Inland Revenue chairman apologises for delays

The chairman of the Inland Revenue has conceded that its reputation was "severely dented" by a benefits fiasco.

Sir Nicholas Montagu publicly apologised after hundreds of thousands of families went without payments. But he said he saw no reason to resign over the problems and that work was under way to restore public confidence in the Inland Revenue.

The body has faced criticism after it emerged it had been wrongly paying out £700m a year in tax credits.

The National Audit Office has also warned that problems associated with the introduction in April of the new child tax and working tax credits - which meant many families did not receive payments they were entitled to - would not be fully overcome until 2005. Sir Nicholas told MPs yesterday: "I accept public confidence has been severely dented. I very much regret that a lot of people who should have been paid on time were not."

Giving evidence to the House of Commons Public Accounts Committee Sir Nicholas, who is retiring from the Inland Revenue, said he was working to restore lost confidence. "We will never get error rates down to zero. But I will be very disappointed if one did not see the halving of error rates with new tax credits."

Sir Nicholas said EDS, the computer firm employed by the Inland Revenue, was to blame for the problems. He added that compensation was being paid and that people would not have to repay overpayments if it meant they would suffer hardship.

The former social security minister Frank Field said the Inland Revenue had provided a "disgraceful" service.

Bill Thomas, the Europe, Middle East and Asia president of EDS, defended the firm. He said the Inland Revenue had to share responsibility for the problems. "I am not ashamed of what my 900 colleagues did on the system," he said.