Examination of Witnesses (Questions 1-19)
DEPARTMENT FOR
BUSINESS, ENTERPRISE
AND REGULATORY
REFORM
12 NOVEMBER 2007
Q1 Chairman: Good afternoon. Welcome
to the Public Accounts Committee, to which we are delighted to
welcome two new Members—Keith Hill and Phil Wilson, who
have declared their interests to the Committee. I understand that
there are no changes in their declarations of interest.
Today we shall consider the Report of the Comptroller
and Auditor General on the compensation scheme for former Icelandic
water trawlermen. We welcome back Sir Brian Bender, the Permanent
Secretary at the Department for Business, Enterprise and Regulatory
Reform. Sir Brian, would you introduce your colleague?
Sir Brian Bender: Yes. On my left
is Mr Tim Soane, who is a director in our employment relations
department.
Q2 Chairman: Thank you. This inquiry
is the result of the sterling efforts of our colleague Austin
Mitchell, the Member for Great Grimsby. But for him, this inquiry
would not have taken place—we are grateful to you, Mr Mitchell—and
he will follow me in asking questions. No doubt, he is far better
informed than I could ever be as the matter is so close to home.
We are talking about only £42 million, but it is a sorry
tale, is it not, Sir Brian? May I direct you straight away to
paragraph 3.4 on page 17 of the Report, which states: "The
Department had been aware of the possibility of a scheme for some
time before it was announced, but it did not start detailed preparations
until a late stage. Policy officials had been working on options
from May 1998, but did not begin detailed consideration of how
the scheme would be administered until July 2000"? People
have been waiting more than 20 years for compensation, so how
could you launch such a scheme, which was plagued with such weaknesses
and poor planning? I am not referring to you personally, Sir Brian,
but to your colleagues.
Sir Brian Bender: First, I accept
absolutely that the Department should have planned better and
should have consulted, but questions such as "Why did we?"
or "Why didn't we?" are difficult to answer several
years after the event. There are two reasons. First, there was
understandable pressure to get the scheme up and running. Secondly—I
am sorry, I have forgotten my second point, but I will return
to it.
Q3 Chairman: All right. They have
been waiting 20 years. Since 1998, they knew that this would happen.
Paragraph 3.5 states that: "officials from the Redundancy
Payments Service, who would have responsibility for administering
the scheme, were not involved in the planning until one month
before its announcement". I see from your CV, Sir Brian,
that you joined the Department of Trade and Industry in 1973.
You have not been there all the time, but you have been in Government
service and reached a pinnacle after 34 years. Why do Departments
keep making such mistakes? The purpose of this Committee is to
find out how that can happen. It was known that such a scheme
would be introduced at least two years in advance, but officials
in a key part of the service were apparently not involved in its
planning until one month before its announcement. What was going
on?
Sir Brian Bender: The difficulties
arose primarily because of the problem of obtaining firm evidence
to show when vessels fished in Icelandic waters and whether people
had worked outside the Icelandic fishing industry during gaps
in service. As you said, Mr Mitchell knows far more about the
particular issues involved than the rest of us.
Q4 Chairman: We know that those ships
had to have done two trips out there.
Sir Brian Bender: They did, but
the Department was in error in not involving the redundancy payments
service sooner because it had a false sense of security as a result
of the 1993 scheme. Having run that successfully, the Department
thought that the matter was fairly routine, but it was not. It
was far more complicated, particularly with the late change in
the qualifying period,[1]
which made it a much more complex arrangement to run. The Department
should have planned. It should have paused when the change in
rules was announced, looked at the implications, talked more widely,
and consulted properly.
Q5 Chairman: Paragraph 3.6 states: "The
practical challenge faced by the Department was to distinguish
these trawlermen from those who lost their jobs at around this
time as a result of the parallel contraction of the distant water
fleet." It is pretty obvious, is it not?
Sir Brian Bender: It is obvious,
but distinguishing what was an Icelandic vessel when there was
no such register, and given the nature of the industry and the
way in which people worked in it—when they were in work
or out of work, as opposed to between work—was far more
complicated. The Department was lulled into a false sense of security
by the 1993 scheme, which it had managed to administer with more
simplicity.
Q6 Chairman: Paragraph 2.8 states
that the scheme opened in 2000, and we know now that there was
not a complete list of qualifying vessels. Why did it take so
long to realise that you did not have a proper list of qualifying
vessels?
