---

Education Maintenance Allowance

That will not affect the line of my argument at all, but we will come back to that point later. What went wrong with the introduction of the new contract? The contract for EMAs originally went to the outsourcing company Capita in September 2004. I think that it was a five-year contract and, by all accounts, it was delivered without problems by Capita. In July 2007, the contract was re-tendered and the new contract brought together and consolidated a variety of learner programmes. It was obviously anchored by the EMA, but it also included sixth form child care, the adult learning grant, the learner support fund and so on. Those programmes were all brought together and the contract was awarded to Liberata. The LSC had commissioned a feasibility study in June 2006, which showed compatibility between the programmes that I have just mentioned. At that stage, the LSC clearly thought that the new combined programme, if I can put it that way, was deliverable. Then everything started going pear-shaped. The problems were spotted early on. In July 2007, Liberata was awarded the new contract but later in 2007 people realised that things were not working as they should. On 19 November, the chief executive of the LSC, Mark Haysom, told the Minister:"““There have been processing and other related problems with the delivery of the helpline, assessment and payment functions for EMA since Liberata won the contract to deliver this service in July 2007.””" From the word go, therefore, the commissioner—the LSC—knew that things might not be delivered. So there we are. The contract has gone back to Capita. The transfer of functions will take place this Friday, I believe, and Liberata will lose the revenues that it would have received from the rest of the contract. I think that the amount is about £60 million; the original contract was between £75 million and £80 million. Astonishingly, however, that dysfunctional company will not face any penalties. I may have got this wrong, but it seems to me from reading the correspondence on the issue that the LSC is paying Liberata £4 million to transfer"““the physical IT assets and applications software””" to the new company that will be delivering EMAs, which is Capita. Instead of getting money back from the company that let down hundreds of thousands of students, the public purse is forking out an additional £4 million to make the transition easier. My friend the Minister explained that to me last week, stating that Liberata had employed"““significant numbers of additional temporary staff to deal with the backlog in applications. In doing so they have incurred extraordinary additional costs and it has been judged inappropriate to impose further additional penalties.””" That is the Government’s position, but I completely disagree. Penalty clauses are in contracts for a purpose. When a company, whether private sector, third sector or otherwise, does not deliver what it has promised, there should be penalties. The acting chief executive of Liberata when all that was happening, Richard Webster, said that he hoped the Learning and Skills Council would not impose a £3 million penalty. He said:"““The issue really for us is, do we want to put £3 million back into improving the service or put £3 million into paying a penalty? We would like to see it going back into the service””." Since it is no longer delivering the service, I see no reason why it cannot pay a penalty. Even when the meltdown was occurring, Richard Webster was still talking things up as though everything was still manageable and hunky dory. On 31 October, he mused on the delays and difficulties and said:"““It’s like getting a new iPhone. The first day you get it, it takes time to get familiar with it…staff familiarity is now where it needs to be.””" That was complete moonshine. Staff familiarity was not where it was supposed to be, and I shall spend a couple of moments describing the situation in my constituency. In Nelson, the biggest town, Liberata created 100 jobs to administer the EMA. On 17 September, the Lancashire Telegraph, the big regional daily, proclaimed on its front page, ““Jobs Lift-Off””—I have it with me as a visual aid. Everyone was happy that all those jobs were coming to Pendle—100 call centre jobs in Nelson. On 18 September, the chief executive of the local authority, Stephen Barnes, was quoted as saying:"““This is a fantastic example of Pendle Council working to bring more jobs to Pendle. The partnership is all about jobs and it is great to see that it is working””." I like and respect Stephen Barnes, but he was led up the garden path like everyone else. Liberata was already delivering back-office functions for the local authority, and he and others must have thought that it could transfer that apparent competence to delivering a different programme, the EMA. One of Liberata’s directors, Rod Haig, said:"““We are training our new staff now and already they are doing well learning their new skills…Our aim is to make as many of the jobs permanent as we can.””" That was complete baloney. Some of my constituents were recruited by Liberata and sacked five weeks later. One had been employed in white-collar jobs all his life and told me that in those five weeks, he had had four hours of training. There was no management supervision or control at all, and if people chose to, they could phone up their granny and have personal conversations in work time. They could put in for time and a half working on Saturdays or double-time working on Sundays with no supervision whatever. Papers sent in by students were strewn across the place and not properly filed away. It was an absolute disgrace. Many people were hoodwinked into thinking that the jobs would be permanent, but when I wrote to Webster, the acting chief executive, he told me on 3 November that the jobs were always intended to be temporary and short-term. He even went on to say that the jobs were not really Liberata’s and that the people were employed by the LSC. Perhaps the Minister would like to comment on that, as it is a very strange way of going about things. I shall say a few words about the BBC ““Newsnight”” programme that was transmitted last week. It was an exposé of the company, in which it was made clear by whistleblowers—former senior executives of that dysfunctional company—that Liberata knew in October or November last year that it would not be able to meet the terms of the contract. It is not just the EMA that has suffered because of the company. We learn that earlier this year, the Financial Services Authority fined Liberata £525,000, more than 10 per cent. of its profits, because it failed to send out documentation that it should have sent to life and pension policyholders. Such sloppiness characterises much of its operations. It runs back-office functions for about 20 local authorities, although I believe it has lost the contract from Sheffield, and no wonder. What is to be done, as Lenin would say?