House of Commons - Welsh Affairs Committee

The future of the Newport Passport Office - Welsh Affairs Committee Contents

Written evidence submitted by the Home Office

Thank you for your invitation to appear before the Committee and for agreeing to a suitable date for the oral evidence session. Your co-operation is greatly appreciated.

As you indicate in your letter of 26 October, this is an important matter for people in Newport and Wales. It is also an important issue for the Identity and Passport Service who take great pride in the contribution made by their staff across the UK to the high level of public confidence in the passport and civil registration services. Therefore, the decision to propose closure of the passport application process centre at Newport has not been taken lightly.

IPS has identified the centre at Newport for a number of reasons. The cost of closing the centre (£6.6 million) is less than any other of our sites and the 10-year Net Present Value (NPV) of the savings versus the costs is greatest (£49.3 million). Closure of the Newport processing centre would enable IPS to reduce staff by only as many as we need to and the other sites are either too small or too large meaning we would need to either close part of another office or recruit in a different location respectively. The working conditions of the existing Newport office are in relatively poor quality compared to every other passport application process centre and the site layout is poor. The lease on the building expires in 2013. Other leases on other buildings are longer or do not give us the combinations of space and would not achieve the staff reductions required.

I have attached a memorandum of written evidence ahead of the oral evidence session to help inform the Committee. As this indicates, IPS has had to take tough operational decisions before, namely to remove postal work from the Glasgow APC in 2008 and the closure of 10 interview offices in the last 12 months. IPS are required to operate within the strict remit of the passport fee and to provide an economic service for all customers in the UK.

I hope that Committee members will find the memorandum helpful and that your Secretariat will come back to me with any specific questions on behalf of the Committee. This would be particularly helpful in order to ensure that we can have an informed session dealing with this sensitive issue.

Damian Green MP
Minister of State for Immigration

1. ABOUT IPS

1.1 The Identity and Passport Service (IPS) has been an executive agency of the Home Office since April 2006. It is responsible for the issuing of UK passports and for the registration of births, marriages and deaths in England and Wales. IPS took responsibility on 1 April 2008 for the work of the General Register Office (GRO) for England and Wales from the Office of National Statistics (ONS) and the Chief Executive was appointed Registrar General for England and Wales.

Principal Activities

1.2 The functions of IPS at the beginning of 2009-10 were to:

provide passport services for British nationals in the United Kingdom,
begin providing identity cards for UK citizens, and
continue to put in place the framework for the wider National Identity Service (NIS) and to provide the civil registration services of GRO.

1.3 On 20 May 2010, the Coalition Government set out in the Coalition Agreement their commitment to scrap Identity Cards, the National Identity Register and to halt the next generation of biometric passports. The Identity Documents Bill was Introduced to Parliament on 26 June 2010 and is currently at Committee stage in the Lords having completed its passage through the Commons.

Funding

1.4 IPS activities are funded in a number of ways:

passport services are funded by passport fees,
identity cards are/were part funded by identity card fees with any shortfall funded by central Home Office funds,
development of the NIS was funded by central Home Office funds, and
GRO activities are funded by a combination of fees for certificates and other civil registration services and central funds for the statutory responsibilities of the Registrar General for which a fee is not chargeable.

1.5 The passport fee covers the cost of the domestic passport service and consular services overseas for British citizens. Passports have to be delivered within the fee structure and be available to the public at an economic rate.

Volumes

Based on historical trends, IPS forecasts that it will issue 5.4 million passports and 1.9 million certified copies of birth, death and marriage certificates this financial year.
Approximately 80% of UK citizens hold a valid passport.
Over the past 15 years annual passport application volumes have fluctuated between 3.9 million and 6.5 million.
Application volumes are currently dominated by adult passport renewals.
An additional 250-400,000 passports applications are expected annually from April 2011 when responsibility for applications from British citizens overseas will transfer from FCO to IPS.
IPS employs 3,913.85 Full-Time Equivalents (FTEs).
There are seven passport regional offices (Glasgow and London only provide counter services), 56 interview offices.
Civil registration is carried out in conjunction with local authorities and central records are held at the General Register Office in Southport.
The cost of a standard adult passport is £77.50, a child passport is £49.00 and a certificate is £9.00. Agreed turnaround time for all documents is up to 10 working days.

