Examination of Witnesses (Questions 540-559)
12 JANUARY 2005
MR LESLIE
STRETCH AND
MR DAVID
BEAGLE
Q540 Chairman: How would that work?
Mr Stretch: The potential engagements
from this for us and for the University would have many different
shapes. There could be the service that is provided by the University.
We could have even looked at providing the service. We could have
resold licences for the platform. There are a number of different
ways.
Q541 Chairman: So other universities
could use a similar platform?
Mr Stretch: Also the commercial
sector. E-learning represents a huge amount of HR investment in
the key commercial markets.
Q542 Chairman: You may find some of these
questions irritating but we want to nail them. Who could get a
share of the profits? It seems a simple question. You are saying
that this market would expand, you would have all sorts of contracts
but surely that money would flow to UK e-University if it was
a great success?
Mr Stretch: From the underpinning
components that I supply just as a computer hardware and software
company. I would expect to benefit mostly from selling my standard,
traditional components that would support users and the platform.
That is where I would make most of my money—from my core
products and services.
Q543 Chairman: Okay, take us back to
this £5 million shares put into the charity. Whose idea was
the charity idea then?
Mr Stretch: I would have to go
back to David Beagle.
Q544 Chairman: Come on, David, whose
idea was it? It is a murky idea. As Andrew says, all the time
we look at the relationships between government departments and
commercial providers and because we have got a lot of experience
in this (in individual learning accounts and much else when Capita
was involved) we find an "it's not me, gov'" mentality.
The private sector comes in and says we were partners at one stage
but then we became service providers. We sit here and think come
on, the real private sector entrepreneurial group was you so we
would have expected you to be the driver in terms of knowing what
the market was like, how you run this thing. You were not going
to expect a bunch of bureaucrats to know that, were you?
Mr Beagle: The original idea for
the charitable trust came out of think-tank that we held with
people such as John Slater when we were trying to work out the
best way of making this happen. I cannot remember whether it was
us or John Slater who had the original idea of the charity but
it came out of that meeting. We then assessed that against all
the other options and at the time that seemed to be the best way
of going forward because a large part of it was, as you said,
where we expected to make money out of it. The forecast in the
original e-University business plan for money coming out as dividends
for those shares was for around 2007-08, that sort of timescale.
We were expecting to be doing reimplementation of the platform
round about now, that was the original expectation, and we saw
that as far more of a significant business for us and that is
what we wanted to focus on, and to a degree we thought it would
be good PR to put those shares back into the sector, so the sector
benefited from it, not us.
Q545 Chairman: So if it had been a wonderful
success would that be the company as it stood getting dividends
or the company after launch?
Mr Beagle: I am sorry?
Q546 Chairman: Well, there were proposals,
were there not, to launch this as a company on the stock market
if it was a success. We have got that information from Companies
House. We know that there were arrangements that on launch certain
people would get a percentage of the dividends. You must have
known about that?
Mr Beagle: We knew that was the
plan but I go back to what I said previously, that was so far
in the future and in our view would be much smaller than the real
idea which was to benefit from the delivery of extra platform
elsewhere.
Q547 Chairman: You are the private sector
entrepreneur. You cannot remember whose idea it was to set this
charity up but you surely must know who had the share ownership?
Who were the other shareholders?
Mr Stretch: One of the points
that worried me about that was that the interim chief executive
in the start up phase—
Q548 Chairman: —John Slater?
Mr Beagle: —The chief executive
was Nick Winton.
Mr Stretch: —was not there
halfway through the project. We really were not interested. We
are a computer company, we are not an investment bank. We are
interested in the education sector and we made an investment.
It was uncharacteristic of us to make that sort of investment.
We had not done that before. We had built and delivered systems
before but our business plan was very simple. It was to get benefit
from providing our core technologies to underpin the platform.
Making money from the service or the flotation of the company
was never on our agenda and that is why a small amount of shares
were placed in this charitable trust.
Q549 Chairman: It is not small, you said
20%.
Mr Stretch: It varied. It became
diluted over time and it would not have mattered if it was 8%,
we did not benefit.
Q550 Chairman: It matters to us, Mr Stretch,
because we are trying to understand this very murky area of why
this charity was set up and who owned the shares and if they were
not owned by the charity who were the other shareholders?
Mr Beagle: All the universities
in the UK had shares in the university.
Q551 Chairman: We all know they had a
£1 share.
Mr Beagle: The rest of the shares
were owned by HEFCE. My understanding is that the rest of the
shares were owned by HEFCE.
Q552 Chairman: But were you involved
with the discussions about launch on the stock market, different
people would have shares of the company at that stage?
Mr Stretch: I was not.
Q553 Chairman: Neither of you?
Mr Beagle: No.
Q554 Chairman: So you would not be aware
that the chairman and chief executive would have had a percentage
of the company on a successful launch?
Mr Stretch: I was not, but it
would not surprise me. That is conventional.
Q555 Chairman: This is not a plot, we
just want to know. Other witnesses say you were a strategic partnership,
you say you were a service provider. That is what we are trying
to get at. It seems to me you started off as a strategic partner
and then the role changed.
Mr Stretch: There are three pictures
you paint there, one, service provider, one partner and then the
third picture we started out with strategic intent and ended up
as a supplier. That is the picture I have and that is certainly
the picture Sir Anthony Cleaver has, as he said in his account.
Chairman: Okay. We will just press on.
Jonathan wanted to come in.
Q556 Jonathan Shaw: Mr Stretch, you said
in your opening statement that you thought the parameters of the
time and money were wrong. Could you just expand on that a little
bit. When did you come to that conclusion?
Mr Stretch: It is a conclusion
that I came to with the benefit of hindsight.
Q557 Jonathan Shaw: Yes, of course.
Mr Stretch: I started to feel
like that in the closing stages. I became involved on a fairly
detailed basis when I took on the role of Managing Director for
Sun Microsystems UK Ltd two years ago because it had a very high
priority in the business and it was really towards the end, towards
the termination when we saw the appointment of Robson Rhodes to
oversee the business that I started to think about how we had
got into that position, and that is when I started to think about
the whole issue of investment and time and how we could have made
the venture a success, but it is a conclusion I come to with hindsight.
I have not discussed it with Anthony Cleaver, but I have noticed
he made a similar statement, and I tie it back to the original
plan which had a budget essentially of £90 million and that
is not where we ended up.
Q558 Chairman: Where did you get that
figure from?
Mr Stretch: I picked that out
from the written account of Sir Anthony Cleaver's statement to
this Committee.
Q559 Jonathan Shaw: When we try and draw
together our conclusions when we publish our report there are
perhaps two lines of enquiry. Is it that the HEFCE were worried
as this was a fantastic venture for education and was going to
be hugely profitable or that this was an idea that was never going
to take off and everyone is trying to avoid having the finger
of blame pointed at them? Those seem to be the lines of questioning.
I think you said that you were closely monitoring the delivery
of the learning platform. In your discussions with Sir Anthony
Cleaver what were those discussions in terms of the relationship
with HEFCE? Was there a perceived panic, was there a concern that
this was going to go belly-up and there were going to be lots
of inquiries such as this, or was it, "We need to remain
calm to be able to see this project through?"
Mr Stretch: I think it was the
latter. The focus was to remain calm to deliver the system and
to see the venture through. I definitely did not get that transmission
of feeling from any of the meetings that I had with John Beaumont,
or Sir Anthony Cleaver.
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