DfE 'unconcerned' about free school meal voucher scheme profit

Department did not ask to see voucher provider Edenred's books or renegotiate contract
Photo: Joybot/Flickr/CC BY-SA 2.0

A committee of MPs has slammed what it has characterised as a lack of concern by the Department for Education over the level of profit being made by the company it has contracted to provide free school meal vouchers.

DfE has appeared to be “surprisingly unconcerned” about whether Edenred, which began issuing vouchers to families with children eligible for free school meals at the beginning of the coronavirus pandemic, was profiting from the scheme, the Public Accounts Committee said.

A National Audit Office report published late last year that flagged problems in the scheme’s early operations found DfE had not exercised its contractual right to see information about Edenred’s income and costs relating to the scheme under the contractor’s “open book” arrangements. It therefore did not know how much profit was being made on the scheme.

In a letter to PAC last month, DfE permanent secretary Susan Acland-Hood said the department had recently looked at the company’s books on the scheme and was “content” with the level of profit being generated.

However, DfE did not share figures with PAC on the grounds of commercial confidentiality.

MPs on the committee were also concerned that DfE did not attempt to renegotiate the terms of the contract, despite extending the voucher programme twice – increasing its value fivefold from £78m to £425m.

The report noted that there had been several problems with the scheme in its early months, as Edenred struggled to cope with demand for the vouchers and correspondence with parents and schools. This resulted in “unacceptable delays” processing orders, the PAC report said.

Meanwhile, early on in the scheme, only a small number of supermarkets accepted the vouchers and so some parents found themselves with little choice about where to spend them, or having to travel some distance to buy food.

In last month’s letter, Acland-Hood admitted the department had not sought to renegotiate the deal “at any point” during the programme, which was put in place on 28 March to ensure children would not go hungry when schools closed because of Covid-19.

“Fees are set through the framework and given the uncertain duration of the contract and the novel and bespoke nature of how the framework was being applied, it was not possible to secure improved terms and extended delivery within the timescales available,” she told PAC in a letter last month.

Acland-Hood also said the department had looked at alternative options for the programme, but had found no “strong market alternative” to Edenred.

The department has “continued to look at options of alternative support throughout the lifetime” of Edenred’s contract.

The MPs said the department should have used the contract extensions to consider how to maintain the contract as a “standing resource” and to tender with other suppliers.

However, it said DfE had failed to make those considerations, which it suggested may have contributed to a delay in standing up the scheme again when schools were closed at 24 hours’ notice in January.

The committee said it had “not yet had the opportunity to examine why there was a delay in re-establishing the existing scheme when schools and parents were already familiar with it”.

PAC chair Meg Hillier said the government had failed to learn from “repeated contracting mistakes”, which she said also included problems procuring PPE for frontline workers during the pandemic.

“After the initial urgency, we have seen the government continuing to play catch up on how to support families whose children are entitled to free school meals, and despite the contract with Edenred growing more than five-fold there was no discussion about tendering the contract or even renegotiating it,” she said.

A DfE spokesperson said there was “no evidence of any ‘profiteering’ through the national voucher scheme”. They said last year's NAO report had acknowledged improvements to the scheme as it went on, as well as the “rapid action” government took to deliver free school meals.

“We have already made further improvements to the scheme which take account of the recommendations in this report, including improving the terms of the contract to ensure the better value for money for taxpayers,” the spokesperson said.

“The scheme has been tested extensively and extra support for schools and parents has been provided, resulting in an efficient system with £47m worth of eCodes redeemed as of Wednesday – 96% of parents say they are happy and satisfied.”

A spokesperson for Edenred said: “With 95% of families saying the free school meal voucher scheme has worked well for them and a contract which has ensured that every pound of public money was passed on to the children and families who needed it, with no charges to the DfE or the taxpayer, Edenred has delivered a programme which has provided vital support for families through the pandemic and value for money for the DfE.

“Edenred rejects entirely any suggestion of profiteering from the free school meal voucher scheme. Edenred has handed back 1% of the contract value to the government in rebates since the beginning of the scheme. This means the taxpayer paid less than the total value of vouchers distributed to families.”

The figure the government paid Edenred amounted to 99% of the financial support delivered to parents, as the Crown Commercial Service charges Edenred a 1% management fee as part of the contract.

DfE pays the company the face value of the vouchers, less the management fee, and Edenred generates profit on the contract by buying vouchers from supermarket chains at a discount.

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