Public Expenditure - Children, Schools and Families Committee Contents


Examination of Witnesses (Questions 180-199)

RT HON. ED BALLS MP, DAVID BELL AND JON THOMPSON

16 JULY 2008

  Q180  Paul Holmes: I have a specific reason for asking about A-levels.

  Ed Balls: I understand. However, it is important that we are not prescriptive at 16 about what is the right path for a high achiever. An apprenticeship to Level 4 or university level can be a really good thing to do, as well. However, I hope that more young people will stay on to take A-levels or other qualifications with the intention of going to university.

  Q181  Paul Holmes: Good—so that was a yes, and Jon was nodding, too. This year, however, the presupposition from the Government to the learning and skills councils in making funding available for 16-19 education was that there would not be an increase in the number of pupils staying on in sixth form colleges to do A-levels. It was thought that there might be an increase in vocational training and the rest of it, but not in A-levels, and therefore funding for sixth forms and A-levels will not effectively go up this year. I shall give you a specific example, but this applies to a number of schools in Yorkshire, the east midlands and, presumably, nationally. Brookfield community school in my constituency is, and always has been, a very good school—it was very good when I went there as a brand new teacher in 1979 and is very good now. It is always bursting at the seams in year 7 and always has a very large, thriving and academically successful sixth form. This year it had a significant and sudden increase in the number of people applying to stay on to do A-levels, but the Learning and Skills Council (LSC) said, "Tough, because we ain't got any money to give to you." Other schools are in that situation—I know of at least one more in Derbyshire and a number in Yorkshire that I have read about in the local press—of having to say to all these kids who are doing well at school and who want to stay on partly because you have exhorted them to, "We are not going to take you, because we are not being funded for you" or, "We'll have to subsidise you from year 7 upwards at the expense of the rest of the school." Why?

  Ed Balls: I am obviously not going to doubt the details of those cases, and it is something that we should really take up with the individual schools and the Learning and Skills Council.

  Q182  Paul Holmes: I have done that, and the LSC says that there is no money for growing A-level numbers, but there is for FE numbers. Why not for growing A-level numbers when your policy is to encourage more kids to do well and stay on?

  Ed Balls: The funding for 16 to 18-year-olds went up from £5.9 billion—it is going up year by year, and will rise next year by 5.2%. There is considerably more funding year on year. We have been moving to a new funding system that is prediction led. The interesting thing around the country was that the LSC found that the predictions from schools and colleges substantially exceeded—if my memory serves me right—the number of pupils in the country. So there were some issues about how the planning system worked. Some schools and colleges were knocked back relative to their plans, but the LSC should be ensuring that the provision is in place for the actual numbers.

  Q183  Paul Holmes: But the East Midlands Learning and Skills Council told me explicitly—I have read the same thing in the Yorkshire Press about the Yorkshire region—that the Government instructions to, requirements on and expectations of the LSCs was that they would not increase funding for A-level pupils because it would all go into apprenticeships, FE and all the rest of it. But your policy for 11 years has been to encourage children to do well, stay on and do A-levels, after which half of them will go to university.

  Ed Balls: I will ask David and Jon to comment, but I do not recognise that instruction. Conversations that I have had with the LSC in Yorkshire suggested that although a degree of iteration had to be gone through to get the new system to work, and while some requests for funding were out of line with pupil numbers, it would be possible to meet expectations with its budgets.

  Q184  Chairman: Could you look into that issue and write to the Committee?

  Ed Balls: I would be very happy to do that.

  Jon Thompson: I agree with the Secretary of State and I am happy to write to the Committee. On my understanding, the overall LSC budget assumed a 3.2% rise in funded learner numbers. We can look at exactly how that breaks down.[2]

  Q185 Paul Holmes: The East Midlands LSC and the heads involved say specifically that Government thinking from the centre said that there would be no increase in A-levels.