2. PASSPORT OPERATIONS RESTRUCTURE

2.1 IPS provides a UK wide operation dealing with on average 5.5 million applications each year. It has a network of offices based at regional and local level. The regional offices are located at Belfast, Durham, Glasgow, Liverpool, London, Newport and Peterborough and there are 56 local interview offices throughout the country. The latter are known as the Interview Office Network (ION) and were set up in 2007 to provide a network of offices to interview all first-time applicants for passports.

2.2 IPS is a public service organisation that achieves high levels of public confidence both on the passport operation and on civil registration. The agency must operate within the income derived from its fee structure and the income must be used solely on the effective delivery of passport services.

2.3 That is why IPS keeps its business operation under review against the key aims of delivering a secure, high quality service at an economic cost to the customer and the UK economy. For example:

In 2008, the passport application processing centre in Glasgow was closed with the loss of 124 posts. The processing work was re-distributed to the other centres at Durham, Liverpool, Newport and Peterborough.
In 2009, IPS closed 10 interview offices to reduce their future cost base whilst not materially impacting on the quality of service to customers.

2.4 The current programme of restructuring is more fundamental. IPS currently has excess capacity in our application processing and interview office networks. Ongoing and planned improvements in productivity and efficiency mean that, by 2012, we will have:

Excess staff capacity of around 350 full time equivalents and excess physical capacity of approximately 25% across our application processing estate.
Excess staff capacity of around 150 full time equivalents and 39 local offices across our Interview Office Network.

2.5 IPS therefore needs to reduce both our headcount and estate. The only way to make an appreciable saving in the amount of physical estate occupied by IPS passport operations, as well as to reduce overall staffing, is to close a passport Application Processing Centre and significantly reduce the number of interview offices.

2.6 IPS has looked at all five existing passport Application Processing Centres: Durham, Newport, Peterborough, Belfast and Liverpool. We have applied the same criteria to all centres and the evidence strongly indicates that the closure of Newport would achieve the required level of cuts and not harm the current and future running of the business. A detailed assessment of the criteria is set out at Annex A.

2.7 IPS has also looked at its local office network. We have concluded that the best way to provide continuing high-quality services is to create a Customer Service Network that brings together passport counter services and interviews through a mixture of IPS-leased offices, the Video Interview Service and new mobile interviewing teams. This will result in the closure of 39 local offices.

2.8 These are not decisions we have taken lightly. We have spent many months looking at different options. We believe these proposals offers the most appropriate solution for the organisation and will deliver improved value for money to the taxpayer, at a time when all government departments are under pressure to deliver more for less.

2.9 On the application processing, a set of 23 criteria were used to establish objectively which Application Processing Centre provided the best option for closure. The results show that Newport provides the lowest cost of closure and the most favourable Net Present Value (NPV), ie the future investment available resulting from closure of the office. By closing Newport, IPS is also able to retain sufficient operational capacity, following closure, without needing to recruit staff to backfill into other offices. The Newport option also provides the opportunity to withdraw from premises that are generally considered as poor quality. The current lease expires in 2013, meaning that IPS can release 19% of its processing estate and minimise fruitless rent payments.

2.10 IPS considered retaining all five Application Processing Centres and reducing the capacity in each. This proved to be too costly and inefficient—to remove the required level of excess capacity and achieve maximum benefit necessitates closing an office.

2.11 The increasing efficiency across the passport processing and customer service networks means the length of time it takes for customers throughout the UK to get their passports will not be affected.

2.12 We very much recognise the importance that the Welsh Affairs Committee has given this important issue and acknowledge the efforts made by the Members for Newport West and East. As indicated during Ministerial meetings with them, in meetings with others and during the Adjournment Debate on 25 October, IPS are proposing the closure of a passport application processing centre. The decision is about the "back office" work to produce passports. That work is not allocated just to the areas in which the office is located. For example, the catchment area for the Newport passport application processing centre is the whole of Wales, Devon and Cornwall, Avon and Somerset, Dorset and Gloucestershire. A Customer Service Centre will be situated in Wales to provide the people of Wales and the South West with a counter service in addition to existing counter services available at Liverpool. The Minister (Damian Green) has determined that this will be located in Newport.

