Welcome to this joint session of the Public Accounts Committee and of the Public Administration and Constitutional Affairs Committee on Wednesday 8 July 2026. I thank my fellow Chair, Simon Hoare, for his Committee’s collaboration with us on this important matter of the ongoing failures of the civil service pension scheme. Before we start, I want to make it clear that both Committees sitting here agree with the Minister that the levels of service and experiences for members of the pension scheme over the past seven months, since the transition of provider to Capita, have been entirely unacceptable. We also recognise that the Cabinet Office is responsible for the ongoing issues with the scheme, many of which predate the transition to this provider. As you will no doubt be aware, this is a very distressing matter for many individuals. All Members of Parliament know that from our postbags. I know that my fellow Committee members of the PAC and PACAC regularly hear from retired scheme members who have been left struggling to make ends meet, at a pivotal point in their life, causing them significant distress and anxiety. I sincerely thank every individual who has taken the time to write the Committees on this issue, and indeed I thank all the staff who have had a really heavy workload in the past few days—it is much appreciated—and everyone who has helped with this hearing. This afternoon, we want to hear what responsibility the Government have for this mess, how the Minister and Cabinet Office officials are holding Capita accountable for its service failures, how they are supporting affected individuals and, finally, what consideration are they giving to insourcing this vital service. I am going to follow my normal practice and ask everyone to introduce themselves. That would be really helpful.

I am Nick Thomas-Symonds. I am the Paymaster General.

Thank you for coming; we appreciate it.

Good afternoon. My name is Cat Little. I am the permanent secretary of the Cabinet Office and the chief operating officer for the civil service.

Afternoon, everyone. I am Andrew Forzani. I am the Government chief commercial officer.

Hi, I am Angela MacDonald. I am the second permanent secretary for HMRC. I have been leading the recovery taskforce to support the Minister and the permanent secretary.

Thank you. Minister, the first question to you, please. Were all the services performing at normal levels by the end of June, as was promised by Capita in their hearing with us?

The straight answer to that question, Sir Geoffrey, is no, but if I may, I will give a brief opening statement and then move to questions. The simple truth of this, which I made clear to the House in my statement on Monday, is that the position we find ourselves in is not good enough. It is completely unacceptable. I am deeply sympathetic to the many members of this scheme who dedicated their careers to public service and have been treated, frankly, so poorly by this provider. I am afraid, yes, Capita has failed to meet its end-of-June milestone to return the scheme to required levels. The figures I am just about to give are correct as of 30 June. In a moment, I will pass to Angela to give more context and detail to them. We are talking about over 6,700 quotations that have still not been dispatched for past retirement dates and over 4,100 bereavement cases that remain unresolved in the system. Frankly, those are grieving families and public servants who are facing serious illnesses. They are dealing with harrowing and difficult situations as it is, without having to deal with the delivery failure on top. I also want to say that under my leadership—I am sure you will appreciate that I have had this responsibility since September, after the reshuffle last year—the Government have been doing everything possible to manage the crisis and fix the issues on behalf of the scheme members. The moment we were alerted to the severe delivery challenges in January, I intervened to establish the Cabinet Office pensions recovery taskforce. I brought in Angela, who is second permanent secretary of HMRC, to lead that. I also deployed urgently a 140-strong Government surge support team directly into Capita to provide vital operational capacity—obviously, the priority then was to stabilise the service. I also established, on an emergency basis, a transitional support loan scheme. That has delivered about £15.6 million in interest-free funds to over 2,700 members experiencing payment delays. I also ordered a team to take direct operational control of correspondence workflows and to establish virtual surgeries running every weekday. We have delivered, I think, over 250 surgeries to support over 150 Members of Parliament and caseworkers since launching at the end of May. Because of those interventions, in my view, and the work that Angela and the team, Cat and the team, and indeed Andrew have done, we have seen an acceleration in the speed of “issuance”. I think we have stabilised the phone lines to achieve a much better average wait time. That is not to say that bad experiences are still not being reported, but certainly the average wait time has gone from over an hour and a half to about three minutes. While I think the emergency intervention has stabilised the service—I dread to think where we would be without it, by the way—we cannot carry on like this, propping up a failed private contractor. I will not have a situation in which public money is funding corporate failings, so I will fight relentlessly for Members to ensure that we recover every single penny of the cost of the surge interventions from Capita. Over the next few months, our immediate focus is on executing robust commercial and operational pressure to clear the remaining backlogs and to recover the service, but for the longer term, I think that the episode has vividly exposed the severe limitations of outsourcing the civil service pension scheme. We are executing our contractual rights at the moment to deploy independent technical auditors and an on-the-ground remedial adviser to pinpoint residual issues. I am actively, with my team, exploring all commercial, legal and operational options, including testing—which I know we will come to in a moment—the long-term feasibility of a full in-house delivery model. I will leave it there, Sir Geoffrey, because I know your Committee members will want to discuss the issues, but I wonder if I may ask Angela to give some context to the updated picture before we move on.

That is perfectly in order. Angela, please.

Thank you. I am aware that I do not want to give you a massive blizzard of figures, because I am able to answer so many of your data questions. At this point, I will stick to some fairly high-level numbers, and then no doubt colleagues will be able to ask me specifics as we go through, if that is an acceptable way to go in. If we look at this at the macro level, how much work is in the whole system? Is progress being made, and what progress is being made against the inherited work? At the moment, we are in a situation of about 90,000 pieces of inherited work—you may remember the 86,000, but do you remember the 15,000 unopened emails that we discussed when we were before you previously? Well, out of those emails, about 4,000 pieces of work were sat inside them. That is where the 90,000 outstanding pieces of work comes from. Since then, since 1 December, about 287,000 new pieces of work have arrived. The scheme is active and plenty of new work is coming in. Overall, therefore, 377,000 has gone into the machine in the round. A lot has been processed, but as we sit here right now, 111,000 pieces of work to do are sat inside the scheme. No scheme is ever zero—a normal head of work in a scheme like this would be about 55,000. To give you a bit of a sense of where we are, we should be at 55,000 by now, in normal running, but we were at 111,700 at 30 June. I am hoping, Chair, that I have not lost you so far. Is that okay?

No, I am with you.

To give a sense of where we find ourselves, we are at double where we should be in this situation. On the particulars, thinking about quotations, which are incredibly important here, the Minister referenced 6,700 at 30 June. About 1,000 more have been issued since then, so we are at 5,700, and we expect another 2,000 or so to go this week, but that would still leave about 4,000 members with past retirement dates. The numbers we are quoting here are for retirement dates pre-30 June, not for retirements that are coming up—obviously, we will have more to do there. As I sit here now, 5,700 members are still without a quote for a past retirement date. There are 3,127 payments outstanding, and 1,800 of those people have been waiting for their payment for more than 30 days. Those get you to the sense of, “I’ve sent my paperwork back; I am not getting my things through”. So that is where we are on payments as we flow through. Bereavements is another key area. There are 16,876 in the bereavements queue and 9,273 of those have no money due. That could be the death of a second spouse or there is no dependant. So there is no further money due in over half of that queue. However, 7,603 are families where further benefits are due. Of the people in that process, nearly 2,000 have been sat in that queue for more than four months. Again, progress has been made in all of these, but there remain significant volumes of families as yet unprocessed. Do you want me to stop or keep going?

Keep going.

There are 618 outstanding death in service cases, of which 237 have been in the queue for more than four months. There are 429 ill health retirement cases, of which 131 have been sat there for more than two months. I make the distinction because ill health retirement cases should flow through the system a lot faster, because they enter the process at a slightly different point. In all of those areas, lots of cases have been processed. However, there are still material pots of members and members’ families who are yet to get all the way through. I will stop there, Chair, if that’s okay. If you want to ask me about other bits, I have other data, but that gives you a sense of the overall position, if that is useful for colleagues.

May I issue a personal thank you to you, because without that surge team we would be in a far worse position than we are today. So a grateful thanks to you. A question to you, Minister, or Angela. For everybody listening to these hearings today, I was slightly worried by your phrase it will take “many months” to clear up the backlog. What is a realistic timetable for when we get back? The headline figure in Angela’s figures was that you are running at 111,000 cases and a normal figure would be 55,000. When are we going to get back to the normal running of a pension scheme of this type?

First off, I want to be very, very clear. We have had two rectification plans with milestones in April and June. We have not met any of those residual milestones, just to be really clear about it. I have asked Capita to provide us with a fully confident rectification plan that has detailed assumptions and asks the very simple question: why is it going to be different and believable this time? They are going to provide us with that detailed plan on 14 July, and you will have an opportunity to ask them a bit more about the timescales. My understanding is that they are going to commit to some of the categories that Angela talked about as being within normal service levels by 1 September, with more complex cases in October. We have to take the rectification plan that Capita give to us, and we are going to have to assure every single detail and assumption in it to stress-test whether we have confidence in it. That is exactly why the Minister has asked us to bring in independent auditors as well, so that we can actually look at the underlying systems and assumptions that are driving that plan.

How can pension scheme members have any more confidence in that than they have had in the past? After all, both of our Committees in various ways have had promises from Capita that first they would get it back to service levels by March, then April, then May, and now they have missed that. They looked us absolutely in the eye and said to my deputy that they understood the question and would get back to normal service level by June. How can we have any more confidence that this will happen?

That is a very fair challenge, Chair. This is why, as the permanent secretary has said, we have gone further in putting the remedial adviser in and in putting in independent auditors. Not only do those independent audits look at process and capability, which is absolutely critical to meeting the milestones set up by Capita, but another dimension of them look at data, tech and IT. I am doing all that I can beneath this to try to get assurance and, as the permanent secretary said, to get them simply to tell us what needs to be true in order to meet the milestone. My officials are in constant dialogue with Capita. It is a fair challenge, given that two deadlines have already been missed. It is about trying to put some structure beneath that to try to give assurance that it will be met, and, if there is concern at an earlier stage that it will not be met, to look at what we as a team can do to come in and assist.

Practically, on the ground, my team and I are meeting with Capita every day and we can absolutely see that delivery is accelerating. The amount of production going out is accelerating every week; the problem is that it is not yet accelerating fast enough. Being balanced, can we see that there is a potential route to get here? Yes, I can, but we should not be taking anywhere near this long to get to the position we should be in.

That gives us a little hope. I apologise to the Committee, as I have taken up too much time, but I have an important question for you, Cat, as a point of clarification. You emailed civil servants yesterday updating them on urgent actions under way to stabilise the civil service pensions scheme. We have had correspondence on this email from civil servants, who say that in the email, you directed members experiencing delay to the portal and case tracking feature on Capita’s website. Apparently, this feature does not work properly and never has done. Why did you direct colleagues to a resource that does not exist?

I am afraid that is not my understanding; Angela will have to verify that.

The portal currently has a “Track my case” facility. At the moment, it is fairly basic in functionality: basically, it recognises that a case is there. You may remember from earlier hearings that there were lots of concern that requests were going into a blackhole and that nobody knew that a request was even there, so the facility very clearly says where you are at. However, it is still quite basic: it says there is either an open case or a closed case for you, but does not tell you all the details. There is a further update for that portal, and we are trying to make sure that there are other resources. There are lots of things on which people have questions, so Capita has updated its website to look at the most frequently asked questions—it is that kind of thing. We are trying to offer a balance of things where people can go online, if that is their preference, or ring. If the portal does not deliver for you, it is really important that the phone service, as the Minister mentioned, remains fit for the purpose. If you cannot get what you need on the portal, you cannot be waiting on the phone for two hours, hoping that somebody will answer your question. It is not good enough yet, but it is part of a multi-delivery.

Lots of questions spring from almost everything you say, but we have a lot of ground to cover.

What counts as a case completed? We are told over and over again that when someone is sent a quote or information about their pension, the case is then marked as done, even if that information is proved to be inaccurate and the individual has to go back to Capita to ask for it to be rechecked. By then, the case has already been dealt with, apparently. Are you taking that into account with the figures? Otherwise, it is very easy to get the figures down by simply issuing wrong information quickly.

Absolutely. The majority of people ask for a quotation because they want to go into retirement. Not everybody comes back afterwards, so keeping a case open in perpetuity and doing a retirement in the round means you end up with gaps. Yes, a quote case is closed when it goes out; however, we are specifically tracking escalations. When people come back in to say, “I don’t agree with the quote,” “I don’t like the quote,” or “I’ve got a query on the quote,” we are specifically tracking that activity, because it is a key quality indicator. That means that those cases have to be re-done, and we need to be tracking them.

That is interesting, but the feedback we have on escalations is that they seem to go into a black hole, and the only response is, “We note your escalation,” end of story. Are you really counting them and dealing with them?

I can only rely on the data that Capita is providing me with, but if there are—

I think that is the problem, isn’t it?

Potentially. But if there are examples where members have those, please let me know and let me get to the bottom of it.

Where does one start? Let’s take that as a key point. How confident are you that Capita is operating with a full—for want of a better phrase—open-book approach and showing you as the Cabinet Office and the surge team everything?

I can answer that in two ways. We are confident they are giving us everything. Do we have confidence in the data and the management information that you would expect to see on a complex contract of this type? We are not fully confident in the data; we have to do a lot of work with Capita to make sure that we have confidence and assurance in the information that we are being given. This was meant to be a Power BI, self-service, MI-enabled contract from day one; it is not. There are lags in the data we need, and the quality of what we are getting still needs significant assurance.

You take me on to my follow-up question. From memory, Government awarded the contract to Capita principally because of their commanding narrative around digital data handling and AI. Either they lied to secure the contract, or they have been let down by a third-party supplier, or the scrutiny of the Cabinet Office to double check what they were being sold in the bidding prospectus was not done; it could be a lethal cocktail of all three. Which do you think it might be?

I can give you some of the details of the recruitment process that was undertaken. As part of the evaluation, Capita made a series of commitments around their ability to deploy technology and automate the service.

Sorry to interrupt. Can you just clarify that? Words are important. Was this to deploy a technology that they already had at hand and which had a proven track record of coping with the demands of a scheme of this sort of complexity, or something that was in an advanced evolutionary stage for which this scheme was going to be a technological guinea pig?

It was a combination of both. In terms of proving their competence to take this contract on, they referenced schemes that they were already delivering in the public and private sector. It was a combination of systems that they were already using on those contracts plus new technology that they promised to develop as part of this.

In the promise to develop, was there an adequate, realistic window to develop that capability prior to the green light coming to them to operate the contract from day one?

There was a two-year transition period, which was specifically to understand what they were taking on and to give them time to develop the IT solutions.

Hindsight is, of course, the wonderful gift that we all wish we had when we are taking decisions. Are you convinced that sufficiently robust scrutiny by Government during that two-year window of technological development would give Government confidence that the capability would be there from day one?

We are assured that we asked the questions and we were given very strong assurances. I am sure we will get into the decisions to go live or not go live, where a lot of that focus was taken. As part of lessons learned, we absolutely need to reflect on whether we could have done more to assure ourselves of those promises and capabilities.

