Examination of witnesses (Questions 80
TUESDAY 16 MAY 2000
and MS HELEN
80. Does it give you any indication as to how
you might change the next report to be even more accessible?
(Mr Shaw) That is what worries me about its length.
We did a summary this time round. What we have found very useful
is that people in the Public Enquiry Unit have a PC in front of
them and can track immediately into briefing material and the
text of this document, so that as and when they get questions,
they can draw from that. They are actually increasingly saying
when people phone up, "Are you on the Internet? If you are,
the key place to look is X." That is really quite a growing
phenomenon, of people phoning up, having the Internet and being
perfectly happyin fact, thinking that is the best way of
having a response to where it is.
Chairman: We are going to move on to expenditure
trends. Can I say in passing that from my point of view, you have
to be congratulated on the re-design of the National Curriculum.
Whoever was responsible for that, if you want to redesign and
transform this, should be on the same team. It is a transformation
of the design of the National Curriculum.
81. We are told that the planned increase in
expenditure for 2000-01 will be quite a sharp increase compared
with the more modest rises in previous years. What I would like
to kick off with is this. There has been a lot of talk about the
areas that are going to do well under 2000-01, but which sectors
of education and training are going to face significant real reductions
in their resources for 2000-01, or is it the case that all shall
(Sir Michael Bichard) This is, as you say, a very
substantial investment. It is 8 per cent in one year, which I
think is the biggest single year increase in 20 years. It comes
on top of other increases during the course of this parliament.
In fact, over the period of the parliament our expectation is
that expenditure will have gone up in real terms by 3.2 per cent
per year, and over the period of the Comprehensive Spending Review
by 5.2 per cent per year. There are, of course, different views
on how you count the 5.2 per cent. You can either say it is an
extra £19.1 billion or you can say that in the third year
expenditure will be £10 billion more than it was in the first
year. However you count it, the main point I am making is that
there are very few losers. Indeed, I am seeking to try and identify
one or two just to convince you of the validity of the answer,
but there are many, many more winners than there are losers with
that kind of investment. It is very considerable.
82. If you are scratching your head to think
of a loser, let me put the question another way. Which are the
sectors within the expenditure which have been given a real rocket
in expenditure terms?
(Sir Michael Bichard) In expenditure on schools, on
literacy and numeracy, on class sizes, on excellence in cities,
on city academies, and on education action zones there is a very
substantial increase in investment. There is the investment in
further education: by the end of the Comprehensive Spending Review
we shall be spending some £3.9 billion on further education.
They are the major winners.
83. But the emphasis in terms of those major
winners you describe is very much on centralised and centrally
driven government education programmes from DfEE. The increases
in other areas are much more modest. Is this a trend that you
see continuing in future years?
(Sir Michael Bichard) I am not sure that it is evidence
of a centralisation and prescription in the terms that you suggest.
84. I am not necessarily saying that is a bad
thing. I am just trying to identify and analyse it as such.
(Sir Michael Bichard) I know you are not saying it
is a bad thing, but a lot of people do say, for example, on schools
expenditure that there is too much centralisation or there is
too much money now going through the specific grant mechanism.
I think our response to that, to take that as an example, is that
the Government did feel it was important that the money which
it was investing in key priorities, for example, literacy and
numeracy, was indeed spent on those priorities, and that in this
transitional period that did require an increase in the specific
grant. We will be looking at the Standards Fund and looking at
whether or not that has gone too far, whether the process is too
bureaucratic. We will have another look at that. I think in the
short term there probably has been some increase in central control,
in central investment, and we need to keep that under review.
(Mr Shaw) The focus on literacy has been very much
going with the grain. The Literacy Hour is not a statutory requirement,
but it is happening in all primary schools, which reflects the
fact that the central initiative on literacy and numeracy was
very much with the grain. One other thing about priorities: capital
funding per pupil has seen a very considerable increase from a
spend of about £350 per pupil in the period 1994-1998 to
over £800 in the period 1999-2002
85. You say it is going with the grain, and
our experience with teachers' representatives is that after initial
teething troubles, yes, they have taken well to the Literacy and
Numeracy Hour, but the fact of the matter is that this is still
quite a tightly controlled and focused central operation, is it
(Sir Michael Bichard) As I said, we have to keep it
under review, but sometimes you have to give a lead, do you not?
