Atos contract does not offer value for money, says National Audit Office

The National Audit Office criticised Iain Duncan Smith's Department of Work and Pensions for setting performance targets too low (Getty Images)

The controversial disability benefits contract between Paralympics sponsor Atos and the Government is too weak to ensure value for money for taxpayers, the spending watchdog has found.

The National Audit Office criticised Iain Duncan Smith’s Department of Work and Pensions (DwP) for setting performance targets too low, failing to adequately fine Atos for poor performance and not properly checking the accuracy of performance data that Atos submitted.

Atos Healthcare has a £110m-a-year contract with the DwP to assess whether disabled and sick people are entitled to claim the Employment and Support Allowance (ESA) or whether they are fit for work. The Work Capability Assessment, designed by the government but applied by Atos, has been subject to scathing attacks from claimants, doctors and charities who claim it is degrading and not fit for purpose.

The NAO report comes after numerous thwarted attempts by MPs to find out more about the performance targets and financial penalties in place. The government has refused to answer these questions claiming the information is “commercially confidential”.

The NAO said the DwP was failing to seek “adequate financial redress” for underperformance by Atos. “We do not consider that the current contractual targets are sufficiently challenging, and in our view this allows the contractor to deliver a significant number of assessments before financial penalties become due.”

Only one out 10 breaches lead to penalties, or ‘service credits’ being enforced by the DwP. This was in part down to “inaccurate forecasting” of referrals which “undermined the Department’s negotiating position in discussions around performance and service credit application.”

Tom Greatrex, Labour MP for Rutherglen and Hamilton West, asked the NAO to investigate after hitting the confidentiality brick wall. "This is a damning assessment of the failure of the Government to get value for money for the taxpayer or properly hold Atos to account for the chaos and confusion at the heart of the work capability assessment... The Government must reflect on this scathing report and bring forward serious proposals for reform."

The WCA contract was awarded by Labour in 2005 but extended until 2015 by the Coalition. Government contracts with Atos have doubled in value in the past two years.

Official figures show that 40 per cent of appeals against a decision not to award Employment and Support Allowance, largely based on the WCA, are upheld. The figure rises to a staggering 70 per cent if the claimant is accompanied by someone like a citizen’s advisor bureau officer.

The tribunals cost the taxpayer £15m last year, but there is scant information about why so many appeals are upheld, though this has now been requested by the DwP.

Two recent documentaries appeared to expose a target driven system in which inadequately trained health professionals carried out a tick box exercise, all of which Atos and the DwP deny.

Despite the criticisms, Atos was recently awarded a £400m contract to conduct the medical assessments for two million people currently receiving disability living allowance.

Atos Healthcare, who was not contacted by the NAO for the review, said:

“We meet our obligations in delivering a complex and challenging contract. We have also been flexible with the Department and implemented all the changes and recommendations from the Harrington report.”

A spokesperson for Iain Duncan Smith said: "The contract continues to evolve as we have it under constant review… we've substantially improved it [since 2010]. We are committed to making it a success to ensure it is both fair and accurate for the user and value for money for the taxpayer."

Richard Hawkes, Chief Executive of Scope, said: “The Government has a responsibility to ensure taxpayers get a fair deal from its contracts, but also to ensure its departments and contractors treat disabled people fairly and with a duty of care.

“It is the Government that has designed this deeply flawed assessment and until it makes fundamental changes to the design of this test, it will continue to have a devastating effect on disabled people’s lives.”