Select Committee on Education and Skills Minutes of Evidence

Examination of Witness(Questions 500-518)

MARGARET HODGE MBE, a Member of the House of Commons, Minister of State for Lifelong Learning and Higher Education, Department for Education and Skills, was examined.

Wednesday 12 December 2001

  500. It is a new animal, Minister, but we were told by the Secretary of State at the time that there would be £50 million savings, and already there is an additional £25 million.
  (Margaret Hodge) There are savings. The expenditure under the old TECs and the FEFC was in the region of £270 to £280 million. The commitment given by Ministers at the time of the Bill that created the LSC was that we would save £50 million on central admin costs. Even with this additional £25 million we are saving more than the £50 million we promised.

  501. The FEFC, I understand, was much more efficient in terms of the amount spent on its administration costs; they spent £15 million on a £3.5 billion budget.
  (Margaret Hodge) I do not think that figure is right, but what we have to look at is the admin costs across both the FEFC and the TECs. Our best assessment of that is that it is in the region of £270 to £280 million.

  502. You can understand the concern. We do not want to see huge amounts spent on admin. You say it is a new beast, as it were, but what we do not want is it turning into a monster that breeds red tape.
  (Margaret Hodge) I agree. They promised a 25 per cent cut in bureaucracy and we join and support them in that endeavour.

Paul Holmes

  503. On 12 November John Harwood, Chief Executive of the Learning and Skills Council, was giving evidence and we were asking him about administration costs. He was saying that £188 million (which has now been agreed) was good value and so forth. He never mentioned to us, on 12 November, that he had put in a bid to increase those administration costs, yet within a few days it was in the newspapers and he confirmed to the newspapers that that bid was in. What day did you receive the bid from John Harwood?
  (Margaret Hodge) I think that is the way of the world. We have been in discussions with him for sometime over the difficulties he is facing in financing the operation within the administration budget framework that we set him. It would have been inappropriate for him to have said anything because—surprise, surprise, as these things go—he wanted more and we settled on this figure of £25 million. He is a servant of government—

  504. So he can be frank on the Today programme but not to the Select Committee?
  (Margaret Hodge) I think he was edited on the Today programme. We all went on and we all said about the same thing, it was just a little five-second clip that they chose.

  505. He was quite willing, within a few days, to admit he had a bid in, yet on 12 November he, effectively, seems to have misled this Committee when he was saying what good value the £188 million administration cost was.
  (Margaret Hodge) Can I be honest? I have not read the transcript of what he said, but from what you tell me of what he said, saying that £188 million was good value is not in conflict with saying "and I want more, please".

  506. He did not say to us "But I need more"; he totally failed to mention that, even though he knew that he was in negotiation and even though within a few days he was telling the newspapers "Yes, I have got a bid in for more money". That does appear to me to be misleading this Committee.
  (Margaret Hodge) I can understand that. There are negotiations over those sorts of budgets (ones that usually take place in confidence) and we announce them when we announce the letter. I think that is fair enough.

  507. Could I ask another question on the admin costs, which Jonathan has partly touched on already? John Healey, in answer to a Parliamentary question on 8 November, said that the figure he had just given was that the administration costs for the predecessors to the LSC were about £270 to £280 million, but the FEFC say that they only spent about £15 million administering their share of the budget and that the TECs spent about £150 million. That adds up to £165 million admin costs from the TECs and the FEFC. Where does the other £110 million appear from?
  (Margaret Hodge) I have not got the details here. I am really happy to bottom this out by letting the Committee have the way in which we calculate it.

  508. So you can give us a detailed write-down of what you say the FEFC spent and what the TECs spent and where the rest of the money comes from?
  (Margaret Hodge) If that will give you the confidence that it is above board, we will do that.[2]

Mr Pollard

  509. Can I change tack? Minister, Jowanka Jakubek is an intern working in my office from Warsaw University. She comes on the ERASMUS Scheme, and I am really pleased about that. I wonder if you could say something about how we might encourage more students to come across here because they are then ambassadors for how we operate. The other thing is, she comes from Warsaw University, which is their equivalent of Cambridge, and goes to Middlesex University, which is not our equivalent to Cambridge. I know that is not your responsibility but I wonder if you could just say something about that.
  (Margaret Hodge) She comes because she comes from an aspirant EU country. I think the ERASMUS scheme is great. What rather disturbs me is that for every two that come here to the UK only one goes abroad, and I am really keen, given the lack of propensity of our UK young people to learn languages, that we should have far more people spending a year abroad. I am looking at how we can encourage a higher take-up of the available facilities for our British students to go abroad.


  510. We are drawing to a close in this session. It would be wrong of this Committee not to, in the closing minutes, mention one area where we are deeply concerned, and you are the Minister for Lifelong Learning. There was a large lobby in this Parliamentary building yesterday by people who are losing their businesses and their income, and much else, because of the chaos over the ILAs. It did seem to us, in our interview where we spent nearly all the time with John Healey, your colleague, on ILAs, there was a—we thought—dismissal of the pain and, also, the undermining of the concept of lifelong learning amongst a lot of people that we are going to rely on over the years to come back into the system and to deliver their training and deliver very important training—IT training. The vast percentage are honest companies and honest people who have put together a business, some of them in the voluntary sector, some in the private sector. We were deeply unhappy about what we discovered in terms of what is occurring, both in terms of the accounting the fact that they did not know how much it was costing, did not know the figures; nobody in the department knew how much money had been lost. On the one hand we were very worried about that and, on the other, we are very concerned about the businesses and the people who are being laid off and made redundant across the country, with a very—we thought—glib dismissal of any claim to compensation.
  (Margaret Hodge) I think right across the whole of the team, Chairman, this is the most difficult issue we have probably had to deal with since we became a team at the General Election. We are all taking it very seriously. John Healey, I think, is doing terrific work in trying to sort out the issues as they arise, and things are changing in relation to ILAs. It is extremely difficult. We share with you your concern, we share with you the concern that we should not, in sorting out the problems associated with ILAs, lose two things: first of all, the real enthusiasm for learning which has come out from the very high take-up (the 2.6 million people who put themselves forward for ILAs); we want to capture that and retain it and build on it. Secondly, we clearly will require the contribution from the private and voluntary training providers over the coming period. Nevertheless, you would have been the first to criticise us if when we started discovering problems with the way in which the ILA itself was running in the current regime we did not take strong and firm action to ensure that we got systems in place that we could properly account to you and Parliament for the money we have spent—and confidently account for that money. You would have been the first to criticise us if we had not done that. So it has been a really difficult situation. I know John is working incredibly hard at trying to sort it out, and it is causing pain to private providers, to the individuals who thought this was opening opportunities for them and to the broader economy.

