MPs demand minister's head over botched tax credits

Gordon Brown, the Chancellor, came under fire yesterday as the Inland Revenue was accused of mismanagement in a scathing report by a committee of MPs into the botched introduction of tax credits.

Opposition MPs called for Dawn Primarolo, the paymaster general, to be sacked and said Mr Brown was on "borrowed time" after the Treasury Select Committee condemned ministers and Inland Revenue managers over blunders that meant hundreds of thousands of people were paid late. The committee said there had been a "series of failures in administration" and the inquiry had "raised serious questions about how the department has been led".

MPs criticised Inland Revenue managers for waiting until they had devised a solution before informing ministers of problems. They expressed "surprise" that the chairman of the agency, Sir Nicholas Montagu, had not even met Ms Primarolo between last autumn and March this year, the vital months in the run-up to the introduction of tax credits.

The committee's chairman, the Conservative MP Michael Fallon, said he was "extremely concerned" that the computer failures that led to the tax credits fiasco came "like a bolt out of the blue" to the Inland Revenue.

He demanded that ministers seek compensation from their computer supplier, EDS, and warned the Government to learn the lessons of the affair before introducing its new pension credits, which depend on a computer system supplied by a consortium that includes EDS.

MPs also criticised the sale of the Inland Revenue's offices to a company based in an offshore tax haven and condemned the failure of officials to inform thousands of people of shortfalls in their state pensions.

The committee said it was "astonished" that the Inland Revenue had abandoned sending people warnings alerting them of shortfalls in their state pension contributions. The notices, which gave people the chance to top up their pension contributions, were halted amid computer chaos in 1997 and never restarted. MPs expressed concern that Ms Primarolo was only told of the problem in March. They said the National Insurance Contributions Office had acted "as a law unto itself without regard for proper accountability to senior management or ministers".

The report attacked as "clearly unacceptable" conflicting evidence from Ms Primarolo and Sir Nicholas about a deal to sell 600 Inland Revenue and Customs buildings to a Bermuda-based company.

Sir Nicholas told the committee that the law did not allow him to exclude bidders based in tax havens, but Ms Primarolo insisted that it was possible to do so.

Conservatives called on Ms Primarolo to quit. David Willetts, the Conservative work and pensions spokesman, said: "While Gordon Brown must take ultimate responsibility for this series of scandals, it's quite clear that Dawn Primarolo is not up to the job."

A Treasury spokeswoman said problems with the tax credit system had "largely been resolved". She said the Inland Revenue would write to all those who had not received warnings about their state pension contributions, and she insisted that no one would lose out as a result of the affair.