Ministers appointed a head of the Student Loans Company, who was later sacked, despite concerns raised by civil servants during recruitment, Whitehall’s spending watchdog has disclosed.
Politicians, including Jo Johnson, the then universities minister, were advised that the contest for the post to lead the SLC should be re-run after examining Steve Lamey’s references, the National Audit Office said.
Lamey was appointed anyway in May 2016 but was forced out of the £200,000 post in November last year for gross misconduct, following claims of bullying and mismanagement.
The role of ministers has emerged in a highly critical NAO investigation which examines the role of the then Department for Business, Innovation and Skills (BIS) and the Department for Education (DfE) in the appointment of Lamey.
Commenting on the report, Meg Hillier MP, chair of the public accounts committee, 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.”
In response to the report, Lamey hit back at what he described as the “unfair and immoral behaviour” that culminated in his dismissal.
“The NAO’s report lays bare serious institutional failings in the oversight of the SLC. It paints a picture of repeated bungling and mismanagement that confirms the crisis of leadership at the highest levels of DfE that I experienced directly in my brief time as SLC chief executive,” Lamey said.
“In essence, I have been pushed out by the civil service for being a leader who was driving change against a background of years of inertia, inactivity and shockingly poor public service.”
A friend of Lamey’s said: “Steve is utterly gutted that the NAO has not emphatically cleared his name. This whole thing was driven by bitter members of staff whose jobs were under threat because of underperformance.”
Auditors found that civil servants advised in June 2016 that Lamey should not have been appointed without a re-run of the recruitment process.
But following an intervention by Lady Finn, a Cabinet Office special adviser, and a meeting between Lamey and Johnson, Lamey was appointed, the report said.
Lamey was sacked without payment after it was found he breached guidelines on integrity, accountability and leadership, while two whistleblowers raised concerns about him that were later investigated.
Not all of the allegations were upheld but “unacceptable management practices” were found, including some claims of bullying, harassment and poor management, the report said.
Gordon Marsden, the shadow higher education minister, said the NAO report revealed a lack of transparency in the decisions made by the DfE and ministers, and their internal meddling within the SLC.
“There are genuine questions over whether Steve Lamey has been made a scapegoat, but months later the SLC is still without a chief executive and is still a failing organisation that makes too many mistakes,” Marsden said.
Lamey said in a statement that the SLC was a “basketcase of an organisation” when he took over in 2016, with a remit to transform it into a modern, digital company.
“These issues have been festering for years. Sadly this report does not bring us any closer to their resolution. Its 6 million customers, who together make up the £150bn national student loan book, and who today do not get the service they need, deserve better,” Lamey said. In 2016, transfer of oversight of SLC transferred from Bis to the DfE. But education officials did not reassess the appropriateness or effectiveness of its oversight arrangements and did not identify problems with Lamey’s actions, the report said.
In recent years the SLC has been plagued by mishaps, with complaints of inefficient bureaucracy, poor customer service and unseemly practices – such as issuing fake debt collection notices – dogging its reputation.
Lamey’s removal followed former chief executive Ed Lester leaving in 2013 amid a tax avoidance scandal and the resignation of then chief Ralph Seymour-Jackson in 2010 after SLC failed to make payments to thousands of students.
A DfE spokesperson said: “After assuming oversight of the Student Loans Company in 2016, we reviewed and introduced changes to our oversight measures, including quarterly shareholder meetings to discuss performance and risk management.
“A review of governance is currently underway to see how we can build on those measures to ensure that the SLC is well-supported.”
