Internet users should be forced to file their tax returns online rather than on paper, according to a provocative study of e-government published today. The report, SmartGov, suggests compulsion as a solution to e-government's credibility problem.

Although the British government is spending billions of pounds on making each one of its 500-odd "services" available electronically by the end of 2005, few people are using e-government. One reason, says Noah Curthoys, SmartGov's author, is a public perception that online public services don't work. There is also little incentive to change from doing business on paper.

Curthoys' solution, for certain types of citizens, is compulsion. "If you have internet access at home, and are computer literate, why should the state subsidise you to use a more expensive, more time-consuming, paper-based tax return system? We should move towards a system in which certain groups become compelled to use online channels."

The office of the e-envoy, which is running the e-government project, said it is not considering compulsion. "We see the internet as one channel choice; other channels will be kept open as long as people want them." Under current plans, the only people who will be forced to use e-government are civil servants when their jobs require it.

In SmartGov, published by The Work Foundation, a leftish think-tank, Curthoys, a researcher at Brunel University, claims that e-government underpins the Blairite political philosophy, with its ambi tion for renewed public services. Electronic service will be the mechanism for changes comparable to those introduced by the governments of Clement Attlee and Margaret Thatcher.

There is one small snag: the British public doesn't seem to be playing. "Voting with their feet, citizens have continued to interact with the state in traditional ways and resisted all but the most heavily promoted e-government initiatives," says the report. More than 99% of taxpayers still fill in paper returns.

A study published for the government in November found that 11% of Britons had used an online government service, compared with 40% of Canadians.

Unused services are bad for public relations. They also reduce the chance of saving money. Online services cut government's costs only when a significant number of people stop contacting government on paper.

According to Curthoys, the main reason people don't go online is not because they are afraid of new technology but because they have no particular reason to change the way they deal with government. Economists call it the "status quo bias" or "citizen inertia": a tendency to opt for the familiar rather than the untried, even when the new choice appears better.

A good example is online tax returns. Although theoretically more efficient, citizens see the benefits as unproven promises: the barriers to going online are real.

One solution is to promote e-government to the "obvious users", relatively wealthy, technology savvy citizens, rather than all comers. These would be targets for compulsion.

Curthoys admits that forcing people to use one channel over another looks undemocratic. But he proposes two examples of acceptable compulsion. One would be to extend the deadline for electronic tax returns and increase the penalties for late submissions of paper forms. Another is congestion charging in London, which is effectively compelling motorists to pay online or through SMS as the only speedy and reliable channel.

The report also highlights several tensions in the plan:

· People who need government services the most are generally least able to use electronic channels.

· Most services are run by local authorities, yet these are least equipped to set up e-services.

· E-government reduces confidence by exposing flaws in the process.

· E-government costs money up front; any savings take years to emerge (if at all).

· Publicised failures create a perception of an entire agenda failing to deliver.

Despite these tensions, the report says there have been successes, and cites three examples where e-government is making a difference - Liverpool City council, North Wales police and the Office of Government Commerce.

The Office of the e-envoy will also take comfort from new statistics suggesting that the e-government message is beginning to sink in. Last week, the office for national statistics reported that 47% of Britain's internet users had used the web to contact the government or other public body.

However, Curthoys argues that apathy and scepticism are still rampant. "The public perception, buttressed by acres of critical media coverage, is that e-government has become a reflection of the problems of the state, rather than the solution_ In other words, it is becoming a political and financial drain."

· SmartGov: renewing electronic government for improved service delivery, by The Work Foundation. www.theworkfoundation.co.uk