MPs savage taxman's IT farce

Parliament's Public Administration Select Committee (PASC) has released a report that says the IT system caused some of the problems and made it difficult to resolve them quickly.

The tax credit system, run by HM Revenue and Customs (HMRC), has been plagued by failures with hundreds of thousands of claimants being paid late while elsewhere there were overpayments. Supplier EDS agreed to pay £71.25m in compensation in November, 2005.

Tax Credits: putting things right, published on 29 January, 2006, broadly agrees with the findings of an earlier report by the ombudsman of HMRC. It identifies inflexible IT as a major contributor to the problems.

One example is that the HMRC wants to introduce a pause between notification of overpayment and its recovery — to reduce the burden on the lower income families most likely to receive credits — but the system is not yet able to accommodate the change. Also, it has so far been unable to automate the provision of clients' payment histories in the annual renewal cycles.

The fact that the tax credits system is designed to be wholly IT based with minimal clerical input has made it difficult to respond to the problems, the report says. It also says the experience provides a lesson for other government IT schemes.

"Careful consideration needs to be given to the design of future government IT enabled schemes so that it is the needs of the customer rather than the limitations of technology which are paramount," the report says.

The PASC agrees with the ombudsman that it will take a long time to solve the problems, but notes that a start has already been made. Paymaster general Dawn Primarolo recently announced a number of improvements planned to come into effect over the next 18 months.

A spokesperson for HMRC said it would not yet respond to details of the report, but it has issued a general statement: "Since [HMRC chair] David Varney gave evidence to the Public Administration Select Committee, the government has already made significant improvements to the administration of tax credits.

"While we will respond formally to the committee in due course, many of the recommendations made by the PASC and the ombudsman are already being addressed in both the six areas for improvement the government announced in May last year and in the pre-budget report in December. As a result there is greater certainty for families who experience changes in their income."