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Memorandum by the Parliamentary and Health Service Ombudsman Introduction 1. I welcome the opportunity to give evidence before the Public Administration Select Committee. 2. I am particularly grateful for the Committee's continued interest in the work of my Office and for its support during what has been at times a challenging year.
Performance during 2005-06 3. When I gave evidence before the Committee on 20 October 2005, I explained that there had been a substantial increase in the number of new cases we had received in the preceding business year (2004/05), and that had resulted in some delays in allocating cases for investigation. I explained what we were doing to improve on that position. 4. Although we have not made as much progress as I had hoped, the end of year picture is a much better one than when I appeared before the Committee in October. In summary, whilst we accepted over 3,000 new cases for investigation during 2005/06, we completed over 3,600 investigations. We therefore managed to reduce our overall caseload by 20% in the course of the year, thus reducing waiting times. We aim to continue that progress in the year ahead. 5. My Annual Report, which will set out in detail our casework performance in 2005/06, will be published on 13 July 2006. I will be happy to give further evidence to the Committee on my Annual Report and on our overall performance in due course.
Debt of Honour 6. The Committee is aware that there have been some significant developments since I gave evidence on 1 December 2005 on the report of my investigation into complaints about the ex gratia scheme for British groups interned by the Japanese during the Second World War (A Debt of Honour, HC 324). At that session, the Minister for Veterans Affairs announced that the Ministry of Defence would conduct a review of the scheme. 7. On 12 December 2005, the Minister announced the interim findings of that review, which he said indicated that claims decided before the introduction of the bloodlink criterion had not been decided on the basis of that criterion or on eligibility rules that were consistent with it. He said that the early payments had instead been made using the criteria of the 1951 scheme for Far East Prisoners of War, which had utilised liquidated Japanese assets. 8. On 19 January 2006, the Committee published a report on the scheme, on my report, and on the Ministry of Defence's response to it. Among other matters, the Committee noted that the Ministry of Defence had now complied with one of the two recommendations that I had made but which it had rejected when my report was published - the need to review the administration of the scheme. The Committee also urged the Ministry of Defence to comply with my other recommendation that had been similarly rejected - the need to fully reconsider the position of those individuals disadvantaged by the introduction of the bloodlink criterion should it be found that inconsistent criteria had been used prior to and after that introduction. 9. On 30 January 2006, the Minister announced that David Watkins, a retired senior civil servant formerly in the Northern Ireland Office, would conduct an investigation into how the use of inconsistent criteria had arisen and why it had not been exposed earlier. This, he said, would focus on: (i) 'how the original inconsistencies arose, identifying any specific shortcomings in the development and implementation of policy'; (ii) 'how, subsequently, the departments involved failed to identify that there had been inconsistencies, despite the need to explain the Government's position in Parliament, in the courts, and to the Parliamentary Ombudsman'; and (iii) 'whether there are any lessons to be learnt for the future from such shortcomings as are identified in the development of the scheme and in its administration'. I met Mr Watkins when he commenced his investigation. I understand that his report is expected in June or July. 10. On 28 March 2006, the Minister made a further statement to the House. He said that the review had confirmed that rules based on the 1951 Japanese asset scheme had been the basis for making payments between the introduction of the scheme in November 2000 and the introduction of the bloodlink criterion in March 2001. The rules used after the introduction of that criterion were not consistent with those earlier rules. 11. The Minister announced that, in consequence, he had agreed to make changes to the eligibility criteria for the scheme - to, first, include those applicants who had been rejected under the birth-link criterion but who would have met the Japanese asset scheme criteria, whether or not they had a Japanese asset scheme record. Secondly, a new provision would be introduced to include those who, by the time that the scheme had been introduced, had resided in the United Kingdom for at least 20 years since the war. 12. The Minister also announced that he had established a working group, whose members would include representatives both of the all-party group on Far Eastern Prisoners of War and of the Association of British Civilian Internees (Far Eastern Region). That working group would work with the Ministry of Defence to ensure that the new scheme eligibility criteria were introduced properly and operated effectively. I understand that that work continues. 13. I welcome these developments. I particularly welcome the positive approach that the Minister has adopted since his appearance before the Committee on 1 December 2005 - and I am grateful for his courtesy in keeping me informed as to progress on the reviews his department has been conducting. I have also offered my assistance to those conducting both internal reviews. 