A report from the National Audit Office has revealed that “limited funds available for IT enhancements” are preventing HM Revenues and Customs from improving the cost effectiveness of the National Insurance payments collection process.

There are ample opportunities for automation at the department in charge of collecting the tax, the report says. “The Contributions Office … has to type in the whole address on letters to the public because there is no postcode-based search link,” it explains. “For some activities, staff have to search paper files and micro-fiche to find key information, which is more time-consuming and less successful than an electronic facility would be.”

Not only are these processes inefficient they are also inaccurate, the report says. “A number of long-standing data accuracy issues persist, and [the Contributions Office] has achieved limited progress in implementing efficiency initiatives involving more than one operating unit.”

However, the selection criteria for IT investments have become “progressively more stringent,” the report says. “From 2010-11, HMRC will only fund enhancements if they are related to the implementation of legislation.”

This, it says, is “affecting the speed with which the Contributions Office can implement improvements”.

After a decade of perceived overspend in public sector projects, the new UK government has taken measures to reduce IT expenditure, such as introducing a ‘freeze’ on any new IT projects worth over £1 million. In his emergency budget earlier this month, chancellor George Osborne said that government IT expenditure would be cut by £95 million in the coming year.

Last week, Cabinet Office minister Francis Maude announced that up to 75% of government websites could be axed in order to save costs.