Examination of Witness (Questions 60 -
MONDAY 24 JUNE 2002
60. What difficulty are you facing? You are
not in the middle. Any penalties would be part of the contract
you originally signed up to and that was signed up to a couple
of years ago, so your are not in the middle of those negotiations.
Are there or are there not penalties for the computer company
failing to deliver and creating enormous embarrassment for youI
know it is not your personal faultbecause it is not going
to provide the software which is needed for the courts to begin
to address the problem we are here to deal with today? What is
(Sir Hayden Phillips) They have not delivered by the
planned due date. We know it is delayed.
61. We have that agreed at last.
(Sir Hayden Phillips) We are in discussions with them
about the delivery capacity. If we agree with them that delivery
will occur through them, then the contract will be varied and
then we shall see what the penalty position is.
62. I do not seem to be making myself clear.
I keep repeating the same question but you do not seem to understand
what I am saying.
(Sir Hayden Phillips) I do understand the question.
My difficulty is
63. Do you understand this question? What penalty
has been triggered as a result of their non-delivery?
(Sir Hayden Phillips) As I say, I am in difficulty
in answering that question because we are in the middle of a commercial
64. That is nothing to do with the current contract.
(Sir Hayden Phillips) I cannot say now that we will
or will not impose whatever contractual penalty is involved. There
are penalties for default in the contract, yes.
65. The whole idea of PFI, we are assured time
after time at this cynical Committee, is to transfer risk. You
now have run into a fairly obvious risk that they could not get
their software right. We have come across that before, so you
would have anticipated it. In your PFI contract, do you or do
you not have a clause entitling you to compensation if they fail
to provide the software on time? What compensation do you stand
to get for failure to give you what you require?
(Sir Hayden Phillips) The answer to the first part
of your question is clearly yes.
66. Yes, what?
(Sir Hayden Phillips) Yes, there is a penalty clause.
67. There is a penalty and is it being imposed?
(Sir Hayden Phillips) Secondly, it is set at a proportion
of the total value of the project. I shall have to check; I cannot
give you an answer immediately as to what that precise proportion
68. Send us a note on that.
(Sir Hayden Phillips) I shall certainly do that. The
reason I am not being drawn on it nowor trying not to be
drawn on it nowis that we are in discussions with the company
about future delivery and I do not want to get drawn into things
which may affect that conversation.
69. Yes, but that is future delivery of a past
contract. I am not asking you about that. I am not asking you
to tell us what your arrangements are about the future. We are
told here that it is now intended to select an alternative supplier
to provide an application to cover the next few years. Will you
pay for that or will ICL pay for that? You are only doing it because
they have not delivered. Who is paying for it?
(Sir Hayden Phillips) That depends. If our current
negotiations lead us to having to go to a new supplier, we shall
then have to consider what proportion of that cost ought or ought
not to be borne by the company which had failed to deliver it.
Like any other negotiation I cannot predict now what the outcome
of that will be.
Mr Williams: May I say that I am appalled?
We are told that the whole essence of PFI is that risks are identified,
systems are put in place to ensure that if the risk is appropriate
to the supplier, as it is in this case, then if they do not deliver
they are penalised. You have not been able to help us in any way
in that respect and you cannot even tell us what is going to happen
with the alternate. You had better put in a detailed written note
within the next two weeks on exactly what is going on. You can
put it in in confidence and the Committee then determines whether
it stays in confidence.
70. Could you do that, Sir Hayden? You may feel
inhibited in answering these questions in public, but can you
do what Mr Williams asks and answer his questions to his satisfaction
in a detailed note, if necessary in confidence?
(Sir Hayden Phillips) Yes. If any difficulty arises,
I shall give an explanation to you so you know where things stand.
My objective will be to meet Mr Williams's request.
Chairman: Thank you very much.
71. May I go back to your point about not imposing
penalties and needing a change in the law to be able to impose
penalties for late payment of fines? Why is it that local authorities
can do that? Whenever I get a parking fine, if I do not pay within
the next few days it is doubled. Why is that legal and applying
that same principle to magistrates' fines is not legal?
(Sir Hayden Phillips) I recognise that system myself
as well as you do and it is an incentive to pay very quickly,
otherwise it is doubled. The reason is simply the legislative
constraint. It was done for that particular fixed penalty system,
it was not done more generally. I think we should look at that
72. In one of the paragraphs of the report it
says that some defaulters cannot pay their financial penalties
because, for example, they have other financial commitments. Why
is it you think those other financial commitments take a priority
in the minds of those who face a fine over the fine imposed by
the magistrates' court?
(Sir Hayden Phillips) Two comments on that. First
of all, you are dealing with human nature here and a court cannot
force somebody instantly to change their priorities for their
own expenditure. If people are choosing to spend money on other
things and not pay their fines, we just have to grind away trying
to enforce the fine in the ways the NAO report describes. There
is another context however in which this is particularly acute,
which is those who are not well off, who are meant to be on benefit
and there it is possible to do an attachment and deduct from benefit,
but you can only do it to a maximum of £2.70 a week and the
person can only have obligatory deductions for three items of
expenditure. A number of the people who are in this position are
on benefit. Some of them will not be well off, they will already
have deductions for water charges or electricity charges or other
things. Once that happens, then you cannot add any more than three
deductions, as I understand it.
73. What proportion of the 37% of fines which
are not collected is represented by those people who are on benefit
and have already had three attachments of benefit?
(Sir Hayden Phillips) I am afraid I cannot answer
74. Could you let us have a note on that?
(Sir Hayden Phillips) If we can get hold of the statistics,
I will give them to you. I was not able to get them earlier.
75. With respect, you just gave that as a reason
why you are not pursuing these liabilities, so you must know that
it is a large proportion or small proportion. You must have a
feel. You have just given it as a reason why you are not pursuing
(Sir Hayden Phillips) No, not necessarily. I was giving
an illustration of circumstances in which it is very difficult
to get someone to give a priority to paying a fine if they are
on benefit, as well as the generic run of people. If people will
not pay and choose to spend on other things, we just have to grind
away through the systems available to us at the moment to try
to get them to pay.
76. What proportion of defaulters in the 37%
are on benefit?
(Sir Hayden Phillips) I shall have to give you a note
about that precisely. We would have to go out. We do not routinely
collect that information.
77. It would be very helpful if you did.
(Sir Hayden Phillips) I can see whether either on
a sample basis or some other basis I could get some information
78. Would you say it is less than half?
(Sir Hayden Phillips) I would not hazard a guess.
I really prefer to give you the facts.
79. Do you not think you ought to know in terms
of deciding policy what the problems are in terms of defaulting
before you decide how you are going to solve it?
(Sir Hayden Phillips) Of course you are right. That
is evidence-based policy formation. We do need to have that sort
of information, it needs to be held above all locally so that
magistrates' courts committees and enforcement officers can look
at the different groups they are dealing with and use enforcement
methods appropriate to those groups of people.
5 Ev 34-39 Back
Note by witness: The relevant legislation stipulates that
the non-payment of a fixed penalty notice within the time allowed
results in the payment due being increased by 50% and the penalty
being registered as a fine. [Ref Qq 31-32 and Ev 27] Back
Ev 28 Back