Select Committee on Public Accounts Minutes of Evidence

Examination of Witness (Questions 60 - 79)



  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 you—I know it is not your personal fault—because 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 the penalty?
  (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 contract negotiation.

  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 is.

  68. Send us a note on that.
  (Sir Hayden Phillips) I shall certainly do that. The reason I am not being drawn on it now—or trying not to be drawn on it now—is 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.[5]

  Chairman: Thank you very much.

Mr Gibb

  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 very seriously.[6]

  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 that.

  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 these people.
  (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.[7]

  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 about that.

  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

6   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

7   Ev 28 Back

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Prepared 27 November 2002