  Ed Balls: The 5.2% was for school sixth forms, and the funded learner numbers in 2008-09 were 384,000—an increase of 3.2% compared with 2007-08. Two thirds of schools will have an increase in their LSC funding—some will be substantially more than the average increase of 5.2%. Those schools with reduced LSC funding are invariably linked to reduced learner numbers. Some schools have had reduced learner numbers but overall, the number is going up substantially. We will set out more details. Perhaps you could give us details of different cases.[3]

  Q186 Chairman: We are going to move on. We have had a session about what has happened with the break-up and this two-year transition period of the Learning and Skills Council. After hearing from experts in the area, we were a little disturbed about how much instability there seems to be in the system. Are you worried about that?

  Ed Balls: It is something that I am concerned about; "worried" would suggest that we thought that it was off-track. I am concerned about it because it is a big change. On the one hand we have been moving progressively—and I think rightly—to a more demand-driven approach to adult skills training. The new adult skills agency will ensure that that demand-led approach continues. On the other hand, for 16-19 funding, we are transferring responsibility to local authorities so that they have the funding to deliver the collaboration we need for these substantial reforms. We are taking part of the LSC to a new adult skills agency, while part of it transfers to local authorities. We will legislate for that next year in the Bill, we have consulted on it and now the LSC must get on and do its job, as well as planning for the transition. It is a big change. I am concerned because we do not want to lose the short-term focus on NEETs and learner numbers on apprenticeships, but we must ensure that the reforms are done well. The long-term prize of more effective funding provision for 14 to 19-year-olds is a big one. To do this properly, we needed to make that change.

  Q187  Chairman: The Association of Colleges is worried that independent colleges will lose their independence as they will come under the yoke of the local authorities again.

  Ed Balls: We are not moving to a bureaucratic and onerous funding regime. Further education colleges often take learners from a number of different local authority areas and there must be stability and predictability in the system. As with Academies, sixth forms and colleges, if we want to deliver 14-19 collaboration, colleges that provide that education need to be part of those collaborative arrangements. There need to be partnerships.

  Q188  Chairman: Would it worry you that there was evidence given to the Committee that morale in the LSC was low and that people's priority was trying to make sure that they got a job after the transitional two years? That is not very good, you know—when we shake up the system as regularly as we have done.

  Ed Balls: It would concern me; David has regular discussions with the LSC and change is happening. There is no doubt about that. In the case of health, I was concerned, as many of us were, by the reorganisation of primary care trusts and the potential that that had to undermine delivery of some of our health objectives. But at the same time, the fact that we now have in my constituency—in our area—one primary care trust for the whole area is much more effective than the old, more fragmented way.

  Q189  Chairman: Is it not the opposite? Now you have various levels. You had one LSC; you knew what you were dealing with in a region. Now you have got these various bodies that you are dealing with.

  Ed Balls: I do not think so.

  Chairman: Well, this is what the colleges are talking about.

  Ed Balls: From the colleges' point of view—

  Chairman: It is the reverse of the health example.

  Ed Balls: The point I was making in the health example was that good reforms must be well managed, and you must keep your eyes on the long-term goal. If the long-term goal was the wrong one—if we were wrong to be running local authority commissioning of 14-19, and wrong therefore to be reorganising, as we have done nationally with our two Departments, the funding of education at a local level into 14-19 on the one hand and adult skills on the other—then of course we should not be splitting the LSC. But personally I think that it is the right long-term goal and therefore our challenge and our concern are to manage that transition. We are doing so with the full co-operation of LSC staff around the country, many of whom are great enthusiasts for train to gain-type, demand-driven provision for adult skills and great enthusiasts for the way Diplomas and 14-19 collaboration can transform that transition to adult life through education. I think people believe in the vision, but we have to make sure that we get there in a careful and staged way.

