Examination of Witnesses (Questions 600-619)
12 JANUARY 2005
SIR BRIAN
FENDER AND
DR ADRIAN
LEPPER
Q600 Chairman: But you were a passionate
advocate of doing it?
Sir Brian Fender: Yes.
Q601 Chairman: That comes through. That
is not a criticism?
Sir Brian Fender: You have to
understand though, I always thought it was better if the Funding
Council kept as much independence as reasonable. That does not
mean to say that we were kind of bolshy with respect to what the
Government wanted to do. We were very conscious of the Government's
agenda, we wanted to support that as much as possible, but in
developing projects of this kind, or initiatives of any kind,
it is helpful if you have as much internal challenge as possible,
people questioning us, saying, "Why are you doing it that
way?" You want to try, if you like, to create as much debate
as possible. I think in retrospect one can see there was not quite
enough challenge here about the basic assumptions, first of all,
about the way of taking it forward and the probability of success,
but, of course, it is easy to say that now.
Q602 Chairman: Of course. It is easy
to have hindsight on these things. When Howard Newby, your successor,
or one of your successors, came in front of the Committees, what
he highlighted was that it was very unusual. The Higher Education
Funding Council has a role, as you know, and reports to this Committee.
This is a very unusual thing for it to be put in charge of. He
thought it was very unusual.
Sir Brian Fender: I would not
expect funding councils to be boring and do exactly the same thing.
It is not as unusual as all that; it depends which aspect you
are talking about. It is certainly not unusual for a funding council
to come up with an initiative which it thinks will help with teaching
or research or for that matter, a third mission.
Q603 Chairman: But not then to run it
itself.
Sir Brian Fender: There are other
models. In the way that it was set up, because the Funding Council
was not running this directly, as you know, it set up a rather
complicated structure in order that it could be some distance
from it. Actually I noticed in the earlier evidence that there
seemed to be some suggestion that this was extremely unusual.
I do not think it is entirely. UK Education Research Network Association
(UKERNA), which is very successful at buying and creating the
network for JANET, was a private company set up with certain freedoms
to develop in the private sector. Fortunately, I think, they were
persuaded that was not a sensible thing to do and they should
stick to their main task of creating a really high-class network,
but in fact that was a private company with an intermediate in
JISC (Joint Information System Committee), as you well know, and
the Funding Council keeping an eye on it and, of course the Funding
Council is well used to working with autonomous bodies in the
sense that the Funding Council has relationships with 130, or
whatever it is, universities and higher education colleges which
are autonomous bodies. You are still used to having a dialogue
with them and expecting responses either way.
Q604 Chairman: But you will accept Howard
Newby, in his evidence, did think it was rather an unusual initiative?
Sir Brian Fender: Yes; I thought
it was rather less unusual.
Q605 Chairman: Looking back, you have
heard the evidence, you have probably read the evidence?
Sir Brian Fender: I have read
the evidence, yes.
Q606 Chairman: What is your reflection
on the trajectory of this thing that was really very much one
of your initiatives? As I say, this Committee is not here to do
a ghastly job on the thing. I think all the Members of this Committee
would very much have liked this initiative to have succeeded and
thrived—that is the truth of it, I think—but can you
just peel away why it has gone wrong?
Sir Brian Fender: I think you
cannot apportion blame. If you are going to put any blame you
should put it on me, I think. I will try to explain why. You had
a very good and forceful defence of UK e-U by Tony Cleaver and
John Beaumont, and they were right, they had made a lot of progress,
they did need more time. On the other hand—and I am sorry
I sound like an Observer leader—the Funding Council was
right to say, "But hang on, what are the probabilities of
success even if we provide more time and some more money?",
and then I think you get into a rather difficult area for judgment.
I will try to say why. As I said, Tony Cleaver and John Beaumont
and the whole UK e-U team made a lot of progress, but they were
essentially dealing with four big issues. As well as advocating
what I think it is an important strategic important aim, and I
think is still an important strategic aim, I should have given
a little more thought to the difficulties associated with these
four tasks. Let me say what the four tasks are. The first task—let
us pick up on the last point we were listening to—was to
create a platform which did push forward the potential for e-Learning.
I had little thoughts about the way that the interim management
team and the PricewaterhouseCoopers' advice went. You have to.
