Examination of witnesses (Questions 161
- 179)
WEDNESDAY 15 DECEMBER 1999
MS ESTELLE
MORRIS and PROFESSOR
MICHAEL BARBER
Chairman
161. Minister, can I welcome you and Professor
Barber to the select committee meeting this morning? You will
know of our interest and our current inquiry into private sector
education and also the parallel inquiry we have looking at schools
in urban areas. Indeed, we have been carrying out visits on both
fronts, both in terms of a visit to the United States to look
at the practice there, to schools here and the most recent school
visit we had was to an Education Action Zone in Lambeth. We are
doing our homework and we are finding it a very productive process.
We have a large number of questions for you this morning. Can
I start by asking you a fairly general one? Looking through all
the questions that we have been getting ready for you, something
that came through to me was process, questions about how the process
works in terms of what the relationships are and indeed how one
checks quality, bench marking and all that. There is a lot of
theme of processing going through a number of the questions. First,
a nice entry question. What do private sector companies bring
to the management of education services that local authorities
and governing bodies cannot?
(Estelle Morris) First of all, can I welcome you and
congratulate you on your appointment as Chair of the select committee?
It is the first time I have had the pleasure or otherwise of appearing
before you. I also notice there is a number of new Members since
I last attended, so my congratulations to them as well. I wonder
if you would allow me to answer that by way of a very brief statement
to begin with, which I think puts into context our view of the
private sector and how we see ourselves working with them. We
have to remember that there has always been a private sector involvement
in education. Schools have always purchased services at one level
perhaps from a private company. It is nothing new. What I entirely
accept is that recently, particularly under this government, the
nature of involvement of education with the private sector has
expanded. You yourself, Mr Chairman, have just talked about urban
areas. If we look at the private sector involvement, both in Education
Action Zones and in Excellence in Cities, that has been an invitation
to the private sector to work with us in areas in which they did
not work with us before. There is no doubt that the area in which
we perhaps invited private sector involvement that has pushed
that boundary between private and public sector is the work that
we have invited them to do with Local Education Authorities. I
suspect that is one of the things that we will go through today.
By way of answering the question, there is only one thing that
guides us and that is standards. I think being a pragmatist is
a good thing as long as what is driving that pragmatism is something
that is worth achieving. Quite frankly, now, we judge everything
by whether or not it will make a contribution to standards. If
it does, that is fine; if it does not, that is not fine. Rather
than an argument about should it be public or private sector in
terms of the involvement in education, I like to think we have
switched that question to what is the best way of raising standards.
I believe and the government believes that both the public and
the private sector have a part to play. Certainly as far as the
Local Education Authorities are concerned the private sector is
here to stay. As a sign of that, we have announced at the Department
today that early in the new year we will be inviting more private
sector organisations, local authorities and voluntary bodies to
seek to bid to be either on our list of approved consultants or
on our list of approved providers as far as our Local Education
Authority work is concerned. Thank you for that and I think the
answer to the question is the point about anything that we need
to do to raise standards we will do. That is a justification for
our work with the private sector.
Mr Foster
162. With reference to the OFSTED announcement
yesterday and Walsall Local Education Authority, one of the failings
was the planning of the education budget. Where do you think that
the private sector companies and the use of accountants in the
private sector can help deliver a better service and higher standards
than in the public sector, where you also have professional, qualified
accountants?
(Estelle Morris) I think it varies. Both you and I
have an interest in Walsall in that it is the first local authority
in the West Midlands, where our constituencies are, that has called
for intervention. If you look, for example, across the West Midlands,
perhaps at Birmingham Local Authority, which got a particularly
good OFSTED report, what it showed there was that there were accountants
and auditors working in the public sector that were doing the
job well. What the OFSTED inspection of Walsall showed yesterday
is that it had good points but in a whole range of things it was
failing to deliver an acceptable service. I am not sure that that
is a sign of saying public sector cannot deliver and private sector
can, but what is absolutely clear is the set of circumstances
that exist in Walsall at the moment, whether it be the relationship
between the councillors and the officials, the quality of the
accountants, or the leadership, there is something wrong because
it is not delivering the goods. Exactly what is wrong, why it
is failing in all those areas, is exactly the reason why yesterday
we announced that we would put consultants in. What OFSTED do
is only a diagnosis. We have to get below that failure and seek
to find out what is driving it, but it is not a conclusion I would
draw from the announcements we made yesterday that it is a definition
that accountants in the public sector are bad and accountants
in the private sector are good. Otherwise, I do not suppose you
would ever have a private sector company that went bankrupt.
