Select Committee on Education and Skills Minutes of Evidence

Exmination of Witnesses (Questions 199-219)




  199. Can I welcome David Gibson and Stuart Ingleson from the Association of Colleges to the proceedings. You will know very well the process we are going through in looking at the Individual Learning Accounts and I wonder, David and Stuart, if you would like very briefly to introduce yourselves.

  (Mr Gibson) Yes. Thank you, Chairman. I am Chief Executive of the Association of Colleges, which I think Members know about. We have now 99 per cent of colleges in membership. Stuart is Principal of Preston College. Preston College was one of the pilots under the FEFC, a large college, with 41,500 students, 1,500 staff and £30 million budget. On the ILAs they had nearly 5,000 enrolments and estimate that the loss of the withdrawal of the ILAs has cost the college approximately a quarter of a million pounds because they decided to honour the commitment to individual students. That is, at the end of the day, the effect on the college.

  200. Can I push you a little bit, Mr Gibson. You say "lost a quarter of a million". How do you lose a quarter of a million? I mean, what is the process? You hired staff? You made classrooms available? You bought more computers? I mean, how do you lose a quarter of a million pounds on teaching that you have not provided yet.
  (Mr Gibson) What I am saying is that the college did provide the teaching. When the ILAs were withdrawn, the college ceased to get that income but nevertheless provided the learning opportunities for the students. I am sure Stuart can go into more detail if you wish him to, Chairman.

  201. Can we have a little more detail on this lost money?

  (Mr Ingleson) Yes, certainly, Chairman. The college budget is drawn up on the basis that we will continue to recruit at the same level that we did last year and therefore we had a negative on our income stream as a result of the Government decision in December to the tune of just over £260,000. We chose to honour our marketing and the commitments we had made to our students. The programmes that we have offered on which ILAs have been used take up seven sides of A4, predominantly on IT short programmes but covering all aspects of the college curriculum, so it was not possible for us to close classes without impacting on large numbers of other students that we have in the institution.

  202. Where are you going to get the money from?
  (Mr Ingleson) Ducking and weaving elsewhere in the college budget.

  203. I hope your accountants are listening to "ducking and weaving"!
  (Mr Gibson) It is different from fiddling, Chairman! Honestly.
  (Mr Ingleson) I think the 120 days of audit we suffer a year would pick up any irregularities, Chairman.

  Chairman: Well said. I think that is sufficient.

  Mr Chaytor: Touche«.


  204. Your plea in mitigation is all right. Let us kick off on ILAs. Why do think the Government has pulled the plug on ILAs? David Gibson, you are known to be pretty street-wise in these things. Why do you think the ILAs have ended up in the way they have?
  (Mr Gibson) Can I perhaps ignore the first comment. The adjectives, Chairman, I am sure you will explain to me afterwards.

  205. I hope, Mr Gibson, you saw that as a compliment.
  (Mr Gibson) That is OK, then; I was just checking. Seriously, I think what it demonstrated quite clearly was that there is a massive amount of interest in the public in learning. What it did was to make a way forward for individuals to be able to pursue their learning requirements. We talk about widening participation, we talk about social inclusion, and we believe that it demonstrated that if we get the funding and the arrangements right—and I am not saying they were right in this case, for obvious reasons—then the demand is there. We talk about encouraging women returners: it did that. We talk about people wanting to re-skill: it did that. We talk about people who we believe are not interested in learning—there is no family tradition and you hear people talking in those terms—and yet people came forward when they had what they saw as the right opportunity. I think what we are most anxious to do is to retain the whole spirit of the concept, but obviously do it in a way that is not open to abuse.

