Examination of Witnesses (Questions 60
- 77)
WEDNESDAY 7 MAY 2003
MR KEN
PASCOE, MS
CHRIS MINETT
AND MR
DAVID CRAGG
Q60 Mr Dismore: Do you want to see
more or less funding going to the voluntary sector?
Mr Cragg: I think that is a slightly
arbitrary question because I think we have to make judgments quite
properly on the merits of projects. Having said that, you can
see from the numbers that we have shared with you that there has
been in our judgment—and the evidence shows this—a
significant increase. I expect in the next round, certainly if
I view it purely from a local perspective, a further increase
in the voluntary sector take. If I put money on one side and look
at successful applicant organisations, on my patch 51% of successful
applicant organisations are voluntary or community organisations.
Q61 Mr Dismore: That still comes
back to the question of what proportion of those who express interest
in the first place are then put off by the process. One topic
I was going to ask you about also was the question of match funding
in the market sector because some of the organisations have found
it a lot easier to obtain funding to apply for match funding whether
it be from a local authority or the ESF or whatever than others,
depending often on the nature of the project.
Ms Minett: I think what we have
here is a confusion between the old system of match funding and
the new system of co-financing. In the old system you are quite
right, each individual applicant had to search for public money
which could be matched. One of the reasons why co-financing is
so much more successful and so much more easy for small voluntary
organisations to bid for is because the responsibility for finding
match funding rests with the co-financing organisation, in other
words the Learning and Skills Council. We will find a match for
projects; it is not something that is now left for a small organisation
to struggle to find. That should make a huge difference, particularly
to the voluntary and community sector. Is that how you understand
it?
Q62 Mr Dismore: I do not know. I
suspect that that just depends then on the extent to which that
particular LSC gives priority to this area of work.
Ms Minett: The priority will be
set out in the co-financing plan which will have been developed
in consultation with that sector and other sectors against the
regional development plans. There will be a very open and transparent
display of what the plan is and what the priorities are for European
Social Fund money to be spent and bid for.
Q63 Miss Begg: I would like to ask
some questions about EC regulations and accountability. In our
written evidence we have heard that under the relevant EC Regulation
spot checking is more rigorous than would ordinarily be expected
for normal conduct of UK Government business. How would you characterise
the procedures for demonstrating that the projects have complied
with the detailed EC requirements?
Ms Minett: I think this is an
area where there is still room for improvement, if we are perfectly
honest. That is room for improvement with the European Commission,
it is not something that DWP on its own can do. I think perhaps
the audit arrangements have taken a little while to recognise
the changes that have been brought about through co-financing.
Currently we feel there is a large non-departmental public body
with its extremely well-presented and well-used assurance mechanisms,
internal audit and so forth. We are surprised that the European
Commission are still insisting on the degree of spot checks. We,
of course, will comply with them, but we would suggest that that
is an area that still needs to be developed and simplified when
you are dealing with large public bodies in co-financing.
Q64 Miss Begg: It is obviously getting
the balance right between protecting the public financial interests
and the bureaucratic.
Ms Minett: Absolutely.
Q65 Miss Begg: Is my understanding
right that the ESF projects are subject to quarterly monitoring
of performance and annual auditing of accounts with monitoring
visits taking place for the bigger projects? Is that laid down
by the EC or is that something that is different in the different
regions? I ask the question because some of the people who are
involved in my area in Scotland who came to see me, knowing that
we were doing this inquiry, have to do monthly monitoring and
they were complaining about the vast amount of bureaucracy. They
have got themselves into consortiums so they are actually working
very effectively, getting large sums of money, but they are tied
into this constant monitoring. I am not sure whether that is because
it is going to the Scottish executive and that is a different
set of monitoring from what actually happens in the different
regions.
Ms Minett: I think that we would
recommend that Scotland takes a look at co-financing because we
speak, as you know, for England and co-financing removes some
of that rigour and demand that is made on the individual organisations.
The assurance mechanisms come through the co-financier largely
and we agreed that nationally. At the same time, there are EC
regulations that demand both Government Offices and the European
Commissions have the right to audit us should they wish.
