HC Deb 26 July 1999 vol 336 cc89-100

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]

8.36 pm
Mr. Steve Webb (Northavon)

It has been my happy privilege to conduct several Adjournment debates recently. After the past two, members of the public have sent me copies of letters to the Minister who responded, complaining that the response was inadequate. One was a Trade and Industry Minister and the other, I regret to say, was the Minister who is to respond tonight. The public felt that he had not dealt fully with the complexities of annuities.

Were I a Minister, in normal circumstances I would bring along 12 minutes of material and extemporise for three minutes in response to the speech. Given that we have the best part of two hours in which to explore this issue fully, and that the Minister will have cleared his diary until 10.30 pm, I will flag up for him at the outset the questions to which I seek answers.

The move to the new national insurance recording system, NIRS2, has caused delays in the payment of the state retirement pension. Given the time available, I thought of multiplying my questions, but I have decided to restrain myself to only five. I hope, however, for a full and comprehensive response.

Basic state pensions are paid more or less in full, but there are serious problems with the state earnings-related pension, SERPS, and possibly more than 100,000 pensioners are receiving something based on a clerical calculation. As I understand it, someone at the Contributions Agency has sat down with a pocket calculator, dug out the files and worked out how much the SERPS figure should be. When will those estimates be adjusted so that people receive the correct amount?

My second question is about the interest on the money that people have not yet received. When will it be paid? Some of the delays have been for months and for hundreds of pounds, so there is a problem with the interest that has been foregone. I hope that the Minister will say when it will be paid.

My third question has to do with the future and people eligible for state pension when they reach 60 or 65. By what date will newly retired pensioners get the correct pension amount from day one of their eligibility?

Fourthly, who pays the compensation bills which, if one includes age-related rebates, run into tens of millions of pounds? I hope that the Minister will give us some assurance about the private sector's contribution to the compensation bills.

Finally, what lessons have the Government learned from the pension payments fiasco? I hope that the Minister will tell us about the inquiry that has been launched, who is leading it and what its terms of reference are. When will the inquiry report, and whose head is on the block?

I hope that the Minister will respond point by point to those five headline questions. The matter has been tackled twice by the Public Accounts Committee. The Committee's 22nd report, entitled "Delays to the New National Insurance Recording System", was published earlier this month. Rather alarmingly, given that the Committee's first investigation was published in June 1998, the July 1999 report found that matters were "much worse".

The Minister may take some comfort from the fact that the contracts were signed by the previous Administration. He may consider the problem to be a Tory bungle, which of course it was. However, the Minister has been in his post for nearly a year, with responsibility for pensions for a significant part of that time. The Public Accounts Committee states that matters have got worse rather than better in the past 12 months, so I am sure that the Minister will say, "Mea culpa", lay his hand on his heart and admit his share of the blame for this worrying matter.

Today, the Government produced their annual report. I understand that people can get two Tesco club card points for buying it, and that is all that it is worth. I looked for an apology to pensioners for the delays in payment of their state retirement pension but, curiously, apology found I none. The Minister is welcome to intervene to tell where in the annual report that apology occurs, or where the report mentions that more than 250,000 pensioners have not received the pension to which they are entitled. Any review of the past 12 months should at least mention that, but I cannot find one. I cannot decide whether the report is shameless or shameful—it is both, I think—but, on pensions, it is misleading in the extreme.

The first of the five questions that I put to the Minister relates to the clerical estimates of SERPS pensions that are currently in payment. A constituent of mine—whom I shall call Mr. N, for the purposes of anonymity—was 65 in Christmas week last year. The Government gave him a Christmas present, which took the form of not paying his proper pension. When he received his pension book, he discovered that, instead of getting about £100 a week of basic state pension and SERPS, he received only the basic state pension.

Mr. Bob Russell (Colchester)


Mr. Webb

Scrooge indeed. Many pensioners would not have been aware that there was anything wrong. The complexities of SERPS are beyond many of us. A less alert pensioner than Mr. N would not have noticed a problem. However, Mr. N had done something astute a couple of years previously. I suspect that not voting Labour might also be considered astute, but I have in mind the request that he sent to the Contributions Agency for a pensions forecast. The agency told him that he would be entitled to about £35 a week of SERPS.

Strangely, although the Contributions Agency knew two years ago that Mr. N was entitled to SERPS of at least £35 a week, and I cannot envisage any circumstances in which that figure would have decreased in the two years—unless I am much mistaken, it could only increase—the Government were none the less unable to pay him the money that he was told he was entitled to then. They paid him only the basic pension.

