Examination of Witnesses (Questions 540
- 559)
WEDNESDAY 19 APRIL 2006
SIR DAVID
VARNEY, MR
PAUL GRAY,
MR STUART
HARTLIB, MR
STEVE LAMEY
AND MR
RICHARD SUMMERSGILL
Q540 Jim Cousins: That is something
for the Committee to consider in due course. I cannot speak for
what view the Committee will take about that. I am simply trying
to clarify right here and now for myself, do the terms of the
deal require non-disclosure of its terms?
Sir David Varney: Yes, the deal
has within it a series of requirements about keeping bits of the
contract confidential. That is why I went into closed session
with the Public Accounts Committee to explain that, because they
did not want to confer advantages on EDS's competitors, which
we would have done if we had talked about the order book. Secondly,
also we wanted to protect, from our point of view, the right to
go back to court.
Q541 Jim Cousins: How can this possibly
not affect public judgments about future contract awards now that
it is known that a contract has been reached partly with regard
to a potential order for potential contracts which may be agreed
and subject to a confidentiality agreement which prevents substantial
disclosure of its terms? How can the public interest about future
awards of contracts to this particular supplier be safeguarded
against the background of that knowledge? That is the difficulty.
Sir David Varney: Well, I think
I have explained. There is no impact upon the purchase arrangements.
This contract was presented and was discussed with the Public
Accounts Committee in session as an accounting officer. We are
going round in the same circle. I do not share the view you have
got that somehow this is going to influence contract awards. I
do not believe that for a second.
Q542 Jim Cousins: My difficulty is
not that I believe these requirements will influence future contract
awards, but that it will be impossible to be sure that they have
not. That is the difficulty, because the holding department for
the deal is the Treasury. It is not a single department of government
like DWP would be, it is the Treasury.
Sir David Varney: That is not
correct. The constitutional position of accounting officers makes
them responsible for value for money decisions in their department
and they are accountable to you through your Public Accounts Committee
for the decisions they make. You draw a picture which is not the
reality of the way in which procurement legislation operates.
Q543 Chairman: The overall responsibility
for recovering the £25 million rests with whom?
Sir David Varney: With me.
Q544 Chairman: Supervised by the
Treasury?
Sir David Varney: I am accountable
for recovering what I have entered into with EDS. I have made
it very clear, if EDS cannot pay the money in accordance with
the agreement, I shall pursue them through the courts. It is nothing
to do with the Treasury.
Q545 Mr Newmark: It must be. It is
a big number. You have said it is a huge financial settlement.
You cannot disassociate your actions from the Treasury being involved
in this whole process because it is a big number.
Sir David Varney: When you passed
the Bill establishing the HM Revenue and Customs you established
Commissioners who have the power to act on behalf of HM Revenue
and Customs. We are exercising that power. The decision to accept
this deal was the decision of the Commissioners of the Revenue.
It has nothing to do with the Treasury.
Mr Gray: Can I just add to that?
In terms of the constitutional position of this department, it
is different from virtually every other department where legislation
and the constitution for other departments names the Secretary
of State. The Bill which this House passed almost a year ago establishing
HMRC was entitled the Commissioners of Revenue and Customs Act
and it places the constitutional responsibility in the Commissioners,
not in Treasury ministers, which distinguishes the position of
this non-ministerial department from most other departments of
state.
Q546 Mr Todd: Can we just turn to
how to draw this matter to the closure you no doubt seek.
Sir David Varney: EDS to pay the
money!
Q547 Mr Todd: Well, yes, but until
they do that I think you are going to tell me that you cannot
disclose a great deal about the process through which we arrived
at this conflict in the first place. You will remember the line
of questioning I took—or maybe you do not—at a previous
interview in which I discussed the OGC Gateway process and the
run-up to the failure to deliver the systems which had been hoped
for. Can we see publication of the OGC Gateway, or are those material
to your case?
Sir David Varney: I think they
are all material to our case.
Q548 Mr Todd: I thought they might
be!
Sir David Varney: Yes, but I thought
it was a good try! This may be taken out of my hands by a decision
of one of your committees elsewhere in the House, but we believe
that we are as keen as anybody to have this fog and uncertainty
removed, but I am under an obligation not to do that and I cannot
jeopardise that.
Q549 Mr Todd: Just forgetting for
the moment the £24 million which is outstanding, one of our
duties and that of other parliamentarians is that we start to
learn collectively from the mistakes which were made in this process,
and the difficulty with your confidentiality agreement and the
continuing possible threat of court action is that we cannot start
that learning process, can we?