  David Bell: I was just going to add that, in a recent discussion that I had with the chairman and chief executive of the LSC, they were at pains to stress that they are still focused on all the current priorities, as the Secretary of State said, about reducing NEETs and so on, because they feel that it is really important to do that. At the same time, they are, I think, really constructively involved in the planning of the new agencies and working with us to do so. I should also say, because you mentioned the Association of Colleges, that the Association of Colleges, the Association of Directors of Children's Services, the main head teachers' unions and so on are really actively involved with us as a Department as we are planning these arrangements. There is no sense in which people are being kept on the outside as we take these reforms forward.

  Chairman: We have quite a bit of territory to cover. Do you want to come in on this, David?

  Q190  Mr Chaytor: Pursuing the argument about the need for 14-19 coherence and simplification, what is the purpose of the young people's learning agency? Why not just cut out the intermediary and direct the funding straight to local authorities?

  Ed Balls: We are, but different areas will have different ways of doing things, and you cannot run 14-19 provision in many parts of the country—not every part of the country—simply by focusing on one individual local authority.

  Q191  Mr Chaytor: The document Raising Expectations provides for the establishment of sub-regional groups of local authorities.

  Ed Balls: But what it says is that there are two different ways in which you can do that. You can either do that through a group of local authorities coming together and as individual entities trying to reach an agreement, or you can do so by a group of local authorities coming together and establishing joint, shared and pooled commissioning arrangements. In the case of the latter, we will expect the young people's learning agency to essentially stand right back and only be there as a sort of adviser and collector of information, but many areas will find it quite hard, in my view, to get—at least quickly—to that degree of sub-regional integration. The moment you have individual authorities making case-by-case agreements, there is a role for ensuring that those agreements are effective, and for stepping in when there are disagreements and things break down. Then I think that the young people's learning agency will need to be more active. So there is a responsibility on value for money and there is a responsibility on monitoring and ensuring that objectives are being delivered. We would expect there to be a very light touch if there is an integrated approach sub-regionally, but if that is not possible, the young people's learning agency will have to hold the ring to a greater extent. That will depend very much on the nature of sub-regional relationships.

  Chairman: The Committee is concerned about efficiency savings and productivity. John, over to you.

  Q192  Mr Heppell: It looks like the Department is quite happy that it will reach its Gershon targets, although I think that there is still some confusion about how those savings are quantified. The figure of £2.9 billion was in chapter 10 of the Department's Annual Report. How has that figure been derived?

  Jon Thompson: How is it derived?

  Mr Heppell: Yes. I can see how some parts, such as job losses of civil servants, can easily be quantified, but some of the other stuff I find difficult to understand.

  Jon Thompson: A whole series of programmes combined to give the targets that we were striving for, which were £4.3 billion in the previous comprehensive spending review round and £4.5 billion in the next CSR. We have discussed before in the Committee the fact that savings break down into two parts. First, there are cashable things such as improving procurement by structuring contracts so that schools can procure cheaper. A good example of that is the implementation of the open programme, which has gone into about 10% of schools so far and enables them to access national procurement deals and therefore get a cheaper price. That is a cashable saving. Then there are a range of savings—again, we have debated them before—that are called non-cashable savings. For instance, introducing a technology can save people time, and then we can estimate how much time is saved and attribute a financial number to that. It is not actually saving money off the budget, but it allows time to be re-prioritised into other areas. There is a programme that breaks it all down, which we could give you. There are at least 50 lines on the matter. The most significant things in the 2004 spending review were improvements in the application of technology in schools. You will be familiar with the huge range of IT programmes that have gone into schools, which have saved preparation and assessment time. The biggest cashable gains were in relation to procurement. As I said, the programme has at least 50 areas in it, and I am happy to provide that detail. It will be publicly reported in the autumn performance report this year, and again in next year's Departmental Annual Report.

  Q193  Mr Heppell: So in that report, we will be able to see what is actually real cash savings that are there for reinvestment.

  Jon Thompson: Sure.