Mr. New is an astute gentleman, as I mentioned, so he contacted me. I took up his case with the Minister and, a matter of weeks ago, Mr. New received a letter from the Department. Having received it, he rang my office because it contained words to the effect of, "We are prepared to have a guess. We'll have a stab at what we think you're entitled to. If it is too little, we'll pay you the balance. If it is too much, we'd like it back."

Mr. New was understandably rather concerned—genuinely concerned. The Public Accounts Committee raised this issue in the abstract, but here is a real person asking whether he should take the money. This gentleman was sufficiently unsure as to what the letter meant and how certain or otherwise the money was that it created genuine uncertainty for him. He did not know whether to say yes to an extra £35 a week, plus back-pay of nearly £800. We advised him that he should take the money, but that there was a risk that the Government would want some of it back. Fortunately, he had his pension forecast, so it was pretty clear that there would not be a problem.

What is bizarre is that the Government were able to send out letters two years ago to tell people what they were entitled to—presumably the letters are still on file somewhere—with what was presumably rather prehistoric technology and yet, knowing that the new system was not working, they could not even make a guess at their SERPS pension.

Mr. New got round the problem. He was given £10 in compensation, as 160,000-plus retirement pensioners have been. Mr. New said that he rang up and asked whether it was a joke. The person at the other end of the line said, "Well, yes. It is rather a joke." Mr. New was offended by the £10, but that is all that he has had so far.

Mr. New now has some money—he has back-pay to his birthday, just before Christmas, and he is getting what the Government thought that he should be entitled to in SERPS when they wrote to him two years ago. However, Mr. New, as far as I am aware, went on working and accruing SERPS entitlements. Therefore, even now and despite all the fanfare, he is still not getting his full SERPS pension. Every week, another pound or two is being added to the arrears that the Government owe him, to say nothing of the £800 back-payment, which he has just received and on which he has had no interest.

The key question for the Minister is, when will Mr. New and other constituents who have had clerical estimates of their SERPS entitlements get the correct amount? When will they know that they do not have to pay anything back? When will the problem be resolved for those people?

Secondly, when will the interest be paid? The case of Mr. H from Yate in my constituency illustrates that problem. He had the misfortune to be 65 in September 1998. He had a rather larger SERPS entitlement—I think, of the order of £45 a week—and he had also sent off for a pension forecast a couple of years earlier. He knew that the figure was too low. He told me that he could not manage on the basic state pension alone, so he deferred his retirement. He took a part-time job to make ends meet. Essentially, a year of his life, when he would perhaps have wanted to spend time with his family, was spent trying to make ends meet because of a Government bungle.

Let us remember that we are talking about someone who was told a couple of years ago that he was entitled to that £40 to £50. The Government knew about it then and yet they were incapable of delivering it to him last September. Mr. H delayed until late spring or early summer before seeing me. I initiated contact with the Minister and Mr. H has received a lump sum of a little under £2,000. When one is talking of those sorts of figures, one starts to ask about interest forgone. Mr. H, too, was getting only a clerical estimate of SERPS entitlement—he is still not getting his full pension.

When will the interest be paid and how much? What interest rate will the Government use? Pensioners often get a reasonable rate of return on their savings in specified investments. What is more to the point, they may have had to run down savings that were in illiquid forms, which they had perhaps planned to use later in their retirement. How confident is the Minister that my constituent will be properly compensated for interest forgone? What additional compensation will he receive for having to defer his retirement? Doing so changed the course of his life—how will the Government compensate him?

Having asked when clerical assessments will be sorted out and when interest will be paid, my third question is when will newly retired pensioners have their pensions handled right on day one, on their 65th or 60th birthday? As the Minister knows, I tabled several written questions in the week before this debate to ensure that I was as well informed as possible. I asked for an update of the April written answer on progress in rectifying the problems with NIRS2, the national insurance recording system. Much to my regret, he adopted increasingly obfuscatory tactics by referring me back to the answer given in April. That raises some interesting questions. Have there been no developments worthy of report since April?

Mr. David Rendel (Newbury)

It has got worse.

