House of Commons - Work and Pensions

Select Committee on Work and Pensions Fifth Report

1 Introduction

1. On 21 July 2006 the Minister of State for Employment and Welfare Reform, Jim Murphy MP, wrote to the Committee.[1] The letter informed us that the Department for Work and Pensions (DWP) intended to use the procedure set out in Section 82 of the Welfare Reform and Pensions Act 1999, referred to in the rest of this Report as 'Section 82', to seek approval for preparatory expenditure[2] on the new IT system for the proposed Employment and Support Allowance (ESA). We were asked to scrutinise the Government's proposals. The Committee has an agreed role in the Section 82 procedure which we explain below.

2. We took evidence from Departmental officials on 18 October. This session was held in private, at the Department's request, as some of the issues under discussion were of a commercially confidential nature. A partial transcript is published with this Report.

Section 82 and the Committee's role in the process

3. The full text of Section 82 is appended to this Report.[3] Its purpose is to enable preparatory work on major new social security services to take place before the relevant legislation gets Royal Assent, as an alternative to postponement or a paving bill, in circumstances when:

"(a) a Minister of the Crown is proposing that or considering whether an Act should change the law as from a specified date, or a date to be determined, and

(b) the Secretary of State [for Work and Pensions] is of the opinion that the change is such that, unless expenditure for preparing for the change is incurred during the period before the passing of that Act, it will not be possible for a service for which he has or will have responsibility to be effectively provided as from that date".

4. The procedure has been used once before, in 2000, in connection with the development of a new IT system for the Child Support Agency. As part of that process our predecessor Committee, the Social Security Committee, issued two Reports: one on the Government's initial proposals in January 2000,[4] and a second, on the version of the proposals laid before the House of Commons, in March 2000.[5] The Procedure Committee reported on the use of Section 82 in its broader context the following year.[6]

5. The three Reports set out the history and background of the Section 82 process. In essence, it works as follows:

DWP sends a draft Section 82 Report to Work and Pensions Committee for comment (the Report is also sent to the Public Accounts Committee)
Work and Pensions Committee takes oral evidence from DWP officials
Work and Pensions Committee produces Report
DWP considers Committee Report
DWP lays final Section 82 Report before the House of Commons
Debate on the floor of the House or in a Delegated Legislation Committee.[7]

6. The House in deciding, and the Committee in advising, have to take a view on whether in each case Section 82 authorisation is appropriate. This Committee has an additional role in assessing the quality of the content of the draft Section 82 Report.

7. Section 82 Reports must be considered carefully because they are an exception to the normal rules of Government accounting procedure, which state that "where legislation is being introduced to provide for a new service, departments should wait until the Bill has received Royal Assent before incurring expenditure on preparing for or implementing the new service."[8]

8. On the other hand they offer the potential for additional time in planning large-scale DWP IT projects. As our precedessor Committee observed in its Report on DWP Management of IT projects: Making IT deliver for DWP customers, the setting of realistic deadlines and discussions with suppliers at the early stages of procurement may mean that projects have a greater chance of success.[9]

9. Angela Eagle MP, then Parliamentary Under-Secretary of State, Department of Social Security, told the Procedure Committee in 2000:[10]

"In the absence of having a special new way of dealing with it, we would have had two choices: either to rush implementation, which would put at risk the coherence of IT strategies, the testing mechanisms, and make the whole project much more risky; or an even longer period of time between when the bill becomes law and when it could coherently be implemented operationally with a reasonable amount of risk".

THE USE OF A SECTION 82 REPORT FOR THE CHILD SUPPORT AGENCY IN 2000

10. The then Social Security Committee reported on the first draft Section 82 Report in January 2000 and on the final Section 82 Report in March 2000. The Committee made a series of recommendations about the quality and type of information in the draft Report.