  Ed Balls: Something that I am very conscious of at the moment, especially given the wider economic climate, is that we need to show not only that we have delivered our Gershon savings but that we are actively doing everything that we can, nationally and locally, to use our budgets effectively. We have been doing a lot of thinking about how we can do even more, nationally and locally, to support efficiency. One thing that I discussed at the National College for School Leadership recently was how primary schools can work together to reduce collective administration costs and free up resources in school budgets. It does not really make sense for every individual primary school to be running its whole IT procurement and staffing budget separately. That is obviously a matter for primary schools, but it is the kind of thing that we are looking at to try to be innovative.

  Q194  Mr Heppell: Okay. For the first time, primary schools are now going to be asked to make a 1% saving, I think over a three-year period—1% annually. Why 1%, when local authorities are asked to make savings of 3% every year? Is the intention to increase it from 1% when schools get used to the idea of making the efficiency savings? Will it rise then to 3%, the same as for local authorities?

  Ed Balls: I am slightly thrown by that question, because I thought that you were about to say, "1% seems much too high, isn't that going to be very tough for primary schools to deliver?" This is the first time that we have done this for schools. It is different for a local authority, with maybe 19,000, 20,000 or 25,000 staff and quite complex delivery processes, and for an individual school, which probably has less scope for that kind of savings through IT procurement. We looked at this and judged that 1% was a demanding objective for schools, but deliverable. That is 1% within the calculation of the minimum funding guarantee. The actual amount that schools on average will be getting will be considerably higher than the minimum funding guarantee.

  Jon Thompson: The additional element is that we considered the balance between staff funding in the dedicated schools grant and non-staff funding, which is roughly split 80:20. We thought that 1% was a reasonable reduction to be made across the board. We thought about the disproportionate impact on the non-staff—in other words, if you took it all out of that, it would require a 5% annual saving, if you did not adjust the staffing budget. We thought that, on balance, 1% was reasonable if you took that 80:20 split into account.

  Q195  Mr Heppell: Under the public value programme—the new efficiency programme—the importance of the process is to find smarter ways of doing business and saving money. What about the things that you have just said about staffing costs? I can see how Building Schools for the Future, with a great big budget, could fit quite easily into that category. How can teaching assistants fit into that category? I am not quite sure what a smarter way is for providing teaching assistants.

  David Bell: The public value programme is intended to ensure that we are getting the best value out of the additional investment that we have put into teaching assistants. That seems to me to be an entirely reasonable thing to do. That has been one of the revolutions in the school work force over the past 10 years: we now have around 300,000 people who are doing those sorts of teaching assistant jobs. What we have been asked to do is to ensure that we are getting absolutely the best value out of that. That is one of the four programmes that you cited that we have to carry out. It seems to me to be an entirely reasonable thing to ask us to do. As the Secretary of State has said, we have been having discussions within the Department, not just to look at the public value programmes as established by the Treasury, but to ensure that we are looking right across our responsibilities, to ensure that we are getting best value.

  Q196  Mr Heppell: The Department annual report included an analysis of productivity this time. In the past, the Department has always said that it could not really work on any sort of productivity. Why has that changed now? Why are you doing it now?

  Ed Balls: Following the Atkinson review, the Office for National Statistics published some work last autumn on educational productivity, which has informed the analysis in the departmental report. It is something that is interesting to people—whether we are using public money to best effect. I think that the discussion around productivity in education is an important one. It brings out some of the real challenges in making effective schools policy. One of the things that is very striking to me is that we, as a new Department focusing on children's policy, talk a lot about special educational needs and tackling those extra barriers to learning inside and outside of school. We do that not only because we care about children being well, healthy and happy, but because addressing those special educational needs is key to raising standards. As we raise standards on average—we are now up to 80% of children getting to Level 4, Key Stage 2—increasingly that last 20% involves more children with learning difficulties who need extra support. Therefore, if we are going to keep raising standards, that means more teaching assistants, more personalised learning and one-to-one education, and more educational investment to go to the next stage. If you measure that by productivity, you would say that that means that it has taken you more teaching input to raise standards to the next level—which means your productivity is falling—whereas I would say that we are investing more in the personal learning of children who, without that extra personal attention, would not succeed. Therefore, we need that extra investment to keep making progress, and accrued or misleading descriptions of those productivity statistics entirely miss the point. You have to keep making the case for more investment in education if you are going to deliver on the objectives for every child. We judged that the productivity debate was a good debate to have so that we can bring out some of the challenges and perhaps undermine some of the glib assertions that a fall in productivity in education is bad.