Just to add to that, if I go back to the three things that you set out, there are undoubtedly lessons learned about the specialist capability we used to go and assure ourselves of precisely what was being developed and the quality of what was being developed. There is no doubt about that, but we were given very strong assurances that this technology would be available by now, and it became very clear, post transition, that that was not going to happen in the timescales that we were given assurances about. We are still awaiting a good, confident technology rectification plan that we have confidence in, which is exactly why we are having to now bring in a remedial adviser to give advice on why this has not been delivered and what confidence we have that it can be.

They weren’t even that good, were they, on what one might be described as the basics—dealing with Members of Parliament raising cases on behalf of their constituents, answering the telephone and dealing with a call in a timely fashion? I am no IT person, but I do not think one could describe the operation of a portal as the cutting edge of technological science. Even on just some of the rather basic table stakes that you would expect from a large, mature organisation like Capita, they failed singularly and significantly, did they not? Forget any of the cutting-edge new stuff; they were useless at just the basics.

I entirely agree. Call centres are right at the heart of many of the services that large outsourcers like Capita deliver. Obviously, we are the recipient of call services from Capita in other parts of Government and the public sector. This should not have been beyond their capability to deliver on day one.

A final question on this section to Ms MacDonald. Ms MacDonald, you very usefully gave the Joint Committee a series of very helpful figures and statistics. We all know that behind each one of those very large numbers is an individual who has worked hard or is going through the upset of bereavement, who is going through the most terrible time, trying to get hold of something which is legitimately theirs. I think of one constituent who has been to see me, who had to retell the story of her early bereavement six times, only to be asked by one person, “Are you sure? Because you sound too young to be a widow.” That is not acceptable from any organisation, still less something the size of Capita. My question is the human one, and it is one I asked the Minister on his useful statement in the House earlier this week. Are you persuaded or convinced that Capita understand the sensitive human nature of the issues that they have in their hands? This is not data. This is not percentages. This is not numbers. This is not a checklist. These are people who are racking up debts, who are worried they can or cannot pay their bills, because their pension is not coming through. They are not necessarily certain they can commit to funding a funeral in some instances, where they are uncertain about the bereavement stuff. I am sure this is a question I will ask Capita when they are before us later on this afternoon: does Capita get the human impact of their inaction and service failure? And is that in any way expediting their response, or is it just data, data, dry data?

I speak to Chris Clements, the lead for Capita Pensions, virtually every day—every other day. The only thing he and I talk about is the situation of members. We don’t talk about commercials. We don’t talk about money. We don’t talk about priorities in terms of “we can’t spend on this and we can’t spend on that”. The only thing we talk about is families, the complaints that we are both receiving and the particular cases that we are trying to fix. You shared the awful experience that you narrated there when we were before the Committee before. I have been to the frontline to sit with some incredibly hard-working frontline colleagues in Capita who are taking these phone calls every day and who are working their very hardest to be able to deliver. I think the core issue at a macro level, and as the permanent secretary mentioned, is that the technology is not yet where it needs to be and so there is a challenge. There is no point just being empathetic and sympathetic; we need to be able to do something for these people. If your technology does not let you navigate your way out, you can have lots of sympathy and empathy but be left unable to actually tackle the cases. The members do not want sympathy and empathy; they want somebody to fix their case and get them sorted. I absolutely know that from the very bottom to the very top, they understand. But “they understand” is important only when it turns into, “And now we have fixed it and now we’re doing stuff,” which is what I flagged to you before.

I am not particularly well known for being up to date with all the latest management speak, but you used the phrase “our colleagues in Capita”. I presume you are not talking about the surge team from HMRC.

I am not.

But they are not your colleagues in Capita. They are a private business, which His Majesty’s Government has contracted to provide a service. With the greatest of respect to him, I would not call the man who comes to repair my boiler or my car my colleague. I am paying him to deliver a service. Could I suggest that the narrative or mindset of working with “colleagues” rather than failing service deliverers—who are seeking to improve; I warrant that—may not give the public confidence that your side of the table understands the professional, corporate, commercial relationship? Colleagues they are not.

I would not want you to think in any way, and Capita would be very clear, that they are not feeling the strength of my 35 years of operational experience as I focus their mind on what needs to be delivered. In my experience, I have found that driving forward by constantly yelling at them for six months probably would not have got us where we needed to get to.

I was not suggesting yelling—nobody was yelling.

Honestly, Chair, I would not want you to think that there is a lack of significant pressure and holding to account being done by me and my team.

I will bring in Catherine in a minute, but this is a question for either Andrew or you, Angela. It seems absolutely critical to the whole thing that the IT is up to the job. When is that going to happen?

That is, as the permanent secretary mentioned, what the rectification plan needs to provide us with. We need to be able to challenge and get the independent assessment to give us confidence that what they are telling us about the progress that is yet to be made on their IT is credible and funded, with dependable assumptions. That is what we expect to get a plan for on 13 or 14 July, and that is what we will be challenging afterward with the independent adviser.

Will the remedial specialists that the Minister just talked about be looking at that and assuring you?

In detail. This is not a job for a generalist. The capability will be people who really understand and can critique a technology plan, and tell us that it is everything that it needs to be.

I am looking at the key performance indicators for the contract. Indicator 36 says that ill health retirement quotes should be provided three days from receipt of request. Given that is the target that Capita should be working towards, can you explain how on earth so many of the most urgent and most sensitive cases are still outstanding? To reflect my colleague’s point, I raised the case of a terminally ill person who had been seeking their quote since January, who died at the weekend having still not got it. How is that happening? I appreciate that in the grand scheme there are many quotes to process, but how are people who are dying not getting their quotes?

It is simply unacceptable that that is the situation. There is no reasonable explanation in any way.

Okay, but given the key performance indicators, what penalties have been levied for that breach in particular, which is so egregious and unforgivable?

Andrew should add to this on the commercial side, but to go back to the KPIs, there are 21 KPIs and we are currently expecting them to fail 16 of them this month. To go back to what Angela described at the start, because they are not working at the pace needed to move through the processing of the work, the backlog is getting bigger and bigger. My expectation is that this trend will continue to worsen unless something radically shifts in their ability to tackle the most important, urgent, high-priority work that they should be prioritising. We have made it very clear that ill health and bereavement are the priority cases and we expect that to be the absolute focus of their attention. Right here right now, we have withheld £9.9 million of transitional funding, and we are undertaking a significant commercial exercise to calculate the service credits due to those significant KPI failures, which we now expect to true up in a grand commercial negotiation. To go back to what the Minister said, we will not have a situation where hard-working taxpayers’ funds are used to subsidise a failing contract. Ultimately, it is our job with our commercial teams to make sure that we go after every single penny.

To come in on that, my very clear instruction to the whole team has been to absolutely hold Capita to account with every commercial lever that is available under this contract. That is exactly what the team has been doing. Catherine, you are absolutely right to raise the issue and where there are breaches like this, our very firm approach is to always be robust.

To be clear, we are withholding and deducting monies each month for failed KPIs.

There are two aspects to this. One is the financial implications of all of this, which should be on Capita rather than the taxpayer and should be substantial enough to create the change that we need to see. There is also the outstanding question for families who are grieving this week and still dealing with this. Do you have a target that you are working towards to at least deal with the most urgent and sensitive cases? Is there light at the end of the tunnel for those families?

Again, we will be getting a really firm commitment from Capita as part of the rectification plan, which we will receive next week. They are driving through these cases, but for the volumes that are outstanding, we are still talking about well through July and into August before we will actually see a material reduction in numbers.

That is really disappointing.

It is, I agree with you.

The family I am talking about is just one of the many cases in my constituency. They have been trying to get answers since January. As a Committee, we have been trying to get answers for months. Why did we have to wait until the point of known and demonstrable contractual failure before work was done to rectify it? Why has this not been done sooner?

On that, I deployed the team on 13 January. The work that Angela and her team did in terms of the surge resource of more than 140 officials and the pensions recovery taskforce was done within a matter of days. We did that really quickly. Your larger point, which is a very fair one, is that at the moment Capita is talking about a working assumption that they will deal with these cases this month and next month. The Committee could be forgiven—we could all be forgiven—for saying that we have had promises like that before. I had promises before the go-live date, which we might come to in a moment. That is why I think the independent audits are so important—to have the underlying structures there as well for exactly the point that Catherine made. Of course, we look at the data and what direction it is going in, but with every single item of data we are talking about a person and a family who deserve much better.

I cannot emphasise enough how appalling this situation is for our constituents across the country. I am afraid to say that when Capita were before us in March, we had absolutely no indication from them that they were prepared to be accountable and that they actually understood the enormity of the impact that their failures were having on people. Given that, what penalties do you plan to levy on Capita for its failure to deliver to required standards?

Again, that is a very fair question. First of all, we have already withheld £9.9 million-worth of milestone payments from Capita. Secondly, they have obviously defaulted in recent weeks, at the end of June, and we are taking appropriate action. Of course, under this contract, as you would expect, there are stages of escalation, including step-in and so on, that you can go to. My instruction to the team, which they have been carrying out to the letter in recent months, is that if there are further financial penalties that can be levied, they will continue to be. There is then, I think, a wider question about this scheme. For me at the moment there are two things. First, there is the immediate duty we have to the 1.7 million members of the scheme to stabilise the immediate crisis. Obviously, that has to be dealt with, in the interest of the scheme members, who are always at the forefront of my mind. There is then a second question about the future of the scheme and its becoming durable. I have only been the Minister since last September, but I observe that, in the past, a variety of iterations have been tried on this scheme to get it to be effective. I have said to the team that I want them to come back to me with options for how we can put it on a stable footing. As I said to the House on Monday, the Government have now introduced the public interest test, so that we do not have outsourcing by default. From April next year, the Government will be looking at contracts worth over, I think, £1 million, when they come to an end, as to what might be the best way to take them forward. In answer to your question, Rachel, the first point—and my very firm instruction—is that we will continue to use the commercial levers that we have under this contract, but I do think there is a second question that has to be answered: how are we going to make the scheme stable and durable for the long term?

Minister, you talk about the future and making the scheme sustainable. One of the things that is being talked about and would make lives a little easier—you have heard about some of the harrowing cases from my colleagues—is a compensation scheme for those who have really suffered hardship. It is felt by the unions and others that the currently proposed £2,000 that the ombudsman would award is not adequate in some cases. Can you tell us anything about that?

Let me come to that, because it is something we have been discussing. First of all, as I say, there is the question of restoring the scheme. There is then the issue of redress, which falls into a number of categories. We have already agreed that interest is automatically due when full benefits are settled more than a month after the member retires. Where you have that gap, which is obviously no fault of the scheme member, there is interest. There is then the issue of financial loss, where members can evidence a delay that caused financial loss, and the issue of distress and inconvenience. To be clear, there is an existing statutory complaints process that can evaluate claims of financial losses. That is done on a case-by-case basis. That is the situation at the moment. There is then the provision on interest to which I have just referred. Where complaints have been raised, there is, again, an established process, passing first through Capita to the Cabinet Office and ultimately to the Pensions Ombudsman. My answer to your question is that I think there are three types of redress that members may be entitled to. It is very important to set those out. There is an existing process that will look at that on a case-by-case basis. As I am sure the Committee can imagine, I will be very concerned to see how that is operating in the next days, weeks and months.

Can you give us an assurance that these cases will be dealt with quickly and sympathetically? I mean, the stage 1 and 2 processes within the Cabinet Office can take a year, and the Pensions Ombudsman much longer than that. The least we could do for these people, if they qualify for those three levels of compensation, is to ensure that they will be dealt with quickly.

Let me explain what we are going to do. You are absolutely right that we cannot have people having to spend several years battling to get all the way through to the ombudsman and then go through that process. I regularly speak with both the regulator and the ombudsman. We are doubling the size of the capacity in the Cabinet Office to make sure that the Cabinet Office step can go much faster and can cope with an increased volume. Obviously, these cases are typically case by case, but we have also been working with the ombudsman to look at themes. Rather than waiting and having the only point at which somebody could get a level of redress be to go all the way through the ombudsman, if we know that the ombudsman would make a certain award for a case like that, let’s make that award right at the very beginning, not wait for the member to have to go all the way through those many steps. Our aim is to be able to provide redress for all the awful experiences that people have had as early in the process as we possibly can and with as few cases as we can manage having to wait to get as far as the ombudsman. The ombudsman is working very hard with us to ensure that we are living within the kind of judgments he would make and the levels of redress that he would have the power to instruct us to make so that everything is happening early and not late.

I must declare some interests before I ask my question: I am a member of the pension scheme, a member of the Civil Service Pensioners’ Alliance and a retired member of the FDA. On the compensation issue, I have a small thing to suggest, but it is something that you could do straight away. I have noticed that when the constituents who have come to me finally get their payment resolved, they are told that there will be a few days delay in the payment because it goes through BACS. Why do you not require that, when Capita is paying somebody later than they should be paid, it at least pays them by CHAPS so that they get the money straight away?

That is a perfectly good question, and I will raise it with Capita.

I would like to follow up on Rachel’s question with the permanent secretary. We know that £9.9 million has so far been withheld in scheduled payments. Are you anticipating withholding further scheduled payments? You have just put on the record that out of 21 KPIs, you anticipate 16 being failed this month.

Yes. As Andrew said, every single month, we are still withholding further payments. For every single one of those KPIs there is what we call a service credit, where we withhold money and deduct it from the payments that are made to Capita. I think that we will be doing that for the foreseeable future.

Are there milestones that they will or can meet that will result in them receiving any of those payments?

Until they are delivering against the core service KPIs—the 21 KPIs and the 59 subsidiary KPIs—ultimately, we will be continuing to withhold money.

They are meeting some of the service levels; they are delivering on the basic core payroll elements.

What are the four or five that they are delivering on?

As Andrew said, it is mainly the delivery of the payroll. We run around 200 payment schedules every single month through the scheme, and they are largely meeting the ongoing payroll KPIs.

I am not sure that is basic—but let’s go with basic.

This is a pretty straightforward question, and I am expecting a very straightforward answer. Minister, under what circumstances would you terminate your contract with Capita?

It would obviously be in circumstances where it was appropriate to do so in a contractual sense. You have to remember that I inherited a long-term contract with a break clause in the second half of the contract. The way I see this, there are escalatory steps. There are steps that we are legally able to take. One of them is called a notice of default—they are already in that. That is why we are deploying the remedial adviser as part of that, together with the independent auditors. There are then escalatory steps, where you can do things such as formal step-ins within the contract. There is a series of steps that you can take within the contract. We obviously act on a very lawful basis and that is what we will continue to do; that is the appropriate thing to do. I should also say, and I understand completely the frustration of members, that it would be totally irresponsible to just walk away when you have a payroll here of 780,000 people. I have to be conscious of both the operational day-to-day and gripping the short term while also looking at the longer term, which is why I have asked officials to come back to me with options.

Does contract that you currently have with Capita define a level of service at which it can be terminated? From what you are saying, it seems that you are prepared to be on this treadmill of failure ad nauseam.

