Examination of witnesses (Questions 180
- 199)
THURSDAY 21 MAY 1998
MR PETER
MATHISON, MR
STEVE HEMINSLEY
and MR TONY
EDGE
180. Is the Unit that deals with it actually
moving then to the Inland Revenue, or not; what is happening to
the staff, are they transferring or are they staying with you?
(Mr Mathison) I am not sure what the detailed
position is; they will be transferring across. If I hesitate,
it is only I am not sure of the detail of any dialogue with the
trade union about whether they want that to happen definitely
or they want the staff to have a choice. Certainly, the day after
the Chancellor's announcement, beforehand I had arranged John
Lutton was actually at the Family Credit Unit, he is Tony's opposite
number, who is responsible for it, talking to staff, and I had
a note that morning available to them about it. His feedback to
me was that staff generally welcomed confirmation that Family
Credit, in some shape or form, was going to continue, and welcomed
assurance from Inland Revenue that they wanted that expertise
and they had that location; because it does fit, in the sense
Inland Revenue tend to operate on centres rather than a dispersed
local office network.
181. Has it been decided yet whether the
Working Family Tax Credit will be administered from Preston, or
not, or do you know?
(Mr Mathison) I am not aware a positive decision
has taken place. All the discussions I have been involved in,
there has been no discussion I am aware of that has even considered
it should be somewhere different.
182. Given that, the successful implementation
of any system, it seems to be that, certainly in industry, we
learn from using pilots, rather than try to roll things out nationally
in a big way, are you aware of any plans for any pilots on how
it will work, or not?
(Mr Mathison) I am not aware, because that is
Inland Revenue, but I share your views about pilots. The thing
I find in the environment we operate in is that, to me, the most
successful pilots are ones where an outcome of the evaluation
of the pilot is that some things did not work, because you should
use something as an opportunity to test it to the limit. In the
environment we operate in, my experience is, and it is limited
to the last couple of years, it is very difficult for us to operate,
to make mistakes, because we get pilloried. And I think that is
a change I would like to see, that we consciously recognise a
pilot is designed, or a range of pilots are designed, to test
out how they best deliver outcomes, and it is accepted upfront
that some pieces of it we find will not work. But all my experience
says, if you do that, instead of aiming from here to here, you
have a goal up here and you actually are up far closer to that
than you ever imagined.
Mr Wicks
183. I am going to ask some questions later
about fraud, but on this issue of Family Credit and looking forward,
as it were, to the new Tax Credit, do you have evidence in the
Agency of fraud relating to Family Credit, in the sense of a collusion
between an employer and an employee to, I do not know, pay some
of the wage in cash, in order to maximise the Family Credit, for
example?
(Mr Mathison) From memory, I am not sure whether
there has been a formal review carried out, but as a matter of
course on our benefits we look at correctness; and it is not playing
with words, I prefer to use the word correctness because it starts
to get away from big arguments about is it fraud or lack of knowledge.
184. I am asking about a specific issue?
(Mr Mathison) Yes, sorry. There is evidence, and
when I say that, you have to recognise the nature of the benefit,
that it is a specific point in time of what the person's circumstances
are and then it is frozen for six months, I understand there is
some evidence that, in some cases, people's circumstances, at
the point in time the Family Credit information is provided, change
fairly quickly after that, but actually trying to prove that that
was a manipulation is extremely difficult. And there is also some
information which shows that there may be collusion and the employer
encourages people to operate in a certain way, and that is particularly
around overtime, for instance.
185. Can any of your colleagues give us
more information on that?
(Mr Heminsley) It is difficult to be other than
anecdotal, because, you may know, we have a programme, what we
term Benefit Reviews, and Family Credit was programmed in for
a review, and we have not actually got the detailed results that
would find that; there is an issue though, and my security section
are well aware that we need to talk with colleagues in Inland
Revenue. I think we are fairly clear about what the sorts of risks
to specific benefits are, in some detail, and by moving over to
a Tax Credit system then we have views on how some of those risks
would be changed. And you can rest assured that, as part of the
transfer of work, it is not just a case of us pushing this thing
over the wall towards Inland Revenue and not worrying about it
any further, we feel we have made some pretty significant strides
over the last four years, or so, in security, and will be trying
to pass on the benefit of our experience.
