EDS IT failure fingered for "unacceptable" tax credit delays

The "inadequacies" of government IT systems have been singled out by MPs as the underlying cause of "unacceptable" problems with the new tax credit system and the national insurance top-up fiasco.

A stinging Treasury Select Committee report called for EDS, which designed the Inland Revenue's tax credit system, to pay penalties for the system failures that led to the delay in payments for hundreds of thousands of families.

The Inland Revenue said the failure arose from the component-based system where a number of different computer systems are joined together, which had led to the flow of data becoming constricted and causing internal queues to build up in the system.

The report said: "Staff using the IT system to process applications and respond to queries from applicants have suffered slow response times and system downtime of up to four hours a day while the system is flushed to clear internal queues. This level of performance is wholly unacceptable and it has led to pressures which at times have swamped both the system and the staff."

MPs are pushing for the Revenue to seek compensation from EDS for the failures and Paymaster General, Dawn Primarolo, told the committee there is provision in the department's contract with EDS for performance-related penalties.

She said: "The Inland Revenue can seek redress to recover additional business costs which are attributable to the failings of the IT services and I certainly would want to see the department doing that."

The problems with the system came like a "bolt out of the blue" for both the Revenue and EDS, according to the report. It said it is worrying that extensive testing had failed to uncover any problems.

"We are extremely concerned that problems of this scale could arise at the last moment without any warning. We expect the department and EDS, working together, to remedy the problems and establish why the trial tests failed to show potential problems," it stated.

IT problems were also an underlying cause of the national insurance top-up fiasco that led to millions of low-paid workers facing shortfalls in state pensions because they were not sent notices warning them they needed to pay more in. Staff stopped sending out the notices because resources were redirected to deal with the problematic rollout of the NIRS2 computer system.

The report said: "The underlying problems for both the introduction of the new tax and benefit arrangements and the suspension of National Insurance Deficiency Notices have arisen from inadequacies of IT systems."

MPs called for government procurement body the Office of Government Commerce to review the way departments enter into IT contracts.

The report could not come at a worse time for EDS, which is bidding to retain a £4bn IT contract with the Revenue. EDS was not immediately available for comment.