The chief executive of HMRC has defended the tax agency’s decision to sign a data storage contract with Amazon Web Services (AWS) after the previous supplier complained the loss of the contract pushed it into bankruptcy.

Jon Thompson told the Public Accounts Committee yesterday that the move from Salford-based cloud services provider DataCentred to AWS had saved it more than 50% and improved its data resilience.

The tax agency has been criticised for the shift as DataCentred went into administration following the loss of the deal, which came despite a pledge to award one-third of government procurement spending to small- and medium-sized enterprises.

Asked about the move by PAC committee chair Meg Hillier, Thompson said that “I don’t personally think there’s anything wrong with HMRC contracting with Amazon Web Services, and that is indeed what we’ve done”.

The shift came because the market for cloud storage has moved on for very large businesses into “hyperscale cloud”, he told MPs.

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“We need resilience in how they hold that data for us, and the price reduction was more than 50% for us, so there is a clear value-for-money explanation. We come out of the data business ourselves, we don’t have physical buildings, and we get much more resilience because it can be held in multiple sites, so if the sites go down we don’t lose data, and we don’t lose services to companies.”

He highlighted that HMRC had unbundled its previous £10bn Aspire IT deal with Capgemini, a move which has provided “a range of market opportunities” for smaller IT firms that were not previously available.

“We estimate there are now 100 small and medium-sized companies working with us now who would not have worked with us before because of that enormous deal with Capgemini,” he told MPs.

“We are increasing the amount of business in relation SMEs, but in this particular example, the SME was not successful. You’re looking at the one that has contributed to the loss, rather than the overall increase through the breakup of one £700m-a-year deal.”