  206. You have not answered my question, which was: Why do you think the Government had to pull the plug out?
  (Mr Gibson) I have heard various people giving evidence to you, Chairman, and we are told, are we not, that there were various meetings in November and October of last year and that the demand was such that there was a major overspend? I believe that to be accurate. Whether or not it was the overspend or it was the way that the overspend was achieved (ie, by non-legitimate means) I am not in a position to give you a proper answer.
  (Mr Ingleson) Forgive me, Chairman, if there is the sound of slightly hollow laughter to the answer to that question. The people who have worked in this sector since incorporation have been here twice before already. The FEFC administered a scheme called the Demand-Led Element Funding, which some colleagues may remember, which was almost identical in principle and concept to the Individual Learning Account. That was stopped when it exceeded any budget estimates that had been made for it. The FEFC had to engage in a very humbling retraction in mid-year—it left a lot of colleges in some difficulty and a lot of students promised activity that they were never able to pick up. We have had a similar experience in franchising. I know that some members of your committee have a particular view about that. I actually believe that it is a very important part of the portfolio for colleges like Preston, both in dealing with members of its community and in dealing with its employers, but, again, we have similar issues around that and the numbers were at a very, very high level and there were budget considerations. The ILAs have been extremely successful. It is clear that you cannot live with a completely uncapped budget in terms of delivering a project of this size.

  Chairman: That is very interesting.

Paul Holmes

  207. Can we develop that a little bit because the Government ministers we have talked to have really nailed their colours to the mast and said they closed it down because of fraud. We have pressed them repeatedly on that. Some people are a bit sceptical about that because only one person has been convicted so far and a very small number have been arrested so far. You seem to be clearly leading down the other angle that perhaps it really was capped because of overspend rather than fraud. Is that a fair assessment of what you have just said?
  (Mr Ingleson) I think I would agree with that, yes.

  208. Therefore, by doing it in that way and doing it so quickly, they left a lot of people in the lurch. We have heard from private training providers how that happened and in your evidence you have given us examples of different ways in which colleges have suffered because of the sudden pulling of the plug, and, as you say, it totals up to about a quarter of a million pound. Obviously people will be very angry if it turns out that it is not fraud at all but overspend in the end that has led to all this. In terms of the huge financial loss that the colleges have suffered and private providers have suffered, what are your views on the arguments being made that there should be compensation for that lost income, for that lost investment?
  (Mr Ingleson) Could I answer that in a slightly different way, if you will forgive me. People who have worked in the FE sector since incorporation have become quite used to Government money coming and going in a quite erratic fashion. In that sense, compensation, I think, is not something that we have considered seriously. I think the issue for us is, of course, that if I have a £300,000 hole in my budget at the year end I have demonstrated yet again that we are not competent to manage our own budget. The challenge for us is to make sure that we balance all the income streams, of which there are many, and make sure that we carry out our activities in a way which does not cost the public purse at the end of the year. We have treated ILAs in exactly that way. We chose to honour the commitment to the students and that means that we have to use our best resources in all sorts of other ways to make sure that we balance our books at the year end. So we have not actively considered the issue of compensation and I do not quite know how you would do that. There can be no guarantees that we would have enrolled the students that we expected to.
  (Mr Gibson) We did a survey and surveyed 105 colleges about the effect. Our estimate from that is that from those 105 colleges there would be an overall loss of something like £2.5 million—and I do not see anything wrong in saying that where that has happened, then some form of compensation should be very seriously considered. What are you doing? You are providing, as Stuart has explained, the best you can for the students, but it is coming from somewhere else. It would seem to me quite legitimate to say: The colleges did this in good faith, the money was withdrawn and therefore some form of compensation would be quite legitimate.
  (Mr Ingleson) Chairman, I do believe that in larger institutions you have economies of scale and you have greater flexibility. Before I had the privilege to be appointed to Preston, I was principal of a much smaller college in the north-east of England, and in smaller institutions you have no margins for movement. I was talking to colleagues from the private training providers before we came in here and they are really strapped. Proportionately the impact on them has been far greater than it has on the way in which, in this particular case, this college has worked. I think some of the smaller colleges would have the same kind of difficulties that we have heard about and which, I think, would merit serious consideration for compensation. I am left still with the issue of how you guarantee that you would have enrolled all those students that you have budgeted for.

