Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 80 - 99)

MONDAY 17 APRIL 2000

SIR HAYDEN PHILLIPS KCB AND MR NICK SMEDLEY

  80. You would find that out at an early stage, would you?
  (Mr Smedley) Death of a receiver?

  81. Yes?
  (Mr Smedley) We would hope to, yes. The case worker would obviously be in contact.

  82. Is there any evidence any of the money you have got in your fund is as a result of people dying and not being replaced?
  (Sir Hayden Phillips) I wondered whether Mr Rendel was questioning you about mental incapacity or talking about the funds in court, which is what we were talking about earlier.

  83. Both.
  (Sir Hayden Phillips) It would differ depending on from whom the money has come in the first place, yes.
  (Mr Smedley) Yes. A case that is live in the Public Trust Office, the money would not find its way into the Unclaimed Balances because we would know whose that money is. The discussion you and I were having was not about the Unclaimed Balances fund, or it was not intended to be.

  84. On Ms Lomas's bonus payments, paragraph 9 of the report appears to show that she was paid 100 per cent for the last 15 months in effect on the grounds that there was no way of judging how well she would or would not have met the KPIs. What was the logic behind that?
  (Sir Hayden Phillips) The logic behind it was to try to secure a payment for that period which, as it were, was defensible and also enabled us to reach an agreement about her departure. What I did—apart from legal advice which I have mentioned—I looked at the pattern of bonus payments that had occurred, and they were running at about 80 to 85 per cent, sometimes higher than that. I recognised that I could not actually come to a decision that was based on objective evidence because the objective validation of these bonuses can only take place after the financial year is over, so I had to make a judgment about what in the circumstances it was sensible to pay to secure an agreement and to get the benefits which were a clean and fresh start of early departure.

  85. What was the worry about not getting some agreement? If you had offered a lower sum what could Ms Lomas have done?
  (Sir Hayden Phillips) She could have argued that I was in no position to say whether or not she might not have achieved a full amount for the period in question and what basis did I have for undercutting it and so on.

  86. If she had said that and you had said "Tough, I think it is fair"?
  (Sir Hayden Phillips) Then either she might have agreed and the costs would have been marginally lower or we would not have got an agreement with the disadvantages that would have involved.

  87. Which would have been?
  (Sir Hayden Phillips) I think we had both come to the view, in fact, that given the scale and pace of change which was going to take place, the fact that she was not going to have her contract renewed from the end of June, it was better for people to be in charge who were going to be focused on being there.

  88. You wanted her out and if you had said "We are going to get rid of you now but you are only going to get, say, 50 per cent of the bonus for the last year and three months of your contract", what would have been the disadvantages?
  (Sir Hayden Phillips) My preference was to make the change but I was perfectly content, if we had not come to an agreement, for her to have been there until her contract came to an end at the end of June. I was not under an absolute obligation, as it were, from my own point of view, to say "We must come to this agreement". I wanted to do it to get the advantages I thought were there but I would have accepted a position, if she had not agreed, by which she stayed.

  89. You are saying that if she had not agreed with the lower bonus payment that she would have been in a position to force you to keep her on?
  (Sir Hayden Phillips) No, not to force me. She was there anyway, that was her entitlement, she had a contract.

  90. Did she have an entitlement to the 100 per cent bonus?
  (Sir Hayden Phillips) She did not have an entitlement to 100 per cent, she had an entitlement to bonuses. What I could not do was to treat the ones for 1999-2000 in the same way as I could treat the ones from the past history.

  91. I can quite understand you had no means of deciding exactly what it should be given the period had not even ended but I just wonder why you felt that you had to provide 100 per cent? Is this not a question of negotiating with the person concerned? What could she have done if your final negotiating position had been "Sorry, 50 per cent"? I do not see that there was perhaps anything she could have done, she would have had to accept 50 per cent.
  (Sir Hayden Phillips) She would have refused the deal and stayed in post.

  92. Does the Civil Service have no means of just removing her from post?
  (Sir Hayden Phillips) That depends on whether one takes the view that the contribution she had made was so unsatisfactory that she should be removed. That was not the view I took but I did take the view of trying to leave on the basis of mutual agreement being sensible.

  93. You could have removed her but decided not to because she agreed to go?
  (Sir Hayden Phillips) If I had thought there were grounds for removal then that would have been the route I would have taken. I did not think there were grounds for removal so I took the route of saying "Look, you can certainly stay to see your contract through or would you prefer to go by mutual agreement?"

  94. You did not think that what was in this report was sufficient grounds for removal?
  (Sir Hayden Phillips) No, for the reasons I had given earlier in relation to all the other aspects of performance which she had carried through with and within the agreement reached with the Department.

Mr Murphy

  95. I want to take the witnesses to another area of the report which Mr Rendel hinted at. Mr Smedley, in response to one of the questions asked by my colleague you said it is your responsibility—and I quote—"... to make it as easy as possible for people to find their money". That takes me to pages 22 and 23 of the report you signed up to and that is the matter of the Unclaimed Balances Index which does anything but make it easy for people to claim their money. I note, Sir Hayden, in your letter of 17 March you were kind enough to inform us that you will shortly be transferring on to a modern database.
  (Sir Hayden Phillips) Yes.

  96. I want to ask questions in relation to the Unclaimed Balances Index, and I do not mind who answers as long as the answers are relatively brief. Can I ask, the report identifies as at May 1999 you were approximately 18 months to two years out of date in terms of the Index, and that is in paragraph 3.23. Can I ask how out of date was that Index when your Chief Executive started in her job? Any idea?
  (Sir Hayden Phillips) You answer, Nick.
  (Mr Smedley) I cannot answer the specific question of how out of date it was in 1994 when Julia Lomas took her job up. I do not know that detail, I can get it if it is relevant.

  97. How out of date was it when she left her job?
  (Mr Smedley) We were in the process—

  98. With her bonus, how out of date was it?
  (Mr Smedley) We were in the process at that late stage of transferring on to this modern database which is now active and live, so it is no longer out of date at all.

  99. When she left how out of date was it?
  (Mr Smedley) I imagine it was in the late stage of being updated, so it was not particularly out of date. She left about three months ago now.


 
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