UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 706-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

THE COMMITTEE OF PUBLIC ACCOUNTS

Monday 21 November 2005

 

Extending acceSs to learning through technology:

Ufi and the learndirect service

 

DEPARTMENT FOR EDUCATION AND SKILLS

MS SUSAN PEMBER OBE

LEARNING AND SKILLS COUNCIL

MR MARK HAYSOM

 

UFI/LEARNDIRECT

MS SARAH JONES and MR PABLO LLOYD

 

Evidence heard in Public Questions 1 - 93

 

 

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Oral evidence

Taken before the Committee of Public Accounts

on Monday 21 November 2005

Members present:

Mr Edward Leigh, in the Chair

Greg Clark

Sarah McCarthy-Fry

Jon Trickett

Kitty Ussher

Stephen Williams

________________

Sir John Bourn KCB, Comptroller and Auditor General, and Ms Angela Hands, Director of Education and Skills Value for Money Studies, National Audit Office, further examined.

Ms Paula Diggle, Second Treasury Officer of Accounts, HM Treasury, further examined.

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL

EXTENDING ACCESS TO LEARNING THROUGH TECHNOLOGY:

UFI AND THE LEARNDIRECT SERVICE

Examination of Witnesses

 

Witnesses: Ms Susan Pember OBE, Director of Learning and Skills, Department for Education and Skills, Mr Mark Haysom, Chief Executive, Learning and Skills Council, and Ms Sarah Jones, Chief Executive, and Mr Pablo Lloyd, Deputy Chief Executive, Ufi/learndirect, examined.

Q1 Chairman: Good afternoon. Welcome to the Public Accounts Committee where today we are considering the Comptroller and Auditor General's Report on Extending access to learning through technology: Ufi and learndirect. We welcome Sarah Jones, the Chief Executive of Ufi/learndirect, Mark Haysom, who is Chief Executive of the Learning and Skills Council, Susan Pember, who is Director of Learning and Skills and of the Learning and Skills Performance Group of the Department for Education and Skills, and also Mr Pablo Lloyd, who is Deputy Chief Executive of Ufi/learndirect. Can I direct my early questioning to you, Ms Jones? If you would please look at page 26, paragraph 2.26, you will see that you were set up in 1998, by 2005 you had spent the best part of a billion pounds, 930 million, but only 37% of employers know about your business services. How can this be value for money?

Ms Jones: In the five years that the network has been running we have been focusing very hard on building the public funded side of the business. We have had 1.7 million learners and delivered four million courses on that side of the business. We have generated brand awareness of 74%. The brand is also aware at 71% in SMEs but when they actually look at the focus of learndirect business, which is a specific offering we have, it falls away to 37%. We clearly recognise that now, as we start to mature our organisation, we have a lot more to do in addressing the needs of the SME market.

Q2 Chairman: I would have thought this was a fairly key result because this is potentially a very useful service to business, is it not?

Ms Jones: Yes, it is.

Q3 Chairman: It does not really say much about your profile, spending 930 million if 37% of businesses do not know how you can help them.

Ms Jones: Our general profile, the brand of learndirect, is good within SMEs. It is 71%. It is the specific offering of what we can offer to their organisation. We have been focused on developing individuals and how individuals might progress and work. We have not been focused on how an organisation needs to develop so, for example, we have not been offering compliance training and that is something SMEs want and is something we want to address.

Q4 Chairman: Let us now look at whether people are getting something out of these courses. If you look at page 34, "Achievements and course completions by learners are increasing", there are some figures at paragraph 3.14, figure 23, and what these show is that only 50%, roughly half, of learners achieve their objectives per course. Why is that? This is an objective, by the way, that they have set themselves and only half of your learners achieve their objectives.

Ms Jones: I believe that is down to data entry because we do not track and monitor specifically on outcomes achievement. What we track is the completions and the completion rate is above 70%. We have got a stated record of 50% of people who achieve their outcomes.

Q5 Chairman: Perhaps the National Audit Office might comment on that because, if you look at paragraph 3.14 and look at the figure, you have got a clear phrase there that says, "over 50 per cent achieved their objectives in 2004-05".

Ms Hands: That is according to the evidence that is available, yes.

Q6 Chairman: That is perfectly clear, is it not? We seem to be getting a slightly different message from Ms Jones.

Ms Jones: No, I am not disputing the fact that there is evidence there of 50%. What I am saying is that an individual might complete their course; that is the 70% figure. Their personal outcome might be, for example, if it is an Excel spreadsheet course, to use pivot tables and what we have not got is a stated record of whether they personally achieved their outcome, but they passed the course and that is the 70% figure.

Q7 Chairman: If you look above there to the top of page 35, it says, "In 2004-05, over 50 per cent of learners achieved their objectives, and the percentage varies regionally from 47 to 70 per cent". That is a huge variation, is it not?

Ms Jones: It is a variation but again it depends on whether tutors are noting those facts down. What we have got there is just the evidence that is recorded on the system.

