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HM Revenue & Customs (HMRC) chief executive Jon Thompson told the Public Accounts Committee (PAC) the department needs extra cash to ensure its contingency plan works, should the new customs declaration service (CDS) not be ready by the time the country exits the European Union (EU).
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CDS is intended to replace the current Customs Handling of Import and Export Freight (Chief) system for handling import and export freight from outside the EU.
The system, which has been in place for 25 years, can only handle about 60 million customs declarations per year, but with the UK leaving the EU in two years’ time, the new system must be able to handle much larger numbers.
However, the CDS programme is currently rated Amber by the Infrastructure and Projects Authority, meaning it is “in doubt”, with “major risks”, and earlier this year the National Audit Office (NAO) warned there was “still a significant amount of work to complete”, which meant CDS may not be ready on time.
The NAO report came after the Treasury Committee said it had lost confidence in the successful implementation of CDS. Thompson told the PAC the department has made “good progress” since the NAO report and he is confident the project is on track, but added there are “no guarantees on technology projects”.
“We can be reasonably confident, but we need to be transparent with you. There are four significant risks to this programme and any one of those could either delay the project or, worst case scenario, CDS wouldn’t be ready,” he said.
“If we don’t manage those risks, this will either get delayed or go off track. It’s currently going well, but I will never give you a guarantee any IT system is going work until after [go-live].”
Earlier this year, the NAO said it was concerned with HMRC’s contingency plan, part of which is to have Chief run alongside CDS and upgrading it to be able to handle larger volumes of customs declarations should CDS not be ready by March 2019.
Chief has never handled more than around 60 million transactions per year, however the estimated maximum figure a system would have to handle post-brexit is 255 million customs declarations a year, based on current volumes of trade.
HMRC has estimated the CDS programme will cost £157m, however this figure does not include costs to upgrade the Chief system.
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When asked by the PAC if he was confident the Chief system would be able to deal with the increase in transactions should it need to be used, Thompson said: “No one said we were confident”, and added that the programme has done “some work” on scaling up, but has “run out of money”.
He added that the department have had “conversations with Treasury” to increase its budget should CDS not work, and said it would cost an extra £7.3m to upgrade the Chief system.
“Is there a risk CDS might not work? Theoretically, yes. We need to have a full-blown contingency, which is Chief, in case it doesn’t work. That’s not fully funded, and we’re having a conversation with treasury, because we need an extra £7.3m,” said Thompson.
Another issue is that Chief is not compliant with the EU Customs Code, which is one of the reasons the system is being replaced.
Last month, HMRC completed 50% of the development work on CDS, and all critical milestones have so far been met. In a letter to the PAC ahead of the meeting, Thompson said the most significant risks currently are the “the integration of the technology components procured from external suppliers in HMRC’s technical architecture and the performance, for example, response times of the end-to-end system”.
He added that the integration work is not complete, but the department has made “good progress” on integrating digital infrastructure, and completed the majority of the work required to allow customers to register and subscribe to “particular authorisations and products”.
The letter also said that so far, the department has not identified any integration issues to indicate the new system won’t work “as expected” in HMRC’s IT estate.
From August 2018, the two systems will be running in parallel to allow the department to gradually increase transactions sent through CDS with the option of reverting back to Chief should any problems occur.