186. I have heard stories, but I do not
know how accurate, but I think those come from within the Agency,
of employers getting buckets of cash out, as it were, from the
bank, literally cash, to pay employees, which suggests a collusion,
in terms of what the formal wage is, in order to maximise the
Family Credit. If there is any truth in those allegations, this
has quite serious implications for the new Tax Credit scheme.
Do you have any evidence of that?
(Mr Mathison) I have just been handed a note,
reminding me that, in the pack I had for the PAC (Committee of
Public Accounts) appearance I did some months back, there was
some information in that, and I would be happy to provide the
Committee with that information.[4]
187. We would like to see that, I think;
thank you.
(Mr Mathison) Otherwise it is me guessing.
Chairman: Can we turn
now to performance and targets. Paul Goggins has got some questions
on that.
Mr Goggins
188. I was very impressed, and I am sure
other members of the Committee were, by your ambitious targets
for accuracy, although I think we all noted as well that we are
talking about the medium to long term, in terms of your less than
1 per cent target. Can I cruelly bring us back to the here and
now and talk about last year and this year, because clearly there
is a problem; you set an accuracy target of 87 per cent and you
come in at less than 81 per cent. Clearly, you must have felt
that 87 per cent was an achievable target, otherwise you would
not have set it as a target, and I would be interested to know
what were the factors that prevented you, by quite a substantial
margin, from reaching your target?
(Mr Mathison) It is perhaps best to start that
the 87 per cent was an inherited target, that I am not clear on
what basis that was established, it was quite a long time ago,
and when I came in we had this, the accuracy performance was actually
declining, it had been around—and this is going back to
sort of 1993-94—82 per cent, and progressively over two
years it had fallen, I think, from memory, down to 78 per cent
in 1995-96. We had quite a long debate within the Agency and then
with Ministers about whether we changed the target, because everybody
told me that 87 per cent was just totally unachievable and nobody
believed it was possible; so I took the view that we should leave
the 87 per cent. We stuck with the terminology "target"
but I said it was a goal and within the Agency what we should
be doing is stopping it sliding backwards, and what I asked all
the operational areas to do was to tell me how much they believed
they could improve on from where they actually were. So we stayed
with the Secretary of State target of 87 per cent, I could not
see the point of changing it because we would just be guessing,
as a goal, and it was accepted that what everybody needed to do
was improve from where they currently were, and that is what we
set in place; and in 1996-97 it went to 80.8. They are not finally
confirmed yet but I am assured that they are likely to be around
that. This last year, and we need to put it into context that
we had a lot of turnover of staff, we had redundancies, so we
had a lot of change occurring, it has climbed to 81.7 per cent,
and, again, the goal for this coming year has been set by the
Area Directors, in conjunction with Tony and John. When I said
this, the question I was asked was, "What do you want the
target to be?" and I said, "I'm not telling you; all
I'm asking you is to stop it sliding backwards and go forwards,
in the opposite direction." I felt, last year, that the target
they set themselves was somewhat ambitious, but I decided that
I should not be the one who said, "I think you're aiming
too high", and they have set a goal again this year. The
monetary value of error also in that period has declined from
£585 million down to about £430 million; because the
monetary value is around 3 per cent. The thing we have been addressing
is the range at area level, and that is the best measure; we do
measure at district but the sample is too small to be statistically
valid. The range of ADs varies between 75 and 87 per cent. Personally—and
Tony can correct me on that—certainly when I go round now,
when I first joined I could not find anybody who believed 87 per
cent was achievable and everybody was saying we should lower the
target, I find the vast majority of people believe that it is
achievable and that they can beat it. In some local offices they
are in the nineties. We also embarked on a programme, probably
18 months ago, called Evidence, which was bringing in some of
the disciplines around, process engineering, in laying out all
the process and having staff who were directly involved currently,
who analysed what all those processes were and where they went
wrong and why, and we did a lot of work around the front end of
building into the process disciplines around ensuring people had
information. And also, and I think that was the big thing, although
it is not totally through the organisation yet, the Secretary
of State targets were changed, to accuracy rather than speed.
So the focus is on getting things right.
189. I must confess, I am very concerned
by your answer, because I can understand that you inherited something
of a fiction, but the fiction seems to be continuing on, and what
you are really saying is, that 87 per cent, and 87 per cent is
the target for this year, it may be achieved, it may not be achieved,
it still has this fictional character?
