UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 479-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

EDUCATION AND SKILLS COMMITTEE

 

 

PUBLIC EXPENDITURE

 

 

Wednesday 12 October 2005

SIR DAVID NORMINGTON, MR STEPHEN KERSHAW and MR STEPHEN CROWNE

Evidence heard in Public Questions 1 - 142

 

 

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Education and Skills Committee

on Wednesday 12 October 2005

Members present

Mr Barry Sheerman, in the Chair

Mr David Chaytor

Mrs Nadine Dorries

Jeff Ennis

Mr David Evennett

Tim Farron

Mr Gordon Marsden

Stephen Williams

Mr Rob Wilson

________________

Witnesses: Sir David Normington, Permanent Secretary, Mr Stephen Kershaw, Director of Finance, and Mr Stephen Crowne, Director, School Resources Group, Department for Education and Skills, examined.

Q1 Chairman: Sir David, can I welcome you again. It is really nice to see you and we hope you have had a good summer.

Sir David Normington: Not bad, thank you.

Q2 Chairman: You are the link in terms of continuity in the Department. We have seen Secretaries of State and Ministers move on on a regular basis. How many Secretaries of State have you seen in your time now?

Sir David Normington: It depends how you count them. Since I have been Permanent Secretary or Secretary, I am on my fourth, but David Blunkett and I only overlapped by three weeks.

Q3 Chairman: You have been in post how long - four and a half years?

Sir David Normington: Four and a half years, yes.

Q4 Chairman: So you are the continuity, whereas Ministers come and go.

Sir David Normington: Yes, well, they have done.

Q5 Chairman: So it is a heavy responsibility on your shoulders. As you know, this is a wide-ranging session where we really ask you about the value for money that our taxpayers are getting out of this increased amount of money that the Government has been putting into education generally, into education and skills, and we were looking at the run of expenditure on education. There is no doubt that if you look at the run over this period since the Prime Minister talked about education three times, we can see the run from 1998/99 starting at 4.6, 4.6, 4.8, 4.9, 5.3 and 5.6, a steady increase and if you track it with health, you see of course the increase from 5.4, 5.4, 5.36, 6.2, 6.77 through to 2004/05. Then all the predictions change and health expenditure carries on increasing year by year and education is tailing off and plateauing and indeed some fear there will be a decline. Is that something that you feel happy about?

Sir David Normington: Well, it is continuing to increase, but it is just not increasing as fast, is it? Over this spending period there continued to be increases and they are real terms increases, ie, they are on top of inflation, so the investment goes on and the commitment is to get ahead of the proportion of GDP spent, the average on education, so the expenditure goes on. It is not increasing as fast as health, but that has been true actually all through this period.

Q6 Chairman: It is interesting, is it not, that in three elections the Prime Minister says the priority is education, but when we look at these figures the priority in terms of taxpayers' money is health, not education?

Sir David Normington: Well, we have had this conversation before and it is not all about money; it is about how it is spent and there have been very substantial increases in education expenditure, but it is also about, as we will no doubt get on to, what you do with it. Obviously it has been spent differentially as well. There have been very large increases on schools within those overall sums and lesser increases in other areas.

Q7 Chairman: Which bits of the spend are you more concerned about? What do you think have been the successes and which have been the ones that still worry you in terms of value for money out of the increased investment?

Sir David Normington: Well, in terms of performance, I think it will always be the case that the performance will lag the investment, and particularly in the first few years there was a lot of investment to catch up. If you ask me what I am proudest of in terms of performance, I think that, despite all the qualifications we might want to make, school performance, both primary and secondary, is dramatically up over this period and I think that has been money well spent because that is the investment in the future. I think that where we have not yet made significant impact is in the performance of young people who do not go to university beyond 16. If you look at our performance there, those statistics have remained. The more people are staying on, those statistics in terms of what people are achieving have not gone up very much and that is why the Government is putting a lot of emphasis on the 14-to-19 age group in this period because we still have to convert the school performance into success in further education and training.

Q8 Chairman: So you are saying that there is a relative success of improving the education system through pre-school through to 16, but you are still unhappy about staying-on rates in that 16-to-19 area?

Sir David Normington: I am saying that at last we are beginning to see improvements in staying-on rates. What we have not yet seen is very significant improvements in the attainment of 16- to 19-year-olds. We have seen improvements in A-levels, but not in vocational qualifications. We have seen some, but that is not yet matching international comparisons.

Q9 Chairman: I happen to agree with you in terms of the relative success of the investment, but why is it, do you think, that people outside do not seem to share that? If you listen to the Today programme and the presenters, the package, you get the impression that nothing is going right in education and then you pick up a copy of The Times and nothing is going right, there have been no successes and this investment is not working. What is it? Is there a conspiracy in the BBC that does not like you or something?

Sir David Normington: I would not dream of saying there is a conspiracy. I do not know. It is very disappointing. If you just take one of these figures which is illiteracy at 11, there has been, I think it is, a 17 percentage point improvement over the period since 1997. We are 6 per cent short of the target that we have set. Now, you can write that story in two ways really. You can say, "What a disaster. They have missed the target", or you could write it as a 17 per cent improvement. I think all the time we have a half-full/half-empty issue here and I think it depends on where you take your stance really as to whether you write that as a half-empty story or half full. It seems that the half-empty stories are always the ones that catch the headlines and it is frustrating, it is very frustrating to me and my colleagues because actually we are really proud of what has happened.

Q10 Chairman: Is it not the case though that there is a view out there, so do you just have poor communications in the Department? Do you work hard on communicating with the media in terms of getting your message across or has Gershon been cutting your staff so badly you cannot communicate so much?

Sir David Normington: No, we work very hard on our communications. We have reduced our communications function a bit, but not to the extent that we cannot communicate. I think the most powerful communicators are going to be the people who are actually doing it and the people who are benefiting. We need to get the parents to be noticing it and we need to get the teachers to be confident about their achievements, and what we have, particularly in schools, is quite a lot of confidence that individual schools are improving, but nobody believes that that is system-wide, so we have this huge gap between what parents and teachers think of their own school and what they think of the system as a whole. We have the greatest difficulty convincing people that there is a national improvement here. We go on trying.

Q11 Chairman: You have my sympathy. I understand I have been blacklisted by the Today programme because I will not go reliably enough and castigate the Government on all occasions, so I have some sympathy there. Can I just push you a little bit though on higher education. If you look at the run of figures, the expenditure is very impressive in pre-school, it is impressive in school through to 16 and even in the FE sector it is better than one expects when one listens to some of the voices in the education sector. Higher education is still the smallest increase across the piece.

Sir David Normington: I think that is true, yes.

Q12 Chairman: Now, some of our colleagues in Parliament have recently been to India and China, and indeed the Higher Education Minister has recently been to India, and were absolutely terrified by the amount of investment they are putting in over there. Is it good enough that HE is still not getting a fair share of the investment?

Sir David Normington: Well, I think you have to decide where your priorities are. After all, there are some parts of the HE sector which have done exceptionally well. There is a huge investment in science and in fact that is perhaps the greatest investment in science facilities and science research. We are now maintaining the unit costs per pupil and are committed to doing so over the period to 2010, but of course the real answer to you, Mr Chairman, is that this is why we are looking for alternative sources of funding and why the Government is in quite controversial circumstances introducing tuition fees because that will raise extra money for the universities. In fact it looks as if it is going to raise about £1 billion, £300 million or so of which will be recirculated into support for poorer students which is a terrific outcome actually, but £700 million or so, and these are very broad figures, will be increased investment in universities. I think all across the education system, in fact all across the public services, you have to be looking at how much the State can do and who else should be contributing if they are benefiting and that is a particular issue in higher education where there are lots of returns to the individual from taking a higher education course.

Q13 Chairman: What do you think is the main theme of the Department for this Parliament? What do you hope to achieve that is different from what has been going on over the last few years?

Sir David Normington: Well, you should really put that to the Secretary of State, I guess.

Q14 Chairman: But what is your interpretation because you have a White Paper coming out imminently, in the next couple of weeks?

Sir David Normington: I think that there are many things that we will be doing to embed things already announced and let's be clear about that. We have not talked about pre-school investment in childcare which is an enormous programme, but the absolute priority in this period will be in the 11-to-19 phase. The Schools White Paper which will come out in a few weeks will be about schools generally, but it will have a lot to say about secondary education and we will have more to say later about how we are getting on to implement what was said before the Election on the 14-to-19 phase, so actually raising standards of attainment, raising the diversity of choices open to the students in that phase, trying to put vocational education on a par with academic education, those are things that we will be focusing on. Actually the reason for doing that is because that is where the historic weakness of the UK education system is, as we were saying at the beginning.

Q15 Chairman: Are you going to carry on on this path of centralisation of the education system? You are getting rid of local education authorities and you are driving things. On the one hand, you are saying that all schools are going to be independent and they will have this tremendous different status than they have had in the past, but at the same time this sort of diktat is going out centrally from the Department that really you see a very centralised system.

Sir David Normington: Well, we do not think that is what we are doing. We do not think we are writing local authorities out of the picture and the Secretary of State has already had something to say about that. We are on a path to delegate more from the Department to regions and localities, particularly to front-line institutions. I know people have a view that the Department for Education and Skills is a highly centralising force and we are trying to shed that image. If you want a parallel trend over this period, it will be about devolution to the front line, much less control, much more security over school budgets with much more freedom for them to spend that money on the things that they think are necessary.

Q16 Chairman: If you are in charge of the school fund and it comes directly from the Department with no real intermediary, that is a central government/local school relationship with no intermediary, is it not?

Sir David Normington: No, the local authorities will continue to set the local formula and will decide how the money is to be spent locally within national guidance. What we are actually doing in this from 06 is ring-fencing the money for schools within the local authority settlement and it will become part of my budget, that is true, it will be called the Dedicated Schools Grant, but actually the distribution of it will be done locally, the decisions about the distribution will be done locally.

Q17 Chairman: You and I know that there is a degree of unhappiness about these changes. You and I know that in local government people are saying that a major service has been taken away from them. That is what they are saying and they are scaling down their education staffing dramatically, so come on, there is a real difference, a real qualitative change, a dramatic change in how we are delivering education in our country.

Sir David Normington: Well, of course there are some people who are unhappy with it, that is true, and it is certainly the case that local taxation will not contribute in future to the degree it has in the past to schools and it will be funded centrally, so that is true and there are people who are unhappy about that. We would say that there remains lots of discretion at local authority level and, importantly, we, with the ODPM, are beginning to redefine the role of the local authority as a commissioner of services for children. Actually many local authorities are very interested in that and the best ones are actively engaged in discussing that. The Secretary of State made a speech about this at the beginning of September, and of course it did not get any publicity, but for those who were really interested, it had a very warm reaction from local authorities and they were really pleased that we were beginning to define clearly that we did think the local authorities had a role. The role is to be champions for children and to be champions for the community, but it is not to run schools.

Q18 Chairman: Sir David, you and I know also that this whole new funding regime came out of chaos and it came out of a panic in your Department over school funding two years ago. Is it a good way to make policy, that you have a crisis, you have got the Today programme and the press running with stories and then suddenly you bring in a new system for school funding because you are in a panic? It is almost as bad as the Dangerous Dogs Act. You have been in for five years. Is this a calm and reflective way to change policy?