I will come to the commercials in a moment, but let me just say that I am certainly not prepared to be on it ad nauseam.

There is a contractual path to termination against continued failure of the main service KPIs. As the Minister has explained, we are walking through the various interventions that the contract allows: withholding money, service credits and now appointing advisers and auditors. We are walking through how the contract deals with failed performance. If that continues, the contract does allow for a termination, but obviously there is the question of whether that is the right thing for the members.

To what extent have any of the issues so far constituted a critical performance failure? Have we got there yet?

Ultimately, the fact that we have put them in default of the contract is us saying: “This is now six months of serious performance failure against the contract expectations. We are formally putting you into default.” We are very quickly walking through the assurance steps that we have outlined. Ultimately, we can walk away from this contract, but we cannot do that unless we have confidence that we have an alternative that could operationally sustain the important service that we provide to the 1.7 million members of this scheme.

I presume, from what you are saying, that you must have looked into an alternative. You would not just be keeping on going, keeping on going and keeping on going without having at some point thought of what an alternative would look like. That would just be insane.

Yes, and rest assured that that is not our mode of thinking. That is why I have asked officials to come back rapidly with the alternative options, because you are absolutely right. We have an ongoing responsibility for this scheme to keep functioning. That is why you cannot just throw your hands up and walk away, because you need this scheme to be running to deliver, particularly for the people who are being paid on a regular basis by it, which I think is 780,000 people.

Minister, maybe you or Cat can answer this question. Short of terminating the contract, there are other things you could do; I am very conscious that you have not even started on McCloud remedy cases, which will bring in a whole new spectrum of work. Are you contemplating taking that out of Capita’s orbit, because they cannot even perform their present duties, let alone that huge amount of extra work?

Yes, you are absolutely right, Chair. There are a range of other things that we can do to simplify and look at the scope of the services that are provided by Capita. The McCloud remedy is a very complex piece of work that must be completed by the end of March next year. It is vital that we step up the service. So that is absolutely one thing that we could look at in order to deliver the things that are most urgent.

Is that included in the current contract?

It is a separate contract. The McCloud remedy process is such a bespoke service that it is not an ongoing part of the contract. We expect the job to be done, and ultimately the quotes to be issued, by the end of March next year. It is a separate contract with Capita.

With that deadline, I cannot see there is any confidence that Capita will be able to complete that work in the time.

There is an ongoing conversation with Capita.

Fair enough.

I want to follow up on a couple of those points. What would the consequences be of failing to process the McCloud contractual changes in time?

I will have to ask Andrew about the commercial consequences but, most importantly, clearly, we are under a legal obligation.

I do not mean commercially; I mean legally.

Legally, we have an obligation, as do all defined benefit pension schemes run by the state, including teachers, the armed forces and judicial, to ensure that the administrators provide those quotes by the end of March next year. It is statutory as well as commercial.

I am just anticipating our next inquiry and report in advance. I cannot get my head around why we are waiting another period to look at options for what should now happen when the writing was on the wall for this outcome six months ago, if not sooner. Can you explain why we are still waiting for even the options of what we might do about what has happened here? Also, just for some clarity, in 2025 the National Audit Office Report found that the Cabinet Office had withheld £9.6 million in payments for missed milestones during the transition period. Can you clarify whether that is included in the £9.9 million? Subsequent to the transition period, has there just been £300,000 withheld? How does that indicate what will be held in future for what are ongoing contractual breaches?

I will pass the precise numbers on to you, Catherine. I very carefully considered the National Audit Office Report from 2025. I will pick up what you said, because I think it is fair to set that out. Obviously, when I got to November and December of last year, I felt that I had very limited options in this space. The contract with Capita from November 2023 was already in place, which obviously predates Cat and me in the Cabinet Office. That was in place. There had obviously then been the two-year transition. It was just not viable to continue with MyCSP. There was no legal basis to do so, let alone anything else. Even if you moved beyond that, there were such significant problems in that scheme—there was no union recognition, there were ongoing industrial disputes and, indeed, that point about staff coming over was something that was raised, I think, by the Public Accounts Committee itself around that time. It was more expensive to stay with MyCSP even if it were possible. There was also the issue that they were not even willing to commit to proper KPIs. They were talking about using best endeavours. Continuing with that was just not a viable option. The idea that I could in-source something in December in those circumstances, with no state architecture to do it and this pre-existing contract is just for the birds, frankly. We are talking about a 1.7 million-member scheme. That was just not a realistic proposition in any sense. What I was left with was the transition to Capita. There is no doubt that that contract gave stronger commercial levers than the situation with MyCSP, which I have obviously been instructing the team to use at every opportunity. I was also looking at contingencies, however—at what we were going to do if things did not work out. First of all, I went to Capita. I am quite old-fashioned; I like to speak directly to people to try to get a sense of what they were talking about. I feel personally very let down about this. I met the chief executive—you will be meeting the chief executive, I think, after this meeting—and I was obviously talking about their preparedness for this contract and what the contingencies were. I was being told then by the chief executive—

When was this?

This was on 25 November last year. It was before the go-live date of 1 December. I was told that the UK Government would be presiding over the largest AI-enabled pension in the UK and I would therefore have “a flagship use case”. That was the assurance I was being given by Capita ahead of this. As the Committee can imagine, we were obviously aware there was a backlog. We were obviously aware, as were Capita, that there were significant problems with MyCSP. I was very specific and questioning of the chief executive throughout that meeting, but I also was reassuring myself that if things did go wrong, Government does have surge resources. That was the other point: we always do have that. And as soon as it became clear—we are talking about early January, so it wasn’t very long afterwards—that we were going to have to ramp up, that is exactly what I did. That is the situation I found myself in. I believe that we have done all we can over recent months. I believe that the officials will all agree I have been giving very robust instructions. They have all been carrying that out to the letter. But I am certainly not coming before you with some sort of counsel of perfection here. We should not be in this situation; there is no question about that. That is why we have to collectively learn the lessons of this—not just the last six or seven months but, let’s not forget, the trouble MyCSP had already significantly got into. What is the best way to run this, going forward? That is what I will certainly be turning my mind to, but as I say, my immediate priority is stabilising this service. And for the very people you were talking about, Catherine, and your constituents—I think you also asked me in the Chamber the question about the person who had, very sadly, passed away—we need to be dealing with that as a matter of urgency, as Angela is. We then have to get it right going forward as well.

Can you provide clarity on the £9.6 million and £9.9 million?

The £9.9 million is the updated amount. That is the total amount that has been withheld from Capita for failing the transition. In addition to that, we have been deducting moneys every single month for failed service delivery. We have not declared those numbers, because we are in dispute with Capita about the numbers each month because of lack of agreement on some of the data, which is why we have brought in the independent auditor. We are doing a reconciliation that will clarify those deductions to date. We will then be able to declare that and update Members.

Minister, you heard what I said and what Catherine said about McCloud. Anybody who has had anything to do with pension schemes knows that there is a huge amount of work involved in McCloud. Can you give us an undertaking that you are going to urgently consider this matter? I ask because otherwise I can see the statutory deadlines not being met.

It is certainly an urgent issue for me. There are discussions I have been having with the permanent secretary. There are ongoing discussions at the moment with Capita. As I am sure the Committee will appreciate, I am being quite guarded in what I am saying, but you can rest assured, first, I am very conscious of the statutory deadline. Secondly, I am very conscious of the scale and complexity of implementing the McCloud judgment across the different defined-benefit schemes. Thirdly, I regard it as a top priority.

As you know better than anybody, Chair, the McCloud remedy affects a number of pension schemes. This is a major challenge for all of us, and we are doing a lot of work across those schemes to learn the lessons and to make sure that we are operating as an administrators group across the public sector. I think that is really important. Also, I should just correct something for the record. I said it was a separate “contract”. It is a separate “statement of works”—that is the term. I just want to make sure, for your record and for the House, that that is the terminology.

As it is part of the existing contract, you would then expect to reduce the total value of the contract.

Yes. There is a separate amount of money specifically for McCloud, but it is part of the commercial umbrella arrangement. When we are doing the negotiations, this will all be part of the package, but there is a very separate statement of works that sets out the performance specifically for McCloud.

That is very clear. Thank you, Cat.

Minister, the nub of the conundrum is surely this: there is no competitive marketplace of bidders in this sector or in many others where the Government have outsourced. At worst, it has been concentrated into monopoly bidders. Sometimes there are just one or two. You are all wrestling with the fact that if the outcomes deteriorate, that moves you inexorably towards terminating the contract. There is nobody outside to whom you could award it, so it would have to be insourced. In those circumstances, it would take you about two years, as I think you said in the Chamber, to get up and running. Capita would have said, “We’ve lost this. There’s no incentive.” The situation would have got worse and you would have terminated the contract because the threshold had been met. What is today a bad situation suddenly looks 10 times worse. The stark issue is that a company like Capita has the private parts of HMG very firmly in their grip. What is the strategy to remind Capita that the Government are their No. 1 client? If they wish to continue to secure business from the Government, they need to up their game. If they are facing an inevitability because we have gone past the tipping point of contract retention psychologically, a bad situation will just get worse and all our constituents will suffer.

Broadly speaking, you summarise the policy dilemmas. That is why there are no easy answers and why the idea that anybody sensible could just walk away from one of these contracts is not viable. You are right to highlight the incentive structures. However, I would gently say that Capita rely heavily on the Government as a customer. Your question hinted at that and you can put it to Capita when they arrive in due course. This is a huge contract and a huge undertaking, but there are many other contracts, not just with central Government but with other public sector bodies. I think there are over 80 contracts. I make rational decisions on individual performance under contracts and legal obligations, as the Committee would expect, but the Cabinet Office is also responsible for the broader relationship with Capita, which Capita should not forget.

Perhaps I can add two things. First, my direct conversations with the chairman of the board and with the chief executive have focused entirely on the fact that we are their No. 1 customer and expect to be treated as such. That is important framing for the whole of this negotiation and getting this contract back on track. Secondly, you are absolutely right to point to the state of the market for large pension schemes. There were only two suppliers left when the contract was awarded back in 2023. The Government and the public sector are one of the last standing parts of the economy that offer defined-benefit pension schemes. We are a very large customer for complex schemes in a market that has a very small number of suppliers. That is the market challenge we are facing. In normal circumstances, you might say, “Why wouldn’t you shape the market? You’re such a big customer. Surely you can stimulate interest and competition.” As these services are high-risk, complex and difficult to administer, we are struggling to see where a competitive market can be delivered. We are in a very classic make-or-buy decision making process. We are having to go back to the basics of the different models. It is not as simple as insourcing or outsourcing. There are many different models for dealing with this sort of market situation.

To add one more comment on your point about who has the leverage, Mr Hoare, I do not disagree with a lot of what you said. However, I would point out that the way we now exercise the contract and the amount of additional investment that Capita is having to put into the service—I am sure its representatives will talk to you about that later—mean that it is very likely that it will lose money on the contract. That is how the contract is working.

Is that the point when we get out our tiny violins and play a tune for Capita?

Thank you, everybody, for coming in. We talked a little bit about the surge team’s work; I think it is about 140 people who have been deployed by the Cabinet Office or the Government to address the failure of Capita’s performance and inability to administer the pension scheme to the standard that we and our constituents would expect. How much has that cost, to date?

The surge team is not the only investment. There are about 140 surge and, looking at the additional, overall there are about another 40 people. That is people such as me, people doing MI, people running things such as MP surgeries. There are a variety of other colleagues. We expect the costs to the end of ’26-27 to be £12.5 million.

That is to the end of the financial year, so until April 2027. Is that when you expect everything to be sorted, so people can go back to doing their day jobs, or do you expect that additional ongoing resources may be needed?

The decision about whether or not we are at the point when we should pull back the support for Government is totally predicated on a complete focus on whether we are content that the members are getting the service that they need to have delivered. We will continue to be there, under the instruction of the Minister, until we are in a situation where we are not there. I am forecasting costs, but the costs will be what they need to be and we are absolutely determined that none of that commercial activity will be to the cost of the taxpayer.

Let me make two points. First, I am not prepared to withdraw that team unless I am absolutely satisfied that you have a scheme that is then able to run to the standard we expect. I have no intention of doing otherwise. That is why we are in the position we are with the presence of the team. Secondly, let me clear with the Committee: I intend to recover every penny piece of that cost—whatever the cost is—from Capita because it is the taxpayer having to step in to deal with, frankly, Capita’s failure.

I think we all agree that it is completely unacceptable that that has had to happen. When are you going to be able to recover that £12.5 million from Capita? Is it being given in stages? Is it at the end of the financial year? When will that cost be given back to the Government?

We have not done that negotiation yet. As part of the reconciliation that we have talked about, which we are doing with the new independent auditor, we are doing a drains-up audit of all the costs that the Minister has talked about. As part of that we will agree the schedule for payments back to Government.

Angela, does the £12.5 million figure go right to the beginning—2 February?

Yes, the entire lot. Everything we have invested so far.

So, Minister, you will recover right back to 2 February, because Capita has so far only undertaken to pay you from May, I believe?

That is completely unacceptable, to be clear. The figure is predicated on a particular timeline. Let there be no doubt: I am determined to get back the entirety of the cost from Capita, whatever the timeline ends up being. I do not regard as a serious proposition Capita’s suggestion that we go back only to a certain moment in time because it is the reason we have had to send a surge team in.

I have a final question. We heard that, despite the surge team and despite all the extra resources that the Government have had to give Capita so that it can attempt to improve its service, we still have cases where escalation mechanisms are not working, and still have a growing backlog. Especially given that you are expecting to recoup the money from Capita, have you considered increasing the number of people in the surge team so that we can get the service sorted sooner?

There are two things. On the surge team, I will always take operation advice on that. If a proposition is put to me that I need to do something additional, I am most certainly open to that. I have regular dialogue with Angela and get regular updates. By the way, Chair, I echo you in saying that the work that her team has done has been Herculean in the circumstance of recent months. I will make a second point, because the escalation mechanisms, whether for individuals raising cases or Members of Parliament raising cases, are something I've found particularly offensive from Capita. We have had to, in effect, take over MPs’ surgeries. There was one that Capita tried to run, and I had such negative feedback from Members of Parliament that we basically had to take that over. I personally ran a drop-in with Angela back in April. I know that officials are now running weekly virtual surgeries, and they have been doing that for MPs and casework since the 29 May. Be in no doubt of the emphasis that I have placed directly to Capita’s chief executive on more than one occasion about dealing with Members of Parliament who are speaking on behalf of their constituents. My colleague in the Cabinet Office, Minister Kaur, has been in contact with the Speaker of the House of Commons about this. We take their failure to respond to MP correspondence in a timely manner so seriously.

That is helpful to know, but, getting back to the surge capabilities, do you have capability within your current headcount in the Cabinet Office or elsewhere to increase that number of 140 people?

We could, but I rely on Angela’s operational expertise—

It is what her judgment is.