Q8 Chairman: Let us look in a bit more detail at what people are achieving. If you now look at page 39, paragraph 3.26, you will see that only 9% of learndirect learners below Level 2 gained a full Level 2 qualification after two years. Why is that? It does not look very good to me.

Ms Jones: Because part of learndirect's offering is not just focused on qualifications. What we have got is 81% of our learners reporting that they have a positive outcome in work and improved job prospects. We have got over 46%, I believe the figure is, of people who go on to a form of higher learning, and then we have got 9% who progress to full Level 2.

Q9 Chairman: As with all these things, we can choose any statistic we want to. There is no point me giving you a statistic and you coming out with another one. I was asking specifically about this. It says there in paragraph 3.26, "A recent survey that tracked people for up to two years after their initial contact with learndirect indicated that 9 per cent of learndirect learners qualified below Level 2 gained a full Level 2 qualification over the two years." That is there in the report.

Ms Jones: Yes, and we have objectives through to -----

Q10 Chairman: It is very low, is it not?

Ms Jones: We have objectives to improve on that figure.

Q11 Chairman: Okay. Let us look at your organisation and your management of it, please. If you look at page 44, paragraph 4.7, how can you be efficient, Ms Jones, if 30% of your money is spent on overheads? That is very high, is it not? You would expect an organisation like you to be spending perhaps 10-15%. You are spending 30% on your overheads, bearing in mind that this is an organisation which has spent 930 million of our money from 1998 to 2005 and 37% of employers do not apparently know about what you do for them.

Ms Jones: And we are doing a lot to get that figure down. In 2004-05 the original budget was not to spend 54 million, as is recorded here, but actually to spend 64 million, so we took ten million out in year, so that was a saving. This year our budgeted overheads for management and marketing are 44 million, so it has dropped substantially, and next year they will drop substantially again.

Q12 Chairman: You would expect people in rural areas to get a lot of benefit for this. This was presumably designed for them, but if you look at page 28, paragraph 2.30, you will see that people in rural areas that are disadvantaged learners, although they should be able to get just as good access as others, apparently do not. Why cannot you guarantee this service to people in rural areas, although I appreciate that it is always going to be more difficult in rural areas?

Ms Jones: Our services are geared towards the low skilled population, so we focus on providing to them wherever they are located. Connectivity across the UK is not an issue. 99.6% of the UK is now covered by broadband, so we can reach people. The issue is the costs of delivery in certain areas where there is low population density. The beauty of e-learning is that it is not necessarily that we need the centres there; we need the method of the outreach to reach the person with the low skill need.

Q13 Chairman: Again, you would have thought that if this was an organisation that was useful for business it would be generating a commercial income. If you look at page 48, paragraph 4.19, you will see that you have generated an appallingly low commercial income, 12 million. Why is that?

Ms Jones: I agree it is a low figure and, as I said earlier, when the business was set up our focus was on sorting out the public funding policy side of the business. Now is the time for us to -----

Q14 Chairman: But what, Ms Jones, does business think of this service if they are not prepared to pay for it?

Ms Jones: We have actually had an awful lot of interaction with businesses. If we look at the SME sector, over 180,000 SMEs have had dealings with learndirect in the five years, and if you put it in comparison terms the British Chamber of Commerce has a membership of 135,000, so we are reaching a lot. We are not reaching enough and we are not generating the income, but we have got plans in hand to change that. We have got very stretching objectives. By the year 2010 we want to be achieving 40 million per annum turnover from the sector.

Q15 Chairman: Ms Pember, on behalf of the department, I think it is a classic case of an organisation which is spending a lot of money with not as much effect as you might expect because it is too complex. You have got the private sector with a finger in the pie, you have got your department with a finger in the pie, you have got learndirect. It might have been easier to give the money direct to the colleges to get on with it.

Ms Pember: When we are looking at those figures in the way you have just described it, you have one version, but when you think that there are 500,000 people attending learndirect centres every year, and when you think that this was a start-up company back in 1998 and where it has got to now, there is another story to tell there. Sarah was right: the objectives given to them were early objectives. Yes, it was to go into business but it was also to widen participation, it was also to get people into learning who did not normally attend colleges, and in that way it has been extremely successful.

Q16 Chairman: You say that, but if you now look at page 24, paragraph 2.15, it says there, "There is a widespread view that learndirect materials could be more widely exploited", so it seems that the rest of the education sector, for example, schools and colleges, could be making better use of learndirect's courses, could it not?

Ms Pember: I think that is perfectly right and they have built up a reputation now where colleges and schools are saying, "Those materials are really good. Can we not have them converted to things that we want to do?". If you had done that six years ago, if you had gone to an FE college six years ago and said, "But learndirect is coming on stream", there was no history to say that these products were going to be good, so again I think you can see that as a contribution that learndirect has made to online learning. People did not have that confidence in this CD-rom type of learning six years ago but they do now. The department has been working with Sarah's staff to make sure that they have access to our schools colleagues so that if there are benefits that we can transfer from adult materials to materials for young people we do that.

Q17 Chairman: Lastly, I was going to ask a question about this breach of internal controls on page 19, paragraph 1.24. Perhaps Mr Haysom can help with that because you have been investigating a breach of internal controls. Perhaps you would give an assurance to the committee that you are managing this risk, that learndirect centres "may falsely create learner activity".

