HM Revenue & Customs' plans for restructuring were "unrealistic", forcing the tax man to reconsider its options, the government's spending watchdog has said.
The National Audit Office said HMRC was reconsidering the scope and timing of its plans to replace 170 local offices with 13 regional centres.
According to the FT, the total cost of the estate over the next decade has risen by an estimated £600m — or a fifth — since 2015, mostly because of the buildings' higher than expected running costs.
Head of the National Audit Office Amyas Morse urged HMRC to reconsider its plans for moving to regional centres. "It should step back and consider whether this strategy still best supports its wider business transformation and will deliver the sustainable cost savings it set out to achieve in the long run," he said.
Meg Hillier, who chairs the public accounts committee, added: "The government's early over-optimism is once again going to increase costs to taxpayers, by £594m over 10 years, and impact their own staffs' livelihoods."
HMRC's push to consolidate its structure is meant to provide better services at a lower cost, as it currently has more space than it needs and much of it is in poor condition.
It believes bringing staff together in large regional centres would create more career options and help them work more efficiently and flexibly.
According to the FT, HMRC expects to lose up to 5,000 staff out of the 38,000 people working in offices that are due to close.
However, HMRC concluded its original plans were over-optimistic in relation to the availability of suitable properties and were carrying too high a risk of disruption to its business, as they involved moving too many staff too quickly, while delivering other significant changes in parallel.
HMRC had set up the timetable for the closures in 2001 over a 20-year period. Under the deal, the Revenue sold its freehold properties, which comprised two-thirds of its estate, to property company Mapeley for £370m. In return, Mapeley provided fully serviced office accommodation, for which HMRC currently pays about £12m each month.
The end of the contract in 2021 provides a deadline for HMRC to reconfigure its estate, as rental and service costs would rise if it stayed in properties beyond that point.
However, according to latest estimates, the whole life cost of the Mapelely contract will be £4.2bn, or £213m more than originally forecast.
Morse said: "HMRC has improved the handling of its current contract with Mapeley and achieved better outcomes, though significant risks remain."
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