Sir David Normington: Actually I think it is really because what we did after the problems which we discussed here before was we tried to stabilise the position by ensuring that every school was guaranteed a minimum increase and that was a system which we put in place immediately after those problems that you describe. What we then moved on to was trying to find a way of securing the school budgets. One of the problems about where we have been is that you announce what the money is for schools and then it is possible locally for that money not to be spent on schools, and that is a problem for schools as well as for national governments giving priority to education, so this system is designed to say, "This is the money for schools", and it actually is, and then to provide schools with security over a period and eventually, we hope, over a three-year period they know what their budgets are going to be. They have never had that before. This living from pillar to post is very destabilising to the management of a school and it stops us saying to them, "You need to manage your budgets better and you need to deliver some bigger outputs for those budgets", so we are trying to secure stability in the funding system. You can trace this a bit from those problems in 2003, but this decision was one that we took in the five-year strategy context a year or so ago.

Q19 Chairman: After eight years we are getting it right, are we?

Sir David Normington: I am sure.

Q20 Mr Evennett: I would like to push Sir David on one point when we were talking about the media and improving the position of standards and increasing funding, but you did mention in your reply to the Chairman how it was not just the media who said that things have not been improving, but it has been employers and universities. They say that standards of new recruits in English and maths have not improved and in fact in some areas they have gone down. How do you answer that?

Sir David Normington: Well, they do say that and, as an employer myself, I sometimes see that the standards of English and maths are not good enough amongst those coming into my employment. This is the half-empty/half-full thing. Things have really improved, but I do not think it is yet good enough. The focus that I was describing on what happens in the 11-to-19 phase includes a continuing and renewed focus on English and maths because the standards are not yet good enough, but they are improved.

Q21 Mr Evennett: But that is the debate, is it not? Some people say they have not improved, that they have gone down. Rather glibly you are saying that they have improved, but we have evidence that they have gone down.

Sir David Normington: No, we have evidence that they have improved and I am absolutely clear that at every phase, at Key Stage 2, at Key Stage 3, 14-year-olds and at GCSE, standards have improved and are improving. This year we will see some of the best results at all those stages that we have ever had. We are actually beginning to see the investment in primary schools in English and maths coming through into GCSE this year. That is really encouraging. You would expect to see that, but it is not good enough yet, I accept that, and employers are not seeing enough of it and there is a historic problem to make up as well. I hear employers myself saying that, I hear it.

Q22 Mrs Dorries: Last time you were here you were asked to prove, if you could, as a given that the level of input and investment in education had actually improved. Now, you seem to be saying today that the reason why the standard is half full is because of that investment. Now, before you actually said, "I would like to be able to prove a link. I would like to be able to do that because I cannot". Actually on August 19, Lord Adonis said that the better results are the product of the increased level of investment in education, so which way is it? Is it that the results are better because of the increased investment or what because you said not and Lord Adonis said it is.

Sir David Normington: No, I did not say not. I said I could not prove a direct link between investment in one area and an outcome and I am absolutely certain that the investment we have made in facilities and in teachers over this period and actually focusing on those key stages, improving the materials, improving the quality of the teaching, I am absolutely clear that that is having its impact. What I cannot prove, and I still cannot prove, is for a given level of investment you will get a given level of output which is the conversation we were having at the time. I cannot say to you that if we put £100 million in there, we will get this amount of performance out, but I am absolutely confident that the investment is producing the improvements partly because of how you can trace the improvements to places where we have put our effort.

Q23 Mr Chaytor: Sir David, you argue that the theme of the next few years will be decentralisation for schools, that your Department is nationalising the funding system. Two weeks ago the Government took a decision to postpone the re-evaluation of council tax on the grounds that it wanted to wait for the outcome of Sir Michael Lyons' wide-ranging review into the future of local government. If the Lyons Review argues for much more decentralisation, including in terms of funding, where does that leave your new nationalised funding system?

Sir David Normington: Well, of course it is for the Government to decide how it reacts to a message of that sort. I think it is possible to say that some things ought to be ring-fenced and some things ought to be devolved. One effect of course of taking school funding out of local authority and local taxation is that the other services, local taxation is a bigger share of those other services which in a sense will mean that in those services there will be more devolution. We can use the term "nationalised", but what we have done is ring-fenced the money. It is called the Dedicated Schools Grant because we are saying that this is the money for schools. Yes, it is a national amount of money, but two things: the local authority will set the formula; and, secondly, there will be much more discretion for schools to spend it as they wish with much less prescription from us as to what they should spend it on because we are reducing, and it is true, we have had lots of budgets. On top of the local settlement, we have had lots of other budgets and we are reducing all those. We hope to reduce them to a very small number, we are in the process of doing that, and that will give schools much more discretion and certainty over their budgets. Now, we can call this a nationalisation, but we of course think it is more devolution to the front line within that system.

Q24 Mr Chaytor: Would you have gone down this line had there not been a degree of tabloid hysteria after the introduction of the previous changes in 2003? Is this simply a response to pressure brought by some schools and some local authorities at that time?

Sir David Normington: We did not need to do this in order to stabilise school funding. What we did in the years after the problems we had with school funding was to introduce the minimum funding guarantee. We did that within the former system, the system which we are leaving, and that did stabilise funding. We could have stopped there, so I do not accept that the policy change we are now making was necessary because of the problems we had. It was thought to be, as I have described, an important way of stabilising and securing certainty about school budgets.

Q25 Mr Chaytor: But the minimum funding guarantee was necessary as a response to the problems that we had.

Sir David Normington: Yes, because it meant that basically every school was guaranteed that they would have an uplift in their funding year on year and that is what we introduced immediately afterwards.

Q26 Mr Chaytor: Could I just pursue the minimum funding guarantee and ask what effect that has had on the changes that were previously agreed to be brought in from 1 April 2003 along with the abolition of the (?) system?

Sir David Normington: Inevitably to some extent they have damped the effect of the redistribution.

Q27 Mr Chaytor: Exactly to what extent has it been damped? Has it not been sabotaged rather than damped?

Sir David Normington: I do not know about sabotaged. Stephen Crowne is the absolute expert on this.

Mr Crowne: When we introduced the new formula which did redistribute money around the system, we did that within the system of floors and ceilings to ensure that the changes we are proposing were manageable. Basically the pace at which you can go depends on how much resource is in the system because any system of floors and ceilings is going to cost you some money. In other words, if you have to protect the position of those who would lose relatively, that will consume some resource. There is no doubt that the minimum funding guarantee, as it were, defined what our floor was going to be. In other words, you had to ensure that every local authority had funds to meet the minimum funding guarantee requirements, but I cannot answer the question of how much that damped the system because it all depends on what the overall envelope of resource looked like. I would say to you that what the effect of the MFG was was to make the changes in the formula manageable over time. The judgment then is at what level you set the minimum funding guarantee.

Q28 Mr Chaytor: But the abolition of floors and ceilings and the replacement simply by a floor has essentially stopped in its tracks the process of redistribution which was agreed under the previous formula.

Mr Crowne: I do not think I would go that far. I would say it has certainly extended the timescale. If you have a higher floor, you are bound to take longer to get to the new formula distribution. That would be the case if you had a minimum funding guarantee or not if you set the floor at a given level. I would argue that the purpose of the new minimum funding guarantee is to give the required degree of stability at an individual school level; it is not to stop the formula change happening.

Q29 Mr Chaytor: So will the principles of the formula established in the previous organisation still be followed through, but over a longer period of time? Are we still going to see a redistribution from those local authorities essentially in the south-east who have benefited enormously for the previous 15 years from the funding system to those local authorities largely in the north who have been penalised under the previous system? Are we still going to see this process of redistribution?

Mr Crowne: Ministers are currently consulting about issues in this area. What we have said for the Dedicated Schools Grant which comes in in 06/07 is that every local authority's grant will be based on their actual spend in 05/06, and, as you will know, that varies around the formula position quite markedly, and then we will guarantee for every local authority a 5 per cent per pupil uplift in each year and that is to underpin the minimum funding guarantee. The question then is what you do with what is left over and there is a substantial chunk of money, maybe up to £1/2 billion in each year, and what we are now consulting about is how that money should be distributed. Clearly one of the options would be to use some or all of that money to make progress towards the formula distribution, but there are other options and indeed a number of local authorities are very interested in other options. We are looking at the responses now and no decisions have been made, but I am sure Ministers will have in mind the possibility, the option of making progress towards the formula distribution.

Sir David Normington: If I may just add, if you look beyond the next two years there is a major question about what the right formula is. Some of what we are doing immediately needs to be about stability as we change the system because we know that these big changes in the system are the things that cause all the upset, as they did before, and we have committed ourselves to having minimum funding levels in two years, but then saying to ourselves in that period, and with others, "Have we moved to a longer-term system?", and hopefully not have such a dependence on minimum funding levels because they do have the impact you are describing.

Q30 Mr Chaytor: So in 2009 there is going to be no change in the system?

Sir David Normington: Well, I do not think there is going to be any change in the overall system, but I think it is an open question as to what the distribution formula is at that point.

Q31 Mr Chaytor: But you would accept that it would be a gross reversal of policy if the gap in the minimum funding guarantee was to widen the differentials between per-pupil spend whereas the purpose of the previous changes in 2003 was to narrow the differentials?

Sir David Normington: Well, the purpose of the previous one was really to ensure that the distribution formula was based on a number of factors which included depravation and so on. There are all sorts of things in that formula. It is always the case, you know, when you make a transition in local authority funding that you put floors and ceilings in and you damp the effect of a number of years, sometimes of a lot of years. I think in police funding that was done partly because, otherwise, you have very sharp cliff edges in funding and also in 2003/04 the introduction of the new formula did bring about quite a shift. I know about Bury because of course they put in a memorandum to this Committee.

Q32 Mr Chaytor: I think it was the third submission received by the Department. The urgency of it is significant.

Sir David Normington: I know about that. The important thing just to say about Bury is that in 2003/04 it did, as a result of the new formula, get a significant shift in its funding. I know people are not very happy about the level they have got to, but it was a big shift and it has had, therefore, over this period one of the biggest increases in funding of all local authorities, partly reflecting some of the things that you are continuing to say. The Bury spend per pupil is just below the national average.

Q33 Mr Chaytor: But we are talking about a whole class of local authorities here, not just this one.

Sir David Normington: Yes, but every local authority has their case, as you know.

Q34 Mr Chaytor: The new system will provide for some compensation in terms of the schools that are losing pupil numbers, so there will be an adjustment to give slightly extra funding to compensate for the fall in rolls and slightly reduced extra funding for those schools that are increasing their rolls.

Sir David Normington: That is right.

Q35 Mr Chaytor: How does this fit in with the whole process of devolution because successive governments' thinking has been that as we move to a more market-based system, more popular schools will expand and the less popular schools will go to the wall, but what you are doing here is actually intervening in that process to limit the effects of parents choosing particular schools?

Sir David Normington: Only in the transition. I think this is about trying to avoid very sharp drops in funding because of course if you lose pupils suddenly, it is not always easy to take those costs out just like that, so some of this is about the transition really and it is not about stopping the process of resources following the pupil, which is the basis of the system, but it will just take a bit longer.

