HM Revenue & Customs has frozen spending on IT, according to a report from the National Audit Office.
The report looks at the efficiency of the collection of national insurance and found that improvements to some of the systems are not going to be possible in the coming financial year.
The department has frozen spend in 2010-11 on "routine improvements" to systems, and the selection criteria for larger IT projects have become "more stringent".
The report says, "The Contributions Office has identified a significant number of further improvements it would like to implement but constraints exist on realising them.
"The selection criteria across HMRC for IT projects have become more stringent and there is no funding in 2010-11 for routine improvements."
The lack of funding may cause problems for the national insurance database as it continues to grow. There are 12 long-standing data accuracy issues which, if not resolved, may affect future pension and benefit entitlements of some people, the report says. And the database is set to continue growing as the UK's working population grows.
The NAO report says, "The availability of funding for IT improvements is in part constraining further operational changes that the Office has identified to make better use of staff."
HMRC is facing cuts of 25%, as set out in the government's emergency Budget. Departments had already been told they face cuts to their IT spending, and have responded with reviews of IT projects and stringent criteria for new investment.