Chairman
163. The second question arises from your speech
to the Association of Chief Education Officers when you noted
that up to 15 LEAs may have to contract out some of their education
services. What intrigued the Committee was the whole process of
consultation before that takes place and what your view is in
terms of consultation with the local authority, with parents,
with governors and indeed students themselves.
(Estelle Morris) We do not have a list of local authorities
who might make up the 15. What we have built up over the last
two and a half years is a very careful way of checking the performance
of local authorities as well as the OFSTED inspection. Just as
we expect local authorities to monitor the performance of their
schools according to the data they have, so we monitor the performance
of Local Education Authorities according to the data we have.
We can look at results and trends of results. We have regular
information from our literacy and numeracy consultants. The answer
to the question is in two parts. Firstly, well before we get to
the point where we have to intervene, we will have, through our
Standards and Effectiveness Unit which Professor Barber heads,
sought to work with the local authority to raise standards. A
poor OFSTED report should come as a shock to nobody. It does not
come as a bolt from the blue. We have already been in there, trying
to prevent that under-achievement. The second answer to the question
is that the OFSTED report itself which is the trigger for our
acting—it brings together all that evidence—is one
that consults on a wide basis so that it consults schools, the
receivers of Local Education Authority services. I suspect, though
I may be corrected, that it does not actually consult pupils at
that point but I suppose when you consult a school community that
is a way of getting feedback from all the members of that community
who are both parents, pupils and teachers as well as of course
governing bodies.
(Professor Barber) We are constantly in touch, through
the Standards and Effectiveness Unit, with all Local Education
Authorities through our education advisers, many of whom themselves
are former senior LEA officers. We are also in touch with them
through our literacy and numeracy regional directors, who are
responsible for the national literacy and numeracy strategies.
We do have constant dialogue with every LEA, good, bad or indifferent.
Where we see problems emerging in a given Local Education Authority,
we do not wait until there is an OFSTED inspection before we talk
to the LEA about whether there is a problem, trying to identify
it and help them solve it. Our guiding philosophy which David
Blunkett has given us is, wherever there is a problem, to identify
it. He wants us in there, helping to try to solve it. It does
not mean the problem is easy to solve, but part of our role is
to seek to solve problems as they emerge. As the Minister has
said, it is very unusual for an OFSTED inspection report to come
out, to be very critical and to be a huge surprise, either to
us or to the Local Education Authority.
164. That is interesting in the sense that when
we were looking at the press release accompanying the decision
this morning on Southwark, Walsall and Bristol it did seem that
a rather different process had taken place, modified to take into
account the very special circumstances of particular schools.
You point out that Bristol is very different from Southwark.
(Estelle Morris) Yes, it is. There were three OFSTED
reports published yesterday and it is on a continuum. There is
a degree of failure and a degree of success. What is true to say
is that no local authority is perfect, as no school is. Even in
the worst authorities, there is usually something that they are
doing maybe acceptably above the line. Before we publish our response
and put that in the public domain, we will have set up relationships
with the local authorities. This is true for every local authority
where we have intervened. The Standards and Effectiveness Unit
and Professor Barber's staff meet both the politicians and the
officers. That contact will have taken place before the release
of the press release yesterday. I meet the politicians. What is
also true in every local authority so far is that I have also
met the head teachers, although I have not been able to do that
in the Leicester case. That is the one where we have intervened
where I have not yet done that. Although the press release was
announced yesterday, once we knew the outcome of the OFSTED report,
there will have been a discussion and in that discussion we will
have been able to discuss with them what the degree of failure
is and highlight the areas where we might act. What we have managed
to do in every single case is, at the point at which we have issued
a press release to say that this is what we are doing, we have
also been able to say, "and the local authority has agreed
to work with us." It is because of those conversations we
had in the weeks preceding that that we can, for all three authorities
yesterday, say the local authority has agreed with us to jointly
appoint consultants. If we are going to get it better, if we are
going to heal it, if we are going to raise standards, what we
can do without is conflict between central government and local
authorities. We invest a fair amount of time in trying to get
that relationship right at that very early stage. I suppose there
are times when it will not work but my judgment would be that
so far it has been time very well invested.
(Professor Barber) We are also in that process tailoring
the solution to the specific problems and circumstances in the
local authority. While there are degrees of failure, there are
also the characteristics of failure, the origins of it, which
we seek to analyse hopefully in partnership with the LEA and then
tailor the solution to meet the exact problems that we have identified.