Q36 Mr Chaytor: Can you see any ways in which the local formula could be manipulated by local authorities to take advantage of the particular features you have put in? Are we going to see an army of consultants being recruited by local authorities to teach them how to beat the system?

Mr Crowne: It is a difficult question to answer!

Q37 Chairman: Well, the answer is yes, of course!

Sir David Normington: Actually the answer is no, I think.

Mr Crowne: In answer to your last question, I certainly hope they are not going to recruit an army of consultants. What we do want to do though is ensure that the framework within which they define their detailed formula is clear about the principles, and the principles have been established for some time, that 75 per cent of the budget could be allocated on a pupil numbers basis, but there is plenty of discretion about the 25 and that is absolutely right because different local authorities in different circumstances are facing different challenges. As to whether individual local authorities would somehow manipulate this, I do not really see that. The discretion is there for a purpose. They need to respond to local circumstances. We have given schools forums the ability to scrutinise. We are encouraging local authorities to work very closely with their schools forums and indeed for the first time we are giving schools forums some decision-making powers which have been devolved from the Secretary of State, from the centre to local level, so the system will operate with a greater degree of transparency. There will be more opportunity for those with a local interest to ask why certain decisions are taken and we are already beginning to see, I am glad to say, a degree of more transparency in the way the local systems operate. I am very confident that we are going in the right direction.

Mr Chaytor: If one of the aims of the Department is to make the system more simple, I have to think of the explanation you gave us of the new system for school funding. We could not understand it and our specialist adviser found it too complicated, so heaven help many of the local authorities that have to find their way through it, but we can come back to that.

Q38 Tim Farron: On the theme really there about clarity, I am concerned about public and democratic accountability for the success or other performance of the school system. Do you think that the new system will provide that clarity about where schools funding actually comes from or do you think that there may continue to be ambiguities about who is responsible for different roles of local authorities in the Department?

Sir David Normington: It will be clear. It ought to be clear that all the money is coming from central government, except for the amount that goes to the local authorities, and it ought to be clearer, but it is nevertheless the case that in our system we share responsibility and, therefore, there is scope for one bloc blaming the other really and sometimes that happens, so I -----

Q39 Chairman: It happens all the time!

Sir David Normington: Occasionally. The national local position is there, it remains in place and I think it will be more transparent, as Stephen Crowne was saying, about what money is coming into the schools budgets and why. I think one of the troubles has been that there have been so many pots of money and it has not been very clear which pot came from where. There will be basically two or three main streams of funding coming in in due course, sort of revenue funding, and I think that will be a lot clearer, but I do not promise that this will be completely clear to the local taxpayer; I think that will continue to be an issue.

Q40 Tim Farron: So when the A-levels are good, Ruth Kelly goes on the radio and when it is a school with special measures, it is the LEA that gets the blame?

Sir David Normington: No, we take responsibility for the successes and failures in the system, but we always say, which is true, that it is the schools that are delivering both the successes and the failures. It is what they do that really matters.

Q41 Tim Farron: I am obviously concerned about outcomes in the end and whatever the process of this is, there surely must be some assumption as to what the outcomes are likely to be. Clearly it would appear that the Dedicated Schools Grant of the new system in general will ensure more popular schools are rewarded less quickly and less for their popularity and less popular schools will be hit less and less quickly for their unpopularity and those unpopular schools that make successful attempts to turn things around will be encouraged to do so in a slower and less effective way. Are these the Government's intentions?

Sir David Normington: I do not think any of that is right actually. The Government's policy is to allow popular schools to expand and to set aside capital to enable that to happen faster than it has. The Government's policy is also to ensure that where a school is weak or failing, there is faster action taken so that schools are not left lingering, which they sometimes have been in the past. I think that the conversation we have just had about money following the pupil, the money will follow the pupil, but it is just that in reality to take the money away from a school just like that is a big problem for a school. The reality of how you manage a school is that if your numbers fall, you cannot get the costs out fast enough, so if you take the budget away from them, the school would be in terrible difficulty. Therefore, all we are doing is just dealing with that, as far as I can see, and it will still be the case that money will follow the pupil and that we will be encouraging popular schools to expand and providing capital money for that to happen.

Q42 Tim Farron: I have a final question of particular concern to the constituency I represent. What work has the Department done on the likely outcomes with regard to small rural schools, particularly those with falling rolls, of these changes?

Mr Crowne: One of the great strengths of the local formula system we have is that local authorities with schools in that position can, with a great deal of discretion, design a local system which will be fit for purpose in those circumstances. We have been very careful when we have been designing the minimum funding guarantee and so on to ensure that that discretion is still there. Indeed quite a lot of authorities with large numbers of very small schools have very distinctive arrangements for funding those schools. That is because such a high proportion of their costs are fixed compared with larger schools. Therefore, I am confident that the current architecture, the architecture that we are introducing certainly does not reduce the ability of the local authority to design a locally-fit-for-purpose system and indeed I think in some respects it increases it.

Sir David Normington: Well, we do have falling rolls in some places and they are quite sharp in some parts of the country and that is obviously raising issues about ----

Q43 Tim Farron: But they are not as a result of schools failing; they are as a result of communities dwindling and the schools do not need to be punished for that.

Sir David Normington: It is the result of school demographics really and also movements of population actually from north to south in many respects.

Q44 Chairman: If you have got so many fewer pupils coming through because of the sharp demographic downturn, most of our electors would say that the budget should go down if you are educating less children.

Sir David Normington: And that is what happens of course in the end.

Q45 Chairman: Is it? On a previous occasion one of your members of staff told us that you could save 50,000 teachers' salaries. Because of the demographic downturn, are we going to see that sort of scale of saving?

Sir David Normington: I do not know if it is that scale, but it is certainly the case that primary school numbers have been falling and that is moving through into secondary. It is quite sharp in some places rather than others. It is not very sharp at all in London, and in fact there are some increases. It is a question of what you do with the money. The money does come out. If there are not the pupils there, you do not eventually get paid for them and that happens relatively quickly. The question then is: what do you do with that money? Up until now the Government has taken the view that you should put that back into the education system to improve elements of teachers' development or school development.

Q46 Mr Wilson: Sir David, can I just explore the impact of some of the new funding arrangements and go down into some of the detail. Can I refer you to the document which was sent to us by Jacqui Smith, the Minister for Schools, in particular, if you go to the section on school budgets where she talks about giving schools stability and certainty and under bullet point two where she talks about a single count date for schools in January. Now, I am not convinced that you have thought through the implications of this particular policy because, as I understand it, many LEAs have a three-points entry system particularly for reception children, which includes the Easter intake. For a three-form entry school, this could mean a projected deficit in the region of about £80,000 in the financial year 2006/07. Now, that would obviously cause severe financial difficulties and many schools would not be able to deal with a deficit of that sort, so really what I am asking you is can you clarify that? Am I missing something or has the Department looked at that in detail?

Mr Crowne: I think it is very important to distinguish two things here. One is that we needed to establish, and we have established, with a complete consensus amongst local authority representatives and school heads what should be the basis for us to distribute money to local authorities with DSG and we had to have a single consistent basis for doing that. Quite separately, the local authority then needs to have a basis for producing the pupil numbers that will guide the local distribution and what we are basically saying is that we need consistency at both levels. Whatever option you go for, and there is a wide variety of practice out there of local distribution, there will be some complications of the kind you have identified. The key thing is to get some consistency and then locally to work out how you deal with the complications. No system is going to be free of those complications. We have road-tested this and are road-testing this with a large group of local authorities. We are not finding that we are getting under-predicted consequences of what we are doing. The message coming back from local authorities essentially is that these changes are manageable, but of course one of the key things we are doing for next year and the year after is testing out the basic elements of this new system and we will be reviewing that operation, but at the moment I think I can give you the assurance that, based on the work that has been done and the feedback we are getting, we think the system is manageable.

Q47 Mr Wilson: So you are setting up the problems for the LEAs to deal with?

Mr Crowne: Not at all. The local authorities already have the issue of how they count pupil numbers and how they deal with unpredictability and changes; they do that already. What we are saying is that we are trying to get to a system with more consistency in it based around really what is agreed to be the best practice in local authorities and that is actually well worth doing in its own right and local authorities have learnt a lot in this process.

Sir David Normington: It is just important to say that local authorities have been distributing money to schools for a long time of course and they will continue to. They are very familiar with these local patterns and they will continue to be. The reason for having a local distribution system is precisely to deal with these different patterns which impact differently in different places because there are a lot of different systems for when pupils are admitted and so on, but they are used to dealing with that.

Q48 Mr Wilson: The message you are giving me is that it is manageable and the message I am getting from schools is that it is not going to be manageable, so I think there needs to be some further thinking on that. Can I move you on to special educational needs because again that is an area I am particularly concerned about. For example, inclusion means that schools are accepting a growing number of children with very challenging behaviours and also disabilities. Currently, as I understand it, statementing allows 26 weeks for a statement to be issued and the statement currently cannot be backdated. Am I correct in saying that?

Sir David Normington: I think that is right, yes.

Q49 Mr Wilson: That means a child can be in a school for seven months before there is any support for that child and when a statement does finally arrive, there are only 20 hours allowed in terms of full-time support for that child. That means the schools are left facing a choice of either not providing support in advance of a statement being issued, which has a detrimental effect on the rest of the pupils in the class, or instigating large-scale cuts in other parts of the school. Now, that obviously is another massive problem and either the Government is going to fund properly inclusion or it is not and I would like to know which it is going to do.

Sir David Normington: Well, there is a lot of money going into supporting children with special needs and statements is only the top level of a system which provides different levels of support for children with different sorts of needs. I am not sure that the changes we are making actually make this better or worse. There is always an issue about how we get support to children with the greatest need and I would not say that the system is perfect, but I do not think that the changes we are making will actually make that different.

Q50 Mr Wilson: Why is there no backdating of funding with regard to these statementing issues? Seven months is a lot of money for a school.

Mr Crowne: The answer has to be that the process of statementing defines the entitlement of the child to the level of provision and the process of statementing looks at the needs and works out what is required in that case, but, as David has said, this sits on top of other monies which local authorities have a lot of discretion about how to distribute to deal with all of the pupils with lesser special needs who would not qualify for statements and indeed for those pupils who are going through a statementing process, and you are right, it can take some time. When you have got complex special needs, it takes understandably a while to work out what the right kind of provision is. I think the answer has to be that you have to look at the budgetary arrangements in the round and what we would expect local authorities to do is make sure that individual schools facing those kind of challenges do have access not only to the money that goes with the statement, but other resources for SEN which deal with those children for the statement date.

Sir David Normington: Quite a lot of that money goes to the local authorities so that they can distribute it. Obviously you cannot distribute it evenly among schools because it has to follow particular types of pupils.

Q51 Mr Wilson: In the responses to the written questions which we sent to the DfES, in response 1.4 it says that the base will be the 2005/06 spending total. Does that take account of money local authorities are spending on schools this year over and above the money provided by the Government?

Sir David Normington: Yes.

Q52 Mr Wilson: The £(?) million?

Sir David Normington: Yes, it takes that as the starting point.

Q53 Chairman: You will know, Sir David, that we are embarking on an inquiry into special education.

Sir David Normington: I do.

