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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 687-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE EDUCATION AND SKILLS COMMITTEE
PUBLIC EXPENDITURE ON EDUCATION AND SKILLS
Wednesday 16 June 2004 MR DAVID NORMINGTON and MR STEPHEN KERSHAW Evidence heard in Public Questions 1 - 164
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Education and Skills Committee on Wednesday 16 June 2004 Members present Mr Barry Sheerman, in the Chair Mr David Chaytor Valerie Davey Jeff Ennis Mr Nick Gibb Paul Holmes Jonathan Shaw Mr Andrew Turner ________________ Witnesses: Mr David Normington, Permanent Secretary, and Mr Stephen Kershaw, Director of Finance, Department of Education and Skills, examined. Q1 Chairman: Can I welcome David Normington and Steven Kershaw to the proceedings of the Committee. David, of course, is Permanent Secretary to the Department and Steven the Director of Finance. I am sure that the radio this morning did not reflect the views of either David Normington or Stephen Kershaw when they said they were coming in for their annual grilling! I know that the Department regards these sessions with the Committee with total pleasure and anticipation. Indeed, I have heard suggestions that you would like to come three or four times a year! Mr Normington: I am at your disposal, of course.
Q2 Chairman: But it is a pleasure to have you here. David, would you like to say anything in terms of introductory remarks, or do you want to get straight into the questioning? You can have it either way. Mr Normington: I think we should get into the questioning really. I am just reflecting that we are in a rather different position from when I was here last year when we talked all the time about school funding. I guess you will want to come back to that, but we have in this year managed to stabilise that position and I have got quite a lot of other things on the way, including improving performance, and we are beginning a major restructuring of the Department absorbing new functions on children and young people, so it has been a very busy year. Q3 Chairman: Thank you for that. One of the things that does worry us as a committee when we look at the overall performance of the Department is what one of our members, one of our team has described as 'Ground Hog Day'. I know that is an American expression, but I think everyone now knows what it means: the feeling that we have done this before and the Department is going to do it again. We will be coming to Individual Learning Accounts a little later in our questioning in some detail, but we now have the E University that seems to have run into severe difficulties again at considerable expense to the taxpayer. I think one estimation was: here is the university, it has only ever got a very small number of students, it seems to have limped on for such long time, a considerable amount of the tax payers' money and each course costing on average £44,000. That does sound a bit like Individual Learning Accounts, does it not? Mr Normington: It is nothing like Individual Learning Accounts, in the sense that Individual Learning Accounts was about the public purse being defrauded. That is not the case in this case. It is also the case that the plug has been pulled on E Universities relatively quickly. As soon as HEFC, who are of course managing this, saw that it was not succeeding, they have pulled the plug on it, but it is not a particularly good story. At the risk of sounding complacent, if you are trying to do a lot of things and spending £60 billion of public money, 30 billion hours and 30 billion through local authorities, I think there will be some problems. I cannot guarantee that there will not be problems in that last ray of spending, but I am not pleased about any of them and this one is one that is on the agenda at the moment. Q4 Chairman: But you remember when we did our inquiry into Individual Learning Accounts. It was not just about the defrauding of the program; indeed, we were promised by you and other ministers that money was going to be retrieved and people were going to go to prison. We have not seen any sign the last time I pushed the present Minister on this of any money coming back or anyone in prison. Our report was really about the competence of the Department in a ranging programme, especially a public/private partnership programme; it was not just about the defrauding, was it? Mr Normington: No, that is true. It was about the competence of the Department, and we put our hands up and said there were lots of things we did wrong. We are still pursuing it, by the way. I recall that there were just about 100 people charged, 108 providers still being investigated and 193, I think, something like that, charged and some people found guilty. I can provide you with those figures in detail if you want, but it is a very prolonged process of prosecution, which is very frustrating, nevertheless that is being pursued. We have not given up on it. We are not recovering large amounts of money; that is true. We are recovering some, but it is small amounts. Q5 Chairman: But the E University commenced when? Mr Normington: It was announced in 2000. It was a three-year commitment commencing in 2001 for a three-year period. Money was committed over that three-year period, and it was money for something that was quite risky. It was something which we did not think would get off the ground without government investing money; it was an attempt to help the universities market on-line their degrees to overseas students; and it was quite a risky business; and it did not work. I think we know that now, but, of course, when we embarked on it, we did not know that it would not work, it was a genuine attempt to improve the competitiveness of UK universities and, until you get to the point where you have tried to prove the concept and see whether it is working, you do not know whether it is going to work. At the two-year point, when this review was held at HEFC'S instigation, it began to be clear that those targets were not going to be hit and that the concept was not going to get off the ground. Q6 Chairman: But it ran its full three years, even though very few people were signing up for the courses. Your thoughts? As you started your answer you said you pulled the plug on it only after three years, and, if you take a comparison, it seemed to arrive in the whole enthusiasm, the bubble for on-line courses and on-line businesses. They very quickly went to the wall, did they not? If they were not successful in the commercial world, shareholders lost their money, but it happened quite quickly. This seems to be a very prolonged agony over three years? Mr Normington: I know you are going to have Howard Newbury here and you will get a more detailed account of this. Q7 Chairman: We will be? Mr Normington: My understanding is that in the first two years it was necessary to build the IT platform, and that was where the investment had to be made. It was always the case that the target of 5,000 courses was going to be met in the third year, once the IT platform was in place, so we did not know until the third year whether it was actually going to take off, and the return on the public investment was going to be subsequent to that. It was the case that this was up-front public investment to build the infrastructure to make this possible, so we did not know until the third year that the concept was not going to work. Q8 Chairman: Why did it not come out of the Department direct rather than HEFC? Mr Normington: Because HEFC are our vehicle for funding universities. We do not fund universities directly from the Department, we do it through an arms length body. Q9 Chairman: It is giving us a bit of concern. We are going to be looking at the commitment to cut the Department, or the staff, by a third, and we have seen the recent articles in the newspapers on this, but some of us wonder: here is the Department with this ambitious target to cut by a third, but, of course, you have all sorts of ways of transferring activity elsewhere, do you not. If you go through the acronyms, you have HEFC, which is a way of delivering departmental programmes, you have Ofsted. Ofsted is now what? How many people work in Ofsted? Mr Normington: I think it is about two, two and a half thousand. I think it is of that number. Q10 Chairman: I think the last time they were going over the three thousand? Mr Normington: They have taken on a lot of the children's responsibilities. That may have pushed them above, but I thought it was two to two and a half. Q11 Chairman: But substantial: over half the size of your Department? Mr Normington: Yes. Q12 Chairman: Then we have ALI, the Adult Learning Inspectorate? Mr Normington: Yes. Q13 Chairman: We have the QCA, we have the Learning and Skills Council. I have to say, on the bus in I was noting a few of the acronyms: QCA, NAA, the LSE, Ofsted, HEFC, the TTA, the ALI. We could add to them. No-one is going to be fooled if all you are doing all the time is saying, "Look, we have got less people over in the headquarters, but everybody knows that they are scattered in different departments." That is going to fool no-one, is it? Is that what is going to happen? Mr Normington: No, because we are bearing down on the budgets, the administration budgets of those bodies as well, and to be absolutely clear, there will be some marginal adjustments between the work of the Department and its bodies. There is some overlap now. We have been quite actively shadowing the Learning and Skills Council and we will stop doing that to that degree because they are now a body that has been in place for a number of years, but we are looking for 15 per cent reductions in the administration costs of all those bodies taken as a whole. So they will not be able to increase their staff to compensate for our reductions because this is about trying to reduce the overall overhead which we and all those bodies represent on the system. I think that is an important thing to do. Chairman: Right. I think we have limbered up with a couple of easy questions, so we will now get started on the serious stuff from school funding. I think Andrew wanted to start? Q14 Mr Turner: May I follow up on the question you have asked about the E University? It has nothing to do with the EU, I understand! Could you just tell us: when was the decision taken to invest this money in constructing the platform? Was a business plan prepared which saw a return on that investment over whatever period of time? Mr Normington: I believe so, yes, but the sequence of events is that the Government decided that it wanted to develop the E Universities idea in, I understand, 2000, and I think it was announced by David Blunkett. It then asked the Higher Education Funding Council to set up the vehicle to make that possible and it was done through a private company which was set up to run it, and that company did, I understand, have a proper business plan which showed how it would get the returns on the public investment that was being made. Forgive me, this is quite properly being done at arms length from me, so I know that much but I do not know all the details because the responsibility in terms of ensuring the funding is properly used was with the Higher Education Funding Council. I am not trying to push it off, but that is a fact. Q15 Mr Turner: No, I realise that, but when the Chairman says the shareholders lost their money in respect of some other IT companies, what we are saying is the taxpayer lost his money? Mr Normington: Yes. Q16 Mr Turner: By which date was it anticipated that he would get a return on his investment? Mr Normington: It was a three-year commitment of public money, the money committed over three years ending this spring, with the expectation that the main return would come after that - in other words, that would be the public investment which would ensure that the concept was in effect and proved and the thing was working - and there was an assumption that this would be so attractive (and this was in the business plan) that the private sector would want to invest in it. Q17 Mr Turner: But the private company, which I assume was not a real private company, it was a private company funded entirely by government? Mr Normington: It was at that stage, yes. Q18 Mr Turner: Was told by the Government what product it had to produce before drawing up a business plan which concluded there was a market for that product; is that correct? Mr Normington: I guess, in sequential terms, that was true. There would be quite a lot of debate going on about what precisely the nature of the investment was, but, yes. Q19 Mr Turner: But that is absolutely bonkers. No sensible private company, surely, would start by deciding what product it wants to use and spending a huge amount of money and only then trying to work out whether its business plan can sell that product, whether there is a market for that product? Mr Normington: I would have to go back to the events of 2000. There was quite a lot of work done to develop the idea before it was decided to go ahead with it. Of course, it was not just decided it was a nice idea and we would invest 60 million in it, there was a lot of work done at that time, including on what the delivery model might be. However, what was being particularly looked at there was the nature of the problem we were trying to solve and the outcomes we were trying to achieve and what seemed like the best approach to delivering it; but, of course, the business plan, the detailed business plan, had to follow from that. Q20 Mr Turner: So it was actually the Department that advised ministers that this was a reasonable aspiration to spend public money? Mr Normington: The Department with the Funding Council advised ministers, yes. Q21 Mr Turner: Thank you very much. We can see the result for ourselves. Moving on to schools funding, could you remind us, please, of the milestones which led up to what was called the funding crisis last year when, for instance, the open PM made its decision about changing funding for local authorities, when ministers made the decision about passporting, when ministers made decisions about the standards, and how those milestones have moved, where they have moved, with the result that there has not been a funding crisis this year? Mr Normington: I am not going to get all the dates right. What we have been trying to do this year, compared with the previous year, is to bring all the decisions forward by about two months, if possible, and 29th October last year was the point at which we were able to provide most of the detail about the education budgets for 2004/5, albeit that was then followed by the local government settlement some weeks later, but the whole process was brought forward by six to eight weeks. Q22 Mr Turner: So every school should have known its full funding allocation by 31st March this year? Mr Normington: If the local authorities had made that possible, yes, but it is in the hands of the local authority then to set the local budgets and to allocate the money, albeit within quite a tight framework which we had set, which included floors and ceilings. Q23 