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18 May 2009 : Column 1218

The Secretary of State for Innovation, Universities and Skills (Mr. John Denham): The hon. Gentleman has said several times in the House and outside that Ministers have encouraged colleges to submit inflated or over-grand bids. Will he give me just one example of a Minister going to a college and asking it to withdraw its bid and submit a new one? If he cannot, I would be grateful if he stopped making that allegation.

Mr. Willetts: I shall deal with the Secretary of State’s responsibility in a moment. He has to accept some responsibility for the LSC’s actions. As with his denial of the figures for NEETs, it is not good enough for him to try to escape responsibility for the policy, when he must have known what was going on. If he intends to tell us that, for the past 18 months, when the LSC was telling colleges to bid for more capital, he knew nothing about it, he is admitting to incompetence and failure to discharge his responsibility as Secretary of State.

Justine Greening (Putney) (Con): South Thames college, which is just outside my constituency and used by many of my constituents, received the other piece of bad advice that colleges got. It had an ambitious project and was advised to submit it in two halves. It got funding for the first half, but funding for the second has been put on hold, so it is stuck with a half done project that is no use to anyone.

Mr. Willetts: My hon. Friend is right. Some colleges have already started demolishing part of their fabric, and lessons are taking place in temporary classrooms as they wait for permission for a capital project. In other colleges, the new project was to be part of the wider regeneration of an area. Many serious problems face at least 144 colleges.

I want to ask the Secretary of State some specific questions on behalf of many of those colleges about what is going on. My first question follows from his intervention. Why did it take so long for the Department for Innovation, Universities and Skills, for which he is responsible, to realise what was happening?

We know from Sir Andrew Foster’s excellent report that alarm bells were sounding as early as February 2008, when the LSC’s director of property and infrastructure prepared a report. Its analysis of the capital promises being made concluded:

We know that that report from February 2008 was discussed by the LSC’s capital policy group in April 2008. We also know from Sir Andrew Foster’s report that the Department attended all the meetings of these groups at a senior level as an observer. Nevertheless, the Secretary of State said, and I accept his word, that he knew about the problems with the capital funding of FE only in November 2008.

How on earth can we have a Department in which senior officials are aware from April, possibly February, that they have an unaffordable set of capital commitments—we know from the minutes, which I obtained through freedom of information requests, that members of the Department’s top management team attended the meetings—and the Secretary of State seems to have been kept in ignorance for six months? That is an extraordinary way to run a Department.

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Mr. Marsden: rose—

Mr. Willetts: If the Secretary of State will not answer that challenge, I will happily accept the hon. Gentleman’s intervention.

Mr. Marsden: The hon. Gentleman’s litany of concern for colleges would have rather more force if the Government whom he supported in the 1990s had done anything about their funding. Does the shadow Secretary of State agree that his position is greatly undermined by the fact that last year the National Audit Office pointed out the appalling lack of investment from his Government before 1997?

Mr. Willetts: The one thing that colleges all say is that when they were funded by the Further Education Funding Council they were trusted to exercise discretion, which meant that they could tackle local problems such as NEETs without being funded by the Learning and Skills Council simply to produce paper qualifications. Colleges look back upon that freedom to run their own affairs very fondly indeed, and we are committed to restoring it to them. The best way to ensure efficiency and high performance from colleges is to give them the freedom to run their own affairs, and that is what we are committed to doing.

I want to pursue the important question of exactly why it took almost a year, from the first report by the Learning and Skills Council, in February 2008, for the Secretary of State to make his first public comment on the matter, which he did in late January 2009. Indeed, even now we are still waiting for him to come to the House to make a proper oral statement about what is happening to college funding. It is now 15 months since the problem was first identified. When he last made a written statement to the House, he said:

We have already had that recess; in fact, we are about to have another one, and still there is no sign of the Secretary of State volunteering any information. At every stage, the information has had to be secured by us, making freedom of information requests, tabling written questions and calling debates. It is a pity that at no point has he felt able to come to the House to volunteer information in Government time about what is happening to our colleges.

Mrs. Cryer: Will the hon. Gentleman give way?

Mr. Willetts: I am going to make some progress.

