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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