Examination of Witnesses (Questions 1-19)
16 JUNE 2004
MR DAVID
NORMINGTON AND
MR STEPHEN
KERSHAW
Q1 Chairman: Can I welcome David Normington
and Stephen Kershaw to the proceedings of the Committee. David,
of course, is Permanent Secretary to the Department and Stephen
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 underway, 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 "Groundhog 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 HEFCEE,
who is 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 ours 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 programme; 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 HEFCE'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 Newby 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 HEFCE?
Mr Normington: Because HEFCE is
our vehicle for funding universities. We do not fund universities
directly from the Department, we do it through an arm's 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
HEFCE, 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 LSC, Ofsted,
HEFCE, 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% 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. 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 arm's 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: HEFCE 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.
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