165. When we have received evidence on this,
the question that is very often asked is what is the effect on
other schools and other education authorities. In a sense, you
are dropping a pebble in the pond. Where do the ripples go and
what do they influence? I see that Stanley Goodchild, the chief
executive of 3Es Enterprises, told us that he had "no doubt
that by involving a private company into the regeneration of Kings
Manor it is not only benefiting that school but it is benefiting,
in my opinion, education in the whole area ...". Do you see
that in the sense of a best practice, a sort of beacon effect
or however you described it?
(Estelle Morris) I do think it affects both the local
authorities and schools, perhaps in two ways. It gives a clear
message that under-achievement will not be tolerated. I think
it gives a clear message to the system that where there is failure
we will act. I suspect that that has been one of the things that
has made some other local authorities look at their practice and
seek to improve it, in much the same way as I believe performance
information in the public domain has the same effect as far as
schools are concerned. Secondly, I think it is about building
up models of good practice and showing other ways in which things
can be done. Although we are not there yet, I have always said,
as I said at the meetings with chief education officers, I think
the ideal is when a good local authority that is strong chooses
that it is in its and its school's interests to involve and perhaps
contract out something to the private sector. There is no push
from us to do that but if there is a model of good practice I
suspect it is not a model of good practice that only works with
failed LEAs. I suspect it is a model of good practice from which
good, strong LEAs can learn as well. Equally, just to set the
record straight, I hope that poor LEAs look to good LEAs where
public provision is good as well and seek to learn from that.
It is good and bad in both sectors and I am sure that the diversity
we are bringing into the system is something I very much hope
will be used other than in a deficit situation, but I do admit
that is where we are at the moment.
Valerie Davey
166. I want to follow that quite directly and
to ask whether, in your initial experience with Liverpool and
Hackney, there is sufficient expertise within the bidders that
you have at the moment to provide and tackle the challenges that
those LEAs and others have.
(Estelle Morris) The phrase we use is it is a very
immature market. It is a phrase I have picked up over the last
few months anyway. As I said in my opening statement, we are exploring
the balance of public/private and we have invited private sector
involvement in LEAs in a way that has never, ever been done before.
I suspect that the companies who are involved in the market at
the moment are not as many as those who will be involved in a
few years' time and that is why, after the first round of interventions,
we will be seeking more people to join the list. I have every
confidence that the companies we have used, both on a consultancy
basis and on a provider basis, are good enough, if not better,
to do the job. I am not unhappy with the list we have. I am very
happy and I feel that, in each case, we have had a number of different
companies from which to choose, but yes, we look towards our list
of approved providers and consultants growing next year.
167. The comment of course is that you are actually
creating the market.
(Estelle Morris) I think that is probably true. I
suspect the private sector does not exist unless it thinks there
is a market. That would be a strange thing to do. What I have
always believed is that there are things happening in the private
sector from fields other than education from which education can
learn. The whole of management culture, the whole of setting ethoses,
setting paces, the culture in which people are expected to work—I
do think there is something called generic leadership and generic
management. I think those companies who are working with us are
not starting from a clean sheet of paper; they bring with them
a whole host of experience elsewhere, some in education and some
not. Where we might be creating the market is I am pretty sure
that what they will seek to do is to build up their expertise
in the area where there are now contracts. I read the evidence
that private contractors gave in one of your earlier sessions
and I thought it was quite compelling that one of the advantages
they have is that they can recruit to meet the need which has
been identified. I thought that was quite a powerful argument
and, yes, no doubt they will do that but I do not feel that we
are with absolutely raw companies that have no experience to offer.
They are bringing with them a wealth of experience and expertise.
168. In the case of Liverpool and, I believe,
Hackney the people who have contributed have drawn their expertise
from the LEAs, so we are recycling LEA experience in part and
it does appear to many people as a rather expensive way of doing
it. You yourself said earlier that we do have excellent LEAs.
Why not therefore use the same model as the beacon schools to
have the beacon LEAs which provide that expertise? Why are we
having to create a private market to do something which the LEAs
could do themselves?
(Estelle Morris) We have to remember that in both
Liverpool and Hackney the degree of failure is absolutely immense,
right at the end of the continuum. It is historic failure. It
is historic letting down of children and schools. I may be impatient
but there is a bit of me that thinks that if all that needed to
be done was that LEA to turn to a good LEA to seek good practice
then they should have done it long ago. Their failure to do that
says something about their own capacity to improve. Where there
have been major interventions, one of the things that came out
of the OFSTED report was not that it is just a poor LEA but that
the seeds of its own renewal, the seeds of its own improvement,
do not seem to lie within that organisation. For a middling LEA
that has some failure, the model of maybe twinning with a successful
LEA is very interesting. I know the LGA are interested in it.
