The UK government failed to effectively oversee the Student Loans Company during the tenure of its former chief executive Steve Lamey, according to a report from public spending watchdog the National Audit Office.
Mr Lamey was dismissed without compensation from the company last year for gross misconduct in public office, including breach of four of the seven Nolan principles of public life and failure to adhere to the Treasury’s Managing Public Money guidance.
A hearing found that Mr Lamey had failed to protect a potential whistleblower and had a management and leadership style that amounted to a “failure in leadership”.
The Student Loans Company administers the UK’s £100 billion student loan book.
A new report from the NAO says that while there were many changes in the company during 2016 – including oversight transferring from the Department for Business, Innovation and Skills to the Department for Education, the appointment of Mr Lamey as chief executive, and a restructure of the executive leadership team – the DfE “did not reassess the appropriateness or effectiveness of its oversight arrangements in response to these changes”.
It also claims that “accountabilities, roles and responsibilities for the department’s oversight of the company are not up to date and lack clarity”, adding that the framework document, which sets out the terms of the relationship between the government and the company, have not been updated since 2009.
The department’s oversight arrangements did not identify problems with Mr Lamey’s actions, and the company gave Mr Lamey a positive appraisal in March 2017, the public spending watchdog says.
“Officials from the company and department also told us they are not clear about the role of representatives from the department on the board and other committees or the extent to which they should be observing, advising or intervening in the company’s business,” says the report.
It adds that the DfE is reviewing the governance and structure of the company, with the first phase set to be completed by June 2018.
Meg Hillier, the Labour MP who chairs the Public Accounts Committee, said that 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,” she said.
“This is a story of the failure of two departments to effectively monitor a public body under their watch.”
Gordon Marsden, Labour’s shadow higher education minister, added that the report “has identified the lack of transparency and lack of direct engagement of DfE officials or ministers over the Student Loans Company, which was a crucial element in the failures of oversight”.