Ministers refused to sign off £563m Capita contract amid civil service pension disaster

Political pressure

MPs and government ministers understand the strong public sceptisim associated with the supplier and are questioning decisions to choose it for government contracts.

Capita has already been removed from the Royal Mail Pension Scheme administration following failures and the ramifications of bad publicity around CSPS, and there is political pressure on government to find alternatives.

Cabinet Office minster Nick Thomas-Symonds told MPs that the contract was terminated following what he described as Capita’s “failure to meet critical transition milestones, and a lack of confidence in the supplier’s ability to implement and transition to the new operating model in a timely fashion…”

MPs are also turning the screws. During a Public Accounts Committee (PAC) hearing earlier this month that quizzed officials about government shared services, MPs questioned Capita’s continued success in tying down lucrative government contracts.

During the hearing, attention turned to Capita’s recent cross department Synergy Synergy Business Process Services contact win, worth almost £1bn. The decade-long contract supports back-office services for the Department for Work and Pensions (DWP), Ministry of Justice, Home Office, and the Department for Environment, Food and Rural Affairs. 

PAC member Clive Betts asked Dianne Jeans, senior responsible officer for the Synergy programme at the DWP, whether she understands “the amount of scepticism there is, given Capita’s performance, of the CSPS?”

“It’s been an unhappy experience at every single stage with Capita, but you’ve awarded this contract without any reference to that, apparently,” he said.

Capita not doing the tech

Jeans said the Synergy contract is “a very different scenario to the pension scheme”.

“Capita emerged as the clear preferred bidder under government procurement processes,” she added.

Jeans reassured MPs that Capita is not delivering the payroll technology at the core of the service, which is being provided by a consortium made up of IBM, Oracle and Deloitte.

“It is based on an Oracle HR and finance platform, and Capita will use that system, but are not actually designing and delivering it,” she said.

She also said it is a different division of Capita delivering Synergy compared with pension schemes. Jeans added that the problems experienced on the CSPS during transition to Capita from MYCSP will be avoided due to “contractual obligations” for a smooth transition between Capita and existing supplier Shared Services Connected, and a “very positive working relationship emerging so far”.

Betts said: “We had lots of assurances on the pension scheme before it went live, that everyone had talked to everyone the right way, got agreements and assurances, and they weren’t worth the paper they were written on. They failed.

“I know you’re saying it’s a different part of Capita to the pensions part, but it’s still the same company, the same culture, the same ethos, isn’t it?”

Jeans reiterated her point that Capita is “not delivering the system”.

In 2023, the Cabinet Office awarded Capita a seven-year contract worth £239m for the administration of the CSPS, which has 1.7 million members. In October 2025, approaching the 1 December date for Capita to take over from MYCSP, the Public Accounts Committee (PAC) warned the government about “missed milestones”.

The report cited the missed IT milestones as concerns, among other things.

At the time of the report, MPs said Capita had only delivered one out of eight transition milestones on time, and that the Cabinet Office had withheld £9.6m in payments.

The problems continued, with huge delays in providing pensions, leaving many scheme members in financial distress, including people with no other source of income receiving no pension.

Jeans said that unlike the CSPS programme, there is “no hard stop with Synergy”.

“We will not go live with the system unless it’s absolutely tested and stable,” she said. “We are very conscious of the issues that have happened in the pension space … we’re very focused on continuity of service, and we are absolutely staying close to the Cabinet Office and learning all the lessons that they have from that pensions experience.”

Betts asked: “Why do you need them there? Why shouldn’t it be insourced?”

In regard to the Synergy contract, Capita said: “We took part in a robust procurement process and stand ready to work with the DWP to ensure a smooth transition of service. Our priority remains to ensure value for money for the public.”

Insourcing strategy

In March, Cabinet Office parliamentary secretary Chris Ward said “the age of outsourcing will end”, and announced plans to insource services. “For decades, successive governments have been, at best, ambivalent about whether public services are delivered in-house,” he said. “At worst, we’ve had outsourcing by default, with public services hollowed out and sold off to the lowest bidder. That era ends today.”

The government introduced a Public Interest Test, requiring all departments to assess whether a service can be delivered more effectively in-house before any outsourcing decision is made. This will apply to service contracts of £1m and above, covering over 95% of central government spend.

“All departments must also publish insourcing strategies to make the biggest wave of insourcing in a generation a reality,” said Ward.

Jeans said: “Insourcing [what Synergy does] hasn’t been done in-house for 10 years. We are actually with an existing outsource provider. We have harvested all the benefits and savings from working with an outsourcing provider and we are building on that continually.”

Regarding the Synergy contract, Capita said: “We took part in a robust procurement process and stand ready to work with the DWP to ensure a smooth transition of service. Our priority remains to ensure value for money for the public.”