The
Committee consisted of the following
Members:
Chairman:
Mr.
Mike
Hancock
Cohen,
Harry
(Leyton and Wanstead)
(Lab)
Engel,
Natascha
(North-East Derbyshire)
(Lab)
Henderson,
Mr. Doug
(Newcastle upon Tyne, North)
(Lab)
Heppell,
Mr. John
(Vice-Chamberlain of Her Majesty's
Household)
Hunt,
Mr. Jeremy
(South-West Surrey)
(Con)
Jenkin,
Mr. Bernard
(North Essex)
(Con)
Keeley,
Barbara
(Worsley)
(Lab)
Khan,
Mr. Sadiq
(Tooting)
(Lab)
Lancaster,
Mr. Mark
(North-East Milton Keynes)
(Con)
Laws,
Mr. David
(Yeovil)
(LD)
Lepper,
David
(Brighton, Pavilion)
(Lab/Co-op)
Mulholland,
Greg
(Leeds, North-West)
(LD)
Murphy,
Mr. Jim
(Minister for Employment and Welfare
Reform)Ottaway,
Richard
(Croydon, South)
(Con)
Penning,
Mike
(Hemel Hempstead)
(Con)
Rooney,
Mr. Terry
(Bradford, North)
(Lab)
Singh,
Mr. Marsha
(Bradford, West)
(Lab)
Sarah
Davies, Committee
Clerk
attended the Committee
Sixth
Delegated Legislation
Committee
Tuesday 12
December
2006
[Mr.
Mike Hancock in the
Chair]
Report by the Secretary of State for Work and Pensions under Section 82 of the Welfare Reform and Pensions Act 1999
4.30
pm
The
Minister for Employment and Welfare Reform (Mr. Jim
Murphy): I beg to
move,
That the
Committee has considered the Report by the Secretary of State for Work
and Pensions under Section 82 of the Welfare and Pensions Act
1999.
Thank you,
Mr. Hancock, for chairing what I hope will be relatively
brief proceedings on this early London
evening.
The report is
a request for authority to incur expenditure on a new service to
support the employment and support allowance, before receipt of Royal
Assent to the Welfare Reform Bill. The expenditure is necessary to
ensure that the IT system required to support the delivery of the new
employment and support allowance will be ready in time for
implementation. The Government have made it clear in Public Bill
Committee and elsewhere that we are committed to introducing the ESA
from
2008.
Before
setting out the main features of the report, I should explain that the
final report has emerged as a result of consultation with the Select
Committee on Work and Pensions. That consultation proved very helpful,
and I should like to put on record my thanks to the Chairmanmy
hon. Friend the. Member for Bradford, North (Mr. Rooney),
and the members of the Select Committee, who played such an important
role and who examined the detail of our proposals with great
thoroughness. The Committee asked us to strengthen parts of the report,
and we have done so. We have also consulted the Treasury and the
National Audit Office, who have both assisted us in progressing the
report.
The report has
been produced to ensure that we have an IT system in place to support
the implementation of the new ESA. Like all IT projects, this will be a
complex task, producing a system that allows details to be recorded,
and payments to be calculated and made. To achieve that requires
significant planning. Planning has already begun, but under usual
expenditure rules we are rightly limited in what we can do in advance
of Royal Assent. If we are to deliver on time we must start preparing
for change as early as
possible.
The
condition for use of the power in section 82(1) of the Welfare Reform
and Pensions Act 1999 is, as set out in section 82(1)(b), that the
Secretary of State believes that a change brought about by an Act for a
social security function will not be effectively provided from the date
when the Act comes into force, unless there is preparatory expenditure
for coping with the change in advance of the Act getting Royal Assent.
That is clearly the case here. The Government wish to
ensure that the benefits that the new ESA will bringbenefits
that received support from all parties in Committeewill be
realised as soon as
possible.
The report
seeks authorisation for a total of £31.25 million in
expenditure by the Department for Work and Pensions on ESA IT
implementation. That will cover expenditure until July 2007, by which
time we would expect the Bill to have received Royal Assent. I hope
that the careful consideration of the draft report by the Select
Committee will allay any concerns that hon. Members may have had about
the extent of spending control. The Department has also put in place
robust processes to ensure that expenditure is closely monitored. In
line with the recommendations of the Select Committee, spending will be
reported on a bi-monthly basis.
To conclude, the use of the
power under section 82 of the Welfare Reform and Pensions Act 1999 will
enable the earliest possible implementation of the ESA, bringing with
it the associated benefits to those who need to seek our support
because of illness or disability. That underpins all that we seek to
achieve in the remaining stages of the Welfare Reform Bill, both here
and in the other place. I commend the report to the
Committee.
4.34
pm
Mr.
