The Inland Revenue is to seek compensation from EDS for problems with the IT systems supporting the new working tax credits policy.

At a Treasury sub-Committee hearing last week the Paymaster General Dawn Primarolo admitted the working tax credit system had performed so poorly that the Revenue was seeking to recover 'additional business costs which are attributable to the failings of the IT services.'

Primarolo said that applications for working tax credit were delayed because the IT system, introduced by EDS, did not run 'as fast as it should have done and was predicted to do.' Thousands of families eligible for the credits had to wait to receive payments.

She told the Treasury sub-committee that the lessons learned would be shared with the Department for Work and Pensions (DWP), which has awarded EDS the contract for the pensions credit computer systems.

EDS leads one of the three consortia bidding for the Inland Revenue's £4bn outsourcing deal. The Revenue is expected to announce the next stage of the procurement process this month, which is likely to involve at least one of the bidders being deselected.

Two other major government IT systems managed by EDS also came under fire last week.

A report from the Public Accounts Committee into benefits fraud said 'inadequate IT systems' at the DWP are constraining moves to cut fraud. The report says that benefit data is held in 20 different systems with no single point of access to the information. The problems are contributing to £2bn of fraud, according to the Committee.

But the report says IT will be critical to tackling illegal benefit claims by joining up information about individuals.

'IT improvements were expected to deliver roughly one third of the further fraud reduction required by 2006,' it says.

The Public and Commercial Services Union (PCSU) criticised the computer system EDS developed for the Child Support Agency (CSA). The union said the system 'effectively prevented CSA staff from performing their job properly'.

A spokesman for the DWP told Computing there has been some 'initial teething problems' at the CSA, but says figures on the delays caused would not be released ahead of a report to parliament.