Mr Haysom: Yes, I can confirm that we are working very closely with Ufi on this matter and that we were pleased that it was Ufi that identified some of these issues and that we are on top of it between us.

Q18 Chairman: It is quite serious, is it not? Have the police not been brought in as well?

Mr Haysom: This is a separate matter. I do not have the absolute detail on this other than to say that because it is a police matter it is not something that we are in a position to comment on at this stage.

Chairman: It is a separate matter; I apologise. Thank you very much.

Q19 Sarah McCarthy-Fry: If I can address first of all Ms Pember, right at the start of the NAO report it highlights the problem of the skills gap in the UK on page 13. It says, "The relatively low level of skills in the UK's workforce contributes to relatively low productivity". Presumably that was the reason that learndirect was set up. How are you measuring whether you have achieved that objective?

Ms Pember: You are right. Learndirect was set up originally to widen participation and to get people into learning who had been turned off learning and, as I said, it has been successful in doing that. How are we measuring that? We are measuring it by helping people to take up learning opportunities. After the first three years we asked learndirect to re-look at the way they were focusing their energy and they are now one of the best skills-for-life deliverers that we have in the country, with last year over 30,000 people getting one of their first certificates in literacy or numeracy. That is something new for learndirect. Up until then they were asked to be non-qualification led and now they are qualification-led. We are looking at it from participation numbers, we are looking at it from service evaluation and now we are looking at it on how many people pass an examination.

Q20 Sarah McCarthy-Fry: You seem to be going down two routes here. We seem to have a focus on the people who have very poor literacy and numeracy, but also we have a focus on trying to do the skills for business. To me they are two totally different paths. Which one did you expect learndirect to do? Did you expect them to do both or was focusing on the business a way of getting the funding for the literacy and numeracy?

Ms Pember: We expected them first to make themselves into a credible business with a reputation that people would want to take up opportunities and that they were able to hold their own within the education world, which they have done. At the same time we do want them, now they are a mature business, to work with industry so that we can draw in new income and full fees, which is part of the same story that we are doing with the rest of the FE world. We are now focusing our intention on making sure that their activities are helping implement the national targets and drawing in new income.

Q21 Sarah McCarthy-Fry: But did you not think that the sort of people who were going to access getting the literacy and numeracy, the really initial building block, were not the sort of people who were interested in whether it was good business or not, but it was the sort of business that was going to encourage them to go and learn these things, but that, particularly with adults, there is a huge stigma attached to saying that you cannot read or write or fill in a form or add sums up.

Ms Pember: You are right, but they are not two priorities that cannot work hand in hand. For some of the businesses that learndirect are already working with, it is the literacy and numeracy diagnostic assessment and the online literacy and support that those employers are interested in and we think over time will begin want to pay for.

Q22 Sarah McCarthy-Fry: Can I turn to you, Ms Jones? Again, coming back to the original set-up of learndirect, the department wanted you to do something that nobody else was providing, so obviously it wanted you to be innovative. How did you go about trying to get that? What research did you do to find what would work and what would not, or has it been trial and error as you have gone along?

Ms Jones: It has been partly both. Part of innovation is to try some things, to take some risks and then quickly analyse whether they are having success or not. There was a lot of research done in terms of what was turning learners off and that is why some of the bite-sized theory behind the size and shape of the learning, the fact that it is quite private learning for people who had previously been embarrassed in the traditional classroom environment, appeals to them, and also the flexibility. It is any time, it is any place and any pace, so it is very attractive to shift workers, it is attractive to people who have care obligations so they cannot regularly commit to turning up, let us say, at six o'clock on a Wednesday evening for a night school type of course. That approach was tested and found to be very successful. Also, in terms of looking at businesses, some of the barriers to SMEs investing in training (and about 59% of SMEs do not do any training at all) are things like costs, time away from the desk, travel expenditure, etc, that goes on around the learning, so the fact that we can deliver learning to people in the workplace is seen as an attractive thing. What we have clearly got to do is go in there and exploit the success criteria that we have got.

Q23 Sarah McCarthy-Fry: In this innovation you have been trying to do, if you could go back and do it again is there anything you would differently, knowing what you know now?

Ms Jones: That is an interesting question. I think part of innovation is always trying things, so there are some things that were tried that did not work but I think the skill of this organisation has been to spot very quickly those issues and move on. The area that we did not get right and we moved away from is the SMEs and the large employer market, and now is the time to move back to that and try and exploit it successfully because clearly we have failed to do that so far.

Q24 Sarah McCarthy-Fry: If you are going to get the large employers, the SME market in there, surely the first thing you are going to have to do is find out what they want. Were you perhaps trying to sell them a product they did not want?

Ms Jones: Yes, we were Part of the portfolio was confused so there was a big overlap in mixture between what was free and publicly funded and what they had to pay for, so it was difficult to make the sale. Also, it was designed more for the individual and the individual progressing and not for the organisation and what the organisation needs, so we have got to listen to organisations. I think it is very helpful with the sector skills councils now because we have got a conduit there so that we can really listen hard and build a product portfolio around what the needs of business are.

