Oral evidence

Taken before the Work and Pensions Committee

on Wednesday 2 July 2003

Members present:

Sir Archy Kirkwood, in the Chair
Miss Anne Begg
Ms Karen Buck
Mr Andrew Dismore
Mr Paul Goodman
Mrs Joan Humble
Rob Marris
Andrew Selous
Mr Nigel Waterson

__________

Memoranda submitted by the Child Support Agency and

the Department for Work and Pensions

Examination of Witnesses

Witnesses: MR DOUG SMITH, Chief Executive, and MR VINCE GASKELL, Child Support Reform Director, Child Support Agency; and MR MARK NEALE, Director, Children, Housing and Presentation Directorate, Department for Work and Pensions, examined.

Q1  Chairman: I open this formal session of evidence by welcoming our witnesses from the Child Support Agency. We have with us Doug Smith, the Chief Executive, Vince Gaskell who is the Child Support Reform Director of the Agency and Mark Neale who is Director of the Children, Housing and Presentation Directorate of the Department for Work and Pensions. You are all very welcome. We have a series of detailed questions for you, but perhaps, Doug, you could set the scene by telling us where you are in terms of the current operational problems facing the Agency.

Mr Smith: Thank you very much. This year Ministers have set some demanding targets for the Agency to achieve for the new child support arrangements to be achieved. Those include a significant increase in the number of cases resulting in a full maintenance calculation and a progressive reduction in progressing cases through the system from an average of upwards of 20 weeks to around six weeks. That is the average time taken to clear cases. It also includes monitoring that reduction against a flight path through the year that reflects the inevitable early teething problems with the new IT system. The additional complexity has been caused this year by linkages between new applications and existing cases and the learning curve for our staff. At the moment delivery - I am sure that we shall want to explore the detail - is broadly in line with that flight path. That has involved some cases not being progressed as quickly as we may have wished, and less quickly than we hope will be possible later in the year. To achieve the required rate of through put we need to increase further staff productivity. There have been two constraints on our ability to do that. The first of those involved EDS, our IT supplier. EDS have not lived up to their own expectation to get the system working effectively, as we would have hoped. Combined with the normal challenges that we face when introducing new processes and a new culture, the implementation has been more difficult than it may have been. There are serious issues around performance and delivery that we are actively pursuing with them, while also withholding funds on account of under-performance. They have acknowledged those difficulties and it is clear that EDS is organisationally seeking to learn from the mistakes of the past. In recent months the company has replaced much of its senior management team and the new team is showing a refreshing willingness to engage with us and to treat us with the priority we expect as well as their major accounts worldwide. We shall continue to monitor closely the company's commitment over the coming weeks and months as we work together to deliver a more stable system to support the business changes. The second area of constraint concerns our staff. The staff have found the culture shift required by the new scheme difficult; in particular the way in which the computer system drives work activity and presents work to them for action. They have found the shift to much greater use of the telephone difficult and they have found the balance between progressing private and benefit cases difficult. We are addressing those concerns in a number of ways, as you would expect. Firstly, we are placing more specialist support staff in local offices to help and to coach staff, in particular in better telephonic usage, and, secondly, we are working with the new management of EDS to improve system stability and reliability. Despite that, the first few months have seen some real achievements. Our Ministers will provide a report to Parliament on that. Maintaining that will be difficult and it is dependent on the factors that I have already outlined. Our staff are working extremely hard to deliver the forecast level of service to clients and at this stage I want to record formally my thanks to them for that and for their continuing commitment to deliver the new arrangements successfully.

Q2  Chairman: Picking up the point about the staff, we have been here before. Some of us are survivors of the original 1991 legislation in terms of the crisis that the Agency went through. I do not know whether you have access to the Public and Commercial Services Union evidence that was given to us in advance of this session, but it filled me with horror. My heart sank because we were back to cases being stockpiled, management systems failing, delays occurring and staff wastage figures still unacceptably high. We shall go into some of the detail during the course of the morning. I cannot understand how we got here. This is the second time around. It is not as though the Department has not had experience of bad IT contracts , for example benefit cards and ICL. There is a trail of failed IT projects. The CSA has been through this once before and here we are again. What frustrates us a lot - I want to explore some of this - is how we try to understand what is really going on. Huge sums of public money are involved. Ministers blame computer engineers; engineers blame Ministers and civil servants; project directors come and go and the problems continue. It is very disappointing. The departmental evidence that we received in advance of this session tells a completely different story from that which comes from the trade union. The trade union may have a case to answer because they are trying to stop you cutting the staff, which seems to be the last thing you should be considering this year. We shall come to that later. Why have we come to the situation that we are in now, where we are potentially facing another crisis in the CSA? Is this a software problem? Is it EDS? Should we get EDS in and talk to them? If we invited them to come, would they come? Can we see the contract? What has your board been doing about all this? Do the minutes of the board meetings anticipate this problem and, if so, can we see them? How do we come to be in this position?

Mr Smith: Let me try to answer some of those points. I am sure that we shall explore the detail as we go through the morning. I have two points. One, this is not a failed computer system. There is a big difference between a failed computer system and a computer system that has more teething problems than we expected. I accept that that may be seen as a piece of sophistry; none the less, we have a computer system that is working effectively for around 150,000 to 160,000 clients, providing a service on a day-by-day basis. Is that service good enough at the moment? No. More work needs to be done on it. But we have a computer system that is working effectively and the staff are using it on a day-by-day basis to process cases and to provide a standard of service to clients which is positive. I think that the second big difference from 1993 - I was not here in 1993, as you know - is that the Agency is still in control of its workload. We are managing the transition from the old arrangements to the new arrangements. We are managing it on a day-by-day basis with the board in contact with and in control of its local offices and the work that they do on a day-by-day basis. I am deliberately not portraying this as a crisis unfolding in front of us. This is irritating and frustrating and I am as irritated and as frustrated as anyone about some of the events that have unfolded over the past few months, but we are in control of it. The IT system is working and, as we go through the rest of the year, we shall get progressively on top of the flight path that I described.

Q3  Chairman: You say that it is not a computer problem at all.

Mr Smith: I am not saying that it is not a computer problem. I think there is a different between a failed computer system and a computer system which is not working at all and which is not supporting the business and the issues that we have with the IT system that has just been put in place for the Child Support Agency.

Q4  Chairman: If we are saying that it is not the computer system's fault, then why are we in this potential situation? If the computers are being tweaked, and that will be sorted quite soon - I do not know whether I accept that and I want to come back to that point - but if it is not essentially a computer problem, what is it?

Mr Smith: I am trying to say that it is not a failed computer system. There are undoubtedly some computer problems and we shall deal with the detail of those, if you wish. There are undoubtedly some computer problems and we need to work our way through them. Equally, on our side of the coin, on the Agency's side of the coin, we have some cultural issues that we need to address as people move into the new way of conducting business with clients under the new arrangements.

Q5  Chairman: So the problems are all down to cultural difficulties among the staff?

Mr Smith: No, not at all. They are a mix of IT difficulties - we shall go into the detail of what those IT difficulties are - and cultural problems associated with the shift to the new arrangements.

Q6  Chairman: Do you talk to EDS at a high level?

Mr Smith: Yes.

Q7  Chairman: At what level do you talk to EDS?

Mr Smith: At the level of the chief executive of the UK and Europe operation.

Q8  Chairman: Is that Sir Michael Jordan?

Mr Smith: No, Bill Thomas and Sir Richard Mottram and Rob Westcott talks with Michael Jordan

Q9  Chairman: There are similarities with what is happening in the Inland Revenue and the tax credit situation. I was interested that the chairman, Sir Nicholas Montagu, told my opposite number in the Treasury Select Committee only a few days ago, in answer to a similar question that John McFall addressed to him at that session: He responded: "I talk every week with Michael Jordan, the chairman and chief executive officer" - that is the global chairman and chief executive officer - "I got him over here two weeks ago to talk over these issues and see them for himself in person. I made it clear to him that the performance of the IT is unsatisfactory, must be improved urgently. It is undoubtedly the most difficult case that the partnership with EDS has faced. it is standing up to the challenge in this sense. We are working of course day and night to try to resolve the problems with the system and keeping everything not just fingers crossed. It does look as if this is beginning to pay off". Why are you not doing that in relation to this contract as well?

Mr Smith: I suspect that if Sir Richard Mottram were sitting here at the moment he would echo that almost word for word. I know that he has met with Bob Westcott, with Michael Jordan this week on the seriousness of the issues and what EDS need to do to stand up to them and resolve the issues was brought forcefully to their attention.. If Sir Richard Mottram brought something forcefully to their attention, it certainly will have been brought forcefully to their attention.

Q10  Chairman: Can we see the contract?

Mr Smith: the contract is, as I understand it, commercial in confidence.

Q11  Chairman: Can we see it with bits blacked out?

Mr Gaskell: I see no reason why not. We can make arrangements for that outside the meeting.

Q12  Chairman: That would be helpful. How much will this cost?

Mr Smith: Would it be helpful if you saw a summary of the contract, rather than the contract?

