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Education Maintenance Allowance

As I said, I have written to the chief executive of the LSC, who is the other party to the contract with Liberata. He will advise me what action he intends to take in response to the problems, and I will inform the House accordingly. Our focus, first and foremost, is on dealing with the current situation. Notwithstanding the progress of recent weeks, the LSC has taken the decision to terminate the contract with Liberata, and to engage Capita to undertake delivery. I fully back that decision. The transfer of the EMA helpline, processing and payment service from Liberata to Capita will take effect from Friday 28 November. Capita will bring in a new senior management team to oversee the staff and operations in Coventry, Manchester and Darlington. The transfer will place us in a stronger position to resolve the helpline and processing problems, which will not only alleviate the current problems, but will help to provide a better service to students and learning providers in the future. The LSC will work closely with Capita and Liberata during the transition period, to ensure that the transfer of responsibilities is as smooth as possible. In the mean time, we are continuing to encourage colleges to use the discretionary support funds, provided by the LSC through their local authority, to help students who need extra support while the problems are resolved. My hon. Friend the Member for Pendle raised the question whether Liberata faces a penalty for its failure to deliver. I repeat what was said in the written ministerial statement: the migration of the contract results in Liberata losing future revenues of more than £60 million over the remaining term of the contract. In addition, following the failure of its IT system, which is at the root of all the subsequent problems, Liberata rightly took the decision to employ significant numbers of additional staff, including in Pendle, to deal with the backlog of applications. In doing so, it incurred extraordinary additional costs. The LSC has therefore not judged it necessary to enter into negotiations about the imposition of financial penalties. The permanent secretary, as the accounting officer, and the Treasury have confirmed that the deal that has been done is in the best interest of taxpayers. Perhaps, over time, my right hon. Friend the Member for Oxford, East and my hon. Friend the Member for Pendle will want to return to the matter. The situation arose from the failure of IT systems developed by Liberata to process applications, which meant that applications had to be processed manually. Owing to a rise in applications in September, a backlog of applications built up. As a result, a huge number of calls were made to the helpline, which struggled to cope. In view of those circumstances, it became apparent that Liberata was unable to manage the problem sufficiently. As soon as that became apparent, we took action to put contingency plans in place to ensure that the outstanding applications were processed as quickly as possible. The Children, Schools and Families Committee has already announced its intention to investigate the issue, and I welcome that decision. My Department and the LSC will be looking carefully at this case to learn lessons that can be applied to future outsourcing of contracts and contract management. As I said, I have asked the chief executive of the LSC to reassure me that the new contract management arrangements are robust. I am unable to answer many of the specific concerns relating to working practices in Pendle. Temporary staff, such as those recruited in my hon. Friend’s constituency, were recruited to address the backlog of applications arising from the technical difficulties. It was always my understanding that those workers were temporary, and I am disturbed to learn that they might have understood otherwise. The use of temporary staff was a sensible short-term solution to speed up the processing of outstanding applications and payments, and has led to the progress that we have seen to date. Liberata notified the LSC of its intention to dismiss temporary staff, including those based in Pendle, on 21 October. I discussed that with the chief executive of the LSC when we met two days later. Despite the efforts then made by the LSC, Liberata followed through on its intention to dismiss staff. Although it was ultimately a decision for Liberata, it was an extremely disappointing decision and was against the wishes of the LSC and my Department. On the question of staffing more widely, it will be for the new contractor to determine appropriate staffing levels in the long term.