Q25 Sarah McCarthy-Fry: Are you intending to restructure your organisation to do that?

Ms Jones: We already have restructured it. The restructuring took place over August and September of this year, so we have a focused business development activity now which is targeting the business market.

Q26 Sarah McCarthy-Fry: This is a question that I am struggling with. A lot of your stuff is on line. If we go to basic literacy and numeracy, if people are struggling with that they are unlikely to be able to use a computer. How do you deal with that?

Ms Jones: They wear headphones, so even though the words are on the computer there is a voice-over.

Q27 Sarah McCarthy-Fry: On the innovation bit can I come to Ms Pember and Mr Haysom? Presumably you want learndirect to continue to be innovative. Innovation, as we have heard from Ms Jones, means that if you are going to try things out sometimes they go wrong. How are you going to help them to continue to innovate?

Mr Haysom: You are absolutely right. It is terribly difficult to maintain the right kind of culture of innovation as an organisation matures and it has now reached that point of maturity. An awful lot of it comes down to us being very clear about what we want learndirect to do and having the right kind of relationship with Sarah and her team to be able to afford that. The fact that we both come from the private sector, Sarah and I, is probably helpful here and so we can talk a language about that. Yes, you are right. It is very important to try and create the right kind of culture. It is not just about money. In fact, money is usually the least of it. I hope Sarah will agree. It is more about just having the right kind of mindset within the organisation and being prepared to take some of those risks that have got learndirect to where it is today.

Ms Jones: We are still innovating. We are not at the end of the innovation process and our innovations are about improving our efficiency in the organisation. For example, we have just in-sourced the IT and that will save us, ongoing, a million pounds per annum as we go. We innovate in the way that we offer our service so that we are better able to bridge the gap on the rural need and what we can afford to do. There are things such as we are innovating on how we provide learndirect into prisons, which is a new area, where still internet access is often prohibited, how we can get ourselves there. We are constantly innovating. As Mr Haysom said, it does not take budget to do that. It takes a skill set and a mindset about looking for the opportunities and working together.

Ms Pember: That is where I think one of the roles the department can offer is making sure that when new things come up we are the voice and champion of learndirect and are able to say, as we do with offender learning, that that is a solution that is already there, that they can pilot and work with offenders, but also to make available the capacity so that their core funding is not at risk. When we have got something new, like something that we called My Guide, which is a new tool to help people who have learning difficulties and disabilities to access the net, that was a new pilot project and what we have done is funded learndirect separately to take that on because it is a new project with new risks attached to it. It is the same for having advice and guidance in every town in the country and the skill strategy we have marked up as a new venture, and again we have funded learndirect separately for that because there is a risk attached to it and we need them to carry on the one hand with their core business but on the other hand we need them to do this innovative work maybe in a different way.

Q28 Kitty Ussher: Ms Jones, what is your PSA target?

Ms Jones: Skills for Life and this year we are contributing on contract 29,000 Skills for Life first test passes but we actually think we are going to exceed that, more to the tune of about 40,000 Skills for Life first test passes in this academic year.

Q29 Kitty Ussher: And that is your main overall target. Skills for Life is basic literacy and numeracy, is it?

Ms Jones: Yes.

Q30 Kitty Ussher: Ms Pember, are there any other PSA targets that the University for Industry is involved in?

Ms Pember: Not at this moment because, as I said, over the last few years we have changed the priority. It was getting people in in the first round and then Skills for Life, so that they worked more towards a qualification, and now, as we put more focus on Level 2, we will be looking to learndirect to raise their profile in that area of work, but it was not their first priority. The first priority was getting people in. We have to balance getting people in who have never done any learning before against the need to get people moved on quite quickly to get a Level 2 qualification.

Q31 Kitty Ussher: Correct me if I am wrong. I do not know if this is an interest I should declare, Chairman, but I was privileged to be working for the Labour Party in the run-up to 1997 and I remember where this idea came from, the University for Industry, and it was very much about skills in the workplace; it was very much about raising Britain's productivity levels. I have to admit I have not been involved in the policy since then but I come here and ask you what your PSA targets are and it is worthy but entirely different. I do not know whether the department can comment on what has happened in these few years.

Ms Pember: As Sarah has already explained, the emphasis was put on the person, not the employer, but the majority of people who take up learndirect activity are in some form of employment. If you went, say, to Bluewater, the shopping centre, there is a learndirect centre there which is really well used by the workers at Bluewater, but if you went to one of the shops there they might not know their own employees were doing that activity. It is still work focused and many centres are in employers' premises or on trading estates within a geographical area but it is focused on the individual being motivated to go in and do something that was about their learning. I still say it is first round stuff. It helps their work chances but it is individual-led, not employer-led.

Q32 Kitty Ussher: In terms of your department more broadly, you obviously set PSA targets to do with productivity, broadly defined here as a macro-economic concept.

Ms Pember: Yes, which are the learning centres to HE , the Basic Skills one and the Level 2 at 19.