Q13  Chairman: No. We have an offer from Mr Gaskell which I appreciate. I am not stupid. You know us well enough. We are not doing this casually or just to make trouble. We are simple seekers after the truth. If there are bits in the contract that are genuinely sensitive, we are adult enough to understand that. How much will this cost?

Mr Smith: In relation to EDS's costs, the contract provides for a level of service and a level of system development to be provided to us at a price that we have agreed. Clearly, if there is an over-cost, to the extent that it falls to EDS's responsibility, they will bear that. To the extent that we are incurring additional costs, we shall incur them in the first place and to the extent that they are attributable to EDS we shall take that into our discussions with EDS on the commercial implications of the delays.

Q14  Chairman: Think about the public purse. When you started on this process, what did we think that it would cost?

Mr Gaskell: The overall contract value with EDS from the outset was 427 million.

Q15  Chairman: Where are we now? What do we think now?

Mr Gaskell: 456 million.

Q16  Chairman: Where is that going to stop? Is that your final bid or do you expect it to increase? Are you in control? Is the contract demand led? If things happen are you then obliged to pay?

Mr Gaskell: Can I deal with that in two parts as frankly as I can? Where, for instance, there are particular problems and delays that are down to EDS, they have no claim against the department for those items. If there are changes that the department seeks, and the last time we appeared before you we were discussing some small changes that the department had asked for, it is legitimate for the IT supplier to claim against those. There are one or two other areas, such as material costs, that are not specifically included in the contract but which they can claim against. Specifically in relation to problems that undoubtedly you will want to explore during the course of this session, where those are down to system problems and their delays, they have no claim against the department, neither is there provision in the contract for the department to pay for those, quite rightly.

Q17  Chairman: When you come back to see us next time, what do you expect to find is the total cost then? What is your best guess?

Mr Gaskell: I would not want to speculate on that for a number of reasons. The principal point is that, as any IT supplier would from time to time, they would seek to increase the value of the contract to them for a variety of reasons. I have already outlined the department's position on that. In view of the problems and difficulties that we are having with them, there are some sensitive and commercial negotiations taking place with them. I do not want to go there and reveal the department's negotiating position. I would prefer to keep that confidential for the time being.

Chairman: I understand.

Q18  Rob Marris: When we discussed these matters on 22 May 2002, I had an exchange with Mr Gaskell and with Mr Smith about this and one thing that emerged was that it was costing 20 per cent more to process each claim than before the new system came in. There turned out subsequently to be a one-year delay. Mr Smith agreed that several million pounds would be the cost of that. Subsequently you sent to us a document that was published in our minutes of evidence - so it is a public document - that mentioned as you have again this morning that extra 20 per cent cost for processing applications, which initially will be borne, or was borne for a year by the department, but there is no mention of whether EDS will pay that. Why?

Mr Gaskell: There is no provision in the contract to seek those kind of increased costs from EDS.

Q19  Rob Marris: There is no provision in the contract?

Mr Gaskell: There is no provision in the contract to seek additional processing costs from EDS.

Q20  Rob Marris: I am sure that we shall come on later to how much responsibility EDS bears for the delay. Hypothetically, in contractual terms, if the delay of one year - we still do not have the migration - is proved to be down to EDS, the 20 per cent average extra processing costs that the department incurs because of that one year delay would not be claimable under that contract from EDS?

Mr Gaskell: That is correct. If you recall the time when you were asking those questions in May of last year, about who was responsible for the delay, you will recall that the response that we gave you then was that we did not attribute blame to either EDS or to ourselves for the period of the delay prior to the implementation of the new arrangements.

Q21  Rob Marris: I was talking about the hypothetical situation, if the delay were down to EDS. What would the contract provide, or what does it not provide, for the extra processing costs? Who bears that cost? It appears to me from what you are saying that in that hypothetical situation if the delay was down to EDS, it is the taxpayer who will bear the extra cost and not EDS because someone did not put it in the contract. Is that correct?

Mr Gaskell: I shall modify slightly what I said. The overall processing costs which are the subject of your direct question are not included in that, but there was provision, at that time, which we have since revised, to seek what we call liquidated damages for the provision of a contingency arrangement in the event that the system was not delivered to time and quality.

Q22  Rob Marris: Are you saying now that the contract has been revised?

Mr Gaskell: In the light of the delays that took place, the contract was modified, but its modification was, if anything, to strengthen it from our point of view and to put a further series of what we call contractual assurance points in against some future delivery date.

Q23  Mr Waterson: Are you saying that as the contract now stands, but not as it originally stood - hopefully we shall shortly see the contract - there are circumstances in which there are liquidated damages calculated by a formula set out in writing?

Mr Gaskell: There is. I cannot remember the precise terms of the contract. There are specific provisions in the contract for liquidated damages.

Q24  Mr Waterson: Have any of those been activated yet?

Mr Gaskell: In the sense that we took them into account in reaching a settlement with EDS at the back end of last year, yes. There are also provisions in the contract for poor performance and for further delays to any software delivery. We have activated those.

Q25  Mr Waterson: You say there is a settlement. Money was to change hands, was it, under the settlement?

Mr Gaskell: In the settlement it was against a number of claims that EDS made against us in relation to the delays and on the basis of that settlement, the summation of which our Secretary of State made clear in his statement this year in launching the new arrangements, the settlement consists of those things that it was legitimate for EDS to claim against the department and for us, under the provisions of the contract, to pay.

Q26  Mr Waterson: Can we see a copy of the settlement as well?

Mr Gaskell: I think that is commercially sensitive.

Q27  Mr Waterson: Even with bits blacked out?

Mr Gaskell: Can I take that away?

Chairman: I am sure that is a perfectly reasonable reaction.

Q28  Miss Begg: I wanted to try to quantify what you say about computer problems and what actually the problems are. It appears from reading the Department's memorandum and PCS's memorandum that they do not match at all. The chairman has already mentioned the evidence given to the Treasury Select Committee last week. They talked about that tax credit computer system being too slow in handling claims, that it could not cope with staff switching screens to check information and that it crashed on average about four hours every day. Are those the problems with the CSA computers?

Mr Smith: No, not directly. Mr Gaskell will take you through the detail. Over the three or four months there have been three main phases of issues that have hit our staff. The first phase involved a slowing of the cases coming across the interface from Job Centre Plus into caseworker work queues. More cases were failing that interface than we expected. EDS solved that and cases are now flowing broadly as we expect them to flow. There were some initial difficulties with response times, which largely EDS got on top of. The second of the main issues involved essential stability of the cases being presented to caseworkers. On too many occasions the cases were disappearing from line of sight of the caseworker at stages when they were handling the case. Again, EDS have slowly got on top of that and now we present a much more stable system to people. The third main phase actually has manifested itself most in the past two weeks. That concerned the response times of the system and the speed at which individual caseworkers can refresh screens to handle cases as they are progressed. My estimate in the past two weeks is that we have probably reduced the productivity of our caseworkers by something between 25 and 30 per cent as a result of those issues which is certainly not trivial. It is something on which we are working carefully with EDS. EDS in response to that put a series of fixes in this past weekend. It has dealt with a significant part of that problem, but it is clear that there is further work to be done over the next few weeks to get on top of that fully. That is the broad progression of issues that have been taxing people as we have gone through the three or four months.

Q29  Miss Begg: The claim was that moving between screens took hours rather than minutes. Are you saying that that still has not been fully solved, but that you are working on it?

Mr Smith: It still has not been fully solved, but I dispute the point about hours rather than minutes. It may be possible for a screen to freeze completely - I have had examples on my own PC of the screen freezing completely, which is not usual. By and large the issue of moving from one screen to another has been minutes rather than seconds. That is not trivialise it. I do not want to do that, because if we are trying to contact someone by telephone, and you have a client on the end of the phone from whom you are extracting information, the inability to move from one screen to another is a great issue and makes it difficult for our staff, particularly when we are trying to move them into a telephone culture. None the less, it is not a problem of hours.

Q30  Miss Begg: Have you quantified how much staff and client time has been lost as a result of the system being down over the months that you have been operating it?

Mr Smith: I have not fully quantified it over the entire three or four months. I have quantified it over the past two weeks. It is something between 25 and 30 per cent of the productivity that they would otherwise be able to achieve.

Q31  Mrs Humble: On facts and figures, how many new child support cases has the Agency received since 1 March and what percentage of those has been cleared?

Mr Smith: I have some figures available to the Committee, if you want them. I can pass them round.

Chairman: That is helpful. If there are up to date figures that will be extremely useful.

Q32  Mrs Humble: I asked that so that we can have an idea about whether or not you are clearing those cases. Are you accumulating a stockpile, as happened when the CSA was first introduced? Mr Smith, in answer to a question from the Chairman you said that the Agency is in control of the workload, but you have just acknowledged in answer to Anne Begg that in fact the introduction of the new computer system has limited the ability of your staff to get through that workload properly. What actually is happening?

Mr Smith: When I spoke in my introduction about a flight path---

Q33  Mrs Humble: I am fascinated by this flight path. We have road maps and now we have flight paths. I am not sure how one gets on top of a flight path, which was another of your comments. I want to come down to earth.