Q54 Chairman: One of the frustrations when we look at it is people who say that it takes so long to get a statement and then if they need an educational psychologist or, heaven help us, if they find they then need a different kind of psychological treatment, that is a nightmare area for most constituents. Of course perhaps the problem would be better if we saw more schools taking their share of SEN and problem pupils and I am sure you will have been as upset as we were by the Sutton Trust Report this week where so many state schools, top-performing state schools take such a small number of such pupils at all. You may have been disturbed by that.

Sir David Normington: Well, of course I was not surprised by that. Of course it looked just at the 200 top schools, I think.

Q55 Chairman: Comprehensive and grammar.

Sir David Normington: Where 161 of which were grammar schools and 39 were comprehensive, so it is not really a comment on the whole system; it is a comment on the top-performing schools.

Q56 Chairman: You know very well that we said earlier this year in our report on admissions that unless you grasp the nettle of admissions and make the code on admissions obligatory, not something you just take note of, you all the time will get schools, especially faith schools, dodging their responsibilities. You know that.

Sir David Normington: Well, we are going to say something about this in the White Paper. I am very familiar with the point. On the SEN issue, I actually welcome your study because I suppose that throughout all my time in this area, both before this as Director General for Schools and now, the issues that are the most difficult are the issues of special needs. We have always had people coming to the Department unhappy with the treatment they are getting and fighting for their children. It is distressing and it is very difficult to deal with. I understand that if you have got a child with special needs, actually you do not really care what the system is like, but you want the best for your children. The system sometimes involves parents having to fight the system and I think that is difficult and I am sure that is what the discussion will be about around this committee table.

Chairman: We will meet again.

Q57 Mr Marsden: Mr Crowne, I wonder if I can take you back to the schools forums which you were talking of a few moments ago. If the schools forums are going to have all these expanded responsibilities, where are the resources going to come from?

Mr Crowne: Schools forums have been there for a couple of years now. The best practice we have seen is actually for local authorities themselves to provide the services that they need relatively straightforwardly actually. What schools forums need above all is clear information and up-to-date data and in a form which is useful to them. They are not particularly labour-intensive operations.

Q58 Mr Marsden: That is what we have been told in the past about school governors.

Mr Crowne: I understand the risk you are alluding to. We have spent quite a lot of time talking to schools forums over the last few months because we have been keen to learn about what people's experience of them actually is and where they are perceived to be more or less successful. I think it is quite clear to me that where they are seen to be more successful, they are based upon a really open and supportive relationship with the local authority.

Q59 Mr Marsden: You are not worried that in the wake of the inevitable scaling down of some local authority functions in the light of the Dedicated Schools Grant local authorities may prove unwilling or unable to provide those resources?

Mr Crowne: That is not what we are seeing on the ground. I would not say to you that every local authority is an exemplar of best practice, I do not think we can say that yet, but I am confident that there are now a substantial group of authorities within which the schools forums are doing an extremely good job and the relationship between the forums and the local authorities is a strong and good one.

Q60 Mr Marsden: Time will tell on the funding and the resources for schools forums, but I would like to press you a little further on some of these new roles or potentially expanded roles. Now, in your written answers to the Committee, the Department said that schools forums would be able to make minor changes to the operation of the minimum funding guarantee where the outcome would otherwise be anomalous. Can you give us any examples of what an anomalous outcome might be?

Mr Crowne: It is possible to think of situations, and I am desperately trying to think of one now, in which the way that the national, as it were, regulations work with the MFG is to produce a result which does not really fit local circumstances and that might be around small schools, it might be around big population shifts, it might be around where schools are being closed and opened, those kinds of situations where pupil numbers shift to a large degree from year to year, so it is those kinds of situations we are talking about. We recognise that the principle of the minimum funding guarantee is the thing really. It is about giving people predictability and stability. If there is a better way of doing that at a local level to deal with a particular set of circumstances, fine.

Mr Marsden: So taking the answers you have given, if you are going to have the potential for that sort of submission coming through, does this not bring us on to a broader question about the issue of how you actually define the validity of these arguments? Let's take, for example, the broader issue of an authority which, awarded this fair funding formula, says it should redistribute the resources, let's say, for instance, in terms of social need. Is that not going to lead schools to hit the buffer in terms of the minimum funding guarantee in circumstances in which presumably local school spending will rise and the Department will have to pick up the tab? Will that not cause a major problem?

Mr Crowne: We designed the system carefully to ensure that every local authority will have some headroom once it has met the individual school minimum funding guarantee.

Q61 Mr Marsden: How much?

Mr Crowne: It is at least one per cent in every authority, so what we are saying is for 06-07 and 07-08 every local authority will have an increase of at least five per cent per pupil. We do not yet know the level of the minimum funding guarantee in each of those years because it will be dependent critically on the teachers' pay settlement, but if previous experience is anything to go by there will be a significant degree of headroom in each local authority.

Q62 Mr Marsden: If it were to be proven that that one per cent was inadequate, would the Department within its current spending predictions be able to adjust it?

Mr Crowne: No. What we are saying is that is the absolute minimum for every authority. Many authorities will get more. The overall increase in each of those years across the country is six per cent, so there will be some authorities on that floor but many will be distinctly above it. What we are saying is that the principle of the DSG is we will set a two-year budget for local authorities and it is for them to work through their local formula with their schools' forums to establish the best way of distributing that locally.

Q63 Mr Marsden: Can I put a final point to you which brings in a broader issue and Sir David might want to comment on it as well. To go back to what you said, you used various examples of what might be anomalous and I have also referred to social need. There is a question mark, is there not then, under this new streamlined system of pots of money concerning those issues which have currently or recently been recognised by the Department as being important but which do not currently find a place in the public funding formula? I am referring particularly there to the issue of transience and the effect of transience in schools. The Department had a couple of reports by Sally Dobson. There was an indication in correspondence to me and I know there have been indications in other correspondence from Ministers that the Government recognises the importance of that, but there is an issue about what that actually means. We can all recognise things but if we do not put our money where our mouths are in terms of the funding formula then it is not going to achieve a great deal. A point my colleague Rob Wilson made earlier on about a particular day being taken for the qualification number will have a particularly significant impact on those areas like my own in Blackpool where transience flows go very fast during the year. How are we going to cope with that? Will the issue of transience receiving special formula funding consideration be adversely affected by your streamlining?

Mr Crowne: I will take that first, if I may. I will deal first with the national distributions to local authorities. We did look very closely at this because, you are right, a number of authorities have said to us is it possible somehow to recognise in the national formula an element of transience. We looked very closely at that and the available data and we concluded two things. One is actually we could not find any databases for identifying authorities who face a particular set of challenges on transience when you looked on an authority-wide basis. It is quite hard to get a data-driven approach and of course we are committed to ensuring that our national funding formula is based on objective and data-driven criteria. A second point: that is not to say, of course, that those problems do not present serious challenges at local level and what we are committed to doing, and we have started now, is looking at the whole issue of deprivation and the manifestations of that. I see the issue of transience very much in that context and the Government is concerned to ensure that local formulae reflect levels of deprivation and the challenges that imposes for schools, many of whom are in deprived areas and face transient populations of various kinds. We are committed to reviewing that. It comes back to a point David was making earlier about formulae; you have to keep them under review to make sure that the way that they operate and the factors they take into account correspond with the realities that local authorities and schools are facing on the ground. That is not to say we are going to make changes every year but we do have to think about whether ---

Q64 Mr Marsden: With respect, you have been making warm noises as a Department about the transience issue for at least two to three years and you have now had two major reports from Sally Dobson on the issue and all you are coming along to say today is that "we will keep the issue under review." That does not sound very satisfactory to me. Have we a timeframe for when you are going to make some decisions?

Sir David Normington: We will not make any more changes until this next two-year period starting in 2006 is over and we will then be doing a review. I know it sounds as though we are brushing this aside. As we know, because we discussed it here before, the distribution of money from a national to a local level (which is not a new issue of course, it has been in the system all along) is highly complex and controversial, and to try to get a system which distributes the money fairly at a national level has been a constant issue over many years and all the time one is trying find the data that enables you to make the big allocation to local authorities. It takes account of rural issues, it takes account of deprivation, but we cannot make the national formula sensitive enough to deal with all these issues, and that is why there has to be laid over this a set of local decisions which take account of particular needs in the area. I know that sound like passing the buck but it is the reality of how a system of national funding has to work. It is why we cannot have a national funding system which in a sense distributes the money straight from us to schools because we cannot at a national level take account of everything that happening at the local level. Alongside that, the Government has over time introduced a lot of other grants. Some of that funding will continue in a separate stream although we will try to make sure, again, that it is not all earmarked money for specific things but actually the money goes out under a more general tag so that some of these local issues at school level can be dealt with, in other words you can decide what your local issue is and spend the money on it, all this within a system where year on year school funding is increasing in real terms by about six per cent over this period.

Q65 Chairman: So, Sir David, are the demands on schools. It is all very well saying that it is a very complex system and it is difficult to get a transformation into a new system, I understand that and you have our sympathy, but at the same time to give you three examples, just recently I noticed when Charles Clarke was Secretary of State he appeared before another Select Committee and said, that the lead role in education for sustainability is with education. I understand that that is now accepted and you have a new policy on education for sustainability of the environment and all that. Does it come with a budget? Who funds it? Then you have the reaction to the Jamie Oliver thing. I have to say that nearly four years ago this Committee wrote a report on school meals so rather than anyone carrying it on in the wake of Jamie Oliver he rather carried it on in our wake. You have now placed another responsibility on schools which is an expensive one in addition to everything else they do. Indeed, who is going to pay for extended schools? If schools are going to open earlier and close at six, who is going to pay for that? Here are three new policies laid on to schools. How are they going to cope?

Sir David Normington: We will be providing extra money for extended schools of course, dealing with that one.

Q66 Chairman: How much?

Sir David Normington: I do not know. I can let you know but I do not know it off the top of my head.

Q67 Chairman: What about education for sustainability?

Sir David Normington: Well, I was going to make a general point.

Q68 Chairman: A general point evades answering the specific!

Sir David Normington: Yes, I will come back to the specific, if I may. I do not have an answer on education for sustainability.

Q69 Chairman: Make your general point first.

Sir David Normington: We do have a system which is highly devolved and for a lot of years now we have said that the school should be the budget-holder and should make the local decisions.

Q70 Chairman: Then you introduce the school meals, which is like Soviet Russia because you say they cannot have vending machines unless they are non-sugar and non-fizzy, and you tell them that they have got to have totally different new school meals. Here is a devolutionary government who suddenly says, "On this issue you will do as you are told and you will do it immediately".

Sir David Normington: Yes and we are putting somewhere approaching £300 million extra into the system to help them do that. What I was going to say was this is a system which is highly devolved. It is a system which both in capital and in revenue there have been huge increases so no school should be telling us they have not had those increases. We have to allow local decisions to take their course and priorities to be set. Quite often when we impose a further national demand on a school, as we have with school meals, we provide extra money. Sometimes - and I think sustainability is a very good example - if the school has the right policy we can support them on this. Sustainability is not necessarily going to cost them more, it may cost them less. We have a very, very big building programme and designing sustainability into that building programme is a key issue for us.

Q71 Chairman: I thought the Treasury stopped you doing that because it is too expensive.