(Mr Mathison) The 87 per cent was not achievable
at the point it was set.
190. But most people, when they hear the
word "target", expect that there is some realistic expectation
that that target will be reached; what you are saying is that
there is no way of knowing, and it is not really a target?
(Mr Mathison) I accept it is not really a target,
but we are stuck with terminology, which says, "This is a
target" and I could not see the point of changing it. I would
prefer to use the expression "goal", in other words,
it is something that we are aiming for. And it may sound like
playing with words but I have never found anywhere where the target
was set so high beyond what people who were actually doing the
work, it was set so far away from what they were currently achieving;
all my experience is that they do not even think about how they
can get towards it, because it is just so far away, it just appears
unachievable. And I strongly believe, as I go round the offices,
I see a clear commitment to driving up towards that figure and
trying to achieve it. The internal target this year is 84 per
cent; early evidence, from the sampling that has been done so
far, would indicate, I believe, that we can achieve that. And
I think we will continue to improve and we will pass the 87 per
cent point at some time.
191. I just say again, I think I find it
a bit disturbing. Your realistic target is 84 per cent, your document
says 87 per cent; it is no wonder that people misunderstand, and
I leave it at that. But just finally, perhaps given your experience
then of dealing with these unrealistic, fictional targets, the
Green Paper on Welfare Reform sets out 32 success measures. I
wonder what advice you would give this Committee about what we
should be thinking about, in terms of our advice to the Minister,
for Welfare Reform, on his 32 success measures?
(Mr Mathison) I think it is around recognising
the long-term aims of Welfare Reform, that they are over a long,
long period of time, that what is essential is that there are
steps along the way, with some goals which are, in the short term,
targets, but I think it is important to have a goal. I worked
for an organisation where we had a goal, on the product we made,
of having a defect rate which was one in six million, and when
we first started it was one in 100,000, and by having that goal,
which was so far away from where we were, all sorts of ideas came
up about how did you actually do that, and we improved far faster
than anybody ever thought. So I think it is about having ambitious
goals, but recognising steps along the way that measure your progress
towards achieving that goal. I firmly believe in ambitious goals,
but recognise it as a goal; a target is a short-term one, which
you should be stretching. I worry if I have a target which I feel,
"Oh, that's alright, I'm sure I can get that." A target
should be stretching but it should be achievable. But I believe
we should be trying to look at, in the operations side, I think,
12-month periods are manageable, I think in some of those policy
areas it is probably longer than that, and the sort of two-year
time pockets, maybe.
Mr Wicks
192. Perhaps we should interview the Minister
of Sport, who could in a very learned way tell us the difference
between a target and a goal. I hope the English team this summer
realise that the purpose of a goal is to actually score it?
(Mr Mathison) I agree.
Chairman
193. I want Malcolm to open up some questions
on the very important area of fraud, but, before we do that, you
said something in passing about redundancies, which caught my
attention. Is it a fact that you have had to lose some of your
quite highly qualified middle managers, by way of redundancy,
in the last 12 months, in order to meet the Change Programme cuts?
Is that figure known; is it published anywhere? Do we know how
many hired hands you have had to relinquish in the recent past
and what kind of category of people they are?
(Mr Mathison) I have not got that in the briefing,
but it has to be available, and we could provide that information.[5]
194. I would be very pleased if we could
get a note about that. It must be known. I would like to know
the quality of the people that you were having to get rid of in
order to stay within the Change Programme cuts in administration?
(Mr Mathison) I think I would qualify it by, yes,
we had to recognise the financial levels that we had to work within,
but in how we manage within that we were looking at organisation
structures and about changes in how we do work, and where the
reductions occurred stemmed out of that rather than perhaps it
being a crude, sort of "We'll take 5 per cent off everywhere";
it was not that, it was a conscious look at, "This is the
amount of money we've got." I stressed that it should be
focused on delivery of the service, so it should be focused on
the operations side and the money allocated should be focused
on staff who actually do the work.
195. I am worried about the quality of the
corporate knowledge that you are losing in that process, and if
there are any figures or notes that we could have? I do not expect
you to have this in the front of your brain but if we could have
a note on that we would be grateful?