Mr Smith: Call it a line on a piece of paper. The line on my piece of paper says that we were going to start slowly with this scheme, come what may, because any large change should start slowly. We will begin to get on top of the workload by the end of the year. We are moving from a world where we are turning cases round in 20 plus weeks to a world in which we want to turn cases round in about six weeks. Inevitably, the first part of the year was spent in people learning the job and the new IT system was bedding in so we were going to be closer to the 20-week end of the spectrum than to the six-week end of the spectrum. There were plans, over the year, as people become progressively more productive, to recover that lost time at the start of the year and enhance our productivity. The answer is yes, we do. That is why what I describe as a line on a graph will increase towards the end of the year. In the first part of the year the number of clearances has undershot and the number of cases that we are taking into the Agency. As we go towards the end of the year, we plan that the number of clearances will exceed the number of cases coming into the Agency so that we end up with as figure of work in hand that is consistent with an average turn round time of six weeks. That is the planned figure. In our planning we had two positions: one is what is the minimum position that we can be at still to achieve our position by the end of the year and what is the worst case impact of IT issues, what is the worst case impact of moving people from the old world into the new world, and a more optimistic projection of how quickly we may make that change and how quickly the IT system will bed in. At the moment we are slightly above that worst case position, but we are above it and not below it. If we stay above it, by the end of the year we will achieve the six-week turn round that we are looking for.

Q34  Mrs Humble: I shall need a translator by the end of all this. We shall have to monitor this situation. Before we all lose track of what we are doing, I shall move on. Information technology and this new system were supposed to make it easy for your staff to collect information on clients. Is it making it easy to collect that information? Is the system working?

Mr Smith: When the system is working as intended, it is easier to collect certain cases from clients. The common reaction from the staff, when I visit offices as I do every week, is, "Wow, when it is working it works really well; it is what we wanted; it is what we have been waiting for and it is what we need to deliver the standard of service that we want to give for the future". There have been really positive reactions to the work involved. When you have been on the end of a telephone for several minutes and the screen has not responded as you would wish, you are deeply frustrated with the new system. I recognise that frustration and that irritation. The system itself is entirely fit for the purpose. It is what the staff want. It does support that job that they do when it works effectively.

Q35  Mrs Humble: Is it working effectively in your interface with the Job Centre Plus? The Jobcentre Plus operates the legacy system and clearly the CSA needs to interact with Jobcentre Plus about the new child maintenance premium payment, but also in taking cases that are referred to it from Jobcentre Plus. How is that interface between the two computer systems working?

Mr Smith: It is working effectively. Each night we are taking an average of 900 cases over that interface from Jobcentre Plus.

Q36  Mrs Humble: I understand you are receiving fewer cases than you anticipated from Jobcentre Plus. Is that something to do with the computer system or simply that Jobcentre Plus is not picking up the cases and there just are not as many as predicted?

Mr Smith: The predictions were based on historic rates of applications received from Jobcentre Plus. One of the benefits of the new IT system is that it is far more rigorous than the old system in ensuring that the only cases that come to us are cases that need a Child Support Agency intervention. Hitherto the number of cases that we were counting included, for example, those cases where there were recent grounds for the parent with care not giving information in relation to the non-resident parent. There is no reason to pull that across the interface, for example, and in the past that amounted to something like one in five of the cases that were being referred to us from Jobcentre Plus. We also looked at the figures in the first couple of months to satisfy ourselves that the numbers that were coming across from Jobcentre Plus were accurate and reflected all the cases that Jobcentre Plus were gathering information on. We also checked that Jobcentre Plus are gathering information in all appropriate cases. The answer to both those issues is positive. We are satisfied that we are getting all appropriate cases coming over the interface from Jobcentre Plus, even though the comparison, year on year, which is not an apples with apples comparison, suggests that there is a declining number.

Q37  Mrs Humble: Do you have figures on how many recipients have benefited from the child maintenance premium?

Mr Smith: At this stage, relatively few, in fact fewer than 100 at this point. That is partly because of the profile of the cases that we are picking up and putting through the system and partly because of the time lags on benefit cases between making a calculation of a case and actually recovering a payment and translating that into a payment of child maintenance premium.

Q38  Mrs Humble: I am very surprised at how low that figure is. From my constituency casework, and knowing how many parents with care are on benefit, I would have anticipated a much higher figure. Will you be monitoring that?

Mr Smith: We are monitoring that very carefully. The crucial aspect that we are monitoring is the time lag for benefit cases between putting the calculation in place and ensuring that we get the first payment. There we have the interaction with Jobcentre Plus where we need to take a series of actions by in some cases by withdrawing an order book and changing the amount of income support payments before we can trigger the child maintenance premium payment. Of course, the fact that there is a delay does not mean that the person is deprived of child maintenance premium. That would be paid as and when we make the recovery.

Q39  Chairman: Can I be clear about what this sheet that you have helpfully given us says? Am I right in thinking that under the old system there was a caseload intake of something like 30,000 new cases every month?

Mr Smith: It was coming up to that, yes.

Q40  Chairman: Under the old complicated system?

Mr Smith: Yes.

Q41  Chairman: Eleven months into the new system, with some tweaks to be done to the computer system, you have now done a maintenance calculation on 20 per cent of the caseload in the past month. Is that right. This last column on the right hand side of the sheet says that you took in 6,349 cases and you made maintenance calculations of 1,200. That is 20 per cent.

Mr Smith: That is correct.

Q42  Chairman: Is that for the six-week period or the 26-week period?

Mr Smith: The average period for those cases assessed last week would have been about eight or nine weeks. We are only 14 weeks into the new arrangements. That time lag would inevitably grow as we move into the next few months before it starts to decline.

Q43  Chairman: You will get closures of 14 per cent on that 950 figure?

Mr Smith: Of the intake, yes.

Q44  Chairman: How on earth can you avoid stockpile problems of massive proportions against that result?

Mr Smith: I do not pretend that we do not an increasing workload in hand. The plan that we have is a 12-month plan which assumes that in the first months of the year the intake will out strip the number of clearances that we will make and in the second part of the year, the clearances will out-strip intake. Across the year as a whole we would move progressively from a longer period of clearance through to clearance within the six-week period that we have targeted.

Q45  Chairman: There is another important question that I want to ask you. Is it true that there are clerical off-takes of management information now with the new system? One of the main benefits to be derived was the automatic processing of clerical information. Is there a systematic clerical off-take of information so that the management side of the computer program currently is useless.

Mr Smith: It is not useless. It is not working as effectively as we want it to.

Q46  Chairman: There are clerical off-takes?

Mr Smith: At the moment there are clerical off-takes. I can obtain accurate information at national level and I can obtain accurate information from the computer system. What I cannot yet do is obtain accurate information down to individual teams or local office level. That is why locally we are trying to collect management information clerically so that local managers can stay in control of the workload in their offices.

Q47  Rob Marris: Did you pull these figures off nationally?

Mr Smith: Yes. They were extracted directly from the system.

Q48  Rob Marris: How would you summarise EDS's performance to date?

Mr Smith: I summarised EDS's performance in my opening statement when I said that it has not lived up to our expectations, which is frustrating.

Q49  Rob Marris: That is a very guarded reply, is it not - not living up to expectations? On a scale of one to 10, where one is poor performance and 10 is spot on, your phrase could cover anything from nine to one. Which is it?

Mr Smith: I would say the lower end of the range.

Q50  Rob Marris: We are talking safely below five, are we?

Mr Smith: We are talking within the lower end of the scale.

Q51  Rob Marris: What service agreements do you have with EDS in terms of monitoring their performance? How do you monitor those service agreements?

Mr Gaskell: There is a variety of means that we use across a range of services, but the two principal ones concern system availability and system performance in terms of response times. For many staff they may think that the system is not available if they have problems in moving from one screen to the next. We measure that by way of system performance and response times. There are contracted service levels for availability and also for system response times. We measure them daily and weekly against that. They are prepared on a monthly basis against that performance.

Q52  Rob Marris: We can all agree that things are not working very well. I want to refer to some questions that the Chairman was asking earlier. Is EDS freeing up additional resources when you need them? How available are they?

Mr Gaskell: The answer to that is yes. Sometimes we have to press them hard to do so. Where there are specific instances or problems that we see appearing on the system, we are constantly pressing them either to engage with the manufacturers and suppliers of particular products that form part of the system and they have shown an increasing willingness to do just that, which is quite right, to help resolve some of those problems and issues. They are also providing additional managers on their side to reduce the management spans, to increase control and to aid delivery. There are examples of them bringing in additional resources to stem and to rectify the problems.

Q53  Rob Marris: Are they doing so promptly?

Mr Gaskell: There is increasing evidence that they are doing it promptly.

Mr Smith: It is fair to say that the new management at senior levels in EDS is bringing a much more customer-focussed approach than was evident earlier.

Mr Gaskell: I would like to come back on a point that was raised earlier. There is a very high level of availability of the systems to the staff. It is not at the contracted service levels. There are financial remedies for that that we are using. In terms of response times, the overall average response time in the system is pretty high. However, that masks considerable problems in some offices at certain points in the day that we need EDS to resolve. To be fair to them, they are working systematically towards doing that. As Doug has already mentioned, just this past weekend they put in some further fixes to improve some of those performance areas. Again, we are monitoring the situation closely to see what improvements they are making.