Mr Turner: Do you know how many schools did have that knowledge? Mr Normington: No, I do not, but a lot more than the previous year when they went on not knowing about it until well into July. Q24 Mr Turner: Finally on this subject of schools funding, do you think there is a causal link between the amount money that is spent and, for example, the GCSE results? Chairman: Andrew, I am sorry, will you hold that question to David Normington. That is a section which we will be covering. I really think it pre-empts other people's opportunity of questioning. Could you stay on school funding per se? Mr Turner: In that case I have finished. Q25 Jonathan Shaw: The Government have introduced a sustainability fund, a transitional grant-- Mr Normington: Yes. Q26 Jonathan Shaw: --to ensure that school deficits are cleared by 2006. Why 2006? What is the thinking behind that? Mr Normington: Simply that we do not think it is going to be possible for every school deficit to be wiped out in one year. This is about trying to do it over a two-year period and to provide the transitional support over that two-year period. I do not know the precise number of schools with deficits at this moment, but the last information we had, which was at the point before they entered this problem, i.e. the end of March 2003, about two and a half thousand schools had deficits. Q27 Jonathan Shaw: Could some head teachers be forgiven for being rather irritated that some schools are getting bailed out when they have managed their budgets sufficiently? You might have two schools with a very similar catchment, the same numbers, et cetera: head teacher A has managed his budget well, head teacher B, it is questionable whether they have managed the budget well and a set of similar circumstances? Mr Normington: Yes. Of course it can be very irritating indeed to a school that has managed its budget well to find that happening, and that is why in the £120 million transitional relief we are providing we are making it a condition that those schools with deficits have to have a plan for sorting them out. Yes, it looks like a reward, but it comes with strings attached about what you have to do to get yourself back into financial stability. Q28 Jonathan Shaw: What happens if in a few years time those schools are in exactly the same position? Will there be another £120 million? Mr Normington: I sincerely hope not. It will depend why they are in deficit, of course. Sometimes it is a short-term issue - they are not all incompetent - but at the moment, in the present system, it is the local authority's responsibility where a school is in deficit to discuss with that school and to make sure that action is taken to handle it. If you look at the pattern - I was looking at the pattern of numbers of schools with deficits over recent years - it has gone up and down around the figure 2,000. So it is sometimes 1800, it is sometimes two and a half thousand. It is in that range. Q29 Chairman: What is that as a percentage? Mr Normington: I suppose it is about 10 per cent. Two and a half thousand would be about 10 per cent. Q30 Jonathan Shaw: What about the other end of the scale where we have got schools building up large reserves? Have you any feelings about that? Why are they doing that? Why are they not spending it on the children at the school? Is it because they are worried about future stability? Mr Normington: Yes. I mean, we worry about that, of course. The equivalent... I have just talked about two and a half thousand schools having deficits. Of course, just over 20,000 schools had a surplus and it adds up in aggregate to about a billion pounds. Quite a lot of that is capital money which they have accumulated for a building project which they are waiting to start or which is spread over a period, but quite a lot of it is not. It depends, but you do hear of head teachers saying, "I am saving it for a rainy day." Actually one wants them actively to be using their resources for the benefit of the school and wants to leave them with that decision, but one does not want them building up big bank accounts against some future problem. Q31 Jonathan Shaw: You said in your opening remarks that you were trying to do a lot of things? Mr Normington: Yes. Q32 Jonathan Shaw: And some things perhaps do not always go right. From what you have just described, in a fair judgment, do you think this is the best use of public money? On the one hand you have got schools that are not managing their budgets, giving them money, even rewarding them, you could say; on the other hand you have got a billion pounds built up. Is this one of the things that the Department cannot manage? Is it too difficult? It is one of the core issues? Mr Normington: It is one of the core issues. I think we are trying to ensure that schools... It is a highly devolved system. There are 25,000 budget holders out there. We are trying to ensure, with a lot of support, that they get better and better at managing that budget. I think if we want them to be confident about managing those budgets and not having large reserves built up, we have to give them more certainty and stability in those budgets so that they have confidence to spend the money, so they do not fear that next year it is going to be a problem. We have admitted that we got it wrong last year, and we were taken to task in your Committee's own report for it, so we are putting our hands up and saying we got it wrong, but other people in the system got it wrong too. I think that our responsibility is to provide a stable framework. If we could move to a three-year budget for schools, and that is a big "if", but if we could do that and give them that certainty, I think I could say to a school, "Why have you got a reserve built up? What is your three-year plan for making sure you are using those resources effectively?" If you are doing it on year to year basis you will always feel on the edge, and I think many schools do feel that. Q33 Valerie Davey: If I can follow straight on from that: it has taken a good while to build up the confidence of heads that there is going to be a year on year increase in school budgets; it is not going to be cut back suddenly? Mr Normington: Yes. Q34 Valerie Davey: Having established that, however, if we are going to project forward, although the budgets will be increased, they will not be increased at perhaps the same percentage in future years. Is that dialogue being entered into with school head teachers? Mr Normington: We are having a dialogue with representatives of all those involved in funding, including local authorities, about 2005/6. We have not yet talked about 06/07, 07/08, partly because the Government has not yet taken any decisions about the system it is going to use for providing security to schools in schools funding at that point, and partly because it is related to the spending review. One thing we learnt from our problems last year was that we needed to be talking much more to school representatives of head teachers and local authorities about the details of this, and that is what your report said and that is what we have been doing, but it is not yet about 06/07 and 07/08. Q35 Valerie Davey: So is that core funding, that absolute basic funding which we are talking about, the totality of budgets and LEA budgets, of course, with the additional local factors there, but I think I would have been a bit concerned if I had read yesterday's article in the Guardian about the complete taking out of the Standards and Effectiveness Unit. I know they have been anticipating that, but how did they know that those additional funds for very special projects were going to go completely? Mr Normington: No, it is really important... This headline: "The Standards and Effectiveness Unit is going", needs some explanation. This is simply a re-organisation in the Department. There will continue to be a unit focused on primary and secondary standards, which is the core job of the Standards and Effectiveness Unit. The standards fund, which has been administered by that unit and others, will be retained. I think it is about 2.9 billion at the moment, and it will be retained. In fact, one of the things we had to do last year was to stop the plan to move more of the standards fund into the local authority settlement in order to stabilise funding, so that is still retained, but over time we need to move to fewer and fewer school budgets so that the money is not tied to lots of small things. We are trying to work to a position where there will be, I guess, a local authority settlement, and central funding comes in the smallest number of streams with an emphasis on the outcomes you want from that and not on the processes and plans you need to put in place to achieve it. Q36 Valerie Davey: I am sure head teachers will be delighted to hear the last part of your answer-- Mr Normington: I hope so. Q37 Valerie Davey: --that we are not going to be bidding, bidding, bidding; but if I had gone to a head teacher yesterday with this article, would they have been able to explain that, or would they have been as alarmed as I was? Mr Normington: I do not know whether they would.... I hope they would not have been alarmed. I do not suppose so many of them read it, but that article is about what we are doing to the Department, it is not about the reduction in funding streams. Part of the reform of the Department is that we do not represent as much of an overhead and burden on the system and that the system is given more freedom to achieve its outcomes. I think they will get that from that message, from that article, and I hope they will be very pleased with it. I think the Secondary Heads Association's General Secretary, in a gentle way, says, "That looks like good news for us", but they know it is coming because it is something we have been talking with them about. Q38 Chairman: When you reflect on what happened the year before last, you said that you got it wrong. In a sense it was worse than that, was it not, because you blamed other people, you blamed local authorities, and that was very damaging. Your job, in a sense, is maintaining a good relationship with the departments that deliver education in this country, and it did not do anyone any good when you in a sense falsely claimed that it was all their fault, not yours. Was there ever any kind of attempt, not to say sorry, but to apologise in some form, and what are you doing about building relationships that were very damaged at that time? Mr Normington: We have said sorry. Charles Clark has said sorry, and we have said sorry to them and I have said it from public platforms. I know that this is sounds as if it is trading words, but we did not think we were setting out to blame local authorities in that way. We were trying to make a point, which is true, which is that we share responsibility and we need everybody in the system to be working to make sure that the local funding system works, and we were trying to get local authorities to share that. They certainly interpreted it as us trying to shift the blame. It does not matter what we think, that is what they thought, and that damaged relations, it damaged relations with secretary heads. What is so frustrating about this, as you know, is that at this point we had made lots of progress in building a shared sense of endeavour with secondary head teachers, we had probably got as far as I thought it was possible to get at that point and it was all set back by the school funding problems and we had to start rebuilding those relationships. Q39 Chairman: It is a strange situation. Here is a government that is pouring money into education and you manage, in the midst of these days of plenty, to get it wrong in terms of your relationship and also get it wrong in terms of the funding. The fact is you have put in a report, you said you have put a sticking plaster over it for a couple of years, but you may - and this is coming back to my reference to 'Ground Hog Day' - you may be in exactly the same position very shortly, because according to our inquiry you have not sorted the basic problem. That is true, is it not? You have put a sticking plaster over it for two years? Mr Normington: It is an interim solution, and until we get certainty about what the long-term position is, it will feel like an interim solution. Two things are better though: one is that we know quite a lot more than we did about the detailed position, and, secondly, you could continue with this arrangement that we have. The arrangement we have put in place which guarantees an increase to every school is a way of providing security to schools, and you could roll that forward - you could do - but until we are clear what the long-term position is, there will be a feeling that this is a two-year sticking plaster. It is a bit better than a sticking plaster, because it has stabilised the position and ensured that schools are getting an increase and that is in a sense the answer to the question. There is a lot of money going into the system. This approach we have adopted ensures that they do know that and they do see it, albeit that they have lots of demands to put against that. Q40 Chairman: There is still the feeling, even with new arrangements, even in terms of your longer term objectives, that you would really like to cut the LEAs, the local authorities, out of the whole thing and directly fund it. Is that not your real ambition? Mr Normington: That is something that the Government will no doubt decide in due course. I do not think I ought to say yes or no to that question. There is a debate going on about the future role of local authorities and the future funding system, but no decisions have been taken yet. Q41 Chairman: You will be giving advice to your Minister on that, will you not? Mr Normington: Of course. Q42 Chairman: Would you like to cut out the local authorities? Would it be much more convenient in your trimmed down department if you took all that responsibility yourself? Mr Normington: I am not... I think it would be wrong of me to give my personal view to this Committee. I will be discussing that with the Secretary of State. All I would say is that we have lots of models around. We have a model where we had a funding agency for schools which did fund about a thousand schools by 1997 directly. There are those models around, but, as I said to this Committee before, you do need to have some local moderation of a national system, and these are big decisions which are for the Government to take, not for me. Q43 Chairman: But you know how the media work in these things, Permanent Secretary. You know that in a year's time what happens at A-level and GCSE time will happen. You know, the BBC and all the media, all those people, the education correspondents, all are brought back from their holidays - they are not allowed to go on holiday at that time - and you know they will be back to this time because they will find a story on the next wave of how you fund schools. Yes? That is exactly what happens at A-level and GSCE. They all come back because they all know there are going to be stories - you do not bring back all those highly qualified journalists for nothing - and they will be there like