It is not something, in some circumstances, we would turn our
back on. I would not have seen it as appropriate for those two,
and yet I am not surprised that the private sector, or the provider,
whoever it be—because it can be another LEA. Birmingham
LEA, for instance, are on the approved list of providers—seek
to include some of the expertise that exists in the education
sector. Not to do so would almost be saying there is no expertise
within LEAs. There are some good officers. Maybe sometimes they
recruit somebody from a local authority but they are actually
enmeshed in the culture of that organisation, so it is not just
recreating a local authority; it is bringing together the strength
of the private company with the strength of an individual who
happens to have a local authority background. Given that LEAs
have had a monopoly on educational support for schools, I am not
surprised that that is where the knowledge and expertise lies
at the moment.
(Professor Barber) The Liverpool OFSTED report was
a very damning report. When KPMG, the consultancy company we had
that had been working for us on this, analysed that situation
they uncovered a very serious set of problems back in the summer.
Since then, KPMG and the Standards and Effectiveness Unit, working
with people in Liverpool, with the new chief executive and more
recently with the new chief education officer, have addressed
the problems that Liverpool had and there has been a very substantial
improvement. What you have seen as a result of that process is
that we faced Liverpool with a historic failure and we said to
them, "It cannot go on like this". To do great credit
to the new chief executive in particular—and also a range
of other people in Liverpool—they have accepted that analysis.
They have welcomed the partnership with KPMG and with ourselves
and they have really got on and begun to sort out the problems.
Progress has been made and, as you know, we announced last week
that at the moment we do not think out-sourcing is appropriate
there because they really have got a grip on it. If that is sustained
through the next year, we will continue to work in partnership
and so be it. That is a terrific example of them facing up to
the problems that they have, getting on and sorting them out.
169. Specifically, on the earlier comments you
made about the DfEE now analysing these reports, the OFSTED reports,
across the board, and seeing some generic situations where, as
I would guess given the ones you have done, in urban situations
there are real challenges which the DfEE itself, it seems to me
has to address, can you tell us at what stage you expect to be
able to give us some analysis of those factors which are common
to urban settings and which really do need some help from outside;
and where you may be able to give us some answers to those specific
challenges facing all LEAs in those circumstances?
(Professor Barber) It is a very good question and
it would be good to do some work with you on that but as a result
of the work we have done in Hackney, Islington, Liverpool, Leicester,
Haringey and now the three mentioned yesterday, we are beginning
to draw out some patterns and then apply that knowledge in each
local case. When we talk the problems through in Southwark, for
example, and when I go and talk to the head teachers in Southwark
tomorrow, we will be able to draw on the parallels with Southwark
that exist in Islington and Liverpool and we will be able to give
some messages. I think it is a good question to ask, what are
the common themes. We would be happy to give some information
to the select committee on that.
Chairman
170. It does seem as though you are developing
a portfolio of responses that are appropriate to each situation.
That was not a question.
(Estelle Morris) It was a correct observation.
Mr Marsden
171. Minister, you have said a lot about the
vigorous response that you have made to failing LEAs and you have
given some very graphic evidence of that. The other thing we have
asked the people who have given evidence before us is what one
does about failing private companies. When Kevin McNeany, the
chief executive of Nord Anglia, came to the Committee, he argued
that contracts for providing education services to LEAs included
step in rights in the event that performance targets were not
met by the private company. He said that he was more accountable
than LEAs in the sense that no LEAs had ever been sacked, although
that is obviously not quite the case. Given that that is the case,
what criteria can you use or are you going to use to decide whether
or not to exercise step in rights in the event that a private
contractor fails to meet target or fulfil the contract? Who will
be deciding on whether those rights should be exercised and at
what stage? Will it be the DfEE or will it be the local authority?
(Estelle Morris) I feel very strongly it is very important
that any private sector involvement in education should be held
to the same accountability in terms of pupil performance as every
other single part of the education service, right down from the
Secretary of State to the teacher in the classroom. They are accountable
for the performance of the students. In the contracts that we
have agreed with the private sector, certainly in Hackney at the
moment, the contract has an element of performance related pay
in. Part of the money which they get for providing the service
is determined by pupil performance. That is really key. If we
were not to do that with them when we are doing it with teachers,
I think that would be indefensible. Because of that, the contracts
we are drawing up with the private sector at the moment are actually
quite tight contracts. I think it is important, at this stage
in the development of the policy, that they are tight and we can
spot failure early. At the end of a five, seven or three year
contract, we do not want to be in the position of saying, "Good
gracious me, we have just discovered that it did not work."
We have points all along, measurable both by—I am not keen
on the phrase—customer satisfaction, i.e., how well the
schools feel they are receiving the service, and pupil performance.