Q54  Rob Marris: I understand that EDS has said publicly that some of the problems are down to specification changes by the department. That is quite common in computer contracts. Mr Gaskell, earlier you referred to small changes asked for by the department. If those changes were indeed small, to use your adjective, they appear to have had a very big knock-on effect if EDS's characterisation is correct.

Mr Gaskell: If their characterisation is correct. Our position is that the degree of change that we sought from EDS over the past couple of years has been modest in comparison with any major IT program. I do not believe that that is the answer. I think that the answer lies in something that we said to you when we last appeared in front of you. As the system has developed, both parties have come to appreciate that the job was going to be larger and more complex than either party envisaged at the outset, despite an exhaustive period of working through the department's requirements with EDS, taking account of past recommendations of committees like this and others. We went through that exhaustive period, but when they started to build the system we found that it was larger and more complex.

Q55  Rob Marris: The price seems to have ended up about six or seven per cent higher.

Mr Gaskell: Six or seven per cent , yes. That is quite modest for a contract of this size.

Q56  Rob Marris: Is that because you got a good deal? If you talk about big changes that you found as you got into it and that has resulted in only a six per cent cost increase, either the changes were big or you got a hell of a deal. Which was it?

Mr Gaskell: The best way to answer that is to say that we believe that the deal represented value for money for the department.

Q57  Rob Marris: Very roughly, the department is paying out 5,000 an hour for the next 10 years to EDS. EDS is delivering a system - or is part of delivering a system along with the department - where the continuing high operating costs of the department are mounting up to the 20 per cent that we have talked about. Mr Smith said to me on 22 May last year, "Our expectation is that the cost of processing new applications under the new arrangement should be about 20 per cent less than processing applications under the existing arrangements in the next year". I have two comments to make on that. As I understood Mr Smith this morning - I may have misunderstood him - that has gone the other way. We are talking about a 25 to 30 per cent productivity hit at the moment. So that gap has gone the wrong way, if I understand that correctly. I also understood him to say - please correct me if I have misunderstood this - that there was nothing in the contract to provide for those delays.

Mr Gaskell: My earlier response to one of your colleagues was in connection with the settlement that we reached with EDS last year. Within the contract - I have alluded to this already but I am happy to amplify it - there is provision that in the event that there are further delays in software delivery or if there is poor performance against service levels that I spoke about a few moments ago, then there is financial redress that the department can seek by withholding and reducing the amounts of payment that we make to EDS on a monthly basis.

Q58  Rob Marris: I got slightly lost there. I apologise to the Committee. I thought that earlier you said that the 20 per cent cost was not recoverable. You now seem to be saying that it is, as an offset.

Mr Gaskell: I was referring to two separate instances. I am sorry if I have confused you. Let me try to amplify. What I was talking about previously was the delays in the implementation of the reformed scheme. I was answering specifically in terms of redress against the delays to the reformed scheme. Once the system is deemed to have gone live, and we are operating the new arrangements, as we are now, we are beginning to pay EDS for the use of the service that they are providing. Before December we were not doing that. In that situation, if the system does not perform to the required service standards that we have agreed within the contract, we are entitled to take financial remedies that are commensurate with the scale of the under-performance.

Q59  Rob Marris: That would include late migration, for example?

Mr Gaskell: Where that is dependent on software delivery, which it is, and that is late, EDS would have been entitled to additional monies on the delivery of that software and if that software is late, they do not receive the benefit of that step up or increase in payment.

Q60  Rob Marris: If they were responsible, would they pay the extra costs?

Mr Gaskell: EDS have been paying the extra costs.

Q61  Rob Marris: The extra costs that your department is incurring in processing applications.

Mr Gaskell: Through the way in which the contract is structured, we have sought to look at the degree of pain or difficulty that the organisation has to face in the light of under-performance of the system and in the late delivery of software and we try to equate that to the amount of money we withhold from EDS. That is the best way in which I can describe it.

Q62  Rob Marris: When you say "withhold", if they are culpable - I am not saying that they are - they may never receive that money.

Mr Gaskell: That is correct. There are situations in which they may get some of it back because we have tried to incentivise them to try to improve the level of service and sustain them. In that case they can re-earn some of that money, as you will no doubt see from the contract.

Q63  Mr Waterson: Are you saying that there is a formula agreed - possibly the settlement agreement that we are not going to see - to quantify how much you can deduct?

Mr Gaskell: That was in the original contract.

Q64  Mr Waterson: Or, if you cannot agree a figure, is there some method of arbitration?

Mr Gaskell: No, there is a sliding scale. If you look at response times, if they do not meet the contracted service levels, there is a sliding scale of redress that we can seek by reducing the levels of payment that we make to them. A formula for that is in the contract.

Q65  Mr Goodman: the Secretary of State told the House that the department would not pay EDS for the system until the system met the standard required. Presumably, it has not yet met the standard required, has it?

Mr Gaskell: At the point that we had reached in judging whether to launch the new arrangements, and indeed to say that the system has now gone live, we were at a point where having tested it exhaustively, which we had jointly and separately, we were satisfied that the system should be fit for purpose at that point. So at that point, which was in late January, we began to pay for the service that EDS were providing.

Q66  Mr Goodman: In other words, despite all the problems that have been circulated around the room this morning, you are now saying that you took the view that the standard had been reached and, therefore, EDS has already been paid?

Mr Gaskell: We started to pay EDS at the back end of January. That was on the basis of what we knew then. Here we are talking about problems that have unfolded that we had not detected in testing and have gone beyond simple, early teething troubles.

Q67  Mr Goodman: Will you continue to pay them knowing what you know now?

Mr Gaskell: We have not yet reached the point of formal acceptance of the system, but we are continuing to pay EDS for the service that they are providing to us, reducing those payments in the way that I have described, commensurate with the levels of service that we are or are not receiving.

Q68  Mr Goodman: If you had known then what you know now, you would not have paid them, would you? The taxpayer is simply paying.

Mr Gaskell: The benefit of hindsight is wonderful. At that point in time what we had seen was the completion of testing, we had let the system go live in the autumn of last year, working in a limited fashion, in our offices. We were satisfied with the stability of performance of the system as we saw it at that point. We sought assurances from IT experts that said is this system capable of supporting the new arrangements and capable of scaling up to deliver the required service. The answers to those questions were positive. On that basis we felt assured that we could deem the system to have gone live, even though we had been using it already, and start the new arrangements.

Q69  Mr Goodman: Can you tell the Committee how much taxpayers have shelled out between then and now on the basis of the judgment that you took then?

Mr Gaskell: That would be commercially sensitive. I am happy to share that with you, but not in this open forum.

Q70  Mr Goodman: All right. Finally, given that EDS is such a huge contractor with the Government, as it accounts for 25 per cent of the UK's civilian computer contracts, if you reached a conclusion at the end of all this that you are dissatisfied with EDS, which would be a perfectly reasonable decision to make on the basis of what we have heard this morning, where would you go then? This situation could be like the man who owes the bank a huge sum of money but he actually owns the bank. If you are in this deep with EDS, what alternative bidders do you have? Could you get out of the clutches of EDS? Rob Marris, the Chairman and myself and you could be here meeting after meeting, year after year, asking more and more questions about more and more contracts with EDS ad infinitum.

Mr Gaskell: That is predicated on the assumption that the system does not work or will not work. We have seen some teething troubles that we could not have predicted, but we are working with EDS systematically to deal with those problems and issues as they arise. The evidence so far is that there has been a considerable number of issues that EDS have had to face between March, when we launched the new arrangements and now and they have dealt with them successfully. There are a number of outstanding matters that I do not want to play down, because Doug has rightly said that they are causing problems for our staff in operating the new arrangements, but we are working with them to resolve those problems. I am working on the assumption that the system continues to be capable of supporting the business and it is just a matter of time to work through energetically with EDS to resolve those outstanding matters.

Q71  Andrew Selous: Looking at the risks that fall on both Government and taxpayers and EDS, as far as the contract is concerned, can you tell the Committee what technical expertise the department has to negotiate a contract of this kind? Do you have, for example, people who have been on the other side of the fence? Do you have people who have worked with big private-sector providers in this area? Do you have anyone who is a poacher turned gamekeeper, someone who knows the tricks of the trade? Perhaps you could give us some detail of the IT experience of the senior negotiating team on the departmental side.

Mr Gaskell: I would be happy to let you have a note on that. Let me say quite directly that the department has brought in, over a period of time, external expertise, both technical IT expertise to help to understand and to work with us to establish whether our supplier is doing the right things and going about them in the right way to put matters right. That is on the technical expertise side. Your specific question relates to the contract. The department has a body of expertise that it refreshes from time to time and which has external expertise within it.