Mr. Webb

It is difficult to say; I hope that the Minister will tell us. As he suggested, I looked back at the April answer. In response to the hon. Member for North Thanet (Mr. Gale), no less a person than the Secretary of State said: It is planned that the Benefits Agency's review of cases will be completed in six months."—[Official Report, 21 April 1999; Vol. 329, c. 591.] That suggests that all the pensions payments problems will have been sorted by 21 October. I do not think that that promise refers to the age-related rebates for personal pensions. I think that that is a different matter but I may be wrong. My reading of the written answer is that six months from that date, everyone currently receiving a pension will be getting the right amount and that newly retired people will get the right amount from day one. The Minister is welcome to vary or clarify that pledge. I am worried that he felt that referring back to that written answer was an adequate response, given that the Public Accounts Committee thought that things had not stayed the same but got worse. Its report criticised the Contributions Agency for not owning up to the fact things were getting worse. I am alarmed by the Minister's reticence, although I understand it.

My fourth question is who foots the bill for compensation and how much will it be? I have asked several questions about that but the reply has been that the Government will not know until they have finished. They do not yet know how much it will be. Some 167,000 pensioners have had £10 each, so the Government have already spent £1.7 million, to say nothing of compensation of more than £30 million paid to personal pension providers. That is £20 million less than the Treasury thinks that it has gained by holding on to the cash. There is a £20 million black hole there. Who will pay for it?

I thought that the whole point of the private finance initiative was to transfer risk from the public to the private sector. There is no point in having the public sector underwrite PH projects because that is the only incentive that the private sector has to perform. I do not know the nitty-gritty of the contracts between Andersen Consulting and the Contributions Agency but the whole thing seems to have been handled appallingly. I hope that the Minister will assure us that Andersen Consulting will foot the bill to the extent that the problems are of its making. The public sector deserves no less. The House would be worried about any further PH projects if a precedent is set whereby the private sector partner can perform appallingly—it seems to have been a shambles on both sides—without footing the bill. I hope that the Government can assure us that, apart from their little windfall in respect of age-related rebates, the compensation and the interest forgone will be paid by the private sector.

I want to pass on to the Minister something that one of my constituents told me. Mr. H rang the Benefits Agency in Bristol to ask if it could help him with his problem. It was at a loss and did not know what to say. He heard one of the people there say, "help" on the phone. I am alarmed that in 1999, when the problem was well known to Ministers, officials of the Department concerned could not brief members of the public.

I have heard something more alarming. When Mr. H recently phoned the Contributions Agency to say that he had been told that the new system was in place, someone told him that it had been running for three months but that half of what it was getting was still rubbish and had to be sent back. I find that deeply depressing. Is the Minister aware that those receiving the output from that computer hold that view? I understand that the slogan is "garbage in, garbage out". I fear that that is still the case for far too many people.

Finally, what lessons have been learned from this fiasco? I understand that supervision of the Contributions Agency is now being transferred to the Inland Revenue and the Treasury. However, I hope that the buck will not be passed in that process. I am glad to see that the Minister of State, Department of Social Security is responding to the debate—presumably because he is responsible for paying out the money, even if he is not responsible for working out how much should be paid. I assume that that is the distinction.

What lessons have been learned? Who is leading the internal inquiry? What are the terms of reference? What is the time scale for the inquiry? Whose head is on the block? I sense that an inquiry might not be taking place; there has been no mention of one in the written answers. However, 250,000 pensioners have been short-changed by the Government. The Government's glossy annual report contains plenty about what they have done for pensioners, but one would have thought that many pensioners would been happier to have had their pension paid in full and on time—instead of all the gimmicks.

It is vital that lessons are learned from this fiasco. I am pleased that the Minister has plenty of time both to answer my questions and to tell us how he will prevent such a fiasco from ever happening again. I look forward to his response.

8.56 pm
The Minister of State, Department of Social Security (Mr. Stephen Timms)

I congratulate the hon. Member for Northavon (Mr. Webb) on his success in securing the debate; I shall endeavour to respond fully to all the points that he made.

The Government recognise that this is a most important issue, which causes concern and uncertainty for thousands of pensioners throughout the country; we very much regret the inconvenience, the disruption and, in some cases, the financial difficulty that has been caused to them. I welcome this opportunity to update the House on the matter, and to inform hon. Members of the progress that we have made.

I am pleased to be able to tell the House that the difficulties are now significantly behind us. However, it will take some months to complete checks on all the benefit claims awarded when the problems were at their height last year. Only then will we be able to state for sure that people have received all the benefit that is due to them. However, we are determined that that will be the result of the process.

I acknowledge the concerns that have been raised by the hon. Gentleman and by scores of other hon. Members who, like him, have written to me about these difficulties on behalf of their constituents. I will respond to the points that have been raised in a moment. However, first, I remind the House of the background.