14. Nonetheless, it remains a matter of concern to me that any of this should have been necessary. It is also of regret to me that the protracted delays in resolving the questions identified in my report, which was first sent in draft to the Ministry of Defence in January 2005, may have exacerbated the distress and outrage felt by those civilian internees denied recognition through the scheme. 15. For example, my report had identified, in paragraph 166, that early payments 'were based to a significant extent on evidence of payment of compensation under the 1951 scheme' and were thus made on a basis that was inconsistent with the eligibility criteria operated after the introduction of the bloodlink criterion. It is no surprise to me, therefore, that this has now been confirmed by the departmental review. 16. It is unclear to me why, at the time my report was published, there was not a sufficient basis for the Ministry of Defence to have taken the action that it latterly agreed to take. 17. As for the other of my recommendations that the Ministry of Defence rejected when my report was published, it is too early to say whether the revised eligibility criteria that the Minister has proposed will lead to the full reconsideration of the position of those denied a payment under the scheme that I have recommended. 18. Once the working group established by the Minister has completed its work, this will be clearer. Initial indications are, however, that the new criteria will resolve the outstanding issues. 19. I am grateful to members of the Committee for the support that it provided - through contributions in the House and through its report.
Trusting in the pensions promise 20. On 15 March 2006, I published the report of my investigation into complaints about the role of government bodies in the security of final salary occupational pension schemes (Trusting in the pensions promise, HC 984). 21. As the Committee knows, my investigation concerned complaints that government bodies had misled pension scheme members and trustees as to the degree of security that the statutory framework, established by government, provided for their pensions, that changes had been made to that framework by the Department for Work and Pensions without proper consideration of the effects of those changes or the need to warn scheme members as to the risks, and that unreasonable delays had been caused in the winding-up of certain schemes by maladministration on the part of the National Insurance Contributions Office. 22. I found that: · the official information provided by government bodies in the period from January 1996 to March 2004 had been incomplete, inaccurate, unclear and inconsistent to the extent that this constituted maladministration; · that the response by the Department for Work and Pensions to the actuarial profession's recommendation in May 2000 that disclosure should be made to pension scheme members of the risks of wind up - in the light of the fact that scheme members and member-nominated trustees did not know the risks to their accrued pension rights - constituted maladministration; · that the decision made in March 2002 by the Department for Work and Pensions to approve a change to the statutory minimum funding requirement for pension schemes was taken with maladministration; and · that, while it was a matter of considerable concern that it routinely takes many years to wind up final salary schemes, there was no evidence that maladministration by the National Insurance Contributions Office had caused those delays, rather that they were a natural consequence of the design of the system for winding up such schemes. 23. I found that maladministration had caused injustice to individuals in the forms of a sense of outrage, lost opportunities to make informed choices, and distress, anxiety and uncertainty. 24. I also found that maladministration was a significant contributory factor in the creation of the financial losses suffered by individuals, along with other systemic factors. 25. A further consequence of maladministration was financial injustice - the distortion of the reality facing scheme members so that they were wholly unaware that their pension rights were dependent on the ongoing security of their employer and therefore took no action to prevent financial loss. 26. This being so, and while recognising that maladministration was not the only contributory factor to the cause of financial loss, I recommended that: · the Government should consider whether it should make arrangements for the full restoration of the core pension and non-core benefits lost by scheme members - by whichever means was most appropriate, including if necessary by payment from public funds; · the Government should consider whether it should provide for the payment of consolatory payments to scheme members as a tangible recognition of the outrage, distress, inconvenience and uncertainty that they had endured; · the Government should consider whether it should apologise to scheme trustees for the distress that they had suffered due to maladministration; · the Government should consider whether those who had lost a significant proportion of their expected pensions - but whose scheme began wind-up between 1 April 2004 and 31 March 2005, after official information became broadly accurate - should be treated in the same manner as those whose scheme began wind-up earlier; and · the Government should conduct a review - with the pensions industry and other key stakeholders - to establish what could be done to improve the time taken to wind up final salary schemes. 