Q33 Kitty Ussher: Which is the same as yours, Mr Haysom, presumably. As your department is negotiating for the next spending round, which obviously is linked to the next round of PSA targets, Ms Pember, what contribution would you say learndirect should be able to contribute?

Ms Pember: We have to agree new policies but I think learndirect has already started re-aligning its business towards the Level 2 activity and I think that will be something we will be looking to them for The other thing is that this is an online organisation and running along with the innovation of learndirect we have had to have QCA matching that with online testing. At the moment we really only have online testing in literacy and numeracy, so there is some more work to be done to make sure the assessment methods that we use are as innovative as the way we are training these people.

Q34 Kitty Ussher: Would you agree that the potential is enormous? Of the top of my head we have got about 27 million people in work and you are touching half a million people a year, which is 2% or so, so over five or six years you could have an enormous effect on the overall prosperity of our country if we get this right. Will you be able to quantify that? Will you be able to have targets that affect Britain's GDP?

Ms Pember: That is exactly the type of work we want to do with learndirect and the Learning and Skills Council leading up to the Spending Review 2007.

Q35 Kitty Ussher: Will those targets be publicly available?

Ms Pember: On the type of information the Government has to decide at the time what the targets will be.

Mr Haysom: It is worth noting that this is real focus on Skills for Life and Level 2. It is only from last year effectively so it is a very recent change and the fact that you and I can help to deliver so well the Skills for Life agenda is a very positive sign and we will be looking for certain to build on that.

Q36 Kitty Ussher: For sure; I do not dispute that in any way. I am just thinking of the potential to make our country richer as a result of the work you are doing. I look forward to hearing more about that. Could you describe for me what an employer should do if they identify a skills gap in their workforce and they think you might be able to fill that gap?

Ms Jones: We reach out to employers and try and engage them. Also, if they identify a need themselves then hopefully through the brand awareness which we will be addressing and improving they will know to come to us and they can either go to a learning centre or we are developing relationships with other key partners and brokers so that they can signpost them on. For example, a lot of small businesses have their trusted adviser, whether it is their accountant or the Small Business Service or whatever, so it is very important that those people know what learndirect has in its toolbag and how it can be of help to a business going forward. That is one of the key areas that we have failed to address in the past and we need to improve on.

Q37 Kitty Ussher: How customised can you be?

Ms Jones: With the SME market it is a matter of breaking it down into the more standardised chunks that we know a business wants, so a lot of that is around compliance training for legislation. For large employers we have done some bespoke work. Barclays is the case in the report where we focused on what their specific training need was for their employees and we have developed a product portfolio around that but, obviously, that involves investment and the large employer needs to be prepared to pay for the investment because that is not something that we would use public funds for. It is the reason why we have got two separate organisations, limited companies, within the business, so that any investment which is private sector is ring-fenced and dealt with and kept well away from any public monies.

Q38 Kitty Ussher: But surely each company has very specific training needs. Will you be able to operate a bespoke product? Are you going to find out where the gaps are for that product?

Ms Jones: In which market? In the SMEs or large companies?

Q39 Kitty Ussher: SMEs particularly but either. How flexible can you be?

Ms Jones: We are always looking for the right products to fit business need but are we going to design a product for a very small business on a particular high street? No. We are going to look for generic products which have got several purchasers across the SME market. The SME market itself is fairly fragmented so we can target things and be specific. Our market research needs to look at that and find where the demand is and invest in those products where we can fill gaps. Working through the sector skills councils could be useful in those areas because they are the ones who know what is needed in their sector.

Q40 Kitty Ussher: Do you have particular targets for the number of small business clients you hope to have?

Ms Jones: We are not targeting in terms of numbers of clients. We are targeting in terms of revenue that we can derive from the market and it will be 20 million per annum by the year 2010 which, based on the fact that we have got 12 million so far in five years, is quite a stretching and demanding target for us.

Q41 Kitty Ussher: One of the other ways that the Government has been trying to increase the skill level of the workforce is through a trade union learning centre which seems to have proved quite successful because it helps people overcome inhibitions that they may have on the current workforce shop floor. Is there anything you can learn from this and is there any scope for collaboration with these people?

Ms Jones: We work very closely with the trade unions. In fact, the TUC is one of our hub operators.

Q42 Greg Clark: Can I pursue this question of commercial revenue? Ms Pember, most of the 12 million revenue over five years that was mentioned to the Chairman came from the public sector, not from commercial businesses. Is that right?

Ms Pember: I thought it was a mixture of both myself. Yes, it was a mixture of both.

Q43 Greg Clark: According to the report there were two key contracts. One was with Connexions and the other one was with the NHS University, the NHSU. Is that correct, that they were the main contracts?

Ms Jones: I can give you a figure. Connexions was six million and the NHSU was 1.1 million.

Q44 Greg Clark: So 7.1 million of the 12 million was not commercial revenue at all. It was from the public sector?

Ms Jones: Yes.