11. The final Report was laid before the House of Commons on 13 March 2000, seeking the approval of expenditure of up to £45 million. It was considered in the First Standing Committee on Delegated Legislation on 5 April 2000 and approved without debate by the House on 11 April. In November 2000 the Government announced that, of the £45 million expenditure authorised only £2.6 million had actually been spent. This was due to Royal Assent being earlier than expected.[11]

12. When giving evidence to the Procedure Committee in 2000 the Chairman of the Social Security Committee was critical about the use of Section 82 on that occasion:[12]

"We summoned officials on the 12th January and we had a full hearing and the whole edifice of the proposal that they had originally sent to us before Christmas crumbled in their hands. They started asking for sums of money in the region of £60 million to be spent before Royal Assent […] Eventually, after a lot of toing and froing and a lot of very heated and concerned discussion and cross-examination by my colleagues in the Select Committee […] the Department admitted that they had done their sums wrong and they only needed £6 million. I repeat again; in fact they did not even need the £6 million because they did not sign a contract until after Royal Assent was given later that summer. So it was disappointing in that the House was not given any real chance to understand anything at all about the consequences and the precedents that this new procedure was introducing into our parliamentary rules and ways of doing things. […] So you begin to wonder to what extent these orders are a sensible thing to be promoting in the first place."

13. The Procedure Committee concluded that "The deficiencies identified by the Social Security Committee, and the contrast between the large sums of money originally sought and the small sums actually spent, suggest that this was a proposal which should not have been cleared by the Treasury."[13]

THE SECTION 82 REPORT ON THE EMPLOYMENT AND SUPPORT ALLOWANCE

14. The draft Section 82 Report is included as an Appendix to this Report.[14] The Government is asking for the House's agreement for power to incur:[15]

"Expenditure that the Secretary of State believes must be incurred if the Employment and Support Allowance (ESA) is to be implemented from 2008 […]; and
The financial liability accruing under contracts to be signed, in advance of Royal Assent to the [Welfare Reform] Bill, by virtue of the power in section 82 of the 1999 Act."

15. The draft Report states that the "estimate of maximum possible spend on the new ESA IT system" before Royal Assent is £31.25 million. A breakdown showing spending month-by-month between January and June 2007 broken down into various categories is also included.[16] The DWP estimates that the project as a whole will take "at least 22 months",[17] and therefore Section 82 authorisation is necessary if the ESA is to be delivered from 2008, a commitment which has been "announced publicly by the Government."[18] The Welfare Reform Bill, which establishes the ESA, is intended to be subject to the carry-over procedure between the 2005-06 and 2006-07 Sessions, and therefore Royal Assent is expected some time in the first half of 2007.

16. The Employment and Support Allowance will replace the current system of incapacity benefits. In our Report on Incapacity Benefits and Pathways to Work, we concluded that "The Government has taken a bold step in its declared 'aspiration' to reduce the incapacity benefits caseload by one million within ten years. It will undoubtedly be a challenge to achieve this but the Committee welcomes the Government's declared intention and will continue to monitor future progress."[19]

The Committee's approach to this inquiry

SCOPE

17. There need to be clear boundaries to what is expected from the Committee in its scrutiny of Section 82 Reports. Given the short period of time we have to do this work, and the fact that the project itself is at an early stage, our Report cannot be a verdict on the likely success of the ESA IT system. Our two areas of focus in this Report and our further Report will be, firstly, advising the House whether this request for an exception to the normal rules for authorising expenditure on new services should be granted and, secondly, the quality and quantity of information in the draft Section 82 Report.