Sir David Varney: I have some
sympathy with that. In the period since 1 September 2004, when
Paul and I started in HMRC, we have done 11 select committee appearances,
so once every 20 days when Parliament sits. New tax credits have
figured pretty importantly in those and quite a bit about the
performance of the IT system. I think there is an interesting
thing which we can learn about. We can learn some of the things
which we have learnt through the work of Steve and his colleagues
in how to get this system to move forward. We understand a lot
more about it. There are things which we can share inside government
between CIOs such as you were raising, this practice with the
Pensions Office and fast solutions, all of that stuff. There are
some other deeper questions, which no doubt when all of this is
over will be the subject of attention from the NAO.
Q550 Mr Todd: To take a good example,
the OGC, which actually again is reviewed by this Committee from
time to time, to examine the effectiveness of their process of
considering risk on projects of this kind and the compliance of
any advice they are given. It would be incredibly useful to be
able to discuss that properly, but since you have just said that
you cannot actually release the Gateway reviews because they might
be part of your case we cannot really start to find out whether
that is an effective process, whether the advice was ignored or
whether EDS failed to comply with various things set out in that
review process, none of that. It is all opaque to those who are
accountable to the public purse in considering what happens. I
am pointing that out as a consequence of the deal which you have
struck.
Sir David Varney: I do sympathise,
but it is not as though there is a barren field of other computer
projects which have not gone well—
Q551 Mr Todd: No, certainly not.
Sir David Varney: —which
can be easily examined because they are not subject to the legal
settlements which we have got.
Q552 Mr Todd: Okay. Just one last
point which is hanging at the tail end of this, the bringing on-stream
of 330,000 or so families on income support who have not been
transferred over to the tax credits system and who were originally
supposed to have been transferred on 5 April 2003. What are the
prospects for that group?
Mr Gray: We continue to analyse
that issue, and I think you had some dialogue with the Paymaster
General about this on 1 February and, as she made clear on that
occasion, this is essentially a risk management issue and that
transfer will not be made until all parties are satisfied that
it is safe so to do.
Q553 Mr Todd: So the answer is, "We
don't know and we don't think it is wise at the moment because
these are some of the most vulnerable people we can possibly deal
with and making a hash-up of the transfer would be about as bad
news as we can get"?
Mr Gray: Indeed, but we are very
actively reviewing the latest position and seeking to reach a
view on when is the optimal time to make that transfer.
Q554 Mr Todd: But it sounds like
never, based on what you are telling us?
Mr Gray: I am not saying that.
I am saying we are keeping the position under review and when
we think the balance of risk points to the transfer that is the
advice we will tender to ministers.
Sir David Varney: We have taken
over, of course, payment by employer.
Q555 Chairman: Just before we leave
the IT point, could you clarify one thing for me. If EDS gets,
say, £7 million worth of government work and the payment
then due to you drops to £17 million below the cost of a
possible court action, can you just explain the relationship between
the contract and the capping?
Sir David Varney: Can we just
put capping to one side?
Q556 Chairman: You told me the court
case would cost £20 million.
Sir David Varney: Yes, it would
cost £20 million, but I have reserved the position that if
I go back to court I reserve the right to re-open any discussions
I have concluded, any new piece of information, because what I
have had to do is settle the contract at this point in time. I
say that because this thing can go on and on and it gets harder
and harder with the passage of time to get to a settlement so
that we can move on.
Q557 Chairman: If you get to the
point in two or three years' time where only £10 million
has been recovered, you will still go after the £15 million?
Sir David Varney: You have got
two things really. You have got one, to make a judgment. The second
is, I wonder what anybody else who deals with EDS would do if
they felt that they took that sort of stance in dealing with a
dispute. It is a real commercial operation and by and large if
you settle commercial disputes with a settlement you expect it
to be honoured, not to be short-changed.
Q558 Jim Cousins: You have referred
to the possibility of court action if you are not satisfied with
the final outcome of this settlement. That court action would
be deeply embarrassing for the Government and for the Treasury,
would it not?
Sir David Varney: Why?
Q559 Jim Cousins: Because it would
involve a rehearsal of everything which had passed in the introduction
of the tax credit system itself, its design, its testing, changes
which may have been required along the line, the source of the
requirement for those changes in design. All of those matters
would appear in court, would they not?
Sir David Varney: Well, both sides
would throw everything they have got at their particular case.
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