Q45 Greg Clark: That is significant, is it not, because the Chairman's questions were about whether this was popular with SMEs and small businesses. It is a different matter having a massive contract with another part of the state. What plans do you have to increase it from a tiny amount, about a million pounds a year, up to 40 million a year by 2010, which is only five years away? Is that a credible target?

Ms Jones: It is a very stretching target.

Q46 Greg Clark: But is it credible?

Ms Jones: It is credible based on the work that we have done in terms of research in demand sectors.

Q47 Greg Clark: What revenue have you got this year from non-public sector sources?

Ms Jones: We are still in the development phase for learndirect business. From large employers we have a revenue which is still continuing around the 1.0-1.5 million mark and from the SME sector it is still very small because we are about to go to the market with new pilots which will test different areas of activity.

Q48 Greg Clark: So this year is pretty much written off in terms of getting to that target?

Ms Jones: It has been a developing year.

Q49 Greg Clark: You have got three years to get from about one million pounds a year to 40 million a year.

Ms Jones: Yes.

Q50 Greg Clark: Who chose this target?

Ms Jones: It was agreed by our board.

Q51 Greg Clark: With whom?

Ms Jones: With the management team.

Q52 Greg Clark: So you set it yourself, this target?

Ms Jones: Yes.

Q53 Greg Clark: Ms Pember, does the department have anything to say about this target? Do you have any role in supervising the choice of targets?

Ms Pember: We have looked at and analysed the way that learndirect has developed that target and with the business plans they have got in place and with their board, who are all key business figures who have been quite successful in their own right, and the business plan that we have behind it we think that learndirect will probably achieve that target.

Q54 Greg Clark: If it does not achieve it does the department have any say in this, given that the organisation itself set it?

Ms Pember: Because they are not using public funds to support that exercise it will not be a loss to the department. This is a new business venture and that is why they have set up the separate company in learndirect Solutions.

Q55 Greg Clark: Who contributes the capital for that company?

Ms Pember: The capital is not the same. They are hubs and they are franchise organisations at the learning centres. They do not have capital in the way of a normal college.

Q56 Greg Clark: So there is no capital?

Ms Pember: There is no capital other than the infrastructure of the ICT but then most of that, when it is on employers' premises, is paid for the employer.

Q57 Greg Clark: So there is no capital, there is no working capital? This commercial subsidiary needs no capital with which to operate?

Ms Jones: The only investment we need, as Ms Ussher was saying, is when we are building specific courses if we want to do bespoke work, so that is where, if I am working with a large employer, I expect the large employer to make that investment in the product.

Q58 Greg Clark: Does it have a dedicated staff who work in the subsidiary?

Ms Jones: Very small because it is a very small business.

Q59 Greg Clark: Is it profitable from the beginning?

Ms Jones: It is. Learndirect Solutions is profitable.

Q60 Greg Clark: So it has no overheads?

Ms Jones: The overheads are kept very small. Also, we make sure that if we are using anything of our central government funded organisation then we charge it at a commercial rate in learndirect Solutions.

Q61 Greg Clark: What happens if the revenue does not come in in the way that you anticipate and you cannot cover even those minimal costs? What is the procedure then?

Ms Jones: The costs would fall away. Each contract bears its own costs so if the contract falls away then the costs fall away.

Q62 Greg Clark: So there is no-one employed specifically to manage this commercial venture?

Ms Jones: There are two people employed there at the moment.

Q63 Greg Clark: Who pays their salary if there are no contracts to support them?

Ms Jones: They are paid by the contracts we have in that side of the business and they are on rolling contracts so if the contract was not renewed their contracts would not be renewed.

Q64 Greg Clark: In terms of your overheads, which again were referred to earlier, you have had a reorganisation during the summer, you said. How many people are working in marketing now?

Ms Jones: Twenty, 23?

Mr Lloyd: Something like that.

Q65 Greg Clark: How much of a reduction is that?

Ms Jones: In marketing I believe by about a third.

Q66 Greg Clark: And in the more general overheads? Is that consistent?

Ms Jones: Yes.

Q67 Greg Clark: It would be helpful to have up to date figures. Can I ask about this rather worrying reference in the report to your noticing that there have been significant weaknesses in internal controls that may have resulted in some units receiving funding to which they are not entitled? Can you give your latest assessment of how many units and what level of funds we are talking about?

Ms Jones: As part of the background behind that we do regular audits, we do quarterly audits and then we do an end of year in-depth review. In preparation for the end of year in-depth review, which will take place now, -----

Q68 Greg Clark: I am happy about the process you have gone through but what is your latest assessment of what public funds are at risk? What is the quantity?

Ms Jones: We analysed our own data and we spotted a potential trend.

Q69 Greg Clark: I know how you have done it. What is the quantity now that is in question?

Ms Jones: No more than two million pounds.

Q70 Greg Clark: What is the minimum?

Ms Jones: I do not have a minimum figure. What I have is a maximum figure. It is no more than two million and we are now dealing with the detailed investigations to build that number up.

Q71 Greg Clark: And if some of these organisations have received funding to which they are not entitled how are you going to recover that?