When we started with the literacy and numeracy strategy three
years ago, there was immense resistance to it, and the Government's
view was that the situation across the country was so serious,
that delivery was so poorwe had 40 per cent of children
leaving primary school without the basic literacy and numeracy
skillsthat we just could not allow that to continue, and
that some greater central intervention and leadership was necessary.
If you have to take that decision too often, then I think it is
worrying, but sometimes you have to take a lead and try and convince
people that this is the right way to go, and then hopefully, gradually,
you can take your foot off the centralisation pedal and people
can take it forward themselves. Unless you have ownership on the
ground for these kind of initiatives, at the end of the day they
will take longer to produce success than otherwise.
86. Can I just take you on from the situation
in terms of that existing allocation for 2000-01 to looking at
the process for future years. In particular I would like to ask
you how the DfEE itself decides internally on its own priorities,
whether in fact they should be bidding hard for early years or
higher education when requests are going to the Treasury for greater
resources. I would like to put that specifically in the context
of joined up government. We have two initiatives at the moment,
the initiative for Sure Start and the whole area of life-long
learning, which arguably cut across traditional sectoral divisions.
I would like to know first of all the technical mechanism by which,
as a Department, you decide which particular one is going to get
the most money, and how you are responding notwithstanding that
to the demands of a holistic approach in education and joined
up government, because the two potentially cut across each other.
(Sir Michael Bichard) What we try to do in the Department
is to be very clear about our strategic priorities. I think we
were one of the first departments to produce a strategic framework
setting out, as I said earlier, our key objectives and our priorities,
and what we have since tried to do is to build all of our work
around those three simple objectives. With that strategic framework,
we can each year go through this business planning process, which
involves officials and ministers looking at our priorities for
the coming 12 months, three years. Having set those for the Department,
every directorate within the Department does the same, and all
of that is monitored very regularly. What we always wanted, and
what I genuinely believe is happening nowMr Shaw will confirm
thisis that when we get to the Budget, when we get to the
Spending Review, when we get to the Public Service Agreements,
these are not new exercises that suddenly we involve ourselves
in afresh. They very much drop out of this planning process that
we have in place. Our Public Service Agreement targets are just
drawn from our business plan and our strategic framework, and
that is what has happened each year. What we have to do is adjust
a little bit to take account of the fact that the Spending Review
is a three-year process and not a one-year process, so effectively
you are looking at the strategic priorities, looking at the business
plan priorities, and deciding what you want to bid for in this
Spending Review process. At that time, as you say, you need to
look beyond the Department. If you look at our strategic framework,
it does not talk about just the issues that are defined as DfEE
issues. I hope it begins to look at the issues that matter to
people out there and identify some of the other departments that
should be involved in delivering that. If you take exclusions
and truancy, there is a real link there to juvenile crime, and
we need to work more effectively with the Home Office, Sure Start
with the Department of Health, Connexions with five or six government
departments. All of that has come from us saying that the way
we have delivered this traditionally is not good enough. We cannot
have five or six departments all delivering the 13-19 year olds
career advice and support separately. We need to bring this together.
87. Are you trying to persuade the Committee
genuinely that the old-fashioned turf wars, not just within the
Department but beyond it, are no longer taking place?
(Sir Michael Bichard) No, I am not. Inevitably that
sort of thing still does happen. I say within the Department one
of the things we have not yet achieved is for people instinctively
to think first about who else is involved in this area and to
work with them. It is still not the instinct of civil servants
to do that. We have a lot more work to do on that. What I am saying
to you is that the way in which we plan and work makes it more
likely that those sorts of connections are going to be identified,
and we have some good examples now of good joined up workingSure
Start, Connexionswhere we have brought together staff from
different departments. They may be working in the DfEE but they
are seconded from other departments. There are joint budgets,
there is joint accountability between ministers and between officials.
Those are the jewels, if you like, but we need to make sure that
they are successful and that we learn from them.
88. You are not immune, although obviously this
is a thought from the long-term process, not just from short-term
political pressures but from issues that genuinely, legitimately
take off in debate. I am thinking of two particular areas. We
had the Chief Executive of the Pre-School Learning Alliance before
our Committee earlier this year warning of, in her view, dire
problems if that particular area was not funded properly. The
whole debate is very rapidly taking off about the adequate provision
of student finance, the whole debate about top-up fees and things
of this nature. To what extent, without being as crude as just
responding to the day's or the week's headlines, do you have the
ability to build those ongoing debates and those ongoing demands
into the process?