You do not accept everything that is given to you. They were experts;
they put a lot of time and effort into it. One of my concerns
was the question of this platform, because a lot of resource was
going to go into it, and I went to Georgetown University and talked
to the Blackboard people there and listened to the users of Blackboard
at that time. At that time I think there was Blackboard use in
FE colleges but not in any higher education institution, or maybe
just one. It was a clearly valuable platform for on campus working.
You have to kind of think of e-Learning developing, I think. It
is not my definition of the stages of it, but they are helpful,
I think, to consider. The first is that you simply use digital
technologies to add convenience. This is a question of using PowerPoint
and email and relatively simple things which do not change the
culture of teaching and learning significantly at all. The next
stage is that you bring in onto the platform the management of
both the teaching staff and the students in the whole learning/teaching
experience, and that is what WebCT and Blackboard do and did at
that time successfully on a campus basis, but you have to go further
than that. You have got to try and produce a platform which is
easily usable by a much wider audience than the familiarity of
a particular campus, and you have to also make it easy to move
forward to the third stage of adaptation to e-Learning, which
is the incorporation of material outside that which is available
to the normal teaching and learning coordinates. Of course, as
digitisation goes on a long time—we have recently read about
Google getting involved with universities to digitise books, and
so on—the number of learning objects which are available
and which can be incorporated into a teaching programme are increasing
rather rapidly, and you want a platform that is well capable of
doing that. Even on the second level of a management tool, the
ability to be able to incorporate a sophisticated range of missions
and assessment, and so on, into one package is very helpful. Then
there is, finally, a fourth stage, which hardly anybody has reached,
but that is a goal that needs to be considered, which is when
you have got sufficient familiarity with the use of digital e-Learning
that is when it begins to change the very nature of how you do
teaching and learning, but we are a long way from that yet. One
of the difficulties, I think, is that UK e-U faced was the relatively
slow change of both the student learner and staff members in moving
up that hierarchy of increasing sophistication. So we have a difficult
platform to build, there was this cultural change necessary by
teachers as much as anything else, and, although you could be
rather hopeful that the UK had dabbled in this through the Teaching
and Learning Technology Programme, rather a lot of money went
and encouraged a lot of individual groups to develop software
and understand better how e-Learning might take a part, I underestimated,
I think, the difficulties there. We have only done two of the
three difficulties. There are four difficulties. The third difficulty
is in understanding our market well enough, particularly if it
is overseas: what the students want; how much customising we have
to do; what are the cultural changes? I mean in terms of the material
level, I mean just the way we were operating, and although you
might consider trying to deal with the isolated student in Outer
Mongolia, as referred to earlier, in practice that means establishing
relationships with higher education bodies in a variety of countries.
That is not easy to do, I think, and we probably underestimated
that as well. There are now three major under-estimations. The
fourth is attracting the private sector, and that in itself is
a difficult exercise. Although in all three of those areas, apart
from attracting private money, the UK e-U made significant progress,
took us further forward; and it was entirely reasonable for Tony
Cleaver and John Beaumont to say, "Give us more time. We
are getting on top of this and we have built a good deal of momentum",
the hanging cloud of insufficient student numbers meant that it
was going to be difficult to carry on that momentum and they would
almost certainly need more money and more time than perhaps it
was reasonable to give them.
Chairman: We have a very good picture,
Sir Brian.
Q607 Valerie Davey: Thank you for sharing
your vision, because I think it is visionary and we value your
contribution to all of this. As the Chair has already said, there
is nobody sitting round here who would not have liked it to succeed.
The one area which we have homed in on, as you have heard earlier,
and where perhaps you might add five, although it is probably
incorporated in one of your four, is the very pragmatic element
of feet on the ground setting the whole thing up initially and
getting the right people onto that interim management. Can you
tell us how you went about that and who, in fact, was chief executive
of that interim management?
Sir Brian Fender: Yes, I agree
with you. That was important, though there were two elements.