There is a saturation point. I come back to the point that if the technology does not work and the data is not there, you can put many more people into this process and still hit a brick wall. Operationally, we are taking Angela’s advice. If she thinks that more surge resource is needed, we will absolutely put it into the taskforce.

The key thing to remember is that this is a really complex pension scheme. It is not a thing where you just throw another 50 people at it and the following week something magical will happen. Many of the inherited people who have who have moved over from MyCSP—I cannot help myself—have many years of deep defined-benefit pensions expertise. Therefore, we are being massively careful to deploy the civil service surge people only to places where their level of skill and expertise means that they can do a good job. That means there is only so much of the scheme where we can make a real difference, because what you really need is deep pensions expertise. We are aiming to do all the jobs where a Capita colleague could be anybody, leaving the Capita people to be able to drive down and focus on the really deep pension stuff. The conversation about, “Could you have more people? What could we do?” is one that I have regularly with Capita. I have to say that Cat's point is the absolutely important one. We will not people our way out of this. Only through the delivery of the technology will a scheme of this scale and complexity get to the point of good, high-quality delivery.

My question is to the Minister. We have heard about how many people who are dependent on this scheme have been let down because the contract has not worked. We have heard that we are now seven months into the live contract and asking for a detailed plan of how they are going to deliver the IT and bringing in specialists to review that. Given all that, Minister, how confident are you in the capability of the Cabinet Office to let and manage contracts?

Let me take that in two senses, because there are two aspects to this. First, there is the negotiation of contracts in the first place, which is distinct from the management of contracts. That is the first point. This is obviously a contract that was inherited from November 2023. Secondly, there is the question that you quite rightly put to me, which is management through the contractual period, whatever that might be. I will turn to Cat in a moment, because we have done things to add more senior leadership to our pensions team. But on the approach I have taken to this contract—speaking personally from my own ministerial experience, which admittedly is since only September last year—I am satisfied that my steers and instructions have been carried out to the letter; I hope you can all see that I have been as robust as I can be within the contract. But I also know—perhaps Cat can speak to this—that we have been increasing our management capacity.

There are lots of lessons learned about both the capability and capacity of contract management. Some of these we have talked about previously in earlier sessions. We completely changed the basis of the contract, based on lessons learned from the MyCSP contract. The levers, the commercial tools, the milestones, the KPIs and how the contract was managed under MyCSP was a lot weaker than what we have under this Capita contract, which is why from day one—and in fact minus six months from day one—we have been able to withhold money. Before they were even allowed to transition to deliver this service, we withheld funds and were able to leverage our commercial position in how the service was delivered. We have boosted both the capability and the capacity of the Cabinet Office team. One of the reflections that I humbly have is that we assumed that we would be able to manage this contract with a similar level of capacity and leadership to what we had under the MyCSP contract. It became clear very quickly that that was not acceptable, which is why Andrew, as our Government chief commercial officer, has personally invested a significant amount of time. It is also why we have invested in a much bigger contract management team with different capability and expertise, to ensure that we are holding them to account every single day. Andrew might want to say a bit more about the strengthening of capability and capacity.

As Cat says, we would reflect on the fact that we did not have a strong enough team from day one. We accept that. We have doubled the size of the team. We have a cross-Government contract management capability programme, which is a really intensive upskilling course, and we have made sure that the key contract managers have either gone through that recently or are going through that accreditation. We have brought in a commercial director to oversee that team as well, so there has been some real strengthening over the last three months, but we accept that we should probably have had more of that before transition. That is one of the key lessons for us to learn.

You have talked a lot about the complexity of a defined-benefit scheme, and how there are not many suppliers out there who can do that. This is a very unusual defined-benefit scheme because it is not funded. It is surely the funding—how you do the investments, how you manage them and how you do the actuarial assessments of whether you have got sufficient investment to deliver the benefit—that is the complicated bit. Actually, this scheme is not particularly complicated. You have talked about how Capita are hitting their targets on the payroll side of it. The payroll side of it is payroll. There are lots of people who do payroll—you do not need to be a defined-benefit pension specialist to do the payroll. In order to work out the calculations, again, it is fairly straightforward. It is about how long the person has worked, when they started working, have they had maternity leave and did they go part time. They are questions that you have to find the answers to, but they are not complicated or specialist; they are fairly basic, HR questions. You could set up some pretty good spreadsheets quite quickly that would have protection on them, so that you could not overwrite the formulae and things, to calculate this. To be frank with you, I have had to do it myself on a much smaller scale, but it is not difficult to do. I wonder if you have got yourself overconcerned that there is only this one supplier, when actually there are plenty of competent people who could deliver those services.

There are a few different points there. Clearly, there is an issue of volume, scale and security—obviously, with something of this size; there is no doubt about that. But what you just described about the nature of the scheme is one of the reasons why a technological solution—I have already read to the Committee the assurance I was given about this—would obviously be so helpful in delivering it. Your wider point is essentially about whether we should look at different aspects from different suppliers—you made the point about payroll. These are the kinds of things more broadly that I have asked officials to look at and come back to me on. You are right: it has payroll in it, but it has other aspects, as we have discussed. These are the kinds of things that we need to look at now and officials will come back to me about.

Absolutely. One thing I would add is that some of the complexity comes not just from scale but the fact that the civil service has had many different configurations over time. We are 120 employers with different machinery of government changes and multiple pension changes in recent times. You will be familiar with some of the moves and the changes within the civil service pension scheme. One of our really basic problems is making sure that we have continuous service data. Because there are so many different HR and data collection systems across Government—across 120 employers—getting accurate data quickly and efficiently is one of the big challenges to the complexity of this scheme. That is why shared services and us moving on to a single enterprise technology platform, so the civil service can manage its people and their data more effectively, is intrinsic to what we are doing here.

Is the civil service struggling to provide Capita with the data it needs in a timely manner?

No. It is just the cleaning up of the data. All the data is with Capita. There is no doubt that they will go back and check information, particularly with some of the more complex cases. There are complexities there, because different bits of information have come from different sources in the data transfer from MyCSP to Capita. They have the data, but it is just not the cleanest, high-quality data you would need to run this as efficiently as you would like.

Can I come back on your comment about choice in the market? That was not our experience through the procurement. It was a very lengthy procurement process. We started with six providers after a very extensive market exercise. When the complexity, scale and other elements of the requirement were worked through in detail, that quickly dropped to three and then to two. We only got two credible final bids, which were Capita and MyCSP. That was not our experience in working with the market.

Cat, you and Andrew have been quite candid about the Cabinet Office’s role in all this. The PAC produced a Report in October, so we did not think that this scheme was anything like ready for Capita to take over. Therefore, it was a surprise to me when you went live on 1 December. You had all the data from both sides, so you should have been able to at least alert Capita to the size of the task it was taking on. I know that they are not angels in all this, but I had a letter from MyCSP, dated 2 April 2026, in a response to a letter from me. On the transfer activities, they said, among other things, “We do not believe that these activities were carried out to the level of detail and thoroughness required for such a major transition. As a result, the risks associated with not having a robust transition/cutover process in place were not fully understood or mitigated prior to transition.” What is your response to that?

Andrew will want to add to this, but we obviously dispute quite a lot of what they say in that letter. There were very robust processes and milestones as part of the transition. We took a lot of time and effort to pay attention to your work. As you know, Sir Geoffrey, I wrote to you on a very regular basis to give you an update on our considerations of your recommendations. I would go back to what the Minister described: when faced with a choice of proceeding or not, I am absolutely certain that we would have ended up in a similar position, with the civil service either having to support a continuing, out-of-contract and increasingly backlogged scheme under MyCSP or being where we are today. The two routes would have ended in some sort of complex failure, and I am pretty confident of that. Andrew might want to add to some of the commercial and transitional arrangements.

Just to clarify, we were in a commercial dispute with MyCSP towards the end of the contract. We did not agree on some of the service delivery and how that applied to the contract at that time. It is not a surprise that it disagreed with some of our decisions. It was a very difficult relationship at that point.

Minister, you referred to the fact that you only took post in September. In January, you started to implement the response to the failures, including the surge team, but already the National Audit Office had highlighted failures in the whole process. Now you are looking at a much more systematic and detailed assessment of what is going wrong and what is needed to be put right. Why did not you begin that particular process at the end of last year? I appreciate that you could not take the contract away, but why did you not start to look at the alternatives and the extra monitoring then, or at least in January?

The first point is that I did look very carefully at the National Audit Office Report. I looked through it in preparation for coming before you today, and with the exception, ironically, of implementing the McCloud judgment, the National Audit Office said, “since August 2017, MyCSP has met expected performance measures”. It was saying where it had been below expected measures, but actually it was not saying, “Do not transition to Capita”; what it was actually talking about was the various lessons to be learned. I certainly did look at that. I looked at what the Public Accounts Committee had said. As I indicated in my answer a moment or two ago, I do not regret my decision on the question of whether to attempt, on no legal basis, to continue with a failing scheme or to support the go-live on 1 December. It was the best thing I could do in the circumstances. On the question you put to me around planning, Clive, the Government were elected on a wave of insourcing. Parallel work has been going on for that. That has been done by the Parliamentary Secretary in the Cabinet Office, Minister Ward, who has been driving forward the work that has got us to the public interest test. Of course, in January, I was thinking already about how I was going to get through this in the medium term. My absolute priority then was stabilising the service. That is what I put the resource into, and that is what I have been doing. The work to look strategically at all Government contracts was going on last autumn. I do not regret the go-live decision, given the circumstance I was in, and I do not think anyone can say that I did not intervene very quickly and very sharply. Looking at all eventualities, I have been very clear with officials—Cat and Andrew can comment on this—about using every possible lever we have under the contract. I would suggest that I have been doing those two things in parallel.

I am not saying you have not been doing things; I am not even saying that you could have stopped the contract from going ahead. What I am saying is: do you think in hindsight that it might have been better to start the process that you have now commenced back in January?

I do not, because what I was left with was a situation where I was moving to a different provider. What I had to do was to prioritise the immediate continuation of service. To do that, I had to focus absolutely on the levers I had available to deliver. We did know about the backlog, and we obviously knew that that was going to have to be dealt with, but I think I was right to focus—of course, I was also considering the longer term—on stabilisation, and I think I am right at this stage to be pushing forward with the work we have. I have acted in a timely way throughout, but let me just say to the Committee, as I said earlier: I had never come with a counsel of perfection, and that is always why we will look broadly at the lessons learned, at both political and official level. I am sure we will take them very seriously.

In the meantime, though, you had eventually decided not to go ahead with the Royal Mail pension scheme, but not to act on Capita. What was the difference in those two decisions?

There are differences here and, again, I think that is a fair challenge. There are a number of factors, which I will come back to in a minute, but the principal thing in my mind was that there was no operational risk on that one. There was no day-to-day operational risk to the scheme members as a result of the decision that I took. In contrast, if you look at this one, if I had tried to walk away in December, I think you would have been talking about, frankly, something catastrophic, in terms of hundreds of thousands of pensioners not getting their payments. That risk was not there in terms of the Royal Mail pension service. I have no regrets whatever about my decision on that Royal Mail contract. They had failed virtually every milestone, so I did not have any confidence in delivery. I am always conscious both of the contractual position—what I want to do within the law—and of making sure that the scheme, whether it is the Royal Mail pension scheme or the many other pension schemes, is delivering day to day. That was the big difference for me.

Right. In the meantime, last year you went ahead and gave Capita the shared services contract, even though things were beginning to go wrong with this one.

On a point of fact, I did not go ahead. I think it is a DWP—

Okay. Somebody in Government did.

I take that. I will come to Cat in a moment, but on that, from the Cabinet Office we certainly reflected across to DWP our experiences and lessons learned, and that was reflected in the approach it took.

Thing one: this is a very different sort of contract. The shared services contract at DWP is for large-volume transactional shared service activity. It is a much less risky service. What we did do was share, at both official and political level, all our experience. As part of those conversations, Andrew, as chief commercial officer, met both the political and official leadership at DWP and Capita, and changes were made to the shared services contract based on the experience that we have had. Andrew might want to add to that, but obviously that was a matter for the Minister at DWP.

We went through a “lessons learned” on what had gone wrong with the transition here and how that could be applied to the Synergy contract. That resulted in the Department asking for additional assurances through that process, which it worked through. Ultimately, though, it was DWP’s choice to do that, against other choices they had.

It is still Government, and people do not understand—including MPs—that when firms fail to deliver, they still get awarded other contracts. If at home, my roof is leaking and somebody comes along and does not repair it properly, and then I have a leak on a pipe somewhere, I do not say, “Well, you haven’t done that very well, but I’ll give you this next job.” Even though it is a smaller job, I do not do that, and no one in their right mind would. Why do Government not properly take account of past or continuing failures when awarding other contracts?

Procurement regulations have always been enshrined on an individual contract-by-contract basis, in order to uphold fairness and transparency for all bidders. This contract was let under the previous procurement regulations, where taking in past performance was very difficult unless there had been a clear criminal act. We obviously brought in the Procurement Act in February last year, which gives the Government additional powers to take past performance into account.

And that is just general failings, is it? It is not just critical performance failure; anything less than that can still be taken into account, can it?

It is the concept of professional misconduct that is at the heart of the new powers we have, and that has a wide range of definitions.

No one is saying it is professional misconduct of some form. They are just saying it is a failure to deliver a service. Most lay people would think, “Surely that ought to be taken into account when looking at awarding a contract for another service.”

Significant, sustained poor performance will come under that criterion.

How is that defined?

Sorry?

”Significant, sustained”. Who defines that?

It is set out in the regulations. I guess what I am trying to explain is that the new powers the Government have to debar companies in future are based around the concept of professional misconduct. It is right that the bar should be high, isn’t it? To bar a company from any public sector contracts is a very significant thing to do.

Sorry, I don’t agree with you actually. It is significant sustained failure. Do you accept that is what is happening here on this contract?

Ultimately, that is why we put the organisation into breach of contract.

Is this significant sustained failure?

There are different definitions. What we are talking about here is the performance against this contract. It is ultimately a matter for our lawyers and commercial experts to interpret and manage in the context that they are operating within. I know you appreciate this, deputy Chair, but some of the things that I would like to be able to say to you are deeply commercially sensitive. All I would say is that the powers that the Government have are legally defined, and commercially and legally managed, with appropriate advice. We will use every single option available to us as necessary.

I think most laypeople out there—the people we represent—would be staggered if the Government now gave another contract to Capita in this situation. Can you give us a guarantee that that will not happen until this matter is resolved?

We cannot guarantee that, because ultimately we have to comply with the law and the procurement regulations, as stipulated, in order to ensure transparent and fair procurement processes.

Can I suggest, Minister, that with your officials across Government you might go away and look at this situation? Most people who pay their taxes for the Government to provide a decent service would not expect the Government to be paying those taxes out to a firm that is behaving this badly.

Two points. On the very narrow issue of the surge team, which I appreciate is not the point that you are referring to—you are talking more broadly—we will want every penny back. To your broader point—the Committee will understand why I am treading quite carefully here—be assured that every single commercial option available to us will be considered.

