IT caused tax credit chaos

Revenue may seek compensation from EDS for credit payments backlog.

Revenue may seek compensation from EDS for credit payments backlog.

In a clear U-turn, the Inland Revenue has blamed its tax credit computer systems after hundreds of thousands of claimants did not get their money on time. It says it may also ask services supplier EDS for compensation.

Less than two months ago the Revenue had said that it was "utterly ludicrous" to blame the computer system for the tax credit backlog. Officials at that time published parts of a confidential government report that praised preparations by EDS and Inland Revenue for the introduction of new tax credits.

But, in an interview to be broadcast by the BBC this week, the paymaster-general Dawn Primarolo says the poor performance of an IT system for paying tax credits led to staff being unable to access information when the public contacted the Revenue's call centres.

"The IT system - and I have been perfectly frank about this - did not run at the speed, was not clearing down the claims or sending out the award notices as fast as it should have done," she said. Call centres had not been able to access information they needed to deal with inquiries, she added.

In June Revenue officials said the tax credit systems were not perfect but they stopped short of blaming the technology for hundreds of thousands of late payments. The Revenue drew from the findings of a confidential Gateway Review carried out late last year by the Office of Government Commerce.

"The facts are that the OGC report concluded that the Revenue is carrying out an excellent job with its computer system, with praise for the Revenue's good programme management," said the officials.

The Revenue said the report had recognised that the project was large and complex but concluded that the new tax credit project was an "exemplar of good programme management".

The wide gap between the praise for Inland Revenue and EDS in the Gateway Review, and minister's criticisms may indicate that the department has decided to blame the supplier after questions were asked in Parliament and by tax staff over the "big bang" implementation of new tax credits in April.

Some specialists believe that the Revenue was wrong to introduce such a large system without phasing its implementation, although they said EDS' systems fell short of expectations.

Revenue staff have said their screens went blank several times a week because communications equipment at the interfaces between computers failed under massive volumes of transactions.

Primarolo's criticisms also raise questions over the ability of Gateway Reviews to stop failing projects before they become disasters. Although the Gateway Review into new tax credits said the project was high risk, the warning was buried in a report that largely praised EDS and the Revenue.

Spokespeople for the Treasury and Inland Revenue declined to comment.

Computer Weekly contributed to the special investigation into the introduction of tax credits by BBC Radio Four's Inside Money programme. This will be broadcast at noon on Saturday (26 July).

A transcript of the Primarolo interview will appear on

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