House of Commons - The work of the Permanent Secretary

The work of the Permanent Secretary - Home Affairs Committee Contents

REPORT

Leadership in the Home Office

1. We took evidence from the new Permanent Secretary at the Home Office, Mark Sedwill, on 18 June and 10 December 2013. This followed a short session on 26 March, only a few weeks after he took up his post, focused specifically on the decision to abolish the UK Border Agency. We are grateful to the National Audit Office for producing a Departmental Overview to assist us with our evidence session on 10 December.[1]

2. Dame Helen Ghosh left the Home Office in September 2012 to take up a new post as Director-General of the National Trust, after less than two years in post. Mark Sedwill succeeded her on 1 February, following an interregnum during which Helen Kilpatrick, Director General of Finance and Corporate Services, served as acting Permanent Secretary. Mr Sedwill pointed out that he is the fourth Permanent Secretary to have served under the present Home Secretary since she assumed office in 2010. He indicated that he intended to remain in post "for a good term", to provide "stability in the professional leadership of the Department alongside the stability we have had in the political leadership of the Department over the last four years".[2] We welcome Mr Sedwill's commitment to his role as Permanent Secretary and hope that his appointment will mark the beginning of a much-needed period of stability in the senior leadership of the Home Office, and in particular the membership of the Executive Management Board. We also welcome the open and transparent way that Mr Sedwill has dealt with the Committee and the occasions that he has intervened to facilitate the Committee's work. This is a refreshing approach from such a senior civil servant and a model for other departments.

The Civil Service People Survey 2012

3. The Home Office scored below the Civil Service People's Survey benchmark results across all the aspects of leadership and management that contribute to how engaged staff feel with the business in which they work. There was significant variation between results from the different areas of the business, with the overall employee engagement index (combining the scores from the relevant questions) ranging from 36% for Border Force and 47% for UK Border Agency, to 61% for the Criminal Records Bureau, 55% for HM Passport Office and 57% for the core Home Office.

4. The Home Office scored poorly in the leadership and managing change category, averaging just 30% positive responses across the group (dropping to 17 per cent for Border Force staff). Given the significant changes currently occurring within the Home Office group this is of particular relevance. Only 21% of respondents agreed that change was managed well at the Home Office, only 18% believed changes at the organisation were generally for the better, and 26% had confidence in the decisions made by senior managers.

5. The Home Office's poor results in the 2012 Civil Service People Survey show that engagement and confidence in the civil service leadership of the Home Office are at crisis levels and need to be addressed as a matter of urgency. It is vital that when significant changes, such as the abolition of the UKBA, are instituted, the staff are engaged. It is notable that scores were particularly low in the former UK Border Agency and in Border Force, two areas which have experienced particular operational and performance problems in recent years. We recommend that the Permanent Secretary start an immediate investigation into the reasons for low morale in the Department, which should include meetings with groups of staff at all levels in the operational areas giving most cause for concern. From the results of this investigation, a strategy of staff engagement should be published which can be benchmarked against the survey going forward. We will return to this subject when the results of the 2013 survey are available later this year.

The spending challenge

6. As part of the 2010 Spending Review, the Department was required to make resource savings of 23% in real terms, based on the 2010-11 outturn, by 2014-15. The Spending Review also required a reduction in capital spending of 49% within the same timeframe. In the 2013 Spending Round, the Department committed to further cuts in real terms of 6.1% in resource spending between 2014-15 and 2015-16 and a 17.6% cut to the capital budget during the same period.

7. These are challenging targets which can be met only by a major overhaul of the Department's spending: halving the administration budget in real terms over the five years to 2015-16, making changes to police terms and conditions of service, realising cost savings from the new landscape of policing and the restructuring of the border and immigration operations and, crucially, by achieving savings from efficiencies in IT, procurement and back-office functions. We recognise the spending pressures placed on the Home Office mean that some difficult decisions will need to be taken in order to hit these targets. However, it is crucial that the cuts must not be at detriment to the work performed by the Home Office and its functions. We recommend that if savings need to be made they should be, as much as possible, found in efficiencies in IT, procurement and back office functions.