Sir David Normington: It is not expensive to make sure you have the most efficient heating systems in new schools, for instance.

Q72 Chairman: Has the Treasury stopped you doing a lot of that work?.

Sir David Normington: I do not think so.

Q73 Chairman: You do not think so?

Mr Crowne: I am confident.

Sir David Normington: I do not think so.

Mr Crowne: In designing our space standards for schools and in the specifications that we are supporting through our capital programmes we are building in very good practice in sustainability.

Q74 Chairman: We are minded to look at sustainability for schools. What about the third one?

Sir David Normington: Remind me what it was.

Q75 Chairman: Extended schools. It is a big responsibility. Who is going to pay for all that supervision?

Sir David Normington: Well, there is a budget for extended schools and, if you like, I will provide you a note about it. I am not precisely sure what we have yet said publicly about it but we cannot expect schools to be open eight until six and expect all the costs somehow to be found by the school.

Chairman: Can we have a note on those three items? Nadine Dorries?

Q76 Mrs Dorries: Sir David, I would like to come back to a point the Chairman raised a moment ago about the top-performing schools taking less than their fair share of children with SEN. I do not have the figures with me but it is the case that a large number of excluded children from less well-performing schools have quite complex SEN needs. In addition to this, the evidence also shows that in the less well-performing schools once those children have been excluded - and in fact this is the reason for the exclusions being on the increase - the learning environment improves. Is this not in itself evidence that funding should continue to go towards special schools and that the programme of inclusion should be reviewed and perhaps halted given the fact that the better-performing schools do not have their fair share and the less well-performing schools are suffering as a result of it?

Sir David Normington: I think investment needs to continue to go into special units and special schools. It is important that we try to design a system which meets the needs of each individual child. Sometimes that will be a special school. Sometimes that will be a special unit for particularly badly behaved children and that will be off-site. Sometimes that will be a unit on site. We have put a lot of money into developing on-site provision. I think that some of the things that we have done in the special needs area to invest in special provision on site in the schools is a very good way of going. We all have these anecdotes, but I saw a school which had a special unit for dealing with children who had various problems of deafness, and what you are able to do if you have those special units is you are both able to provide them with special support in the school and you are also able to enable them to join in with the other activities in the school as well. Clearly there is a need for some children to be in special schools. We do not have a policy of closing down all special schools and forcing those children into mainstream schools. We have a policy of trying to have special schools, special on-site units and also, where that is feasible, support for children in the classroom. It ought to be a mix of those things. I would really hate it if we jumped to one solution. We have to try to design this system for children of all sorts and, frankly, it does not quite match that yet.

Q77 Mrs Dorries: No, and in fact we have seen 91 closures of special schools in recent years. The on-site units which you are talking about, which are actually orbital units to the schools themselves where the children are treated separately, do not exist in very many schools. What we do see is inclusion within the classroom, which is not working in many many schools particularly in the area about which I have particular knowledge. A moment ago you stated in answer to my earlier question to you that you can see where funding goes there are better outcomes. I do not think you can make the assertion of those outcomes unless you have the evidence to back it up, but surely seeing the funding going to special schools is one of those cases where you can prove and do have the evidence that funding going into a particular area produces the right outcomes?

Sir David Normington: At the risk of repeating myself, I think you can point to very successful examples of children with special needs in mainstream schools in classrooms with support. I think you can point to successful cases of children who are in special schools. I do not want to be categorised as saying that there is one right solution. We have to try to do all these things. It is true that there have been closures of special schools but it is also true that there are a lot of special schools still and the policy of trying to build those schools as centres of expertise which can offer their expertise to schools which do not have that specialism is a very important policy too so you improve the capacity of schools which do not have special units to deal with children with disabilities and special needs. Can I just say I will not have the suggestion that we are closing down special schools as a matter of policy. I will not have the suggestion that inclusion is the wrong policy. Sometimes it is the right policy. We have to try to design the policy for the parents and the children. It will not always be right for them to be put in a special school.

Q78 Mrs Dorries: You have just made the point that special schools provide training to the teachers at the schools with inclusion, but actually that is a major problem that because of the 91 closures of special schools there is not the training, there are not these centres of expertise. They are reducing the number of centres to help those schools with that training. I know of many schools where the teachers cannot get any assistance or specialist training because the number of teachers who have that experience is dwindling because those special schools are closing.

Sir David Normington: I do not think over a lot of years that it has been the case that special schools have provided their expertise to mainstream schools. I think that is what we are trying to do. I agree that where special schools have been closed it is just a fact that they do not exist, but our policy is to build up special schools as centres of expertise in a way that they have not been before, so I do not think we come from a time when the schools did offer enough help to children who were in mainstream schools. So that is what we want to do. Can I come back to the on-site units. It is true that they are not everywhere, but we have been trying to support the development of on-site units which both provide support to that school but can also support other schools. It is another way of doing it. However, the system is not perfect and I would not dream of saying it is.

Chairman: A last question from Stephen.

Q79 Mr Williams: Just to clarify the answer to a question Rob Wilson asked right at the end of his series of questions, to make sure I understood the point about the new funding arrangements. You said a couple of times in your remarks earlier that the new funding arrangements took schools funding out of local taxation. I hope I am quoting you correctly there. Does that mean that the funding that the Department will give to local authorities will reflect what, when I was a councillor, was called the SSA or will it take into account the excess spending that many local authorities do on top of that? Bristol and Avon have all spent well above the SSA. Will the new grant that goes directly to the authorities from the Department take into account that discretionary spending?

Sir David Normington: Yes, it starts from the basis of what is being spent.

Q80 Mr Williams: So that anomaly will be removed?

Sir David Normington: --- which is very important. I should make one qualification. As I said before, it will be possible for local authorities to continue to raise local taxation to supplement what is coming from the dedicated schools grant. Whether they will decide to do that I do not know but it will be possible for them to supplement the national financing.

Chairman: We are going to move on to efficiency savings. I apologise, Sir David, I should have said I have a particular interest in education for sustainability. If you look at a particular article in The Telegraph yesterday you will have seen that, and I should have declared that interest.

Mr Evennett: A very good article too!

Chairman: And, David, you are going to lead.

Q81 Mr Evennett: First of all, we are having rather mixed messages from you today, Sir David, about centralisation and devolution and I am concerned. I personally am more into power to schools and localities and I am very concerned about the areas we have had heard about so far. We must go on to efficiency savings. Obviously you are very aware of the Government initiatives to cut down the number of civil servants to make them more efficient. Also following the Gershon review your Department has got to deliver a huge amount of annual efficiency gains by 2007-08. I believe you are on the record as saying that two-thirds of that saving of a large amount of money will come from the schools sector, and it is obviously of concern how the schools are going to manage. What advice you are going to give them to do that if we are going to have those huge efficiency savings within a few years? Would you like to comment on that first of all?

Sir David Normington: May I make one preliminary comment which is there is an issue about reducing staff numbers in the Department for Education and Skills which we are doing. I will talk about that if you like. Inevitably that is quite a small amount of money. The big amount of money is obviously somewhere within the £60 billion that is spent on education and the big efficiency savings come from getting better outcomes or greater efficiency from the use of that money. We are committed over three years to producing £4.35 billion efficiency savings. That is the first thing. The second thing to say is that it is true that we are looking broadly to the schools sector, which, after all, is the biggest consumer of resources, to produce those savings, but it is important to understand that what we are looking to do is to give them more headroom in their budgets, not to take money away from them. This is not about taking money away. If I can just take a small example but a real one. We are looking to see how we can reduce the cost of school insurance. Indeed, we are looking across the whole are of procurement policy in the education system to see how we can get best value for the things that everybody has to do. If we make those savings, what we will do, effectively, is negotiate a number of national or regional contracts which hopefully will lower costs. It will then be up to the school to make use of those, but any money they then save will be kept by them. This is not about taking that money out. Similarly, a substantial chunk of money comes from the more productive use of the school workforce. There are very big changes happening in schools in terms of how they use their workforce, designed to relieve teachers of jobs that are not about the core job of teaching and learning, and getting those jobs done in a more efficient way, either by technology or by other staff and so on and thereby releasing productivity in the system. We are very well down that road this year and that will release real resource for the school. We have some real examples of how we are doing that. I am sorry it is a long answer but a lot of the savings are in helping schools to make more of the money they have got, not taking money away from them.

Q82 Mr Evennett: Again, it is centralisation, is it not? It is you telling them rather than leaving it to localities and schools themselves?

Sir David Normington: I do not think so. I think local authorities do this too and we will be working with local authorities as well. To go back to the school insurance example. We will not be telling them who to use for insurance. We will just be telling them that there are these deals that we think will lower the cost.

Q83 Mr Evennett: I did not mean that side, I think they are excellent. I was talking about how they use the staff within the school. Of course it is excellent to go for the insurance because you have the expertise in your Department which presumably the schools or local authorities will not have. However, if you are talking about what jobs should be done within schools, is it really your role?

Sir David Normington: I think what we are trying to do is encourage schools to think differently about how they use their total workforce. Again it is up to them. I need to give you a specific examine, if I may, just very briefly. We have a very good case of a secondary school which I will not name, which through the process that I am describing of getting them to think again about that workforce modelling and how they use their workforce, has decided they will try to stop using supply teachers altogether and they will take that budget (which they discovered was £200,000 on supply teachers which was not very productive and was not very efficient for them) and employ three more trained people called "cover supervisors", to ensure that if a teacher is away they can get somebody who knows the schools and its ethos and rules into that classroom and make sure they are supervising the work. That has cut the costs for them and they have saved money. They are absolutely delighted with how it has brought better order to their school and they think they are getting better use of the workforce out of it. There is real benefit there. One thing we have done here is we have got a national remodelling team, a team of expert people usually drawn from schools, who are supporting schools who are finding it difficult to think this through. Lots of schools do think this through. The one I described decided this itself and saw this itself. There are lots of good models like that to spread round the system. That is of real benefit to them.

Q84 Mr Evennett: What you are really saying is that you are going to give advice but you are not going to impose and that the cuts that there may be (or the efficiency savings) will not have an impact on the education?

Sir David Normington: I have to account then for whether we have found the £4.35 billion, so there is the issue of ---

Q85 Chairman: How much is that per school?

Sir David Normington: It is 2.5 per cent of the total budget. I do not know what it would come down to for an individual school. I would not expect it to be the same in every school.

Mr Kershaw: It is across the whole system, not just schools of course.

Q86 Chairman: And what savings would you expect for an average comprehensive school of 1,500 pupils?

Mr Kershaw: If you said that about a third of the savings (efficiency gains, not cuts) were coming from the schools sector, that would be £1.5 billion or so in year three. You would have to divide that by 20,000 schools. I guess you are going to have to do some complicated weighting for large secondaries as opposed to very small primaries. It is quite a complicated sum to do.

Q87 Chairman: There is an army behind you there.

Mr Kershaw: I think someone will have to get their calculator out!

Q88 Mr Marsden: I would like to take up two issues. Perhaps first of all I could just speak about your administration costs. The Department's Annual Report says that staff numbers will have reduced by 31 per cent from 2003-04 to 2007-08 but your annual administration costs only appear to be £6 million lower, in 2003-04, £243 million and 2007-08, £237 million. Why do you not expect to make a greater saving?