That is something that we might want to pursue at some point.

Thank you, Clive. I have a lot of sympathy for what you said. I think you perhaps need to look at those procurement rules, Minister.

Again, I am treading carefully here. On your broad point about whether potentially severe penalties in the event of poor performance drive good performance, you would sincerely hope that is the case.

You are reflecting very well on your experience in local government, Peter. There is a lot of expertise around the table. Be assured that in recent months, my steers to officials have been precisely around looking at every lever that we have to drive performance and, where things are going wrong, ensuring that appropriate moneys are being withheld. That is exactly what we have been doing. That reflects what you just said about your experience, Peter.

First of all, we have started making changes with the public interest test last month. As I indicated in an answer a moment or two ago, from April 2027, when a contract worth over £1 million ends, we will consider the appropriate home for it. We will certainly be looking at the procurement regime. That work is already going on, and it will continue. You are right that we need to look at the incentive structures in the public sector.

Can we speed up? The Minister has a hard deadline and we are now over our time.

Minister, in your statement earlier this week, you said that were you able to bring this pension scheme in-house today, you would do so. We have talked about the barriers around immediate operational risk. We have talked about the IT system problems. Are there any other barriers to bringing it in-house? Bearing all those in mind, what sort of timeline would we be looking at from the point that a decision was made?

I have already said on the record that with this contract, when we get past April 2027 that seems to be a prime candidate for insourcing, but if you have a 1.7 million-member scheme that is, on a regular basis, paying out money that 780,000 people are relying on, it is not a simple operation to take indoors. You would need technology. As the Committee has heard, I have been discussing that with Capita, but you also need a quite enormous state architecture to cope with something of that size. That is why I have asked officials to look at the range of options for me and to reflect on the history of this scheme over recent decades. Other versions of this particular model—an outsource model with a private company—have been tried over the last 20 years with varying degrees of success. It is important that we look at all those things to make sure that I have realistic options going forward.

We have known about Capita’s failings for a long time. The NAO and the PAC have been ringing alarm bells about key milestones being missed throughout 2025. The Cabinet Office is also aware that the market for this sort of service is very small. There were only two providers, you have told us, at the last procurement. Given all of that, what pre-emptive preparation work has been done to prepare for the possibility of bringing it in-house? That seems to have been the direction for some time.

There are two aspects to this. First, it is about stabilising the scheme. We have to solve the kinds of situations that Members on the Committee are seeing their constituents in. We have to solve the backlog and get it to the level that Angela is talking about, which one would ordinarily expect it to be in. Secondly, we are looking in the medium term at the best way going forward to run a scheme like this. Both those things are happening in parallel.

Will you commit to asking the independent auditors to make a point of looking at how quickly and easily the pension holders’ data could be extracted from Capita’s systems and uploaded into a hypothetical new system that we bring in under a future in-house model?

We will do that piece of work. We are looking at different options to make this a sustainable service, with experts coming to help us. We are pulling together a pool of experts to help us with those different options at the moment. The independent auditors are there to do a very specific job, which is auditing the current service and giving us confidence that the data, technology, processes and operations are optimised to deliver the current service. It is a similar group of expertise. It will not be the auditors; it will be people helping us to deliver those options.

Will those people have sufficient access to Capita systems to make a reasonable assessment of how easy it would be to extract the data?

I think that is still up for discussion with Capita directly. Obviously, we would need to be able to do that to understand the limitations and constraints on doing this.

I have a final commercial follow-up question. What contractual options do you have to require Capita to make some modifications to its systems to make data extraction easier? Essentially, we need to avoid an outcome where it can hold us to ransom by virtue of saying, “We have made it so that every single person has to have a manual download of their data and upload somewhere else.” How can you require them under the contract to simplify that and avoid that becoming a problem? We can have an answer in writing, if needed, because I know that is quite technical.

We absolutely have full rights to access all the data. There is no problem with accessing information and data.

I am talking about the systems rather than the data itself.

We might need to reflect on that question and come back to you.

My question is about the loans that are paid out; perhaps we could have a bit of information. Also, perhaps, Minister, you could have a look at the people who are not entitled to them. Some really difficult cases have been raised by the Civil Service Pensioners’ Alliance—we will pass over the letter—including for Caroline Wise, Miriam Cartwright and Mikki King, in different circumstances. The problem is that some of them are waiting for widows’ pensions, and they of course do not qualify because they are not actually ex-employees. Then you get deferred pensioners, with Caroline Wise not qualifying for the loan. Unite the union also raised the Capita fire and rescue service. It is outsourced from the civil service, so they are ex-civil servants, in the civil service pension scheme, and Capita, which is their new employer, will not give them a transitional loan for its failures under the pension scheme. You couldn’t make this up, could you? All these people are disadvantaged in different ways and cannot get transitional loans. Could you have a look at it?

Certainly. Could you, perhaps through the Chair, just send me that directly, please? I will most certainly look at that.

Thank you; I will do that. The Unite one isn’t in writing, but I can pass that information on to you; Unite will give that to me as well.

I should, just as a matter of disclosure, refer to my own entry in the Members’ Register of Financial Interests about support from Unite the union.

I am a member of Unite as well, so we can both do that.

Minister, we have one more question, but, as a matter of courtesy, I do not mind if you leave; I know you have a sensitive meeting to go to, so it is entirely up to you. Your officials are perfectly welcome to answer it, but if you want to stay for it, please do.

I will be brief, in the interest of time. I was having a quick look at Capita’s financial results for 2025, and there is a quote in there that made me chuckle: “With clear priorities for 2026, we remain focused on disciplined execution”. I think we can all agree here that Capita has not been involved in “disciplined execution”; it has been an absolute, complete disaster. I am interested in zooming out a bit and thinking about the UK Government’s overall exposure to Capita, because I think the British public need to know what risks we face, and the risks, as a whole, to using Capita. To the extent that you are able to share—you may need to follow up in writing—can you say how many contracts, or statements of work, we have with Capita? What is the value of those? And are there any other contracts, where you have similar concerns, that really need to be investigated?

The answer to your top question is 85— not just for central Government but across the public sector—but, on the commercial bit, I will defer to the Government’s commercial team.

As the Minister says, we have 85 contracts in total; I think it is 39 with Government and 46 with the wider public sector. On the Government contracts, in terms of the transparency of performance information, all major contracts have to publish three of the most critical KPIs on gov.uk every quarter, so you can actually see the performance of all of the Government contracts at the moment. Outside this contract, I think there are two other contracts that are showing red KPIs: the Army recruitment contract, which is about to expire and transition to a different provider, I think in about six months, and the teachers’ pension contract. Those are two contracts that we are very focused on in the Cabinet Office as we manage the total relationship. We are very sensitive to Capita’s role in delivering a significant level of public services across those contracts.

Cat, I will not ask you to answer this next question now, but I will just ask you to write to us about what I think is the most sensitive group of all: the bereavement cases. There are still 4,300 of those outstanding, and 3,700 requiring information. Please could you write to us and tell us when that is going to reach service levels, because they are some really tragic cases? Cat Little indicated assent.

I will just say of the cases I mentioned that Miriam Cartwright and Mikki King have been waiting since last year—last year! These are people who have been bereaved; it is just not acceptable.

We entirely agree. As we committed to at the beginning, we have Capita giving us its service rectification plan on 14 July. We will obviously share with you all that data, and you will have an opportunity to ask Capita directly what its plans are, but that is clearly not good enough.

I thank all of you very much today. This is not an easy subject; I wish it were better, but it isn’t. What we are really all about is trying to get the scheme back on track, so that those pension members who are entitled to their money from the scheme are able to get it without too much fuss and in a reasonable time. Minister, thank you very much, and I thank all of your team. The transcript for this session will be up in the next few days. Thereafter, we will consider, jointly as Committees, what further action we wish to take. Again, thank you very much. Witnesses: Adolfo Hernandez, Richard Holroyd and Chris Clements.

Welcome back to this joint session of the Public Accounts and the Public Administration and Constitutional Affairs Committees on Wednesday 8 July 2026. As some people in the room will know, earlier we heard evidence from the Cabinet Office on why performance has been so unacceptably poor since Capita took over the contract and their perspective on what remains to be done to restore service to acceptable levels. Despite our strong views on Capita’s performance on this contract, we are grateful that you are appearing today. It has not been difficult to secure your appearance and you are facing up to your responsibilities by giving evidence. Thank you for that. That being said, as you would expect, our scrutiny will be robust and challenging but, I hope, fair. Good temper and moderation are hallmarks of parliamentary debate that we will uphold this afternoon. We are not here to castigate you, but we want to understand exactly what has gone wrong. We will be seeking answers about why you failed to restore service levels by the end of June, a deadline had already been extended from the end of March, and what more Capita can do to ensure that all eligible scheme members and their spouses can fully access their pensions, to which they have contributed for many years. A warm welcome to all of you. I will let you introduce yourselves.

My name is Adolfo Hernandez. I am the group chief executive.

I am Richard Holroyd, the chief executive of the Capita public service division.

I am Chris Clements, the managing director of Capita pension solutions.

Thank you very much for coming today. Adolfo, do you want to make any opening remarks or go straight into the questions?

First and foremost, I would love the opportunity to deeply apologise. I would like to apologise to all the members who have been receiving a very poor service at a very difficult and challenging time in their lives. They are citizens who have worked for the country for many years in a variety of critical positions who, at this time of their lives, in the hardest possible circumstances, are unable to get the retirement and the solutions that they truly deserve. For everything that we are responsible for and on behalf of the company, I sincerely apologise. We reassure you that we will not stop until we get this fixed.

Thank you for that apology, but on behalf of scheme members, what we really want to do is make sure that you get back to service levels as soon as possible. In order to help us with that, I will start with questions from the chairman of PACAC.

Good afternoon, gentlemen. Let me ask you a mood music question. How does Capita view His Majesty’s Government? Is it a cash cow to be milked to the point of dropping exhaustion or a valued client? Correct me if I am wrong, but I think HMG is Capita’s largest client.

We view His Majesty’s Government as a partner. We pride ourselves on working with the Government across a variety of challenges and opportunities where the Government have decided to look for external expertise, skills and capabilities to work with the Government. We take all matters related to the Government extremely seriously. Over the 80-plus contracts that we have with the public sector, we focus on delivering a high-quality service. Over 90% of our KPIs are green, but that will not help the members of the CSPS. Unfortunately, we failed to deliver, but we live and die by making sure that that 90% becomes 93%, 95%, 97%. This is what we do for a living. We are a critical part of delivering for the Government, whether it is social benefits, providing national resilience, helping the forces, helping social service provision or a number of other things. We do that with pride, and I think that we do that very well, even if in this particular case, and I apologise again, we did not deliver up to the standard that was expected and that the members deserved.

Let us just try and pull that apart a little: inability to run a telephone helpline to customer satisfaction; an inability to deliver a reliable, transparent and accessible portal; the need to have HMRC provide surge teams of around 150 people; bereaved people awaiting payment; people awaiting settlement figures; as the numbers progress on the backlog new people are joining so that you are running to stand still; promises made to the Government and the Cabinet Office during the contracting process that the two-year transition period would lead to the digital AI revolution to deliver a world-class, world-leading pension service. None of that met—neither the novel nor the basic. I was not privy to your evidence to the PAC—I chair the PACAC—but I understand that you gave that Committee, and had given Ministers of the Crown, a cast-iron guarantee and assurance that the end of June date would be met. Notwithstanding the additional surge, and the fact that one would hope that through the chain of internal Capita managerial reporting an alarm bell was ringing, none of the key service delivery has been met to a standard that our constituents deem to be acceptable, this Joint Committee believes is tolerable or His Majesty’s Government believe either meets the contract or delivers value for money. In basic terms, what in the name of all that is holy went wrong? This is systemic failure and not a one-off. Are you just resignedly now coasting to the moment when the frustration level of Government is reached and the contract is taken from you? In short, you are just running down the clock, and the people who are caught in the crosshairs of that strategic decision are, as always, the poor bloody infantry, i.e. those who require their pensions or who are dealing with bereavement and across the piece.

There is a lot to unpack there. I can fully understand why the Committee would be interested in all these matters. I am committed that we will give you all the answers that you need through my answer and the rest of the session. I reiterate my apology and that of the company.

You offered an apology at the top of the meeting, which Sir Geoffrey, as the Chairman of this Joint Committee, has accepted on behalf of all of us. It will add nothing to the sum of human understanding or the milk of human kindness from this Committee towards Capita to repeat it. Let us park the apology. It has been accepted. It is not a substitute, I am afraid, for clear answers to specific questions, to which I would now like you to turn with some forensic detail.

Okay, I will do that. First and foremost, this is a very complex scheme. More complex than we thought, realistically. It is like nothing that our colleagues in pensions have seen before in terms of the ramifications. We have served pension schemes in the defined benefits space for nearly 50 years. We do over 200 of them. What makes this one unique is not the size, although it is 1.7 million. You have the size, you have the fact that you have some 300 different employers. You have some employers that are no longer there.

We know that. But surely you realised that when you submitted your bid for the tender. That did not come as a great surprise, surely. It was not like a lightbulb moment.

Indeed. We submitted the bid for tender and I am accountable to deliver it. Like the Paymaster General, I have inherited this contract and I will do everything that it takes to get it right. First, the complexity is very high. Secondly, you wanted some details on the backlog—I think you went through some details this morning. The backlog was higher than anybody expected. We were told that it could be higher and it could be twice as much, but the Paymaster General admitted that we did not really know the size. But a backlog of cases that were originated last week, two weeks ago or two months ago is not the same as a backlog of cases that were originated one, two, three or four years ago. A backlog of cases that say, “I need you to adjust my tax code,” is not the same as a backlog of cases with a particular circumstance—for example, if somebody worked for a Government Department that no longer exists and the service record is incomplete. The sheer scale of the data that was missing upon transfer is huge. We are talking about 20 million records, and these are effectively members’ service records that were either incomplete, missing or inaccurate. This business is about calculating and administering pensions, and the service data is at the very core of any calculation.

Let me pause you there, and forgive my ignorance on this point. You inherited the contract, or you won the contract, it having been taken away from MyCSP for reasons that we all readily have to hand; they do not need relitigating here. First, they had been paying out pensions. As Members of Parliament, we were not getting a vast number of people coming into our inboxes or surgeries saying that they had a problem. What happened to the massive amount of data—this lacuna of data—that you identified, on which you rest an argument as to why you have not been able to meet your contractual obligations? Surely MyCSP must have had historical data, so is this purely a matter of incompatible software, a lack of industry during the transition period, or possibly both?