Jeremy Hunt (South-West Surrey) (Con): I welcome you to
the Chair, Mr. Hancock, and I welcome the Minister to his
place. I see a couple of Welfare Reform Bill Committee survivors
herethe hon. Member for Nottingham, East (Mr.
Heppell) and the hon. Member for North-East Derbyshire (Mrs.
Engel). As the Minister and both of those Members know, we debated the
Welfare Reform Bill in Committee in what was on the whole a very
constructive manner, and we made a lot of progress. In that spirit I
just wish to probe the Minister a little bit on some points relating to
section 82. I ask the Minister to address some of the
Oppositions concerns about past mistakes in IT expenditure and
to say how he will ensure that such mistakes are not made in the
future.
This is the
second time that the Government have asked for money under section 82
of the Welfare Reform and Pensions Act 1999 since it became law. Last
time, they asked for money for a new computer system for the Child
Support Agency. Given how disastrously that money was spent and the
appalling consequences for hundreds of thousands of families, the
Minister will agree with me that it is important to know what lessons
can be learnt.
In the
first debate on section 82 of the 1999 Act, the then Minister, the hon.
Member for Wallasey (Angela Eagle), explained the reason for requesting
the money. She said
that
when Parliament and
the public believe that change is necessarythat is clearly the
case with child supportthere is pressure for change to be
introduced as quickly as possible.[Official Report,
First Standing Committee on Delegated Legislation, 5 April 1999; c.
1.]
The Minister made
a similar comment today, referring to the April 2008 deadline for
starting the employment and support allowance. In that first debate,
the Minister spoke very critically about the IT system that she was
seeking to replace. She described it amongst other things as a
hopeless system that
needed to be replaced with a modern system based on up-to-date
components. She painted a picture of the previous Conservative
Administration going up Tottenham Court road with a load of used
fivers, trying to get a knock-down deal.
My
hon. Friend the Member for Brentwood and Ongar (Mr. Pickles)
said in a restrained way that by speaking in the way that she did the
Minister was setting a very high standard for herself in terms of
computer competence. We now know that the Government failed to meet
that high standard. Hundreds of millions of pounds was wasted but there
are still 347,000 unsolved cases that depended on that system. The fact
that they are unsolved is causing untold human misery, which affects
most Members of this House and led to the resignation of the chief
executive of the CSA in 2004. These are very serious
matters.
The National
Audit Office said of that system that overall the new scheme performed
no better than its predecessor. We know that in the end the Government
decided to scrap the entire systemwe are hearing about it in
Parliament this weekcosting the taxpayer £539 million.
EDS was the supplier in that contract, and it is likely to be involved
in a new ESA contract. We also know that what happened with the CSA IT
system was not a unique example; there has been a pattern of failure in
Government IT contracts.
The Public
Accounts Committee reported a succession of IT programmes and projects
characterised by delay, overspends, poor performance and abandonment,
including the NHS IT programme originally estimated to cost £6.2
billion and now estimated at £12.4 billion by the National Audit
Office. There is a deficit of £70 million on the Criminal
Records Bureau contract with Capita, with £273 million wasted on
individual learning accounts scrapped in 2001 and so on.
Computer Weekly
calculates that the cost of cancelled or over-budget Government IT
projects between 1997 and 2003 was greater than £1.5 billion.
One cannot help but be reminded of Ronald Reagan, who said, A
million here, a million there, soon well be talking about real
money. I hope that the Ministers response will be
slightly less gung ho and more humble than his predecessor who talked
of going up Tottenham Court road with used
fivers.
The
previous Minister said in March 1999 that responsibility for the
strategic management of the Departments information technology
services would be transferred from the Information Technology Services
Agency to within the Departments headquarters. Given the
failures, is that decision now seen to be wise? I should be interested
to know if it is being
reviewed.
I welcome
the improved parliamentary process under section 82, in particular that
there have been two reports from the Select Committee, on 25 October
and 29 November. I welcome what was said in writing. The Minister
restated that the DWP had taken on board all the observations and
recommendations of the Select Committee
reports.
I want to ask
the Minister a few questions. First, the Select Committee wisely
suggested that the National Audit Office should be asked to review the
reasonableness of the cost estimates that form part of the section 82
report. Given the short time scales, however, the Comptroller and
Auditor General stated:
Within the current
timescale it has not been possible to undertake a full examination of
expenditure proposals.
Instead, he has examined only the process
by which data were obtained to provide a high-level cost and risk
analysis performed by the Department. Why was the NAO not given more
time? Given the catalogue of mistakes that we have had in other IT
systems, would it not perhaps have been wise to give it more time?
Perhaps the Minister will explain his thinking on the matter. Is he
prepared to honour the Select Committees request that in future
the DWP give the CAG more time?