Q66 Miss Begg: So that helps to explain
why they are looking at you with a degree of envy. It is the Scottish
executive, presumably, that makes that decision about the co-financing.
Ms Minett: I do not know where
that decision is made.
Mr Cragg: The Scottish programme
was agreed before the Learning and Skills Act for England was
introduced. It was really the Learning and Skills Act which introduced
the whole concept of co-financing and this strategic alignment
of public funds with ESF. I think it is probably an issue that
flowed naturally from creating the Learning Skills Council and
the Learning Skills Act.
Q67 Miss Begg: As an organisation
they did not know where to go to put the pressure on. To what
extent was there sufficient consultation amongst all stakeholders,
including independent service providers, prior to the co-financing
status being conferred? How would you respond to the complaint
that there was insufficient consultation amongst independent service
providers prior to conferring co-financing status and that as
a result the co-financing organisations do not fully understand
the needs of the service providers?
Ms Minett: Every local Learning
and Skills Council—all 47 of them—were guided or directed
by their regional Government Offices on how to consult and the
degree of consultation that was required in establishing the co-financing
plans. From my experience that was fairly rigorous in that the
checks that were required by Government Offices to assure them
that we had had very wide consultation when establishing the co-financing
plan in the first instance. If consultation had not been sufficient
there were requirements on us to actually consult further before
they would accept the co-financing plan as it was submitted and
approved by government offices. I am sure David will have examples
of how that was carried out.
Mr Cragg: That had to be fed back
and evidenced to regional programme monitoring committees where
all the stakeholders were represented, not least local authorities
represented, voluntary sector represented. Just to give you a
flavour of the process, we found ourselves in the position locally
where we had a local authority co-financing body in the form of
Birmingham City Council. We began the whole process jointly consulting,
trying to make absolutely sure that we aligned our plans with
the city council and vice versa. We held a whole series of public
events and we gave a period of two months consultation on the
written co-financing plan. Having received significant feedback
we delayed the call for bids by a month from our original deadline
because we had not given people sufficient time—or were
likely not to have given them sufficient time—to prepare
themselves for bidding. We took on board virtually all the comments
we received and we have continued that consultation process. For
example, before the second bidding round, before we were even
ready to put forward any further funding proposals, we actually
held a separate consultative event to consciously encourage people
to give us feedback on the first event. We held individual surgeries
for that so individual organisations could all take up their issues.
It has been very challenging but I think it has been an extremely
fruitful and productive process which has been mirrored certainly
also at a regional level. In the early days there were real concerns
from some regional organisations that they might end up cut out
of this process, so we again put in place a special regional consultation
for organisations which operate, especially in the voluntary sector,
at regional level.
Q68 Miss Begg: I suspect you are
an example of the best practice and to what extent is what you
are doing replicated throughout the country in the light of Andrew
Dismore's experience in London?
Mr Cragg: I would want to show
Mr Dismore the detailed paper which was out for public consultation
from London East Learning and Skills Council. It seems to me that
they have gone to even greater lengths than we went to engage
voluntary community organisations and organisations representing
disadvantaged groups. My experience within the region which I
know best—I also chair the national ESF Project Board made
up of my colleagues representing each of the nine regions in England—is
that people went to great lengths to consult very widely and have
continued a dialogue with prospective bidders.
Mr Pascoe: Can I add that we have
been very conscious of the fact that as we are one national organisation
we made sure we kept everybody informed, briefed and able to perform
this very important task.
Q69 Chairman: Can I just ask a question
about IT? We have picked up the fact that the new system—as
new IT systems have a habit of doing—has come up with some
glitches. If we had more time I would ask you a series of questions
about that. We are worried that the risk analysis of ESF cannot
be properly accommodated and dealt with until you get your ICT
systems working efficiently. Is there a timetable for that or
could you sent us a note about it? Or is there anything you could
tell us to reassure us about that?
Mr Pascoe: I think it is fair
to say that we are aware that this is one of the risks and it
is certainly on our risk register. I think in terms of background
it is worth saying that in bringing together the 74 predecessor
bodies plus the FEFC we have had a huge task in replacing all
those different IT systems—over a thousand different systems—to
bring it down to one national system. It has been a very big job
indeed. This element is something we still have to complete.
