REPORT BY THE COMPTROLLER AND AUDITOR
GENERAL:
Individual Learning Accounts (HC1235)
Examination of Witnesses (Questions 1
- 19)
MONDAY 4 NOVEMBER 2002
MR DAVID
NORMINGTON CB, MR
PETER LAUENER,
MR ROD
ALDRIDGE OBE AND
MR JOHN
TIZARD
Chairman
1. Good afternoon. Welcome to the Public Accounts
Committee, where we have an interesting session ahead of us on
individual learning accounts. Before I start could I please welcome
Mr Beukman, who is the Chairman of the South African Public Accounts
Committee whom I had great pleasure in meeting earlier today.
Mr Beukman is very welcome and is very interested in how we do
things coming from a fellow Commonwealth Parliament, of course,
and we also welcome Mr Bacon, who is deputy speaker of the Tasmanian
Assembly, as we welcome everybody who is attending today. Today
we are considering the report by the Comptroller and Auditor General
on the accounts. We welcome Mr David Normington and Mr Peter Lauener
from the Department of Education and Skills, and Mr Rodney Aldridge
and Mr John Tizard from Capita. Thank you for coming this afternoon.
Perhaps I could just ask a few questions to start with to Mr Normington.
What struck me from this report is that a large number of those
doing this training had degree level qualifications, and there
are doubts about the amount of learning that actually took place.
Why did you not target specific groups and collect more data on
results?
(Mr Normington) The purpose of the scheme
was to encourage people of all sorts to learn. There were, as
the report points out, groups within that who were target groups
and actually the marketing was targeted on those. Those included
young people without qualifications who are 19-30; people returning
to the labour market; people in small firms and so on, but it
was not just the aim to reach those groups. The aim was to encourage
more people to come back into learning.
2. And was there any monitoring at an early
stage of who was joining the scheme?
(Mr Normington) There was no monitoring early on —
3. Exactly —
(Mr Normington) There were some follow-up surveys
done as the scheme progressed but there was no monitoring of people
coming into the scheme.
4. On the risk management, secondly, you spent
two years developing the scheme and a number of pilot schemes,
and we see that in report card 1, paragraph 2.23. While having
had these schemes that clearly were not working, did you implement
a completely different national model very quickly and with inadequate
risk assessment?
(Mr Normington) Yes. I think that is a very fair criticism.
It was the case that what had been piloted was not implemented.
What we learned from the pilots was that it was very difficult
to get people to take up the scheme in many circumstances, and
also that there were serious problems in what I might call the
savings account model involving the banks, and ultimately the
financial institutions would not participate, and at that point
at the end of 1999 there was a significant change of direction.
It is a critical moment; there should have been a pause; it should
have been replanned and was not.
5. And you were up against a timetable?
(Mr Normington) We were up against a manifesto commitment.
6. Which was influencing your decision?
(Mr Normington) There was a manifesto commitment to
deliver a million accounts by 2002.[1]
7. On monitoring, then, we are now into the
scheme and it is up and running, why did you wait until April
2001 to recognise that take-up was running way ahead of expectations?
If you look at page 26 you will see a sudden blip, a lot more
interest in the scheme, and there were activity reports coming
from Capita to you. Why did you not spot something unusual was
happening?
(Mr Normington) I am afraid we thought that we had
a success story on our hands. That was patently not true, but
that is what we thought. We thought we had found the way of stimulating
a lot of interest in learning, so we were not concerned at that
point that there were a lot of people coming into the scheme.
My first briefing when I took up this job was, "We have a
success story on our hands. For the first time we have managed
to reach a lot of learners". I think there is a serious problem
about management information which is reflected in the report,
but I think if you had looked at the management information available
in April, you would not have concluded from that that the scheme
was running away. You would have concluded we had a success story.
8. But surely you must have thought something
was a bit fishy when you had sudden surges, maybe up to 10,000
people coming on to the scheme in a month. Did not that ring a
few warning bells?
(Mr Normington) I think it should have done. You will
hear me say a lot today that this was a bad story—it is
a story of inadequate monitoring and not picking up the signals.
I think there ought to have been much better monitoring of those
sorts of blips. People were very focused on getting to the million
and believed we would have a lot of trouble getting to the million,
and that coloured the whole risk assessment. A lot of the risks
that were being managed were the risks that it would not happen,
not the risks that it needed to be turned off. That was entirely
wrong as it turned out.
9. Thank you for being honest with us. It is
always good when people come on this Committee and say "mea
culpa" straight away but we still have to go on asking our
questions! You are still investigating 133 cases; only 99 have
been referred to the police; only one has been prosecuted. The
scheme has been closed down for a year now. Why is everything
taking so long?
(Mr Normington) Just to correct that, we now have
151 learning providers in the serious case; 99 are in front of
the police; there have been 60 arrests; 11 charged; ten court
appearances are awaiting; ten other people have been cautioned—why
is it taking so long? It is taking so long because these are fraud
cases and collecting the evidence and collecting the information,
finding the evidence that there was fraud, is proving quite complicated
and time-consuming. I am afraid it is going to go on for quite
some time. Getting the evidence that convinces the police and
the Crown Prosecution Service that there should be prosecutions
is also taking time as well. I would like it to go faster.