Mr Kershaw: Because there is a short term and a long term issue here. In the short term, of course, we have had to use and invest some of our existing running costs over this period in voluntary release schemes and so on for folk who are leaving. That is one of the ways in which we have managed to secure quite significant staff reductions without compulsory redundancies. That has had to be paid for over the next couple of years. In the period ahead you will then see some quite significant reductions in our cost limit because then of course the returns really come in in terms of a much smaller number of staff. I think you are just describing a transitional arrangement. In the short term we have to fund the staffing reductions of some of the people moving on and out. Longer term it will represent some quite significant savings.

Q89 Mr Marsden: What sort of anticipated savings on administration costs could we see in 2009-10, for example?

Mr Kershaw: I think it is quite hard for us to predict that at this stage because that depends to some extent on the next spending review and we will get into trouble if we pre-empt that kind of negotiation.

Q90 Mr Marsden: We can guess can we not, that the next spending review, at least in terms of all the press comment, is going to be rather severe and therefore the impetus for you to make administration cost savings will be rather great?

Mr Kershaw: It will and I think we can expect a very challenging conversation with the Treasury which will be about demonstrating that those savings have been played back into the front-line and essentially about efficiency gains in terms of money that is already at the front-line, as Sir David has said. This is the area where we will need to demonstrate we have used that money in a quite different way and we have got it out through the funding system either into schools or further education or wherever, so I think it is right, that pressure will be on us very directly.

Sir David Normington: We are expecting to save over this period and it is right that we have to invest to save this. This does not get reflected in this three-year £21 million reduction in our admin costs in 05-06, £21 million in 06-07 and £44 million in 07-08. We would expect in the period beyond that to see the full savings that we are making in the three-year period reflected in our annual cost budget. The Treasury will not let us get away with it.

Q91 Mr Marsden: Nor will we, I suspect.

Sir David Normington: Even more so, I do not suppose you would either, nor do I want to.

Q92 Chairman: Sir David, we will be watching you very carefully. We do not want any "Del Boy" tricks, a Trotter approach to this, what we usually call "smoke and mirrors"!.

Sir David Normington: I have been called many things but Del Boy is not one of them!

Q93 Chairman: But you take my point. We do not want to see these savings --- and it is not just Gershon, it is the Lyons Report too --- I have to say, I do not know about my colleagues but I have not seen many civil servants from your Department moving out, I have not seen a substantial number coming to Huddersfield and setting up there because it is much cheaper and more pleasant to live there or Barnsley or Guildford and other places but I have not seen it. Quite honestly, most of us do not think the Lyons thing is working at all. Why has Ofsted not moved out yet? Why have we not seen some really significant changes out of this overheated London and South East to places where graduate employment will be very welcome. Why has it not happened?

Sir David Normington: You will see 800 posts ---

Q94 Chairman: 800. Out of how many? Why do we have not a substantial number? Why do you not say this Department could do even better with the move of a large number of civil servants out of London?

Sir David Normington: We have done that. The majority of my Department is already outside London.

Q95 Chairman: Where are they?

Sir David Normington: They are in Runcorn, Sheffield and Darlington. The majority of staff are outside London. It is the minority of staff in London and I am committed to moving more outside London. We are also committed to moving the remaining NDPBs, the QCA and the TTA, out of London substantially. That is all on the record. That is what we will do. However, in the meantime we are also reducing our staff and I think, just to put this on the record, I have 760 fewer staff than I had a year ago. Ofsted are reducing by 500 in this period. These are real job losses, they are happening.

Q96 Chairman: Okay how much outsourcing are you doing? For example, I know Capita have got a big contract from you and they immediately announced that they are shifting much of their work to India. I have to say that both the transfer of responsibilities out of government out of the Department to Capita and then to see them get transferred out of this country seems to me a Del Boy sort of tactic. You might say we have got less people working for us but you have outsourced them. How does that account?

Sir David Normington: Those figures do not include the Capita contracts. They were there before.

Q97 Chairman: Are you pleased they are outsourcing to India?

Sir David Normington: I do not think I know precisely where they are outsourcing to because the main contract ---

Q98 Chairman: It has been in the newspapers, Sir David.

Sir David Normington: Yes I know, but the main contracts that they run for us they run from Darlington where they have built up their employment since the outsourcing of the teachers' pension scheme a few years ago. The other contract they run is a contract about school improvement which is about employing a force of local advisers to support schools in Key Stage 3 particularly. You cannot outsource that. They are all in this country. So I do not think in the contracts they run for us - and I stand to be corrected - there is major outsourcing to India.

Q99 Chairman: What about sector skills councils, why do they predominantly appear to be in London and the South East? They could be anywhere. You hear rumours it is because the chairman lives somewhere. What sort of basis is that, that you have a sector skills council in London and the South East because of the convenience of the chair? It is probably the wrong chair if that is the case. Why are the sector skills councils not distributed around our country?

Sir David Normington: I do not think I have a full list. I could provide a full list of where their headquarters are. The Sector Skills Development Agency, which is the one I do control, is between Rotherham and Sheffield.

Q100 Chairman: You give them a budget, do you not?

Sir David Normington: Partly although they are mainly employer-led bodies and therefore they really ought to be in the places where those industry sectors have their main focus. I am not sure they are all focused in London, some are.

Q101 Chairman: Can we have a note on that because, seriously, some of us are very disappointed about the speed with which the Lyons Review is being implemented. When we come back to Gershon we are concerned and worried because on the one hand we want good quality administration in your Department and if it came to it we would defend you against the cuts as long as you can prove to us we are getting value for taxpayers' money. You have got to be honest with us, Sir David, and if you want us to defend your position we will do it but we are not going to put up with what I have called smoke and mirrors where Gershon is there and the Lyons Review is there but we do not see much change.

Sir David Normington: I would like you to support the changes we are committed to. I do not want you to defend me against the efficiency savings. I think they need to be made. I think any organisation ought to be able to find this level of efficiency savings. I am completely committed to reducing the size of the Department. It is part of the conversation we had earlier about doing less at the centre. I would like support for that. We are halfway through a programme of reducing the DfES by 31 per cent in staff numbers. That is my figure, I put it forward, and I am very happy to defend it to anyone, including my own staff.

Q102 Chairman: And the qualitative change that both the Prime Minister and the Tomlinson Report wanted that you became a more strategic department; that really is working?

Sir David Normington: I believe it is working.

Q103 Chairman: What is the evidence that you are more strategic now than you were a year ago?

Sir David Normington: It is not a finished task. I can describe quite a lot of examples. We have had a lot of conversations about school budgets where we are trying to devolve decisions to a local level and to do less at the centre. I do not know whether you want me to go into specific examples but I can do if you like. I will take just one.

Q104 Chairman: Sir David, the worry we have is here you are diminishing the role of LEAs, local authorities in education, and you are devolving to schools, which pulls a very important centralised responsibility onto your Department at the same time as you are going to be more strategic and cut down your numbers. Sometimes that all just does not seem to add up very well.

Sir David Normington: I think it does add up perfectly because what we are trying to do is to put the schools at the heart of the system and only put in place above and beyond the schools those functions that can best be done there. I think schools get a lot of burdens placed on them from a great superstructure of organisations which often send out lots of communications to them, including us. We are trying to cut all that down. Part of that is taking out the admin costs at local authority level, at NDPB level and at departmental level. I would defend that to anyone because it must be better for the schools.

Q105 Chairman: Some of us look at one particular part - post-16 education - and see this enormous growth of the learning and skills councils. This is a very large empire and the word on the street seems to be that soon you are going to have a parallel body to the learning and skills council for schools because you are going to have to create some sort of intermediary. Is that a realistic fear?

Sir David Normington: No, I do not think that is going to happen. I do not have a plan and I do not think we have a plan at all for putting another body in place between us and schools. On the Learning and Skills Council, of course they have just announced they are going to reduce their staffing by 1,300 from 4,700 to 3,400, remembering that includes their head office and all their 47 local offices, so that is quite a big cut. This is happening, it is real, and the difference will be felt.

Q106 Mr Marsden: I just wanted to comment and ask Sir David on the point about the Learning and Skills Council - and I speak as one of the people who sat on the original Standing Committee on the Bill that set it up - one of the problems with it is that it has been too centralised and it has not been devolved sufficiently and not had key strategic people in the regions making decisions in relation to the LSC. In relation to the broad point that the Chairman has been making, would it be possible - and you refer to your commitment to moving posts out of London and the South East - for you to give this Committee a list of the people who have so far been moved out of London and the South East, who you expect to be moved and out and, perhaps most important of all, what their grades are?

Sir David Normington: I do not know I can do the grades bit but I can certainly give you the numbers. I do not think we have in detail all the grades but I will do my best to answer you on that.

Q107 Mr Marsden: You appreciate why I make the point about grades because we are talking about strategic devolution as well as nuts-and-bolts devolution?

Sir David Normington: I understand that and I will try and give you as much of that information as possible. The Learning and Skills Council though, just to pick up that point, would accept your criticism that it has been too centralised. The agenda it has just announced is all about having effective regional input and more effective (strategic if you like) people at local level, and certainly people who can engage at the right level with colleges but within the overall envelope of reducing the total number of staff. So they are on that case quite hard.

Q108 Mr Wilson: You might not be able to answer this question now. It may be something you can add to the note you are going to send the Committee later on. You say you are making substantial job reductions. I would be very interested to see whether your expenditure on consultants and contractors and other forms of temporary work arrangements is increasing as a result of the staff reductions you are making and whether there is any real reduction overall.

Sir David Normington: I do not have the precise figures but I am very familiar with the point about consultants. I am not in the business of increasing expenditure on consultants to mask the cuts in civil servants. That is not what we are about. I will certainly provide you with what detailed information I have. I want to say one thing about consultants and that is there are consultants and consultants. We employ quite a lot of people from the education system - schools, colleges, universities - on short-term contracts to help us with particular jobs. They are often categorised as consultants. They are not consultants in any normal sense of the word. It has been a big drive of mine to have many more of those people helping us short and long term so we can change the nature of the Department. I will explain this in the note. It is really important that they do not get cut off. If they are coming out of their school for a day or two obviously we have to reimburse them for that. There are quite a lot of them. Then there are the other consultants as well, what we might call the "real" consultants, and sometimes it is important to use them, they have a place. I do not think it is acceptable to use them as a way of getting round efficiency savings and in any case we are having built into our budgets cuts in resources, so that ought to stop us doing that anyway. I am quite clear about this. We have just been audited. The National Audit Office have looked at this. We have produced our own booklet with the National Audit Office on this so we are completely on this case.

Q109 Mr Wilson: You say in your written answers to this Committee of the DfES that "our efficiencies are in the main efficiency gains", which to me sounds highly dubious, being the sceptic that I am about these things. Could you be specific about how it is going to be apparent to either this Committee or the public how you are going to make those £4.3 billion-worth of savings over the 2004 figure?

Sir David Normington: I will ask Steve just to come in but I promise you we will be absolutely transparent about this. We have put on our website our whole plan of how we are going to achieve this and we will publicly account for it. A new system is being set up through the National Audit Office to check this.

