The £15bn IR IT cock-up - is there worse to come?

The run of botched government IT projects continued today with the admission by the Inland Revenue that problems with the introduction of a new computer system in 1998 led to a shortfall in national insurance payments for 10 million low-paid workers in the UK.

This means those workers potentially face a collective bill for up to £15bn which must be repaid over the next five years if they are to receive the basic state pension when they retire - though the Revenue maintains only about 4 per cent of top-up reminders are ever paid.

It’s a shoddy state of affairs that adds to the growing pensions crisis in this country and it is made worse by the fact the Revenue has known about the shortfall for years, as it made a deliberate decision to stop sending out top-up reminder notices because all its resources were being put into the delayed and problematic rollout of the National Insurance Recording System (Nirs2).

Already opposition ministers are calling for an investigation into the incident, with the Tories labelling it “another savage twist in the pensions crisis” and blasting the government for ignoring warnings over problems with Nirs2.

This is just the latest in a long line of IT cock-ups by the taxman, highlighted by problems in the last year with filing tax returns online using the self-assessment website. And these are just the things we know about. Who knows what other problems are in store as a result of the Revenue’s disastrously executed IT policies in the 1990s. There’s no doubt things have improved recently but it is now even more critical that the government makes the right decision later this year when it chooses which IT supplier will run the Revenue’s systems for the next 10 years in what is expected to be a £4bn deal.

There have been criticisms that the tendering process is little more than an expensive beauty parade, with incumbents EDS and Accenture favourites to win despite a somewhat patchy record that has included penalties for late delivery.

That said, rival bidders including BT and Cap Gemini Ernst & Young remain adamant they have a realistic chance of getting the contract. Let’s hope, whoever wins, that a genuinely competitive bidding process ensures a much healthier future IT strategy for both the taxman and taxpayers.