Examination of Witnesses (Questions 20-39)
DEPARTMENT FOR
EDUCATION AND
SKILLS & LEARNING
AND SKILLS
COUNCIL
Q20 Mr Dunne: Have I misunderstood
the footnote? Is it not an annual agreement in which you determine
how much funding each college will get?
Mr Haysom: Yes.
Q21 Mr Dunne: So you could determine
next year that they will get, say, the equivalent of 5% less on
their procurement aspect and impose that saving upon them?
Mr Haysom: We could, but, I have
to say, that would not be a terribly clever way of going about
it. There is something of a history here within the sector, a
history of efficiency gains year on year and absorption of those
percentage increases in cost which did not actually reap much
dividend other than the threadbare estate and a reduction in quality
of what was being delivered. That is not what we are trying to
do here. What we are talking about here is not just cost saving,
and I think that is an important point, it is about value for
money as much as anything. It is not just cashable savings, it
is also other savings, and it is about making sure that the college
runs itself as best it can, knowing that, in doing that, it is
actually creating opportunities for itself to do better things
for its learners. That has got to be a much, much better approach.
It is more difficult, but it has got to be a better approach.
Q22 Mr Dunne: So this is a choice
that you are making? You have the power, you have the tools, if
you want to, to impose cash constraints from year to year, but
you are choosing not to exercise them?
Mr Haysom: It does not quite work
like that. I suppose what we could do is cut the unit of funding
for different kinds of courses. I suppose we could do that, but
that is certainly not what we see as our job here and it is certainly
not what the Government is asking us to do. In fact, there has
been a significant injection of funding, as you know, in unit
prices and it has actually raised the quality of what is happening
across the whole of FE and indeed narrowed the gap with the sixth
form, so that is not the approach that has been taken here at
all.
Mr Taylor: If I may, I would reinforce
the point that we are trying to win hearts and minds here, we
are trying to promote procurement, and there is a heck of a lot
we can do with the carrot rather than the stick, and to wield
the stick too soon would probably be a big turn-off to colleges.
Q23 Mr Dunne: I come from the perspective
where devolving power, I think, is the right approach, so I am
not actually being critical, I am just trying to understand what
powers you have at your disposal if you want to use them. Again
I am unfortunate in having followed Mr Wright because the issue
I wanted to raise he has already raised, so I will try and approach
it from a slightly different angle. If you turn to page 14 again,
table 7, and I appreciate what you say in terms of the responses
that came through to the NAO, but it seems to me very surprising
that such a low percentage of colleges were able to respond with
detailed information on their cost base. I note, Mr Taylor, that
you are the governor of two schools. I am the governor of a school
and I am well aware of the extent to which discretionary spend
in the cost base of a school is very, very limited and, as a governor,
I happen to have been chairman of the finance committee, so it
may well be that I take a higher interest in this than other governors,
but the primary function of the governing body, apart from the
educational aspect, is to make sure that the school runs within
budget. If the information is not good enough to be able to tell
how much they are spending on their fuel bill, for example, then
there is something seriously wrong with the financial information
within that body. Could you comment on your experience of the
quality of financial information, and I know you touched on it
earlier?
Mr Taylor: I think it is probably
more of an ability to analyse and understand what the question
was and take data from the finance system and convert it into
something that is useful from a procurement perspective, so yes,
I think some of these percentages are surprisingly low. My schools
would be able to come up with a much better analysis, I think,
from the data that we have because I have done it myself, but,
equally, I think it gives us the opportunity to chart improvements.
It clearly is the case, given this quality of information, that
colleges are not yet terribly advanced in terms of procurement
and there is a huge opportunity to make progress. What we have
to do is make sure that they can analyse the data they have got
properly.
Q24 Mr Dunne: I accept that for procurement
there is the information base. Have you looked at the quality
of information and what have you done since getting this Report
in relation to this aspect about understanding what is happening
within colleges and their financial control and management?
Mr Taylor: The procurement team
in the LSC are tackling individual colleges that want to understand
their spending patterns a lot more and, in doing so, are learning
quite a bit about how colleges could analyse their data so that
that can be passed on to the next colleges which ask the question.
We have got pilots running with a couple of tools or systems which
will help do the analysis on a more automatic basis to see what
the output from those pilots is, and that is coming through, I
think, if not this month, then next month. That then gives us
a platform to say to many colleges, if not all colleges, "This
is the best way of using technology that is available with your
systems to give you a really good starting point for procurement".
We have had guidance out since July 2006 on how to do it and we
now have a process or the challenge of getting people to use that
for a purpose that is perhaps not within their normal purview;
they have been analysing chartered accounts and report accounts
and so forth, but not using that data for a procurement purpose.
I would quickly add that many private sector organisations in
a similar state who have not looked at procurement before face
exactly the same problems, that there is an understanding analysis
issue before you can start tackling the opportunities issue.
Mr Haysom: I was about to make
the same point, that, in my experience of being in an industry
where a lot of companies are acquired, you always start from this
base of trying to get the information in the shape that you need
it. It does not mean that there is not the information required
to run the business, but it is the ease with which you can extract
it, the cost codes that you are using and mapping that against
a common set of accounts. All of that sort of stuff takes time
and I think that the chart on page 14 probably suggests the ease
with which they could get to this rather than the fact that they
could not get to it at all, or I suspect it is that.
Q25 Mr Dunne: I hear what you say
about needing to get systems on a common basis, but surely the
fundamental job of the finance director of each of these colleges,
and I assume they have each got a finance director or manager—
Mr Haysom: Yes.
Q26 Mr Dunne:— is to have a
proper handle on the cost base that is within their discretion.
Is that not their primary task?
