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UK tax credit IT system slammed by MPs

Gordon Brown's welfare plan hobbled by IT

Members of Parliament have renewed their criticism of the troubled tax credits system - the flagship welfare plan introduced by chancellor Gordon Brown - as new figures reveal overpayments in to claimants have hit £5.8bn in its first three years of operation.

The tax credit IT system has been repeatedly hit by crises, contributing to overpayments to claimants totalling £4bn between 2003-04 and 2004-05. Since then the government announced changes to the tax credit plan, while a series of changes have been made to the IT system.

Last year, paymaster general Dawn Primarolo told the Commons Treasury committee that the IT problems had largely been ironed out. "IT performance has been significantly improved. In total there have been 300 improvements made to the system since April 2005," she said, adding that a new software release in November 2005 had delivered "real improvements in operational performance”.

But as Brown prepares to take over as prime minister from Tony Blair, the powerful Commons public accounts committee has painted a picture of ongoing crisis in his flagship programme, with continuing overpayments and a lack of basic information about payments, fraud and error levels.

The MPs' fourth report on tax credits notes that the overpayments total has now risen to £5.8bn over the first three years of the plan, although changes are expected to eventually reduce overpayments by one third.

But HMRC "does not have complete information on the causes of overpayments and is uncertain about how far each measure will reduce overpayments," the report says.

The MPs' findings echo concerns raised in the Treasury committee's report of June last year that HMRC had no idea what role IT systems had played in the tax credits fiasco. "We have seen nothing from the department attempting to assess the contribution made by IT system error," the Treasury committee said.

The PAC's inquiry found that while the design of the tax credits system results in overpayments, "there have also been unforeseen overpayments due to software errors”.

The committee's report say there were still 199 known software errors in the tax credit computer system in October 2005, but the "majority of these errors have since been resolved”.

The report reveals that HMRC has already written off more than £500m of overpayments as unrecoverable and is "unlikely to recover" a further £1.4bn of debt.

"Tax credits suffer from the highest rates of error and fraud in central government, undermining HMRC's reputation for accuracy, fairness and proper handling of taxpayers' affairs," the report says.

But again, HMRC "does not have up to date information on levels of claimant error and fraud in tax credits". In 2003-04 between £1.06bn and £1.28bn was incorrectly paid to claimants - between 8.8 percent and 10.6 percent of tax credit payments by value.

The tax credits web portal - now shut down - was a key opening for fraudsters, the report notes. "The design of the internet system for tax credits was deficient from the outset and left it vulnerable to attack by organised criminals," it says, adding that the system "did not conform to mandatory requirements on security" set down by the government's own e-envoy.

Committee chair Edward Leigh MP said: "This is the fourth time that this Committee has had to examine the current tax credits system - and it will not be the last. Billions of pounds, far more than those who thought up the system ever envisaged, are still routinely overpaid to claimants."

The report follows revelations last month that contractor Capgemini - which took over the Aspire IT contract from EDS in June 2004 - had been forced to repay nearly £4.5m to HM Revenue and Customs because of IT failures between July 2004 and January 2007, including 18 hours and 30 minutes of disruption to online services.


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