Examination of Witness(Questions 480-499)|
MBE, a Member of the House of Commons, Minister of State for Lifelong
Learning and Higher Education, Department for Education and Skills,
Wednesday 12 December 2001
480. Minister, you have written to the Chief
Executive of the Learning and Skills Council in the first annual
grant letter, you announced an increase in funding of £500
million, you will know that 69 colleges are still in the weakest
category of financial health, and you will know that there is
a concern about the differential salary structures between staff
in further education and the primary and secondary sector. Where
is the £500 million going?
(Margaret Hodge) There were 45 budget lines in last
year's budget to the LSC going down into the FE colleges with
79 or something different budget heads. It was absolutely huge.
What we have done is reduced it to 9 budget lines, within 4 main
headings. If I can just go back to where we were before, two of
the budget lines in the previous year's letter accounted for something
like two-thirds of the LSC budget; 19 budget lines accounted for
one per cent of the budget. So we have got rid of that sort of
nonsense. As I recall the actual distribution between the broad
heads, there is a greater focus, probably, on growth on the 16-19
than there is on the other, but the growth is spread across the
481. Within the sector, although there have
been percentage increases in funding in the last five yearsvery
welcome increasesthe unit funding per full-time student
has barely changed. In fact, I think we are now back at the position
we were in in 1995. Will this £500 million or a proportion
of the £500 million increase the unit funding per FE student?
(Margaret Hodge) We stopped the decline in the year-on-year
efficiency saving and FE faced the same constraints that HE faced,
if not worse. It depends how you define these things, and I do
not know terribly useful definitions. What really matters is how
much money goes into a college for them to spend on teaching and
learning. Some of that may well go into capital investment or
something like that, some will go into the standards fund for
quality improvement and some will come out of that into teachers'
pay initiatives as well to encourage individual development and
reward excellence. What I am really concerned about is the totality
of the amount of money a college gets, which will go up. The LSC
has a real terms increase of nearly 6 per cent for 02/03. So that
will be reflected in the college's budget. If you just define
it in that very traditional way, I do not think that is desperately
482. There is a half a billion increase to the
LSC on a budget of just over £7 billion.
(Margaret Hodge) It is difficult to say because, remember,
they are also getting the other funding, which distorts the figure
a little bit this year.
483. We would assume that given that sizeable
percentage increase, there ought to be an increase in the unit
funding per student, because if there is not then the money is
not going directly to the front line.
(Margaret Hodge) The money will go directly to the
front line. I have not looked at a sort of exemplification of
what it does in the traditional way of counting because I have
never found that terribly useful. I genuinely think that what
matters is the money that college heads get.
484. You would accept the colleges are concerned
about the way in which money has been ring-fenced and the way
in which they have been prevented from increasing the unit funding.
(Margaret Hodge) Quite. I do share that concern, which
is why we have reduced the budget lines to nine. In the letter
we sent to the LSC we also said that we expect them to reduce
the budget lines down into the colleges. This is quite a radical
shift for government. It will be interesting, and I hope you will
observe it and hold us to account on it, but what we are doing
is shifting from input control to giving institutions the flexibility
to choose how they spend their money and then we are going to
get much tighter on measuring their outcomes. I have to say, right
across the LSC/FE sector that means they have got to get better
at producing proper, up-to-date data and information, so that
we can measure those outcomes properly. I am not 100 per cent
certain I have got it completely right year one, but it is a radical
change in the way that we are choosing to fund and access colleges.
485. If we move on to the funding of the LSC
itself, you will recall in the establishment of the LSC the Government
claimed that there would be a saving of £50 million on the
administration of the FEFC and the TECs. Has that saving of £50
million been achieved?
(Margaret Hodge) Yes.
486. I understand, also, that the LSC were arguing
that there ought to be an increase in the funding for their administrative
costs. Has that increase been awarded?
(Margaret Hodge) Part of it has been awarded.
487. Can you tell us how much has been awarded?
(Margaret Hodge) £25 million. Even with that
increase in additional admin costs there will still be more than
£50 million saved in administration in comparison to the
predecessor bodies. Can I say a little bit about the reason for
the admin costs and how they are approaching it? It is always
difficult to get the baseline right and we have probably got it
wrong. What we did not have regard to, for example, was that the
LSC has to pay VAT and the TECs did notsomething that somebody
should have spotted along the line but we did not. The other thing
that has happened is that the LSC is going to have increased responsibilities,
taking the funding for sixth forms and then, if the Bill that
is currently before Parliament becomes law, a much stronger planning
role in 16-19 provision. We have had to have regard to that. Most
of the money is going down to the local LSCs, it does not sit
in the centre, and in the letter that we sent to the LSC we have
also made it absolutely clear that we hope this will enable us
to get the baseline right and then we expect to bear down on those
central administration costs over time.
488. When the Chair and the Chief Executive
of the LSC were before us the other week
(Margaret Hodge) They wanted more?