Mr Kershaw: The first thing is that we have published a technical note (which I think the Committee has had and your adviser has certainly seen) which sets out in considerable detail the 40 different strands through which we are going to try and achieve our efficiency gains. The point about efficiency gains, to re-emphasise, is that this is not about cutting resource out of the front-line. All but £261 million of our £63 billion spend is front-line funding now, so it is not about cuts out of the front-line and that is what we mean by saying it is efficiency gains. It is freeing up the system and using its existing resource in a range of more powerful ways. The point about producing a technical note is it sets out the different strands, it explains how each one will deliver efficiency gains and in some cases real efficiency savings of one kind or another, it says how we are going to monitor that, and what kind of data we will need from the system and in other ways to demonstrate it. All of that has been agreed and validated with the Treasury, the National Audit Office and the Office of Government Commerce. In each case it is said how we will publish the data about how we have got on. So there is a huge body of information there about how this is going to be done and how it will be published and made transparent over time. Some of that the Department itself will do, some of it will be cross-government and will be done with the Treasury at various points. I think there will be a considerable amount of information over the next years about how we have made progress against each of these strands.

Q110 Mr Wilson: Can I just be clear about this, that the National Audit Office will effectively be the external evaluation of the efficiency savings?

Mr Kershaw: Yes.

Mr Wilson: Excellent.

Chairman: Can we move on now to targets and public service agreements. David?

Q111 Mr Chaytor: You have a target for stopping young women from getting pregnant and for stopping them smoking during pregnancy and now you want to ban their children from eating sausages. Are these the right sorts of priorities in the public service agreement targets?

Sir David Normington: I do not think we have a target for sausage eating. Sausages are fine if they are made from the right things.

Q112 Chairman: There is no target for a reduction in junk food?

Sir David Normington: Not yet. I think this is quite an interesting question. We have some trouble measuring that progress. However, since we are in the business of protecting children, we know that they are protected if their mothers do not smoke during pregnancy so if we are entitled to have a public policy about that, it is very difficult, as you can see, to measure progress to it. I think that it is right to have that up in lights. Even if I did not think that was right it is Government policy to do that. I think similarly with teenage pregnancy, it is a very serious issue for this country. Compared with most other countries we have one of the highest rates in the world and the consequences for those children and families of course go on from generation to generation sometimes and I think the state is entitled to take a view of that and, through persuasion, to try to persuade teenagers not to have early pregnancies. That is all I think you can do; you can persuade, you can advocate; you cannot stop it.

Q113 Mr Chaytor: You do not have a PSA target, for example, relating to school admissions and compliance with the current kind of practice or number of appeals that are referred to the adjudicator? In light of your comments earlier about the forthcoming White Paper and the role that admissions policy might play in that, do you think there may be an argument in the next round of PSA targets for including something specifically on admissions?

Sir David Normington: I do not know, I doubt it. What we have been trying to do is to focus the high-level targets on outcomes and I would not really want to move us to inputs and process. I think we have been able to move to outputs. Where I think your comment is interesting is if you take the schools standards. Some of what we have done in recent years is to look at value added, in other words, who goes into school at 11 and what their achievements are and where the children get to at 16 or 18, which takes account of the type of children and where they come from and what their entry point is. That is how I think if you are going to use inputs you should use them. It is a more sophisticated measure than an absolute outcome target, but I would not want to move to input targets. I think it is right for us to have underneath these headline targets a series of indicators about how things are doing, so you could have indicators for other issues.

Q114 Mr Chaytor: On the question of outcomes, not all the PSA targets are specifically to do with easily measurable outcomes. For example, if we look at PSA target 14 on participation in higher education, there is a figure for increasing participation but then it says and "we will bear down on rates of non-completion". "Bearing down" is not exactly an outcome is it?

Sir David Normington: Of course you pick on the one that is not an outcome-based target.

Mr Chaytor: There are one or two others.

Q115 Chairman: And you tried to achieve six out of the 11?

Sir David Normington: Well, it is of course true that some are still process targets because it is very difficult to get an outcome target for higher education and we thought we needed some way of measuring ---

Q116 Mr Chaytor: The rates of non-completion are specific targets, are they, in the ten per cent?

Mr Kershaw: Can I just say that underneath the PSA again is another version of a technical note for each PSA which says in a lot more detail how different components ought to be measured. So, you are right, in its own terms that is a fairly broad and non-specific target. "Bearing down" is a rather vague phrase but the technical note underneath sets out in more detail what that actually means.

Q117 Mr Chaytor: Could I just ask something on the question of success or failure of the targets. About half the 2002 targets were not achieved. Do you take that as evidence of poor performance of the Department or of poor target setting?

Sir David Normington: I have to take my share of responsibility for not hitting the targets. After all, we accepted the targets in the first place and when we set them we believed we would get towards them or closer to them, so I have to accept my responsibility for that. I do not think I ought to say. You have picked on two which I think are very difficult targets - the teenage pregnancy and smoking in pregnancy target. I think it is very difficult to make as fast progress there as we need to in the target. I think there are some targets that are particularly tough. I will give you another one. The GCSE target was a two per cent increase a year. There has never ever been a year when there had been a two per cent increase in a year. So actually that was a really tough target and we have not hit it. We have increased year-on-year but we have not hit that two per cent. Yes, I think it was a tough target, probably too tough actually, but nevertheless the targets do provide pull through the system and are important for that purpose. I go right back to the beginning of the conversation which says what is half full or half empty. We are six per cent short of the target on Key Stage 2 literacy. We are up 17 per cent. I think the targets have pulled us up that much by providing that ambition and focus but, no, we have not hit the target yet.

Q118 Chairman: What about truancy; are you missing or hitting your target? There has been a lot of press coverage of that one.

Sir David Normington: Of course our target is about attendance and we are on course to hit the attendance target. The reason it is about attendance is because of course what is authorised and unauthorised absence, which is what lies underneath this, is subject to local decision. All the advice we had from the system was you should measure who is at school and try to increase the number of people at school and the time that they are spending at school, and we are on course to hit that target.

Q119 Chairman: So the coverage in the press is wrong?

Sir David Normington: The press is not wrong on that. Beneath that, unauthorised absence has been increasing a bit. I would say the reason for that is partly - and truancy is a problem and no-one denies that - is because we are asking headteachers to bear down on unauthorised absence, and therefore they have been refusing to authorise it. We have quite a lot evidence of that.

Q120 Chairman: Is there a stage where you say we have overdone the targets because targets do pull and they pull away from other things. When you go to schools, teachers say "not another target". David Miliband used to boast that he did not trust any new targets during his entire time as Schools Minister as a bid for fame.

Sir David Normington: I think there should come a point where you should move on or decide not to have targets. I think you should always have some targets. I do not think we have to have the same targets year in year out. I think that public services, like any other service or any other industry, ought to have targets and ought to be judged against them, so there is always the danger that they will have a distorting effect. I think you should think very carefully how you convert a national target into school level targets. In this phase we are not going to convert every national target into a target on schools. We are only going to bear down on a school where we and it has agreed it has a particular issue it needs to address and focus on that because I think it becomes too complicated at local level to focus on all the things.

Chairman: We are not criticising targets, especially teenage pregnancy and many of the others, but one does hear about too many targets at the front-line. Can we now move on to further and higher education. My friend and colleague has been entirely uncharacteristically saint-like in his patience.

Q121 Jeff Ennis: Patience is a virtue. Sir David, do you stand by the argument put forward in the Government's response to the Committee's report last year that the funding gap between schools and colleges is closing? Is it seven per cent this year as forecast? How do you respond to the Learning and Skills Development Agency's research suggesting that the gap is over 13 per cent? What is the reality of the situation?

Sir David Normington: Well, I am aware of that. We think on our figures that it is narrowing and the LSDA research suggests it is not. The truth of the matter is whatever the precise figures it is not narrowing very much and has not really narrowed. We believe on our measure it has narrowed slightly but the gap is still there. I do not think we think it is quite as big as the LSDA but there is a sizable gap there.

Q122 Jeff Ennis: This is obviously a major problem for our authorities based on tertiary college systems. It was about 18 months ago that a previous Secretary of State, Charles Clarke, told this Committee he thought that over the next five years - and that was 18 months ago - that that gap would close. We are now down to three and a half years from what Charles said at that time. Are we going to close the gap in three and a half years from now?

Sir David Normington: I do not know if we will close it. We still have an intention of narrowing it and we have not given up on that. Some of the things we have been doing ---

Q123 Jeff Ennis: We have not got a target to close the gap, to go back to the previous line of questioning?

Sir David Normington: Charles Clarke clearly made that commitment. I do not think it is a formal target but we will have more to say about this in due course. I think we have been giving priority to school funding and we have been protecting school funding and that has made it difficult at the same time to close the gap. There is no doubt about that. We have made less progress than we would want in that area.

Q124 Jeff Ennis: As I say, it is really important in local authorities like Barnsley and Doncaster. I will give you a classic example: the over-achievement of student numbers in sixth forms. As I say, we have got almost a complete tertiary college system in Barnsley. The local college recruited an additional 100 students in the sixth form. As you know, the levels of staying-on rates in Barnsley and Doncaster are below the national average and we have got a target to get them up to the national average, which I am sure you would support. The LSC agreed with the target to be given for that particular year but they said they would not fund those additional students. If that had been a school sixth form there would have been no question of funding those students, that funding would have been there on the table. How are we going to get round problems like that which are causing real difficulties in Barnsley and Doncaster and other authorities which are based on the tertiary college system?

Sir David Normington: Well, I recognise that description of what happens. As I say, within a limited funding pot we have been putting money into schools rather than into colleges. We have been increasing unit funding for colleges but nothing like to the same degree. The reason I am being a little hesitant is because we have series of announcements in the new few weeks right through into November which will be about LSC funding, particularly about the priority areas like 16 to 19 funding. We have an announcement in due course about finalising the school budgets. I am hopeful that out of that we can address some of these issues. Of course, you can only do it within an overall funding envelope and that is ultimately what has stopped us closing this gap. That gap was there and it requires more resource than we have had to close it.

Q125 Jeff Ennis: But the current envelope, Sir David, means that school sixth forms can recruit as many sixth form students as they can ad hoc but tertiary colleges are limited and they are being penalised. Students in Barnsley are being penalised and, after all, we are trying to increase the staying-on rate in deprived areas like Barnsley. We are penalising tertiary colleges from recruiting students into sixth forms?

Sir David Normington: We would like to see this problem that you describe being tackled and I accept we have not done so yet. I hope some of the things we will be doing in the next few weeks will help at least.

Q126 Chairman: I hope the message goes through. The great failing, it seems to me, over these last eight years of the Government's policies is that we still seem to reward the "haves" in educational terms and not the "have-nots". It is true what was said about the Sutton Trust Report yesterday. The social mobility argument that came out in research done by the London School of Economics. It still seems that we have not made a dent on transferring resources to those people who have not had the chance of a decent education in the past from those who have everything. This is the argument that Jeff Ennis is making, that it is crystal clear in Barnsley that there is an immense prejudice against those people who have less chance of getting a stake. You said at the beginning of this conversation this morning that where you have not been doing as well as you could is at post-16.

Sir David Normington: I actually think the Government has put a lot of extra resources in various ways into both people from poorer families and also into areas ----

Q127 Chairman: I was speaking to Peter Mantle of the Sutton Trust yesterday and he said the real problem still is the goodies in education are distributed unfairly. That is the central problem that this Government has and it still has not faced up to that.

