What does CDIO Mark Dearnley’s departure mean for HMRC’s making tax digital strategy?

WHEN Mark Dearnley revealed he would be leaving HMRC as chief digital and information officer (CDIO) next month, once his existing contract expires, it came as a shock to anyone who had been following the organisation’s digital development.

After all, Dearnley is leading the tax authority’s move away from the £800m-a-year Aspire contract, which is the largest single ICT contract in all of government. It is for this reason that MPs on the Public Accounts Committee (PAC) emphasised in its recent report on the Aspire contract, the need of effective leadership.

“HMRC now plans to take crucial decisions in 2018 on the long term IT model it will operate from 2020. We remain concerned that HMRC may struggle to integrate different services from different providers. As we have seen from elsewhere in government, one of the main factors that determines the success of complex programmes such as this is the quality and stability of their leadership,” the report said.

“HMRC must ensure continuity in the leadership of the Aspire programme to maximise its ability to design and introduce a new IT model successfully,” it added.

MPs had made clear that there were some critical decisions to be made over the next two years which would have a direct impact on the success of the transitional project.

The committee had heard that HMRC was in negotiations with Dearnley about his contract which ends in September this year, with MP Richard Bacon stating that the department should ensure that it keeps Dearnley in his position. HMRC chief executive Jon Thompson replied, stating: “We all share the same aspiration. We are in negotiations”.

But that aspiration didn’t lead to Dearnley staying, and in fact, just one week later, Dearnley revealed that he would be moving to the private sector.

Mr Digital

While this looks from the outset to be a damaging blow to the department’s ‘making tax digital’ strategy, Georgina O’Toole, an analyst at TechMarketView, believes it will not mean any change at all, and that HMRC will continue to work towards a digital tax system.

“My understanding is that, in the interim, Mike Potter, who has been HMRC’s head of digital, will take Dearnley’s role. While he may be a different type of operator, the fact that he is ‘Mr Digital’ – as one supplier described him to me – bodes well for the commitment to the strategy,” she says.

O’Toole suggests that Dearnley may have wanted to leave on his own accord, emphasising how difficult it is for public sector departments to keep hold of top talent.

And although MPs may have wanted a leader to continue with the job they’re doing, O’Toole suggests that Dearnley may have thought of the organisation’s tasks in phases, and may have felt that he had achieved everything he had set out to achieve in the current ‘phase’ and that the next phase is better suited to someone with different skills.

It must be noted that the committee did conclude that HMRC “is making progress in replacing the Aspire contract” – although that should of course be the minimum requirement. HMRC meanwhile, has said that it trusts the executive leadership team that it has, and the external parties that it is using to ensure the programme will be a success.

The most complex digital programme in the public sector

HMRC has to deal with a huge amount of complexity, involving staff changes, IT architecture changes, in addition to other legal, commercial and technical issues.

The first tasks for Mike Potter in the interim, or indeed Dearnley’s replacement in the long-term, will be to improve the quality of service it is providing taxpayers, which has been deteriorating because HMRC released too many staff too soon. The new digital leader will also have to figure out how to ensure customers use online methods of contact such as a digital tax account; HMRC has stated that this is the key risk it faces in personal tax services. As the PAC advised, HMRC also has to ensure that its plans to further digitise its services are sustainable (particularly in regards to the 34% reduction it expects to see in its personal tax department by 2020-21).

Whoever does take over from Dearnley will have to give regular updates to the committee on HMRC’s progress, in what is still an extremely daunting task ahead.

The digital tax account programme is an exemplar for other government departments, and therefore its importance cannot be understated.

“Government really can’t afford the digital tax account programme to fail. It is, arguably, the highest profile and most complex digital programme in the public sector today,” says O’Toole.

“It needs to succeed otherwise other departments will use it as an excuse not to pursue their own more complex digital transformations. That wouldn’t be good for the public sector, suppliers or the taxpayer.”