Procurement

8. Our 2012 Report on Olympics Security highlighted a problem that has been a cause for public concern for some time. Major Government contracts are awarded to a comparatively small number of large providers—in the case of the Home Office, companies such as Capita, G4S, and Serco—with apparent disregard for performance under previous contracts. We recommended that the Government establish a register of high-risk providers, who have a track-record of failure in the delivery of public services, to provide a single source of information for those conducting procurement exercises about companies which are failing or have failed in the delivery of public contracts.[3] The Government, in its response to our recommendation, told us that

9. Our concerns about the questionable performance of some of those large corporations who appear to have cornered the market in major Government contracts were amplified in July 2013, when the Justice Secretary told the House that his Department had identified "a significant anomaly in the billing practices" of G4S and Serco under their contracts to provide electronic tagging services. A further audit confirmed that the companies had been charging for people who were back in prison and had had their tags removed, people who had left the country, those who had never been tagged in the first place but who had instead been returned to court, and those who were known to have died. In some instances, charging continued for a period of many months and indeed years after active monitoring had ceased.[5] Serco has since agreed to repay £68.5m (plus VAT) and the Government and G4S are still negotiating repayments after an initial offer from the company of £24 million was rejected. Both companies have lost the tagging contracts, which are being given to Capita on a temporary basis at the end of the current financial year, and are being investigated by the Serious Fraud Office.

10. The Permanent Secretary told us that these companies' contracts with the Home Office had been audited and, based on a thorough audit of a sample of payments, had been found to be "accurate, correct and in line ... with the contract".[6] He had nonetheless asked an external auditor to conduct a deeper dive audit into both Serco and G4S.

11. The Permanent Secretary was right to commission a robust audit of G4S and Serco's contracts with the Home Office in the light of the tagging scandal and we are pleased that, so far, no anomalies have been revealed. It is unacceptable that the Home Office is still over-reliant on a very small number of large providers to deliver its major projects, many of whom appear to have a track-record of underperformance, from the lamentable saga of e-Borders, through the absent Olympic security staff, to the placement of asylum-seekers in sub-standard housing under the COMPASS contracts. We believe that the Home Office's procurement arrangements could be made more efficient if more thought were given to how contracts could be made more accessible to smaller businesses, in order to increase the range of providers who are able to bid for them. Breaking down great, monolithic contracts, which can only be tackled by large providers, into smaller components would increase the complexity of the contract management process, but it would increase competition for contracts, breaking what is perilously close to an oligopoly in the provision of contracted-out Government services, some of which, such as G4S's contract to deliver security for the 2012 Olympics, have in the past gone badly wrong. We recommend that the Home Office conduct a review into all of its contracts with a view of selecting those with the potential to be split into smaller deals. Those which can be remodelled immediately with no financial penalty should be put out for retender without delay, and all others retendered at the first opportunity.

12. The Government has rejected our recommendation for a register of high-risk providers. However, we remain convinced that greater openness and transparency about providers' failure to deliver on Government contracts would improve the quality of procurement on major projects. In light of an increase in the evidence of poor performance from these type of companies we recommend the Government reconsider its response to the high-risk register recommendation and adopt it immediately.

Police procurement

13. Some £474 million in savings are to be found by 2014-15 from better procurement by police forces of goods and services. The National Audit Office has found that procurement practice varies considerably between the 43 forces in England and Wales, and that forces have not agreed common specifications for many types of goods and services, which has reduced their ability to make savings by delaying or preventing collaborative purchasing arrangements being established. It also found that there was a tension between the Department's centrally-directed strategies to increase collaboration and national procurement, and its reforms to increase local autonomy and accountability for police forces.[7] The NAO concluded that the Home Office was unable to demonstrate that the £1.7 billion spent annually on police non-IT procurement represented good value for money. The Permanent Secretary told us that, since the NAO's Report, some further progress had been made towards the development of common standards for body armour, emergency vehicles and "commodity IT".

14. The quality of the Home Office's information about police procurement is also poor, something which the Permanent Secretary readily acknowledged, describing the completeness of the Department's data about police procurement as "closer to 5% than 95%". He said that the Department had not made nearly enough progress so far in improving the quality of its police procurement information and that this was due primarily to the range and complexity of procurement arrangements among the 43 forces. The Department's objective is to raise the level of procurement data to 80% by the end of the Parliament, and to that end a team of Home Office officials is being sent out to forces early in 2014 to try to help them realign their procurement systems.

