The Public Accounts Select Committee has become the latest group of MPs to lay into the HMRC and its serially unlucky former IT partner, EDS, in the latest report on tax credits debacle.
A report by the committee says that overpayments for 2004 to 2005 are expected to be around £2.2bn – the same as the 2003-2004 overpayment that first dragged the scheme into disrepute last year.
The committee said the problems were primarily down the way the scheme is run. Payments in a given year are provisionally paid based on the previous year’s income, and are only finalised when the year in question is over. Because incomes tend to increase, the committee says, it is very easy for applicants to be overpaid. Hardship then results when the government attempts to claw back overpayments. The committee noted the department had made a £1bn provision for doubtful debts. It also noted that recent budget changes should reduce the level of overpayments.
EDS was also targeted in the report, which said computer cock-ups also led to incorrect payments being made. EDS was finally forced off the contract in late 2003.
Gross losses down to EDS amount to £209m, the committee said, of which £105m is being clawed back from claimants. The department has reached a settlement with EDS of £71.25m, including cash payments from EDS and “the off setting of certain amounts which would otherwise have been due from HMRC to EDS”. Staged payments of £26.5m are contingent on EDS winning more business from the government.
The part of the settlement for EDS’s mistakes that depends on the services giant grabbing more public contracts has angered members of the committee. Committee chairman Edward Leigh described this as “an invidious position”, according to the BBC. ®