10. What is the highest level of fraud that
somebody might have got away with? The figure of up to £2
million has been given to me. Is that beyond the bounds of credibility?
(Mr Normington) I do not know. I really do not. I
think that we could be dealing with some tens of million pounds
of fraud here. I do not know how it breaks down into individual
cases. I do not suppose it is beyond the bounds of possibility
that £2 million could be there but I simply do not know.
The way that this could happen, of course, is you have to have
a very high volume of trainers multiplied by quite small amounts
of money, so it takes a long time to get to £2 million.
11. They had these logarithms going and they
could run straight through these programmes and a mass of accounts
very quickly, could they not?
(Mr Normington) In the last week they were running
computer programmes for 24 hours trying to get into a lot of individual
learning accounts so they could draw the money out of it.
12. And we know that 40 per cent of the people
who signed on to this scheme got no training at all, do we not,
but a lot of these may be completely fraudulent.
(Mr Normington) A lot of that money was not spent.
It is not the case that when you signed on to the scheme you immediately
had to cash in the learning. There was always going to be a time
lag. You took your account out and then you could pre-book learning
over the next six months, so the fact that there was a gap between
signing on and actually cashing in the learning does not mean
to say that that learning was not there and was not provided.
There were 1.4 million people who did learning under the scheme.
13. So in the light of all this, what lessons
have you learned about your contracting arrangements for the future?
About spelling out security arrangements, requirements for management
information, and exception reports, for instance?
(Mr Normington) We have learned all those lessons.
Our project management was not good enough, our contract and supplier
management was not good enough, our management information and
getting that focused on the exceptions was not good enough, and
we have learnt a lot about our relations with Capita. I say again
to you, this is a very bad story, I am quite ashamed of it and
I am quite ashamed of it on behalf of the Department. I am very
sorry for it too, and we have to put it right.
14. Thank you for that. Was one of the reasons
that there was too much of arm's length relationship between you
and Capita? Perhaps if there had been a closer partnership, things
might have gone better? They were trying to warn you, or were
they not?
(Mr Normington) Mr Aldridge will speak for himself.
I think they probably should have shouted louder at us at various
points. I think that the relationship was one of us being the
contractor and they being the supplier. It was not a partnership:
we did not sit together on a partnership project board and therefore
we were not sharing a discussion about what was happening with
the scheme. We were asking Capita to do things—they did
things. They sent us management information. There was not enough
sharing of that so in that sense I think we have learnt quite
a lot of things about how you run these sorts of partnerships.
15. Just one last question to Mr Aldridge: how
was it, when all your competitors said they could not do this
on time and it was not going to work, you alone decided to go
ahead. Was it because you knew the risk lay with the Department
and not yourself?
(Mr Aldridge) When you go into bids like this you
do not know that you are the only bidder, and in fact the process
that starts is generally with a long list and comes down to a
few that were bidding. We chose to bid for this, and that is the
other point to make. You select what you want to bid for. You
do not necessarily go into it without making that choice. The
reasons that we went into it were that we had the infrastructure
that could meet a lot of the requirements of the scheme; we had
good working relationships with the Department; we have a very
good track record of implementing contracts and projects in a
very speedy way. For example, we implemented throughout the country
the theory driving test which we set up in six months, 150 outlets
around the country, 1000 people recruited, an IT system designed,
and it all went well. We set up for the Department for Work and
Pensions the winter fuel payments which involved 2.7 million people
—
16. We are not interested in anything else.
If you could now answer my question. At the end of the day you
knew the risk lay with the Department.
(Mr Aldridge) The contract, the discussions that then
evolved—we were not aware, if I may say, that we were the
only bidder. What we were aware of was the risk
17. But if you got the contract, the risk lay
with the Department?
(Mr Aldridge) The way the contract was negotiated,
and it is not uncommon with any contract, you look at what the
risk and rewards are, you take risks where you can reasonably
expect to control the things around you that are going to trigger
those risks; where you cannot, then you say we are not prepared
to take that risk, and that was the sense of the conversations
that went on in the contract. We did not set out believing that
everything was going to be a risk with the Department. That is
not the way we —
18. You heard Mr Normington being very apologetic
for this. What is your view? Does the blame lie with the Department,
yourself, or is it to be shared between you?
(Mr Aldridge) The NAO report concludes quite a number
of things about the whole scheme. What I would say is that I wanted
to be involved with this because quite passionately I believe
in education. I believe in everything that was trying to be achieved—developing
a training, provide an environment, and also encouraging life-long
learning—so I am enormously disappointed and saddened by
the outcome of this. I feel that, as we will gather from the conversations
we will have, there were things that could have been done and
things that have to be learned from this.
19. And there are minimal things you should
do in the future in your relationship with the Department—security,
unusual patterns of activity and all that we saw in this scheme?
(Mr Aldridge) Of course, a lot of that information
was there—it was how it was interpreted and used, and a
lot of that is around the relationship that we have with the Department,
particularly with the project board.
Chairman: We will leave it now and ask
Mr Howarth to question further. Thank you very much.
1 Note by witness: The manifesto commitment
was to deliver a million accounts within the lifetime of the Parliament. Back
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