We know from Sir Andrew Foster’s excellent report why the problem built up in the way that it did. Sir Andrew gave one reason why the information was not percolating through to the Secretary of State:

People were not willing to bring to the Secretary of State the bad news about what was happening in the Learning and Skills Council and in further education capital projects. I regard that as a serious dereliction of duty.

Rob Marris rose—

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Ian Stewart rose—

Mr. Willetts: Let me make some more progress.

The problem is worse than that, however. We know, from the freedom of information requests that we have made and from the minutes that we have read, that the “no bad news” culture spread as far as giving deliberately misleading accounts of what happened at some of the crucial meetings of the Learning and Skills Council. The minutes of the meeting on 17 December 2008, which was attended by the Secretary of State’s senior officials, as all the previous ones were, show the following crucial item, when the problem was finally confronted:

be made to the minutes of the previous meeting. The minutes continued:

That was what the minutes of the November meeting stated. This is what was added subsequently:

In other words, it was recognised that the minutes of the previous meeting had been misleading. The council had pretended that the problem was that there was no time to discuss the capital projects; they admitted, at the subsequent meeting, that the underlying reason was “concern over affordability”.

The problem reached the stage that the minute-taking in the Learning and Skills Council was deceitful, in that it was not willing to acknowledge the capital problem. That is why there was a failure of management in the capital project. At no stage was anyone openly reporting between the LSC and DIUS or between DIUS officials and Ministers about what was happening. The Secretary of State has to take responsibility for that culture, and for the way in which the Learning and Skills Council functions.

Ian Stewart: I thank the hon. Gentleman for giving way; he has been generous with his time. This is an important issue, and it is important for us to get to the bottom of it. I am intrigued by the details that he has put forward today, but is he aware that, when the former chief executive of the Learning and Skills Council stood down, he went on record to say that he did not become aware of the issue until October, and that the reason for that was, he claimed, that the council was looking at in-year figures? The hon. Gentleman has hit on some interesting points today, and perhaps we can get to the bottom of this.

Mr. Willetts: There were clearly managerial failings within the Learning and Skills Council, but I do not think that it is feasible to say that the problem was simply a matter of those failings. We, the Opposition, are trying to hold the Government to account and to find out why there was a culture of bad news not being reported, of minutes of meetings being misleadingly reported, and of crucial information not being conveyed. We need to find out why there was almost a year between the problem first being identified and any public statement being made by the Secretary of State, and why we still have not had the statement that was
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promised before the last recess. As hon. Members in all parts of the House understand from other contexts, there is a need for openness, and a lack of openness has contributed to the scale of this problem.

Rob Marris: Will the hon. Gentleman give way?

Mr. Willetts: I am going to try to make some progress, because many other Members want to speak.

I want the Secretary of State to comment on certain other crucial points. We need him to tell us, authoritatively, how many colleges are affected by this problem. The figure of 144 comes from a letter that I received from the Learning and Skills Council after I had asked questions in the House, but we need the Secretary of State to give us an updated account. As soon as the list of colleges was released, I started getting e-mails from people asking why their college was not on it. We then discovered that there were other colleges involved that had not been on the first, official list, but we have not had a further, authoritative update from the Department on how many colleges it thinks are affected by the crisis.

May I also ask the Secretary of State what criteria will be applied as he tries to get the further education colleges out of the appalling mess that they find themselves in? We realise that there will have to be priorities, because there is a capital overhang of £3 billion or more, and that the needs of all the colleges cannot be met easily or rapidly. However, there needs to be far more public information than we have had so far on the criteria that will be applied and on how the limited amount of money will be dispensed.

Mr. Marsden: Will the hon. Gentleman give way?

Mr. Willetts: No, I want to make some more progress.

We are told that one criterion will be whether a project is shovel-ready, but there will be others. What about the projects that are part of the wider regeneration of a town or district, for example? What priority will go to them? We also need to know what will happen to those colleges that have made commitments to buy land or commitments to move. How much weight will be attached to that consideration?

It will be tempting—and I suspect that the Secretary of State will succumb to the temptation—to say that the crucial issue will be to knock down the building costs charged by the building industry, and indeed there might be some savings to be made in that way. Will he acknowledge, however, that one reason that these projects have turned out to be so expensive is the extraordinarily cumbersome regulatory procedures surrounding them, involving preferred builders and preferred planning consultants who might be approved of for one region but not for another? Many colleges have told me that they could have delivered their capital project at a much more modest price than it was ultimately billed for, if only they had been free from the bureaucracy of the LSC.

