Tax chiefs are doing well so far at slashing running costs but face a serious challenge to cut deeper without harming customer relations, a watchdog has said.
A report by the National Audit Office (NAO) warned the extra burden of benefit reforms and a related new income tax computer system could derail the efficiency drive.
HM Revenue and Customs (HMRC) achieved savings of £296 million in 2011/12, the NAO said, almost a fifth above target. It is now a third of the way to meeting a spending review task of slashing running costs by £955 million by 2014/15 - including axing 10,000 posts.
But with new savings having to be identified of £585 million a year, it would be "challenging for it to make more and deeper reductions over the spending review period and maintain performance, particularly customer service", the report concluded.
HMRC officials admitted last month that about 16 million individuals and businesses calling the taxman for help face hanging on the line for more than five minutes.
They were criticised for "low ambitions" after revealing that about 20% of 80 million calls to their hotlines - many of them 0845 numbers - are expected to take longer than five minutes to answer. HMRC was condemned last year for costing callers £136 million a year through such delays.
NAO head Amyas Morse said: "In one year, HMRC has managed to deliver a third of the savings it is required to deliver over the four years of the spending period, at the same time as maintaining performance in key areas such as maintaining tax collection and reducing tax debt.
"HMRC is moving from making tactical efficiency savings and quick wins towards a more strategic approach to managing its resources. We recognise the importance of this change. The big challenge ahead will be to make more and deeper spending reductions without impairing its performance."
An HMRC spokesman said: "Today's NAO report recognises HMRC's success in exceeding our 2011/12 savings targets whilst delivering more value for money to the taxpayer. We are now taking a more strategic approach to managing our resources, resulting in us answering phone calls faster and turning post around more quickly than ever before.
"The NAO have recognised how well HMRC manages change and how cost reduction and reinvestment plans are aligned with long-term plans to maximise revenues, and improving customer service."
UK 