  209. Because you are a large institution with different sorts of financing, because you are used to the Government pulling the plug at short notice, you are able to ride it out and make your losses elsewhere, because you partly anticipate this sort of thing happening. Looking ahead in terms of replacing the ILAs with an improved system, what words of advice have you got for the small learning providers who came in expecting the Government to keep their word and got their fingers burnt? How do we get them back into this when the new scheme is set up?
  (Mr Ingleson) My understanding is that the individual providers have no form of contractual relationship with the Government over this. The decision to place the financial resource in the hands of the individual meant that the relationship is with the individual provider, and that is certainly my understanding of our relationship with our individual students. I think that the way forward has to lie in some sort of accredited provider system, because the issues that I think have exercised us greatly have been around the issue of quality. I think there will be some difficulties for some small private providers in complying with the kind of quality assurance framework to which colleges and, indeed, increasingly private providers who take LSC money are subjected. I do not know whether any Members have seen the application form for organisations that wish to be in receipt of LSC funding, but it is a daunting document.

Jeff Ennis

  210. You have already indicated, Mr Ingleson, that your college is a big tertiary college (very similar to Barnsley Technical College, in the area that I represent) so it has been able to ride out the storm to some extent, as it were. Do we know what proportion of FE colleges have not been able to ride out the storm and are suffering quite severe financial detriment?
  (Mr Gibson) Of the 105 colleges that I mentioned earlier we surveyed, 84 of those indicated that they would make some financial losses.

  211. Will they receive compensation from the Government?
  (Mr Gibson) They have not, to my knowledge, sought that at the moment because I think the messages that have come out have been fairly clear in the other direction. I believe that they should be entitled to do so, yes. That is my personal belief.

Mr Pollard

  212. I would like to pursue with Mr Ingleson, if I may, this thing about losing money and assessing students. Each year you have to assess what your student population is likely to be, so this is not a new decision that you would have to take. There must be an element of risk all the time that, you know, the feng shui course might not be filled up and you would have to cancel it halfway through, but you have taken on staff to accommodate that course.
  (Mr Ingleson) Indeed.

  213. Is there slack built into your system generally to accommodate that or not? If not, was this a complete surprise to you: Whoosh? I think you said earlier on that this had happened before with FEFC and one or two of the other things, and you said, "I smile wryly"—though I am not sure those were your exact words. "Hollow laugh" that was it. Can you take us through that a bit?
  (Mr Ingleson) Yes, of course. The funding mechanism to which we operate at the moment is so complex, it demands such an audit trail, that almost inevitably at the year end we find holes in that, and we will be penalised for that financially so we have to aim to over-recruit. If we do over-recruit, in the past we have received not a penny. So Preston last year achieved about 107 per cent of target; that is over £1 million of unfunded activity. If we had been a few students short, we would have lost money. For over-achieving, at the moment funding provides nothing—well, it may this year, but we wait to hear that. The ILAs were quite a significant part of our projections of our student numbers based on performance in 2000 and 2001. Of course the numbers fluctuate in all our areas and we will seek to recover that by a mixture of reduction of costs in some areas and the generation of additional income in other areas, either from commercial activity or from fee income or from more students.

  214. Is the ILA considered to be a riskier investment to you than the feng shui or whatever it might be, so that you are taking on almost an unknown quantity? Does that make sense to you?
  (Mr Ingleson) I need to come at that a slightly different way, I think, Chairman. Preston has a large team of staff in a number of different parts of the institution whose task is to work and engage with students, offer them the best impartial advice and guidance we can give them, and place them on a course which makes sense in terms of their need. What the ILA did was take away the risk for many of those people.