Sir Brian Bender: The Department
initially relied on information from the trade association—the
British Fishermen's Association (BFA)—and soon realised
that a number of vessels named in claims had not appeared on the
list, but it was too slow to doubt the BFA list.
Q7 Chairman: Paragraph 2.8 states:
"Representatives from Grimsby supplied a list of more than
100 vessels not on the list that they said had fished in Icelandic
waters from their port. The Department began verification work
and continuously added vessel names". You wonder why that
was not done quietly and sensibly over a two-year period before
the scheme was up and running.
Sir Brian Bender: As I have said,
it was mistakenly believed that the BFA list is comprehensive.
Defining Icelandic vessels is far from straightforward. No official
records showed where each trawler had fished, so we had to find
a proxy of some sort. The proxy was identified in the Report and
it turned out to be far more complicated. You are right. The Department
should have pressed the pause button, so to speak, and engaged
more comprehensively and consulted, rather than pressing ahead
despite the pressure to proceed.
Q8 Chairman: You do not think that
it was odd that your Department was taken by surprise by how many
people applied. After all, those men had been waiting 20 years
for the scheme. Apparently, you were surprised, according to paragraph
2.2, that you received claims from: "over 3,700 former trawlermen
and their dependants (54% of the eventual total)... The Department
did not expect to receive such a large number of claims".
Did it not occur to your officials that the trawlermen had been
waiting for 20 years, that there had been considerable local publicity
about the matter, that presumably they knew whether they had been
fishermen or not and that they might all apply fairly quickly?
Why did it surprise you?
Sir Brian Bender: As stated in
that paragraph, 54% of the total claims were made in the first
month. We had a reasonable estimate of 4,000 compared with the
4,400 that eventually came in, but of those that came in the first
surge, 2,600 were ineligible and 4,000 were duplicates. The primary
problem was not the volume, but the unexpected complexity.
Q9 Chairman: What also worries me
is whether we can be sure that the scheme was administered properly.
I refer to paragraph 2.17. When the NAO carried out a test, it
was unable to confirm proper payment in 36 out of 100 cases that
it examined. That raises a real possibility of a very large number
of errors. There were delays and then there were errors in how
the process was carried out.
Sir Brian Bender: Absolutely,
Chairman. A deliberate element of judgment was used by the case
officers.
Q10 Chairman: Judgment or hit and
miss?
Sir Brian Bender: They used some
judgment, and they deliberately erred on the side that, unless
there was incontrovertible evidence to say that the claim was
not correct, they should proceed with the claim. The couple of
cases of underpayment were the result of human error, but most
of the cases identified are ones in which the case officers had
reached the view that, on the basis of the evidence, rather than
check more and more, they would pay the money. It is not satisfactory:
I accept that.
Q11 Chairman: So you apologise to
the men.
Sir Brian Bender: Well, I do not
apologise to those who received an overpayment.
Q12 Chairman: You apologise for all
the mistakes.
Sir Brian Bender: I do apologise.
If Mr Mitchell wants to take this back to his constituency, he
is certainly welcome to do so. I apologise for the length of time
that it took after the 20 years to sort it out. That is deeply
regrettable and I apologise on behalf of the Department.
Q13 Chairman: My last question is
about why did you not conduct a formal review of the scheme, when
it was clear that it was going badly wrong—or had gone badly
wrong? Paragraph 3.18 states that: "the Ombudsman said that
the extent of the issues identified should have led to a review
of the scheme with the aim of realigning the detailed scheme rules
with the policy intention behind the scheme."
Sir Brian Bender: The Ombudsman
said that and, as the Committee may know, the Department has made
an initial response to the Ombudsman's report. It has accepted
the recommendations, but the issue of whether or not we should
be rerunning the scheme is currently before Ministers, as Mr Mitchell
in particular knows. The primary problems with the scheme were
the difficulties of finding supporting evidence 20 years after
the event, not with the rules themselves. Although that is a finding
of the Ombudsman—the question of whether the Ombudsman's
findings are legally binding is currently before the courts—I
am not myself persuaded that rerunning the scheme along the way
was the right thing to do, as opposed to getting it right in the
first place, which I completely accept.
Chairman: Thank you, Sir Brian.