  Q197  Mr Heppell: You have effectively said in the past that cost-benefit analysis is the best way to judge effectiveness in educational spending. What is the latest cost-benefit analysis and does that show that we are being effective with our spending?

  Ed Balls: That is a good question. We produced a cost-benefit analysis on education to 18 and we judged that the impact upon the economy and wider society of universal education to 18 would be positive. I am not sure whether we have done a particular retrospective cost-benefit analysis of school reform in general. It has been more on discrete issues.

  Jon Thompson: That is exactly our situation—we have done it on discrete issues rather than the system as a whole. As we debated last time, the Institute for Fiscal Studies report, I think, supports what the Secretary of State said. Between 1996 and 2000-01 there were significant increases in both input and output as judged by the Institute for Fiscal Studies, so productivity rose, but it has slightly fallen back between that period and now. My understanding of the IFS report is that if you take the 10 years as a whole, there is a 27% increase in outputs for a 25% increase in inputs, therefore there is a 2% productivity gain.

  Ed Balls: My point is that you would expect productivity to fall in education because the challenge gets greater the more that you raise standards as the children who you want to get to that level need extra and more intensive help. It is almost like the opposite of manufacturing. In manufacturing or a service economy technological change normally drives a rise in productivity as you invent new things and find new methods. In education, the more you develop as a society and the more you are demanding that every child should do well, the more intensive in the way that you support children you have to become. Developed economies tend to find it more expensive to keep driving up standards but it is the right thing to do.

  Chairman: Secretary of State, I think that the Committee would agree absolutely on that. Having recently been to Denmark to look at issues with children in care, there is no doubt when you come back to this country that the real challenge for us is going to be putting even more investment into early years, special attention for particular children and training and rewarding the work force better than we do at the moment.

  Q198  Mr Heppell: I was slightly surprised by that earlier answer. Do you not do regular cost-benefit analyses all the time? You seem to be saying that you have not done it for a while, and that surprises me.

  David Bell: One of the frustrations that we have had in looking more generally at the question of productivity is that some of the work done across Government appears to move at a rather stately pace. That is not through lack of will, it is because it is very difficult. All of our discussions with the Office for National Statistics, which heads this, suggest that it is difficult for the reasons that the Secretary of State has highlighted. As he said, on a number of policies we will do that cost-benefit analysis that you have mentioned. We have to examine the big-picture questions around effectiveness, productivity and so on across Government with the Office for National Statistics and it is complicated stuff. The Office for National Statistics has been working on this. The Atkinson review first reported in 2003 or 2004, so we are five years on and people are still wrestling with what is a really complicated business.

  Q199  Paul Holmes: On the productivity issue, you make the case strongly enough. Would the Treasury be willing to argue the case that falls in productivity in health or education are good? When you publish figures such as those in the report, the CBI jump in and say, "All this money that has gone into education and health is a waste of money because productivity is falling". Should you, as a Minister, or the Treasury be arguing more forcefully that falls in productivity are good because they mean increased quality?

  Ed Balls: Clearly, in the case of health, there have been huge increases in productivity and cost. You have much more potential for technological change through new drugs and new treatments to allow you to cure many more people. Statins are an example of a new discovery that allows you to be much more cost-effective in your GP hour, because you prescribe them. That has a big impact on health.

  Paul Holmes: For the first time today, I am asking a friendly question.

  Ed Balls: I took them all as being friendly.



2   See Ev 50 Back

3   See Ev 50 Back


 
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