  215. Transferred the risk to the college?
  (Mr Ingleson) No. One of the issues you have discussed in your previous evidence has been the extent to which this has brought people back into learning who otherwise would not have been there. Chairman, if you would just indulge me a moment, I thought the Committee might like to hear brief pen portraits of the students we have been able to work with who otherwise, I think, would not have been there. I know there has been some concern of the Committee that people already with qualifications have been back on this. To some extent I think that is inevitable. If you get people back on the first rung of the ladder and you encourage them and they want to go on, if they have only got there because they have had that financial support and the lack of risk then they are going to go on on that same basis. A women who enrolled at one of our outreach centres in a small market town, a 50-year old working mother with no qualifications whatsoever, did an introductory IT course and then progressed through onto other IT practice. On the basis of that, she applied for and was appointed to a head receptionist post in a major legal firm. That was specifically job-related progression which she simply otherwise would not have been able to access. A man who worked as a cleaner in a local factory and a supermarket in the evenings, lacking in confidence, left school at 15 with no qualifications, on receipt of his certificate commented, "I am so proud of myself for gaining the certificate for the computer driving licence. The only other certificate I have had is my birth certificate." Another man, again with no formal qualifications, heard about ILAs through his union representative—and I know you have heard something of the trade unions in this—who we briefed. We have meetings for trade union representatives in some of our local employers, the message went through the system to this individual, he came on an introductory course, completed an intermediate programme and has then gone on to higher education. He would not have started the programme without the ILAs being there. The people we have predominantly brought in through this scheme would not have invested £150 of their own money in a programme which they may not complete. The figures that we have on the students who have come through the system on the ILA basis are on the sheet you have been provided with. They look quite reasonable: 84 per cent completion and 73 per cent achievement rate. That is a lot lower than you would normally expect for short programmes. An analysis of students in the college who were not in receipt of ILAs but on the same courses, gives us much, much higher figures: a 98 per cent retention rate and a 97 per cent achievement rate. That demonstrates for us what we would have expected, that we have worked with a group of students who would not normally have been there and have found it harder to complete, even with the support that we have been able to provide for them. I have absolutely no doubt that this has brought us into contact with students who otherwise would not have been there. It does not answer directly your question about the fluctuations and the variability, but we chose to retain the potentially 2,500 to 3,000 students we would have lost if we had not decided to honour our promises for people in receipt of ILAs.

  216. I still cannot get over whether you think it is a riskier investment for the college or for colleges generally to assume ILA students rather than the normal process that you would get.
  (Mr Ingleson) I think for the future that is a debate and a decision that we have not yet taken. We are beginning the process of setting next year's budget over the next few weeks. We will have to look very hard at the question of whether or not we are able to continue the short term remedial action we have taken this year as we move into next year's budget. It is quite possible, I think, unless we get some steer about the mark 2 ILA, that we will downgrade our estimates of our student numbers in these areas. I do not think we have a choice in that.

Jeff Ennis

  217. On this line of questioning, in terms of trying to reach the most difficult students—and I represent quite a deprived area where the outreach centres from the local colleges are very important in terms of first footing (as we call it), getting people into adult education. How important a recruitment tool has the ILAs been in those very deprived areas in terms of the first footing element?
  (Mr Ingleson) Very important.

  218. Would it rank as the top initiative, would you say?
  (Mr Ingleson) Not necessarily, no. Remember that the people who have received ILAs are not in a sense the most disadvantaged. People who are in receipt of a range of benefits would have tuition fees waived for them anyway and be fully funded by the FEFC, as was, and now the Learning Skills Council. For people that are in low paid, predominantly part-time jobs, particularly women, they have been very important. In that sense, operating alongside the fee remission scheme that the college and the LSE can talk about to you, they have been a very valuable tool at that level which is just above people in receipt of benefit.

Mr Baron

  219. A very general question, but could you try to be as specific as possible: What harm do you think this episode has done with regards to both colleges and students generally? I know the colleges are expected to meet the loss of expected income in order to honour commitments to students, or most are anyway, so obviously there is a financial loss, but the implications of any subsequent programme initiative, what are the implications of that?
  (Mr Ingleson) My answer might not be quite what you are fishing for, so please come back at me if I am not answering in the way you wish.

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