We took over the payroll, and, as the Minister said, we have not missed a single payroll. We continue to make the payments. We have paid out £4.8 billion to more than 700,000 members. Through the transition, we ensured that we understood all the rules and all the things that feed into them. What you can see from both the anecdotal examples and the management information is that there are cases that have waited a very long time. When we first took over the call centre, we received a lot of phone calls from people who said, “I have been waiting for you to take over to fix my old case.” You mentioned the call centre. We stood up a call centre to take 7,000 calls a day, and we were receiving 25,000 calls. We are now receiving 9,000. We have stood up a second call centre. We have massively increased the amount of training, and we are now answering calls within eight minutes. [Laughter.] Over 50% of those calls are one and done, so they are completed and the person gets the action that they want on the call. Since we took over, as Angela pointed out at the start, we have done over a quarter of a million pieces of work, and we continue to work through all the old data and the missing member records. To be clear to the Committee, we have also had technology problems, as the Minister and Angela pointed out. Those technology problems have meant that it has taken us longer to resolve things. Both things are true. We inherited data that we have had problems understanding. The scheme rules are exceptionally complicated—it really is a very complicated scheme—and we have not been able to deploy the technology that would allow us to get there. What you have seen—

But that is the purpose of the transition period.

Absolutely. I am sorry that the technology we have deployed did not work in cases. We have worked tirelessly—

Hang on. Let us just pause that. You had a transition period, the purpose of which was not to metaphorically—I do not mean this disparagingly—twiddle corporate thumbs; it was to prepare the ground to ensure that there could be as seamless a transition as possible from one contract provider to another. At what point did you say to the Cabinet Office—either to Ministers or to senior officials—“We’re not as confident about the robustness of the technology as we hoped to be. We need a bit of extra time”?

Throughout the transition and post transition we have been transparent with the Cabinet Office on the status of all the elements of our project.

That may be true, but I am afraid that does not answer my question. At what point did you tell the Cabinet Office that the technological solution that you had promised in the bidding process for the contract was taking longer to reach the levels of scope and reliability that you recognised were required?

It is slightly complicated by the fact that there are many different types of technology and parts of technology, all of which are delivered in different phases and different ways. You heard previously that there are transition milestones, and we have discussed previously in our evidence that transition milestones were missed, and we then caught those up. Each of those represented a different part of the technology solution. The part that has caused us the problems in processing the cases is the end-to-end back-office processing, which relates to our ability to handle the complex cases and our ability to do the complex calculations at scale. That is the bit that has taken longer to deploy and that is the bit that we are continuing to deliver. Since we were last here, we have taken our ability to do back-office cases from 7,000 a week to 17,000 a week. We have deployed additional skilled resources from other parts of my business. We have taken the lessons that we have learned on how to deal with particular idiosyncrasies of the scheme to work out different ways of dealing with the problem. We will continue to do that until we have made sure that every single member has the pension that they deserve.

I do not want the question the honesty and voracity of answer that you gave a moment or so ago, but I would like to see some data to back up something that you have just told the Committee, which, forgive me, I find hard to believe. Mr Clements, you said that there were people who were not receiving their pension or not getting everything that they thought they were entitled to under the operation of MyCSP, and they were waiting to have that resolved until Capita had the contract and was operational. Bear in mind that for the vast majority of these people, this pension is not icing on the cake; it is the cake. It is what pays for the bills, the rent, the mortgage, the food on the table and so on. I would love to know how many people were prepared to forgo receiving an adequate pension or their pension in full while the corporate contractual wheels between the Government, the Cabinet Office and Capita rolled.

It—

Sorry, Mr Holroyd, that was a question to Mr Clements.

There were points in the previous evidence we gave to this Committee that there were well over 1,000 complaints open when we inherited this case. Of the 90,000, there were many hundreds who had waited more than a year. Some had waited even longer—more than two years.

I am not challenging you on that. What I am asking you to back up is what you told the Committee a moment ago, which you were using as a reason to justify the spike in queries that you were dealing with: that people had pressed the pause button on prosecuting the resolution to their case until Capita rode over the hill like a knight on a white charger. The figures on that, to substantiate that assertion, would be helpful.

In our first week of operation back in December, we conducted surveys of callers and their reasons. Once we noticed the trend, we began asking the question, “Had you waited to call back?”, and around 13% of all callers in that first week that were surveyed answered that they had been waiting for Capita to take over in order to get their call resolved. There were also a number of aged cases; people called back and their statement was something along the lines of, “I haven’t bothered calling about my old case, which I have had huge problems with. Please, now that you are in place, can you fix it?”

I will call Catherine in a minute, but I wanted to challenge something you said, Chris, because you will have heard disbelief from the audience when you said that there is only an eight-minute delay on the phone system. My information is that, for non-urgent cases, there is a 24-minute delay. That has gone up from the previous hearing we had, when it was a 17-minute delay, so it is actually getting worse again.

In the month of July, the average wait time for all calls was eight minutes and 47 seconds.

Not all calls, but some people are still waiting up to 24 minutes, which is quite a long time.

There is a variance between the longest and shortest waits. As we stated in previous evidence, we prioritise calls for bereavements and hardship cases, and that means that non-prioritised calls do tend to wait longer than the average.

What is the longest wait, in the latest available figures?

I am really sorry, but I do not have that number available to me. I am happy to write to you to confirm that.

You can write to us, but waits have clearly gone up from 17 minutes to 24; that is not acceptable.

Absolutely. We are continuing to take actions to reduce the call volumes and to ensure that cases are completed, the FAQs are updated and calls are one and done—that is, the member gets what they want when they are on the phone. All of those are the actions we are taking to improve the experience of everybody on the contact centre.

While we are on systems, let’s go to the portal. We are hearing too many cases of people who feed their information into the portal, get a reply back saying that their case will be dealt with and they never hear anything more. That is also unacceptable.

Absolutely, and I apologise to anybody who has had that experience. Since the portal went live, we have had 25,000 successful uploads and more than 300,000 successful downloads of documentation. We have identified a number of cases where there has been a problem with the upload; we have identified and fixed that upload and followed up with members to make sure that no documents were lost. We are actively communicating with all members from whom we are awaiting a document to make sure that they are not caught by that, and we are helping anyone to expedite their case.

So why is your client so livid?

This service is not meeting our SLAs; we are not achieving a good service. This is not how my other clients experience the pensions service, and this is not acceptable. We will continue to improve until it is acceptable.

Bereavement and complex cases, yes, but do you accept that your performance has been so lamentable and your corporate reputation so hanging by a sliver thread that you do not now have the luxury of triaging when it comes to how you handle calls? Each call, irrespective of genesis, should be dealt with as pressing and urgent, and you should be resourcing the facility in order to deal with all of that. You do not have the reputational capacity or the luxury to triage anymore.

We treat all calls as urgent, and we continue to do so. We continue to make sure not just that the phone is answered, but that it is answered by someone who has had the training and who understands and can help the member—[Interruption.]

Audience participation is all very well, but we must have the courtesy to allow the witnesses to reply.

In previous parts of the recovery of this service, we have increased the call centre with non-skilled staff, and that has led to dissatisfaction, as I understand, because then you are not getting—

Hang on. So you have a bad situation, which you then decide to make worse by putting in untrained staff to answer telephone calls. That is what you have just told us, Mr Clements? Correct?

No, sorry, that is—

I think the record will show—you may have misspoken and wish to clarify—that you have just told the Committee that to address the backlog, you put in people who were not qualified to answer telephone calls to, guess what, answer telephone calls.

May I clarify?

Yes, of course.

When the surge team—both our surge and the Government surge—came into force, we made sure that everyone was trained on how to answer the phone, how to deal with cases, how to record the information and how to conduct themselves. There are contact centre operatives who are exceptionally skilled in pensions who can do administrative tasks and to be the one and done. As we discussed in the last Committee, we have continued to invest in the training of the contact centre, so that they have more and more ability to do more things on the call, instead of taking the case, creating a case and sending it to the back office.

That is good, but that is not what you said.

I apologise for misspeaking. Everyone had had initial training, but it is the detailed pensions training that we have been deploying, which is what has increased the one and done statistics since we were last here.

On the point about where our reputation is, let me say, as the person who runs the public sector business, that we absolutely recognise that point. We are completely conscious of it in every single meeting we have with every customer across our estate in every service we deliver. It was me who committed to Chairman Sir Geoffrey Clifton-Brown that we would hit the end of June date. We threw all our resources in there in order to do that. We did not scrimp or hold back. We moved resources from elsewhere across the public sector division to do that. As you heard from some of Mr Clements’s testimony, we have moved things forward a lot, but not enough, and we fell short of the plan that we committed to. We are absolutely living through that reputational impact. I did not want the Committee to think for a minute that we are not aware of it and that we are not getting everything we can behind moving this, because our reputation relies on fixing it.

Have you considered your position?

Yes, I have. I have had that conversation with my chief executive as we have been through this. As I think I was touched on by your colleague at the previous Committee, it is very easy to say, “Yes, I am going to turn to the right and walk away,” but that would leave my colleagues without the support that they need through this. From my perspective, that is not the right thing to do. Those are not the values I have been brought up with.

I am the group chief executive. Ultimately, I am responsible for making sure this gets delivered. I am responsible for its failure today. I am also responsible for marshalling the resources, the budget, the overspend, the people, the talent and the operational efficiency and for trying to expedite every single thing that we have to do in Capita to ensure that Chris and Richard and their teams can fly as fast as they possibly can, so that we can restore this service to the level of quality that members deserve.

So no one is resigning. It does not sound as though anyone has been sacked. Is the board of directors looking to impose any penalties on anyone within Capita for this failure?

All of us serve at the discretion of the board of directors in all matters, so it is up to them. We have been working very closely with the board during this period—not only going into 1 December but before that—making sure it has visibility of the criticality of the project, what was being done, the resources we were using and the budget and the overspend we were going to go through, because it is the right thing to do in order to make sure the executive works and executes, while the board is there to advise, align and keep us accountable.

The word “accountable” is interesting because it does not sound as though there has been much accountability. It is a private company and it is a matter for the board of directors; I just find it surprising. Mr Hernandez, you sit on the board, I understand, so I wonder whether you can answer this: has there been discussion at the board about treating His Majesty’s Government as a key client? Have the board of directors expressed any concerns at the treatment the Government are receiving?

Absolutely.

What actions have they therefore put in place?

We have taken a lot of actions. This has featured in copious meetings—online, offline and formal. We have made investment plans, and the service normalisation plan that was created at the beginning of May was formally presented to the board. The board has been getting updates, asking and supporting. The chairman has been personally involved in discussions, where required. We have received support from the board in getting this done, but also fair challenge: are we doing the right things, are we thinking outside the box, is there any other thing we could be doing that we have not done? They have been doing what you would expect—supporting, guiding and challenging us at the same time.

Sam, we will need to move on because we do not have much time.

To follow up on your comments, Mr Hernandez, how much is the overspend on the contract so far? You have referenced it a couple of times.

As you can imagine, that figure is commercially sensitive, so I cannot discuss it in public. As a listed company, there are implications. I would be happy to have a private discussion or maybe write privately to the Chair.

I would be very interested, because although Mr Holroyd mentioned progress, I do not really understand what that progress is. It feels as though you are going backwards, not forwards. I may have misunderstood the reams of numbers that we have been given, but if you look just at what you define as the most pressing and urgent cases—bereavement and ill health—those numbers are going up, not down. I have a constituent who died at the weekend, who had been trying to get a response from Capita since January. I raised that case over a month ago—and I have had no response. How are those urgent and priority cases if even an MP representing a terminally ill constituent does not get a reply?

I can only apologise—

We do not want you to apologise; we want you to explain.

I understand that, but I want to lead with an apology because it is simply not good enough. Now I will tell you what we are doing. Chris mentioned earlier that we have a triage system, which we defined with the surge team from the second permanent secretary. There is a whole set of steps: what we are going to do, how we are going to do it, what we are going to triage and how we are going to do that. We have invested in recovering where we fell short on automation. While I can mention the backlog, the complexity and the data issues, I also have to be honest and say that we fell short on getting the automation on time. That is important because the automation gives us the throughput and the ability to deal with those urgent and vulnerable cases a lot faster. On the statement you made earlier, what is different now? I think we have gone from a system that was in distress and that, in the first half of the year, had a capacity problem to a system where we now have a backlog problem, so I think it has been stabilised. We have the capacity, with the numbers that the second permanent secretary shared this morning, with which we are 100% aligned. The problem is that we now need to use that capacity for the next few months to process as many cases as we can, with the urgent cases first. In the last couple of weeks, we have made tremendous progress, and the numbers in many areas are all going in the right direction. We can write to you with some more specific data to prove to you that we are moving forwards, not backwards.

Presumably the surge team is being funded by Capita—or is it being funded by the Government?

In the first place, we never intended to have a surge team.

I know, but is it being funded by the Government or Capita?

I made a commitment to the Paymaster General, the Minister at the Cabinet Office, that we would start picking it up from April. We have had not had a commercial discussion—

Let me stop you there. I think you were listening to the previous hearing. The Minister said that was completely unacceptable, and that you have to pick up the entire bill for the surge team from 2 February, when it started.

I heard him say that. We have not had that conversation yet. I made an offer.

Surely it would be reasonable for you to make a commitment to the Committee this afternoon, considering the Government were good enough to put that surge team in. You heard me thank the surge team. The whole situation would have been far worse without the surge team.

I would agree.

Can you make a commitment this afternoon, on behalf of Capita, that you will pay from 2 February? That seems to me only reasonable.

I think there are a number of variables here.

I do not want flannel; I want a commitment. You are the chief executive officer of Capita; you are in a position to make that decision. Will you give that commitment to the Committee this afternoon?

There are a lot of decisions that need to be made; there are no isolated decisions. There are decisions that pertain to this particular investment. There are decisions about others. I think we need to have a commercial discussion and put them all together. I hear you loud and clear. I heard the Minister loud and clear. I heard the permanent secretary loud and clear. I know what is being asked of us. When we sit around the table, this will be taken favourably, but we have not sat around the table. It would be a little bit irresponsible for me to make a commitment before I have—

I do not think it would be irresponsible at all. I think it would be the right thing to do. But, anyway, I hear what you say. I think that is an appalling reply, I have to say.

I am sorry for that.

You are talking about recognition of the reputational damage, not to mention the damage to people’s lives. That is why I asked about the overspend. I think Capita needs to pick up the ticket for the failure to deliver on what was promised. No matter how much you explain how difficult it is and how complex the contract that you took on is, you made a commitment and you have not delivered on it. For you, rather than the taxpayer, to pick up the bill for that would be one way of making some amends for this mess. The other way you could immediately help would be to enable MPs to escalate concerns. I do not want to not be able even to help any more constituents who are dying. That is the position that you have put us in, not to mention our constituents.

That is totally fair.

I have not had that with any organisation. People answer MPs when they represent their constituents, but Capita does not.

We noticed that we were falling short in that domain—I think it was around April. We did not have to have a lot of debate. We figured out what the best possible way was to do that. We resourced a team to go into those sessions. Speaking from memory—Chris will correct me—I think we have done nearly 300 drop-in sessions, working with the Cabinet Office, and we have another 150 scheduled to happen in July. We will do more and better. We have also learned that the first few ones were not up to scratch. There was more detailed information. There was a request, clearly, from case handlers that we needed to be more specific and use different language that is not as technical. We are listening to the feedback. We are engaging. We have done more and we will continue to do more. If we do not raise the bar enough, I would love to have the opportunity to hear from you and improve again.