There is the Pricewaterhouse team, as expert a team as we could
lay our hands on, who were there, if you like, to help set up
the structures, to produce a business plan, though this early
in the game I do not think you would put a lot of credibility
on that. It would clearly be for the real managers to reform that
business plan, but at least it was something to start with. The
Pricewaterhouse team was important, and that, I think, was the
strongest team we could lay our hands on. Then there was an interim
management team: Nick Winton was appointed by the Funding Council
as Chief Executive, they had John Slater—very experienced,
nobody more experienced really—from JISC who has been doing
this kind of thing for a great many years, understood the higher
education system in this area as well as anybody, and then we
had a secondee from Rothschild's. They had their views. Again
we did our best to find a team which would be—You will remember
that we were exercised to try and bring in private money as much
as possible; indeed, you might say, "Why did you not do it
the conventional way, which is to start with public funding, of
course allocate money in the normal process and build up that
way?" If you turn the clock back, that is what I would do,
but in 1999-2000 you would not have got the money for that, I
believe. People said, "No, no, we have got lots of people
willing from the private sector to throw money into this area.
You have got a very good proposal. Surely people will want to
do it." Unless you have been in the game of raising money
from the private sector, I think it is easy to think how easy
it is. First of all, they are necessarily very hard-nosed and
they would be a good deal more hard-nosed by the time the company
was set up and looking for it. Secondly, they wanted a lot of
control. Anybody who has had any conversation with venture capitalists
will realise that they let you do next to nothing. So there was
clearly a blank here. Put the blame on me if you like for not
pointing out forcibly enough the essential potential serious conflict
between higher education institutions used to doing it their way
and we have had strong views about how e-Learning could be exploited.
One of those strong views was that they wanted to control the
whole system from entry to graduation, because that is what universities
do, a lot of their brand, their reputation, is associated with
that longitudinal process from beginning to end, but, of course,
a private investor into e-Learning is much less interested in
that and much more interested in the fragmentation advantages
which you get from e-Learning and would want the control to be
able to say, "No, I am not interested in that. What we want
is a module that we will sell wherever we want to at whatever
price we want to." I think the conflicts there are quite
reasonable, and I certainly had conversations and the interim
team pursued those with Pearson. Pearson was a very attractive
strategic partner in this. I think, as we have heard, there were
discussions with Sun Microsystems and they realised the potential
for them as a strategic alliance partner, but in the end, as we
have seen, the actual operating circumstances meant they became
much more of a supplier. Pearson was attractive for a variety
of reasons, but it was pretty apparent early on that we would
not be able to come to an agreement. Even if they wished to invest
money at a significant level it would be pretty impossible to
produce an agreement which was satisfactory to universities because
they would want far more control than was willing to be conceded.
So you then left, in terms of attracting private capital, and
the company was set up. I will come to why it was set up in the
way it was in a moment, and an additional reason. Having not been
able to bring in an alliance partner, you are then faced with
saying, "Let's make a success of this operation sufficiently,
so demonstrating it is commercial, that indeed you can create
a partnership in which private sector needs are met just as well
as the university needs. Do it by demonstration, lead by example
and then try to draw people in", which is where we were.
The second reason, I think, why the Interim Committee was so committed
to the private approach, which was one of my nagging doubts, because
I did actually understand how difficult it was to raise private
capital—I had a nagging doubt about it—was because
they wanted to inculcate into the HEIs, in order to make this
successful, a high business approach; in other words they wanted
universities to be properly business-like and, therefore, in their
commercial dealings to deliver on time, etcetera, etcetera—all
the things that actually universities are quite good at doing,
but there will still be certain a nervousness about whether they
will always do that in the most effective way—and, if you
are going to go out globally, you need to be able to be sure that
you will get those deliverables. I think UK e-U demonstrated that
it was not all that easy to come to contractual agreements with
universities, and I did not understand that[1]
Q608 Valerie Davey: You have just raised
so many questions, I think I will come back to the one you posed
yourself. Why did you set it up in this way? Given that you had
obviously had doubts very early on as to the relationship which
you were trying to forge between the private sector and the universities
and HEFCE, why did you go forward with the plan that you did?
Sir Brian Fender: You cannot let
personal doubts dominate when you have hired people that are the
best you can get and listen to their expert advice. If I as Chief
Executive of the Funding Council had run off on my personal whims,
that would have been quite wrong. That is not my job to do. It
is not my money, it is the tax-payers' money, and I have to have
proper processes for making the best decisions that can be made.
I set up, I think, with the help of my colleagues, the right kind
of groups to provide that advice and take it forward, and I have
to live with that.