locusts waiting to see if you have got the answer that year? Mr Normington: They will. They are very interested in this, yes. We exist in that world and, first of all, we have to try to minimise the individual cases which provide the story and often are the things that then cause the story to run away, but, secondly, we need to provide some long-term stability on these big policy issues. Q44 Mr Turner: Do you really think that long-term stability can be the Government? Mr Normington: I think it is very difficult in a system which is... You must not read anything into this comment - it is neither a plus nor a minus - but in a system where it is a combination of national funding and local funding, both of which depend on national and local government's willingness to fund, to put resources in so at local level it will depend on whether local authorities are able to put up the council tax in order to fund their share of this, it is very difficult in that kind of system to provide stability. On the other hand, if you are a school you do not really understand that. What you really want, you are trying to run your school and you have a longer time horizon than a one-year horizon. So I think we must all try to provide that stability even though I think it would be very difficult. Q45 Chairman: The reason I ask is because it sounded to me as though you were accepting the sticking plaster because you could see long-term stability being achieved, but now you are telling us it would be difficult to achieve? Mr Normington: Yes, but the Prime Minister has said publicly that he would like to see a move to three-year budgets - that is what he said to the National Association of Head Teachers a few weeks ago - and I am saying that will be very difficult to achieve but that is what we are working towards. Chairman: We would like to move now to schools funding, particularly focusing on teaching numbers. Jeff Ennis. Q46 Jeff Ennis: If I could, prior to coming on to that, ask a question supplementary to the point we have just been pursuing about the billion pounds that is consumed in school budgets at the present time. David, you have already acknowledged that a fair chunk of that is being kept by head teachers for future capital projects, but there is also a fair chunk that is being kept for a rainy day by certain schools. Do you foresee the fact that we are going, hopefully, to a three-year budgetary span will that reduce the amount of that billion pounds that has been put away for a rainy day, and should that be ruled out in the amount that continues at the present time? Do you foresee that happening? Mr Normington: If we can get to three-year budgets or something that provides that kind of stability, then I would expect it to be possible for schools to be more confident about using their surpluses. That is what our aim would be. I think we need to encourage them to do that, because that is money that is sitting there unused and it is public money for education. Equally, I think we have to give them some discretion to decide what to do over a period. Q47 Jeff Ennis: But we are conveying that message to head teachers? Mr Normington: We are conveying that message very strongly. Of course, in last year's problem we encouraged local authorities to try to use some of those surpluses to help the problems. Q48 Jeff Ennis: Focusing on last year's problem, first of all, in terms of the problems it created for personnel issues with schools, we have been given a variety of figures just exactly how many teachers were lost within the system. The University of Liverpool said that although we had a net loss of just over 4,500 jobs in the private sector we had a small gain of 20 jobs in the secondary schools sector. Are those figures accurate? Mr Normington: The figures I have, which are based on a January account of the number of teachers in schools, is that in January, 2004, compared with January 2003 there were just over 4,000 extra teachers in schools and 16,000, just over 16,000, extra teaching assistants in schools compared with the previous year. There are some differences between different parts of the country. Generally there were increases everywhere, but it was largely flat in the North East and the West Midlands. We are doing further analysis of that to see what the local authority position is: because if it is true that we had problems last year, and we seemed to have, it may be that in particular places it shows up as a fall. Can I say one other thing? We have this issue underlined - this is why it is so difficult to get to - we have this issue of falling primary school roles, and indeed the fund next year, falling secondary schools roles, and that is causing some reduction in primary teacher numbers potentially, although it is not showing up in the figures very much yet. Q49 Jeff Ennis: So at some point in the future we will have the figures? Mr Normington: We will have a better figure, but the figure that we have is that schools in this last year have employed 20,000 extra staff. Q50 Jeff Ennis: Do we have a figure on the number of compulsory redundancies that were made last year? Mr Normington: No, we have tried to get that answer and I am afraid we just do not have it. We do not collect that as a matter of course and I do not have it. Q51 Jeff Ennis: Do you think we ought to collect it in future? Mr Normington: I would have liked in the last year to have had a better handle on what was happening. We tried to get a better handle on what was happening using local authorities and they were never sure what was happening right up until the moment. In fact what was happening in the summer last year was that some notices were being given which were then not implemented. So it is very difficult to get an accurate figure here, and compulsory redundancies are very rare indeed. Q52 Jeff Ennis: Absolutely. So that is why it should not be too difficult to get the figure? Mr Normington: I should think the answer would be almost none, but that does not tell you whether there was a shake out of people, does it, because some people go every year for various reasons, some voluntarily? Q53 Jeff Ennis: What about compulsory? Mr Normington: There would be none, almost none. Q54 Jeff Ennis: What information do we have about the distribution of new teaching posts? Are they evenly distributed across the country, or does it depend on the circumstances of individual schools or LEAs? Mr Normington: I would have to come back to you on that. It is certainly the case that setting aside the one-year funding problem that there are some places where there is significant growth in roles and some places where there are significant falls. The most extreme cases are the North East, where school roles are falling quite sharply, and London and the South East where they are growing quite fast. These aggregate figures, of course, do mask this problem that we have, that there are quite a lot of jobs in some places and the market is static in others. We do have that picture, but I would have to come become with the details if you wanted it. Mr Kershaw: One way of answering that question is through vacancy rates. We do know from last year's figures that vacancy rates fell pretty much across the board and fell more sharply in places like London, where, as the Permanent Secretary says, that the demand for new teachers is biggest because the population is still growing, but actually the gap between the number of teachers-- Q55 Jeff Ennis: The reduction in vacancy rates, would that be across all areas? Mr Kershaw: It will vary between subjects. I think we all recognise there are particular challenges, for example, in maths and science teachers, but broadly, and it is an average in that sense, numbers are falling, vacancy rates are falling, across the piste and most sharply in the areas where the demand is greatest. We thought that was rather encouraging. Q56 Jeff Ennis: Going back to the hypothetical example that Jonathan quoted where you have got a school with a similar social mix and a similar pupil numbers, has the operation of the funding mechanism meant that a school in one area can recruit more staff while a similar school in another area has had to reduce? Mr Normington: Do you mean in one area? Q57 Jeff Ennis: From one LEA to another with a similar social mix, similar pupil numbers? Mr Normington: If I say, no, you will almost certainly give me an example of a case where this is happening. I cannot be sure that will not be happening. Overall the allocation mechanism was designed to move resources out of the south-east in broad terms, but there are quite significant historic disparities between the funding of education in neighbouring local authorities, which means that the resources that local authorities have from place to place do differ quite a bit and you get schools on either side of the local authority boundary which can be funded quite differently. So it is possible, though if you are putting a floor in in terms of the increase each school is to get, every school should be getting that increase. So in terms of the increase this year, every school should be getting it, but it is from a different base in each case. Q58 Jeff Ennis: Is the funding of individual schools fairer now since 1997 and is it as fair as it should be? Mr Normington: We try. In the reallocation, in the new formula that was introduced, the one that was the basis of all the problems, that did attempt to provide a fairer system for allocating resources in terms of pupil numbers and need, and I believe that was a fairer formula. What has happened is that by putting in floors and ceiling, as you well know, we have slowed down the impact of that. So the impact of that is going to be introduced over a much longer period. It will happen, but putting in floors and ceiling means that you do not have the sharp shifts immediately. So it is fairer but it is going to take time. Q59 Paul Holmes: One quick question on teacher numbers. Last year there were these big arguments, which Jeff has already referred to, with some surveys suggesting there were big losses of teachers, but the Government have come out with figures saying that in fact there was a net increase of 4,200 teachers. Part of that 4,200, nearly half of them, 1,800 people are trainee teachers, they are trained for qualified teacher status through an employment route. Is that not fiddling the figures when we do not include those who do PGCEs as teachers, we do not include people doing BA and task teachers, why include trainees through a third route as teachers? Mr Normington: I do not think it is fiddling because those figures are on the record. We announce them. So you can see it. If you want to take 1,800 and 4,200, fine. They are real people and they are in schools and the graduate training groups, the graduate teachers programme, does involve them being in the classroom teaching, albeit with support and supervision. So they are real people and they are teaching, but, yes, they are trainees. Q60 Paul Holmes: Why not equally then include all the class time the PGCE trainees spend in schools, which is a significant part of course? Why not roll all those up and say, "We have got lots of extra teachers there as well"? Chairman: Very tempting. Q61 Paul Holmes: I am sure it is comment! Mr Normington: Because they are not on the strength of the school, these are trainees on the strength of the college. These are just definition issues about where you count them. The trainees that you are referring to are in the schools, properly involved in the schools, and so on. The PGCE students are there for some of the time but they come and go, and, in fact, they will usually do two schools in the course of the year, so they are not really on the strength of the school; and usually the graduate trainees are going to be become qualified teachers in that school - not always but usually they will be - and they will be experienced often in their subjects, they will bring in experience from business or industry. So they are more experienced people, albeit they are not experienced teachers. There is no... I do not want to mislead about this. Those figures are on the record. Q62 Paul Holmes: So one amount of time for trainee teachers does not count, but one amount of time for trainee teachers does count? Mr Normington: The graduate training programme, teachers are included in the figures because they are in the schools, the PGCE students are not. That is a fact. Q63 Chairman: Can you take through-- Mr Normington: That is all on the record; it is just all on the record. Q64 Chairman: Could you take us through the planning. How does the Department work? We are told that you are probably going to get rid of 20,000 teachers in primary education by 210 because of falling school roles - that is the figure we have from the Liverpool University -but everyone in the sector believes there is going to be a very sharp drop: because of the demographics there is going to be far less need for primary school teachers. If that is true - do tell us if you do not think it is true - how does the Department plan for that change? Mr Normington: I would have to check on the precise figure, but obviously falling school roles means that there will be the need for fewer teachers unless you take a decision that you have smaller class sizes. There are other options, but that's a question of resource. That debate is going on. It does not automatically follow that you should take the resources away from primary schools. You could do, but it does not follow, and that debate is being had. In terms of planning for the future, we have relatively sophisticated means of analysing the future need for the teachers and setting the targets for teacher training accordingly. Q65 Chairman: But should you not have been planning for this for a long time? On the one hand, you are training teachers and, as I understand it, you are not reducing the numbers of teachers training for primary schools; on the other hand, you do know, everyone one knows, this is the last year of a high level of population coming through privately. Surely you have a mechanism of saying, "Look, here is a policy. We are going to continue training this number of teachers and perhaps increasing them." At the same time it is very important that you make adjustments, surely, because otherwise these people are in training now, or are about to begin their training in teaching and there are not going to be the jobs for them when they get through? Mr Normington: I believe we have adjusted primary teacher training levels. Mr Kershaw: May I come in simply on the basis that I know a little bit about it. As the Permanent Secretary says, we have rather a sophisticated teacher supply model which works both with our analytical services focusing on the department and the policy code and in the Teacher Training Agency which does indeed plan in some of the judgments about falling teacher numbers as a result of falling rolls in primary and has done for some years, and that is why the Teacher Training Agency has long-term second recruitment targets. We would only do it a year at a time, although, of course, we modify it as we go along. The second point, of