Select Committee on Education and Skills Minutes of Evidence


Examination of Witnesses (Questions 100-119)

23 JUNE 2004

MR DAVID YOUNG AND SIR HOWARD NEWBY

  Q100 Mr Turner: Clearly, that was subsequent to your appointment in March 2001.

  Mr Young: I was appointed to the HEFCE board in June 2001 and took over from Michael Checkland as chairman on 1 October 2001.

  Q101 Mr Turner: So that was subsequent to that. What advice did ministers have about the level of risk, as far as you knew, before that conversation took place?

  Mr Young: My understanding would certainly be that from the outset it was always made plain that this had more risk than most of the things—almost all of the things—with which the funding council involves itself.

  Q102 Mr Turner: I think most of us find it quite difficult to envisage risk. We know that with Russian Roulette there is a one-in-six chance of being dead. Can you give me some sort of measure of the risk which (a) you represented to Mrs Hodge and (b) was represented at the beginning to ministers during the year 2000?

  Sir Howard Newby: Perhaps I could take this because, in practice, Chairman, it was I who reported to Mrs Hodge at the time, and subsequently to Mr Johnson on a regular basis, about the e-University in our regular meetings. The nature of the measurement of the risk was in what we might call a fairly conventional form—low, medium and high risk were identified. We set up a risk register, that risk register was agreed by DfES in 2001 and it was updated subsequently—but without, I have to say, fundamental changes thereafter. I think the risks which have come to fruition, if I can put it that way, were risks that were identified in the original register.

  Q103 Mr Turner: Right. So the DfES accepted those risks in 2001?

  Sir Howard Newby: Indeed they did.

  Q104 Mr Turner: Did they, in your view, understand those risks? Who set the ball rolling? We know that David Blunkett made a speech, we know he asked you to do things and we know that in February 2000 a steering group was set up and PwC was employed. Was HEFCE asked to give him any advice before he asked you to set up a global e-learning enterprise?

  Sir Howard Newby: Well, obviously, I was not around at the time but my understanding is yes, HEFCE was involved at that stage. My predecessor, Sir Brian Fender, was quite heavily involved in discussions with ministers at the time about the form in which the e-University might take. One of HEFCE's obligations is to advice ministers on the needs of the sector, and I have little doubt that some of HEFCE's thoughts at the time were, indeed, incorporated into David Blunkett's speech.

  Q105 Mr Turner: So he had their advice before he made the speech and before he asked you to set the ball rolling?

  Q106 Sir Howard Newby: Yes. I was President of Universities UK at the time of that speech, so I also know that some of the advice that was fed into the department and to ministers at that time consisted of reports, one of which, at least, had been commissioned by Universities UK itself. That was the Borderless Education report commissioned by Professor Robin Middlehurst at the University of Surrey, which had also surveyed the global scene and tried to assess the potentiality for e-learning in a UK context. That was also fed in at the time.

  Q107 Mr Turner: Would you like to quantify the risk which ministers were advised on at that stage, or were they not advised on any risk at that stage?

  Sir Howard Newby: I think, Chairman, I see no reason constitutionally why we cannot send you a copy of that risk register. We are not trying to hide anything here. I do not think it is covered by the confidentiality of advice to ministers—we can check on that—but I certainly have no objection to sending the Committee a copy of that so you can see for yourselves both the risks that were identified and how they were categorised in terms of high, medium and low.[9]

  Q108 Chairman: That would be most useful, as would your suggestion—going right through to Brian Fender, significantly, PwC, Sun Microsystems, PA and the other two boards—as to who you think are the crucial people that this Committee should interview to continue our forensic investigation into what happened. We will not take them all but we would be grateful to know who you thought were the key players as well. Could you give us that information?

  Sir Howard Newby: Personally, given the structure that was established, I would have thought the Committee might like to consider inviting someone from the Holdco board, which would probably be Sir Brian, who chaired Holdco, and no doubt someone from the operating company; either Sir Anthony or Professor Beaumont, or both.

  Q109 Chairman: When you talk about PwC, as a company, we all know there will have been a key person in PwC.

  Sir Howard Newby: That was Quentin Thompson.

  Chairman: That is the sort of information we want.

  Q110 Mr Turner: The next stage was that 74% of the   respondents among the higher education institutions leapt on board. Presumably this was on the basis it was not costing them anything.

  Sir Howard Newby: It was on the basis of them agreeing that there was a real opportunity here that the UK should grasp, and a broad consensus that it should be something that should, as far as possible, involve the whole sector, not just one or two institutions in it.

  Q111 Mr Turner: So it was 74%. A pretty large number of the institutions.

  Sir Howard Newby: Yes.

  Q112 Mr Turner: How many respondents were there, after all?

  Sir Howard Newby: Again, we can send the precise information[10] but, since at the time this was looked at as a UK venture, there would have been, I guess, probably 104 universities and, possibly, about another 30 or 40 colleges. As a round figure we are saying there was about 150, I would guess.

  Q113 Mr Turner: At what level in an institution would such a decision classically be taken?

  Sir Howard Newby: In this case it would be taken by the senior management of those institutions—at chancellor and, indeed, vice-chancellor level—advised, no doubt, in many cases by the heads of their education technology units. That was certainly the case in my institution at the time.

  Q114 Mr Turner: Earlier on, Paul Holmes referred to the lack of private sector capital, and you have used the word "partner". Judging by the amount of information that has been withheld by Sun Microsystems, what risk were they taking as your "partner"?

  Sir Howard Newby: Chairman, that is a question you will have to ask Sun Microsystems. They were making a considerable investment, in their terms. There was a financial risk (and, I repeat, I think the amount of money they put into the venture—they would probably claim they spent far more than that, as things have turned out) and there was obviously a reputational risk to them if the venture was not successful. I would imagine those were the two key reasons they would have identified.

  Q115 Mr Turner: But there was no private sector capital invested in the scheme?

  Sir Howard Newby: If you mean by that did the operating company have a significant private capital investment, the answer is no. Sun were a partner in developing the platform but they were not an investor in the operating company.

  Q116 Mr Turner: Could you tell us how big were the holding company board and the Opco board?

  Sir Howard Newby: Yes, the operating company board had approximately 10 members and the holding company 10 or 12. We can supply you with that information.[11]

  Q117 Chairman: Can you tell us if at any time people left and when they left?

  Sir Howard Newby: On the operating company, Sir Alan Wilson, who was a founder member of the operating company board (he was then Vice-Chancellor of the University of Leeds) left the company on his appointment as director general for higher education in the DfES. That would be, from memory, in August 2003.

  Q118 Mr Turner: You told my colleague that the holding company board was appointed by you and institutions. Exactly what was the process by which members of the holding company board were appointed?

  Sir Howard Newby: For the holding company board we essentially put out an advertisement for people to apply to put themselves forward as members of that board.

  Q119 Mr Turner: "We" being HEFCE?

  Sir Howard Newby: Yes, on behalf of the funding councils and SCOP. We had a very large number of applications from whom the eventual board names were selected by a small working group.


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