Examination of Witnesses (Questions 100-119)
16 JUNE 2004
MR DAVID
NORMINGTON AND
MR STEPHEN
KERSHAW
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 vired 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 chapter two of the report and then another set of accounts
which is essentially governed by the Treasury conventions 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 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.
Mr Normington: Keith Bedell-Pearce,
I think, is the Chairman and the Chief Executive—sorry,
it escapes me. I am sure it is in here.[3]
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. 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 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%, 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 Connexions 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% 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.
3 Note by witness: The Chief Executive is Ralph
Seymour-Jackson. Back
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