Michael Simmons Michael Simmons

There’s another dodgy data scandal brewing

Credit: Getty Images

The government is reeling from the Post Office Horizon scandal. ‘Lessons must be learnt’, goes the cry around Westminster. But a computer scandal with striking similarity to the bugs in the Horizon system has been brewing under the Department for Work and Pension and HMRC’s noses for over a decade. 

When Universal Credit was introduced to reform and modernise the benefits system in 2013 it needed a data system to drive it. HMRC came up with the solution. The taxman billed its new ‘Real Time Information’ system as the ‘biggest change’ to the tax system since PAYE began in 1944. Employers were mandated to report their worker’s pay every time they ran payroll. It supports Universal Credit by providing earnings data in near real time (it has since been used to support Covid furlough). 

Problems with the RTI system quickly emerged. Automated interventions backed by financial penalties to ensure employers reported earnings records accurately and on time – essential to the proper running of the system – were abandoned after just one outing in March 2014 as soon as the stream was turned on. HMRC’s then head of personal tax acknowledged: ‘We haven’t been able to target them [400,000 automated compliance messages to employers] as sharply as we hoped and they went to people who had complied’. Sound familiar?

With the planned compliance regime turned off and the underlying issues ignored, things got worse. As I reported on Coffee House last October, FTSE 100 companies have experienced their PAYE liabilities misstated by millions of pounds, confidence in the quality of tax data at senior levels in industry has collapsed and the finances of households on Universal Credit are at risk.

At the root of the problem is dodgy data on the earnings of the UK’s 30 million employees. This data is used to calculate 30 million people’s taxes, the benefits of 23 million claimants and the tax liabilities of 1.5

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