2.13 As the content of the next section indicates, closure of the Newport centre is justifiable on the cost of grounds, on sustaining future business operability and, importantly, on maintaining a secure, high quality service to the public by continuing to provide passport services at an economic cost to the customer.

3. ANALYSES USED TO DETERMINE RESTRUCTURING PROGRAMME

3.1 IPS has undertaken detailed analysis, using the Multi Criteria Analysis (MCA) method, to establish objectively which office provided the best option for closure. The criteria we have used fall into groups of Cost, Affordability, Estates, People, Customers & Partners, Performance and Operational Feasibility. Consideration was given to the respective weightings of the criteria but these were ultimately given equal weights, as they had no discernible impact on the outcome of the analysis. The criteria and data relevant to each were built into a model, which was run to determine which closure option would be the most sensible.

3.4 The full data pack is attached at Annex A. The pack provides a detailed description, worked example of the Multi-Criteria Analysis tool used, and includes all the input data used to analyse the various options and further comparative data on the Application Processing Network. Much of this information will be included in the Impact Assessment that will be published at the end of the consultation.

4. NEXT STEPS AND FUTURE IPS PRESENCE IN WALES

4.1 The formal consultation with the trade unions ends in mid-January 2011. IPS will consider the findings of the consultation alongside any representations made directly to the agency or to the Home Office. IPS will produce its response to the consultation together with a full formal Impact Assessment in accordance with guidance issued by the Department for Business, Innovation and Skills.

4.2 IPS does have to operate within the parameter of the passport fee paying for delivery of a high quality, secure and nationally and internationally respected travel document. IPS cannot use the passport fee to pay for surplus staff, an excess of physical estate or for failing to implement better working methods. Therefore, comments are particularly welcome on the economic and delivery aspects of the proposals and the need for IPS to provide a service across the UK.

4.3 We recognise that wider issues have been raised about the impact on the local economy and claims that people in Wales will no longer have access to a passport service. IPS are proposing closure of the passport application processing centre at Newport—but will retain a Customer Service Centre in Newport to service South Wales and the South West. This will employ up to 45 people to provide a counter service and the ability to deal with applicants in the Welsh language. The Customer Service Centre will cater for the 47,000 people a year who use the current Newport regional office and provide capacity for 7,000 interviews. So the number of people who come to Newport to use IPS services at present will not change as a direct result of the closure of the passport application processing centre.

4.4 The loss of jobs is very much regretted. IPS is committed to ensuring that staff who are declared surplus under restructuring plans are considered for any internal vacancy or redeployment opportunity across the Civil Service before considering compulsory redundancy. Support is in place to enable our staff to enhance existing skills and to enable them to apply for suitable vacancies outside of the Civil Service.

4.5 The formal consultation is about how best we can achieve the most favourable outcome for operational delivery of passports in the United Kingdom and managing the consequences for IPS staff currently employed in the passport application processing centre at Newport.

Annex A

FULL DATA PACK FOR NEWPORT OFFICE CLOSURE

1. BACKGROUND

1.1 On 31 August 2010, the IPS Management Board agreed that a recommendation would be made to Ministers proposing the closure of the Newport regional office.

1.2 This is a considered response, based on detailed analysis, to the issue of overcapacity in the network, both in staffing and in physical capacity terms.

1.3 In resource terms, the cancellation of the National Identity Scheme (NIS) has reduced the activities and functions of the IPS passport operation, resulting in some staff overcapacity. Additionally, in our regional passport processing operation we have been able to demonstrate increasing productivity over a number of years and have further plans, through investment in our replacement system and online channel and though streamlining our processes, to improve productivity further. This will lead to increased levels of excess capacity by the end of 2011 of around 350 staff (Full Time Equivalents). The recent Voluntary Early Release (VER) exercise has addressed some of this excess capacity but still leave us with approximately 250 FTE excess staff by 2012 in the passport processing part of the business.

1.4 In terms of physical estate, IPS previously estimated that by 2012 it would have ~25% over-capacity in its estate. IPS has further reviewed its position and now estimates that it has 26,537 (m2) floor space and a requirement for 20,144 (m2), equivalent to 24.1% overcapacity. The refinement of these numbers makes no material difference to any of the analysis.

1.5 IPS has followed Treasury Green Book guidance in completing its analysis and selected the Multi Criteria Analysis tool to develop an objective recommendation for Ministers.

