Examination of Witnesses (Questions 100
- 119)
WEDNESDAY 22 NOVEMBER 2000
SIR JOHN
BOURN, KCB, PROFESSOR
DAVID MELVILLE,
MR GEOFF
HALL AND
MR GLEN
HULL
100. One final question, if I may, I understand
that there is a difference at present between further education
colleges and school sixth forms. Where there is a lower age group
attached to the same school the school sixth form does not stand
alone, part of the school has a pre-GCSE section in terms of whether
the students concerned can join the NUS. Will there be a difference
made when we go to the Learning and Skills Council?
(Professor Melville) I would imagine that would be
an issue, perhaps, for the Learning and Skills Council to take
up. As a Funding Council we have encouraged the NUS particularly
in dealing with student complaints and helping develop facilities
for students. With quite a large number of colleges—and
I believe it is colleges that are in the group where you do find
sixth form colleges you find NUS memberships—I am not sure
whether there are any DfEE issues associated with membership of
student unions, but I think that the general answer would be the
Learning and Skills Council is designed to equalise and harmonise
across the whole of the education. I would expect a number of
these issues to come together in the future.
Mr Campbell
101. Professor Melville, some time ago, if I
heard you correctly, you said to the Chairman that in your view
it is difficult to stop colleges falling into Category C and that
really it was your job to help to get them out. Some would say
that was quite a limited role for the FEFC. Does that limitation
have its roots in legislation, or in the amount of resources that
were given to the FEFC, or to the way in which the FEFC has gone
about its task under your leadership?
(Professor Melville) It is chiefly the second. What
was behind it was my reference to the overall financial health
of the sector. Basically it started from a poor position and was
then subject to some swingeing efficiency squeezes. Therefore,
there is what you might call a general lack of resilience in the
sector. If you compare it with higher education, the net reserves
of the sector were negative all through that period as our figure
indicates. They went up to 17.7 million in the first year, they
were positive. That is not very good for an annual sector budget
of three billion pounds. Therefore, I certainly was not, as it
were, despairing of stopping colleges going into health Category
C, I was just simply indicating that pragmatically you see it
happen. We do, however, stop quite a number going in. That is
through the regional review process. We start to see colleges
deteriorate because they go from Category A to Category B to Category
C, and Category C is what we are focusing on now. So yes, we do
take a number of steps. The key starting point is what you would
call the underlying position. I have to say that that surplus
position is improving and the lower efficiency squeezes that we
have had under this Government, the very welcome announcement
of even further increased funds made yesterday by the Secretary
of State, providing an influx of £522 million more next year
for further education, will help ease the situation.
102. Yes, but it is not just about additional
resources, is it, it is about the way in which the Funding Council,
or whatever it calls itself, goes about its task? I think it is
important for the Learning and Skills Councils to reflect to some
extent on what has gone before. You spoke rather enviously of
the additional resources that will be available to the Learning
and Skills Council, and I think, if I am correct, there will be
additional powers that they will have. Was that an admission then
that the previous regime was really inadequate?
(Professor Melville) I do not think I would describe
it as inadequate. What I am trying to describe is that it was
set up for a different purpose and staffed in this particular
form. Its overhead, if you like, is a half per cent of what is
delivered with round about 450 staff.
103. It is a fairly common complaint, though,
is it not, for both colleges and schools that where checks were
placed on their work even in the form of inspections or audits,
their job was seen as holding the institutions to account rather
than supporting them?
(Professor Melville) It was a government policy, Mr.
Campbell. It was quite clear.
104. Your own personal role in that was very
constrained by that, rather than the decision that you took at
the beginning that this is what the FEFC role would be?
(Professor Melville) I came into the Council seven
months before the general election, so I saw the change. One of
the first things I introduced was very much a differential approach,
what was called "a lighter touch", to most colleges,
in order to focus more resources, more of the staff resources,
on colleges in difficulty. The process that was introduced then,
particularly linked to the regional review process, is an extremely
rigorous and regular review process, with all of the additional
advice and support to managers and governors, to separate the
inspection of grading of the management and governance, for example,
to make it clearer, to put audit alongside inspection in order
to get a clearer view of what was going on. So yes, we did change.