(Sir Michael Bichard) Of course, you have to be able
to do that. If you have a planning process and a budgeting process
that is so rigid that it cannot accommodate those kinds of developments
when you are working in a political world where that is going
to happen all the time, the planning process is impeding progress
rather than facilitating it. You have got to be able to do that.
If, on the other hand, week to week all you are doing is amending
your plan and your priorities to take account of those sorts of
elements, then you have a problem because it means that in the
first place you did not really get a very good grip on the real
issues around. If you take Higher Education, the top-up fee debate
was not a surprise to us. We have been thinking within the Department
about HE and the future of HE and the funding of HE, and that
is why the Secretary of State was able to say
89. There may not be a conceptual surprise,
but is it a surprise in terms of briefing papers and potential
budget implications that you are putting forward? Do you see the
difference that I am making? We can all say that conceptually
that it is not a surprise. It is a different matter to say, "Go
away and write me a paper on what the implications of this are
for public finance if in fact it comes in within two or three
(Sir Michael Bichard) You have to take a view on something
like that and whether or not you want the issue to run or whether
or not you do not intend it to be part of the current debate,
and the Secretary of State made it absolutely clear that whilst
he was happy for there to be a debate around top-up fees, to take
that specific example, he was not going to be a party to the introduction
of top-up fees.
90. So you have not got officials sitting there
thinking away as to what the implication might be if they were
introduced in two years' time?
(Sir Michael Bichard) No, but what I do have is one
set of officials in a small strategy unit thinking longer term,
and they are very much at the forefront of trying to make the
connection with other departments. I also have a group of officials
which I have established over the last six months called the Policy
Innovation Unit whose task is to identify issues that might drop
between departments or even between parts of my own Department
and develop them to a point where ministers and we can decide
whether there is a product here worth running. So there is a small
group of peopleand it is a small numberlooking at
long- and short-term policy ideas and working them up to the point
where we can see whether they run. One of the problems with the
Civil Service sometimes has been that someone has an idea and
three or four people then get to work to destroy it before we
have actually decided whether the idea would work. You need to
devote a little bit of resource to working up the idea to the
point where you can decide whether it will run or whether it is
Mr St Aubyn
91. You are probably familiar with the public
expenditure statistical analysis.
Do you agree with the trend in education spending as a percentage
of GDP shown in table 4.4 of that Treasury publication, which
shows that the proportion of national income spent on education
in the first three years of this Government is less as a share
of national income than that spent on education in any of the
last seven years of the previous Conservative administration?
(Sir Michael Bichard) I thought you might raise this.
We had a long debate last time on this issue, I seem to remember.
One of the difficulties is that there have been some changes made
in the system of national accounts which make it difficult to
have a continued series of comparisons. The factual position is
that in 1996-97 education constituted 4.8 per cent of GDP. As
a result of the changes in the accounting arrangements, that figure
dropped to 4.7 per cent, and our expectation with the figures
we have already is that by the end of this parliament it will
have increased to 4.85 or 4.9 per cent in round terms. So our
figures for this parliament are that there will be an increase
from 4.7 to 4.9.
92. Just to be clear, you are referring to the
change to resource accounting here, are you?
(Sir Michael Bichard) No, I am not. I am referring
to changes which the Office of National Statistics introduced
in September 1998, which included the adoption of a new European
system of accounts. There is a further source of potential confusion
in that GDP, in which education spending has a part
93. As a percentage of GDP, would you like to
estimate the impact on reported spending that the European accounting
change has had?
(Sir Michael Bichard) Yes. We think that was the large
part of the 0.1 per cent reduction. That is why the first year
is 4.8, it has gone down to 4.7, and on the same basis, by the
end of the parliament it will be 4.9 per cent.
94. Nevertheless, in the last three years of
the last Government the average spend as a share of national income
was 0.3 per cent more per annum than the average of the first
three years of this parliament. So even with a 0.1 per cent adjustment,
the spending in the first three years of this parliament is 0.2
per cent less per annum than it was in the last three years of
the last parliament. Is that correct?
(Sir Michael Bichard) You may well be factually correct.