2. OBJECTIVE

2.1 The objective of this analysis was to determine the best option to remove excess capacity from passport operations at least cost, in order to maximise efficiency and value for money in IPS.

3. MULTI CRITERIA ANALYSIS METHODOLOGY

3.1 IPS has undertaken detailed analysis, using the Multi Criteria Analysis (MCA) method, to establish objectively which office provided the best option for closure. The broad outline of the Multi Criteria Analysis as described in the Treasury Green book is as follows:

(A) Identify policy options for analysis.
(B) Identify criteria against which options will be assessed.
(C) Assess options against criteria using quantitative or qualitative data.
(D) Score options against criteria on a consistent basis.
(E) Weight criteria and compare options.
(F) Carry out sensitivity analysis & revisit conclusions.

3.2 The criteria we have used fall into groups of Cost, Affordability, Estates, People, Customers & Partners, Performance and Operational Feasibility. These were agreed with relevant stakeholders in Passport Operations, Finance and Strategy. Consideration was given to the respective weightings of the criteria but these were ultimately given equal weights, as varying the weightings made no discernible impact on the outcome of the analysis.

3.3 The criteria and data relevant to each were built into a model, which was run to determine which closure option would be the most sensible.

1.1 How this works in practice

Mechanics of the Model

3.4 Once the criteria had been agreed, raw data were gathered from across the organisation to input into the MCA model. The input data were then processed and indexed, meaning that a relative weighting—scoring 100 for the most positive response to IPS and decreasing proportionately—was determined for each data set. Indexed values were then allocated a score based on the weights given to each of the criterion. An output score was then produced by summing the output values.

Worked Example—Write Offs (Reduced or Zero Value of Assets)

3.5 Data were gathered from IPS's accounting system on the amount IPS would need to Write Off by closing each office. The raw data for Write Offs is as follows:

Scenario	Close Belfast	Close Durham	Close Liverpool	Close Newport	Close P'borough
Write offs	£4,302k	£626k	£4,346k	£1,253k	£928k

3.6 Once Indexed each office is awarded a relative value as follows (low Write Offs are preferable so Durham is given the maximum indexed score):

Scenario	Close Belfast	Close Durham	Close Liverpool	Close Newport	Close P'borough
Write offs	15	100	14	50	67

3.7 Write Offs contribute 6% of the total score which provides the following relative weighted score to each office:

Scenario	Close Belfast	Close Durham	Close Liverpool	Close Newport	Close P'borough
Write offs	1	6	1	3	4

3.8 This score is then added to the total as presented in the table in section 7.

3.9 Details of the exact scenarios, data and weighting are provided below.

4. OPTIONS FOR ANALYSIS

4.1 IPS developed a number of options for delivering its objective and these were built into the model for analysis. Descriptions of the options are given below.

4.2 The option to remove excess staff capacity across all five Application Processing Centres rather than closing a single centre was discounted at an earlier stage of the analysis. IPS currently pays £7,853k in estates costs per year[4] on its five application processing centres. An excess estates capacity of 24.1% means that, should we retain all five APCs, £1,893k of fruitless payments will be made on estates costs per year due to over capacity. Across a 10 year period this is equivalent to approximately £19 million. Sir Phillip Green's Efficiency Review[5] (pages 25-30) raises the fact that property is not managed as a commercial estate across government and highlights the issue of chronic over capacity. Cabinet Office has established a moratorium for all lease breaks and entering into leases across government.

Option: Close Belfast RO, end 2010

Belfast would cease application processing immediately before the move from Hampton House. The existing Counter and local printing would move into Law Society House (LSH), along with all the Interview Offices in Northern Ireland. The upper floors in LSH would be blocked off from the counter and mezzanine area and sub-let to recover as much of our rent costs as possible, although this could be difficult short-term.

Option: Close Durham RO, March 2012

The entire Durham regional office would close after the 2011 peak, handing over the estate by the lease break in October 2012. We would need to investigate retaining the Newcastle Interview Office as a replacement counter for Premium and Fast Track customers. The counter would operate until the end of August 2011 and postal applications would be accepted for processing until the end of July 2011, subject to sufficient staff remaining.

