Page last updated at 17:07 GMT, Wednesday, 19 November 2008

Grants company loses its contract

IT suite
The allowances encourage young people to stay in education

Liberata, the company behind delays in students' maintenance allowances in England, has lost its contract.

The Learning and Skills Council said Capita, the company that formerly administered EMAs, would take on its full range of learner support services.

Earlier, at Prime Minister's question time, Gordon Brown said Liberata "had not delivered".

Thousands of students are still waiting for their payments, more than two months after the beginning of term.

In a statement published on Wednesday, the LSC said: "Learners have suffered weeks of delay in receiving payments as a result of Liberata encountering technical difficulties in processing EMA applications.

The LSC's view is that a change of supplier is the best way forward
Learning and Skills Council

"The focus of the LSC and Liberata throughout this period was to ensure that all possible steps were taken to overcome these delays," the statement said.

"At one stage the backlog of applications was in excess of 200,000. Liberata has worked to reduce this backlog to below 12,000 and the remaining applications are expected to be cleared within the next few weeks.

"Despite this progress, the LSC's view is that a change of supplier is the best way forward."

Chief executive of the LSC Mark Haysom said it was "unacceptable" that young people had had their EMA payments delayed and the LSC was "delighted" that Capita had taken the contract on.

No further financial penalties

The details of the transfer of the EMA contract are set out in a letter from Schools Minister Jim Knight to Barry Sheerman, the chairman of the Commons' Children, Schools and Families Select Committee.

The transfer of the EMA helpline, processing and payment service from Liberata to Capita will take effect from Friday 28 November, the letter says.

From that date, Capita will bring in a new senior management team to oversee the staff and operations in Coventry, Manchester and Darlington.

The loss of the contract had resulted in Liberata losing future revenues of over 60m, Mr Knight said.

No further financial penalties were being imposed, he said, because Liberata had also incurred extra costs through their employing significant numbers of extra staff to deal with the backlog in applications.

"The payments being made to young people will continue and during the transfer period, outstanding applications will continue to be processed," he said.

"As I have made clear before, all delayed payments will be backdated in full."

It is the second time in a matter of months that the government has had to end the contract of a private company which has failed to perform. This summer ministers parted company with American firm, ETS, which was responsible for delays in the delivery of national curriculum test results for primary school children.

'Catastrophic failure'

EMAs are paid to about 600,000 teenagers from low-income families as an incentive to keep them from dropping out of education.

Although the scheme is UK-wide, only England is affected by the problems arising from its administration being contracted out to private firm Liberata.

The contract to deliver the allowance and other payments is currently worth more than a million pounds a month.

There have been long-running problems with the delivery of the means-tested allowances of up to 30 per week.

This has prompted repeated complaints from MPs, students and college principals.

The National Union of Students welcomed the announcement. Vice president for further education, Beth Walker, said: "We are pleased that the government has taken heed of students' concerns over Liberata's shambolic handling of EMAs.

"However, the Learning and Skills Council must continue to work to ensure the remaining backlog is cleared and all back payments are made.

"We fear that many students have been forced to drop out of their courses by the delays and there is an urgent need for the government to conduct a full inquiry into this catastrophic failure,


Meanwhile, the BBC's Newsnight programme has learnt that Liberata knew a year ago that it would be unable to fulfil the contract.

Newsnight interview with Liberata whistle-blower

A former senior Liberata executive told the programme: "I believe they knew from the early days of the deal.

"I am aware that a senior colleague of mine presented a report stating the technical and non-technical problems he had identified and said they needed to employ more staff and make technical changes - this was in October 2007."

Asked if he was saying Liberata bosses were warned by a senior colleague a year ago that the contract could go off the rails, he replied: "Yes I definitely am.

"The report he had put together made clear that in its current form the thing was not going to work."

Liberata have declined to comment on the allegations.

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