Publish reports on troubled tax credits IT system, demand MPs

MPs from the three main political parties have called for Gateway reviews of the tax credits system to be published after the Commons Public Accounts Committee released a highly-critical report on the scheme last week.

MPs from the three main political parties have called for Gateway reviews of the tax credits system to be published after the Commons Public Accounts Committee released a highly-critical report on the scheme last week.

The committee criticised the design of the tax credits system and said problems administering it had damaged the reputation of HM Revenue and Customs for "accuracy, fairness and proper handling of taxpayer affairs".

The committee said, "Schemes that are intrinsically complex carry the risk of being too difficult for the intended beneficiaries to understand and for departments to handle."

Now MPs want HMRC to publish Gateway reviews - independent assessments by the Office of Government Commerce - into the tax credits system. 

Edward Leigh, chairman of the Public Accounts Committee, said he applauded Computer Weekly's campaign to improve the transparency of HMRC's affairs. He said Gateway reviews into the scheme should be published to see whether they had exposed the "structural flaws" that led routinely to claimants receiving overpayments.

"We have a system where hundreds of thousands of people, many of them in very difficult circumstances, have been and are being seriously mistreated. There must be serious questions about how [the tax credits system] can be made to work," he said.

Labour MP Frank Field also called for Gateway reviews on the tax credits scheme to be published. He said he was concerned about "incompetence" and "deep-seated problems" in the administration of the tax systems.

The tax credits scheme led to 1.8 million people being overpaid. The committee said 540,000 of the overpayments were because of software errors. Most of the software problems occurred in the first three months of operation, from April 2003 - the department is in negotiation with IT supplier EDS over compensation.

But the Public Accounts Committee's main concern was over the design of the tax credits scheme. Many claimants receive provisional overpayments as part of the system's design. When HMRC claims back the overpayments the following tax year, many recipients cannot afford to repay them.

Richard Bacon, an MP on the Public Accounts Committee, said if HMRC were willing to publish Gateway reviews, it would be a sign of confidence that the department is not afraid of reality and is prepared to identify and deal with mistakes.

"There will be problems and mistakes because we are all human and the best way to tackle them is first to know about them," he said.

Vincent Cable, Liberal Democrat shadow chancellor and former chief economist at Shell International, said, "The government must publish its internal reviews into the workings of tax credits. We already know from the ombudsman's report that there has been serious maladministration and that many people are suffering because of the over complexity of the tax credits system.

"What we do not know is how effectively the technical problems are now being managed. Full publication is essential."

Gateway review reports might have alerted the department and ministers to the complexity of the scheme. Six stages of Gateway reviews are carried out on medium- and high-risk projects at various stages in their lifecycle.

But the Office of Government Commerce has repeatedly refused requests, including those under the Freedom of Information Act, to publish the findings of Gateway reviews.

In addition, HMRC has refused to answer repeated requests for information on how many "open cases" it has, which include unreconciled taxpayer accounts. The number of open cases provides one indication of how well the department is coping with the administration of tax affairs.

Cable said, "Pretence that all is well and blocking release of information are unacceptable and likely to cause bigger problems in the longer term."

The Public Accounts Committee was also concerned that the Revenue had accidentally deleted nearly one million taxpayer records between 1997 and 2000, some of them live accounts, without having back-up copies of the data.

Revenue refutes MPs' criticism

David Varney, chairman of HM Revenue and Customs, has defended the tax credits system, describing it as flexible and responsive, though MPs, the parliamentary ombudsman and others have criticised its complexity.

Varney said, "We reject any assertion that overpayments have occurred because the tax credit scheme is either 'unduly complex' or 'hard to implement'É We must also remember that this is a system benefiting over six million families, the vast majority of whom have faced no difficulties with their payments."

But Liberal Democrat shadow chancellor Vincent Cable said, "David Varney's comments are extraordinary since he appears to be disputing the central conclusion of the parliamentary ombudsman and the National Association of Citizens Advice Bureaux as well as the cross-party Public Accounts Committee."

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