E-envoy Andrew Pinder and the head of C&E, Richard Broadbent, appeared before the Public Accounts Committee to answer criticisms made in the Government on the Web II report by the National Audit Office earlier this year.

The report said there is still no methodology for establishing the financial costs and benefits of on-line services and no central collection of data on web site usage.

MPs questioned whether any of the e-government projects to date had delivered any value for the taxpayer.

But Pinder said all projects have been subject to value for money tests and the returns will only be realised with widespread take-up of the services.

C&E came in for fierce criticism from the committee about the performance of its online VAT returns after the NAO report revealed only 1,000 out of a possible 1.7 million people had used the service.

'On this you have made no progress at all,' said PAC chairman Edward Leigh.

Broadbent acknowledged there was no benefit for companies to file returns online and said the business processes underlying it need to be changed to add value.

One MP asked flippantly if these incentives would include selling insurance or showing a movie. But Broadbent said emailing VAT returns is one option being looked at.

'We could send an email once a month saying it has been done for you, are you happy with it. There will be the opportunity to change the return and the opportunity to pay other taxes at the same time,' he said.

In response to criticism about the lack of any central information on e-government progress, Pinder said his office is about to embark on an audit of government departments.