It has to be measured regularly. Because they are in the contract,
it means that we can see under-performance and we can intervene.
There are two issues. If it was failing to a degree where it was
absolutely abysmal and we thought the contract should be ended,
the contract is written in a way that that would be possible.
172. Who is going to do the intervention in
that process?
(Estelle Morris) The contract is between the local
authority and the private sector. Unlike the consultancy contract
that is between the DfEE, and the consultant, the provider contract
is legally between the LEA and the private sector. I can assure
you, as you would imagine, that we have an ongoing interest and
an ongoing observation in seeing how that goes.
173. The initiative in those cases would lie
with the Local Education Authority with whom the contract was,
but you would essentially be hovering over their shoulder to make
sure that these things were done properly?
(Estelle Morris) I think that is right.
174. Can I press you a little more on that because
you spoke earlier in your comments about private sector companies
that went bankrupt. Nord Anglia of course is a publicly quoted
company. What would happen if Nord Anglia went bust?
(Estelle Morris) They have insurance that we would
be protected from that. That is clearly one of the things that
we could not agree a contract that did not have a situation in
terms of public insurance that would indemnify a local authority
if that should happen.
(Professor Barber) That is right. Nord Anglia themselves
would have insurance to cover the contractual situation. There
would obviously be a major problem if that occurred; let us not
pretend that it would be anything other than that, but the contract—
175. With respect, insurance does not necessarily
supply a whole new back-up staff, does it?
(Professor Barber) No. We would then have to act with
the Local Education Authority to solve that problem if it occurred.
You are right. Insurance does not solve the immediate problem
of—
176. I have no reason to believe that is the
case; indeed, I have reason to believe that Mr McNeany's share
price is booming at the moment. Can I ask about the duration of
contract between the local authority and the private sector provider?
Minister, you have already said that you are looking for a number
of step points along the way to look at that. Could you be a bit
more explicit about what length of contract is envisaged and will
there be the equivalent of a whole scale, mid-term review, aside
from the sort of points of intervention that you have referred
to?
(Estelle Morris) I will answer on the contract and
then perhaps Michael could just give some examples of the monitoring
steps that have taken place in the detailed contract. We listen
to the providers on this. We are learning all the time. When we
out-sourced Hackney's LEA services, it was the first time it had
ever, ever been done. We do not have a blueprint that shalt not
change. The length of the contract was one of the things which,
quite honestly, we have changed our minds about a little bit as
we have gone along. To begin with, we thought three years might
be appropriate but then, after conversations with everybody concerned,
I think we moved to five years for the Hackney one. We need to
get that right, but I suspect that it will be between three and
seven years. I say that just because I am not quite sure and we
need to continue to talk to the market and work out what length
of contract private sector is prepared to take the risk to actually
bid to be a provider.
(Professor Barber) The Hackney one is a three year
contract and the negotiations with the function providers in Islington
are ongoing. We are discussing between five and seven years for
that. There is not a mid-term review. In the case of the Nord
Anglia contract in Hackney, we are not going to wait a year and
a half to see if it is working. We have, with the authority and
Nord Anglia, a monthly meeting at this stage where we are reviewing
that process ongoing. We are constantly monitoring that because
it is a new policy and, as the Minister says, we are learning
as we go with that policy. We need to make sure we learn the lessons
early. We do not want to wait for something to go wrong and then
sort it out. We would rather identify things early and make sure
that things do not go wrong in the first place. We are trying
to get it right first time and learn from that initial contract.
We will do a similar thing in Islington, as we are doing in Liverpool
in different circumstances where the LEA's services are not being
out-sourced at this stage.
177. You are happy with the situation in Hackney,
are you, because I gather there were some problems with key personnel
in Nord Anglia in the first instance?
(Professor Barber) There were some early problems.
They have been resolved and we are monitoring the situation. I
think we would like to see the service continuing to improve.
178. What happens at the end of a contract between
a local authority and a private contractor? What is the process
by which those services are handed back to local authorities?
(Professor Barber) At the end of the Hackney contract—or
indeed in other cases when contracts have been let—there
are a number of options. One is the contract could be renewed.
The LEA may decide that is the best way to carry on providing
the service. They may be happy with the service; the schools might
like it. The other possibility would be for the Local Education
Authority to relet the contract. A third would be for the LEA
to decide that it wanted to now provide the service directly.
If it was to choose that option, it would need to convince us
that it was capable of doing that.
179. What period of time would you require to
be convinced of that before the end of the contract, roughly?
(Professor Barber) Clearly in time to ensure the smoothest
possible hand over of services from the contractor to the local
authority, so it would need to be several months.
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