Will the Secretary of State also explain exactly how costs that have already been incurred by colleges will be treated? According to the Association of Colleges, £187 million-worth of expenditure that was thought to be part of capital projects might already have been incurred, but if those projects are no longer going
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ahead, that money could count as current expenditure instead. Counting it as current expenditure could drive colleges into deficit. I see my right hon. Friend the Member for North-West Hampshire (Sir George Young) in his place. He, too, has raised that matter, because it affects his local college. Some colleges might find themselves in breach of banking covenants if their current expenditure budgets are suddenly hit. Therefore, we need authoritative advice about the accounting treatment in these circumstances and about the prospects for colleges to get redress for the costs that they have already incurred.

It is interesting to look through the minutes, because another revealing item from them suggests one of the reasons for the secrecy surrounding all these matters. The minutes state:

One suspects that the LSC is legally vulnerable when colleges have incurred these items of expenditure; again, we are waiting to hear some authoritative guidance from the Secretary of State.

Members of all parties will be concerned about the problems facing colleges in their constituencies and I want to give as many of them as possible the opportunity to raise their specific concerns. However, as well as noting the individual injustices and grievances, we should not lose sight of what this tells us about the importance of investing in skills in a recession and this Government’s failure to give FE colleges the opportunity to do just that.

If we wanted to know what was wrong with this Government’s approach to skills, I could think of no more vivid example than the recent report from the UK Commission for Employment and Skills. The Secretary of State would not need to read even the executive summary; all he needs to read are the statistics on the cover, which show the international ranking for the three levels of skills. For the highest level, the UK’s position is 12th internationally. The Government’s ambition is that we should be eighth by 2020, but the report projects that, on current policies, we will be 10th. For intermediate skills, we are currently 18th in the international league table. The Government’s aim is for us to be in the top eight, but the report says that on current policies we will go down to 21st by 2020. As regards low skills—we have a particular obligation to people with low skills because the issue is fundamental to social mobility—our current international position is 17th. The Government’s aim is for us to be eighth by 2020, but the independent report suggests that, at this rate under this Government’s policies, we will be 23rd internationally in 2020. That is why we need a different approach and why I commend the motion to the House.

4.27 pm

The Secretary of State for Innovation, Universities and Skills (Mr. John Denham): I beg to move an amendment, to leave out from “House” to the end of the Question and add:

I welcome this debate, but I am surprised by the temerity of the hon. Member for Havant (Mr. Willetts) in raising it. The hon. Gentleman quite often repeats unfounded allegations that, as the House heard earlier, he is unable to justify. That is a shame, because the issues we are debating are of real importance to our society and they are better conducted by not making allegations that cannot be substantiated.

It is true that, as this country works to recover from the impact of the global recession, it is going to be British business and the skills of the British people that ultimately ensure that the upturn comes as quickly, as strongly and as sustainably as possible. Investing in the skills of the British people is one of the most important things we can do. Through training, we can improve their productivity and the productivity of their companies. Through training, we can give individuals the skills they need—skills to keep their jobs, skills to get new jobs and skills to develop their careers and provide a decent life for themselves and their families.

Mr. Heald: When I was a Minister, I expected my officials to tell me as soon as they knew something was going wrong, in case the Opposition spokesman gave me a hard time. In fact, it was the right hon. Gentleman. I would like to know whether he works on the same basis; and, if so, what went wrong? Was the junior Minister not told about the meetings that officials were attending where all the money was obviously wrong?

Mr. Denham: We will come on to the Learning and Skills Council in due course, but I point out to the hon. Gentleman that, yes, I do expect to be told. One of the reasons I commissioned the Foster report—it did not just appear out of nowhere; I commissioned it before anyone had a clear picture of the size and scale of the problem—was that I wanted to understand what had happened. That is the way I have always worked as a Minister. I gave him a hard time when he was a Minister and I was Opposition spokesman, and I think I often told him things that he did not know, but Ministers do and should expect to be informed. Where that does not happen, clearly it is a matter of regret and we usually follow such things through.

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