Annex A
Letter from Lt Gen Palmer to Rt Hon Baroness
Dean of Thorton-le-Fylde
ARMED FORCES PAY REVIEW BODY
Thank you for your letter of December in which
you seek information concerning the Army's problems with Pay 2000.
I do, of course, very much share your concern to ensure the earliest
practicable resolution of this issue. It might be of assistance
for me to provide you with the background to the current situation
in which a variety of technical anomalies have resulted in both
under and over-payments against agreed entitlements to a significant
number of Army service personnel.
These pay related problems are largely confined
to the Army and have a number of origins not all of which directly
relate to issues of delivery. There are in fact several different
problems each of which affects a particular group of Army personnel.
An example would be the pay level adjustment for temporary armoured
fighting vehicle crew commanders. Pay 2000 was implemented in
April 2001 for the Regulars, October 2001 for the Royal Irish
and November 2002 for the Reserves and this phased introduction
has partly accounted for the time it has taken for the scale and
complexity of the problems to become clear and for the cumulative
effect to become apparent. There were some changes in entitlement
for Army personnel that were knowingly incorporated in the Pay
2000 policy; these were agreed by the Defence Management Board
prior to the introduction of Pay 2000. Reference to this is in
Paragraph 16 of the Department's paper of evidence and includes
the £3,578 to which you refer in your letter. However, no
servicemen actually received lower pay as a result of the transition
to Pay 2000, irrespective of any change of entitlement, and there
is absolutely no intention to take retrospective action in any
of these cases. My comments below are therefore confined to anomalies
which have arisen as a result of the implementation of the endorsed
Pay 2000 policy.
Our investigations have shown that resolution
of some of the problems will require significant re-programming
of pay computers and until that is undertaken neither the total
numbers of personnel affected nor all the sums involved will be
known. This is a complex process, not least because investigation
of the required software changes indicated that a change in one
area could have a knock-on effect elsewhere; therefore a single
project providing a co-ordinated approach to the 17 individual
elements of re-programming would be necessary. Although many of
the individuals who have suffered over or under-payment have been
identified and the Army has ensured none have been financially
disadvantaged, the full scale of the numbers and sums involved
will not be known until the re-programming work allows a comparison
between current and amended pay to show where all the anomalies
exist.
The issue of any repayment by those individuals
who have been overpaid is also inextricably linked to an understanding
of the total problem. Our policy on recovery and writes-off is
governed by the Treasury's guidelines laid down in the Government
Accounting Regulations 2000, which are of course applicable to
all Government Departments. In essence, where a Department has
overissued pay, allowances, pensions etc it should in the first
instance attempt recovery of the sum involved. The Regulations
require that where a number of individuals have been affected
by the same error, they should be treated equitably. A Department
may submit a business case to the Treasury for consideration where
it is believed that there is value for money or it is in the public
interest to write-off all the overpayments. As soon as sufficient
information is known, AFPAA will approach the Treasury to discuss
the feasibility of a writes-off case for these pay issues. The
situation is complicated by the fact that even at this stage,
pending the completion of all the re-programming, the full extent
of the numbers and sums involved will not be known.
Our policy on underpayments is quite simple,
they are reimbursed as soon as they have become known and quantified.
For those individuals who are already known to have been underpaid,
unit administrative staffs are currently making cash adjustments
and, therefore, in most cases the likely levels of reimbursement
will be quite small.
Communication with individual soldiers is conducted
through the chain of command but to date there has been no consistent
message on how individuals will be impacted by this issue, in
part because of the difficulty in scoping the extent of the problem.
The Army is, however, addressing this urgently.
Having outlined the nature and complexity of
the problem, I will describe the corrective action AFPAA and the
Army are taking. The programme of work has been divided into two
phases with the first phase, which will be completed by the end
of 2004, comprising nine separate projects. The second phase of
work, which will be completed by the summer 2005, will require
a large number of pay accounts to be re-transitioned back to their
respective Pay 2000 start dates and then brought forward again
to ensure the correct calculation of all pay transactions. This
is a technically complex software task which has not previously
been attempted and, thus, is not without risk. The necessity to
correct these anomalies is, of course, uppermost in our minds
but the nature and variety of the problems and the complexity
of the required solutions prevents a more rapid repair.
JPA is, as you acknowledge, a very major undertaking
for AFPAA and a key benefit of modernising our computer system
and harmonising processes will be to help avoid similar problems
arising in the future. However, I can assure you that, in spite
of the importance of JPA, it will not be allowed to affect this
remedial work on Pay 2000 which carries the highest priority within
AFPAA. Indeed, the Pay 2000 remedial work is integral to the successful
introduction of JPA as it will ensure the correct quality of Army
pay data is available to support the move to the JPA environment.
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