  511. Minister, you are right that we would criticise you if you did not take speedy action when you knew something had gone wrong, but we also now are critical of the fact that people out there deserve, at the very least, some timetable very soon. Is ILA mark II coming back? We have had that promise from the Secretary of State and from John Healey. When is it coming back? What steps can the department, meanwhile, take to keep these people with good companies in business as far as they can? If they were told that they had a certain amount of time that they have to manage for before the new system comes on stream, I think even with the hardship that would bring there would still be some great relief amongst that community. I have to come back to this: you have just told us that because of TUPE all those staff in the TECs are being looked after, very comfortable lives, in the transition, although we know some of them are inappropriate and will have to be diverted into other occupations over time. So a nice comfortable scenario for the public service, but with the private sector you have got really good people losing their jobs. As a Committee we feel this is a worrying scenario.
  (Margaret Hodge) I do not think it is fair to juxtapose the two because you would also criticise us, Chairman, if we did not properly stick to the employment rights of individuals who find that their jobs have changed because we have decided to change structure. I do not think it is fair to juxtapose the two. We want to move forward as fast as we can. Equally, we want to make sure that we have a robust and appropriate replacement for the ILAs that will deliver the objectives we have for it. So we have not got a clear timetable yet, but we are moving as speedily as we can because we do not want to have a gap between the ending of the one scheme and the introduction of the new. The final thing I would say to you—and, like you, I have probably spent quite a bit of my life doing things in the voluntary sector and in the private sector—is that it is just one of the tough realities of life; if you are engaged in contracts (whether it is with a public body or anybody else) those contracts can go wrong. There has to be a limit to where the responsibility of the contractor—in this case the public sector—can elude their responsibility in picking up the undoubted difficulties that creates for a range of voluntary private providers. The best way forward is to get a new system up and running as fast as we can, and we are working on it.

  512. Minister, I have to say, I find that last part unacceptable, in that I would have thought there is a clear responsibility; the Department has got this wrong, and it is the Department's responsibility to get it right fast. Your teams should be working, burning the midnight oil through the night to get this done and to get some assurance out there, because I find this quite different from anything I have seen in the voluntary sector, which is for a government department to cancel a major programme overnight, putting a lot of people out of work, without coming through with some explanation as to why it went so badly wrong and how they are going to fix it. Getting it fixed is what I think this Committee would like to see happen very quickly.
  (Margaret Hodge) Absolutely. We need to have a replacement in place, but it has got to be robust, it has got to be sustainable and it has got to meet the objectives that we want of it. Where there is the potential for abuse or fraud, you have, if you are a public sector body, to act very swiftly to ensure that you close off any of those potentials as quickly as you can.

Paul Holmes

  513. Speaking of the replacement for the ILAs, can you confirm, I understand that Bryan Sanderson, of the Learning and Skills Council, suggested that the Learning and Skills Council are working on a new version of the ILAs?
  (Margaret Hodge) I am sure that we will be working with them as a delivery partner, on a new version.

  514. Also you were talking about contracts between Government and voluntary sector and private sector and so forth. Quite a number of the small training providers who were here last night are sacking staff or are on the verge of bankruptcy or having to say to their bank managers in terms of overdrafts, "Well, we don't know when we'll have a cashflow coming back again," and the bank manager is saying, "Well, that's it." A lot of them are very angry because they are saying that in terms of contracts they are actually owed money by your Department, all of which at the moment is frozen because the computer is down, the website is closed and so on, and their cashflow has gone midstream because they are owed money by your Department. They are talking about breach of contract. Do you have any comment on that?
  (Margaret Hodge) Obviously legitimate claims for money will need to be met.

  515. But they are sacking staff now, as of this week.
  (Margaret Hodge) Yes, but what would you rather we did—that we left the system open to further opportunities for abuse and fraud?

  516. But how quickly will they get the money that is owed to them?
  (Margaret Hodge) As quickly as we can possibly ensure that we are paying those to whom we legitimately owe money, if appropriate learning has been delivered. Nobody is trying to keep money back just for its own sake. We just have to make sure there is no abuse and no potential for fraud.

  517. Can I clarify, did you confirm that the LSC are looking into a new form of ILA?
  (Margaret Hodge) We talked to the LSC. They have a group of people who are evolving some work on policy development and no doubt they will be looking into this. My understanding is that the work is being done within the Department.


  518. Minister, we have had a good, frank and open session.
  (Margaret Hodge) Thank you. I look forward to coming back!

  Chairman: Thank you very much for your contribution. I do not know whether you are a poacher or a gamekeeper these days, but thank you again.

2   See Ev. p. 117. Back

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