SOUTH NORFOLK MP Richard Bacon has called on the Treasury to stop government departments accepting confidentiality clauses when negotiating with contractors, as a new report criticises HM Revenue and Customs for entering into a confidentiality agreement with IT firm EDS.

Mr Bacon was speaking as the Commons public accounts committee published its report into Tax Credits.

HM Revenue and Customs (HMRC) experienced serious problems with the computer system EDS supplied to support the Tax Credits scheme, including delays in the processing of claims and incorrect payments being made.

In 2003, HMRC entered into negotiations with EDS for compensation and two years later, announced it had agreed a settlement in which EDS paid £71 million to Revenue and Customs. This settlement included a confidentiality clause and when the public accounts committee took evidence on the EDS deal in December 2005 Mr David Varney, Chief Executive of HMRC, requested the deal be discussed in private session. It turned out that not all of the £71 million compensation payment to HMRC was to be upfront, but that £26.5 million of the total would be paid from EDS revenues on future government business which the firm had not yet won.

Mr Bacon said today:  

“Confidentiality clauses are not acceptable. This is public money we are talking about and settlements with suppliers should be public and visible. It is absurd to suppose that cooking up a secret deal with a supplier might provide a solid basis for explaining how taxpayers’ money is spent”.

“Parliament will not connive at secret agreements.  What’s more, briefing select committees in private is not a substitute for a proper and open accounting of how public money is spent.  I would like to see the Treasury instruct government departments not to agree to such deals in future”.  

“The Tax Credits mess has caused fear, misery and hardship to many hundreds of thousands of people, and taxpayers have a right to a public explanation of what went wrong, who was responsible, what it has cost and what is being done to put it right”.

25 April 2006

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See also:
PAC REPORT: Inland Revenue Standard Report: New Tax Credits

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