The delays that we have heard about in this debate resulted from problems with the replacement of the national insurance recording computer system—the replacement is known as NIRS2. The contract to deliver NIRS2 was awarded, and the project delivery structure was set up by the previous Conservative Government in 1995—as the hon. Gentleman acknowledged. The system was initially supposed to be fully operational by 10 February 1997. However, it was not and, at the general election in May 1997, we inherited a project that was already facing substantial difficulties.

Our strategy for dealing with it has been twofold: first, to minimise the problems for those who depend on contributory benefits; secondly, at the same time, to secure the substantial long-term gains offered by NIRS2 for the effective operation of the benefit system. We wanted to achieve both those objectives, so we implemented robust contingency arrangements to minimise disruption for people, including making emergency payments and carrying out clerical calculations of benefit entitlement. By Friday, clerical calculations had been carried out in more than 13,600 cases.

I want to clarify one point made by the hon. Gentleman. When a clerical calculation has been carried out, we can be pretty confident that the result is correct. Clerical calculations offer a quicker way of getting to the answer than waiting for the current process of reviewing all claims to end. In cases where a clerical calculation has been carried out, the correct benefit is already in payment—in other words, it is not an estimate.

We were particularly anxious to minimise the serious financial difficulties that could have arisen for some—the hon. Gentleman has quoted a couple of cases. We have taken steps to compensate those who have been adversely affected, despite our contingency arrangements. As the hon. Gentleman has pointed out, more than 160,000—in fact, 167,000—pensioners were compensated for delayed payments between April and June this year, with further payments under the Department's special payment scheme automatically being considered as cases are reviewed. When the review process has been completed, everyone will have received all the pension and other contributory benefits due to them, together with any compensation due.

The hon. Gentleman has asked what interest rate is payable in those circumstances. The normal building society rate is applied; however, no compensation is payable unless certain conditions are met. First, the delay must have been at least eight months; that is the normal rule applied by the Department in respect of delays in retirement pensions. Secondly, the amount that has not been paid must be at least £100. Thirdly, the amount of compensation payable based on building society interest rates must be at least £10. Those are the standard rules applied by the Department in respect of compensation for delayed payment of retirement pensions.

Mr. Rendel

What would happen in a case of a pensioner being able to prove that, for one reason or another, he had to withdraw savings from a fund that paid a higher interest than the normal building society interest rate; or he had to borrow money and so had to pay interest at a considerably higher rate, which he would not have had to do had his pension been paid on time? Would not such circumstances make a case for compensation paid at a rate rather greater than the building society rate?

Mr. Timms

No one has given me any such example, but it is not our intention to vary the long-established rules for compensation in such cases. The procedure is well established and we anticipate that we shall continue to operate it.

It has also been important to ensure that NIRS2 is delivered successfully, so that its potential for supporting welfare reform in future is fully realised. We worked in partnership with Andersen Consulting on a major review of the system and its problems, so as to get the project back on track. I am pleased to be able to tell the House that those efforts have borne fruit: NIRS2 is a powerful system which will enable important improvements to the benefit system to be made quickly and efficiently in future. I have visited the NIRS2 installation and spoken to those responsible for its development. I am satisfied that it will, in due course, serve us well.

The problems surrounding the system's introduction have rightly been the subject of considerable interest. As the hon. Member for Northavon said, the Public Accounts Committee took evidence from those involved and rightly expressed its concern about the impact of the delays in finalising the correct rate of benefit in payment. However, the Committee recognised that, without the Government's contingency arrangements, the impact would have been much worse. By and large, the contingency arrangements worked well, which is a tribute to those who operated them.

Let me set out in greater detail how the problems arose; in doing so, I shall answer one or two of the hon. Gentleman's points. In spring and early summer last year, we hoped that it would be possible to introduce the new system during the summer. However, when the system was implemented it became apparent that there were a number of matters to be ironed out before it could be relied on to produce what the Benefits Agency needed. It took some weeks before we were confident about what was being produced.

NIRS2's live facilities for jobseeker's allowance were rolled out on 9 November last year, followed by the other short-term benefit, incapacity benefit, on 18 November. Facilities for the long-term benefits—retirement pension and widows benefit—became available on 6 January this year. NIRS2 has thus been capable of processing new claims to all the contributory benefits since 6 January of this year. The hon. Member for Northavon asked when I expected the system to be able to do that. The answer is that it has been able to do so since 6 January this year.

