HM Revenue & Customs in £1.6bn cost-cutting 'challenge'
HM Revenue and Customs faces a "big challenge" to cut running costs by £1.6bn in the next four years, the National Audit Office has said.
In a report, it said HMRC had to reduce costs while increasing tax revenues and improving customer service.
It said money-saving plans included cutting staff numbers by 10,000 and reducing the number of offices but said the measures needed to be developed.
HMRC said focusing on customer needs would enable it to "deliver savings".
It said measures aimed at reducing costs include achieving savings in the provision of IT services, improvements in productivity and reducing sickness absence.
The size and shape of HMRC will change substantially as it reduces staff numbers by 10,000 and significantly reduces the number of offices it operates.
The report stated that, in assessing potential cost reductions, HMRC had established specific priorities in the way it operates and revenue targets.
However, the NAO said some of the measures, such as the reduction of sickness absence, had not been tested and there was, therefore, a need to "build greater confidence in the planned reductions".
It said HMRC had a "limited understanding" of the link between the cost and value of its activities which had "restricted its ability to assess fully the impact of cost reductions on business performance".
Amyas Morse, head of the National Audit Office, said: "Reducing running costs by £1.6bn over four years is a big challenge for HMRC. It is making progress but there is no contingency in its plans.
"To achieve value for money, it needs to better define the service it is aiming for; improve its understanding of costs; and develop its implementation plan."
In response the NAO report, the HMRC said it was "very clear" on its key objectives to 2015 to "make it as easy as possible for honest people to pay the right amount of tax easily whilst cracking down on those who break the rules""
AN HMRC spokesman said: "Focusing on the different needs of our customers enables us to deliver savings efficiently and effectively.
"In addition, we are communicating a clear vision to HMRC's people which sets out our operational priorities and targets to be achieved by 2015."