Q609 Paul Holmes: Sir Brian, can we go
back briefly to one of the opening questions from the Chair. He
was asking what role you played in initially creating the idea
of setting the system up and in talking to ministers, and you
said that you did not talk directly to David Blunkett. Your successor
as Chair of HEFCE, Sir Howard Newby, said to the Committee, "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 which UK e-U might take,
and one of HEFCE's obligations is to advise ministers on the needs
of the sector. I have little doubt that some of HEFCE's thoughts
at the time were indeed incorporated into David Blunkett's speech."
How big a role did you play? Did you talk ministers, if not to
David Blunkett?
Sir Brian Fender: No, I did not
sit beside David Blunkett and say, "You should push this
up your agenda when you make your speech." What we did was
to make a submission, as I said, to the Spending Review which
outlined the arguments and the advantages of pursuing the e-Learning
initiative, and then, of course, there was the toing and froing
which takes place between my colleagues in the Funding Council
and the civil servants. Certain questions came from ministers
which were discussed, because they did their proper job of challenging
certain proposals—for example, the question would we be
selective in the number of universities that we brought in to
move the requested project forward in the early stage—and
it was the view of ministers we should try to restrict that to
a small number of universities with higher brand. Indeed, we did
pursue that in our consultation with universities, who were rather
quick to wish the project to be inclusive, and there are good
arguments for that. Particularly good programmes for e-Learning
are not necessarily associated just simply with brand; brand is
much more associated, as you well know, with research ability
rather than teaching ability; so I think we were right to be open
and to have a big range of universities contributing. There was
that kind of dialogue which took place between my colleagues and
the civil servants and leading on into ministers, but did we have
a round table discussion with ministers? No, we did not. I am
not sure that that would have been particularly helpful. I think
there was a perfectly good discussion between the Funding Council
and the Department in the way that I have described.
Q610 Paul Holmes: So Sir Howard Newby
is wrong when he told us that you were heavily involved in discussion
with ministers?
Sir Brian Fender: It depends on
what you mean by "heavily involved." If you looked in
the correspondence between the Department and the Funding Council
you would find, no doubt, a full record of discussions on this
topic, as you would on any other topic where we were proposing
an initiative or responding to a policy from the Government. All
I am saying is that there are different styles, different ways
in which chief executives of funding councils operate. Mine was
to keep as much clarity and perspective from the Funding Council
as was desirable, in my view, in order to have the best possible
debate with government if there was an issue that needed debate.
Q611 Paul Holmes: In all the dialogue
between government ministers and HEFCE, where did the initial
initiative come from, the initial idea? Was it from you and HEFCE
to the ministers or did the ministers come to you and say, "We
have had this great idea for an electronic university"?
Sir Brian Fender: I think ministers
would say that, indeed, the first proposals came from the Funding
Council decision.
Q612 Paul Holmes: Came from?
Sir Brian Fender: Came from the
Funding Council. If you look at the spectrum of activities in
higher education, you would find some which initiated with the
Funding Council. You can read the text. It is there easily if
you look. In those days, in the Blunkett era, the letter of guidance
from the Department was a full and lengthy one, and you could
see it very clearly—there was no attempt to hide it—where
the Department was welcoming initiatives taken by the Funding
Council and where we were being told what we should do.
Q613 Paul Holmes: Within HEFCE where
did the idea emerge from? Did it just emerge from a collective
group or was there one key person who said, "Let's look at
this"?
Sir Brian Fender: Why I am taking
a good measure of responsibility for this is that I was influenced.
I went with my Head of Policy to Aspen Colorado, where they have
regular meetings of largely but not exclusively private universities
in the States, well-known universities in the States, and there
was a rather good debate around the strategic changes that higher
education faced, and included in that was the role that e-Learning
would play. I came away from that, a three/four day conference,
and I talked direct with the Director of Policy and others of
my colleagues and was rather resolved at that time. I think it
has to be said that we needed to raise the profile of e-Learning;
we needed to make sure that universities were fully aware of the
changes which we now accept as happening all the time. What you
cannot predict in a period of rapid change is exactly how it is
going to happen and at exactly what rate, but everybody knows
the digital invasion, if you like, of practice is taking place
very rapidly and I just wanted to make sure that higher education
was not caught flat-footed.
Q614 Paul Holmes: In December 2000 an
interim management team was set up. Who was the interim chief
executive officer?
Sir Brian Fender: Neil Wyndam[2]
Q615 Paul Holmes: Where exactly did the
idea come from of having this complicated system that we have
already talked about of the holding company and the operating
company?