Mr Smith: The contract was negotiated in 1999 or earlier. The contract negotiation was done partly by people in house and partly guided by external expertise and certainly external legal advice. However, a year or two back as a department we recognised that we needed a much stronger contracts management function within the department and a much stronger technical management function within the department, which is why we sought to advertise and to recruit externally a chief information officer. We appointed last year Rob Westcott and he in turn advertised externally and recruited a number of people from the private sector to staff his technology office with a view to putting in place exactly that balance of external and internal expertise that we were looking for. One of the lessons that we have picked up as we have gone through the two, three or four years' relationship with EDS is the need to strengthen our position as a more intelligent customer for the services provided by the external supplier.

Q72  Andrew Selous: I will not ask you to go into specific details, but does your external expertise include people in senior management positions of large companies like EDS who have seen such contracts being negotiated and who know all the pitfalls of trying to implement them from the other side of the fence?

Mr Smith: I do not want to illuminate Rob Westcott's CV but his previous job was as chief information officer with General Motors who were EDS's largest account in the United States. So there is a significant private sector expertise in contract management in EDS and they are aware of their strengths and weaknesses.

Q73  Andrew Selous: Well, I personally still have a remaining concern there that you perhaps do not have people who have actually worked for large IT suppliers for a big customer like yourselves, but can you give me any last bit of comfort on that?

Mr Smith: I think I can give you comfort without going through a complete list of appointments that Rob has made.

Q74  Andrew Selous: I am just asking you to tell the Committee ----

Mr Smith: It does have strength in depth, in my opinion, both from an IT customer perspective and an IT supplier perspective. For example, my memory is that our departmental chief architect for IT systems was drawn from an IT supplier, so we do have that mix inhouse now.

Q75  Andrew Selous: I want to go on to the timing of the decision to implement the new system. EDS has said that this was "completely a ministerial decision". Now, that sounds a bit to me as if EDS are trying to say that the current problems are not their fault because they were possibly rushed into implementing something for which they were not quite ready. What do you say to that?

Mr Smith: I would say that we and EDS were satisfied when we took the decision to provide advice to our ministers at the turn of the year that the system was ready to be implemented on 3 March.

Q76  Andrew Selous: Is it not odd that EDS say it was completely a ministerial decision if they were happy with the start date?

Mr Gaskell: Yes, I would find that odd because they ----

Q77  Andrew Selous: Well, they have. It is a direct quotation.

Mr Gaskell: I would then just add this to what Doug has just said: that part of the departmental approvals process in making recommendations to ministers, not just from Doug and I, is that it goes through our own internal gateway process of which EDS, at senior executive level, are a part and that body unanimously took the view to support the advice that we were going to give to ministers to proceed with the new arrangements from 3 March, so EDS, at a very senior executive level, were party to that decision and agreed.

Andrew Selous: Well, I still think the phrasing is odd, but perhaps it is a question we should more fairly put to the Minister.

Chairman: Just to avoid any doubt, you have kindly offered to do us a little note about some of the background qualifications of some of the staff that Mr Selous was asking about earlier and that would be helpful.

Q78  Mr Waterson: I want to talk about a slightly different flight path, if I can use that expression, which is the flight path for the nearly one million sort of old cases, if I can call them that, or existing cases which need to end up on this new system and to come under the new formula. Where are we with the migration of those existing cases to the new system? When is that going to happen? What is your flight path for that to happen?

Mr Smith: It is more a landing than a flight path, I think.

Q79  Mr Waterson: Well, if you were an airline, I am not sure I would choose to fly with you!

Mr Smith: The software required for bulk migration of cases from the old system to the new system was intended to be delivered to us by EDS during the summer of this year. It is now clear that that will not be delivered to us until the end of this year. The software that we needed to do bulk conversions of existing assessments into the new-style calculations was intended to be available to us around the autumn of this year. It is now clear that that will not be available to us until the spring of next year.

Q80  Mr Waterson: And are those delays linked to the problems you have already had with the new cases?

Mr Smith: I think that the delays are linked to the need for EDS to focus on dealing with the issues on the system delivered on 3 March rather than get ahead with the software development for the next phases of implementation.

Q81  Mr Waterson: So this is now beginning to look quite a long way ahead. When are you planning on your line on your piece of paper that all existing cases will be using the new formula?

Mr Smith: Well, ministers have always said that they will not make a decision on when to migrate or to move existing cases on to the new formula until they are satisfied that the new arrangements are fully bedded in, and that remains the position. Ministers will take a decision at some stage in the future based on the information they have on how the new arrangements are working and the confidence in EDS's ability to deliver the remaining software elements to the timescale they are now working to.

Q82  Mr Waterson: So do you think it would be fair to say that if ministers have got any sense, they will be extremely cautious about making that decision?

Mr Smith: I think that ministers will want to take stock at an appropriate time on how the new arrangements are working and how EDS, under its new management, are delivering before they make any decision.

Q83  Mr Waterson: Is there any thought at this stage about how the cases will be prioritised? Will certain categories of the old cases, if I can call them that, be dealt with before other categories, or is it too early to say?

Mr Smith: The intention is and always has been that all cases that require their existing assessments to be calculated will move on to the new arrangements from a common effective date rather than attempt to stagger that implementation.

Q84  Mr Waterson: So it will all happen at once?

Mr Smith: The work will not happen at once. We will spend a period of time dealing with the migration of cases from the existing computer system to the new computer system and ensuring that those are properly bedded down on the new computer system. We will then spend a period of time going through those cases and making the calculations of the new maintenance payments on the basis of the information we have. We know at that stage in the process that there will be significant contact from clients as those new maintenance calculations arrive and, therefore, we do need to allow a period of elapsed time to permit us (a) to do the work and (b) to deal with the responses. Having done that, the date at which those new maintenance calculations become effective will be one common date applying to the entirety of the client base.

Q85  Mr Waterson: How are you dealing with the clients in all of this? Obviously a fair number of non-resident parents will actually be better off once they get on to this new scheme, or that is almost certainly the case. Do you get them ringing up and asking, "When are we going to get on the new system?" and how do you kind of placate them? What is the sort of script that you are using with these people?

Mr Smith: There are a number of people who have been in contact with us on that point and the script is almost exactly as I have articulated it today. Ministers have made it clear that existing clients will only move on to the new arrangements when they are satisfied that the arrangements for new clients are working well, and that is what we are telling people.

Q86  Mr Waterson: Do you find that this is going down well?

Mr Smith: That rather depends on whether the person making the enquiry is likely to be advantaged or disadvantaged by the shift to the new arrangements.

Q87  Mr Waterson: Can I just ask just a couple of quick questions about the child support premium. How much longer will parents with existing maintenance arrangements have to wait before they receive the child support premium?

Mr Smith: Broadly until we reach the common date on which we are applying the new maintenance confirmations.

Q88  Mr Waterson: But as a temporary measure, a sort of interim measure, can the 10 premium not be paid like any other premium on income support, for example, the carer's premium?

Mr Neale: The child maintenance premium is linked to the new arrangements, intimately linked to the new arrangements in the sense that it is only payable under the law when the non-resident parent is making payments of child support, so we can only introduce the child maintenance premium when cases are on the new system and the non-resident parent is making payments and maintenance.

Q89  Mr Waterson: Is that absolutely clear? There is no way you can apply it without that happening?

Mr Neale: No, that is the law. We have to have cases on the new system and the non-resident parent making payments and maintenance in order to trigger the child maintenance premium payments.

Q90  Mr Waterson: So is there any suggestion of compensation for the parents who are having to wait?

Mr Neale: We do not think that this meets the test of maladministration that would trigger payments of compensation. Ministers have always been clear, as Doug has said, that we will only move people across on to the new system when the IT has bedded down. We are not, as it were, letting down people's legitimate expectations because we have not given them a firm date for this conversion to take place. It is also worth bearing in mind that parents with care who are still on the old system can and do benefit from the child maintenance bonus at the moment, that is to say, where there is a stream of maintenance being paid by a non-resident parent, they qualify at a rate of up to 5 a week for a bonus if they then move into work up to a total of 1,000. Indeed 7 million worth of those bonuses have been paid over up to January since the decision was taken to delay the introduction of the new scheme.

Q91  Chairman: Have you taken legal advice on the Government's exposure to liability for compensation?

Mr Neale: We are quite clear that with the law as it is, there is no liability to compensation. This does not meet the test of maladministration that would trigger ----

Q92  Chairman: Who is "we"?

Mr Neale: The Department.

Q93  Chairman: Have you taken legal advice on the exposure to liability for compensation?

Mr Neale: What I am telling you reflects the advice of our lawyers, yes.

Q94  Mrs Humble: I have had several representations from non-resident parents on this issue and especially from those who are currently paying very, very high levels of child maintenance who under the new system would be paying a good deal less, and because it is a good deal less, even when you do migrate them on to the new system, it will be several years, if ever, that they would be paying at the new rate. Of course we have to take into account the interests of the parent with care who cannot be expected to cope overnight with a very substantial reduction in the amount of money that she is likely to be receiving. These people genuinely do feel that they have been disadvantaged by the changeover arrangements and feel passionately that they ought to be compensated, as the Chairman has said, so have you taken into account those particular needs, that some of these parents who have been paying for some years, their children are going to be 16 in another four or five years' time and they are unlikely to be paying any more and they are now paying very, very large sums and will not be under the new system?