course, is to count the demographics of the population, the teacher population, as well. So over time, as we know, a significant number of teachers are approaching retirement age and that, of course, is taken into account in the model as well. So the falling numbers you describe in primary, to some extent demographic changes will take account of that. The third thing is that when one takes the nature of training that we are talking about, of course we are not going to ask the Teacher Training Agency to train people for whom there will not be jobs. It is fair to say that over the last few years all the pressure has been to recruit and train more people generally rather than cut them off, but it is one reason why, if you look at the figures, over the last two or three years there has been a distinct shift from the four-year B-Ed which traditionally people have gone on from to primary school teaching into the PGCE, which traditionally has been the main route into secondary teaching, and that has been a very deliberate shift to take account of that. That is what secondary people want to do, and that was where the main challenge in terms of growing recruitment will continue to be. So I think it is a bit more planned and a bit more long-term than your question suggests. Q66 Chairman: I am not saying it is not planned. I am saying the Committee would like to know how you plan. This is one of the things we are seeking to learn. A key political decision on all that would be at what stage inserted into this do you want to continue training teachers because you want to reduce class sizes? That is crucial, is it not? Mr Kershaw: Yes. Q67 Chairman: When is that going to be insinuated into your model, because that is a very big political decision, is it not? Mr Normington: At the moment the model is that we will not go on reducing class sizes. In a sense the position will be stable from now, but obviously with the spending review just concluded and us thinking about the next three years, that is an issue that is being considered and discussed. Q68 Chairman: What about the feeling in something that we are very aware of in terms of our interest in early years, that there is a strong body of opinion out there that there are not enough qualified teachers in early years, pre-school? This would be surely an opportunity to improve the quality of pre-school trained personnel? Mr Normington: It is, and that will be factored into it. I think that the great expansion in under-fives' education and childcare does to some extent counteract the declining primary numbers, because we do need more qualified people for under-fives, and that is an issue now. Chairman: Let us please move on then. Thank you for the answers to those questions. Jonathan, you wanted to do something on the financial management capability of DfES. Q69 Jonathan Shaw: You said, and I repeat it, you are trying to do lots of things. We have spoken about the individual learning accounts and the E University. The next public roll-out of targeted money is the Education Maintenance allowance, which I believe runs into its third year about £500 million. What, if any, lessons have you learnt from ILAs and the universities and the many things that you do that you can tell the Committee with confidence that the Educational Maintenance Allowances are pretty secure? Mr Normington: You are right to draw the comparison, and we have been trying very systematically to learn the lessons from Individual Learning Accounts where that is appropriate and moving across to Educational Maintenance Allowances, and we have a very tightly run project for implementing education maintenance allowances which I personally have been keeping a close eye on. Q70 Jonathan Shaw: I bet you have. You do not want them to blow up on your watch, do you? Mr Normington: By the way, in a sense that comes from a much better risk assessment in the Department, which says: what are the big risks to us? And clearly the implementation of a system like this is a risk involving quite a big IT system as well, and we have learnt that we need to plan that properly, that you need to get your sequencing right, that you need to work effectively with your private sector partners much better than we did on ILAs. The issue of fraud is one that we have been very concerned about, because in a mass payment system of this sort there is scope for fraud, and we have been analysing where that may be and trying to put in steps to minimise it, with the National Audit Office, as you would expect, watching us every step of the way. Will it go well? I hope so, but all I can say is we have done everything possible to make it go right. Q71 Jonathan Shaw: Who is your partner? Is there a partner? Mr Normington: It is Capita. Chairman: Oh, that is interesting. They are old friends! Jonathan Shaw: I wonder if anyone else exists. Q72 Chairman: Can I have Hansard report that the Permanent Secretary is smiling! Mr Normington: They won the contract, of course, fair and square and they are very, very big in the education world. Q73 Jonathan Shaw: Did they give you a presentation on their track-record? Mr Normington: We are, of course, well aware of their track record and their plusses and minuses because we have a lot of dealings with them. Q74 Jonathan Shaw: There is a great big minus when it comes to ILA, is there not? Permanent secretary, I think people reading the transcript and listening to these deliberations would be rather taken back, the fact that you awarded this to Capita given the parallels with ILA. Some people might say you have got the front to put in an application to run this? What would you say to that? Mr Normington: It is really important that we do not attack Capita in their absence, after all they are a highly competent company. They have a number of contracts with us. They run the Teachers Pension Scheme, for example, and they run it very well, so they do have a track record. The IT bit of this is really not a complicated bit of system design at all, it is a simple transaction. They won the tender fair and square and they are very experienced in this field, but I am, of course, completely clear about the risks we run, and I am sure this Committee will have me back here if it all goes wrong. Q75 Mr Gibb: What does a company have to do to be blackballed by the DfES? What do you have to do? Mr Normington: You see, you assume that they were the main reason that the ILA system collapsed and had a problem, that they participated in that, but they were not the only reason. Indeed your report showed that there were all kinds of decisions taken at the wrong points which sent the programme in the wrong direction. I do not like to contract with anyone who, I think, puts us at risk and we took the judgment that Capita were not going to put us at risk in the Educational Maintenance Allowances. We are working very closely with them to try to make sure that the programme functions properly. A lot of young people will be wanting this money. Q76 Jonathan Shaw: You do a lot of things, you try to do a lot of things and in trying to do a lot of things, you underspend quite a lot of money every year. How much did you underspend on the EMA? Did you not underspend on the EMA? Mr Normington: I do not know. The Educational Maintenance Allowances only roll out nationally this year. Q77 Jonathan Shaw: The pilots then. Did you underspend in the pilots? Mr Normington: I do not know. I think it is very unlikely. There were not huge amounts of money being spent on the pilots certainly. Q78 Chairman: Well, Stephen is the Financial Director, so would he know? Mr Normington: We would have to look up that detail. We can provide you with it though. Q79 Jonathan Shaw: Why do you think it is that every year you underspend? Is it because, in your own words, you are trying to do a lot of things, perhaps trying to do too many things? Mr Normington: Well, we do a lot of things. This is not meant to be avoiding the question, but I need to say that we operate increasingly on three-year budgets and we are trying to manage our resources over those three years and it makes no sense to focus on the artificial point of the end of March each year in terms of the way we manage resource, so what we are trying to do of course is to have a profile of expenditure which is sensible to get us as close to that profile as possible and actually in this year which has just finished we will be within about two per cent of our budget which, on a budget of £27 million, is pretty good actually, but it still turns out to be £500 million. If you look at aggregate sums, £500 million really is quite a big underspend, but it is two per cent of the total budget and most organisations would be quite proud to be within that range. The issue is whether that money is lost. No, it is not. It gets profiled over a three-year period and in terms of helping with the school budget position, we have actually used some of that projected underspend to underpin what we are doing to stabilise school budgets over the next two years, so that is how we manage resource over that three years. Q80 Jonathan Shaw: So you factor that in? Mr Normington: Yes. Q81 Jonathan Shaw: You know you are going to underspend and you can provide a sort of cushion ---- Mr Normington: Sometimes. Q82 Jonathan Shaw: ---- in case, with a lot of the things you are doing, some of them go belly-up? Mr Normington: Sometimes we anticipate an underspend if we are confident about it. We also in the Department always try to retain some kind of contingency reserve against the unexpected and in fact it is largely spent now. Q83 Jonathan Shaw: Does the Treasury anticipate that you are going to underspend each year? Mr Normington: The Treasury give us end-year flexibility in the expectation that we will manage resources over year ends and we will not fall off cliffs at the end of the year. Q84 Jonathan Shaw: Those are not normally words which you hear associated with the Treasury, giving money and being flexible. Mr Normington: Well, we all learn, do we not? Q85 Jonathan Shaw: Well, what I wondered was that we do know that there are targets to meet and lots of things to do in order to get money from the Treasury, so is that not the real reason why you underspend every year? Gordon Brown has such a long list, so he says, "If you want money from me, you are going to do all of these things", so you say, "All right then, we will do all of those things", and you know that you are never going to be able to complete them, so is it not the case that that is why you underspend? Mr Normington: I do not think so. There are certainly cases, and I can cite one which is SureStart, where when the programme starts out, there is over-optimism about how quickly it will develop and build up and, therefore, you get your profiling wrong. It is not that you do not get to that target; it is just that it is slower to develop than you expect. The biggest problem always in Whitehall is actually managing your capital investment because buildings do not ever go quite as you expected and do not fit neatly into financial years, so you do sometimes get it wrong. You sometimes do, but I do not think that is because of the number of things we are asked to do. Sometimes there is an ambition to do things faster than is practical, that sometimes happens. Q86 Jonathan Shaw: Of that £500 million underspend, what percentage of that is for planned capital projects as against revenues? Mr Kershaw: A relatively small proportion because we have got a great deal better at managing our capital underspends in the last couple of years. Q87 Jonathan Shaw: I am sorry, I thought the Permanent Secretary said it was only capital. Mr Kershaw: Capital is always one of the, he said, I think, most challenging things to do in terms of managing any kind of budget and, therefore, managing a potential underspend, but actually it has been tightened up quite a lot over the last couple of years. My understanding is that at the moment we have an underspend on our capital investment of around about 2.4 per cent whereas, interestingly, the Whitehall average, is nearer 8 per cent, so actually the Department is doing rather well compared with the Whitehall average. My point really was going to be that actually in terms of investing our underspend, you are wrong, I think. It is not just about dealing with problems or indeed pressures from the Treasury, but actually sometimes it is about making the very best of success. Ministers announced yesterday, for example, that they are putting an extra £130 million into the Learning and Skills Council and that is actually because they have done a great deal better than either we or they had dared to hope in terms of participation in learning by post-16s and actually we want to give them some extra money to help them make the most of that and make sure that colleges have sensible and challenging budgets over the next three years. That is an example where we have used our end-year flexibility much more in an intelligent way than perhaps we might have done a little while ago, the kind of challenge you, as a committee, have often set in the last couple of years, and it makes the very best of the money we have got. That is much better than the kind of arbitrary one-year closure sort of debate where actually what you end up with, I guess the technical term, is a "splurging" and actually we do not do that anymore, but we cross those end-year boundaries to make the best of the money we have got. Q88 Jonathan Shaw: Just for clarification, Mr Normington, you did say that one problem was capital in terms of the underspend and then Mr Kershaw said, "Well, it is only actually a small part of the picture", so help us to understand where the underspend problems emerge. As you rightly said, £500 million is a lot of money and there are plenty of headteachers and principals of colleges who would give you a long list as to how you might best spend that in their institutions. Does it arise from new initiatives, new projects? If you sort of have a list of particular areas or policy which you are trying to implement, would new projects and new initiatives come up more often for underspend than ---- Mr Normington: Yes. We do not have the end-year reconciliation, I think, for the underspend for the year we have just come out of. If you look at the year before, about half of the underspends in that year were in the SureStart and children's area which is simply about the speed of the build-up and it is generally true that new programmes take longer to get off the ground and there is over-optimism about the profiling of those at the outset and that is particularly so. This is also a factor in underspend when it is a highly dispersed programme, so you are very, very dependent on local partnerships and local programmes getting off the ground. Therefore, for two or three years before this one, the SureStart Programme has been a significant part of our underspend, I think. Q89 Jonathan Shaw: It is a reasonable point for us to question you on, do you not agree? Earlier on you were complaining about headteachers squirreling away money and they might say, "Well, don't talk to me while you have got £500 million