Option: Close Liverpool RO, by March 2012

The entire Liverpool regional office would close by the end of FY 2011-12. The counter would remain operational until the end of August 2011 and postal processing until at least June 2011, although longer might be desirable to give contingency for rollout of the replacement passport issuing system. We would need to investigate providing alternative premises or redirecting customers, as a replacement counter for Premium and Fast Track customers. The servers currently located in Liverpool RO are planned to be moved to a data centre by the end of FY11-12 anyway, so there would be no additional cost should the Liverpool RO close.

Option: Close Newport RO, by March 2012

The entire Newport regional office would close by the end of FY 2011-12. We would need to investigate retaining the Newport Interview Office, providing alternative premises or redirecting customers, as a replacement counter for Premium and Fast Track customers. Application processing could cease at any time after May 2011 but we might wish to continue past this point to keep contingency for the rollout of our replacement passport issuing system.

Option: Close Peterborough RO, by March 2012

The entire Peterborough regional office would close by the end of FY 2011-12. The counter would remain operational until the end of August 2011 and postal processing until at least July 2011. We would need to investigate providing alternative premises or redirecting customers, as a replacement counter for Premium and Fast Track customers.

5. CRITERIA

5.1 The criteria detailed below were agreed with operational leaders and were reviewed by PCS representatives during pre-consultation meetings. The data used in the model are detailed in section 6.1.

5.2 As previously stated, consideration was given to the respective weightings of the criteria but these were ultimately given equal weights, as weighting had no discernible impact on the outcome of the analysis.

Criteria & Weightings	criteria weight	internal weight	% Benefit in category	overall benefit
Cost	100				17%
Net Present Value (NPV)		100	33%	6%
Write offs		100	33%	6%
Payback		100	33%	6%
Affordability	100				17%
Cost Profile		100	100%	17%
Estates	100				17%
Workstation maximum potential capacity (FTE)		100	50%	8%
Empty Space		100	50%	8%
People	100				17%
Business Functions (HQ & Operations)		100	10%	2%
Regional Specialty		100	10%	2%
Backfill Recruitment		100	10%	2%
Staff Survey Engagement Index (%)*		100	10%	2%
Staff Survey Plan for the future (%)*		100	10%	2%
Staff Survey Managing Change (%)*		100	10%	2%
Attrition (%)		100	10%	2%
Attendance (% Average Sick per month)		100	10%	2%
VER		100	10%	2%
Security Audit		100	10%	2%
Customer & Partner	100				17%
Customer Complaint %		100	100%	17%
Performance	100				17%
Weighted Average Transaction Time		100	17%	3%
Productivity Efficiency Rate		100	17%	3%
Efficiency Distribution		100	17%	3%
Quality Standard		100	17%	3%
Fraud Detection (%)		100	17%	3%
Key Performance Indicator		100	17%	3%
				100%

*The criteria that are marked with an asterix were discounted during sensitivity analysis following discussions with PCS and make no difference to the outcome.

6. DATA INPUTS

6.1. The data used in analysing the options are detailed below. These data represent the position at 13 September 2010. Information was drawn from empirical data sources and has been verified by the IPS Management Information Team, Network Operations Team, Finance and Performance Team and Regional Managers.

*The criteria that are marked with an asterix were discounted during sensitivity analysis following discussions with PCS and make no difference to the outcome.

Note: NPV is defined as the difference between the present value of a stream of benefits and that of a stream of costs. A positive NPV occurs when the sum of the discounted benefits exceeds the sum of the discounted costs.

Financial Calculations per APC

Note (1): Severance costs have been estimated using an average payout per FTE. This equates to one months salary for the first five years of employment followed by two months salary for each subsequent year, subject to a cap of 12 months, averaged across individual salaries. These calculations predate the proposals contained within the current Superannuation Bill. Any changes in severance costs as a result of the Superannuation Bill would apply to all options.

7. OUTCOME OF THE ANALYSIS

7.1 Running the Multi Criteria Analysis (MCA) model provides a clear view that the Newport office is the recommended option for closure for a combination of reasons. The score is derived from running the MCA model and presented in column three in the table below. Supplementary information is presented to aid management and ministerial decision making.

