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Meet HMRC’s horizon-gazing futurists

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Published: 30 Nov 2021 Update History

The UK tax authority’s Futures team monitors trends in the economy and society that could have an impact on government revenues and tax administration.

The pandemic blindsided the world, forcing organisations in both the public and private sector to re-evaluate their approach to future risks and shocks. It also highlighted how valuable ‘Futures’ teams can be to the government.

HMRC’s Futures unit, now in its sixth year, helps the department’s longer-term thinking when dealing with the challenges of a rapidly changing society and economy. Rather than making predictions, it helps policymakers anticipate and learn about opportunities and challenges, supporting the decisions they make to implement better policies for society. 

“What we don't do is predict, because anyone can predict,” says Tony Gradwell, Senior Strategy Adviser in HMRC’s Futures team. “We look at the outside world and assess changes, collecting evidence of trends that are coming to fruition. Then we bring them in-house and raise awareness among our colleagues for consideration.” 

Tracking the pandemic

The Futures team discovered during the early weeks of the pandemic that many trends they had already acknowledged as critical to the future of the economy were rapidly accelerating, such as remote working, the gig economy, and the blistering pace of change in retail across the supply chain, from logistics to warehousing.

The team helped HMRC to consider how these phenomena would have an impact on revenue, compliance and operations, using a variety of models that allowed analysts to formulate the best response. 

“In the food and drink sector, there are changes that have crystallised and are unlikely to be reversed,” says Andy Smith, another Senior Strategy Adviser in the Futures Team, which will have a big impact on tax income. Underneath the COVID impact is the rapid rise in sales of e-vehicles which potentially means significant challenge to fuel duty revenue in due course that is already under consideration by the Treasury.

“We’re now in the process of trying to understand some permanent shifts,” he says. “It's not so much a reversion of behaviours to a pre-COVID-19 period, but actually a reset of certain attitudes, behaviours and trends.”

“A big part of the pressure currently being experienced across the economy is that people want more products delivered to their homes,” says Smith. “People want to order and have the item in their hands three hours later, with a way of sending it back if something is wrong. Some of us are old enough to remember that when you ordered from a catalogue it took 28 days, and then more when you had to send it back.” 

“We’ve been looking closely at automation, and the kind we’re seeing in supply chains for certain industries is very different from what we anticipated when we last looked at the issue,” adds Smith. “The development of heavily automated fulfilment centres, replacing the old styles of traditional warehouses, is especially interesting. It's all about speed today.”

Tomorrow’s trends, today

The evolution of working arrangements is a central theme for the Futures team, and while the headlines are focused on haulage bottlenecks and driver shortages, there are other risks playing out, such as a shortage of accountants and other white-collar professionals. 

“On the future of work there’s no forecast, only uncertainty,” says Gradwell. “There’s a shortage of lorry drivers, but there’s also a shortage of white-collar professionals. In accountancy, for example, can AI help businesses manage Making Tax Digital (MTD)? For businesses already struggling because they can’t hire enough staff, how will it affect them? That’s the kind of uncertainty we’re beginning to articulate for the benefit of our policy and strategy people.”

The government wants to increase wages across certain areas of the economy, and the Futures team is mapping out what consequences that may have elsewhere. 

“Demand elasticity could affect a number of things like the size of the gig economy, and the professional job shortage could also affect the size and shape of the freelance economy,” says Gradwell. “There are also questions as to what this means for the accountancy profession. If there’s a bigger market due to policies such as MTD, how will it play out for intermediaries and advisers? How is that market likely to evolve? What about technology? Will there be a concentration at either the top or the bottom of the market? That’s sector specific, but those are the kinds of things we're looking at when we think broadly about the future of work.”

The evolution of work and play

The questions are likely to have been prevalent in both the private and public sector over the past 18 months as the pandemic recalibrated visions of the future, both in working life and at home, from the top of corporations to the individual mulling their next move. 

“We’re going to have more retirees depending on the taxes paid by the working population this decade,” says Gradwell. “This is clearly a problem for the Government of the day to tackle; our role in Futures is to identify where the uncertainties lie: who will be working, how they will work, when they will work and what level of automation might make up any shortfall.”

Somewhat ironically, one trend COVID-19 has very much accelerated is future thinking itself.

“It was already there, but the pandemic brought it to the fore and encouraged a huge amount of cooperation both inside and outside the government,” says Gradwell. “It has really embedded future thinking as a standard practice.”

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