The Government has announced its intention to merge the Inland Revenue and HM Customs and Excise departments into a single department, to be called HM Revenue and Customs, in line with the recommendations of the O'Donnell report ('Financing Britain's future: review of the Revenue departments, Cm 6163; ISBN 0101616325) published in March 2004. The Committee's report examines the case for merger; expected costs and benefits; risks; legislation: confidentiality and powers of the new department; tax policy-making; and ministerial accountability. The Committee supports the decision in principle and looks forward to a detailed analysis of expected costs and benefits being carried out as soon as practicable, and also supports the introduction of new accountability arrangements. However, the fact that the Executive Chairman will report to three Treasury Ministers on various aspects of the new department's work appears unnecessarily cumbersome, and recommends that this should be reviewed in light of practice once the new department has been created.

merger of HM Customs and Excise and Inland Revenue : Oral and written evidence, Wednesday 24 January 2007, Mr Paul Gray, Acting Chairman, Mr Mike Eland, Director General, Enforcement and Compliance, and Mr Dave Hartnett, Director General, Policy and Techn

Hm Customs and Excise

By transferring ownership or leases of around 60 per cent of its estate (591 properties) to a private contractor, Mapeley, in 2001, the Inland Revenue and HM Customs & Excise planned to reduce their running costs and had the opportunity to save up to £1.2 billion by reducing the size of the estate. However, the NAO concludes that the merged HM Revenue & Customs has not achieved value for money on the contract, as it had no long-term plan and has not obtained all available savings. The existence of the contract allowed for a smooth estates merger, following the merger of the two departments in 2005. HMRC has the flexibility to vacate up to 60 per cent of its estate over the 20 year contract, allowing it to save up to £1.2 billion. But it has not recognised the contract as a major strategic asset nor committed appropriate commercial skills to managing it. As a result, the total possible savings available now amount to £900 million. There is now a significant risk that HMRC will not achieve value for money over the rest of the contract unless it strengthens its management of the contract. There needs to be active management at Board level and HMRC needs to develop an estates strategy.