Public Accounts Committee.

In a follow-up letter to the committee he insisted that whereas funding prices for the programme elevated from an anticipated £552m in 2017 to a present determine of £953m, an enlargement of the programme – together with extending the funding section from 10 to fifteen years – was the rationale.

He stated that the programme, which has to this point seen HMRC workers transfer into buildings corresponding to Ruskin Sq. in Croydon, Unity Sq. in Nottingham and Atlantic Sq. in Glasgow, would see whole-life prices basically unchanged at £2.88bn measured over a 25-year interval.

Harra, who is because of stand down as perm sec within the coming weeks, informed MPs that the funding value will increase had been brought on by a spread of things, together with the enlargement of the programme’s scope and “unprecedented excessive ranges of inflation over current years”.

A breakdown of investment-cost will increase confirmed that £248m had been attributed to the addition of regional centres at East Kilbride, Preston and Portsmouth to the programme – together with inflation-related value will increase. The determine additionally contains the impression of “strategic selections” to amass some hub freeholds when it represents higher worth for cash than earlier preparations.

Different value drivers included the elevated expense of voluntary redundancy packages due to a authorized problem that compelled revisions to the Civil Service Compensation Scheme to be put aside. Closing native workplaces and inspiring workers to maneuver to different workplaces probably triggers the choice of voluntary redundancy for individuals who would face extreme journey occasions.

The PCS union received a Excessive Court docket battle over adjustments to the compensation scheme that got here into impact in 2016, forcing the then authorities to revert to the scheme’s extra beneficiant 2010 phrases for voluntary exits. It efficiently argued that the Cupboard Workplace had did not correctly seek the advice of on the adjustments. HMRC subsequently paused its exit programmes.

Harra’s letter stated the impression of getting to revert to the costlier 2010 compensation scheme phrases had added £82m to the price of the Places Programme.

Along with the five-year extension to the Places Programme’s funding section, Harra stated HMRC had modified the programme’s evaluation interval from 10 years to 25 years. He informed MPs that regardless of the enlargement and extra monetary pressures detailed, the entire life prices of the programme had been solely £49m greater than had been deliberate in 2017.

The perm sec stated that the comparatively small change to the challenge’s whole-life prices was “testomony to the worth for cash options we’ve been in a position to safe”.

He added that switching to a “smaller, fashionable and extra environmentally environment friendly community” of regional centres and workplaces had allowed HMRC to drive down general operating prices and “resulted in elevated programme advantages general”.

For the most effective a part of a decade, PAC members have challenged HMRC on the underlying enterprise case for its its regional centres – which characterize the primary wave of the federal government’s hubs programme. Key issues have included whether or not the division has accurately anticipated its long-term area wants, significantly in gentle of the elevated development in the direction of hybrid working powered by the response to the Covid-19 pandemic.

Harra informed MPs that as of September 2024 the occupancy fee for the 12 HMRC regional centres which are open was 67% – as measured by Cupboard Workplace-defined metrics.

The perm sec acknowledged that his division has spare capability, however stated deliberate will increase to headcount would take up a number of the surplus, whereas extra area could be rented out to different components of presidency.

“HMRC’s allotted capability at the moment exceeds our wants as a result of we’re holding area for the long run workforce development introduced by the chancellor in her Autumn Funds,” Harra stated. “I count on HMRC occupancy ranges to rise as we proceed our deliberate workforce development and sublet extra of our allotted capability.”

Harra informed MPs that HMRC has sublet 61,000sq m of area on the 12 regional centres to 52 authorities departments and companies. He stated the area may accommodate round 14,000 workers and was forecast to generate earnings of £36.6m in 2024-25, rising to an anticipated £39.2m in 2025-26.

Harra stated HMRC sublets an additional 23,000sq m of area in its wider property to departments – representing area for an extra 1,300 full-time-equivalent workers.