Q70 Chairman: What you have just
said worries me even more.
Mr Pascoe: Except that we are
on the case.
Ms Minett: We are more than on
the case; we have an end in sight. I think what you have to remember
first of all is that co-financing began at the same time as the
Learning and Skills Council so we have developed IT systems in
parallel with co-financing and that is always problematic. Clearly
we always seem to be a little bit behind because we started off
running before we even had a chance to get the IT systems in.
There are a number of IT systems needed, as you can imagine, for
a complex programme such as this. We have already delivered on
a number of those internally in the Learning and Skills Council.
There are two large IT systems remaining to be developed. One
is just on the point of going live, which is our contract management
system and is essential for us to manage the costs and for each
the Learning and Skills Council, the 47 local councils, to manage
their contracts. The other big IT system is the match funding
IT system which is in line now to be delivered and go live by
the end of May. It has been problematic, we make no bones about
it, but that is largely because of the complexities of match funding
which again, if I could make a suggestion, there are some things
there to be developed with the European Commission. The complexities
of measuring match funding to individual beneficiaries require
us to put in place a very complex IT system. It seems to us at
times that the system is still working on the old pre-co-financing
days when you are not talking about single-funding streams through
large public bodies such as Learning and Skills Council. Nevertheless,
we have developed over a number of months this IT system. We are
on time to go live in May so that we can complete match funding
claims to Government Offices at the June end quarter. That is
the important date for us and I have regular meetings with the
IT team and everyone else involved and I am assured that we will
be on time for that.
Q71 Chairman: If that is later this
month that is an ambitious target. Could you drop us a note when
it happens?
Ms Minett: Yes[14].
You will see the fireworks going up.
Q72 Mr Stewart: What are the opportunities
and threats facing you post-2006 with the possible reduction in
objective 1, objective 2 and the changes in the emphasis in EU
structural funds towards the poorer countries and the possible
repatriation of UK policy on regional policy and effectively spending
which is currently covered by structural funds?
Mr Pascoe: Quite clearly we are
going to have to think about how a reduction in funding from that
source is going to be tackled and I suppose that one way we will
have to look at that is that the spending review cycle is due
to start again soon; the third year of the current cycle which
is 2005-06 becomes the first year of the next cycle. We are starting
to engage with the Department for Education and Skills about our
views about what the priorities might be in the next spending
review for us. I think that is one avenue through which we might
repatriate some of this activity to national expenditure. However,
I think there are also other things that are going on, for example,
participation: education maintenance allowances are due to come
in from September 2004. That in itself we are expecting to give
a boost to participation in the 16 to 18 age group.
Mr Cragg: I think your question
is a very reasonable one, especially viewed from a regional perspective.
I sit on the programme monitoring committee for the objective
2 region in the West Midlands. We clearly have got local and regional
anxieties about that. I think it is going to be absolutely essential
to have transitional funds to make sure we can manage our way
through that process. What I do think it provides on the positive
side is an opportunity to get out of what is an enormously arcane
creation in the form of all this match funding arrangement. I
think there are better ways of handling it. If anything I think
that co-financing, for example, presages a better way of doing
things. If you look at the scale of bureaucracy which is involved,
even in managing co-financing let alone managing the ESF on the
ground, it is really worrying that we still have such an over-engineered
system. On your key point of substance, I think in any region
where you have big issues of so-called convergence in productivity
and employment terms as we have, then we are clearly, as a region,
keenly interested in ensuring that appropriate transitional funding
is available, especially around the human resource dimensions
where I think the Commission sometimes, in regional policy terms,
underestimates the crucial need for up-skilling and really increasing
the participation rate right across the age range in terms of
education and skills.
Q73 Mr Stewart: Are there any further
points to add at this stage so far as co-financing is concerned?
Mr Pascoe: I suppose there is
the local intervention development fund which we need to bear
in mind. We do have some £250 million coming through that
particular fund. That is available for local LSCs to deploy flexibly
at the moment. I think we need to look at how that is used in
relation to some of these projects in the future.