(Mr Mathison) I will let you have a note on those.[6]
196. Can I ask you a couple of quick questions
about ADAPT, because we have had some very worrying press reports
recently about the three areas that the private sector has been
linked with, in the BA operations. I would like to know what areas
really have been chosen and what was the purpose of these areas
being chosen; but, more than anything else, can you reassure me
about some of these press reports, which talk rather wildly, one
suspects, about 20,000 redundancies from within the Agency being
lost to the private sector? What is going on, what is happening,
is there any truth to any of this, where is it going; just talk
to us about it for a bit?
(Mr Mathison) My experience of things I read in
the paper is that there is somewhere hidden in there something
with some degree of truth, but invariably there is a lot of it
which is not really the facts. It is difficult because it is a
commercial contractual relationship, which is ongoing. The three
areas, and Tony knows what they are called, as ADs, AD1, 2 or
3, and I can never remember them, but it is Yorkshire, East London
and and Anglia, and the South West, where three different consortia
are working in each of those areas. The areas the consortia are
working in are to gain knowledge and experience of what we actually
do and how things actually work, rather than the theory, or something
that is said in a book about what happens. Anything that comes
out of that is not necessarily related to those individual areas,
it is to look at how the private sector may bring added value
to improving how we operate the Benefits Agency. It is unfortunate,
on the press information, that there were some indicative numbers,
which were a wide range of numbers; some of the numbers on the
money side, because I am not sure where that number came from,
I assume somebody has divided by an average wage, or something,
is that it is the vast majority of what one of the consortia believe
could be saved, was programme expenditure, so it was a saving
over the programme expenditure, not the administrative saving.
I think the thing that really demonstrates the issue around the
numbers is that our running costs are £2.5 billion, of which
£1.2 billion is salaries, over £400 million is methods
of payment, £300 million is accommodation, £300 million
IT, and £300 million is the rest of it; which I think clearly
demonstrates that a claimed £7 billion saving on admin. over
ten years is not possible. So it is mixing two numbers, the vast
majority of the £7 billion, that is unsubstantiated anyway
and not verified, related to programme expenditure, which is £90
billion.
197. How many useful ideas have emerged?
Presumably, this is a time-limited project which will be written
up, will be published, and I understand there might be just a
touch of commercial sensitivity at the margins, but presumably
we will get some idea of what particular processes are being studied
and what the ideas are, before this thing goes very much further
forward. I can imagine it goes down like a lead balloon with the
staff when they read reports like this; you and I are sophisticated
readers of newspapers and we know that we do not rely on everything
that we read as being Holy Writ, but a lot of people out there
whose jobs are at stake might be slightly concerned about some
of this stuff?
(Mr Mathison) I think the first article was on
a Thursday, and I got a communiqué out to managers that
afternoon, to give lines to take to staff, and said that I would
be writing to all staff the following morning, and on the Friday
morning there was a letter from me, explaining to staff the circumstances
and what we had said. So there was a letter to all staff, explaining
to them what the position was and what we had said to the consortia.
198. It would be very helpful, actually,
to have a copy of that, as well. I know the list is getting long
of the things that we are asking for, but would you mind doing
that for us?
(Mr Mathison) Yes.[7]
199. That is kind. But, just finally, this
is time-limited, this will not go on indefinitely, presumably
it is a project that will come to an end and some report will
be published that will be in the public domain that will let us
get a feel for what is going on?
(Mr Mathison) I find, coming in from outside,
that the Government procurement process, under EEC/GATT, I understand
all the background as to why, but what it does do is, it means
that when we go into procurement it takes a lot longer than it
would do in the private sector. It adds nine months on to it,
and there are certain aspects of it which are not conducive to
the way most large organisations now deal with party suppliers.
But we have to operate within the law, so we have to accept what
is there. The nature of the advert that was placed on which contracts
were awarded is that they would, for a period of up to 12 months,
work within the Agency and with the Agency on gaining an understanding
of how the Agency operated, the issues and the problems that needed
to be addressed, and they were to come up with, and the expression
"innovative" was used in the terminology, ways in which
they could add value to what we were doing and bring their expertise,
capital investment, because it would be PFI. There is no guarantee
of any award of business, but we could award business if we believed
there was benefit from that. They could bring added value, which
would be subject to competition between the three consortia; and
we are not at the stage yet of having the information to be able
to consider with them where they may bring added value and measuring
those against the criteria Ministers have set.
4 See Ev pp. 70-71. Back
5
See Ev p. 71. Back
6
See Ev p. 71. Back
7
See Ev pp. 74-75. Back
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