27. I recognised that the subject matter of my report was complex and covered evidence related to many years, that factors other than maladministration were also relevant to the financial losses suffered by complainants, and that what I had recommended was significant in terms of public policy and possible expenditure commitments. I therefore offered the Department for Work and Pensions a two-month period following publication of my report in which to reflect on what I had found and was recommending - and in which to consider its response to my report. 28. As the Committee knows, the Department for Work and Pensions rejected this offer. Its response to my report - which was to reject my findings and all of my recommendations other than the one in which I suggested a review of scheme wind-up - can be found in chapter 7 of - and annex D to - my report. This response was confirmed by a written statement to the House and in a press notice on the day that my report was published. 29. It will not surprise the Committee that I am disappointed by the terms of the Department for Work and Pensions' response to my report and at the way in which it was provided. I am also concerned about the apparent implications of that response. The terms of the Department's response 30. The Minister for Pensions Reform told the House on 15 March 2006 that the Department for Work and Pensions did not accept my findings as it did not believe that my report 'makes a sustainable case that maladministration occurred or that... losses were the responsibility of Government'. 31. The press statement released at the same time quoted the Minister as saying 'for the report to assert that the taxpayer should make good all such losses - however they arose - is a huge and unsustainable leap of logic' and reiterated that 'the Government also disagreed that maladministration had occurred'. 32. I am concerned that the reasons given by the Department for Work and Pensions for rejecting my findings did not address the basis on which I came to them - and that, instead, the Department for Work and Pensions has made assertions about my report that any reader of it would not recognise. 33. My report does not say that leaflets issued by government bodies claimed to offer comprehensive financial advice, or that occupational pensions were in effect guaranteed by the taxpayer, or that, in relation to the 2002 decision to weaken the Minimum Funding Requirement, a decision to act on the best advice available constituted maladministration. These assertions are completely without foundation. Nor is it true to say that I have asked the taxpayer to foot a bill for approximately £15 billion as redress. 34. My report makes clear that I found a range of official leaflets, documents, ministerial statements and other information produced by government bodies to constitute maladministration as their content did not meet the standards that the Department for Work and Pensions set for its own publications. I also found that the information fell so far short of what was appropriate in this context that it did not accord with principles of good administration. 35. I also found that the Department for Work and Pensions took an inconsistent approach to whether to accept professional advice, an approach that there was insufficient evidence in official files to explain and justify. 36. Nothing in the Department for Work and Pensions' responses to the report to date has dealt with the factual inaccuracies and significant omissions in official information from January 1996 to March 2004. 37. Nor has the Department for Work and Pensions in its responses explained why it acted on two recommendations to relieve the burdens on employers, which reduced the protection to scheme members, but it did nothing when it received advice from the same source on two other occasions that action should be taken to improve protection for scheme members, with the resulting increase in the burden placed on employers. 38. My recommendations were offered in full recognition that, while maladministration had played a significant role and that other actions of government bodies had also contributed to the situation, there were other factors that had also played a role. 39. I reported that it was my view that Government was best placed to co‑ordinate a solution to the very real injustice suffered by many pension scheme members, not least because of the restrictions that the statutory framework place on developing creative solutions to remedying pension shortfalls. 40. The Department for Work and Pensions' response to my report has failed to address any of these issues. The manner of the Department's response 41. In addition to my disappointment at the substance of the Department for Work and Pensions' response to my report, I am also surprised at the way in which their response has been provided. 42. On the day on which my report was published, I received a letter from the Permanent Secretary of the Department for Work and Pensions, who informed me that that letter constituted the 'final response' to my report. 43. This was that the Department 'rejects the findings of maladministration in your report and the proposals contained in the first four recommendations' for the reasons set out in chapter 7 of my report. 