However, from the beginning of January, we faced a new problem. The hon. Gentleman, who is an expert in these matters, knows that at the beginning of each year, we start to require the national insurance contributions data from the previous tax year in order to establish benefit entitlement. Because of the delays and difficulties since the summer, it had not been possible to load up the data for all those contributions on time.

On 6 January, the system capability was in place, but a large chunk of the data needed was not. About a third of the data had not at that stage been loaded—16 million of the 47 million items for the year. Although the system was capable of processing the claims, the data that it needed to do so were missing in about a third of cases.

The priority at that point was clearly to load up the remaining data as quickly as possible. By the beginning of February, I was becoming concerned about the rate of progress, as there were still 13 million records to go. I commissioned daily reports on the numbers, and during February the number fell sharply, I am pleased to say, to less than 7 million.

Currently, there are just 160,000 records outstanding, the rest having been successfully loaded. In some ways, we are now in a better position than we normally would be at this time of year. The reason is that NIRS2 is a better system than NIRS1 was. Allowing for records that are rejected, as some records always are, and with outstanding queries, NIRS2 has posted about 900,000 more records than NIRS1 had done by a comparable time a year previously. Indeed, the previous year had been a good one for NIRS1. We are now in quite good shape in terms of the data loaded to the system, and we are starting to see improvements in performance from NIRS2, vindicating our commitment to making it work well.

For the 1998–99 tax year, there are 46 million items to be posted. The target is for 98 per cent. of them to be posted by 31 December this year. The national insurance contributions office of the Inland Revenue, which is now responsible for NIRS2, is two weeks ahead of schedule for hitting that target, boosting our confidence that we have a good system for the future.

I and the Government apologise unreservedly to those who have been inconvenienced and, in some cases, distressed by the problems that have occurred. I have no hesitation in putting that apology on the record.

The hon. Member for Northavon referred to a couple of his constituents who had been particularly inconvenienced. I am not aware of the case of the person whom he introduced as Mr. N but went on to refer to as Mr. New. The hon. Gentleman may want to tell me more about that, and I shall be happy to investigate.

The other constituent whom the hon. Gentleman mentioned was Mr. H, who I think has appeared on HTV West to speak about his problems, so I do not think that there is much reason for anonymity in that case, but I shall respect the fact that the hon. Gentleman referred to him as Mr. H. I know that that case has been resolved. The arrears due to Mr. H were paid within a couple of weeks of the hon. Gentleman writing to me about the difficulties that his constituent faced.

I pay tribute to staff in the Benefits Agency and the Contributions Agency, which is now the national insurance contributions office of the Inland Revenue, and to staff in Andersen Consulting, who have worked extraordinarily hard to resolve the difficulties and have put us in a relatively happy position.

The hon. Gentleman asked about the review process. We have completed about 30 per cent. of the process so far, and I am hopeful that it will be completed by the end of the year. By that stage, we will ensure that everybody has received all of the benefits, plus any compensation, due to them.

Mr. Webb

The Minister has announced a further slippage in the completion date. He said previously that the review would be completed six months from 21 April, which is 21 October. Last week, when I asked him for a report on progress to date, he referred me to the April date. When did he learn about the slippage to the end of December and why did he not have the grace to respond accordingly to my question last week?

Mr. Timms

I am bringing to the House the best current information: the whole process will be completed by the end of the year. Of course, if it is possible to conclude sooner, we shall do so. However, I am advised that we can anticipate the completion of the process by the end of the year.

The hon. Gentleman suggested that more than a quarter of a million pensioners had received incorrect pension payments. That is not the case. Some 285,000 pensioners are having their payments reviewed through this process, but all of those payments were not wrong. Of the 30 per cent. of cases that we have reviewed so far, we have found errors in about 10,000. Thirty per cent. of 285,000 cases is about 90,000 cases, but errors were found in 10,000 of them. Of those, the great majority of pensioners were underpaid, so we shall increase their payments in order to put things right.

However, a small number of pensioners were overpaid and, as the hon. Gentleman said correctly, in those circumstances people have been asked to indicate an understanding that they will need to pay back the overpayment. Matters are in hand to put that into effect. Anybody who has difficulties in the meantime may contact the national insurance benefit task force.

Mr. Michael Trend (Windsor)

I seek clarification about what will occur in the case of overpayment. The Minister said, in a rather sinister manner, that he was putting matters in hand. What will happen to people who have been overpaid a relatively modest amount, who have spent the money in good faith because they did not understand the original advice that they should hold back, and who did not know their genuine position? Will the Government pursue such people in law in order to recover the money overpaid?