Mr Neale: It is easy to understand the frustration of non-resident parents or the parents with care who would find themselves better off under the new system, but I can only repeat what I have said, that the test of maladministration that would trigger compensation is not met in this case.

Q95  Ms Buck: The original 2003 business plan projected an assumption of efficiency savings and the line of questioning I would like to pursue is, firstly, where has that got to because looking at the current business plan, there does not appear to be a target for efficiency savings? Is there currently a target for efficiency savings in the current financial year?

Mr Smith: Yes, and it is probably best articulated in the financial baseline that the Agency receives which assumes that there will be a financial saving within the current year because of the new arrangements. That in turn equates to an expected headcount reduction within the current year of something like 1,600 people on a baseline of around 12,000 at the moment. Now, a word of explanation around that: of that 1,600 expected reduction ----

Q96  Ms Buck: Can I just stop you there and can we come on to staffing next because I want to pursue that, but can we now just stick with the issue of the efficiency savings. The efficiency savings are what in terms of both cash and percentage?

Mr Smith: I do not have that figure immediately to hand, but I can let you have a note.

Q97  Ms Buck: Is part of the efficiency saving target linked to the assumed 20 per cent reduction in costs out of the shift to the new system?

Mr Smith: Certainly, yes.

Q98  Ms Buck: Which you are not going to meet?

Mr Smith: Which we may make this year. At this stage in the game, it is not clear whether that will be made or not made.

Q99  Ms Buck: Well, first of all, has the 11-month delay so far had any impact on the recalculation of that efficiency saving?

Mr Smith: Most of the 11-month delay so far fell in the last financial year where remarkably the Agency absorbed the cost of that delay within its existing budget, and not only absorbed the cost of the delay, but actually increased its, for example, compliance rates and accuracy rates, which is a phenomenal achievement for the staff in the Agency. There will be a knock-on impact from the delay in the current financial year, I accept, but we have not yet quantified what the cost of that is likely to be because a number of factors may influence it, as they did last year.

Q100  Ms Buck: I find this a bit hard because you are saying, on the one hand, that you have a business plan projection for savings which is going to turn into real staff losing real jobs, but, on the other hand, you cannot tell me where you are going to meet the efficiency savings because there are lots of unquantifiable factors. Would that be right?

Mr Smith: I am hoping to meet our efficiency savings, but to the extent to which it is a difficulty in meeting the efficiency savings because, for example, software has been delivered to us late to achieve that, then it is always open to me to go back to the Department and make a formal change request against my financial and staffing baseline.

Q101  Ms Buck: Would it not be a reasonable assumption to make that if you are unable to make efficiency savings, this will simply mean that that number of staff reduction will probably be increased? It is going to be the staff reduction which will carry the weight of any fluctuations in the efficiency savings you are going to project?

Mr Smith: We will seek to retain the staff we need to operate the system effectively at the end of the year. The main impact of delay is not necessarily on the group of staff who are dealing with new clients at this moment, although they are bearing the most visible brunt of the impact, but it is on the far larger number of staff who are dealing with existing cases and who are both working on the existing cases and preparing the existing cases ready for migration. There is a group of staff there that we may need to hold on to for longer than we would otherwise wish to do to ensure that we are in a position, if the conversion of existing cases is delayed, to maintain the level of service that they were employed to do. Therefore, the issue is not entirely focused on the number of staff on the new claimant teams.

Q102  Ms Buck: Going back to some of the figures you were talking about earlier, you are saying at the moment that there is a 25 to 30 per cent loss of productivity because of the impact on the system.

Mr Smith: Yes.

Q103  Ms Buck: I do not understand how you can be talking about a 25 to 30 per cent loss of productivity and a major staff reduction programme simultaneously.

Mr Smith: I come back to the second point. There is not a major staff reduction programme targeted on the staff who are dealing with new clients at the moment. Productivity is down and we are attempting to frank some of that partly by seeing if we can bring any other people in to assist with their work and partly by extensive use of overtime working, which is costly, but part of that, in turn, is franked by the reduction in the money we are paying to EDS for the service that we are receiving. The far greater impact of headcount reduction planned for this year was on the ability to reduce the number of people directly involved in Mr Gaskell's area in actually running the programme and in the teams in our offices that we are retaining to deal with data claims work and conversion work which may now fall into the following year rather than into this year.

Q104  Ms Buck: But assuming for a minute that that is perfectly okay in terms of the capacity to reduce staff in the existing claims area, surely this loss of productivity, and I have to say that in looking at these figures, I have not got the smallest jot of confidence that you are going to be able to turn this around on the basis of the existing plan which you have outlined so far today, but surely there is a need for more staff in that area, or likely to be, if you are not just going to build up this catastrophic backlog because of the productivity loss? Surely in terms of overall budget and in business planning terms, if you lose staff on the one hand and save money, there is potentially a very strong argument either for overtime or for additional staff and you are going to need to extend it in the other area?

Mr Smith: Yes, and the point I think I am saying is that if there is a strong argument, and we are looking at those arguments, we will go back to the Department for Work and Pensions and make those arguments and seek a change to our current financial or staffing baselines.

Q105  Ms Buck: Well, I think on the basis of everything else we have been discussing, one of the things which certainly worries me is that this early warning, going back to the Department and saying, "Things aren't working out quite as we would have wished", does not appear to be as effective as I would expect it to be. You are really saying to me on the basis of all of this information that you are quite happy with the staff reduction, quite happy with your business plan, quite happy with your efficiency targets and that at some time later on in this financial year, you will have time to go back to the Department and get it all put right if it is going wrong?

Mr Smith: No. What I am saying is that if there is slippage in implementing the final phases of the IT system, and I have already indicated that there is slippage, then Mr Gaskell's project team will need to stay in place for longer. The people in our local offices that need to be in place to deal with the impact of data claims for migration and of case conversion will need to be in place for longer and we will need to seek funding for that. The extent to which I need to seek funding for that by going back to the Department or the extent to which I can manage that within my existing budget is for me to work through and to discuss with the centre of the Department, but, nonetheless, we will put the staff in place which will permit us effectively to deal with the new clients that we are taking applications from now and manage existing clients through migration from the old system to the new system and convert their applications. Everybody is well aware of that and that is a commitment that I make and the Department makes.

Q106  Ms Buck: We have talked about this year, but can you just clarify for me, what would you see the total staff complement being in three years' time if you are at 12,000 now?

Mr Smith: If all goes well, the number of staff that we employ on the UK mainland will be around 8,000.

Q107  Ms Buck: So it is about a third reduction. Given that you also talked earlier about cultural issues with staff, this is good for staff morale, is it?

Mr Smith: Where we are at the moment is not good for staff morale, but what is good for staff morale is that when the system is working effectively and we can see the new arrangements working well and we can see money flowing from the non-resident parent to the parent with care more effectively and faster than in the past, that is exceptionally good for staff morale.

Q108  Ms Buck: And are any of those things actually happening?

Mr Smith: In offices, yes. I do meet people, as I say, on a week-by-week basis who do have that experience. This is not a universal experience. A universal experience I will not pretend is in place at the moment, but there is sufficient evidence there to believe that actually when this is up and running properly, it fully meets the needs of staff and it fully meets the needs of our clients.

Q109  Ms Buck: I would not particularly disagree with that, but as there is no evidence at all that it is working properly at the moment in any kind of comprehensive sense, surely the sensible thing to do is to put a major staff reduction programme on hold until you have got it working properly, so why do you not do that?

Mr Smith: I think in a sense that is what I have said we are doing, that inevitably if there are delays in implementing the next phases of software, then we will need to keep certain teams in place for longer than we would otherwise expect.

Q110  Ms Buck: So at the moment they are working on the basis of a 1,600 reduction at the beginning of July, but that might not happen?

Mr Smith: It will almost certainly not happen, but I am not too sure what you mean by working on this reduction. This is not something that is impacting at the moment directly on the work of the new client teams. What it is doing is retaining a team in place to support the project in Mr Gaskell's area for longer than we had expected and retaining within business units certain specialist teams that are focused on data claims activity, preparation for migration and conversion, and we will keep those teams in place.

Q111  Andrew Selous: There was a little phrase in your answer, "on the UK mainland". Are you proposing to outsource any of this work to India or elsewhere?

Mr Smith: No, not at all. We have in practice outsourced some of our work to Northern Ireland.

Q112  Andrew Selous: That is part of the UK.

Mr Smith: Indeed, my use of the word "mainland" there being injudicious.

Q113  Mrs Humble: In your memorandum, you say that "the Agency has sought to limit avoidable wastage [of staff] by ensuring that new potential recruits are aware before joining of the real nature of the job". What do you tell them? Do you tell them they are going to be dealing, at the end of the phone, with distraught claimants, trying to chase people who tell them that their earning levels ----

Mr Smith: All joking aside, the answer is yes. There is, in my view, little point in bringing people in on a false prospectus. What we do offer people increasingly now is the ability to sit down with our existing caseworkers and see what life is like because one of our highest areas of wastage outside the Department as opposed to moving on inside the Department takes place in the first six months when we have expensively trained people and then they come face to face with the reality of the job. What we now want to do and what we are increasingly doing is bringing them face to face with the reality of the job and then training them and if people do not like the reality of the job, hopefully they will disappear in the first two weeks, not in the first six months.

