'Serious errors' in setting up equalities watchdog

The EHRC has been chaired by Trevor Phillips since it was set up

"Serious errors" were made in the way the UK equalities watchdog was set up - at a cost of nearly £39m - the Commons spending watchdog has said.

Three bodies were replaced by the new Equality and Human Rights Commission - seven staff members who took severance pay were rehired at a cost of £338,708.

The process was "patently flawed" and "major issues" remained, a report said.

The commission said it had been under "extreme pressure" when it was set up in 2007 and was making improvements.

It also said its interim boss - who has been paid £1,000 a day from May 2009 - was being brought onto the staff payroll on a salary of £150,000, as his contract had been extended until September.

In a highly critical report, the Commons public accounts committee echoed concerns first expressed by the National Audit Office last year.

'Early exit' payments

It pointed out that when the EHRC started work in October 2007 - it was 140 staff short of its planned 525 workforce.

The committee said it was "surprised and concerned" at the £38.8m cost of setting up the commission and "winding down" its predecessors - the Commission for Racial Equality, the Disability Rights Commission and the Equal Opportunities Commission .

Of that £11.1m, went on severance and early retirement schemes for 185 staff but the new EHRC had no say in who got the "early exit" payments and was left short-staffed.

This is not the way this committee expects public bodies to be run

Committee chairman Edward Leigh

Five former Commission for Racial Equality senior staff, and two junior officers, were re-hired as consultants - without the approval of the Treasury.

All had received severance payments and the five senior roles were appointed without jobs being advertised - because the EHRC was "in a great hurry to be ready for the start up on 1 October 2007".

Overall the seven were paid £629,276 in severance pay and were then rehired at a cost of £338,708 on short-term contracts, without being asked to repay any money. They were also on "significantly higher" salaries, the report said.

'Level of scrutiny'

A "transition team" of 83 people to set up the EHRC cost £8.7m and another £9.3m was spent on new equipment like computers - but the EHRC had not explained why it did not use computers it had inherited from the other bodies, the report said.

It acknowledged that the EHRC now holds all recruitment "on a competitive basis", had accepted that it had not been ready to begin work in October 2007 and its board did not "exercise the level of scrutiny it might have done".

But the committee said "major issues" remained.

We have accepted these criticisms from the PAC and - as the NAO has recognised - we are taking steps to improve our financial and performance reporting, and strengthen our governance arrangements and other control systems

Equalities and Human Rights Commission

These included an as-yet unexplained £15,000 payment made to one consultant, three months after they stopped working for the commission, into which an investigation had been launched.

The EHRC had also breached limits on the number of staff it can employ in 2009 and breached limits on pay rises for staff in 2007-8 and 2008-9.

And there was still no permanent chief executive, after Nicola Brewer's resignation last year. The cost of the interim director general Neil Kinghan amounted to £138,000 - excluding VAT - by the end of January.

Public accounts committee chairman Edward Leigh said: "This is not the way this committee expects public bodies to be run and reinforces the need in future for stronger controls and proper procedures for managing and using public money."

He said the process of setting up the EHRC was "patently flawed" and the rehiring of former staff meant "the taxpayer was hit twice".

He said commission chairman Trevor Phillips "was in part responsible for the ineffectiveness with which the board scrutinised the set-up process and challenged management's proposals".

On Thursday the EHRC said Mr Kinghan's contract had been extended to September but he had been brought onto the staff payroll on a salary of £150,000.

A spokesman for the EHRC said: "In their reports, both the National Audit Office and the public accounts committee acknowledge the extreme pressures that commission was under to open its doors on 1 October 2007.

"Under these circumstances, the commission made mistakes - for example not making an adequate case for re-engaging several former members of staff.

"We have accepted these criticisms from the PAC and - as the NAO has recognised - we are taking steps to improve our financial and performance reporting, and strengthen our governance arrangements and other control systems."

Another parliamentary committee - the joint committee on human rights - is carrying out a separate investigation into the EHRC after a spate of resignations by commissioners.