Investigation into oversight of Student Loans Company’s governance

By agency reporter
May 12, 2018

On 7 November 2017 Mr Steve Lamey, then Chief Executive of the Student Loans Company, was dismissed without compensation for gross misconduct in public office including breach of four of the seven Nolan principles and failure to adhere to Treasury’s Managing Public Money guidance.

The National Audit Office (NAO), given the circumstances leading up to Mr Lamey’s dismissal, has investigated how the Department for Education (the Department) oversaw the company during his tenure, which it has published in a report.

At the time of Mr Lamey’s appointment, the Department for Business, Innovation & Skills (BIS) had concerns about his appointment. This led to the Company appointing him with an extended probationary period, however BIS and the Department did not believe this would effectively address their concerns. BIS suggested additional measures to Ministers, such as identifying a non-executive director of the company to work with the chair to oversee Mr Lamey’s performance, but not all of its suggestions were implemented.

In May and July 2017, two employees formally made allegations about Mr Lamey which included concerns about his management and leadership style. The Department and Company chair treated both individuals as whistleblowers. The individuals told the NAO that the Department contacted them within hours of making the formal allegations and provided good support. The Department and Company jointly commissioned two separate investigations into the allegations.

In October 2017, a disciplinary hearing found that Mr Lamey had breached: the 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. The specific findings of the hearing included that Mr Lamey had failed to protect a potential whistleblower and had a management and leadership style which amounted to a failure in leadership. Mr Lamey appealed against the decision. The appeal upheld the initial decision to dismiss.

There were many changes in the Company during 2016 including a transfer of oversight from BIS to the Department for Education, the appointment of a new Chief Executive Officer and a restructuring of the executive leadership team. The Department did not reassess the appropriateness nor effectiveness of its oversight arrangements in response to these changes.

The NAO further found that accountabilities, roles and responsibilities for the Department’s oversight of the Company are not up to date and lack clarity. 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 Department aims to complete the first phase of a review of its oversight and the governance of the Company by June 2018. The Department has not yet set terms of reference or a timescale for phase two, which is likely to examine the Company’s operating model for the longer term. The Department is also reviewing its relationships with all of its arm’s-length bodies, which it aims to complete in early 2019.

The Student Loans Company administers loans and grants to students at universities and colleges across the UK. It processes around 1.8 million applications a year, and has over 8 million customers repaying or due to repay loans totalling over £100 billion. The Company is funded primarily by grant-in-aid. The Company is a non-departmental public body which until June 2016 was sponsored by the Department for Business Innovation & Skills. From July 2016 the Company has been sponsored by the Department for Education.

The Nolan Principles, the seven principles of public life, apply to anyone who works as a public office-holder. This includes people who are elected or appointed to public office, nationally and locally, and all people appointed to work in sectors that deliver public services.

* Read the report Investigation into oversight of the Student Loans Company’s governance, and management of its former chief executive here

* National Audit Office https://www.nao.org.uk

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