105. I think the point I am getting at is also
about what the Funding Council saw as its role during the periods
between audit and inspection. I think it is an important issue
as to to what extent you were able to advise and you were able
to support as well as to go in and audit what was going on. I
want to go wider, if I may. You talked about spreading best practice.
I want to ask you about drawing attention to bad practice. What
did you do, perhaps in response to the report which the Public
Accounts Committee, amongst others, have produced, to spread information
about colleges like Halton and Bilston?
(Professor Melville) Very significant. I think you
will be aware that besides the NAO Report on Halton, I also produced
a very detailed report on Halton College. Both of them were sent
with strong covering advice to all colleges. They were the subject
of a whole series of meetings I and my Chairman, Lord Davies,
had with all college governors on a regional basis. We went through
some of the issues associated with these reports and provided
additional advice on some of the specific things in this report.
To give you an example, one of the issues was advice on the expenses
on the part of the members of staff, another issue was overseas
travel. We issued specific guidance to colleges on those issues.
We followed up in great detail. I do not think there is a single
college governor in the land who is not aware of the name Halton
College. Of course, we have continued to do that through our training
materials, and a lot of the outcomes of that have actually determined
the content of our advice and our advice to new governors.
106. So this Committee may have some purpose
after all. The report notes the difficulties arising for colleges
as a result of the financial problems that they may have had at
the time of their incorporation. You were unable, I think, to
give the Chairman definitive answers on sorting out the timescale
for sorting out some of the messes that currently exist. Will
those messes be sorted out by the time the Learning and Skills
Council has taken over, or will they inherit the mess?
(Professor Melville) A number of these issues take
some time to resolve. To pick up the latter part of your question,
of course many of the issues that are discussed here today relate
to overclaiming prior to my time in the Funding Council and prior
to 1996. So yes, some things take some time to resolve, and there
is a continuous process where these can count as a success for
the FEFC. As far as inherited issues were concerned, there is
reference to it in paragraph 2.2 at the top of page 15. About
100 colleges at incorporation came in with inherited deficits.
Some of them were large. The largest was about £2 million
which in the early 1990s was a very significant sum. If you look
now, most of those have now been resolved, and only about 11 of
the colleges in Category C were in that inherited liabilities
range.
107. I suppose they are perhaps similar to schools
or hospital trusts where one wondered where the additional resources
were going in the first few weeks, and the difficulty of paying
the debts is the answer and helping to create perhaps a more positive
economic environment. We are about to see important changes to
the funding formula. How do we know that those changes will not
make the financial situation in some colleges worse?
(Professor Melville) I think the major assurance is
that there are additional funds available. Obviously I do not
want to prejudge what my successor in this process determines
in terms of funding, but as far as the first year is concerned,
there is a degree of continuity with the funding regime. As I
indicated already in terms of the regional review processes, I
have seen drafts of the regional review process that take forward
all of the major matters, and as I said earlier, there will be
more people on the ground to implement them, but also to follow
up, as you quite rightly indicate, on a more regular basis between
reviews.
108. What assurances can you give the Committee
that the situation for sixth forms in schools has been given particular
consideration? Of course, in April 2002 the Learning and Skills
Council will be responsible for that. As an advocate of the line
that I think as long as schools want to have sixth forms they
should be allowed by and large to have them, what special consideration
has been given to some of the difficulties that schools might
face in the new arrangement?
(Professor Melville) This was outlined in the Government's
White Paper but also in the more recent document about funding
arrangements. Schools have been given what might be called a real-terms
guarantee—that is, in terms of their funding levels—and
providing they maintain the same numbers of students, then their
funding will remain the same and will be protected. Secondly,
there is a whole issue associated with what might be called the
number of sixth forms in existence. As you see from the figures,
we have 103 sixth-form colleges, there are something like 1,800
schools with sixth forms. The majority, if you like, are very
much in schools. The levers will chiefly be centred around policy
rather than finance, in my view. Those have been the issues that
have been featured in all of the Government consultation documents.
I understand, however—my colleague Geoff Hall will correct
me if I get this wrong—that there is a consultation document
due in December on precisely the way school sixth forms will be
funded in the Learning and Skills Council regime.