You will be hearing from us.

I want to go on to these bereavement cases, Adolfo. As Catherine said, if somebody is dying and they cannot get the money they are entitled to, these are really sensitive cases. You took over about 15,000 such cases. Today, there are about 4,300 being processed and another 3,700 waiting for information, so it seems to me that you are not making the inroads into this most sensitive of categories quickly enough. What do you intend to do about it? By the way, you have put the deadline back from March to May for this most sensitive of categories. That is appalling, isn’t it?

I will continue to apologise to the people waiting longer than they should. We have deployed a new piece of technology in the last couple of weeks. In the first week of July, we closed more than 1,000 of those cases. We will continue to close those cases as fast as possible. The rectification plan, as discussed in the previous evidence, will include a clear and measurable plan to make sure that we close down all those cases and get within SLA on that.

Let’s try to get something out of this session this afternoon: when, in the case of bereavement cases, will you get to your service level agreement?

We are going to close out all of the cases that are with us and workable in the next two months. As I have said, in the last week, we have already closed well over 1,000 cases, and we will continue to do so. There are a number of data, member record and other issues that we will work through. We are currently making sure that we do all those as fast as possible, but they are a tiny bit more complicated. We would never not follow the process as set out. It is a complicated process, and we will continue to make sure we follow all the rules in that process, so that we are not taking any shortcuts, and we are making sure we do these cases properly.

On the workable cases, which I assume means you have proper data, they will be sorted within two months. Correct?

Yes.

Good.

What is the percentage breakdown?

Of workable and unworkable?

Yes.

On death in service, 218 are workable and there are 618 outstanding. For the ones that are not workable, we are working with the taskforce to go through and make sure that we either receive the documents or fix the underlying member record issues. We don’t not work on the unworkable ones—we are actively managing them—but there are dependencies that mean that we cannot control when they will become workable. As soon as they become workable, we work them as fast as possible.

So about a third?

Yes.

You narrowed the category to death in service, there. I was talking about bereavement cases in general.

I apologise.

Does the commitment mean that all those bereavement cases—the workable ones—will, in general, be sorted out within two months?

Yes, and I can give you the same numbers on that. Of the 4,500 that Angela talked about in the previous session that are available to process, 1,465 are workable. For the others, we are working on either the data or the documentation.

What about ill health in retirement?

Out of 429, 360 are workable.

That is useful, anyway. Thank you very much indeed.

Everyone who is waiting for answers from you will be delighted to know, Mr Hernandez, that they are no longer part of a capacity problem but part of a backlog problem—I am sure it is very reassuring to be told that. You said a few minutes ago that you have been waiting to sit around the table with the Minister, the permanent secretary and other officials. Do you mean that you have not been sitting around the table in the last few weeks?

No, I have not had the pleasure of a meeting over the last few weeks. We met before 1 December. Following that, we exchanged a number of letters and updates, as you would expect, but we have not met in person. We have been in touch with the permanent secretary, the chief commercial officer and the second permanent secretary, so the engagement has been quite tight.

Mr Holroyd and Mr Clements, you have met officials from the Cabinet Office regularly, so why could these assurances about the surge team and who was going to pay for it not have been dealt with in those meetings?

I think the second permanent secretary and the leader of the taskforce said this in the previous session. What we have been focused on, with her agreement, is return of service. There are commercial conversations to go. The Government chief commercial officer explained what is happening in terms of payment being withheld. We understand that. I think he also said that the full bill for what we will be required to pay will be defined once we get back into service-level agreements. It has not been the case in all my conversations with the Government chief commercial officer. Chris has been working very closely with the leader of the taskforce. Because we understand the contract well, we understand exactly the sort of penalties that are coming, including the service credit penalties and so on, but we have not taken time at this stage to total it all up. The second permanent secretary gave you the numbers of what we agreed were the estimations of the Government spend to date. It is not the case that we are avoiding it, and it is not the case of trying to adjust it or of negotiation. We are required to deliver a rectification plan, as I think was mentioned in the previous session. We have a meeting in the diary on 16 July with our opposite numbers. We will go through that process there. There will be discussion of an auditor, and the appointment of an auditor will be at our cost. We will do that in partnership with the head of the taskforce. Please accept my assurance: we are not avoiding this or dodging it. It is just that they will produce the bill, and we will sit down and go through it. Because we understand the contract, we know the nature of what is coming.

We are also interested in what is coming in terms of service delivery. When are you actually going to get all the service you provide up to the contractual arrangements you entered into?

What we have committed to is that by 1 September, we will take all those that are in the current retirement process—the people who are just recently retiring because the machine now works, as the head of the taskforce said. The engine is now working. We could take those people through, and we will deliver those by no later than 1 September. That means that we can get those people through the engine because it works. The more complex cases are those that we referred to earlier. We actually refer to it with the taskforce as “the stock”—those people who are sitting waiting for payment, and some of them have been sitting for some time. The commitment there is that we will get those paid and cleared by 1 September. That goes to our point that we have built the machine, and the machine is now able to operate. There are some highly complex cases that we inherited, and you have raised some of those with us before. There are about 600 of those cases, which we largely inherited. In some cases, those service records are not complete, so to Charlotte Cane’s point, we have to sit with HMRC and the Department for Work and Pensions to recreate that service record. In some cases, that Department of State does not exist any more and the member left the scheme some years ago, so there are a number that are highly complex.

So you have 600 of those?

It is roughly 600.

Right. Apart from those, when will all the rest be dealt with according to your contract?

For the numbers that I gave you—bear in mind that we are taking in inflow all the time—which are the numbers that we had as of yesterday, we have committed that those coming in through the normal process will be completed by 30 September. We will get to those in the backlog element—that is how we referred to it earlier, perhaps incorrectly—by 1 September.

So with the exception of the 600 complicated cases, all cases will be dealt with by 30 September in line with the contract?

Yes. The important thing to note—this is not a swerve—is that because we are taking in inflow all the time, we will always have—

No. Capita is contracted to deal with cases within a time limit. That assumes that you are always going to get cases coming in, doesn’t it?

Yes. We will have a work in progress running all the time.

All the cases, including the new ones coming in, will be dealt with according to the contract specifications by the end of September?

Yes. There is a key point around SLA. As the previous team sitting here mentioned, there is a whole bunch of SLAs and sub-SLAs. Those SLAs are like a chess clock. When we receive a request for a pension, we have to get that quote out to the member within a certain number of days—we have to hit that. That is the SLA. That then goes to the member, and if the member returns that to us within the number of days set out in the contract, the chess clock starts again, and we have three days to respond. Those are the ways that the SLA is written, which is why we end up with the phrases “workable” and “cases that are waiting on other inputs”. To explain it in terms of SLAs, currently, because of the way that the contract is and because we inherited those 600 cases, we could not be in SLA anywhere because those 600 cases are beyond an age—

We will put those to one side. I am asking for your assurances. We assume that when you send information to pensioners and members in the future, you will send them the correct information. One of the things that we have been told is that when information goes out, it is rushed through, inaccurate and wrong. Then when the person responds, their response goes into a black hole, and they do not hear back for weeks.

We continue to monitor quality. We monitor cases like that and ensure that we—

People say that it doesn’t happen. The responses come back to you and nothing happens. Then when they are escalated, nothing happens. That is what we are told repeatedly.

We apologise for the delays, and we are continuing to work—

You keep apologising, but you could have sorted it.

We are continuing to work through the open cases and ensure we move them all as fast as possible.

Well, as far as I can see, we have a commitment to the end of September. We will get that written out. Mr Holroyd, I am going to ask this very bluntly. When you came before and gave us a commitment about timescales and finishing, I said to you at the end, “Why should I believe a word that you tell us?” I was wrong to believe you then. Why should I believe you now?

I do not have an adequate answer. I can say it again, and I am sure you are in the same position. We have to prove this through delivery. That is the only answer that I can give.

Well, we will wait and see again.

Clive, thank you. I have to say that I am pretty sceptical. We were given a deadline of March, and we were then given deadlines of April, May and June, and they were all missed. It is not very good, is it, Richard? The more it goes on, the worse Capita’s reputation is getting. They may well not get other Government contracts. I have to say that you are not doing yourselves any good.

You are absolutely correct. This is having a very negative impact on our reputation and our ability to handle contracts like this and for which we are responsible. I want to come back to a point that was made earlier: we are not going to be just sitting out time. We are here and we are going to be in charge until we are not—if that is what comes to happen. We will work to ensure that the members get the service. We have been late on the technology and on some of the automations, but they are coming in, as some of the numbers from Chris suggest. We have a number of other automations coming in even as we speak. Through the summer that will improve the numbers even further. Hopefully they will become, once we have delivered them and given you the fact, new reasons to believe that we are 100% committed to getting this one right. We do that in the vast majority of what we do for the Government. I said earlier that over 90% of the KPIs are met. There are isolated areas in a number of contracts, but the vast majority are met. That is something that we are very proud of and we are very proud of what we are doing with the Government and for the country. It is in our interest to make sure that we get this addressed firmly and quickly.

I am not sure that I would be proud of what you are doing, but anyway, that is a different point.

On the escalated cases, what is the SLA if you have an escalated case? Among my constituents, there is somebody suffering from cancer and somebody suffering real financial hardship, and they do not know how they are going to pay their bills. They have been telling me that it is a four-to-five standard waiting time for their case to be dealt with. What SLA or timetable are you working to for escalated cases like those I just described?

We are working as fast as possible and as fast as the process and systems allow us to. The contract is very clear on the SLAs. It is the same as the case: being two, three, five or 10 days depending on the nature of the case. However, as we have said, we are in a backlog situation, and we are prioritising and getting through the cases as fast as we can.

You do not have any real internal timeframes that you are working to try and meet for those cases and that we can understand as MPs—is it just as soon as you can?

We are working through all the open cases and backlogs that we have discussed and closing them as fast as we can. As has been stated, we are not currently within the SLA, so we are not currently able to close them in that timeframe.

There is an issue around being able to track how much you are improving, particularly on those cases that are really material to people’s circumstances. If you are not setting a timeframe that within two weeks it will be dealt with—half of what non-urgent cases would be expecting—and measuring it, it becomes very difficult to give us assurance that you are making the progress that you need to.

We do measure and share the measurement of all of that with the taskforce that holds us to account to make sure that we are moving those cases through as fast as possible.

In terms of all the services that you are undertaking and have talked through this afternoon, which are most at risk of failing again?

A number of the services are not within the SLA at the moment. However, we are continuing to process all those cases. We are able to process all the cases, and it is now a case of getting through the backlog.

On how you are prioritising your resources, how are you mitigating the risk that other services that you need to provide are not falling over in the meantime?

First, we are making sure that anyone and everyone who is qualified to work on the scheme works on the scheme. We prioritise in conjunction with the taskforce to make sure that we are getting to those members most at need first. We are also working through cases based upon age and hardship-based priority.

We heard earlier from the Minister, who described a sort of AI-driven data approach that you had pitched as part of your successful bid. To what extent are the problems that we are talking about in terms of the technical challenges coming from that AI-driven solution that you proposed?

They are not; they are coming from the calculation of the complex benefit structures, which are done by traditional automation.

You talked at the beginning about how you were surprised by the complexity and size of the scheme. That surprised me because I believe that Capita managed the scheme until 2012 and had a two-year transition period as well, when you had a good chance to look at it all and understand it. We have heard about the fundamental problems, the fundamental backlogs, but another frustration that a lot of my constituents have is that when they get through to someone, they are given a deadline for when they will hear again from Capita—when their case will be resolved. I am afraid that that deadline is routinely missed and there is not even an apology to say, “Sorry; the new deadline will be X”. That person has to recontact Capita. Eventually, that person—that constituent—gets so frustrated that they contact me as their MP. I then contact Capita on their behalf, and I get the same game. I get told that it will all be resolved by a deadline. When I go back to the constituent after that deadline and they say that it is not resolved, I have to go back to Capita. Most recently, I have had a constituent waiting for data so they can finalise probate from last year. I was told that they would get all the paperwork by 7 July. As of this morning, they have not had it. I hear all the problems that you inherited, but how do you justify treating people like that? Why do you not give them a proper deadline for when you can sort it out and then meet that deadline? It is so stressful for them. The other thing, as I raised with the Cabinet Office, as you will have heard, is that at the end of this, you pay them by BACS, so there is a delay of several days. I know a few days seems hardly anything in the great scheme of all the months that these poor people are waiting, but why do you not have the decency to at least pay them by CHAPS so that they get the money straight away?

There are several parts to that question. Initially, you said we administered the scheme back in 2012. We did not; we just did the payroll. First of all, I say sorry for the people who have waited. As we have mentioned before, we are not currently operating within our SLA and that means that we are operating with backlogs and it is very hard for us to make sure—we are processing things as fast as we can. They are constantly coming up against issues and delays, and we are trying to resolve those as soon as they happen so that we can get to every case as fast as possible. On the point around BACS, the majority of payments do go out by BACS. The normal payroll goes out by BACS, but in issues of hardship or where there is an escalation, we do use CHAPS as a method when it is necessary to do so. I apologise for us not hitting the deadlines that we have given the member, and we will continue to improve that and continue to make sure, as I have said, that we work through things as fast as possible and be honest and open in our communications.

Why are you still making promises for deadlines and then not meeting them? Why do you not assess the case and give a deadline that you are confident you can meet? That would reduce some of the stress for people.

I can only apologise that we have made that mistake. We will look at how we are doing that. We are attempting to do what you described. Obviously, as you have described, we do not always achieve that.

Going back to the BACS and CHAPS thing, why should they have to tell you that they are in hardship? They have been owed this money. It has taken months, maybe years, to resolve the case. Why do you not just pay the money as quickly as possible through CHAPS?

They do not have to tell us. An assessment is made on each payment about what the most appropriate and practical payment is, depending on the nature of that payment and what it is. The full-scale payrolls, where we do mass payments, they go by BACS; that is how that automation works, so it would actually take longer to pull it back.

Payroll I get. That goes through BACS because you are paying that monthly, and that is fine. But when you have delayed somebody getting their payment, can you commit now, going forward, to routinely pay them by CHAPS, so at least they get it straight away?

There is a technical problem there; even when we are doing processes like lump sums and arrears that go through, they are also going through the payroll, and it is therefore very difficult to take out large numbers of payments into CHAPS. It would delay the process even further to make every payment by CHAPS. By making sure that we are getting all the payments done as fast as possible using BACS, and then prioritising those cases where we use CHAPS, you get the best balance of making sure everyone gets their money as fast as possible. The way the automation in the system works, it is easier—

It is easier and it is cheaper?

I apologise—it is faster. Our teams, as you have heard, are absolutely focused on getting members the outcome they deserve. On anything that is required to make sure that this service works, we are not skimping on the money.

