MPs hammer Customs for failure to control IT spending

Customs & Excise has been slammed by the Public Accounts Committee (PAC) for committing vast amounts of public money to IT programmes without any clear idea of their possible benefits.

PAC chairman Edward Leigh, MP for Gainsborough, said: "It cannot be acceptable that Customs has already spent huge sums of public money without being confident about the scale of the likely benefits."

Customs has already spent £100m on its e-programme, which is set to cost £327m by 2010. It is also committed to spend an additional £250m enhancing its IT infrastructure under a PFI contract with Fujitsu.

The department's IT structure was taken over by then national champion computer company ICL in 2000 under a PFI deal. The original contract was for £500m over 10 years. In 2003 this was increased to £631m, giving a whole-life cost of £929m.

The PAC report begins by praising Customs for its innovation and efforts to meet the target of offering all of its services online by 2005 and achieving 50 per cent take-up of key services by 2006.

But then it slams the department for a catalogue of errors. These include:

- Spending £100m on its e-programme without a rigorous business case. Customs originally claimed that the systems would save £4bn but modified this to £1.2bn in 2002. The committee warns that this could fall further once the detailed analysis of financial benefits and costs is completed.

- Failing to manage the risks, resulting in costs being higher than expected, take-up of e-services being low and benefits being delayed.

- Failing to follow good practice by: having poor control over commissioning and managing consultancy contracts (it spent £28m on 300 consultants between November 2001 and March 2003), not using sensitivity analysis in evaluating business cases and not appointing a senior responsible owner for the overall programme soon enough.

- Not having a comprehensive contingency plan for the risks of IT system failure and its impact on service availability and the take-up of e-services.

And the watchdog pointed out that Customs introduced an electronic VAT return in March 2000 with little success. Companies simply found the paper system easier to use and only 2,700 companies made the switch.

The replacement system is designed to go live next month but Customs has yet to provide any incentives for companies to use it. One of the alternatives Customs is considering is simply to compel them to do so.

The department's further failings are pointed out by the committee saying that it needs a firm assessment of the benefits for Customs and for businesses from the eVAT service and assurances that the required 50 per cent use of the system can be achieved.

A Customs spokesman said: "While we have made good progress to date, we know lessons need to be learned and more needs to be done."