23 April 2004
The introduction of the Inland Revenue's New Tax Credit system has been described as 'nothing short of disastrous' by Parliament's spending watchdog.
A damning report on the 2003 changeover to a unified system of tax credit payments, published by the Commons' Public Accounts Committee on April 22, highlights a series of major failings at the Revenue – many of which could have been avoided, MPs claim.
The ill-conceived changeover left several hundred thousand claimants suffering hardship because of late payments and was underpinned by a weak IT system, mirroring technological failings elsewhere in Whitehall, the MPs found.
Committee chair Edward Leigh said the department should have been 'more realistic in setting the [changeover] timetable and [should] have put in place better contingency arrangements'. He also warned the Revenue to better explain to claimants how the future recovery of overpayments will impact on other benefits, following fears that low-income households, unaware that they have been overpaid in the past, will now suffer from the department's failings.
The report claims that the failure to introduce effective controls to the system when it was launched 'has had serious financial consequences for many thousands of citizens' and disrupted other areas of the Revenue's work.
New Tax Credits, which replaced the Working Families and Disabled Person's Tax Credit schemes, were estimated to cost the Exchequer around £16bn during 2003/04.
The report highlights how the confusing, older system led to between £510m–£710m of overpayments a year. The new system was designed to rationalise the process, but 'serious problems' with the IT caused disruption.
But the PAC, which has investigated previous IT failures across Whitehall, indicates MPs are losing patience with poor technology performances. A statement said: 'NTC is one of a series of major IT systems that have caused serious problems, other notable cases being the National Insurance Recording System and the Passport Office system.
'The Office of Government Commerce should analyse the weaknesses of IT partnering arrangements… with the aim of helping departments to understand better how to manage problems.'
A spokesman for the Inland Revenue said: 'The IT system is [now] stable and working well, with 6 million families benefiting from tax credits. Many of these criticisms relate exclusively to the changeover period and have already been addressed over the past year.'
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