Mr. Timms

Any such case will, of course, be handled with sensitivity by the agency. However, as I have said—and this was a feature of the speech by the hon. Member for Northavon—people were asked to indicate that they understood that that was a possibility. It was absolutely right that that should have occurred, and payments were made on that understanding.

The national insurance benefit task force was set up to help resolve some of those difficulties. It may be helpful if I read into the record both the address and the telephone number of that task force, which has been established to assist people who are experiencing difficulties or who have queries about the problems that we have discussed this evening. The postal address of the task force is: PO Box 6, Newcastle upon Tyne, NE98 1XB. The telephone number is: 0845 6010586, which is a local-call-rate number. Anyone who has a query about these matters is welcome to call that number at any time between 8.30 am and 4.30 pm, Monday to Friday.

People also have the option of contacting their Member of Parliament, as hundreds of them have done. If their MP then writes to me, I can give an assurance that problems such as those that have been highlighted by the hon. Gentleman will be dealt with promptly, as they were in the case of Mr. H. The hon. Gentleman wrote on 16 April, and full payment was made on 30 April. The hon. Gentleman will therefore accept that the issue was swiftly resolved once it had been drawn to our attention. It is our firm intention that such hardship cases should be resolved speedily.

Mr. Webb

The Minister is being very generous in giving way. I want to be absolutely clear about the situation for people who will retire in future. Is he saying categorically that anyone reaching 60 or 65 will now get the correct, full pension from day one, and that we shall not have to write to him henceforth about new cases?

Mr. Timms

I certainly hope so. In the old days with dear, old NIRS1, there was the occasional error, and I cannot give an absolute commitment that there will never be an error in future. I certainly hope that there will be none. I can tell the hon. Gentleman that the NIRS2 functionality is now fully in place and there is no problem in calculating the benefits, as there certainly was until 6 January, and then, because of lack of data, for several months earlier this year. I can give the hon. Gentleman the reassurance that he seeks.

I was asked how much compensation we expect to pay in total. I said that £1.67 million has been paid in the £10 payment category. We estimate that ultimately about £7 million of compensation will be payable. About £3 million of that will be paid through the £10 special scheme, and £4 million under the Department's normal compensation arrangements, which I outlined earlier in my remarks. To date, we have paid a total of £1.853 million in compensation of both kinds.

The hon. Gentleman asked what we were doing about the Public Accounts Committee's recommendations. We are considering them carefully and they will be taken forward by the Inland Revenue, which is now responsible for managing the NIRS2 system in discussion with Ministers. The hon. Gentleman referred to an inquiry. Clearly, that will be a matter for Ministers to consider in their response to the recommendations in the report.

The final point that I want to make relates to the hon. Gentleman's important question about what lessons have been learned from the experience. The most important lesson relates to how such projects should be developed in the future. There was a fundamental flaw in the way in which this project was set up because it was thought that somebody needed to write a detailed specification and hand it over to a firm of consultants. They would then be sent away for a couple of years to build the system according to the specification. On 10 February 1997, the consultants would be brought back to plug in their machine and everything would work.

Of course, that is not a sensible way to try to build an information technology system of this complexity. It might make sense if one is building a bridge or developing a project of the kind that is frequently associated with the private finance initiative. We need a much more partnership-based approach to projects so that throughout the project's development, there will be a close relationship between, in this case, the Department of Social Security or the Inland Revenue and the people doing the work. Changes that are needed over the life of the project and issues that are raised during the work can then be quickly and sensibly tackled. We can then have confidence that the resulting system will meet the Department's requirements.

That is the biggest lesson to be learned from the problems that we have had with NIRS2, and we are building it into our future planning for modernisation. There is a great need to modernise the systems on which our benefits system depends. We inherited systems that were pretty antiquated in a number of respects, but we have to modernise them in a way that does not lead to a repeat of the difficulties that we have experienced with NIRS2.

Mr. Webb

Will the Minister clarify his response to two of the issues that I raised specifically? First, who will pay the compensation? I am not sure that he told us whether Andersen Consulting will face a big bill and I should be grateful to an answer on that. Secondly, although he said that an inquiry would be the Inland Revenue's business, can he confirm that no inquiry has yet started?

Mr. Timms

On the latter point, we have not yet responded to the recommendations of the Public Accounts Committee, but we shall do so. A great deal of work has gone into learning the lessons of what happened with NIRS2. Andersen Consulting has already paid some compensation because of the delays in the project and the matter of whether further compensation will be payable has not yet been determined, but the public purse will be the source of funding for compensation.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes past Nine o'clock.