David Normington, permanent secretary at the Department of Education and Skills, was being grilled by the House of Commons Public Accounts Committee after a damning National Audit Office report exposed incompetence and fraud in the scheme run by Capita which was stopped earlier this year.
He said when he took up the job in 2001 the government believed ILAs were ‘a success story’.
But, Normington continued, things got worse and it became ‘a bad story of inadequate monitoring and of not picking up the signals’.
He admitted to MPs: ‘This is a bad story. I am ashamed of it on behalf of my department. It is as bad a case as I can remember. We have to put it right.’
Normington said the department had failed to respond to fraud warnings and that it had been under intense political pressure from ministers to deliver the scheme, which was a 1997 General Election commitment.
He agreed with the NAO that the £273m scheme had been inadequately planned and the £55m contract with Capita to administer it was ‘deeply flawed’ and lacked proper security measures.
The senior civil servant said the Whitehall investigation into the ILA affair, which he is supervising, could take another two years to complete so that the full scale of fraud could be estimated and said while none of his staff had resigned one had been moved elsewhere.
In response, Capita’s executive chairman Rod Aldridge rejected government claims it was largely to blame. He told MPs the company was excluded by Whitehall officials from management of the project and therefore had ‘no control over the decisions that were made’.
However Normington was adamant that Capita would receive ‘quite a bit less’ than the original £55m agreed.
He said his department and the firm were in talks on the termination of the contract and reaching a settlement.
Normington told MPs: ‘We are having a discussion about the termination of the contract. We have not paid anything to Capita since last April.’
When pressed on how much the department expected to pay out on the contract, Normington said he hoped it would be ‘quite a bit less’ than the £55m agreed: ‘This is a settlement we will have to reach with them. I hope we won’t pay the full amount of the contract.’
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