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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