I could deal with". Mr Normington: It is reasonable and indeed we do not require the Committee to be an intermediary in making that point to us; we get that point a lot. Therefore, it is a reasonable point to make because we have to be as good as we can be at profiling the build-up, the expenditure profile of any programme. We are getting better at it, but with new programmes it is always a bit of a guess because you have some evidence, but you do not know for sure, but that money is not lost to the system and the way in which we have now got the flexibility over three years enables us, and it has enabled us with school funding, to transfer some of the underspends to schools. We have got out of the school funding problems by putting a lot of extra resources in as well as providing stability and that extra resource largely comes from underspends, not wholly, but largely. Q90 Jonathan Shaw: Do you say to the Secretary of State when he comes in in the morning, "I've got a new idea. What we're going to do is we're going to have SureStart, we're going to do all of this for young children and families in deprived areas and in three years' time it is going to look like this", and do you ever say, "Hang on a minute, it won't probably look like that because going back year after year we have had this underspend and the reason why is because we can't deliver it in the time that politicians say"? Do you say that to him? Mr Normington: Yes, but it is not as unsophisticated as that. I would not dream of suggesting that the Secretary of State was as unsophisticated as that. Actually SureStart was a prime example of a great deal of policy work which goes on beforehand. There is always quite a debate about what the profiling of a programme should be and, yes, I said to the Secretary of State, "It's not going to happen". I have a Secretary of State who is quite realistic about those issues, by the way. Jonathan Shaw: Yes, I have heard he is a very cerebral and cultured man! Q91 Chairman: We are talking about the wrong Secretary of State, are we not, the previous one with SureStart? Mr Normington: The SureStart Programme is an interesting example of a programme which has a ring-fence around it, something which I would like to remove because I think it does not help us to manage the resources, but nevertheless it has a ring-fence and, therefore, I am not able to transfer the resources out of that programme without Treasury approval and that is because the Treasury wanted to make sure that the resources they gave to SureStart were in fact devoted to SureStart. I understand that, but eventually I hope they will have sufficient confidence in us to enable us to manage those resources, as we do the rest, as a total block. Mr Kershaw: Maybe I can make a point arising out of that which is simply to say that there is a natural caution about how we spend our money and if there is one thing worse than underspending, from the point of view of this Committee and no doubt the Public Accounts Committee, it is overspending, so there is in a way a natural level of underspend. Now, one way of dealing with that, and that has to be as small as it possibly can because of the reasons you have given, but actually one way around that is precisely that we have to reduce the number of individual budgets because if everybody underspends a little on lots and lots and lots of budgets, that is what produces the big numbers which we are criticised for. Actually what we are doing in terms of new relations with schools and the single grant for school improvement which will go with that, the Permanent Secretary's remarks about the SureStart ring-fence and how over time we are going to change how that works, those are ways of actually helping colleagues within the Department to manage bigger clusters of budgets themselves in a much more intelligent way and do their own yearly reshuffling of money to the top priorities rather than, as it were, having to hold big amounts back and saying to the Department that we will just live with the kind of underspends you will probably criticise us for, so I think there are some policy assaults on that problem as well as the classic systems within the Department. Q92 Chairman: How many other ring-fenced programmes are there? Mr Normington: The Children's Fund is ring-fenced at the moment, although that is to be eased. I think some of the student support budgets are not quite ring-fenced, but they effectively are because they are sort of demand-led and, therefore, we have to fund the number of students that come through. Mr Kershaw: And Educational Maintenance Allowances of course are currently within how you manage the expenditure rather than within our delegated expenditure limit, so they are in effect almost managed for us by the Treasury on a year-by-year basis and that itself produces small differences in the system, but we have agreed with the Treasury that that is because it is a very new programme and it is very demand-led at the moment and over time it will come back within our delegated expenditure limit. Q93 Chairman: So was the decision made in the Treasury that SureStart would never expand beyond the limits which it was given, however successful the programme has proved to be, that SureStart could not go beyond that because the budget was fixed by the Treasury in the first instance? Mr Normington: But it was a very significant budget and in a sense it worked the other way with the Treasury. They wanted to make sure that those resources were spent on SureStart and that they were not used for anything else. Q94 Chairman: No, but, Permanent Secretary, that is exactly our point which we brought up last week with Margaret Hodge. There has been a decision, first of all, that this flagship programme, SureStart, which, as everyone says, is absolutely magnificent and really gets to the early-years stimulation of the child and so much else, the support of parents and so much else, and everybody knows that it should be rolled out, but the decision has been made that it is too expensive to roll out, so we are going to do it on the cheap in other communities. SureStart is not going to be rolled out beyond its present bounds, is it? Mr Normington: It will be expanded, but at the moment, for instance, if you talk about children's centres, it will be focused on the most deprived wards, but in the Spending Review settlement which we have got for the next three years, there is a 17 per cent increase in SureStart resources, a big increase, so we are going to expand and continue to expand SureStart. Q95 Chairman: I understood that it was going to be trialled in a third of the poorest communities. Is that right? Mr Normington: I hope we will be able, with the resources we have, to have a children's centre in every of the 20 per cent most deprived wards. Q96 Chairman: Yes, but that is not SureStart. Mr Normington: Well, it is part of the SureStart Programme. Q97 Chairman: Yes, it is part of the SureStart Programme, but the formal SureStart Programme is different. Mr Normington: We will not be able to have the SureStart Programme everywhere, but the children's centres will be the centres for the running of the SureStart Programme and it will be, I hope, by the end of the Spending Review period, in every of the 20 per cent most deprived wards providing that full service. We have ambitions to go further than that, learning the lessons, but not necessarily having everywhere the full SureStart offer. Q98 Chairman: You had the ambition? Mr Normington: We have ambitions. Q99 Chairman: You still have? Mr Normington: Yes, but we are still looking at how we might do that. Using school resources, using schools more effectively as extended or community schools is a way of doing that. We have lots of community resource in the system already and we are just not using it properly, I think. Q100 Mr Chaytor: Given what you have said about the importance of three-year budgeting and the increasing fluidity between the budgets at the end of each financial year, is there not an argument for presenting your accounts in the departmental report in a different way because the accounts are presented in a sort of traditional end-of-financial-year outturn only and it is impossible to see how the Department has fired money between budgets. Now that we have got three-year budgeting as the norm, is there not, for the sake of openness and transparency, a case to have a different presentation of the accounts so that we see each year's assessments and each year's outturn and then we can ask questions as to why any variations take place? Mr Kershaw: I think that is a very interesting point. You will know that we have tried over the years to present the accounts in a way which is most helpful to this Committee and that is why there is one set of accounts in a sense in chapter one of the report and then another set of accounts which is essentially governed by the Treasury conveyances in the annexes and we have always tried to respond constructively to those kinds of points. I agree with you in the sense that the point of accounts is to reflect transparently where policy is going and to tell a proper story about what we are trying to achieve with our money. I think that is a fair point and we would like to take it away and reflect on it. We will have to talk to the Treasury about it and those others who are very keen on telling us in a sense how we should present our material to Parliament. I think you make an interesting point. Q101 Mr Chaytor: Can I return to the ILA legacy because in the Public Accounts Committee's Report to the ILA affair, in criticising the Department's risk-assessment procedures, they concluded apparently or recommended that your new risk-assessment arrangements should reflect best practice and that they should be accredited by internal audit, so are your new risk-assessment arrangements now in place, do they reflect best practice and have they been accredited by internal audit? Mr Normington: I believe they reflect best practice and yes, they have been accredited by internal audit, and they go right up to the board level where risk registers are maintained, so they are maintained at different levels and the board reviews them on a quarterly basis. Therefore, I think they do reflect best practice and we have taken a lot of advice on them. This is part of a government-wide drive to improve risk management and assessment right across government. If the next question were, "And will you always get it right?", of course not because ---- Q102 Mr Chaytor: No, my question is a different one. Mr Normington: Okay, but it is inevitably the case that you do your very best with risk assessment and it is the risk which you do not see of course which knocks you right off course. Q103 Mr Chaytor: Well, we will move on to some of the risks which you might not yet have seen. One of the other flagship policies which will essentially involve problems of forecasting demand is the Level 2 entitlement to free tuition for adults who do not have a qualification to Level 2. Are you confident that your new risk-assessment procedures will accurately forecast the level of demand for take-up of Level 2 entitlement, how much is it going to cost and how many adults will be eligible to take up their entitlement of it? Mr Normington: Well, we have not done all that work yet because we are just at the beginning of making that assessment. We will have to make sure that we have all the things in place which you describe and it is on our risk register as one of the issues which we need to consider. Remember, we have not allocated our resources for the three years to 2007/08 yet and, as we do so, we will be trying to answer those questions and to profile the take-up, so we are a little way from having those answers, but that is the work which is going on. Q104 Mr Chaytor: But is there not a problem with the sequence of events because the policy has been agreed upon and publicised without any understanding of the numbers of people who may be entitled to take advantage of the policy, so should it not be the other way around? Mr Normington: I think, to be fair, a policy objective has been announced in the Skills Strategy in fact and we are now looking at how the resources which we have been allocated in the Spending Review will enable us to meet that and over what period. I do not think that those parameters have yet been set, so that work is going on at the moment. Q105 Mr Chaytor: So is it possible, therefore, that once the implications of the next Spending Review have been looked through, the Department may decide that it cannot actually provide the Level 2 entitlement for adults? Mr Normington: Well, I think it would be very odd and that would be a change of policy really, but of course it must be possible in any policy area that we say that we cannot do it with the resources we have got, but I am not anticipating that that will happen. Of course it will be a question of over what period you deliver it and the resources will affect that as well as how quickly it will be taken up and I think to some extent to what extent you try to encourage and generate the demand and to what extent you just let it come, so there are ways of phasing this so that you match it to the resources you have and that is what we will be doing. Q106 Valerie Davey: In a similar vein, is the Department confident that if the HE Bill comes through the Lords virtually unscathed that the policy which has been determined there can be effectively delivered in terms of student funding in university? Mr Normington: I believe so, but of course that too is on our risk register. It is a very big change in the system and a lot of work is going on to make sure that it can be delivered, but yes, we believe so. We did a lot of that thinking further back, but actually ensuring that the system works effectively and that the Student Loans Company, which is the main vehicle for this, operates effectively is a major issue. Q107 Valerie Davey: How many staff will it take? How many officers were actually allocated to this area of very complex financial risk assessment approximately? There are two questions: how many; and was it done within the Department or did you get people from outside to try and give, what I think is, a very specialist area of expertise? Mr Normington: In relation specifically to the introduction of tuition fees, do you mean? Q108 Valerie Davey: Well, let's take tuition fees, yes. There are different aspects of it which are all highly complex and interrelated. Mr Normington: There are. I simply do not know the answer to how many staff precisely, but there are a number of steps here. There was a great deal of modelling of cost and likely impact done actually during the whole of the period leading up to the preparation of the Bill. We have some very, very expert analysts, but they are a very small number, just a handful of people, and indeed we had to bring some extra help in because they were very, very stretched, as you can imagine, trying to do this. There is a separate bit of work about how the system is going to operate which was done by a separate number of people working with the Student Loans Company, but