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

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 today.

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.

Notes for Editors

  1. The NAO conducts investigations to establish the underlying facts in circumstances where concerns have been raised with us, or in response to intelligence that we have gathered through our wider work.
  2. 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.
  3. The National Audit Office do not audit the accounts of the Student Loans Company but has exercised its value for money access rights to carry out this investigation.
  4. This investigation describes the events surrounding Mr Lamey’s appointment and dismissal. It sets out the Department’s role in oversight of the Company and how it responded to the concerns raised by the two Company staff. We have not re-investigated the allegations made by those staff. We have also not evaluated the original decision to dismiss Mr Lamey or the findings of the subsequent appeal.
  5. The Nolan Principles, the 7 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.
  6. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
  7. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund, nationally and locally, have used their resources efficiently, effectively, and with economy.  The C&AG does this through a range of outputs including value for money reports on matters of public interest; investigations to establish the underlying facts in circumstances where concerns have been raised by others or observed through our wider work; landscape reviews to aid transparency and good practice guides.  Our work ensures that those responsible for the use of public money are held to account and helps government to improve public services, leading to audited savings of £734 million in 2016.

Contact

NAO Press Office
+44 (0)20 7798 7400 or email pressoffice@nao.gsi.gov.uk

PN: 22/18