The Treasury department has not given value for money and has failed to set an example for other sections of government, a landmark parliamentary report said on Friday.
The report covering 2006/07 by the all-party House of Commons Treasury Committee was highly critical of the tax department, which it said saw complaints about tax credits rise and VAT processing targets missed.
It questioned why, "in a year of poor performance and job losses", senior civil servants at Revenue and Customs (HMRC) received a "completely unjustified" 60 per cent average increase in bonuses.
The government countered saying that over the past financial year the tax department's pay bill, including bonuses, reduced by 4.5 per cent in real terms.
Despite aiming to have all government department heads appointed with accounting experience, this had not been achieved, the report, "Administration and expenditure of the Chancellor's departments, 2006-07", found.
"It is essential for the success of Government that the Chancellor's departments carry out their role effectively," the report said.
"Therefore whilst other Government departments may sometimes fail to give a good account of their performance, we look to the Chancellor's departments - the engine of Government spending - to demonstrate clear progress against their targets.
"Sadly in some areas the Chancellor's departments fail to lead by example."
It welcomed the Royal Mint's return to profit.
The report is further blow to Chancellor Alistair Darling, and his predecessor, Prime Minister Gordon Brown, whose economic reputations have taken a blow in the wake of the credit crisis and the nationalisation of mortgage lender Northern Rock.
A Treasury spokesman defended the department.
"The Treasury has demonstrated its strength in running the Gershon efficiency programme, which has made 21 billion pounds of savings since 2004," he said in a statement. "The Treasury Group itself has a target to achieve 18.7 million pounds in efficiency savings by the end of the (year).
"As reported in the Group's Autumn Performance Report 2007 we have already exceeded our target ahead to time, securing 18.9 million pounds of savings by end September 2007."