Ms Jones: Our normal procedure is that we go in, we do a detailed investigation with the organisation, we recover the monies and then we send the report to the police.

Q72 Greg Clark: And in terms of the public getting its hands on money that may have been misallocated, how does that happen?

Ms Jones: We recover the funds.

Q73 Greg Clark: From?

Ms Jones: From the organisation.

Q74 Greg Clark: What if they have not got any money?

Ms Jones: We still attempt to recover the funds from any provision that they may have.

Q75 Greg Clark: Is it part of your assessment when you enter into contracts with suppliers that they are robust enough financially to be able to pay that?

Ms Jones: Absolutely.

Q76 Greg Clark: So if you find that, say, a million pounds is owed, you are confident that that would not be written off and you would get it back?

Ms Jones: Yes.

Q77 Greg Clark: Finally, can I ask the National Audit Office: it was difficult to discern from the report whether the NAO's view is that Ufi offers value for money. Can we clarify that at this stage?

Sir John Bourn: Our view is that it potentially offers value for money but it does not do it yet because of the reasons that have been canvassed in the discussion so far, like the quantity of overheads, like the degree of market penetration and other factors of that kind.

Q78 Greg Clark: You will have experience of the Open University which is quite effective in a different market at delivering services directly. I was surprised that there were not more benchmark comparisons yet to be able to make that assessment. Was that something that went on or is there a reason why that was not there?

Ms Hands: The learndirect service is pretty unique. It is quite difficult to get comparators. In terms of the costs per course, for example, those are only just becoming available. Because it is an online system it is not directly replicated elsewhere.

Q79 Greg Clark: Online systems are not that unusual nowadays.

Ms Hands: In terms of the way the Ufi one works they are quite unique.

Q80 Stephen Williams: I do not know whether it is an interest or not but I will declare it anyway. I was formerly a tax manager with Grant Thornton, who I understand are the auditors for Ufi, but I never had any connection at all with Ufi while I was in practice. I want to focus on some of the target groups of learners, particularly those at pre-Level 2 qualifications, grade C GCSE. If you look at page 31, table 17, it shows the growth in the advice sessions that people have had, and the contact people have had with learndirect is increasingly via the website now rather than the telephone. My own webmaster is always bamboozling me with hits and visits to my website, and I notice you have web sessions. These figures look quite impressive, with up to seven million interacting with the website, but surely a lot of those are the same person looking at different things over and over again. Can you define how many people you think are using the website to access learning as unique individuals?

Ms Jones: Yes, I can. I think it does state in here how many we believe are repeats, although I do not have the figure to hand. There is a proportion that we think are repeat web sessions and there is also a proportion of callers that we think are repeat callers. About a quarter of callers are repeat callers and that is stated in paragraph 3.4.

Q81 Stephen Williams: It also says in paragraph 3.4 that a quarter of the callers are up in London and only 5% are from the north east or the east Midlands or other regions. Clearly, 25% is not a fair share of the population for Londoners and Londoners, from data I have seen elsewhere, tend to have higher qualifications anyway, so do you think you are reaching the right regions with the service or the server?

Ms Jones: Yes, we believe we are. We think London is a bit of a quirk. Our own Ufi view is that there is so much provision in the London area that people need signposting through that, so they more often ring up to ask for that help in directing them to the best course in the area.

Q82 Stephen Williams: Paragraph 3.5 maybe demonstrates how fatuous targets sometimes can be. I notice that the Department for Education originally set you a target of half a million calls from pre-Level 2 qualified people and you failed to reach that target. In the following year, 2003-04, they reduced the target and your success rate was lower again. Now the Learning and Skills Council is perhaps coming to the rescue with a lower target again for 2005-06 of 0.3 million calls. Do you think you are going to meet that target this year?

Ms Jones: Yes. I am confident that we are going to meet the target this year. There was definitely a factor in 2004-05 which contributed and that was the fact that we are taking the calls for other campaigns. For example, with the BBC Broad(?) Campaign recently, we have taken the calls for that and the number of calls that we get are part of our target. The Gremlins campaign, the apprenticeship campaign, they all contribute. If one of those campaigns slips in time that means there are fewer calls coming into our advice service, so part of it - and I know this sounds a poor excuse - is beyond our control because it is up to those organisations to launch the campaign that they had planned at the appropriate time and for that campaign to be effective. The other side of it is that the basis of the calculation was changed and I think that is why we ended up with the targets being misaligned for a while, but now we are back on track and we are confident we will achieve those.

Q83 Stephen Williams: Do you think the target for other people to contact is meaningful though?

Ms Jones: I think it is important for the sector because it means that we are integrating our activity across lots of different organisations.

Q84 Stephen Williams: I read also in this section that you do a follow-up or you maintain information on some of the contacts via the telephone but you do not maintain a record of persons who contact you via the website. In that the growth in traffic is on the website anyway rather than the telephone, is that not going to make it harder in future for you to measure how successful you have been in having an impact on individuals' lives?

Ms Jones: We are talking to the Learning and Skills Council and the department to make sure that we are working with the website side of the business as well because it is growing at about 20% per annum at the moment. Vast numbers of people are coming to us via the web and I think that is a shift in how consumers deal with organisations nowadays.