Sir Brian Fender: That was a recommendation
from the Pricewaterhouse team who looked at structures and devised
this. The operating company was expected to operate as a private
company would. That was to make it attractive to private investors,
and it is modelled in quite a conventional way as a private sector
company, and, indeed, with governance which would be appropriate
for a listed company; but then, of course, there had to be a way
of relating to the public funding, and so the holding company
this was created really for two reasons. The most important, in
a way, was to resolve any potential conflicts between the commercial
drive of UK e-U and the reputation of institutions in terms of
what was offered, the quality of the programme. The holding company
was there to hold the licence, so if UK e-U went off and did things
that did not maintain or add to the reputation of British universities,
then we could withdraw the licence, and we held the trademarks
and the web addresses, and so on, as a means of being able to
do that. I think that was a sensible safeguard. If you set up
a commercial company, you may make short cuts and you do need
to have a handle on that. What we also created was the Committee
for Academic Quality. We had a lot of debate about who that should
report to. In the end it was, I think rightly, decided it was
a committee of UK e-U but it would report through UK e-U to us—by
"us" I mean the holding company—and would have
the right to come to the holding committee if it had concerns.
So one of the big roles for the holding company was that whole
issue of quality, reputation and the licence. It did have another
role, and you will see the Funding Council expected the holding
company to be aware of value for money when passing money from
the Funding Council through to the operating company, and I think
that is a role we accepted, but we have to do it in a rather limited
way, as you can imagine, because this is a voluntary or an unpaid
Board with a part-time and modestly paid, I might say, Chief Executive,
and there is a limit to how we could investigate the value for
money of the operating company. We were not powerless in that.
We had the right, and took it with great care, to nominate the
Board members of UK e-U. It was entirely our right to do that,
and we exercised it, as I think you have seen, in producing a
good Board with a range of experience. Particularly if I think
of the university representatives, not only were they extremely
experienced academic and university administrators, but they had
an interest in setting up companies or in e-Learning, and they
proposed a chairman which with Tony Cleaver's experience it was
easy for us to accept, and private sector nominees, again, were,
I think, as strong as we could get. So that was one way we had
an influence over the operating company, an important one, but
we did monitor. They came and they presented to the holding company,
which meant about three or four times a year they made presentations.
We received information from them, we made sure that they did
have governance practices which were acceptable in the wider world
and I like to think we did what we could with the time and resource
available, but you could question Adrian about his diligence.
He and I met once a month. We exchanged issues and looked at issues.
When it came to this difficult period in the autumn of 2003 when
we were all waiting, the Funding Council was waiting, the holding
company was waiting equally avidly for a revised business plan
and there was, I think, a misunderstanding which arose from the
fact that they were operating as if they were a private company
and we were expecting information as if they were a body spending
public money. So we got a set of figures, which were projections,
without which I would have expected, looking at it from a public
sector perspective, a whole series of supporting arguments. They,
of course, following private practice, rarely do that.
Q616 Chairman: They rarely do?
Sir Brian Fender: They rarely
provide you with a strategy. The new legislation introduced by
Patricia Hewitt, which comes into force on 1 April requires an
operating and financial statement, so you will get in future a
glimpse into the strategy of private companies, but it is perhaps
not quite so surprising that UK e-U, set up in the way it was,
rightly or wrongly, was a bit reticent about what its approach
was.
Q617 Paul Holmes: One of the points of
the holding company was to keep HEFCE distanced away from the
detail of what was happening. Is that right?
Sir Brian Fender: Yes.
Q618 Paul Holmes: Was it therefore wise
that on 29 March HEFCE appointed yourself to be Chair of the holding
company?
Sir Brian Fender: No, it did not.
It was the Board who elected the chairman.
Q619 Paul Holmes: So HEFCE played no
role in appointing you as Chair?
Sir Brian Fender: They might have
expected me to be appointed as the Chair, but it was up to the
Board. Some Members of the Board of the holding company were appointed
by the Funding Council and some by Universities UK, and there
was a SCOP representation as well. To be honest, I think it may
well have been expected that I would be appointed Chairman. I
was independent; I did not have a university to run, etc.
1 Note by witness: UK eU demonstrated that it
was not all that easy to come to contractual agreements with universities,
and I did understand that, not didn't understand, as stated
during the session. Back
2
Note by witness: The interim chief executive officer was
Nick Winton, not Neil Wyndam. Back
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