again I do not know precisely how many. The Student Loans Company is the expert in the payment of loans and so on, so they have been helping with this, but I do not know precisely the numbers. Q109 Valerie Davey: Who is running the Student Loans Company at the moment? Mr Normington: Do you mean the Chairman and Chief Executive? Q110 Valerie Davey: Yes. Valerie Davey: Keith Bedell-Pearce, I think, is the Chairman and the Chief Executive - sorry, it escapes me. I am sure it is in here. Q111 Valerie Davey: And, lastly, does the Treasury itself take over in terms of trying to work through what I would almost call the 'bridging loan period' of moving from one funding method to another which has deferred repayment? Is it the Treasury itself which monitors that or is that left with the DfES? Mr Normington: We will be both monitoring it, but the main responsibility for it lies with us for both planning and monitoring the expenditure, but clearly in an area like this, the Treasury will take a greater interest than it would in some others. Q112 Chairman: When you were looking at higher education finances, did it come as a shock to you or was it all built into your forward-planning of how you expand higher education, how you get what Universities UK have called the '£8 billion gap in funding'? The argument has been going on that £1.5 billion to £2 billion could come from the student loan source, but how far have you been taking into account the figures which the British Council and the Higher Education Policy Institute have been given, that there could be £5 billion, £6 billion or £7 billion coming in potentially from overseas students coming to this country to study? Mr Normington: We do look at all the income streams and that is one of the major ones, so when we are trying to model what the income of universities is going to be, we do take that into account of course. Q113 Chairman: So that would account for the market underspending because with all other education investment of this Government, the remarkably lower level of investment in higher education, you are basically saying to universities, "Well, you are going to get that from expanding your overseas market"? Mr Normington: I do not think that follows. I think if you do not fund universities, they will look around for other sources of income and that has been a major source of income, graduates are too, and that does affect their behaviour in terms of where they can recruit paying students from, but I do not think that that was by design; I think this was about how much we could afford to put in higher education. I do not think the assumption was, "Well, it will be all right because they can get lots of overseas students", although they can and we actually want them to. Chairman: Well, we will come back to that when we look at FE and HE in the next session but one. Q114 Paul Holmes: I just wonder if you could clarify the sort of sequence of events in announcing the one-third reduction in staff at the DfES. You have had an expansion in functions in relation to children, so you have got more work to do, but suddenly in the budget it is announced that one-third of your staff are going to lose their jobs. Has that come about because either you realised that your Department was overstaffed by one-third, or is it because some functions have just come to an end, so you do not need them, you do not need those staff anymore, or is it because the Chancellor suddenly told you that he wants an eye-catching headline and you are going to lose a third of your staff? Mr Normington: The Prime Minister and the Chancellor together have been setting a challenge to government departments to think about what the role of the centre of government is and how much resource needs to be spent on it and that is something they have done well before the Budget and it was a challenge to us and actually to all government departments to have a serious look at this, so although it came sort of into the public debate in the Budget, actually we have been working on this for about five or six months. My own staff had been told that we were working on it and indeed the initial announcement of reductions had been made in January. Now, how is it going to come about? Well, it is going to come about through three main ways: firstly, through a major re-engineering of the system in the way I described right at the beginning, so fewer funding streams, fewer planning arrangements, fewer accountability systems, and fewer initiatives; secondly, sorting out some of the overlaps between us and our NDPBs, many of which were being described at the beginning; and, thirdly, through what all organisations should do from time to time, which is purely bearing down on your costs and looking for efficiencies, particularly in your sort of support functions and doing that by benchmarking your HR and your finance functions against external benchmarks. All of those three things contribute to the reductions which are over quite a period to the end of the financial year 2007/08, in fact over the next Spending Review period, but with a commitment to reduce by 850 by 2006, so it is 850 by 2006 and 1,460, which is 31 per cent, by the end of the 2007/08 financial year. Q115 Paul Holmes: So the sequence was not that you were told to get rid of a third? Mr Normington: No. Q116 Paul Holmes: The sequence was that you had a careful look at your organisation, went back to the Chancellor and the Prime Minister and said, "We can lose a third"? Mr Normington: Yes. Q117 Paul Holmes: So it has come straight from you? Mr Normington: Yes, but when the Prime Minister and the Chancellor ask you to look at your organisation with some clear objective in mind, but not a figure, you take it seriously, do you not, and that is what I did. Q118 Paul Holmes: So the balance of the jobs which are going to go, are they because of the ending of all the overlapping budget streams, bidding processes, et cetera, which you talked about, or is the balance going to come from efficiency savings? Mr Normington: It is something like half and half, but slightly more, I think, will come from the changing of the system and slightly less from efficiencies. I actually have got the details set out internally and I would be happy for you to see them. Q119 Paul Holmes: Are there specific individual sections where you can say, "We are just losing that completely", or is it spread across the board for everybody in every area? Mr Normington: If you take the children's responsibilities which we have taken in which you have described, what we actually have as a result of recent history is a lot of separate units, all of them with their separate programmes driven centrally into the field, so we have SureStart and we have the Children's and Young People's Unit, although we have now merged that, and the Connections Service, we have the Youth Service; we have a lot of things which actually will benefit from being properly integrated and with the many fewer separate funding, budgeting and planning streams. There is major scope for rationalisation there and over 31 per cent of that directorate will be reduced and that will be to the benefit of a local system which hopefully at the end of this will have a smaller number of outcomes to deliver and more flexibility about how to do it. That will happen over time, but that is the Government's commitment in its Every Child Matters Green Paper and that is my contribution to bringing that about, so it is really important to see this as the Department in the system and it is very ambitious, therefore, and quite difficult to command, a big job. Q120 Paul Holmes: And, as the Chairman was asking you during the start of the session, I think, to clarify that, there will be no case of sleight of hand whereby you say, "We're cutting staff and losing this", but in reality it is going over to a lot of numerous quangos which already operate in the field? Mr Normington: There will be some functions moved to our NDPBs, but it will be a very small proportion of this number and since we are looking for the admin costs of those bodies to be reduced, we will be looking there for them to increase their efficiency as well. The Learning and Skills Council has in parallel announced 800 staff reductions, so this is what I mean about a whole system re-engineering. We are doing this with our partners and by looking at how the whole system works. Mr Kershaw: There is almost no transfer of staff from the Department to our various NDPBs, thoughs we are transferring some work, but we will not actually be transferring any people with it and that is part, if you like, of the efficiency challenge for those NDPBs themselves to take on some more responsibilities, but without us giving them either more resource or more people, so this is part of the whole system challenge which the Permanent Secretary is talking about. There is no sleight of hand here where we say the same people end up doing the same job, but in a different organisation. Q121 Paul Holmes: So you are saying that the same people will not ever do the same job just by moving to another organisation, but will there be a pressure on the various organisations, quangos, local education authorities, for them to expand, in other words, take up the slack which you are no longer able to deliver? Mr Normington: Well, let me give you an example. We set up the Learning and Skills Council to do a major job in relation largely to post-16 education and training and while it is being set up, we have retained quite a significant shadow function in the Department. We are really saying to the LSC, "Look, you have grown up now. You need to be able to provide stronger policy advice yourself and, therefore, we will actually pull out of doing some of that work", and this is a discussion we have had with them. Now, they will strengthen their policy function as part of that, but in doing so, they will also be reducing the burdens which they put on the system through their planning and budgeting system, so they will be growing some more policy expertise, but it will only be a small number, and that will also be within the context of an 800 staff reduction overall, so we will be stopping doing something and expecting them, having now become a fully functioning body, to do the job they were set up to do. I hope it does not sound like sleight of hand. I really do not want it to be like that and I am not moving the deckchairs about, I promise you. Q122 Paul Holmes: How much did your staff go up from 1997 to 2004? Mr Normington: It is a little bit complicated because of course we were the Department for Education and Employment at that point, but net we put on about 800 staff, I think. You can sort of track it in the documents. It sort of goes up and down in Annex F of the Departmental Report. It is quite difficult to track because in 2001 we lost a significant chunk of responsibilities to the Department of Work and Pensions and then we went down. Then we came up again because we got children's responsibilities. I estimate that we put on about 800 staff net between 1997 and now largely to do with things like the SureStart Programme, which did not exist, the Children and Young People's Unit, which did not exist, the Connections Service, which did not exist, the Standards and Effectiveness Unit, which largely did not exist, so actually it was new functions which we built up. Q123 Paul Holmes: So you are aiming to cut 1,460 and 800 of those by April 2008, but that first 800 by 2006 will just take you back to 1997. Are you saying that is confused because of new functions? Mr Normington: It is quite difficult to track that in that way, but we did expand, there is no secrecy about that, from 1997. Q124 Paul Holmes: In terms of actual monetary savings through this reduction of one-third of staff, what does that equate to in terms of staff budget and as a percentage of overall expenditure? Mr Normington: In very crude terms, it is about £70 million. Q125 Paul Holmes: Are you looking at the staff savings mainly being at basic levels or higher managerial levels? Mr Normington: We have announced this, that there will be a slight preponderance of more junior staff because this is about the nature of the Department which we are seeking to create. We are not going to do as much direct delivery. We should not need, therefore, to do as much administration. Q126 Chairman: Can you tell me, Permanent Secretary, what has been the effect of this announcement on staff morale in Sanctuary House? Mr Normington: Not absolutely brilliant of course. People are quite anxious about their futures. I am actually quite proud of how we have managed it. We have been as open as it has been possible to be with the staff. We have had lots and lots of face-to-face meetings with them. We are seeking to manage it through a voluntary early-release scheme and through natural wastage. We have not announced compulsory redundancies, although we cannot rule those out. People are bearing up. They are not happy particularly, but then quite a lot of them have bought into our view about how the Department is going to be, and quite a lot of them, particularly the management, believe that we are going to be better and want us to do better as a result, but you cannot manage these things without there being an effect on morale. People are very anxious and until they know what their own personal position is, they cannot be happy. Q127 Chairman: Well, this Committee would be concerned. On the one hand, we would like to see good value for taxpayers' money, but a cut, if it destroys morale and reduces the effectiveness of the Department, we would be most concerned about. Mr Normington: And so will I. I have got to manage that too, but it is very difficult for there not to be a dip in morale. Q128 Chairman: How does this link in with the Lyons Review? Are you fully participant in that? Many of us in this Committee would quite like to see certainly some of your quangos moved out preferably to Huddersfield or Bristol, Kent, Chesterfield or wherever, but are you dragging your feet on this one, saying, "We're too busy cutting the size of the central Department", but are you pushing any of these quangos out into the regions where they would be very welcome? Mr Normington: Most of my quangos are outside London. Q129 Chairman: Ofsted is not. Mr Normington: Ofsted is not, but Ofsted is not actually one of my quangos. Q130 Chairman: You have no influence on Ofsted? Mr Normington: I have quite limited influence on Ofsted and rightly so. They are a non-ministerial government department. Q131 Chairman: So they do not come under the Lyons Review? Mr Normington: They are under pressure from the Lyons Review itself to relocate as well, as are the QCA, which remains in London, and the Teacher Training Agency, which remains in London. In the Lyons Review, there is an expectation that the Department and its NDPB family will move about 800 jobs out of London. Now, the majority of the Department's 4,500 staff are out of London already, in Sheffield, Runcorn and Darlington, and all the quangos, except the ones I have mentioned, are out of London, so 70 per cent of the staff of the Department and its quangos are out of