Rank Office Score One-off costs (£m) Total CSR Spend (£m) NPV over 10 yrs (£m) Total FTE in Region Backfill Needed (FTE)

1 Close Newport RO 91 6.6 514 49.3 313 0

2 Close Peterborough RO 89 8.6 515 41.5 463 182

3 Close Liverpool RO 86 9.6 511 48.7 363 73

4 Close Belfast RO 86 7.4 529 26.0 156 0

5 Close Durham RO 85 10.0 514 32.8 629 311

Newport

7.2 Closure of Newport, first in the MCA model running order, is the recommended option because it combines the lowest costs of closure and the highest Net Present Value (NPV) with an opportunity to vacate a relatively poor building (and not renew the lease). Closure could also be done at acceptable operational risk because we would retain sufficient operational capacity in the remaining network to meet forecast demand for passports, without the need to recruit and backfill elsewhere. Whilst this option would not remove all the excess physical capacity, we are expecting an increase in demand, as we absorb Foreign and Commonwealth office customers from Q3/4 2011-12, and absorb interviews into the Application Processing Network premises, for which this space will act as contingency. Following Ministerial agreement, a Customer Service Centre will need to be established in Newport to accommodate existing customers served by the Newport regional office and interview office.

Peterborough

7.3 Peterborough is second on the list because its NPV and the ongoing CSR running costs (following closure) are reasonable and, as a larger office, a greater amount of physical space would be removed. However, the up front costs for closing are higher than Newport and, as the second largest site, there are simply too many of our staff at Peterborough for us to continue to meet demand, were we to close the office, without significant recruitment to backfill at the remaining sites. Recruiting at the same time as making some of our staff redundant is considered an inappropriate and expensive strategy.

Liverpool

7.4 The combination of its results puts Liverpool lower on the list. Whilst Liverpool has the lowest ongoing cost profile (because the Liverpool building is relatively expensive) it is also a very large public caller office catering for significant counter volumes. It also has a large contingent of some 69 HQ staff who would be displaced to other sites. Liverpool scores best against most of the productivity and quality measures. In addition, the lease does not expire until 2019, although there is a partial break opportunity in January 2014, which would mean closing the office in 2012 incurring significant fruitless payments.

Belfast

7.5 Belfast has reasonably low one off closure costs because there is no requirement to backfill staff anywhere else. However, closure would mean writing off the ~£5 million spent on relocation, resolving what to do with the building and living with a higher ongoing cost profile of remaining offices. As an option, it would leave us with spare staffing capacity in the system and it would only reduce our physical footprint by 8%.

Durham

7.6 Closing Durham would incur the highest one off costs and has a poor NPV. It would provide the best response to the challenge of excess physical estate but is not a feasible option due to the operational risk of closing the largest site without very sizeable backfilling, posing a real risk to the business through the next cyclical peak in demand. The Durham office lease expires in 2014, which means that, if we do not close Durham now, there is an opportunity to reduce physical capacity further at that time, by downsizing the Durham physical estate by around one third, removing the remaining spare physical capacity.

8. OTHER SUPPORTING INFORMATION

IPS Estates

IPS Space Requirements

SPACE REQUIREMENT—POST EFFICIENCIES (M2): 20,144

Current capacity (m2):	26,537
Over Capacity (m2):	6,393
Over Capacity (%):	24.1%
New capacity (m2):	21,376 (Post Newport Closure)
New over Capacity (m2):	1,232
New over Capacity (%):	5.8%

Any slight variations in % or (m2) compared to previous figures is due changes in the Belfast estate linked to the change over of offices.

Estates Footprint and Lease End Dates per Regional Office

Note (1): Estates costs includes: building rent, services charges, rates, facilities management, fuel and utilities and maintenance. Figures represent spend in the FY2009/10.

PASSPORT APPLICATION VOLUMES 2005-09

A summary of postal and total applications received per Application Processing Centre is provided in the following table:

Although postal applications are received in all local nominated offices, in order to maximise efficiencies and best delivery these are routinely transferred to other sites in the UK for processing.

DIVERSITY INFORMATION*

* This information has been extracted from Dataview, which draws data from Adelphi, pay roll and Kallidus. It only represents paid civil servants and excludes unpaid staff who may be on career break, long term sick or maternity leave. This information is accurate as of end September 2010.

Black and Minority Ethnic

A summary of Black and Minority Ethnic (BME) data per APC is provided in the following tables: