MPs report attacks Inland Revenue's tax credits failures

Computing

analyses the Treasury Sub-Committee report on the introduction of tax credits

A parliamentary Treasury sub-committee has submitted its final report on the disastrous failure of the Inland Revenue tax credit system.

Computing looks at the report and at some of the reasons it failed.

The MPs report is now available online at:

www.parliament.the-stationery-office.co.uk/pa/cm200203/cmselect/cmtreasy/834/83402.htm

The computer failures which disrupted the tax credit system were a disaster that came like 'a bolt from the blue', according to a highly critical Commons report.

Treasury Sub-Committee chairman Michael Fallon said there had been 'a catalogue of significant administrative failures which ministers must address as a matter of urgency.'

IT errors meant that 220,000 claims were left unresolved more than 10 months after they were submitted, and 400,000 claimants received their money late.

The blame for a catastrophe that came without warning lies in two areas, says the report.

Revenue deputy chairman David Hartnett said IT supplier EDS had not picked up the potential for the 'arterial sclerosis' that eventually blocked up the flow of information through the Revenue systems.

As Computing reported two weeks ago, EDS now faces a hefty compensation claim.

But the committee also says Inland Revenue chief Sir Nicholas Montagu and Paymaster General Dawn Primarolo must also shoulder responsibility.

'The real thrust of our report is a failure of leadership by the chairman and the minister,' said Fallon.

'We are extremely concerned that problems on the scale encountered arose at the last minute and did so without any warning.'

The report calls for managerial changes to ensure that the disaster is not repeated.

Fallon said it was 'crucial that the necessary lessons are passed on to the Department of Work and Pensions before pension credits which will use an IT system being implemented by a consortium including EDS - the IR's partners who designed the tax credit system - starts this autumn.'

The Inland Revenue has responded to harsh criticism from MPs by saying it gets more things right than it gets wrong.

A Revenue spokesman said: 'We are studying the report carefully and have learnt from the issues that the committee has been critical of, but overall we get more things right that we get wrong.'

Inland Revenue Chairman Sir Nick Montagu's job has come under renewed threat following a damning report by MPs on a year of chaos in the department.

His leadership was directly questioned by the House of Commons Treasury committee which set out 'a catalogue of significant administrative failures by the Revenue which Treasury ministers must address as a matter of urgency'.

By implication the Labour-dominated all-party group also questioned the role of Chancellor Gordon Brown and his ministerial team.

The report on 'Inland Revenue matters' highlights the massive problems over the introduction of new family tax credits, the unauthorised suspension of notices being sent to people whose National Insurance contributions fell short of the amount needed for a proper state pension, and the sell-off of Inland Revenue and Customs and Excise properties to a company operating from an offshore tax haven.

The report highlights 'a growing list of failures of communications between ministers and officials' and condemns paymaster general Dawn Primarolo and Sir Nick, for failing to meet between late Autumn 2002 and March 2003.

The report concludes this inquiry has raised serious questions about how the department has been led.

Conducted by a special sub committee of the all party group chaired by former Tory minister Michael Fallon, the report demands that the 400,000 applicants for tax credit who received late payments - and in 220,000 cases have received no payment - be 'compensated swiftly and in full'.

It condemns the failure of the helpline service to cope with demand and says the computer company responsible for failures in information technology that led to the crisis should be pursued vigorously for compensation.

The committee says it is 'astonished' that no minister was informed of the problems of 'national insurance contributions deficiency notices'.

The fact that they were suspended thus jeopardising the level of many people's state pension without ministerial approval was described as 'a striking example of the failure of some Next Step agencies to understand the nature of accountability to ministers'.

The report says this saga identified 'multiple failings in the organisation'.

It says that Revenue officials must inform ministers immediately in future of problems and not hang on until a solution has been found.

The committee demands an urgent review of accountability and communications between the Revenue and ministers to prevent a repeat of the problems.

Mr Fallon said: 'Our report sets out a catalogue of significant administrative failures by the Revenue which Treasury ministers must address as a matter of urgency. It also raises serious questions about how the department has been led.'

http://www.accountancyage.co.uk/News/1134277

David Ruffley, a Conservative member of the Treasury committee and a former special adviser to Kenneth Clarke when he was chancellor, has said that Dawn Primarolo should quit.

The committee is certainly tough on her failure to liaise properly with Sir Nick Montagu, head of the Revenue.

'The real thrust of our report is a failure of leadership by the chairman and the minister,' said chairman Michael Fallon.

The issue of departmental control goes wider than Primarolo, however.

There is an implied criticism of a much bigger target: Chancellor Gordon Brown.

Clearly there are serious managerial questions to answer.

But Primarolo is concentrating blame firmly on the IT systems.

Answering a question laid down in the House of Commons by Conservative MP David Lidington. '[The system] has not been working as well as we expected and there has been unscheduled downtime as a result,' said Primarolo.

'We have temporary measures in place, while we are making the system more robust, where people can go to their local Revenue enquiry centre and get a giro.'

Resignations are highly unlikely but the government has seemed reluctant to accept the role of managerial issues in the breakdown of projects.

The government has talked tough about the Revenue supplier EDS and is demanding compensation.

