Credit: PA
Two Whitehall departments have been criticised for their handling of the hiring and oversight of former Student Loans Company chief executive Steve Lamey, who was sacked from his job for gross misconduct in public office.
A National Audit Office investigation into Lamey’s 2016 appointment and 2017 dismissal has revealed that the former HM Revenue & Customs director general for benefits and credits had been deemed unsuitable by officials at the Department for Business Innovation and Skills when he was proposed as the only appointable candidate following a head-hunter led recruitment process.
Public Accounts Committee chair Meg Hillier said the report showed that BIS had failed to effectively monitor goings on at the Student Loans Company after Lamey was hired, and that the lack of oversight had continued when the Department for Education took over responsibility for the organisation following 2016’s machinery of government changes.
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The just-published NAO investigation into the affair reveals that BIS officials proposed re-running the recruitment exercise after Lamey’s HMRC references prompted concerns about his ability to “build the right relationships, trust and rapport” that the role would involve.
However, a special adviser to then-business secretary Sajid Javid disagreed with the conclusions officials had drawn from the anonymised references and raised concerns about the expense of re-running the recruitment process.
The NAO said the unnamed spad pointed to a 2012 performance appraisal for Lamey as delivering results that put him “in top performer territory”, and he was hired but subjected to a special 12-month extended probation period proposed to mitigate officials concerns.
Lamey had successfully argued for his extended probation period to be kept secret from everyone at the Student Loans Company, apart from the chair who was responsible for monitoring his performance. The NAO said the board chair had expressed concern from the start that they had “significant reservations” about the probation clause, and that it would not “not set the right context” for the start of a relationship between a chair and their new chief exec.
The report also noted that while BIS officials had suggested additional measures to ministers, such as identifying a non-executive director of the company to work with the chair to oversee Lamey’s performance, the company “did not implement all of them and the department did not review the arrangements”.
Lamey 12-month probation period ended at the end of May 2017, but the company neither extended nor confirmed conclusion of his probationary period. The first concerns about Lamey management and leadership style were made in mid May and notified to the chair on 24 May , just after the May board meeting. The chair told the NAO that he then advised Lamey that, as a result, he was not in a position to confirm that the probationary period had been concluded satisfactorily. Allegations included publicly criticising the Student Loans Company at stakeholder events; overseeing the SLC’s occupation of a new building without a Cabinet Office approved lease; conducting a restructuring of the company’s senior management team that left “no qualified member responsible for finance”; and displaying behaviour that amounted to bullying at an appraisal meeting.
During May 2017 the DfE received the first of two formal whistleblower complaints about Lamey’s conduct. He was suspended from his duties in July, the month that a second whistleblower came forward, and was dismissed in November following a disciplinary hearing and appeal.
The hearing found Lamey had breached four of the seven Nolan principles of public life: managing public money guidance; the company's code of conduct and values; and provisions in the framework document setting out the terms of the relationship between the department and the company.
In terms of specifics, it found Lamey had failed to protect a potential whistleblower and had a management and leadership style which “amounted to a failure in leadership”.
PAC chair Meg Hillier said the reports damning findings laid bare the extent to which both BIS and the DfE had not keept a close-enough eye on goings on at the Student Loans Company.
“This is a story of the failure of two departments to effectively monitor a public body under their watch,” she said.
“The concerns raised by officials about Mr Lamey’s appointment should have been taken more seriously by BIS.
“And it shouldn’t have been down to whistleblowers to alert DfE to Mr Lamey’s wrongdoing. The DfE’s review must make sure this doesn’t happen again.”
The DfE is due to complete the first phase of a review of its oversight and the governance of the Student Loans Company by the end of next month. The NAO said that neither a timescale nor terms of reference had yet been set for a second phase.