Q74 Mr Stewart: There is a view,
which I would not necessarily fully support, that if you want
to break out of the economic criteria of 75% of GDP for the very
point that you do not want regions to continue to be at that low
level, the whole idea of structural funds is that you build them
up to a higher and higher point. The other argument is that if
the Government is changing its approach—they have a consultation
document at present—and takes hold of regional policy, then
what they are saying is going to ensure that the transitional
funding will be the responsibility of Government rather than the
European Union and that might cut out some bureaucracy and might
enable a lot more flexibility. Obviously the jury is out on whether
that is going to work or not. What is your view on the Government's
proposals so far?
Mr Pascoe: The other thought on
that is that we do already access some RDA funding.
Mr Cragg: I think one of the most
encouraging developments over the last 12 months is the extent
to which we are integrating our activities at a regional and local
level with regional development agencies. I think without over-simplifying
it, it is increasingly becoming the agents and delivery bodies
on the ground for delivering the skills dimension of the economic
strategies in the regions. We have a comprehensive approach to
that in the West Midlands which we think is working extremely
well. I think there is a lot of potential saving and added value
to come out of that much more coherent approach at a regional
level.
Mr Pascoe: I think actually there
is a plus for ESF that we have not mentioned, that it did make
us work together very closely in those early days to get all this
off the ground. We do not have a regional structure, no regional
offices, but it did mean that the 47 had to come together at the
regional level and work together and I think that that has actually
laid a lot of sound ground for the work we are now doing at the
Regional Development Agencies.
Q75 Mr Stewart: I suppose the big
picture is simply this, there will be huge changes after 2006
no matter what negotiation comes out from the UK. Many areas are
probably too dependent on structural funds. The other side of
the coin is that we have huge potential new markets for the ten
accession countries and it is how much you can balance the two
together, bearing in mind that you could say: Let's increase the
total structural fund spend that the EU has. As we are a net contributor
to the EU it is going to mean that we can spend more but we will
have less money to spend on domestic issues. There are huge dilemmas
for the UK.
Mr Pascoe: As I said earlier,
I think we have to take those sorts of issues into the spending
review because some of the things that we are doing with this
money are really fundamental to reaching the bits that we cannot
reach through traditional methods. We are particularly concerned
about some of the participation issues and getting into the very
disadvantaged communities and working with organisations that
are acceptable to bring people back in to the system and then
get them back into mainstream. We want that to continue and we
will have to have that sort of debate with the Department.
Q76 Chairman: You caught my attention
with the phrase that you used about over engineering with bureaucracy.
One of the things in this inquiry that I would really love to
be able to do—although I think it may be impossible—is
to actually identify and try to pin down some of the total opportunity
costs as well as the bureaucracy and all of the wasted effort
and the professional time that goes into applications that go
nowhere. Is there any way that you could point us to the sources
of finding even estimates of what the total bureaucratic cost
would be of ESF funds?
Mr Cragg: That is a very challenging
question. I think it would be very helpful for us to take that
away.[15]
I would imagine that at some stage some work has been done around
contract management costs and total bidding costs in respect of
ESF. We certainly have not looked at it. Co-financing strips a
lot of that out and we bear that administrative and bureaucratic
burden. I think we will go away and look at any studies that have
been done in the past which might be very helpful in informing
you.
Q77 Chairman: That would be immensely
helpful. I ask the question a positive way round because you are
right to say that if we can learn lessons from what we have done,
we have obviously got better and it is quite clear from your cogent
evidence this afternoon that we could get better still. We have
between now and 2006 to look at ways of getting better still.
I think people are hiding; there is a huge submerged iceberg below
the surface and we really have to try to learn what we can from
that. That is one of the things we can do in this inquiry in a
positive way, not just attack people and tell them they are wasting
their time because they are not. That would be an extremely helpful
outcome for us if you could kindly go away and think about that
and let us have the benefit of your thoughts. Is there anything
else that you want to say because we have been trying your patience
enormously and I am really sorry for that, but is there anything
that you feel we should have touched on that we have not?
Mr Pascoe: No, I think we have
covered all the ground we needed to.
Chairman: Thank you very much for coming
before us; it has been extremely helpful.
14 Please refer to supplementary memorandum submitted
by the Learning and Skills Council (ESF 15B), at Ev 34. Back
15
Please refer to Appendix 17, Ev 182. Back
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