Secondly, the Select Committee
is concerned that the final report did not include an updated table of
likely expenditure under section 82 and that the numbers were different
from those supplied to the NAO. The updated figure was £30.42
million, down from the figure of £31.25 million that appears in
the draft and final section 82 reports. The statement that the final
report
reflects the
Departments best current estimate of required
expenditure
is not
correct. The numbers change, of course, but should not the final report
have had the very latest figures? If the House is to approve
expenditure, we must have accurate figures laid before us. Perhaps the
Minister could explain what went wrong there.
The Select Committee was also
disappointed that the Department has done no value for money analysis
of alternative courses of action. It describes that part of the report
as weak, and clearly suggests that more detailed
information should be included in future section 82 reports. There is a
huge number of unknowns in this project. For example, the Department
said that it would use the same code as that used for the pension
credit system. The NAO report
says:
The
project estimates have been prepared on the assumption that much of the
front end and back end of the new system can be based on the existing,
successful, Pension Transformation System and Jobseekers Allowance
Payment System. Up to 80 per cent. of the Employment and Support
Allowance System is expected to use design principles and code from the
other two systems.
I
read the text slightly wearily, because I have a background in IT and
am aware of the complications when trying to specify IT projects and
also the risks in saying that one system is similar to
another.
The pension
credit customer account management system and jobseekers
allowance payments are fundamentally different, and are considerably
less complex than the ESA. For example, neither has an equivalent to
the two groups in the ESAthe support group and the work-related
activity group. It is not just about the two separate categories, but
the way in which they relate to each other because the Government have
said that those in the support group can volunteer for services offered
to those in the work-related activity group.
To my knowledge, neither the
pension credit, nor the JSA have significant legacy system issues
whereas the Government have said that they will allow those currently
on incapacity benefit to migrate to ESA as resources allow, which could
involve a potential legacy issue. Also, to my knowledge, there is no
conditionality with pension credit, and the way in which conditionality
works with ESA is likely to be considerably more complex than for
JSA.
Neither pension credit nor the
JSA system have the complications of the personal capability
assessment. In short, this very complicated new system is being based
on relatively simple existing ones. Does the Minister have any evidence
that it will work? The National Audit Office says:
The Employment and
Support Allowance is a more complex benefit than Pension Credit,
reflecting the needs of the Customer Group, who will require more
regular contact with the department. This will lead to a longer
development timescale, and differences in the detailed IT system
required to deliver the new benefit.
It also says that it is impossible to
estimate costs accurately when some key decisions have not been made in
respect to
the
operational business model, and also the extent of connectivity between
front and back
ends.
Have those
decisions been made? If they have not, will the Minister clarify
whether progress has been made towards doing so and whether he has a
more accurate specification for the project, bearing in mind the time
limit in this
debate?
Finally, I would like to ask
the Minister about the risk analysis that the Department has conducted.
The DWP has said that the development costs for ESA could increase by
as much as 40 per cent., which would constitute an additional
£80 million, of which £11 million would fall within the
section 82 period. What will be the Minister's strategy if that
happens? Would the project be put on hold until the Welfare Reform Bill
obtained Royal Assent? What is missing is any coherent analysis of just
why so many Government IT contracts have gone so badly wrong, and what
lessons can be
learned.
May I gently
warn the Government of the dangers of over-reliance on management
consultants? Contracts depend not just on the quality of contractors,
but on the quality of the people managing the contracts. Following the
Gershon headcount reductions, does the Department have enough officials
with sufficient experience to manage complicated projects? Problems
often occur because the specification changes mid-contract, which in
turn happens because policy makers have not thought through their plans
in sufficient detail. The relatively sketchy detail in the Welfare
Reform Bill suggests that that might be the case this time too. Have
lessons been learned in that respect, in terms of making sure that
there is a proper specification before the start of the IT
project?
A final
reason why systems often fail is the lack of early involvement of end
users in testing. The success of a system depends on accurately
predicting usage patterns, which in practice can never be done if users
are excluded from the process until it is too late. Will the Department
have a proper, early system of user-acceptance
testing?
What I would
like to hear from Ministers is some evidence that the Government have
learned from previous mistakes. In particularwithin the
constraints of commercial confidentialitywill he say whether he
plans to award any contracts to EDS, which
was responsible for building the failed CSA system? The last time money
was granted under section 82 of the Welfare Reform and Pensions Act
1999, it led to a waste of £539
million.
Mr.
Doug Henderson (Newcastle upon Tyne, North) (Lab): I hear
what the hon. Gentleman is saying, but does he seriously expect the
Minister to say in Committee whether his Department is going to issue a
contract to a particular
supplier?