18. At the same time we have had to look at the draft Section 82 Report in the context of DWP's previous record with IT projects and the so-called 'legacy systems' which do the nuts-and-bolts of benefits system processing. In particular, during the course of our inquiry reports appeared in the media that a major DWP IT project, the Benefits Processing Replacement Programme (BPRP), had been cancelled at a cost of nearly £140 million. The BPRP had been described by DWP only as recently as February 2006 as "a key strategic initiative" in evidence during our inquiry into the Efficiency Savings Programme in Jobcentre Plus.[20] We sought additional written evidence from Jobcentre Plus on the circumstances of the cancellation of the project which is set out in an Appendix to this Report.[21]

19. We were particularly interested to know whether there was any link between the cancellation of BPRP and the need for Section 82 authorisation. Annex B of the draft Section 82 Report describes "a new modernised system using Benefit Processing Replacement Programme (BPRP) architecture" as one of four options that was considered for developing the ESA IT system. Officials confirmed that the use of BPRP had been under consideration until the Programme was suspended and then closed in August 2006.[22] It appears that there may be a link between Section 82 authorisation and the suspension of the BPRP. This should be clarified in the final Report.

LOGISTICS

20. Section 82 Reports necessarily have to be considered at speed. At the same time this is not an area which the Committee can approach cold. In order for scrutiny to be effective Members need to be familiar with the subject matter.

21. When the Procedure Committee reported in 2001 it recommended that "the Government should normally make allowance for a period of at least six sitting weeks between the submission of a draft report to the Social Security Committee and receipt of the Committee's comments."[23] The Government reply accepted "the essence of the Committee's recommendation" but added that "Where a substantial proportion of the six week period would fall over an adjournment or when it is necessary to incur expenditure urgently a set period of six sitting weeks could cause unnecessary difficulties." It concluded: "In such cases the Government will consult the Committee over an appropriate time scale."[24]

22. In this case the Committee was only notified of the Government's intention to use Section 82 on Friday 21 July, after the Committee's final meeting before the summer recess. The draft Report reached us at the end of August. We recommend that in any future uses of the Section 82 procedure the Work and Pensions Committee is given at least four sitting weeks' notice of the Government's intention to prepare a Report, as well as, if possible, a period of six sitting weeks to conduct its scrutiny.

23. Section 82 Reports are of interest to two Committees: the Work and Pensions Committee, from the policy side, and the Public Accounts Committee, from the financial side. In this case, as in 2000, the Chairman of the Public Accounts Committee agreed that this Committee should take the lead in scrutiny of the draft Report. We have sought, therefore, to look at issues of both expenditure and policy and have been assisted in this task by the resources of the National Audit Office.

1 Appendix 2 Back

2 The distinction between 'preliminary' and 'preparatory' expenditure was explained by the then Chairman of the Public Accounts Committee when giving evidence to the Procedure Committee in 2000, Third Report, Session 2000-01, Section 82 of the Welfare Reform and Pensions Act 1999, HC 358, Q 62 Back

3 Appendix 1 Back

4 Social Security Committee, First Report of Session 1999-2000, Power to incur expenditure under Section 82 of the Welfare Reform and Pensions Act 1999: New IT system for the CSA, HC (1999-2000) 180 Back

5 Social Security Committee, Second Report of Session 1999-2000, Power to incur expenditure under Section 82 of the Welfare Reform and Pensions Act 1999: New IT system for the CSA (further report), HC (1999-2000) 315 Back

6 Procedure Committee, Section 82 of the Welfare Reform and Pensions Act 1999 Back

7 The Government has stated that it "will consider any recommendations from the Work and Pensions Committee or representations from the Opposition" in coming to a decision about whether the necessary debate should take place in a Standing Committee or on the floor of the House. (Government response to Procedure Committee Report, Cm 5172, July 2001, para 11) Back

8 Government Accounting, para 2.3.10 Back

9 Work and Pensions Committee, Third Report of Session 2003-04, HC 311-I, paras 15-26 Back

10 Procedure Committee, Section 82 of the Welfare Reform and Pensions Act 1999, Q 1 Back

11 Procedure Committee, Section 82 of the Welfare Reform and Pensions Act 1999, paras 14-16 Back

12 Procedure Committee, Section 82 of the Welfare Reform and Pensions Act 1999, Q 60 Back