Adolfo, what I am hearing is that the service for Members of Parliament is not good enough. Even during the height of the pandemic, when the Passport Office was in huge difficulties, it held surgeries in here and, with a bit of a faff, Members of Parliament could get their constituents’ cases resolved on a reasonable timescale. Why can the same thing not happen here with MPs’ correspondence? Can we have a commitment to improving the service that Members of Parliament get? After all, they are desperately trying to sort out these cases on behalf of their constituents.

Yes, 100%. You have my commitment. We will continue to improve this service and we will make it work.

Thank you.

You spoke previously about deploying all the resources at your disposal to fix the mechanics—to fix the engine, as you have explained it—and then start to churn through the backlog. What is the size of the resource you have deployed: how many people is it, and how much does that cost?

The BAU operational team inherited 330 staff from MyCSP through TUPE. We currently have deployed a Capita surge of 191 staff from the rest of my organisation. As was discussed earlier, there was 120 with the Government surge. They are then allocated to the different teams based on the skills they have. As the second permanent secretary for HMRC described earlier, we focus those people with the most pensions expertise on the most difficult and complex cases. Given that they are Capita people, we have most Capita people focused on those complex cases. That is the BAU staff. In terms of the technology, we have all the resources of the group, including all the technology resources, and the technology resources of our technology partners, dedicated to making sure that we deliver the technology that is required. That, in total, is more than 200 people across those providers.

We can see from the NAO Report that the number of staff deployed by MyCSP was previously somewhere in the region of 450 through to December 2024. Did you underestimate the resource it would require to administrate this? Is that fundamentally where you have fallen down, first with the engine not working and secondly by not having enough staff to then churn through the process? You have underbid the project, you have competed by putting a lower price in, and ultimately you have been found out.

Over 95% of the people eligible for TUPE transfer chose to transfer to us. That was 330 people. We inherited everybody that MyCSP had working on this project. As we have made clear in previous Committees, the initial Capita surge was put in place before go-live, because we identified that some of the technology was not going to be there on time. We put people in and estimated everything based on the volumes as we understood them. As I said in answer to an earlier question, the change in members’ behaviour in December caught us out, but since then we have continued to add humans where the technology has not delivered, to ensure that we can process as many cases as possible. Those are highly complex, detailed processes that take very skilled people.

We did read the NAO Report. This was one of the contingencies that I discussed with the Minister at the Cabinet Office, that we would put in additional resources—50% more—just in case, because we did not really know the backlog or the full scale, complexity and age of it. However, for the reasons that we have already covered, that was not enough. Even though we have added another new call centre, which has helped to alleviate things, it has not been enough. I also want to be very clear about one thing: the way we are going to get out of this is not through more surge teams. The way we are working to get out of this is through the technologies that we started to deploy, late—

But the backlog will be fixed with surge teams—

Partially. I think the scale, if I may—

If you want to get through the backlog, you put more people on it. You fix the engine. You have described it as a backlog problem. If you wanted to fix that, you could put more people on it, but that would cost you more.

We are going to need both. However, the real scale will come through the automations. That is how you jump from 200 quotes a week to 5,000 quotes a week. That is the difference. It is not about putting 10 times more people in; it is getting the automations in. In the last four weeks, we have put in a number of automations that have helped us get there. We look with confidence to the date that Richard mentioned earlier, which is predicated on the technology continuing to work and on the new things that we have in the pipeline.

I think we have asked this question already, and you declined to answer it, so can I request that you write to us and explain how much you expect it to cost in total to return the service to acceptable levels? When we are doing a post-mortem and looking at similar projects in future, there may be lessons learned that we need to apply to them. We need to understand what numbers we should be looking at in a contract or bid for a job of this complexity. Finally, you mentioned the technology resource that you have deployed from other parts of the company. Other than technology, what other resources and expertise have you used to fix the issues?

I have an actuarial business, and we have taken actuarial staff away from other private sector work. I also have a data business, from which we have taken data teams away to carry out the data triage—by data, I mean member records. I have deployed well over 100 of my consultants into the project. I also have a project management team, and we have deployed all its resources to help co-ordinate and run everything. We have taken people from throughout the pensions business, which, as I think we mentioned earlier, serves more than 200 clients, and brought them into the civil service to support. They are particularly valuable in this case because they have expertise in the defined benefit pensions market.

I have a very brief “when” question, following on from Luke’s question and an earlier exchange, about the surge team services. The Minister, in his responses to us earlier, made it very clear that he is determined to recover the cost of those services. When will that take place? We have already had an exchange about whether it starts from 2 February or from the April date. I assume that part of your answer is linked to determining which date is agreed, but when are you likely to start paying that back?

It refers partly to my previous answer. We have the rectification plan meeting next week. As part of that, we will also be entering into discussions and negotiations about the rest of the options in the contract that sit there for the Government to take. I do not have a date to give you, because I do not specify the date. That will be in negotiation with the Government chief commercial officer—when I say negotiation, I mean that he will lay out the payment schedule, and I think that was in his answer previously. You will understand that, as a supplier, we do not dictate when we might pay penalties.

Understood.

We will need to speed up, because I think we have to finish before 4.25 pm.

We have covered a lot, but I wanted to go back to the comment that you made about the surge teams. Being in a backlog situation rather than a capacity situation seems to be the exact scenario in which you would require a surge team. Because we are pressing on the cost of surge being transferred to Capita, rather than the Government paying, is that why you are now thinking it is not required?

No, and apologies if that is the way it came across; it was not intended to come across that way. The work that the surge teams did with Chris’s team was divided into three sprints. The first sprint was the stabilisation, one was addressing the urgent cases, and the other one was getting into throughput. He has provided, and continues to provide, an extremely critical service, particularly in the areas where we have had to interface with Government Departments. There are the connections and the information, and they are much better placed to do a lot of that. They have provided an absolutely invaluable service, and I could not thank the second permanent secretary enough for that. As we look forward, we will continue to need surge, but the real speed, the real gains and the real scale will come from a combination of surge and the technology, the automations and the calculations. Those two things working together is what will allow us to eat into the really painful cases fast enough. That is all I intended to say.

Are you confident that the AI and additional technological capacity will be there in the next two months to clear the backlog?

Indeed. A number of solutions have been deployed—but, unfortunately, as I said earlier, late. They have been deployed through late May and June, and some of them even last weekend. That should have happened before. We have more coming. They are already operational and working. When we have a little more time, all of them will be working, plus new ones will be introduced—some of which have already been tested by our colleagues, together with the Cabinet Office—and they will all help.

If it does not deliver what you intend and what you hope, will you invest in additional surge capacity or additional capacity within your own teams to meet the demand and meet the promises you have made today to clear the backlog?

Yes.

As you will have heard, the Cabinet Office estimates that you will fail on 16 of the KPIs. I am not quite sure whether you have already failed, in terms of the deadline you have currently reached, or that the Cabinet Office has anticipated that you will fail. Can you clarify that? Can you also clarify what that means for the current profitability of this contract for Capita?

The KPIs are assessed monthly, and we share those. I believe the official was referring to both the failure that has happened and I think they said that they will continue to fail. We report on those monthly. As we have said, we will not be compliant with those SLAs until we have cleared the backlog, because that is how the SLAs work. What was the second part of your question?

I will pick up on that. You will appreciate that you heard the Government chief commercial officer say that we are having payments withheld, and £9.9 million-plus service rates. We are absolutely not in profit on this contract. I think I said at the last Committee that it frankly is not our focus. I know it is perceived that that is the way we would operate. The Government—I think the permanent secretary at the Cabinet Office said this—is a major strategic client for us, so we cannot think about profitability here. What we are thinking about is reputation across the rest of the business and how we recover here. There is no profit motive or profit driver in this; this is restore service, rebuild trust. To the question I was asked earlier about why you would believe me now, we have to rebuild that trust.

That is why I picked up on the reference to overspends. Quite frankly, at this stage, given the state of things, an overspend would be in order if it is needed to fix things. It would be good to understand that there is a commitment on Capita’s part to overspend on this contract, if needed, to put things right.

As Adolfo said, there are a bunch of things that are commercial in confidence, but I can assure you that there is an overspend.

There are concerns that we are heading into the next crisis, which is the McCloud deadline. Presumably, under the contract you have entered into, given the situation you are currently in and the capacities you have, we need some reassurance that we will not just have the same thing again in six months’ time, with you not able to meet the legal requirements for McCloud.

We are currently in discussions with the Cabinet Office over the McCloud contract. As I believe was stated in the Cabinet Office’s evidence, that is a separate contract and a separate statement of work. That separate statement of work is resourced and managed separately from the main contract. We are currently working through the plan on how to approach that.

That is not very reassuring, because they are the same people—the same people in your current backlog will end up in the McCloud backlog as well. In all likelihood, many of them will overlap. You talk about separate contracts, but as far as we are concerned, it is our constituents and it is the same people. We are just flagging that now, and we are hoping that we do not have to revisit this.

Absolutely. I guess the point I was trying to make with the separate contract is, one, that we have not signed it yet, so we are working with the Cabinet Office to make sure it is robust before we sign it and, two, that we are not going to leverage the same operational resource. That is what I mean by separate. I apologise; I did not—

When you talked about making commitments to clear the backlog by September, you were careful to reference the workable cases you would clear. I think you said there are several hundred cases that are not workable. When will you clear those by?

We will work with the taskforce to make them workable—to resolve the dependency that is not entirely within our control—and, as soon as they are, we will work them as fast as possible. I cannot give you a guarantee, because it is not entirely within my control, but what I can guarantee is that we will continue to chase, work with and engage with whatever third party the case is with, or the Departments or the taskforce, on creating the member records required to do the calculations. As I said earlier, we will not not work on them, but there are dependencies that are out of my control, so I cannot give a commitment. The commitment I can give you is that, as soon as they are workable, we will work them as fast as possible.

You must have a project plan and an estimate.

The problem is that if it is, for example, probate, you are waiting for the probate certificate to arrive; that makes the case not workable. If you are waiting for a member to submit a death certificate, the case is not workable until they submit it. In terms of a project plan, yes, we have these cases very firmly gathered and awaiting third-party input, and we know, line by line, what we are awaiting from that. As Chris said, we use HMRC surge resources, where it involves Departments, to help chase that data down to make cases workable. That is not a very empathetic way of describing it; it is about the elements where you cannot put the member into payment, because you are waiting for something else in order to complete the calculation, sort dates out, etc.

And you are actively looking for that information.

Absolutely, because, again, it is part of our clearing the SLAs and clearing the backlog.

Could you outline your understanding of the circumstances and level of service failure under which your contract could be terminated?

We do—we understand.

Could you outline those levels to the Committee?

That is a matter that I think the chief commercial officer mentioned this morning. It would be irresponsible for me to comment. It is up to the Cabinet Office to proceed, if that is what they want to do. My job today is to ensure that every resource, every effort and management time is devoted to fixing this. Then there will be other forums and opportunities to talk about anything else commercial.

It is very well defined in the contract, but forgive us: the contract runs to 30-odd pages. We do not have it with us, and I do not have the capacity to know it all, but we are very happy to send those elements to you so that you can see them, because it is very clearly laid out.

I think that will be helpful for us to see. Would you accept that the issues so far have constituted a critical performance failure?

I think you heard this from the Government chief commercial officer—we are in in default on the contract. We know that, and that is why we are involved in the rectification plan.

I want to pick up on a brief question regarding the technology that Catherine asked just now. Mr Hernandez, a few moments ago you said that the way we are going to get out of this situation is through the deployment of the technology. Earlier on, Mr Clements, you said that earlier you had been having technology problems. Can you tell us in more detail what went wrong with the deployment of the technology that stopped it being deployed, as you promised when bidding for the contract, and what specific issues have you now resolved that gives you confidence that you will be able to deploy it going forwards?

I will give you an overview of what it was; then we can get into some of the specifics that broke down. The solution was built on the system, the technology, called Hartlink. That is in production with over 200 customers. It works with some of the largest defined benefit pensions. Then we built a front end on top of a Microsoft solution for the portal. Then the work was how to get the two to connect and how to build something that offers the Microsoft CRM capabilities that give the digital journey for the member and for the employer, as well as the resilience of the back end. That is effectively what we built. Then a number of calculations and automations were going to be built into the system to allow the throughput to happen. During last year, in 2025, it took us longer than expected to get those two systems to talk, to meet some of the milestones, but then we cut it back.

Surely it is not unusual that you have to have a front end for a pension scheme. Is that not something that you designed in advance? Why did you have trouble getting it to—

Well, it was done. It needed to be secured, it needed to be tested, and it needed to work. The challenge that we had in going live on 1 December was that the volumes were multiple times what was expected. We had allocated 50% more licences than we thought we were going to have concurrent users. We thought, “Let’s make a contingency. Let’s put in 50%.” It turned out that 50% was not enough, so the Microsoft system collapsed. It took us a couple of days to get it back up with all the new licences, and then it was resolved. We got that to work, but where we fell short was in the calculations and the automations. We should have had those ready by March. We didn’t. We were working under stress and a lot of strain on all the issues that we had encountered. Those things that should have happened by the end of March ended up happening in May, but they are now being deployed and they are already operational. There has been a very impactful delay, but the technology is now coming together.

We will perhaps dig into that further in the future, but finally, we talked to the Cabinet Office just now about the potential for them to insource the contract. Just now you were telling us how badly the data transfer went when you took it over from MyCSP. What reassurance can you give us that if the Government do decide to insource this contract, you won’t essentially pull the same trick and you will ensure that there is a complete data transfer in the easiest way possible?

First of all, contractually the Cabinet Office has unfettered access to everything, so that isn’t going to be there. Above that, we are in the business of solving and managing complex problems on behalf of the Government when the Government so decide. As part of that, sometimes we take from other providers, and sometimes we give things back. We will do that to perfection. If that has come to pass, we will work professionally, hand over, and do a tripartite, as we are doing today for example on teachers. We are working with the new provider, with the Department for Education, and being totally transparent and giving total access to the backlog and to data. We will do everything that we can to avoid anybody having to go through the pain that we have gone through.

To be clear, it wasn’t the data migration itself; it was the membership records contained within the data. The data migration was conducted successfully. We received the records that were there. The records that were there do not have all the information we need to do the calculations, but the actual act of transitioning the data was completed correctly.

I am afraid we will have to leave it there because we are out of time. Can I thank our witnesses very much? This was bound to be a slightly difficult session. Can I appeal to you, Adolfo, that when you make that rectification plan, you stick to the promises made in it? There is nothing worse than for you to keep coming before this Committee and making a promise, and then it is broken. We really want to see these pensions paid to those people who are entitled to get them in a reasonable time. We look forward to seeing that rectification plan from the Cabinet Office. Thank you very much for coming today, all of you. The uncorrected version of the transcript will be up in the next few days. We will then carefully consider the evidence that you have given us today and that the Cabinet Office have given us, and decide how to take that forward, no doubt after we have seen the rectification plan. Thank you again.