Q114  Mrs Humble: Last year when you were answering questions about the retention and recruitment of staff, you did say that you were looking to staff to develop new specialist skills as the new system came in and there would be a different way of working. Are you looking at their pay and conditions of service as part of a deal to enable them to develop those specialist skills? To put it bluntly, do you think that some of the staff who are dealing with the very, very difficult cases are actually paid enough to do the job?

Mr Smith: In common with every other agency within the Department, we are bound by departmental pay levels and departmental grading levels. It is questionable and the PCS have raised the question formally whether, when we have fully skilled caseworkers in their new roles operating effectively, the current grading structure is appropriate or not appropriate. What we have said in response to the PCS is, "Yes, we would like to join with you in looking at that". If that involves a shift of grade and, therefore, a pay rise, that will be a positive development for that group of staff.

Q115  Mrs Humble: We have had a memorandum from the PCS, but have you done a recent survey of staff attitudes to help you understand what the staff are actually going through now?

Mr Smith: I am not too sure I need a survey to understand what the staff are going through now. I repeat the point I made earlier, that each week I spend time with the financial officers and at no point during this process have I shrunk away from that commitment and that responsibility. That is mirrored equally by my senior management team, including Mr Gaskell, and we are visible and we are present in offices and we talk with staff at the front-line and engage with their work from time to time at the front-line, so I think I and my senior management team are fairly well tuned into what staff are thinking and doing at the moment. We do, however, have a staff attitude survey which takes place annually and the next staff attitude survey, I think, is due in August/September of this year.

Q116  Mrs Humble: Can I just draw to your attention one comment in the PCS submission to us and that was talking about the impact on staff, the problems we have previously talked about. They say, "Problems are compounded by the loss of any case ownership for individual caseworkers", and they say that the IT system forces cases to move along, so it is not the same individual who is dealing with a particular case. One of the things that I know as a constituency MP is that I get my constituents coming in and they say that whenever they ring up the CSA, they are talking to a different person, they have to explain the case from the beginning and they get horribly frustrated. It would appear from the memorandum that staff also feel frustrated that they are not seeing a case through. Is that deliberate in this new system or what is happening?

Mr Smith: If indeed that is what the PCS have said, which I assume it is, it is incorrect and Mr Gaskell will explain.

Mr Gaskell: The system is designed, and the training that we provide to our staff is geared, towards a new case being allocated to a caseworker in the new client team and it stays with them for a subsequent activity until we have established first payment from the non-resident parent. It is possible for a team leader or a manager in the organisation to move that case to another caseworker, but the system is designed to keep it with one caseworker. Now, there are many reasons why a manager might want to move it and a team leader might want to move it in terms of support, of less or more able staff, but the system is designed, and is working this way, to allocate cases to caseworkers and to stick with them for subsequent work actions on them until the point of establishing compliance.

Mrs Humble: Then I think, Chairman, that we need to clarify that particular point.

Chairman: Indeed.

Q117  Mr Dismore: Can I look at some compliance and enforcement issues and perhaps bring you back down from your flight path to the planet Earth on which our constituents live and the long, winding and tortuous road which sends us to a dead end for our constituents. I presume you are familiar with the case of Ms Priedon.

Mr Smith: Ms?

Q118  Mr Dismore: Well, I am surprised that you look at me like that because I wrote to you two weeks ago telling you that I was going to raise this case today and you wrote to me on 23 June, indicating that you were acknowledging it, so I am surprised if you have not had a briefing about it, but be that as it may, obviously that is another problem in your Department. I wrote to you a couple of weeks ago and you wrote to me on 23 June, "Doug Smith, the Agency Chief Executive, thanks you for your letter", and that is from Mr John Mills, Parliamentary Correspondence Manager.

Mr Smith: My apologies.

Q119  Mr Dismore: And I wrote to you on 19 June, saying, "I will probably wish to refer to this case during the CSA evidence session on 2 July".

Mr Smith: My apologies for not having had a briefing. If there are any points on that which you wish to raise, I am happy -----

Q120  Mr Dismore: Well, I want to use this as one example of what goes wrong. Ms Priedon has been trying to get the CSA to help her get money out of her former partner, Leo Ferrol, in relation to her two children, since 1996. The file is enormous, but in 1996 alone she had five different assessments from the CSA, yet there appeared to be no attempt whatsoever to get the money out of Mr Ferrol. Eventually she came to see me and by that time Mr Ferrol owed some 23,000 in unpaid assessments. I then took it up with the CSA and you say that your problem was tracking down Mr Ferrol and how difficult it was to find his whereabouts and although he owed her 23,000, here was 170 to cover her inconvenience, which I am sure she was very grateful to receive. Now, eventually, following the story on, I took it to the Independent Case Examiner who seemed to be even more bureaucratic. We had I do not know how many letters acknowledging the fact that I had made a complaint and referring backwards and forwards, but in the end the CSA, the Independent Case Examiner, was able to write to me in October last year that the case had been resolved to her satisfaction, and she gave me all this detail that you had finally got round to getting your court order against Mr Ferrol. However, any sign of any money? No. What happened was she wrote to me again in April of this year saying that she had written to me on a few occasions regarding the Child Support Agency, which is something of an understatement, as you can see. She says, "I was informed by the CSA that a liability order was granted towards Mr Ferrol, but that he has now moved again and the CSA can't find him. I find this extremely frustrating after seven years of correspondence with the CSA. I wonder if you could explain the effectiveness of the CSA to me. I am aware of the need to stick to regulations, but you must admit that this hinders being able to locate people who could be found from a simple mobile phone bill address. How can a man who has lived and worked in the country for the past seven years be so hard to find?" It turns out in fact that when your people went to the court to get the order, they told the court that they had Mr Ferrol's address when in fact they did not have that address at all. In fact they did not tell the court the truth. The problem then is that I refer it back to the Independent Case Examiner who says, "I can't look at this because it has got to go back to the Chief Executive again", and it cannot be seen as a continuing case by them. What this case illustrates, I think, is a complete inability of the CSA to follow through any form of proper, effective enforcement action. Bearing in mind that you now have the right to have information exchanged, for example, with the Inland Revenue, and Mr Ferrol is working and paying his taxes, it seems to me incredible that even when a Member of Parliament gets involved and when the Independent Case Examiner gets involved, you are still not in a position to get your act together to track down somebody like him and make him pay up what is now a debt approaching 30,000. I would like to be able to go back to Ms Priedon with an answer to her question, which I have put to you in writing, but you have not seen the letter yet, an answer to her question about the effectiveness of the CSA when it has let her down so badly. I have to say that this is not an isolated example, bearing in mind my postbag, and I am sure the same applies to other members of the Committee too.

Mr Smith: I apologise first of all that we have not responded to your letter and that I do not have a briefing on the particular case. I am not too sure that it would be appropriate to deal with the particular case at this hearing.

Q121  Mr Dismore: She is happy to talk about it.

Mr Smith: I am certainly more than happy to talk with you and talk with her about it.

Q122  Mr Dismore: She wants her money, she does not want talk.

Mr Smith: The resonance of the case around the table was clear and it resonates through my postbag. It is interesting, as I said, I think, at the last meeting, that in recent years (a) the number of letters, the amount of correspondence I am receiving from Members of Parliament is diminishing, which may be a plus, it is certainly a plus for me, and (b) the content of those responses is switching away from delay and error focused on the parent with care to failure to enforce once an assessment is in place. I have attempted to respond to that by increasing the amount of resource we have put in place in our enforcement areas, by undertaking a review of our enforcement work and creating a new enforcement guide, which will be placed in the House of Commons Library shortly, and enhancing our contacts within the Revenue, DVLA and others in an attempt to trace. Nonetheless, there are a group of individuals, and I suspect there always will be, who are quite determined to avoid and evade their responsibilities under the system. These are extremely difficult and time-consuming to track down, bring to court and elicit money from. I am pushing more resource in that direction, limited though it may be, but we are not moving as far and as fast clearly as people around this table want us to move. Let's remember that one of the purposes of the Child Support Reform programme was, once it was bedded in, to create additional resource to permit us to do this type of enforcement work more effectively.

Chairman: How many driving licences have you taken away?----

Q123  Andrew Selous: Two.

Mr Smith: As I said at the last meeting, the purpose of the Agency is not to withdraw driving licences, is not to commit people to prison ----

Q124  Mr Dismore: But you have not done it.

Mr Smith: It is to take sufficient action against those recalcitrant individuals to ensure payment and in a sense withdrawing the licence or committing to prison is a failure because we are not at that stage gaining money for the child.

Q125  Mr Dismore: But this is a failure and you have not taken Mr Ferrol's driving licence away. Let me put it this way to you: we know that the average earnings of your staff are 14,000 a year. Mr Ferrol owes twice that much. You could put two members of staff full-time on tracking him down and still end up quids in.

Mr Smith: I will not dissent from it. It would be good if we could devote further resource and I will look at the specific facts of that case to see whether we can move it along.