London already. Therefore, the scope for doing more is more limited than in some other places. Indeed the Lyons Review held us up as an example of a department which had taken relocation in the previous round seriously, but we are committed to trying to achieve that figure which has been published which is 800 and we are working towards that. I am not anticipating that there will be large numbers of departmental staff relocated in the immediate future because I cannot handle a run-down of the size that I am describing and a relocation of any significant size as well; that is just a management challenge too far really. However, a larger proportion of the jobs which I am describing will be lost will be lost in London. Q132 Chairman: The majority of the jobs will be lost in London? Mr Normington: Yes, there will be effects on all four sites, but more of the jobs will go in London. Mr Kershaw: As to Ofsted, of course it is only the headquarters of Ofsted which are in London. Actually Ofsted is now a highly dispersed organisation and the acquisition of the childcare responsibilities made it more so, but the majority of Ofsted staff are not in London and they are actually all around the country. Q133 Chairman: Working from home in fact. Mr Kershaw: Yes, absolutely. Q134 Paul Holmes: You have said quite firmly that the sequence of events was that the Chancellor and the Prime Minister said to people like you, "What can you lose from your Department?" Mr Normington: Yes, I felt under considerable pressure to answer that question seriously. Q135 Paul Holmes: And over the space of four or five months you looked at it and you said, "We could lose a third". Would you ever have said that voluntarily if you had not been asked by the Prime Minister and if not, why not? Surely, as the man in charge, you should every year be reviewing whether you can make efficiency savings. Mr Normington: And I was thinking that I would need to reduce my staff, but there is no doubt about it that the process which was set in train in government brought that very, very sharply on to the top of my in-tray, as you would expect, so I was concerned about the size of the Department, given the job we were being asked to do in the future. I was concerned about the agglomeration of functions which we had collected together on children which looked rather disparate and needed reorganising, so we were already addressing that, but I think the work which I described with the Prime Minister's and the Chancellor's request did advance it, there is no doubt about it. Q136 Mr Chaytor: When the Chief Executive and the Chairman of the LSC were before the Committee a few weeks ago, they both agreed that the funding differential between 16 to 19-year-olds in colleges and schools remained stubbornly at around 10 per cent in spite of commitments by successive government ministers that this would progressively narrow. Now, looking at the spending profile of schools and FE contained in the report, it does seem that the LSC in the last year has increased spending on school sixth forms more than on FE and over the timescale that you indicate the spend for, which is 1998/99 to 2005/06, there is a significant increased rate of spending on pupils in schools than on students in further education. Do you agree with my reading of the way that spending is going and is that not in direct contradiction to what ministers have said about closing the gap and what do you intend to do about it? Mr Normington: Some of those figures are volume-related, ie, where is the expansion of 16 to 19-year-olds, is it in sixth forms or is it somewhere else, so some of it is volume-related. Your general point that actually ---- Q137 Mr Chaytor: The figures I am quoting are in Table 2.5 and Table 2.6, which are the figures for the per pupil or per student rate of spend, not the aggregate rate of spend. Mr Normington: But 2.5 is all pupils, is it not, not just plus-16s, is it? Q138 Mr Chaytor: That is right. The Government have been deliberately increasing spend per pupil. The Government are seeking to narrow the differential of sixth-formers between FE colleges and school sixth forms, but it is happening very slowly, though it is happening slightly. For instance, the Government funded the increase per pupil for each qualification attained which was 4.5 per cent in colleges last year and 3 per cent in schools and that was an attempt to narrow the gap slightly. There are some constraints on it. One is that when the Learning and Skills Council took over school sixth-form funding, some guarantees were in place that they would not lose any money in real terms and, therefore, this has to be a slow process because actually the Government's commitment is to bring all the funding of FE students up to the same level as school sixth-form students and that is a costly business and it will take time to achieve, it will take some considerable time. Figures are not moving very much, that is true, but they are moving slightly, though it is at about 10 per cent still. Q139 Mr Chaytor: How considerable is considerable? If you had to put a figure to that, how many years on present trends would it take to achieve convergence? Mr Normington: The reason I cannot answer that yet is because we have not allocated funds to FE colleges and schools for the Spending Review period and the answer will come out of that. However, I think it will be longer than that Spending Review period because the numbers, the demographic bulge which we have had is moving into post-16 education and training and actually into higher education, so actually the pressures on funding will be from a great increase in numbers. If that is increased further by more teenagers getting good GCSEs and wanting to go on to colleges and to sixth forms, then the pressure will be to fund those people rather than to narrow the gap, so the gap is closing slightly and it will close again in 2005/06, but I cannot give you a commitment as to when it will be closed; it is a long-term process. Q140 Mr Chaytor: Do you see any direct relationship between the gap in funding and the gap in quality because the theme which comes out of the report is a general satisfaction with the rate of improvement in primary and secondary schools, but a concern about the slow rate of improvement in the further education sector? Do you think that is related to historic levels of funding or differentials of funding? Mr Normington: Well, I would never claim that funding is the only reason that institutions go downhill or improve, but a very long-term squeeze on the unit of funding for further education, which has only been reversed in this Spending Review period which we are in now, has been a big problem for the quality of further education and we have seen a major squeeze on their unit of funding over ten or 15 years and we have seen the effect of that on the staff with a lot of casualisation of staff and all kinds of problems of maintaining standards. There you can see a direct link between the under-investment in further education and an under-qualified casualised workforce, which we are now seeking to reverse, but that is a big legacy to have to reverse and it is taking time. Q141 Mr Chaytor: How is the casualised workforce to be reversed? Mr Normington: What I mean is that they are all on short-term contracts and they do not have stability of contracts and quite a remarkably high proportion of further education college staff are not qualified teachers and that is an issue too, so there is a link, I think, there between investment and quality, but it is not an exact read-across. Q142 Mr Chaytor: So you say that there is a positive commitment to reduce the number of staff on short-term contracts? Mr Normington: No, I am not saying that. What I am saying is that there is a positive commitment over this three-year period to improve the funding of further education. For the first time the unit of funding is going up, not going down and in parallel we are putting a lot of effort into developing the framework for the training of FE college lecturers and other staff and for the improvement of leadership in those colleges, and I am hoping that that will produce a more highly qualified staff. I have no control over the terms on which they are employed, but I think if you think your budget is going down every year, that does cause you to take some decisions about who you can employ. Q143 Mr Chaytor: We have talked about revenue funding differentials. The question I would like to ask now is about capital, because in terms of the school sector we have this hugely ambitious Building Schools for the Future programme but we do not have a Building Colleges for the Future programme. Could you say why the big differential in the approach to capital investment in the two sectors? Mr Normington: There is capital investment now going into colleges but nothing like what has gone into schools. This is simply a question of government priorities; the Government decided to prioritise schools and decided to put the bulk of its resources into schools. I do not think there is anything more than that, really, although it is putting capital investment into colleges now. Q144 Mr Chaytor: Are you confident that the process of approving bids under the Building Schools for the Future programme is consistent with the conclusions that are coming out of the LSC's area reviews, area inspections, because there do seem to be two separate processes at work? Individual LEAs submit their bids and if a first wave is approved another wave will be issued, but at the same time the LSCs are taking a broader view about 16-19 provision than an LEA or a number of LEAs. Are you confident that the two processes are absolutely in tandem, or are we likely to get new schools built where six months later the LSC may argue for more colleges (?)? Mr Normington: I am confident that the right players are round the table taking those decisions. What I am not yet confident about is the way in which capital investment is funded pre-16 and post-16, and that is what we are addressing. At the moment you can get discontinuities because there are two separate funding streams, one which comes through the LSC and one which comes through local authorities. That is where, if we are not careful, we will get a mismatch between what people locally think is a sensible thing to do and the ability of the funding to be put behind that. So I am concerned about that, but I think the right people, including the local authorities, the LSC, the schools and the colleges are round the table looking at the future provision of an area. One wants to come out of that a reasonable diversity or provision; one wants there to be some choices for people about where they might go. So what we do not want is a sort of cartel of people deciding to close down some provision and open it up unless they have thought seriously about what the range of provision is in an area and how that meets the needs of local people. But I am reasonably confident in that process. Q145 Mr Chaytor: Are you confident that building 50 or more academies, each with its own small sixth form, is going to help the process of co-ordinating the growth of the 14-19 sector? Mr Normington: They are for a very specific purpose in areas of deprivation, usually to replace failing schools, and they are designed to give an injection of investment and energy into an area which has never had, for many years, satisfactory education provision. So I think that is needed. I think all the time, when you come to sixth form provision, it is important that the academy provision is looked at alongside what else is available in the area so that if it is providing some competition, fine, but you know why that is, and if it is providing complementarity that is fine too. We have only got a small number of academies up and running. We are trying to get that right but the implication of your question is right that it is an issue, because if you are putting in, in a sense, independent state schools into the system, which is what they are, then how they sit with the rest of provision locally is an important issue. So it is a long answer. The final thing is that they are usually being set up with the support and co-operation of a local authority even though the local authority has no serious involvement with them, and that I think is some assurance that there is a local provision being provided. Q146 Chairman: I want to get on to our last section of questioning, but just before we do there did seem to be a sort of discontinuity in some of the answers you gave, Permanent Secretary, in the sense that reading the annual report, particularly on your real concerns about the quality of some of the provision in FE, the backdrop is, again, according to this, that over the period of 1998/99 you had an increase of 53 per cent in real terms in FE colleges, and per-student money has increased by 21 per cent in the same period. But you articulate some very serious statistics: "16 per cent of providers are below the floor target for long qualifications", "12 per cent of providers are below the floor target for short qualifications" and "24 per cent of providers are below the floor target for either long or short qualifications." From what comes out of the report, and from what you said, you are a bit complacent about FE. Mr Normington: I am absolutely not complacent. I hope that was not the impression I gave. Q147 Chairman: When you came back to David about short-term contracts and unqualified staff, you did not say "But we have a programme to change it"; you said nothing about it. Mr Normington: We have a programme called Success for All which is designed to tackle all those issues that I described and to incentivise good performance and to give colleges that are reaching some of those targets and performing better higher rewards than other colleges, and actually to tackle issues of the under-qualification of staff, improvement of leaderships in the colleges, the improvement of the facilities in colleges and to drive the improvement of performance. The assumption that Mr Chaytor made - and which is true - is that further education provision in some places is not yet good enough in terms of the standards that it is achieving, and we have in place a programme to do that. The reason it is possible to have a really challenging approach to that, which is what the successful programme is, is that that goes alongside, for the first time, increasing the unit funding. So, in a sense, we are saying "Right, we have reversed a long-term trend but you have now to deliver", and that is the challenge, really. It is quite a challenge, really. Q148 Chairman: Is not the challenge to the department really to take the skills agenda more seriously? I know we have had the White Paper and we all recognise that, and many of us like much of what is in it, but is not the fact of the matter that if you are looking, as we have been, across the skills sector this is the area that this country has to do much better in, dramatically better, and it does sometimes, from your annual report and the way that the department presents itself, still seem as if, "We are the Education for Department - and, oh, Skills". I would like you to be taking on more staff if they were actually promoting the skills agenda. Mr Normington: I know that is how we are often portrayed. We are often portrayed as the Department for Schools, in fact, but that is not how we think of ourselves. The present Secretary of State has given a lot of priority, as you know, to skills, and I have been very, very keen, particularly given my background (which is all in the post-16 area and most of my working career was in the employment department, not in the education department) to put us on the map on skills in a leadership role in the way that we have not been before. I think that we are doing that, and I think people are noticing it. I do not think you can ever get people to write about further education and skills in the excited and, sometimes, frenzied way they write about schools. Q149 Chairman: No, media interest in our skills inquiry has been much lower than we would get in any other inquiry. Mr Normington: It is disappointing. Chairman: Indeed. This is the first time - and I know we are not only talking about skills - I can remember an interview with the Permanent Secretary not being televised or on the radio. I think it is shameful. I do not know what is going wrong with the broadcasting system in this House, but it is certainly not serving this Committee very well at the moment. I just wanted to get that on the record. Now we get to effectiveness of increased expenditure on schools. Q150 Mr Gibb: There has been a huge increase in spending on education and skills, particularly something like 32 per cent more than inflation over the last four years. Has that delivered higher standards in education? Mr Normington: I strongly believe it has. I can go through the areas where it is doing that, if you like. Just to take some headlines: the performance at GSCE has improved from 45 per cent to 52.9 per cent over that period; we have seen very great improvement over that period in Key Stage 3 performance; we have seen some improvement initially in Key Stage 2 results - major progress - but that has now plateaued, and that is a major source of concern to me; we have seen smaller class sizes, we have seen major investment in early years education and, actually, we are now providing some early years education for every child who wants it at 3 and 4. These are major investments. You go on seeking to improve performance; you do not always see the immediate effects of that investment. Your investment in early years has a very long-term return link to it; you will not see the benefits of that in terms of school performance for quite a lot of years, but all the evidence is that if you make that investment that is one of the most important investments you can make in the development of the child and the long-term return to the economy. So I do think we are getting major improvements. We are not hitting all our targets, which certainly will be a question I will be asked, but those targets are pulling up performance in every area with the one exception I particularly described, which is that after a big improvement in primary standards they have now plateaued. Q151 Mr Gibb: You cited three output figures there, GCSE, Key Stage 3 and Key Stage 2, and there is no doubt that increased funding is having a benefit not least because you can pay teachers a decent salary and recruit the best quality of teaching. Let us look at the GCSEs figure. That represents something like a 5.0 increase or a 6.7 increase, depending which year you take. If you take the previous four-year period from 1994 to 1998, that also showed about a 4.5 point increase in the proportion of pupils getting five or more GCSEs, but in that period there was only a 3.5 per cent increase in real terms in spending. How do you know for certain that there is a causal link between this very large amount of spending and these increases in the proportion achieving those high grades? Mr Normington: It is no use fencing about this. I cannot prove that a given level of investment produces a given level of output. I cannot prove it. I can show what we are getting out for what we are putting in. I think one has to be given time to see the benefits of the investment; I do not think you will see it immediately. All I can demonstrate to you is, really, two things: one is how much money we have spent over time and what the improvements are, and, secondly, my economists can show you the huge returns to the economy that we get for quite small increases in performance. For instance, at GCSE, there is a big economic return for performance at GCSE, at A level and, of course, at university. Therefore, I am confident that this money is worth investing, but I cannot prove to you - and some of your colleagues have tried to get me to say this before - that a given level of investment produces a given level of output. I would like to be able to do that, of course, but I cannot. Q152 Mr Gibb: In 1990 36.8 per cent of pupils achieved five or more GCSEs and that figure is now 52.9 per cent. That is a 16 point increase in 12 years. I am assuming there is no great inflation, and that is a significant improvement, but the rates of spending varied quite staggeringly. Just to go back to the third output measure ---- Mr Normington: I think it is true that there has been increased investment in that area over that period. It is true it has increased in recent years. Q153 Mr Gibb: Taking the third output figure, the reading level. Has the literacy and numeracy hour not had a bigger impact on that improvement from 57 per cent achievement at level 4 at 11 to 75 per cent than the increase in expenditure? Mr Normington: It is only just beginning to come through to 16, if that is your question. Q154 Mr Gibb: No, my question is about the third output figure you cited, which was the 75 per cent achieving level 4 at age 11. Most people attribute that to the literacy hour rather than anything else. Mr Normington: Yes, and that is so, but that did involve quite a sizeable investment in the training of teachers for that and preparation materials and so on. So there is quite a significant increase, but I entirely accept that not all improvements require substantial amounts of resources. If you looked over the period from 1997 or 1998 when we invested heavily in the literacy and numeracy strategies, I do not know what the precise figure is but it would be quite a lot of hundreds of millions of pounds that would have been put in to achieve those improvements - specifically into the literacy and numeracy strategies - I think you can say that that has brought significant improvement but investment by itself never works unless you have very effective management of those resources and of the staff by the leadership of the school, and the quality of the teachers is very important to that. However, as you said, the quality of teachers is related to what the rewards are and what the investment is in their training. Q155 Mr Gibb: There is no doubt you need to pay teachers properly, but I am just questioning whether policy matters have more impact on raising standards than simply cash. Mr Normington: You need to have very effective policies first, and you then need to ensure that you are funding those policies properly. Q156 Chairman: You can have the best-equipped school in the world with the most beautiful buildings, but if you have not got the amount of discipline in a school with the good leadership and the good teachers that allows good teaching to take place in the classroom, then none of that expenditure is worthwhile, is it? Mr Normington: It is absolutely the case that those things must go in parallel; you must have an effectively run school. If you simply build a new building then that will be wasted unless you have very good quality leadership and very good quality staff. Very good quality of leadership involves all the things you describe: a very good discipline framework, an absolute focus on raising standards, and you can get a long way even where buildings are falling down by very effective pedagogy, really, focusing on the quality of the teaching and learning process and individualising that to the child. You can get a long way with that but you need good qualified staff to do it, of course, and we have some evidence from a survey we did that actually there is a direct benefit from improvement in buildings. Clearly, you need decent buildings; you should not be teaching children in the 21st Century in buildings that are falling down, as some of them were, but there is some evidence from the survey and evaluation we have done that investment in building has a direct impact on the performance of the children and the performance of the staff. Q157 Mr Gibb: I was intrigued by the remark you made to Jeff Ennis's former questions about teacher redundancies. You said that you did not know what was happening in terms of the numbers of redundancies and the LEAs did not even know what was happening, and yet you have £60 billion of money being spent, the vast majority of which is raised by national taxation. If an MP who takes an interest in education cannot get an answer to a simple question about redundancies, I just wonder how we are meant to know whether this money is being spent correctly. Mr Normington: You should really judge it on the performance of the school, and that is the information that we collect and which is available for every school now in the country, both in absolute terms and in value-added terms. You can got on to a website now and actually compare the performance of similar groups of schools and see which ones are doing well and which ones are not. Schools can do that. That is a huge improvement in the information base about the performance of individual schools which we have brought about because we think our focus should be on outputs. I am hauled before all sorts of groups to be complained to about demanding too much information from the system, and I have to judge which information to collect. We focused on performance and, therefore, we do not have information about redundancies because we have taken that judgment. We cannot go on answering those questions on everything. Q158 Mr Gibb: Sure, but to whom are schools accountable? Are they accountable to us here or are they accountable to local councillors? Where does a parent complain? To which elected official does a parent complain if they are not happy with the way a school is functioning? Mr Normington: It depends on the type of school slightly but they should, first of all, complain to the head teacher and governing body. They should first of all take ----- Q159 Mr Gibb: Which elected official? Mr Normington: The local authority is generally the first line of responsibility for the performance of schools in that locality, which is where you should go. Q160 Mr Gibb: So if a person locally is unhappy that a school has very large class sizes but the head there has decided to put money into carpets and not class sizes, so there are 35 in a class, how do they get that changed? Mr Normington: They either complain to the local politicians about that or they complain to the national politicians about it. Q161 Mr Gibb: And the local politicians could change that, could they? Mr Normington: Yes, because they have quite a lot - and this is the debate, really - of control over the use of resources and it is possible for them to change that. Mr Gibb: I am told they cannot do that. Q162 Chairman: I am conscious of time. Mr Normington: The first answer is that there is a lot of autonomy for the school, and you should therefore take it up with the school. If you cannot get satisfaction there you should go to your local authority. That is what you should do. It would have to depend on the individual case. Many local authorities would think that they could change that, and I think it is a matter of determination, really. Some of them would say it is about "the lack of resources we get from national government", of course. Q163 Mr Gibb: There are two methods of accountability in society. Supermarkets supply the kind of food we want to buy and if no one goes there they go bust. In the state sector, if a school or a state provision is not providing what the public want you go to your elected officials and you re-elect somebody who will get that right. In terms of schools, one gets the impression that it is the head who determines these policy issues such as class sizes, whether or not a school has uniform or what the curriculum choices are and whether there is setting or not setting in a school. These are matters left to the head and the public has no say on those kind of policies in a state-run system. Is that a correct understanding of how it works? Mr Normington: Yes, but it is within a framework of national standards against which the school is inspected, for instance, and held accountable. The National Curriculum is, in a sense, the basic set of standards and the school's performance in delivering those standards in the National Curriculum is inspected and the school is held publicly accountable for that, and the local authority and sometimes national government will intervene if that school is not performing well. Where we can - but actually not in many places, in reality - there are choices for the parents as to where they send their child. That is another incentive. So there are lots of checks and balances on the school but it is right that some issues are left to the professional judgment of the head teacher as long as it is within a set of standards against which you can judge how they are doing. I think, for all its imperfections, that is a reasonable system; a system of national standards against which schools are held to account. I think that is okay. Chairman: A very last question from Jeff Ennis. Q164 Jeff Ennis: In response to one of Nick's earlier questions you said how disappointed you were that the Key Stage 2 results had plateaued out. Given all this additional investment that has gone into schools since 1997 are there any other improvement indicators either at Key Stage levels or GCSE improvement levels that you can also envisage bottoming-out to the same extent as Key Stage 2 in the next three or four years? Mr Normington: We are not planning for any of them to bottom-out. Indeed the resources are provided on the assumption that we will both re-start Key Stage 2 performance and, also, seek continuing improvements at other levels. The Chairman referred to one problem area which I think is a very high priority, which is participation post-16 and attainment post-16. That is one of our key weaknesses internationally and it relates to what the schools are doing in terms of driving performance. In a sense, although GCSE performance has been improving it is still not translating well enough into what people do afterwards. If you are looking for one area where we are having great trouble improving performance, apart from Key Stage 2, at the moment, it is there. Jeff Ennis: Thank you, Chairman. Chairman: David Normington and Stephen Kershaw, thank you very much for staying with us for this quite extensive session. We appreciate the answers you gave us. Thank you. |