Q14 Mr Mitchell: As the individual
responsible for part of the Report, and certainly for the Ombudsman's
report, I am not in any way critical of the scheme. I thought
that it was a good scheme. It did justice to the fishermen and
achieved a very important social purpose. I am also not interested
in the value for money aspect; it is the value for Grimsby that
concerns me. That is what interests me in politics. Why were the
fishermen so little involved? Why was the scheme formulated without
the close knowledge of the industry and its practices, which was
necessary? Why was the scheme formulated without the close knowledge
of the industry and its practices, which was necessary?
Tim Soane: I think the officials
concerned at the time believed that, in talking to the British
Fishermen's Association, they were talking to the industry. They
were given every reason to believe that from those who were putting
forward the case. It turned out, with the benefit of hindsight,
that that was not fully the case.
Q15 Mr Mitchell: I have to interrupt.
In fact, you were talking only to one section of the British Fishermen's
Association—the Hull section. There had been a split—a
breakdown in communication, shall we say?—between Hull and
Grimsby and between Hull and Fleetwood. Only Hull was invited
to the initial meeting, which was called about a month before
the scheme was unveiled—that is to say, in September 2000.
It was not until I started kicking up a stink that I got both
Grimsby and Fleetwood invited. Why was that so? Why the reliance
on Hull?
Tim Soane: It certainly was not
the intention to invite only Hull. I think officials at the time
believed that they were inviting the industry. As it turned out,
they were not. As Sir Brian has said, we should have consulted
more widely when we were setting up the scheme. That is a matter
of fact.
Q16 Mr Mitchell: Okay. The problem
was that the Hull BFA presented you with a list, and it was only
later, according to paragraph 2.8, that Grimsby added vessels
to the list, after you had started working with the list provided
from Hull. The problem was, of course, that even when Grimsby
had made its additions, the list was not complete. It was not
until 2004 that the consultation regarding what vessels should
finally be on the list took place. I pay great tribute to Mr Askwith,
because he did a lot to consult the industry and work with it,
which is something to be said for somebody who came from Hull
and who was therefore cordially disliked in Grimsby—he did
a good job. Nevertheless, that situation must have caused a lot
of problems.
Tim Soane: I completely accept
that, were we to do that over again, we would do it differently—we
would consult on the list, although it is unlikely that it would
be a list of vessels. But if we were to pass back in time, we
would have consulted on the list of vessels before the scheme
was introduced.
Q17 Mr Mitchell: Okay. There are
two other things in respect of which there seemed to be an incredible
ignorance of fishing. Compensation was for people who had been
working in the industry up to 1979, but Icelandic fishing finished
in 1976. Who would extend it to 1979 and why?
Chairman: You're on your own.
Tim Soane: I do not have a complete
answer about how the precise date was arrived at. That proposition
was put to Ministers, and they decided that it was a reasonable
time frame to catch the people who were in that industry in that
period.
Sir Brian Bender: As you will
know, Mr Mitchell, in 2001 claims were allowed from trawlermen
who worked after 1979, so some of that lesson was learned—but
later.
Mr Mitchell: Yes, but the extension from
1976 to 1979 caused problems.
Sir Brian Bender: It did.
Q18 Mr Mitchell: The second incredible
thing was that officials originally insisted that the provision
applied to vessels fishing within the Icelandic limits, which
they set in imperial miles rather than nautical miles, which was
barmy. How did that happen?
Tim Soane: I think that that
was just a misunderstanding, but I do not believe that it had
any material effect on the scheme.
Q19 Mr Mitchell: It had a material
effect, because nautical miles extend the limit to Faroese waters—disputed
waters between Iceland and the Faroes. Vessels—middle-water
vessels, we call them—fishing north of the Faroes were actually
fishing in Icelandic territorial limits and were therefore eligible
for compensation. However, they only got it very belatedly.
Tim Soane: And those waters were
included in the scheme by the time it finished. I admit that that
should have been spotted in the first place, but they were included
in the scheme by the time it finished.
Sir Brian Bender: It is not a
satisfactory explanation, but the reason for all this is that
the Department thought that by talking to the BFA, it was getting
a complete picture, but it plainly was not, for the reasons that
you are explaining very clearly, Mr Mitchell. There is no doubt
that the fundamental lesson is to consult properly with all the
players before introducing a scheme like this. That must be right.
1 Note by witness: The late change related
specifically to the treatment of continuity of service. A month
before the launch of the scheme, the rules were amended to allow
gaps in service of more than 12 weeks without breaking continuity
of service, provided that the trawlermen had not worked outside
the industry in that period (i.e. any work apart from service
on a qualifying vessel). Back
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