15. The Home Office's drive to ensure better value for money in police procurement is underpinned by a central police procurement hub, an on-line marketplace through which forces can procure goods and services. Around 20,000 different goods and services are available via the hub. The Permanent Secretary told us that just over half of all forces had signed up to use the hub, but only 16 were using it actively and it was used in only 2% of all transactions.[8]

16. The current picture of police procurement is dismal: forces are making next to no use of the central procurement hub, and they continue to operate a wide variety of procurement arrangements, making it difficult to realise the potential savings that would flow from a more co-ordinated approach. On top of this, the Home Office's understanding of police procurement is sketchy, at best. The Permanent Secretary clearly recognises the scale of the problem, and we are pleased that he has a clear target to improve the quality of the Department's information about police procurement by the end of the Parliament. We will review progress in January 2015 against (a) the Home Office's information about police procurement, (b) the number of forces which are making active use of the central procurement hub and (c) the proportion of transactions which go through the hub.

17. One of the obstacles to adopting a more consistent approach to procurement has been the tension between the Department's strategy to increase procurement at a national level, and its reforms to increase local accountability. In order to resolve this tension, the Department should enlist the support of police and crime commissioners in improving their forces' compliance with national procurement procedures. We recommend that, before the end of the current financial year, the Home Office issue detailed guidance to PCCs and chief constables about good procurement practice, and encourage them to work together to develop a procurement improvement strategy.

E-borders / Border Systems Procurement

18. The Home Office's largest major project is still the ill-starred e-Borders programme, now known as Border Systems Procurement, which is intended to bring in an integrated information and Communication technology system to deliver greater border security. The project, which has now been in development for over a decade, has a lifetime cost of £1.3 billion and is worth as much as the Home Office's two next largest projects—COMPASS and the Disclosure and Barring Service Programme—combined.[9]

19. The history of the e-Borders programme has been well documented: the original contract was let to a consortium led by Raytheon Systems Limited in November 2007, but terminated for cause in July 2010. Raytheon and the Home Office are still in dispute over the contract termination and the dispute is now in arbitration. The 2012-13 accounts record the existence of this dispute as a contingent liability (as was the case in the 2011-12 accounts) with no quantification of the liability being possible due to the inherent uncertainty surrounding this process.[10] When originally asked by the Committee to comment on what went wrong the response from Raytheon UK was as follows:

we are presently in arbitration with the Home Secretary regarding her decision to terminate Raytheon's involvement in the e-Borders Programme. As you will appreciate, the arbitration process imposes certain duties of confidentiality upon me and my company. In addition, our e-Borders contract itself contains confidentiality provisions which arguably survive termination. I trust, therefore, that you will understand that there are some constraints upon the information that I am at liberty to share with you.

When he gave evidence to us on 10 December, Mr Sedwill was unable to provide any further update on the dispute, due to the confidentiality of the mediation process.[11] We are appalled at the handling of this matter post-termination of the contract; and that 3½ years later it still is not resolved. Neither the company nor the Government are in a position to explain more. The confidentiality means we do not known what went wrong and are losing the opportunity to ensure this does not happen again. To avoid conspiracy theories there has to be full transparency and lessons need to be learnt.

20. The Permanent Secretary told us that it was "absolutely still [the Home Office's] intention" to have exit checks through e-borders and other mechanisms by the end of the Parliament and that "very substantial progress" had been made towards that.[12] He told us that the following benefits had already been realised: advance passenger information, inbound and outbound, on almost 90% of air travel by the end of 2013,[13] and the ability to check the data of 75% of passengers coming in and leaving the UK.[14]

21. We are pleased to see that, more than ten years after the e-Borders business case was first prepared, some of the projected benefits are finally beginning to be realised. However, many of the key benefits, including the ability to count all foreign national passengers into and out of the UK, are still a long way off. It is farcical that, given that passenger information is already collected on departure, exit checks cannot be implemented to a shorter timetable and we recommend that the Home Office produce a plan for doing so.

Capita and the Migration Refusal Pool

22. In September 2012, Rob Whiteman, then Chief Executive of the UK Border Agency, told us that Capita had been awarded a contract to locate those missing in the Migration Refusal Pool. The contract is based on payment by results, with Capita being paid for the number of people they make contact with and who leave the UK. He suggested that, under these arrangements, Capita might earn as much as £40 million over four years, if their results were good. The contract is based on the following outcomes:

Outcome Target Penalty Incentive

Confirmed departures 20% of cohort or higher The Contractor will provide a service 'credit' of 10% of the contract price per case for each case less than 20%. 2.5% increase in payment per case above target. An additional 10% for each extra case if Capita achieve more than 30% confirmed departures. This is a total potential incentive of 12.5% per case.

