Immigration staff are still processing thousands of claims by hand, even though the Home Office has paid more than £8m for a new computer system.
Staff at the Immigration and Nationality Directorate in Croydon, Surrey, were promised the software nearly two years ago by the German company Siemens.
But they are still struggling to cope with a backlog of visa renewal applications and asylum claims - because the system has not yet been installed.
Despite last year's claims by Jack Straw, the Home Secretary, that initial problems with the system had been resolved, Siemens Business Services now admits that no new deadline has been set for installation of the Casework programme.
Staff moved into new offices expecting the software to be ready but it wasn't.
Siemens was first awarded the contract in April 1996 but experienced problems with the software last year resulting in a backlog of 176,000 asylum and nationality cases. It emerged last week that a parliamentary watchdog is to investigate the purchase of a computer system which overpaid £10m in income support claims.
The Department of Social Security which agreed the contract with Electronic Data Systems is still considering the company for a £1bn contract.
An Immigration Service insider said staff were unable to access the system properly because the main database had not been installed.
He added: "The idea of the new software was that staff were supposed to be able to access everything on one system but this has not happened."
David Lidington, shadow Home Affairs spokesman, said that Jack Straw had failed in his promise to have the system operational.
"The chaos at the Home Office gets ever worse," he added. "Jack Straw said in his annual report for 1999 that the teething troubles at Croydon had been sorted out and that is not happening. It's time ministers came clean and got a grip."
Britain's language schools have had a particularly hard time obtaining visa renewals for their students and complain the process now takes months - damaging their business and the tourist trade. Their representative body, the Association for Registered English Language Schools, is so concerned it is to to take the matter up with the Home Office.
Last night, Siemens said it was unable to give a date when the system would be functional. A spokeswoman added that parts of the system were being piloted but would not be on everyone's desks until thay had been fully tested.
"The whole solution does exist but it's been decided that we will take it a bit at a time. We are in agreement that we should not set a date for its installation," she added.
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