A report released last week by the Treasury Committee
says HM Revenue and Customs does not understand the role of IT in
tax credit overpayment
The UK government has no real idea how much IT failures contributed
to the tax credit debacle that saw claimants overpaid by £1.8bn in
2004-2005, according to a key House of Commons committee.
The Treasury Committee report, published last week, was damning
about HM Revenue and Customs’ awareness of how its computer
problems contributed to the overpayment. “We have seen nothing from
the department attempting to assess the contribution made by IT
system error,” the report said.
Without this knowledge, the committee said, HMRC cannot expect
to improve the running of the tax credit system. “We recommend that
the government undertake a complete analysis of the incidence of IT
system error and the extent to which it causes or contributes to
overpayments, and that it publishes that analysis,” the committee’s
report said.
In July 2003, the government blamed computer problems for the
majority of the failures during the introduction of the tax credit
system that went live in April that year. After the system went
live, hundreds of thousands of claimants had their payments
delayed.
According to the National Audit Office, software problems
resulted in overpayments of £184m in 2003-2004 and 2004-2005, and
that HMRC was “continuing to investigate the reasons for other
incorrect payments caused by system miscalculations”.
However, paymaster general Dawn Primarolo, the government
minister responsible for HMRC, told the Treasury Committee earlier
this year that computer problems had largely been resolved. “IT
performance has been significantly improved. In total there have
been 300 improvements made to the system since April 2005.”
A new software release introduced in November delivered “real
improvements in operational performance”, she said.
This account conflicts with those from people working closely
with the system. The PCS, a civil servants’ union, told the
committee that although the identification of computer errors had
improved, problems persisted.
“The system is not user-friendly and continues to be often
unavailable at key times… Our members report continuing problems
with the interface between the [tax credits] computer system and
treatment of data that HMRC operatives are forwarding for inclusion
(such as a claimants’ change of circumstances),” said the PCS.
The Citizens’ Advice Bureau, which advises claimants, told the
committee the system made it difficult for claimants to change
details and sometimes records were lost all together. It was then
difficult to get them back onto the system.
However, Primarolo did not acknowledge significant ongoing
problems with the system when she appeared before the committee,
and denied there was a problem with unplanned downtime.
“The computer has downtime in order for it to have the software
put on to it… I have no information… that the computer was
repeatedly going down… This idea that it is repeatedly not
available and you cannot get access I disagree with.”
More detail and clarity on the lessons that may be learned from
the tax credit fiasco could be useful in avoiding such problems in
future government IT projects. However, this information may not be
available until the National Audit Office undertakes an
investigation into the IT procurement behind the tax credit
system.
The National Audit Office has not yet said whether it will take
up the Treasury Committee’s recommendation.
HMRC, in an initial response to the report, said the tax credit
system had benefited millions of people and welcomed the
committee’s endorsement of the principles underlying the system. It
said it would respond officially to the report in due course.
● House of Commons Treasury Committee: The Administration of
Tax Credits (HC811-I)
Related story:
EDS deal ‘appears improper’, say MPs
A compensation deal for IT problems with the tax credit system
agreed between outsourcer EDS and HMRC “has the appearance of
impropriety, if not the fact,” according to the House of Commons
Treasury Committee.
The fact that up to £26.5m of the £71m compensation deal was
contingent on EDS winning new contracts with the government was
first revealed in Computer Weekly in April.
The report highlights the MPs’ frustration at the
confidentiality agreements signed by HMRC and its suppliers. Such
clauses hinder the wider public sector in learning lessons.
The existence of a confidentiality requirement “makes it
impossible for the house to assess what happened in this particular
case, and to seek to draw broader lessons from it about the
problematic area of government IT contracts,” the MPs
complained.
They also said such terms were restricting HMRC’s ability to
answer the committee’s questions. “We are extremely concerned that
HMRC appears to be claiming to have effectively ‘contracted out’ of
its obligation to be publicly accountable for its administration
and expenditure, by virtue of having entered a private
contract.”
HMRC officials cited confidentiality clauses when questioned
about the compensation settlement with EDS for the system’s
catastrophic failure when it was introduced, and the resulting
£2.2bn overpayment during 2003-2004.
During 2004 and most of 2005 the government and EDS were
embroiled in arguments about compensation, before settling out of
court in November 2005 for an agreed payment of £71.25m.
Neither HMRC, ministers nor EDS published the fact that £26.5m
of the settlement is contingent on EDS winning new business with
the government.
The committee said “We have grave concerns about the wisdom of
an agreement which then makes the payment of compensation to the
affected government department by the provider of the
unsatisfactory service contingent on that provider winning other
contracts with government.
“Our concern is not that we believe the contingent payments will
influence future decisions by government departments to award
contracts, but that it will be impossible to be sure that they have
not.”