Traced but individual does not leave UK (barriers to removal) 65% of cohort or lower None, as incentives are focused solely on increasing confirmed departures.

No trace 15% of cohort or lower None, as incentives are focused solely on increasing confirmed departures.

Source: Letter from Rob Whiteman, Chief Executive of the UK Border Agency, to the Chair of the Committee, dated 25 January 2013

23. In October 2013, there was significant criticism of the contract with Capita following the publication of information which revealed that some of those contacted by Capita were in fact British citizens, or otherwise had the right to remain in the UK. Capita responded that there had been a total of 143 complaints, and of those, only 14 individuals had been contacted in error. However, we find it difficult to understand why such work essential to effective immigration control should be undertaken by Capita instead of the Home Office itself. In view of the savings the department has been subject to, which we referred to earlier, an estimated £40 million seems an excessive amount to pay an outside contractor, even if it is for a period over four years.

24. The Committee will continue to monitor the work of the Home Office directorates on a 3-monthly basis. Despite Mr Sedwill claiming that:

Don't worry, folks, most of us will be doing the same job in the same place with the same colleagues for the same boss.

We note that Mandie Campbell is due to take over as the new Director General for enforcement on 1 February 2014. We welcome the commitment by Sarah Rapson to improve customer service but the Committee is yet to see any empirical evidence of this.

Staff remuneration

25. The Home Office Remuneration Report shows that 18 senior staff received bonuses in 2012-13. Only those senior civil servants judged to be in the top 25% of performers are eligible for a bonus and no bonuses were worth more than £10,000.[15] The total bonus pot for senior civil servants in the Home Office fell slightly, from £283,500 in 2010-11 to £280,000 in 2011-12. The Permanent Secretary explained that the bonus arrangements for senior civil servants were negotiated across Whitehall several years ago, to incentivise good performance. Whereas the Treasury allows up to 5% of the total senior civil service paybill to be allocated for bonuses, the Home Office allocates only about 2%.[16] He argued that the Home Office would not be able to recruit and retain high performers if it were to drop the bonus system:

26. In 2012-13, 40% of all Home Office staff received some kind of bonus, and a total of 11,672 bonuses were paid, with an aggregate value of £6,524,712.[18] This equates to a mean bonus of £559, equivalent to 1.7% of the median Home Office salary of £32,799. Bonuses are taxable but not pensionable and are not consolidated into pay, so the net value to the recipient in the long term will be considerably smaller than an equivalent consolidated pay increase.

27. We have noted the fact that Mr Sedwill will not take a bonus and recognise that this shows leadership. However, with the current financial pressures on the Home Office and the increased public scrutiny of bonuses it is irresponsible of the Home Office to continue to pay out very significant sums in staff bonuses despite poor performance in many areas. We recommend that no further bonuses should be paid until a thorough review of performance against the whole range of Home Office activity has been undertaken.

1 The performance of the Home Office 2012-13, National Audit Office, December 2013 (hereafter, "the Overview"): www.nao.org.uk/wp-content/uploads/2013/12/10330-001-Home-Office-Departmental-overview.pdf Back

2 Q81 (10 December 2013) Back

3 Home Affairs Committee, Seventh Report of Session 2012-13, Olympics security, HC 531 Back

4 Cm 8500 Back

5 HC Deb (11 July 2013) col. 573 Back

6 Qq117-118 Back

7 National Audit Office, Police Procurement, HC 1046,Session 2012--13 (March 2013) Back

8 Q66 (18 June) Back

9 COMPASS (Commercial and Operational Managers Procuring Asylum Support) has a budgeted lifetime cost of £687million and the Disclosure and Barring Service Programme has a lifetime cost of £710million Back

10 Overview, p. 23. For background information see Independent Chief Inspector of Borders and Immigration, Exporting the border'? An inspection of e-Borders, October 2012 - March 2013 (October 2013) and letters from Robert M Delorge, Raytheon UK, dated 3 August 2011,and from Rt Hon Damian Green MP, Minister for Immigration, dated 22 August 2011, to the Chair of the Committee Back

11 Qq102-106 Back

12 Q107. See also Qq6-9 (18 June) Back