Civil Service Pension Scheme

My Lords, midnight tonight marks the deadline by which Capita promised a complete return to normal contractual service levels. We will hold Capita’s performance against this important milestone. The Minister for the Cabinet Office intends to provide a comprehensive update in the coming days, once we have fully evaluated the data. We have been consistently clear that we will not hesitate to take firm action for continued underperformance. I will endeavour to repeat any Statement in your Lordships’ House, subject to agreement by the usual channels.

I thank my noble friend the Minister for her reply. The issue is getting a return to normal service standards, which was hoped to be achieved by June—by today—but clearly it simply has not happened. Many new pensioners are still losing their earnings income and not receiving their pension, leaving them in poverty. It is clearly an important and urgent matter. It is time to reconsider the contractual arrangements, but I hope my noble friend will agree that the important issue now is urgent action to help those facing poverty.

My noble friend raises a very important issue. While there are contractual issues at play, the reality is that behind each and every one of the statistics that we will undoubtedly discuss today there is an individual and a family who are struggling. We have heard many harrowing and heartbreaking stories. We previously set out two recovery targets, including an end-of-June milestone by which we expected a return to standard, contractually required levels. The end of June deadline has now arrived, and Capita has completely failed to meet this milestone for all services, as well as missing its initial April target. Since its explicit personal assurances have not been met and core outputs are deficient, we are deploying a unified package of escalating measures, including independent technical audits and an on-the-ground remedial adviser to hold it ruthlessly to account. I look forward to discussing the detail of this after my right honourable friend the Paymaster-General has made a Statement to Members of the other place in the coming days.

My Lords, Capita’s failures are unacceptable, but this also raises serious questions about the Cabinet Office’s own contract management. Given the warnings before handover, what further interventions are Ministers prepared to make if service levels are not restored? What lessons have been learned to ensure that this saga is not repeated, and will the Minister commit to including the actions taken as a result of those lessons learned in the update in the coming days?

My Lords, I gently remind the noble Baroness that this contract and its details were signed by the previous Government. We are now trying to fix, and seek assurances for, a contract that has failed many people. On the detail and the actions of the Cabinet Office, we have established a pension recovery task force led by Angela MacDonald, the Second Permanent Secretary at HMRC. There are 140 surge staff, the costs of which Capita confirmed in a letter to the Cabinet Office in April it will be funding. Capita has surged its number of support staff as well; 500 people are working on the contract, which is a 50% per cent increase on the previous contract. Clearly, however, too many individuals are waiting. Regarding the details that the noble Baroness has requested, obviously a Statement is coming. If they are not included in that, I know she will make sure that I write to her with the details as and when we get to that point.

When I previously asked the Minister in what circumstances a failure by a supplier could result in its being banned from future contracts, she said “authorities can now also exclude suppliers who failed to rectify poor performance under a contract with a public authority despite an opportunity to do so, provided the issue is continuing”. That sounds very much like the current situation with Capita, so I ask the Minister: how close are we now to Capita being excluded from future contracts, and what level of further failure on this contract would trigger its exclusion from any future contracts?

There are two separate parts to this, which include the current contract. On debarment and the Procurement Act, while I cannot go into the specific details of this case right now, I assure the House that the Government remain committed to taking necessary and proportionate actions in accordance with the law. With regard to Capita as a supplier, we need to remember how many contracts it supplies to government. It has a total of 85 contracts across the public sector, 39 in central government and 46 with the wider public sector. While there have been significant, outrageous failures in this contract, the reality is that, in operating its other contracts, it is currently meeting 87% of its KPIs, so this has to be assessed on a case-by-case basis. However, to reassure Members of your Lordships’ House, outside of the contract for the Civil Service and the Royal Mail pension schemes—I updated the House on the latter earlier this year—the Cabinet Office does not have any further contracts with Capita.

My Lords, does the Minister accept that a figure of 23,000 has been identified as the number of those who have been caught by this problem? Those who are newly retired may still have payments to make on mortgages on their houses and may be in danger of losing them. Is there no mechanism that can be brought forward immediately to make estimated payments to those who have a pension entitlement but no figure coming through so that they avoid the worst excesses that could come their way unless this is resolved?