Q85 Stephen Williams: Paragraph 3.26 relates to how effective this service might be given that the key user group is people who have got below Level 2 qualifications when they initially contact you. It says that after two years from a survey only 9% of learndirect learners have progressed to a Level 2 qualification. Presumably you are not happy with that.

Ms Jones: No, we are not happy with it and we are stretching the target and trying to improve in this area, but we must not forget that many of the people who come to our service are not aspiring to further qualifications at a Level 2 level. Over 50% do progress to a higher level of qualification than their initial point of engagement and also eight out of ten people get a positive outcome at work. Going back to the original basis of why Ufi was set up, it was designed to enhance productivity, so if people are getting a more positive outcome of work, getting a job, getting a promotion at a job, that must be having a knock-on effect on the productivity and the economy of the UK.

Q86 Stephen Williams: This might be a question for Ms Pember. In the same paragraph, 3.26, it refers to the unique learner number from 2007 which the department is going to introduce. Could you expand on that? What is the purpose of this learner number? Is it going to be allocated to every school leaver or every school?

Ms Pember: Every school leaver and it is also the college and the number of the school which the pupil has attended. The rationale behind the learner number is to track people because we suspect that people start in learndirect, they go on then maybe a year later to another course at a college and often progress to Level 2 but because we have not got this unique learner number we have no way of tracking somebody through our system. We want to be able to introduce that so that we can do this progression of information. We also know that some learners go to more than one establishment to further their learning programme and we want to be able to track that as well.

Mr Haysom: It is a really important development which will also have a huge impact on reducing bureaucracy because we will not have to keep collecting the same data over and over again and it will also have a real benefit to individuals so that their learning records will be captured and will be accessed to them and that will go with them wherever they are.

Q87 Stephen Williams: Ms Pember, how much is this going to cost the department?

Ms Pember: It is part of reducing bureaucracy so you have to measure it against efficiencies. The whole of what we call the in-management information project is costing us between three and five million a year to get it started, but we expect over the next few years to receive that back in efficiency gains because of, as Mr Haysom pointed out, the duplication in the system of every student having to fill out a registration form for every course, every provider having to log them onto a system. Once they are there this will be a very efficient way of dealing with this record-keeping.

Q88 Stephen Williams: This presumably is going to go on a database on everyone from the age of 16?

Ms Pember: Sixteen-plus, yes.

Q89 Stephen Williams: And the database will be restricted purely to educational attainment?

Ms Pember: Absolutely, and to the individual as well. Therefore, if they go into an establishment and they cannot remember what their last qualification was or the last time they took part in a learning activity, that information will be there for them and they can keep it renewed themselves.

Q90 Stephen Williams: Will this information be discrete to the Department for Education and the Learning and Skills Council or will it be shared with other government departments?

Ms Pember: It will be shared with other partners like QCA and the awarding bodies because that is when it stops the duplication, but it will be done with the full knowledge of the individual involved. It will be very similar to the number we already use in HE for entry into university.

Q91 Sarah McCarthy-Fry: Going back to this innovation and the fact that it has taken this amount of time to get this far, Ms Pember, you are looking to recouping investment that has been made in learndirect through businesses. Have you also looked at whether you can recoup it by using the lessons you have learned in other government departments?

Ms Pember: Absolutely. We use the example of offender learning with the Home Office. Learndirect is also in contact with the Home Office for developing their own staff skills. We also are very keen over this sort of direct governance to help people access government information and local government information and we see the centres being part of that. We ran a pilot last year and now we are doing a cost analysis to see how we can do more on that but it is vital now we have grown this expertise that we use it across departments and across government.

Q92 Sarah McCarthy-Fry: Presumably the other departments will get it cheaper and they will be looked on as if they are really good value for money because you have done all the work. Is there a mechanism for cross-charging?

Ms Pember: I think my colleagues in Health will say they have developed some things that we in Education use. I am thinking on mental health and things like that for young people, so there is this conversation across government. With offender learning and for the Home Office, yes, you could say that Education did the development work for this in the beginning. We have not thought of cross-charging. There are other things we can do, and that is why we are doing this cost analysis where other government departments might have to provide us with some of the mechanisms to develop this activity.

Mr Haysom: Could I come back on an earlier point? You used the phrase, "We are looking to recoup the cost of Ufi". I do not think that is an accurate comment, if I may say so. What we are saying is that Ufi is performing an incredibly important function. There is a business opportunity to bring in some money which will offset in part the cost but I would not wish the committee to feel that we are looking to recoup the costs of Ufi. That is not what is going on.

Q93 Sarah McCarthy-Fry: I did not say you should manage to recoup the whole cost. I wanted to make the point that innovation costs money because it is trial and error. Therefore I am sure you must be looking to get some money back which we are not getting at the moment.

Mr Haysom: Absolutely.

Chairman: Ladies and gentlemen, thank you very much. You have heard what the Comptroller and Auditor General has said in his assessment of whether you provide value for money, Ms Jones, and that will be dealt with in our report.