Ministers ‘were surprisingly unconcerned’ over whether free school meals firm profited from taxpayer

The Department for Education (DfE) has been accused of being “surprisingly unconcerned” over whether the company behind a free school meal voucher scheme was “profiting at the taxpayers’ expense”. 

The Public Accounts Committee (PAC) said there were “serious problems” in the early weeks of the programme set up last spring, which introduced £15-a-week supermarket vouchers to help families in need to cope with lockdown and school closures. 

These included “unacceptable delays” in Edenred, the company chosen to run the scheme, getting vouchers to families and their systems “failed to cope” with demand for vouchers and the volume of queries, according to the commitee's report.

PAC said the scheme’s performance improved after April and both the DfE and Edenred have since apologised to schools and families for problems and inconvenience in the early stages. 

The new report also said: “The department was surprisingly unconcerned about whether Edenred was profiting from the voucher scheme at taxpayers’ expense, and missed potential opportunities to reduce the cost or share in the profits.”

“Despite extending the contract twice, and increasing its value from £78m to £425m, the department did not seek to renegotiate any of the terms or introduce any profit-sharing element.”

Schools are currently able to order free school meal vouchers through a scheme run by Edenred, while most pupils are out of school during England's national lockdown.

The government has faced criticism this year over free school meal parcels – separate from the Edenred scheme – after images were circulated on social media, with the education secretary saying he was “absolutely disgusted” by the standards of some packages.

The voucher scheme was also available from March to August last year, after it was extended to cover the summer holidays in a U-turn following public pressure and a campaign from footballer Marcus Rashford.

The PAC report said: “The department considered it achieved good value for money because it did not pay Edenred anything more than the face value of the vouchers issued to families.

"However, Edenred bought the vouchers from supermarkets at a discount, and the department could have chosen to try and renegotiate how much it paid Edenred per voucher and so reduce the cost to the taxpayer.”

The PAC report said the DfE did not use an “open book arrangement” included in the contract to check Edenred’s income and costs until after the scheme had ended. 

“The department now says that it is ‘very comfortable’ with the level of profit Edenred made from the scheme, but has provided no figures or explanation of any kind to back up that judgement,” it said.

Geoff Barton from the Association for School and College Leaders (ASCL) said the scheme’s launch at the start of the pandemic was a “shambles”.

“It adds insult to injury to see the damning conclusion of this report that the Department for Education apparently missed potential opportunities to renegotiate the contract and reduce costs, and that it seems to have been pretty complacent on this front,” the union’s general secretary said.  

“The DfE is constantly lecturing schools about the importance of running efficiently and saving costs wherever possible, but appears not to have brought the same rigour to bear on its own management of this scheme.”

Meg Hillier, the Labour MP who chairs the PAC, said: “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 fivefold there was no discussion about tendering the contract or even renegotiating it.”

An investigation into the scheme in December found staff were forced to use the website late at night to avoid long waits in the first few weeks and the number of emails sent to the company peaked at more than 8,800 on one day in April.

The National Audit Office said last year the scheme’s capacity, performance and waiting times improved. 

In a company statement, Edenred said it "rejects entirely any suggestion of profiteering" from the free school meal voucher scheme.

"Edenred has handed back one per cent 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," it said.

A DfE spokesperson said: “There is no evidence of any ‘profiteering’ through the national voucher scheme."

They said the NAO investigation "acknowledged the rapid action this government took to deliver free school meals for eligible pupils, the significant improvements that were made to the scheme and our oversight of it".

“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 DfE spokesperson added.

Edenred said it was pleased the PAC recognised "the overwhelming majority" of operations "ran smoothly" following "initial challanges" in the month of the launch, and said the scheme delivered the equivalent of £384m last year.

"Following the recent relaunch, the scheme has attracted consistently high satisfaction ratings from parents and schools with orders typically being fulfilled the same day," the company said.