Select Committee on Public Accounts Second Report



37. Ms Julia Lomas was appointed the Agency's Chief Executive on 1 July 1994, when the Public Trust Office was established as an executive agency. Her initial contract ran for three years until 30 June 1997. A further contract was agreed for the three years to 30 June 2000. The contract stipulated that a six month notice period would normally be given unless dismissal occurred on grounds of inefficiency, illness or as a consequence of disciplinary proceedings, in which case a shorter period would be appropriate. Continuation of employment was subject to performance to the standard required. The contract provided for the payment of a performance bonus, of up to 15 per cent of annual salary at the relevant year end, linked to the achievement of the Agency's targets.[36]

38. Ms Lomas left her post as Chief Executive of the Agency on 31 December 1999, six months before the end of her contract. The Department stated that this was by mutual consent and that they had made clear to Ms Lomas much earlier that her contract would not be renewed. As a result of the Quinquennial Review published in November 1999, the Agency was undergoing significant change which would run beyond mid-2000, when her contract expired. The Department considered it appropriate for Ms Lomas to leave her position early, to enable the programme of work associated with these changes to be taken forward by others.[37]

39. The Department paid Ms Lomas a final sum of £63,000 on her departure. This comprised £38,700 in salary and related elements which would have been payable for the six months of her remaining contract period, and £24,300 of bonus payments for the period from 1 April 1997 to 30 June 2000. Some £11,800 of this bonus represented the maximum bonus allowable for 1999-2000 and for the three month period to the end of June 2000, including the six months between Ms Lomas' actual departure date and the date on which her contract expired.[38]

40. The payment of the full bonus for this period reflected the Department's view that it was inappropriate to prejudge whether the 1999-2000 performance targets would have been met had the former Chief Executive remained in post for the duration of her contract. Bonus payments in prior years had been about 80 to 85 per cent of the maximum payable, and sometimes higher. The Department had received legal advice which confirmed that bonuses for the final 15 months of the contract could not be withheld as Ms Lomas was contractually entitled to them. The Department had felt that the Chief Executive should be paid a full bonus for the last 15 months of her contract because the intention was to secure a payment for the period which was defensible and enabled the Department to reach agreement with the Chief Executive over her departure.[39]

41. The Committee asked why, given the serious problems at the Agency, bonuses were payable at all. The Department stated that the Chief Executive's entitlement to bonuses was based on whether the Agency met its Key Performance Indicator targets, and year on year these targets were hit or nearly hit. However, they acknowledged that this was a mechanistic approach and not necessarily the right way to reward or remunerate the head of an agency. Selection of a few key targets did not describe the real nature of tasks for which a person might have responsibility. It might have been better to consider wider aspects of performance.[40]

42. The Department told us that they did not feel there were sufficient grounds for termination on the basis of poor performance. The Department would have been content for the Chief Executive to have remained at the Agency, if necessary working alongside her successor, but considered that it was in the public interest to secure a clean break and a fresh start. The Department did not explore whether a lower severance settlement could have been negotiated.[41]

43. The severance agreement with Ms Lomas included a mutual confidentiality clause which bound the two parties not to reveal any details of the settlement reached. The Department had made clear to Ms Lomas that this clause could not be used to withhold information from this Committee.[42] The agreement nevertheless falls short of previous responses to this Committee's recommendations, in which the Government accepted the undesirability of such clauses in severance agreements, except for reasons of commercial confidentiality.[43]


44. When the Chief Executive left her post early, in December 1999, she was paid the maximum performance bonus for 1999-2000 and for the three month period to the end of her contract term in June 2000, despite the Agency's serious failings in key areas. The Department considered it inappropriate to prejudge whether the Agency's key performance targets would be achieved for these periods, and they were advised that the Chief Executive was entitled to the bonuses. In our view the presumption should instead be that a bonus is payable only to the extent that there is clear evidence of achievement.

45. The Department felt that it was mutually beneficial for the Agency Chief Executive to leave her position early, to allow her successor to see through important changes affecting the Agency. Despite the serious problems at the Agency, the Department did not consider that there were sufficient grounds for removal on the basis of poor performance. In their desire to obtain a mutually agreed departure, the Department made no attempt to negotiate a smaller severance settlement.

46. The former Chief Executive's severance agreement included a confidentiality clause preventing disclosure of the settlement terms by either side. The Committee have made clear in the past that the use of public money must be open and accountable, and that such confidentiality agreements are inappropriate. The Department should refrain from entering into such agreements in future, in line with government responses to previous recommendations from this Committee.

36  Evidence, Appendix 2, pp 15-17 Back

37  Qs 9, 118 and Evidence, Appendix 2, pp 15-17 Back

38  Evidence, Appendix 2, pp 15-17 Back

39  Evidence, Qs 9, 84 Back

40  Evidence, Qs 9, 22, 48 Back

41  Evidence, Qs 84-94, 117 Back

42  Evidence, Qs 119-121 Back

43  Treasury Minutes to the 26th Report of the Committee of Public Accounts for 1998-99, Cm 4469, and to the Committee's 28th and 40th Reports of 1994-95, Cm 3013 Back

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