The noble Lord is right that this is affecting people’s day-to-day existence—we have seen in the news coverage at the weekend quite how heartbreaking that has been. We are working on a case-by-case basis. Some of the most harrowing cases have been raised with colleagues at the other end of the building and we are working with MPs, including by having virtual surgeries every day since 29 May, to help them support their constituents in this space. I want to raise two specifics that it is important for your Lordships to be aware of. First, we have doubled the amount available in transitional support loans—it was £10,000 last time I was at the Dispatch Box on this issue; it is now £20,000 that is available to everybody who is not yet accessing their pension. I urge noble Lords, if they know people in this space, to let members of the scheme know that they are to contact the department they worked for and they can access £20,000 in a loan. We have also introduced a process to pay interest in respect of pensions payable by Capita from 1 December 2025 where full benefits are paid more than one month after retirement. The interest rates applied will be based on Bank of England base rates plus 1% for the period of delay between retirement and payment. However, the noble Lord is right: we need to do this as quickly as possible and get people their money.

My Lords, I declare an interest in that my wife is a beneficiary of the Civil Service Pension Scheme. She was entitled to her first payment on 1 October last year and she received it on 3 June this year. We can afford to take that hit, but thousands of Civil Service pensioners cannot. What assurances are we going to get, first, that people are compensated for the loss of their pension over a period; secondly, that there will be a full inquiry into the way in which the scheme was operated by Capita; and, thirdly, that Capita is properly held to account in terms of bidding for contracts in future.

I thank my noble friend, and I am truly sorry for the experiences that his wife has had; I am pleased that she has now received her pension. My noble friend’s factual story is unfortunately all too familiar given recent events. He is absolutely right. The reality is that the Government are trying to fix what has clearly been broken while establishing the facts. We are trying to prioritise the most vulnerable and put in support processes. Then, it is fair to say, we will establish and determine exactly what went wrong and where, making sure this can never happen again.

My Lords, did the contract that was signed by the previous Government have penalties in it if the party failed to deliver what was required of them, and if so, are they being implemented?

I thank my noble friend. We have already withheld nearly £10 million in transition contract payments for undelivered milestones from Capita. This represents our continuous position that public funds will only ever pay for what is successfully delivered to the required standard, and this figure is not the sum total of withheld payments across the wider contract lifecycle. This is obviously only stage 1. I look forward to being able to further update your Lordships’ House next week.

My Lords, is not the systemic failure here that the Civil Service refused to take past performance into account? That is completely contrary to normal life. If someone did a job on your house or on your car and failed, or if you took a holiday with a company that failed, not only would you not use them again but you would advise everybody else not to. If we want only one example, it was the Capita failure on the Army recruitment programme, which was an utter disaster for service recruitment. Is it not time that we changed that so that past performance counted? That would focus the attention of management on fulfilling the contracts they have got rather than on the contracts they hope to get.

I thank my noble friend—I think. He is absolutely right. He and I were members of the Defence Select Committee in the other place and discussed the terms of the recruitment contract for the Armed Forces in great detail. There have clearly been challenges in the past, but I remind noble Lords that Capita is meeting 87% of its KPIs on other contracts. However, the issue that the noble Lord has raised is incredibly important. Given that, only last week, the Cabinet Office issued a Written Ministerial Statement making clear our insourcing drive and the public interest test, I hope all these factors are brought into account.

My Lords, will the Government be asking the contractor for compensation for their costs and inconveniences, as well as the contribution it should be making to those who have lost on their pension?

My Lords, the noble Lord is absolutely right. We have already done so, and Capita confirmed in writing in April that it will meet the costs that we have laid out.

My Lords, following on from the question from the noble Lord, Lord Spellar, is it not a fact that government has become vulnerable because so many services have been outsourced and there are very few companies that can win contracts? Therefore, there is not much option but to use Capita. Do we not have to rethink the whole question of government capacity and outsourcing?

My noble friend is absolutely right, which is why the Cabinet Office issued updated guidance about public procurement last week in line with our manifesto. The reality is that there were few businesses of the scale that could manage a complex pension scheme such as the Civil Service Pension Scheme. It remains clear government policy to advance insourcing, and this pension scheme is a prime candidate for future insourcing once immediate operational stability is secured. The contract remains under intensive taskforce oversight, but if performance fails to improve, absolutely all further commercial, legal and operational options remain on the table—for this or any other contract.