Q126  Mr Dismore: Maybe we should get the Today programme to find him! Can I just move on to look at some of these points because the Independent Case Examiner has said to me previously that they mean to move more staff into enforcement. You say you are going to put more staff on it. You presently have 197 people working on enforcement. How are you going to increase the number of staff working on enforcement, bearing in mind the questions you were asked by Karen Buck and the answers you have given about the overall drive to reduce the number of staff so dramatically within the CSA? How many staff are you going to transfer on to doing enforcement action and over what time-frame?

Mr Smith: I do not know how many staff or what time-frame. Our strategy, and it is no more than a strategy at the moment, is that as we move through the Child Support Reform implementation and we gain the benefits we are expecting to gain from that, we will create some headroom to put more people on to enforcement, and we will review that year on year as we develop our business plan for the year.

Q127  Mr Dismore: But last year's annual report from the Independent Case Examiner concluded that you were not putting the resources you should be into enforcement and information-gathering. She said that what powers you had, had not been used effectively and had been minimised by flawed implementation. That was a recommendation from over a year ago and it seems to me from what you are saying that you are not taking any account of that in actually developing a case to meet that very important criticism advanced by the Independent Case Examiner and which is yet the experience of everybody sat around this Committee.

Mr Smith: Not at all. The response to the Independent Case Examiner was to commit additional resources into the enforcement teams, but I recognise that the start of that process, committing additional resources, was not sufficient. What we had to do was make sure that the resources we had on those teams were being deployed most effectively, and that meant taking a root-and-branch look at the way they did they work on a week-by-week basis. We conducted an enforcement review and we will publish the results of that in the form of the new enforcement guide and hopefully that will permit the existing people we have in those teams to operate more effectively than they have been doing.

Q128  Mr Dismore: So will your guide say that the hardest cases to track down are where they owed these tens and tens of thousands of pounds to parents with care and to the Government, that they will get priority, and will you put proper effort into tracking down these enormous debts?

Mr Smith: We are putting proper effort into tracking down those debts. I will say as an aside that all too frequently when I become personally involved in that sort of case, the debt becomes something of a chimera in terms of the fact that it is based often, and I have no details of your case, but often on interim maintenance assessments rather than full maintenance assessments, and when you get to the bottom of the case and establish the underlying reality of an individual's earnings, the debt disappears.

Q129  Mr Dismore: Well, that brings me to my next question, Mr Smith. How many non-resident parents who have refused to provide information or wilfully provided false information have you prosecuted?

Mr Smith: I do not have the figures immediately to hand, but a relatively small number.

Q130  Mr Dismore: So what you have just said to me does not make a great deal of sense then, does it, if you are not actually dealing with the problem of people wilfully failing to provide information or giving you duff information?

Mr Smith: We are taking action on a level of cases where people have provided false information or refused to provide information.

Q131  Mr Dismore: But only a handful? How many cases have you got where people have provided false information or not provided information?

Mr Smith: I do not have that information to hand.

Q132  Mr Dismore: So you do not know how many there are where people have failed to provide information, in other words, where you have had interim assessments due to lack of information?

Mr Smith: I do not have that information to hand.

Q133  Mr Dismore: Is that not a rather important management figure for you to have? I would have thought that was essential if you are going to have a proper compliance and enforcement process.

Mr Smith: The number of cases reaching prosecution stage, as I understand it, is just under 100.

Q134  Mr Dismore: Yes, but going back to the previous question I asked you, you cannot tell me today how many cases you have got where people have not given you adequate information to allow a proper assessment to be made?

Mr Smith: I do not know how many interim maintenance assessments we have made, but the whole thrust of our staff's effort is to gather sufficient information to make a full maintenance assessment.

Q135  Mr Dismore: You are going round in circles, Mr Smith.

Mr Smith: It is not possible, almost by definition, to say how many cases do we have where people have provided incorrect information.

Q136  Mr Dismore: Well, let's move on and finally pick up the point the Chairman was asking you about which I want to put to you again. How many driving licences have you taken away?

Mr Smith: In a small number of cases.

Q137  Mr Dismore: How many?

Mr Smith: I think it is about eleven.

Q138  Andrew Selous: No, it is not. It is two.

Mr Smith: Sorry, it is two that have been taken and nine where the magistrates have suspended the taking of the order pursuant to receiving a payment and in those cases a payment was received rather than a suspension of the order, which is actually what we are looking to achieve rather than taking away the licence.

Q139  Mr Dismore: So if it works to get the money back in nine out of eleven cases, why are you doing it for all of these other ones?

Mr Smith: We are taking -----

Q140  Mr Dismore: But you are not. The figures you have given me show that you are not taking this compliance and enforcement regime seriously.

Mr Smith: If I was not taking it seriously I would not have conducted a review of enforcement to try and ensure that our processes were fully ----

Q141  Mr Dismore: I am not interested in a review, Mr Smith. I want some action and you are not taking it.

Mr Smith: We are taking action. It may not be sufficient action in your terms, but we are taking action.

Q142  Mr Dismore: But 100 prosecutions, two driving licences taken away and we have got tens of thousands of people not providing information, I suspect, but you cannot give us the actual figure.

Mr Smith: But the crucial point is whether we gain that information before we move the case to the stage at which it needs to come to court and whether we gain the money before we get to the point -----

Mr Dismore: But you are not, are you? The case I have given you is a perfect example of that. Since 1996 you still have not got it.

Chairman: Let me come to your aid a little to this extent: that it is true that, as I understand it, in the ICE report which has just been produced you have reduced the non-compliance rate, so it was 30 per cent and it is now 24 per cent. If you had said to me in 1991 when I sat through the original legislation that 14 years later a quarter of the caseload would be non-compliant, I would not have believed you. I think that something really needs to be done. As Karen Buck was saying, we are losing staff. We have got 197 people only on enforcement and it seems to me to be almost derelict in your duty. We seem now to have slipped into accepting that it is going down, it is only a quarter, but I just think that is casual. It is almost a dereliction of duty.

Q143  Andrew Selous: Could I return very briefly to that driving licence point again. None of us wants to take people's driving licences away, but we want money for parents with care, but can you not accept the case that most non-resident parents who do not pay think and know that they have got a very good chance of getting away with it. Why will you not take more driving licences away in wholly justified cases up and down the country to encourage the others to pay?

Mr Smith: First of all, it is not up to us to take driving licences away.

Q144  Andrew Selous: Well, you could put it in motion, could you not. It is up to the courts, I accept that. There are eleven cases, you have told us, but why do you not do it more often? We would give it the local publicity and you could as well and then the word would get around that you get into trouble if you mess with the CSA. Why do you not do that?

Mr Smith: There is a process that we run through before we get to the point of taking individuals to court and it is right that we do that. The first stage is to establish a liability order -----

Q145  Andrew Selous: I know the process, but can you say why you do not do more of it? We understand the process and we are all in favour of the due legal process, but why do you not instigate more of it?

Mr Smith: We are instigating a significant amount of compliance effort commensurate with the resources of the 197 people we have got. It would be nice to broaden that out and take additional cases, but the point I would make, going back to a point the Chairman made, is that the enforcement regime, which I am not casual about in any terms, though it needs significant improvement, actually stands comparison with the best compliance rates in the world which were achieved in Australia, which is around 80 per cent compliance. They are using many of the same tools and many of the same actions that we are using, so I suspect there is an irreducible core here that nobody throughout the world has yet found a way of cracking.

Q146  Andrew Selous: You said earlier that you seemed to derive some comfort from the fact that the number of letters from MPs were going down on these issues. I have to tell you that there is so much cynicism and despair that nothing will happen that very many people are failing to actually even contact their MP in the first place, and I have a lot of anecdotal evidence of that in my constituency, so please do not think just because your postbag is going down that this is an issue that MPs are not that concerned about.

Mr Smith: Let me say that I have no complacency at all on this issue and I do take all letters from MPs extremely seriously. In fact I read and sign at the end of the day all substantive responses----

Q147  Mr Dismore: Why did you not read mine?

Mr Smith: Substantive responses.

Q148  Chairman: It is very easy for us to sit here and put all of these questions. I make no apology about it, but the Committee is deeply concerned about the future because I think that if some of these trends and some of the PCS evidence, which I find quite compelling, are right, we are going to face an increase in complaints from our constituents and there is just no justification for that in my view. We will be monitoring this very, very carefully over the coming months and if there is anything that you think would help us to understand what you are doing, and we understand there is a ministerial statement in July, so we will look carefully at that, if there is anything you can help us with as some of these problems unfold by way of notes, that would be very useful because I fear that the Committee may have to return to this issue in the coming months if we continue to have the concerns, some of which we have been able to share with you this morning. I am grateful to you because you have dealt with some difficult questions very ably and professionally, but I want you to take away from this session that there is a real abiding concern that we are in another phase two with a potential - a much overused word - crisis in the Agency and we must do everything that we possibly can collectively, and we are all on the same side in this argument, to try and avoid that if we possibly can. Do I make the situation clear?

Mr Smith: Yes, that is absolutely clear.

Chairman: Thank you very much for your appearance.