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The Department of Trade and Industry’s scheme to compensate former UK trawlermen who lost their jobs as a result of settlement of the ‘Cod Wars’ with Iceland cost some £43 million, £18 million more than initially estimated. Some claims took a long time to process and the NAO could be certain about the accuracy of the Department’s decision in only 64 claims out of 100 that it examined. These are the main findings of a report out today by the National Audit Office.
Today’s report draws lessons for future schemes and is intended help inform the development of guidance for government departments.

The development of a scheme to compensate former trawlermen for loss of employment as a result of the settlement of the ‘Cod Wars’ posed the Department with a difficult challenge. Former trawlermen who had worked in Icelandic waters were not an easily identifiable group with a common employment history, but were individuals who had served for varying periods on a range of vessels in Icelandic and other waters. The ‘Cod Wars’ had also ended over twenty years before.

Before the Department launched the scheme it did not know enough about the industry, its structure or working practices to enable it to draw up workable scheme rules. It did not prepare effectively for the scheme and therefore lacked the evidence it needed to verify whether claims were eligible under the scheme rules. It also lacked a robust plan to implement the scheme, with appropriate project and risk management procedures, and did not pilot the scheme which could have revealed subsequent shortcomings.

The Department paid nearly £43 million in compensation, £18 million more than initially estimated. This was primarily because it had to address additional issues affecting the scope of the scheme which had not been considered when the initial budget was set. The average payment for successful claims was around £9,700.

The NAO could be certain about the accuracy of the Department’s decision in only 64 claims out of a sample of 100 that it examined. The report found that nine of the sample claims were found to be overpaid and two underpaid, mostly because the Department lacked the evidence needed to assess these claims accurately when making its decision. In a further 25 sample claims, there was insufficient evidence to say for certain whether the decision was correct.

The report also found that some claims took a long time to process. The department did not set formal targets for the rate it planned to process claims before or after the scheme began. It also underestimated the number of staff it would need to process claims in a timely way, but did allocate additional staff once the initial rush of applications became clear. It took on average just under eight months for the Department to take an initial decision in the sample of 100 claims. Problems with the quality and availability of evidence, however, significantly delayed the processing of some claims.

There is no general guidance for departments on how to design and deliver compensation schemes. The NAO aims to share the lessons learnt on the design and implementation of this scheme so that they can be applied to future schemes.
 
Sir John Bourn said today:

“Today’s report highlights a number of problems experienced by the Department while implementing its compensation scheme for Icelandic water trawlermen. The scheme had evident shortcomings that inhibited efficient and effective delivery of the scheme objectives. Better preparation by the Department prior to launching the scheme would have put it in a much stronger position to deliver an effective service to claimants.”

“The Ombudsman highlighted, in her report in February 2007, a lack of Government guidance on designing compensation schemes. It is important that other departments learn the lessons outlined in our report so that the same mistakes are not made again.”
 

Notes for Editors:

1. After the Second World War much of the UK fishing industry worked distant waters, particularly those around Iceland, where for example 17 per cent of fish by weight were caught in 1972. Following a series of disputes between the UK and Iceland over access to these waters (known as the ‘Cod Wars’), the UK Government agreed in 1976 to phase out fishing by vessels based in the UK within 200 nautical miles of Iceland.
    
2. The Parliamentary Commissioner for Administration Ombudsman published her report “Put together in haste: ‘Cod Wars’ trawlermen’s compensation scheme” (HC313) in February 2007.
    
3. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk . Hard copies can be obtained from The Stationery Office on 0845 702 3474.
    
4. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.