Sir David Normington: There are two issues here: the money that we distribute for schools has a major factor in for deprivation, and that has been increased over this Government's life. That is the first thing.

Q128 Chairman: Is it working?

Sir David Normington: That is true. Secondly, there is a specific issue, and I am putting my hands up to that, about the gap between sixth form funding and further education college funding.

Q129 Chairman: You can put your hands up but you do not seem very repentant. What are you going to do about it? You have got three and a half years, why is the gap not going to be closed? You have not said a word this morning saying, "Yes, we are going to put it right".

Sir David Normington: Our aim is to close that gap, as Charles Clarke said. Over the next few weeks we will be saying something which I hope will help in that direction but the Government has decided to give priority to school funding rather than college funding. The other thing I was going to say was we have been increasing funding to colleges and we have been increasing the funding to 16-19 provision in colleges and to some of the priority areas for adults, like getting everybody up to Level 2. There have been substantial extra resources, but because substantial extra resources are also going into the school system that gap has not closed. Overall both sectors have had substantial extra resources and we are completely clear, particularly in the phase when we were concentrating on 14-19 education and training, that this is a major issue for us.

Q130 Jeff Ennis: It is linked in with the SEN issue of further education. There have been examples of institutions having to close or severely restrict courses for adults with learning difficulties and make staff redundant because they are no longer included in the Learning and Skills Council's funding priorities. What is the DfES's view on this? Should education for adults with learning difficulties not be a priority?

Sir David Normington: Yes. I am not quite sure what to categorise there. We have a major priority which we give to the LSC related to basic skills which includes people with particular learning difficulties. We have put huge extra funding into improving basic skills, so I am a little surprised at that. It should not be the case that we are seeing large amounts of that provision closing down. I would have to look at the individual case.

Q131 Jeff Ennis: You would look at that?

Sir David Normington: I would happily do that, yes.

Q132 Stephen Williams: Can I link us back to another target, the Government's target of 50 per cent participation in higher education and how this links into that. Over the summer I have been around the FE colleges, Bristol City College, one of the largest in the country, and St Brenda's, which is the largest catholic one, and the number of people who take A level courses at those colleges dwarf provision by any sixth form, but their social intake is broad while the sixth forms, as the Chairman has just alluded to, are largely middle class. How is this disparity in funding, which you recognise but do not seem to be setting a target for bridging or closing completely, contributing in an adverse way to meeting the Government's target of getting more people from disadvantaged backgrounds into higher education?

Sir David Normington: I have admitted that there is this funding gap and what you say about the intakes of sixth forms and further education colleges is broadly true, although it varies. Obviously sixth form colleges are in a different position from general further education provision. I think we are very aware of the issue. I said earlier that we are increasing resourcing for both sectors but we are not closing the gap very much, and I accept that, and I think the Government accepts that. When ministers have come here, as Charles Clarke has, they accept that we have to try to make progress here. I am saying to you we have not made enough progress and I agree that in order to encourage more people from the lower socio-economic groups to gain A levels or vocational equivalents you have to support them in that. Many, many of them do that in colleges. I am saying that we have to try to close that gap or make substantial progress in that direction, I agree with that, and we have not done so.

Q133 Stephen Williams: Can I make another point about widening participation, students who are in higher education, particularly part-time students. The Act of 2004 treats differently full-time students and part-time students. Are there any plans to have similar funding arrangements for part-time students who are in higher education and also to give part-time students themselves the same financial support that a full-time student now gets under the top-up fees regime?

Sir David Normington: I cannot say that today but we are very aware of the issue and the minister is having a serious look at it. It is a disparity at the moment in the way funding works and we are having a serious look at it.

Q134 Stephen Williams: When might we hear the outcome of this serious look?

Sir David Normington: I cannot tell you for sure, I am afraid that is a ministerial issue. I can tell you for sure that is being looked at.

Q135 Tim Farron: I am sure you are aware that 27 per cent of pupils, students of further education colleges, come from the poorest 15 per cent of wards in the country, so the funding gap clearly does exacerbate the problem and flies in the face of the Government's stated widening participation objectives. That point being made, I want to come back to the issue raised earlier with regard to the LSC priorities. I wonder whether the Government has made any consideration of the likely impact on the viability of courses counted under other provision of adult education in setting and revising the new LSC priorities and, if so, what is that likely considered impact?

Sir David Normington: There is about to be another statement about this because we are about to allocate money to the LSC for the next period, and also at the same time we will be setting out the priorities which the Government believes this sector should have. I think that already there is built into the assumptions for some of the other provision an assumption that there will be a large contribution from the individual to the fees of that course. I think previously the assumptions were that the Government would fund in its funding formula 75 per cent of the cost with the expectation that fees would raise 25 per cent. We have put that up to 27.5 per cent. I referred to this earlier. I think this issue of who pays for what courses is quite an important issue for us, accepting that the Government will always seek to protect and support those who cannot afford to pay. That is an issue that is very much being debated at the moment and very much affects the other provision, which is not a priority in a way for the Government compared with its other priorities but obviously for individuals can be very important for them.

Q136 Tim Farron: You must have had feedback since the priorities have been put into place. The impact has not been that prices have gone up a bit and private individuals pay a little bit more, the impact has been that courses have closed down and whole adult education centres have been put under serious threat, job losses and so on. In any area, but in an area like mine with older people who are retired, they are not just interested in gaining Level 2 qualifications, they are interested in keeping the grey matter going and this is a terrible blow to communities. I cannot imagine the Government did not realise this might be an outcome.

Sir David Normington: The Government was clear that it was expecting colleges, where they could, to raise more money through fees. All colleges have their own decisions to take about what they charge for and what not. We do not tell them what to do but we do include something in the formula. In fact, our estimate is that colleges forego about £100 million of income by not charging fees. Many colleges decide to charge no fees at all. We think that is wrong really. Our surveys show that where a course is valued, people who can afford to pay are very willing to make a contribution to a course, they do not understand why they should not but they do expect the Government to make a contribution as well. I have had the feedback that you have described. I do not think it is as yet a national issue in terms of closures everywhere but we are looking to colleges to look for alternative ways of raising some of the money. I am talking about a quarter to a third of it. There is a lot of Government money going into adult learning and in the end governments have to say, "I have got this money, how can I get the most value for it?" 16-19 is a priority, getting adult basic skills up to an acceptable level is a priority, getting adults to Level 2, which is the vocational equivalent of five A-C GCSEs, is a priority. You have to have your priorities and some provision, therefore, will be squeezed.

Q137 Tim Farron: The larger colleges are able to absorb some of these costs.

Sir David Normington: I am aware of that.

Q138 Tim Farron: Certainly in an area like mine we are talking about lots of small, perhaps school-based, adult education centres that have no fat to draw upon and they are seriously in danger of closing down.

Sir David Normington: I am aware of that and I will take that point back to the others.

Tim Farron: I would be grateful if you would.

Q139 Mr Marsden: Sir David, you made the point that it is for colleges to make their own decisions and the LSC is arms' length in that respect from them but also from the Government in the sense that you give them the pot and they decide what to do with it. Is not the point that is emerging from this debate about funding of adult education, and I accept the Government has done an enormous amount in this area, is that there is a law of perverse consequences. Many of the things that we are hearing about, certainly in my own neck of the woods in Blackpool, these cuts in adult education, are going to affect not just people who want to keep their grey matter going but people, particularly women in their 30s and 40s, who need to re-skill themselves in order to remain in the workforce. We have broader targets as a Government for meeting that. If I could give you a very specific example of the perverse consequence of this. In my particular patch it is going to result in a potential reduction in the number of trade union learners. That cuts directly across the Chancellor's state aim to expand the whole union learning environment. Do you not have a broader responsibility in terms of overall Government policy when discussing and deciding these things with the LSCs and should you not have given clearer guidance, particularly in respect of what the impact was going to be in terms of Section 98?

Sir David Normington: I am in danger of repeating myself. First of all, this sector will get substantial extra resource and the Government will be very clear what its priorities are for that resource and it will describe them. It will include getting an entitlement for all adults to get up to Level 2. It will include new sorts of re-entry courses particularly for those who have not got basic skills. In the end this is about how much money is available. One of the things that is happening in the skills sector is because of the emphasis that we are putting on raising the standards of 16-19 year olds, we are beginning to see many more staying on. We have not yet got the outcomes but many more are staying on. That is putting enormous pressure on that bit of the budget. Similarly, our success in getting many, many more people coming back into basic literacy and numeracy courses is also putting pressure on that budget. We have to make those choices with the LSC and the LSC ultimately has to make the choices locally about what it will fund. We are very clear about this issue of trying to protect the valuable provision locally and the LSC is very clear about that. As we make the funding allocations in the next few weeks we will be trying to ensure both that we have a clear set of national priorities but that the LSC will be trying to ensure that it is sensitive to these local issues.

Q140 Mr Marsden: Given that is the case, can I just emphasise and urge you to relay this to the LSCs, that the impact of many of the cuts that we are hearing about in terms of adult learning are falling disproportionately on those courses which are being delivered in non-traditional FE environments, such as community centres and so forth, and for those groups of people who have been most reluctant in the past to enter into the FE structure, unless attention is given to that, the whole social inclusion aspect of this programme will be jeopardised.

Sir David Normington: If you have those examples we would like to have them. I know Bill Rammell would like to have them.

Q141 Chairman: We have been talking about priorities and we understand governments have to prioritise their spending, but as you do go round the country, as all of us do who are interested in education, you must hear what we hear about Academies. People are in favour of Academies, they think it is a very good regenerative innovation, but they wonder why it has to be so expensive. Why do all Academies have to be new build? Why does it have to be 25-30 million? Why can there not be partnerships with universities and Academies? It is the cost. People say there is nothing wrong with it in principle but why should they be such costly items?

Sir David Normington: The reason they are as expensive as they are is because they are new builds, as you say. We would like to have more refurbishments. In fact, we have one or two now in the pipeline. We do not think all Academies need to be new builds from the start. Very often Academies are replacing schools that in many respects have been neglected and are in areas where they have never really had decent educational provision. One bit of feedback I have had is from people who have said, "We never thought we would see anything like this in our community, it does not happen in places like this". That sort of reaction makes the investment worthwhile because it has a bigger community effect than just the educational effect. One last point on this: over the years we have not built many new schools, not many really brand new secondary schools, so when people are seeing these brand new schools going up they have not got much to compare them with. In fact, these schools are not as new schools - particularly in inner cities - any more expensive on average. Some individual projects are but overall they are not any more expensive than if you were building an ordinary new school. There is a sort of myth about this that somehow they are very expensive. There are some very expensive projects and they are usually expensive because of some problem with the site, the clearing of land and so on, which has important community benefits; if you have got polluted land cleaning it up is a good thing to do. Overall the average cost of Academies at this moment is not significantly ahead of the cost of building new schools.

Q142 Chairman: Sir David, that is part of our mission here, dispelling myths. Can I thank you, Sir David and the two Stephens, for your attending and your answers to our questions. Could I congratulate our new team on having just as much capacity and ability in asking difficult questions. I hope everyone understood that our job is to be as robust as we possibly can be. Thank you for your attendance and we will see you again in the not too distant future.

Sir David Normington: Thank you.