Budget 2004: Revenue and Customs to merge

The government is to merge the Inland Revenue and HM Customs & Excise (HMCE), a move which is likely to lead to a major IT integration programme.

Chancellor Gordon Brown announced the merger in today's Budget, claiming that it will deliver big savings to taxpayers by reducing back-office costs.

The newly merged department would, according to Brown, "deliver better outcomes for the country, particularly improving the service to taxpayers, managing tax revenues and improved efficiency".

The merger follows a seven-month review of the two departments by senior civil servant Gus O'Donnell, who indicated that the integration project was likely to see the appointment of a senior IT specialist to oversee the work.

"I would be very surprised if the new management team did not recruit a chief information officer," he said.

The CIO would oversee the merging of two large IT systems, and a number of outsourcing partners.

HMCE has a desktop contract with Fujitsu Services, while the Revenue recently awarded a £3bn deal to Cap Gemini Ernst & Young.

O'Donnell explained that the prospect of merging the departments had been taken into account when awarding the Revenue's contract.

"When the contracts were signed we made sure they were flexible," he said.

Recruitment for the overall head of the tax service begins today. But while some new jobs are in the offing, Brown also revealed that 10,500 jobs would go as a result of the merger.

The review followed a series of high profile problems at both departments, such as the Revenue's child tax credits fiasco and IT projects at HMCE running over budget.