There are a number of points on that. The first is that we are
looking at two issues here: the relation of education expenditure
to the GDP, so movement in the GDP affects the proportion of education
spending as a percentage of GDP. One of the reasons why education
spending in the early 1990s was so high as a proportion of GDP
was that the economy was in recession, therefore the figures looked
better than in reality they were. The second issue is that this
Government came into power in 1997 on the back of a promise to
maintain expenditure at the level set by the previous Government
for the first two years, and therefore in those first two years
it is not surprising that the expenditure as a percentage of GDP
did not increase. It is increasing in the last three years quite
dramatically, as I said earlier. The third point to make, which
I think is at the bottom of some of the slightly misleading media
coverage of this issue, is that it is sometimes spoken as if this
Government had a manifesto commitment to raise the level of education
expenditure as an average over the course of a parliament. Actually,
the manifesto commitment of this Government was to increase education
expenditure as a percentage of GDP during the course of the parliament,
and that is exactly what will happen, and that is why the increase
from 4.7 to 4.9 is what the Government was saying
95. If you begin by cutting the percentage of
GDP, it is much easier to say at the end of the parliament that
you have raised it compared to the beginning. Can I just ask you
about your second point. When the Government spent £38.3
billion in 1996-97, was that the figure they said they were going
to spend in 1994-95 or was it more than the figure they had said
they were going to spend two years hence? In other words, was
it not the fact that under the previous Government forward projections
of expenditure tended to be revised upwards? It was the peculiar
nature of this Government when it came into office in its first
two years that it made no upward provisions in the estimates which
had been inherited from the previous Government, whereas the practice
of the previous Government had been to spend more in each year
then they said they were going to.
(Sir Michael Bichard) I do not think you can expect
me to come along today and comment upon what the practice of the
previous Government was and what might have happened if the previous
Government had been in government following 1997. I try to avoid
commenting upon the projections of any government.
96. With respect, you just did. You said this
Government used the projections of the previous Government as
the basis for its spending in the first two years.
(Sir Michael Bichard) I am sorry, Chairman. I did
not say that. I said this Government came in with a promise that
it would maintain expenditure at the level which had been set
by the previous Government, and that is what it did in those first
97. Can we then look at the actual spending
rather than in terms of GDP, because the other factor from table
4.3 of the same publication, which measures managed expenditure
in real terms, shows that in the first three years of this Government
the actual cash spend on education was £0.5 billion less
in the first three years than the cumulative cash spend in the
last three years of the previous Government. Putting aside any
relationship to the growth in the economy, actually in cash terms,
according to this publication, spending in the first three years
of this Government was £0.5 billion cumulatively less after
three years than in the last three years of the previous Government.
Do you agree with those figures in table 4.3?
(Mr Shaw) The figures in table 4.3 are figures that
are aggregate figures across the UK as a whole.
Therefore, as well as figures that are the Secretary of State's
responsibility, they include other areas. It is back to the same
sort of point that you were making about the first couple of years
of this administration, where it was the previous Government's
plans that were used as the base. A better comparison if one is
looking over this parliament as a whole, taking a full five-year
period, is that education spending will increase by over 16 per
cent in real terms, 3 per cent a year, compared to the previous
parliament, where it was an 8 per cent increase in real terms
over the length of the parliament. So it is double over this five
years compared to the previous. A lot of that increase does take
place in the latter part of the period because it was as a result
of the Comprehensive Spending Review, the results of which were
announced in July two years ago, that the big changes took place,
and a lot of that did not begin to come into effect until September
1999. But what we are seeing if you compare last year to this
year is of the order of an 8 per cent increase in expenditure
in real terms.
98. Can I just be clear about this: are you
saying the aggregate 4-5 year expenditure of this parliament will
be 16 per cent higher in real terms than the spending in the last
(Mr Shaw) The increase in this parliament is 16 per
cent in real terms. The increase in the previous parliament was
8 per cent.
99. Is that the increase from 1997 up until
2001 as an annual figure or is it the cumulative aggregate spend
that has increased by that over the 4-5 years of the parliament?
(Sir Michael Bichard) The increase over the parliament
from 1997-2002 will be, if current plans are delivered, 16 per
cent in real terms. The increase of the last parliament was 8
per cent in real terms. That is the comparison in real terms.
The point you are making is a function of my earlier point, which
is that the Government came in with a commitment to keep with
the spending plans of the previous Government for those first
two years, which is why they were lower than they will be for
the next three years. In fact, the Government did invest another
£1.5 billion in 1998-99. That was the reason for the lower
expenditure in the first two years.
2 Public Expenditure Statistical Analyses 2000-01,
Cm 4601. Back
3 Note by Witness: The figures in table 4.3 show aggregate
spending in 1994-95 to 1996-97 was £0.5 billion less in real
terms than in 1997-98 to 1999-00 and from the figures in table
4.2, more than £10 billion less in cash terms. Back