EDS has remained silent but the pressure is mounting. MPs want to know how tough talk is going to translate into a really telling punishment that will act as a warning to others.

The sub-committee report criticises Inland Revenue evasiveness over the extent to which EDS will to be asked to pay for the cost of the disastrous IT which caused huge delays paying tax credits to Britain's poorest families.

Senior officials have only promised that negotiations over compensation will take place.

Inland Revenue chief Sir Nicholas Montagu promised only that there would be talks with the IR's IT partner of 10 years over the cost of compensation to those whose payments were delayed and the administrative costs of 200,000 interim payments that had to be made as a result.

Revenue deputy chairman David Hartnett suggested that the IT problem was one of data flow in a component-based system involving several different computer systems.

He compared the problem to 'a sort of arterial sclerosis' constricting the flow which was 'something like a clot'.

He told MPs in evidence: 'There is something which triggers this that cannot be replicated in testing and was not picked up in testing. It triggers in live running and what our IT partners have been able to do, crudely, is work around it for the minute so that we can get everyone into payment.

'It is working out what is constricting the flow and has caused queues in the past and what causes the clot to appear and really build queues, that is the key issue in relation to this IT.'

There were daily consultations with senior EDS technicians and the main board in the US to find out what was going wrong and demand it be put right.

Hartnett revealed EDS itself had not realised the scope of the failures because extensive testing had failed to throw up the slow running that built up.

The full extent of the problem only became clear as delays built up and 'it was only as we were then processing more and more claims that the difficulties that we have had over the last weeks began to emerge.

'It was only by pressing our IT partners really hard that we got more and more information out of them, because I do not think that initially they fully understood everything about the difficulties.'

Paymaster General Dawn Primarolo admitted that applications for working tax credits had been delayed because the IT system, introduced by EDS, did not run 'as fast as it should have done and was predicted to do.'

She told the Treasury Sub-committee that the lessons learned would be shared with the Department for Work and Pensions (DWP), which has awarded EDS the contract for its pensions credit computer systems.

A new report investigating why government IT projects fail is to be used to help the public sector avoid repeating the same mistakes.

Compiled by the Parliamentary Office of Science and Technology (Post) the report, Government IT Projects, will provide independent analysis identifying why some government IT projects fail, and considering the effectiveness of measures put in place to tackle the problems.

The full report is due to be published later this month, but a summary shows that common problems include unclear user requirements and a lack of clear senior management and ministerial ownership and leadership.

It has been researched against a background of IT difficulties at, among others, the Criminal Records Bureau, Inland Revenue, National Air Traffic Services and the Department for Work and Pensions.

Jim Norton, an external board member of Post, said: 'There is no such thing as a computer project. There are business change projects that involve IT.

'For projects to be successful, they must consider the people dimension, explaining what is entailed - motivating and training staff and making them aware that productivity will initially fall with the move from the old to the new way of doing things.'

The report said that while IT delivery problems occur in the public and private sectors, government programmes are perceived to fare worse because they are 'often announced early and sometimes without considering the full delivery implications.'

'In the public sector, policy can alter rapidly, often leading to IT changes,' it added.

Technology issues that are specific to public sector IT projects include rapidly changing technology. The report said government departments may not be familiar with the latest IT, so may be unable to judge whether suppliers are overselling a technology.

Complexity and oversight also contribute to failures, as non-technical management in departments may have difficulty estimating how long a job will take and the quality of software being developed.

Project issues such as relations with suppliers are also critical. The report stresses that with external suppliers doing most of the work, government must be 'intelligent clients' when it comes to scrutinising bids, and 'be realistic about what systems are likely to deliver.'

'Big bang' approaches to projects are discouraged by the Cabinet, and the report recommends that all major IT programmes should have a senior responsible owner to ensure that objectives and delivery are met.

Norton said: 'This report will be used by parliament so it can understand what government is up to and promote better scrutiny. It is also meant to educate peers, MPs, ministers and backbenchers to look at key aspects of projects and know what best practice is.'

The Post report will also consider the common causes of project failure identified by the National Audit Office and the Office of Government and Commerce in 2002:

* Lack of a clear link between the project and the organisation's key strategic priorities, including agreed measures of success

* Lack of clear senior management and ministerial ownership and leadership

* Lack of effective engagement with stakeholders

* Lack of skills and proven approach to project management and risk management

* Lack of understanding of, and contact with, the supply industry at senior levels in the organisation

* Evaluation of proposals driven by initial price rather than long-term value for money (especially securing delivery of business benefits)

* Too little attention paid to breaking development and implementation into manageable steps

* Inadequate resources and skills to deliver the total portfolio.

Links

Revenue chiefs in the firing line, from BBC Online

http://news.bbc.co.uk/1/hi/business/3089613.stm

Inland Revenue under fire over late payments

http://www.thescotsman.co.uk/business.cfm?id=799212003

Brown savaged by MPs for Revenue shambles

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2003/07/24/nbrun24.xml&sSheet=/portal/2003/07/24/ixportal.html

Tax Credits Online

http://www.taxcredits.inlandrevenue.gov.uk

Government re-examines failures

http://computing.co.uk/News/1142501

Tax office seeks costs from EDShttp://www.vnunet.com/News/1142182