Select Committee on Education and Employment Minutes of Evidence



Examination of witnesses (Questions 80 - 99)

TUESDAY 16 MAY 2000

SIR MICHAEL BICHARD, MR PETER SHAW and MS HELEN WILLIAMS

  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 happy—in 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.

Mr Marsden

  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 have prizes?
  (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 not?
  (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 poor—we had 40 per cent of children leaving primary school without the basic literacy and numeracy skills—that 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 now—Mr Shaw will confirm this—is 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 working—Sure Start, Connexions—where 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 years."
  (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 people—and it is a small number—looking 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 a non-starter.

Mr St Aubyn

  91. You are probably familiar with the public expenditure statistical analysis[2]. 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 two years.

  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[3]. 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 parliament?
  (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

 
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