Mr Haysom: It absolutely is. Whether
they can extract the information in the way that is required for
this particular exercise or whether they are looking at it in
a different way through a different prism is another matter, and
that is the bit, is it not?
Q27 Mr Dunne: That I accept, Chairman,
but whilst we are using the word "procurement" to talk
about spending money in a cost-effective way, actually procurement
in a large number of these categories is just to do with information,
"How much am I spending already on my heating bill?",
and that is not a difficult thing and, however you ask the questions,
you are able to provide the answer. I would like to move this
on one stage further and for you to tell us what you are aiming
to do to encourage, for example, pool-buying of electricity costs,
as that is something which is now quite common and possible across
different industrial sectors and the private sector and is indeed
happening in other aspects of the public sector.
Mr Haysom: And that is one of
the big surprises when you come into all of this, that some of
that very basic and obvious stuff just is not happening. We are
working very hard, as we have already said, to encourage collaboration
between different colleges and between colleges and other parts
of the public sector to actually take advantage of some of the
blindingly obvious stuff. Crescent, which is the consortium which
Ian mentioned earlier, the membership of that has grown from 100
and something to 300 in a matter of months. What we were trying
to focus on in preparing for today, I was talking to my team,
asking, "Where are some of the big wins?", and energy
is one of them and those deals are there to be had, are they not,
Ian?
Mr Taylor: They certainly are,
yes, already available, and part of this is getting information
out to colleges in a form which they can use.
Q28 Mr Dunne: To go back to your
analogy of the incentive and the risk that if people make a saving
or volunteer a saving, they are never going to see the benefit
from it, are you not saying, given that you are not in a position
to or you are choosing not to direct, are you not imposing some
stick so that, in the event that they then do not in one or two
years join up to some of these collaborative schemes, they will
suffer some consequences?
Mr Haysom: I do not think we are
into that phase at the moment. I think we are very encouraged
by the fact that so many are signing up so readily at the moment.
I think Mr Wright's comments earlier are absolutely right, that
it is the cultural change that you need to drive from that point
on which is the real challenge. I am not sure that you drive cultural
change with sticks. I think the big stick that exists and which
exists increasingly, the point I made earlier, is that the way
FE colleges are going to have to operate in the future if they
are going to be successful in this demand-led system where they
are only paid absolutely on results, so only when an adult learner
signs up will that trigger, it means they have to really act much
more commercially and it does mean that their cost base has to
be in great shape to be able to do that, so I think that is the
real focus, that is the real concentration of the mind. One of
the things that we are busy doing, which is not directly related
to procurement, is that we are visiting every board of governors
around the country, telling the message about the move to the
demand-led system and making it really clear what it takes to
succeed in this new world, and one of the things that it takes
to succeed is running your business well and of course governors
understand that absolutely.
Mr Dunne: Thank you, Chairman.
Q29 Mr Bacon: Mr Haysom, you are
the Accounting Officer, are you not, for the Learning and Skills
Council?
Mr Haysom: I am indeed, yes.
Q30 Mr Bacon: So I would like just
to ask one question before we get on, and in a way it is about
procurement, specifically about the procurement of the career
development loans which you, I am sure, are familiar with. You
are, as Accounting Officer, charged with looking after public
funds and public funds are used in the creative element, as I
understand it, to fund the interest payments of the loans that
people take out to do training courses to help them get back into
employment or to improve their skills. That is right, is it not?
Mr Haysom: That is right, yes.
Q31 Mr Bacon: You would not knowingly
use public funds in that way to help fund training provided by
convicted criminals, would you?
Mr Haysom: Not knowingly, no.
Q32 Mr Bacon: But you have been doing,
have you not?
Mr Haysom: Forgive me, Mr Bacon,
but I thought we were here to talk about procurement, although
I am happy to discuss career development loans.
Q33 Mr Bacon: Are you familiar with
the television report which was broadcast on the BBC a couple
of weeks ago?
Mr Haysom: Yes, I am.
Q34 Mr Bacon: May I ask if you have
done anything about it since the broadcast went out?
Mr Haysom: What we have done is
we have looked long and hard about what we can do to help learners
who are affected by that particular instance and by other instances
of a smaller scale, the learning providers who fail and, therefore,
the learners involved are then left with that debt and without
the opportunity of completing their learning, so we have looked
long and hard at what we can do in terms of helping them through
the banks and we are looking to review where we are in terms of
that whole programme and how we might actually run that programme.
Q35 Mr Bacon: Because it is about
procurement, it is about the procurement of quality training that
people can rely on.
Mr Haysom: Well, there is a policy
that sits behind—
Chairman: It is a bit wide of what we
are asking about.
Q36 Mr Bacon: But I am just interested
because—
Mr Haysom: I do not think it is
actually the target area at all.
Q37 Mr Bacon: I happened to be on
a television programme a couple of weeks ago and this came up.
Mr Haysom: I would be delighted
to meet you separately on this and talk to you about it.
Q38 Mr Bacon: I would be very pleased
to do that, if we may. If we can move on, I have a question for
the NAO. You did an investigation of the Manchester College of
Arts and Technology based upon allegations that they had been
systematically entering fraudulent figures by manipulating course
registers so that students who were not there were shown to be
there in order to inflate the monies that they were getting from
the Learning and Skills Council. That is right, is it not?
Ms Hands: Yes, we did.
Sir John Bourn: Yes, we did.
Q39 Mr Bacon: Were you aware, in
doing that, that large amounts of auditable records have been
systematically destroyed?
Ms Hands: They were destroying
records, and I would have to check with the Learning and Skills
Council, but it was quite swift, the destruction of records. I
think it was within a year.
Mr Haysom: I cannot recall whether
it was within a year, but it was certainly quicker than is practice
today.
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