44. However, I have seen in Hansard that the Department for Work and Pensions now intends to produce a further 'final' response to my report in what a Minister has said will be 'the next few weeks'. 45. In response to my enquiries about this further response, I am told that the Department for Work and Pensions has undertaken to provide Parliament with a full response to the report including details of their costings as to redress. I have also been told that it is planned that the Department will provide me with an embargoed copy of the response prior to publication. I understand that the further 'final' response from Department is unlikely to be published prior to my appearance before the Committee. 46. That a full and proper response to my report, including an assessment of what full redress might cost and analysis of a range of ways of raising those costs, would take some time is not a surprise to me - and I do not criticise the Department for Work and Pensions for taking approximately two months to complete this. 47. However, it is a matter of regret that this was not recognised by the Department for Work and Pensions when my report was published and when I offered them such a period in which to reflect on my report - and that, instead, it gave an immediate response, making claims that cannot be sustained as to what I had found and recommended and what that might cost. The implications of the Department's response 48. As I could not be satisfied, in the light of the Department for Work and Pensions' response to my report provided prior to publication, that the injustice that I had identified was a consequence of maladministration would be remedied, I laid my report before Parliament under section 10(3) of the Parliamentary Commissioner Act 1967. 49. As the Committee noted in a statement released on 15 March 2006, this was the second time in a year that I had used my powers to report to Parliament that an injustice would not be remedied that had been suffered by individuals in consequence of maladministration - and that this is a matter of deep concern. 50. This is clearly an unsatisfactory situation, which raises questions about the commitment of government bodies to the system of independent scrutiny of the administrative actions of public bodies. 51. This is exacerbated by what I see as a further example of a worrying trend - that the Department for Work and Pensions, the body whose actions were under investigation, considers that it is appropriate for it to decide whether to accept the findings of the Ombudsman, which Parliament has decided should on its behalf investigate and adjudge the administrative actions of government bodies. 52. It is one thing for the Department for Work and Pensions or another government body to reject recommendations that I may make, after proper consideration of the public interest, of other calls on the public purse, and any other relevant matters. That is a decision that it is entitled to take, was one envisaged by Parliament when it decided that I would not have powers to make binding recommendations, and would be one for which the relevant Department would have to account to Parliament. 53. However, it is entirely inappropriate, within a system of scrutiny of the way in which public bodies deal with citizens, for those whose actions are subject to such scrutiny to seek to over-ride the judgment of the independent arbiter established by Parliament to act on its behalf - and for the Department for Work and Pensions' response to be merely to say that it does not accept that judgment. 54. This goes to the heart of the Ombudsman system - and of parliamentary scrutiny of the executive - and is a matter on which the Committee may wish to reflect. I will be happy to assist the Committee in considering this and associated matters.
Other matters Tax credits 55. As the Committee will be aware, from April 2006 I adopted a new approach to the way that my Office handles complaints relating to tax credits. Due to the unprecedented number of such complaints received by my Office over the last two years there have been significant delays in those cases being resolved, many of which could and should have been resolved as part of the Revenue's own complaints procedures. Having monitored the situation closely, I am confident that the Tax Credit Office is now in a better position to respond promptly and appropriately to the complaints made about the service they provide. From 1 April 2006 I will investigate only those complaints that have either exhausted the Revenue's complaints procedure, cases which raise new issues we feel need exploring, or cases where there are other issues that would make a referral to the Tax Credit Office and/or the Adjudicator's Office inappropriate. All other cases will be referred back to those Offices to be investigated and resolved. 56. I have obtained assurances from the Tax Credit Office and the Adjudicator's Office that all appropriate measures will be taken to handle these cases promptly and effectively, and I shall of course monitor the situation closely. I consider that this new approach will help to restore the natural order between the Tax Credit Office, the Adjudicator and my Office and, in so doing, result in a better service to complainants. Notwithstanding the above, I will continue to monitor the progress made by the Revenue since the publication of my special report in June 2005, in order to assess whether a further special report is required. In that respect, I have arranged a meeting with the Deputy Chairman of HM Revenue and Customs later this month to review the progress that has been made.
26 April 2006 |