Taxpayers face paying millions in compensation for identity card project

The taxpayer will have to compensate a French firm for lost profits if the Government’s controversial national identity card scheme is cancelled at short notice.

By David Barrett |

Under the terms of a £5 billion contract signed by the Home Office, Thales will be entitled to claim for its lost profits if ministers call off the ID cards scheme with less than a year’s notice. If the company is given between a year and 18 months’ notice, it will be entitled to have its costs met.

The total bill for taxpayer is expected to run into millions of pounds, but exact details are being kept secret for “commercial confidentiality” reasons.

Details of the contract were obtained by the Conservatives, who have pledged to terminate the ID cards contract if they win power.

The costs will arise because the contract has standard terms and conditions. The Tories argue that a specially-tailored contract should have been used because of the unique circumstances of the ID cards project.

Dominic Grieve, the shadow home secretary, called on the Government to renegotiate the penalty clause and disclose the full details of the Thales contract.

In a letter to Mr Grieve explaining details of the contract, Sir Gus O’Donnell, the Cabinet Secretary, said: “For termination for convenience where between 12 and 18 months notice is given, a supplier may recover costs incurred and those associated with terminating the contract.

“Where less notice is given, some anticipated profit lost as a result of the decision to terminate early may be claimed as well as costs incurred.”

Dominic Grieve, the shadow home secretary, said: “Given the rising costs and the increasing evidence of serious problems in delivering the ID cards project, it was reckless and irresponsible of the Government to burden the taxpayer with such onerous financial liabilities.

“In light of these circumstances, I call on the Home Secretary to disclose the full terms of the ID card contract with Thales, commit to renegotiate the terms of this penalty clause and give a public undertaking that no such liabilities will be undertaken with any of the four other commercial contractors.”

A Home Office spokesman said: “The Government remains fully committed to the identity card scheme and has agreed contracts that appropriately protect the public purse, which is why there is no need to renegotiate.

“Regardless of the government of the day it would be inappropriate to operate based on opposition policy because it would unreasonably constrain our work. There are many examples of contracts extending beyond the duration of a Parliament.