109. I am very pleased with what you say about
quality and finance. My last point goes back to the question of
competition between schools. Paragraphs 2.10 to 2.12 refer to
the correlation, if I read it correctly, between colleges in large
towns and the risk, or otherwise, of financial problems. I want
to focus, really, on this issue of competition. Does the future
suggest that it would be one of merger and rationalisation to
overcome some of the difficulties that these colleges face or
does it say something about the nature of competition for students?
(Professor Melville) I think the first issue is in,
if you like, cities where you have several colleges. The report
notes, and we would agree, that generally they have more difficulty
recruiting and there is more competition then, say, a small town
where you have a successful college. A number of colleges in small
towns also have sustained themselves by distant franchising, so
they have been subject to some of the changes. As far as the future
is concerned, the important statements that have been made follow
on from the changes this Government introduced as compared to
the last Government. The last Government had the view that quality
would be improved by competition, basically if there were more
providers then quality could be improved. The new Government encouraged
colleges to work together to improve quality. There will be no
exception to that in the future. LEAs will still retain the responsibility
for schools. Funding will be through the LEAs and they will be
encouraged to work with colleges locally, instigating reviews,
which will be called area reviews of quality, area inspections,
looking at them and saying how best can we reorganise and how
best can we improve quality. There is a new power in the 2000
Learning and Skills Act which gives local authorities the power
to create new sixth form centres. If you like, there is more evenness
in it, more powers to get the right kind of results that are focused
on quality rather than numbers or financing.
110. My final point is, as someone who for a
long time has been concerned at some of the aspects of competition
for students, has any assessment being made of the amount of time
and money which has gone into marketing and advertising in order
to attract numbers?
(Professor Melville) The NAO looked at some of this
in the Managing Growth Report some time ago and we have done a
joint study with the NAO on good practice in marketing. I do not
believe things were precisely quantified. We have quantified the
benefits that come from colleges working together, particularly
where there have been mergers. One of the major outcomes of looking
at the benefits of a merger has been a reduction in the marketing
budget, which comes about from competition. That is one of the
major financial gains. One has to say that colleges have taken
very positively to the more collaborative regime which has existed
over the past three years[11].
Mr Gardiner
111. Mr Hall, good afternoon.
(Mr Hall) Good afternoon.
112. I did not want you to go home without saying
anything this afternoon. I will now address my remarks to Professor
Melville. Professor, has the FEFC under your leadership since
1996 been a success, in your own judgment?
(Professor Melville) I believe so, yes.
113. How many colleges under your period of
tenure experienced serious problems of financial control?
(Professor Melville) We can define it in various ways,
but there are roundabout 100—120 that have gone into or
stayed in or come out of Category C.
114. For what percentage of those do you consider
the FEFC bears some responsibility?
(Professor Melville) It is a matter of where you put
responsibility in all of this.
115. I said "some", I do not mean
the responsibility for them being in that state, but some responsibility.
(Professor Melville) I think there are a number of
factors that come out in this discussion which, perhaps, make
it more difficult for colleges in the way we handle funds, and
so on. Very broadly, I think the major responsibility lies in
the difficult funding position the colleges find themselves in
and also the need to grow while reducing costs.
116. You have given me some quantification and
that is that the major responsibility lies with them. That means
that the minor responsibility lies elsewhere, possibly, if you
are answering my question, with the FEFC. Can you be a bit more
specific and say, answering the question, what percentage of those
you consider the FEFC bears some responsibility for?
(Professor Melville) I do not think I can answer that
question very easily. I would put a much larger level of responsibility
once we take the funding issues out, and that comes out of this
report very effectively, is with the quality of management and
governance in colleges. I am not trying to be obtuse but I simply—
117. You are not an obtuse man, you are a very
distinguished academic.
(Professor Melville) I do not have an answer to the
proportion that FEFC—
118. How many times have you appeared before
this Committee?
(Professor Melville) This is the third time.
119. When the Committee considered further education
in 1996/97 were you part of the team that appeared at that stage?
(Professor Melville) That was my predecessor.
11 Note by Witness: Since 1998 colleges have been
required to provide details of marketing expenditure. In their
annual financial statements and their financial forecasts. Back
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