489. The Chief Executive was quite explicit
that he felt there was a surplus of staffing within the local
LSCs (this was the legacy of TUPE) and that, in time, this issue
would be dealt with. So you will see from the Committee's point
of view there is a paradox here that you are awarding an additional
£25 million and the Chief Executive is saying to the Committee
that is probably over-staffed.
(Margaret Hodge) I am delighted he said that. I will
look at the record of your proceedings to get confirmation of
that statement, because that would be extremely helpful to me
in the negotiations with him.
490. You might also read another paragraph in
which the Chairman expressed deep unhappinesswhich we prised
out of himabout the differential payment to A-level students
in sixth forms compared to the equivalent student in FE. He went
on the record as being very unhappy about that. I hope you will
look at that, too.
(Margaret Hodge) Yes. Let me come back on that. That
is why I said we have tried to get the baseline right and then
we will bear down. On the issue of the funding gap that exists
between funding for 16-19-year-olds in FE and in sixth form colleges,
and funding in schools, there is, again, a commitment in the manifesto
to ensure that upward funding until we meet convergence, and that
is informing, yet again, our thinking around budgets. That is
the first thing to say. The second thing to say is that it is
actually extremely complicated. I have had a number of Parliamentary
questions on this issue, some of which are from Members round
the table. The figures I gave in the answer to one PQ was that
for sixth forms in schools the funding was £3,230 and in
FE it is £3,420. On the face of it, that looks as if FE is
better. One of the reasons for that is when you look at the FE
figure it incorporates total public funding into FE, whereas if
you look at the schools figure it is the delegated funding to
schools, so it does not include the LEA funding, some of which
will go to support the sixth formers in schools. So we have got
to bottom out what the difference is, and we are doing that; we
are trying to assess a real valid difference, and then we have
got to, over time, see how we can address that, because we want
16-19 year-olds to have access to equally funded provision wherever
they experience it, be it in a school, a college or a general
491. We were saying, in terms of the budget,
that the £188 million in 2001-02 has now been enhanced by
the £25 million allocated in the grant letter.
(Margaret Hodge) Yes.
492. In terms of the widening responsibilities
of the LSCs for 14-19, given the majority of staff in the local
LSC were, by definition, inherited from the TECs, are you confident
that the level of expertise in the local LSCs is sufficient to
deal with its responsibilities for the college sector and for
school sixth forms, and for the 14-16 age range?
(Margaret Hodge) I think we should be happy with what
the LSC has achieved so far. They have had a really complicated
task. They have had the transfer of 10,000 staff from a variety
of bodies from whom they inherited their responsibilities; they
have had to get the money out to 417 colleges and to 2000 training
providers. On the whole it has not gone with too many hiccoughs.
I addressed the LSC's annual conference earlier this week, in
which I said we have now really got to the end of the beginning
and what we now need to see, as we now move forward, is that they
start grasping that very important agenda that we have set around
widening participation and enhancing standardsall those
areas. I think they have got to, in some areas, build their expertise
around some of those issues where it did not exist before. Can
I say one thing? One thing that was born in quite controversial
circumstances was this OFSTED/ALIif you remember, the two
inspectorates that were created under the new LSC. Coming to it
and dealing very closely with both OFSTED and the Adult Learning
Inspectorate, I think that is a system which is bedding down really
well. There is very good experience coming in there, with putting
very much the learner at the heart of the inspection process in
a developmental and creative way, so that although they are finding
in, perhaps, too many instances, not very satisfactory practice,
the process of inspection itself is supporting the development
of improvements, particularly in workplace learning and in the
inspection of New Deal provision. When they go back there is a
massive improvement. So there is expertise coming in at all sorts
of anglesthat is what I am really saying to youas
well as the LSC. Remember this with the LSC, which I am sure is
something you get when you talk to local LSC and FE colleges,
the LSC is there to steer not row. The expertise in terms of further
education has to be at the principal level and within the institution
and the LSC should, as with schools, intervene in inverse proportion
to success. We have got to think of a new way of expressing that,
but it is the right thing. When institutions are doing well let
them get on with it.
493. Are you confident that the LSCs are intervening
in proportion to
(Margaret Hodge) I think that is the sort of thing
that has to develop. They have settled down, they have set up
their organisation, they have got the money out when they had
to and they have now set themselves some broad objectives and
business plansthe normal sort of stuffand now is
the time to start delivering on those issues.
494. Minister, you have told us that you have
given the LSCs £25 million more towards administration costs.
Is that the first part of the £50 million we have heard about?
Will there be any more money?
(Margaret Hodge) No.
495. There will be no more money?
(Margaret Hodge) Not for administration. That is the
496. Do you still think that 3 per cent of turnover
represents good value for money?
(Margaret Hodge) I think the arguments that they put
forward on why they needed the extra £25 million were sound.
497. What were they?
(Margaret Hodge) They were the arguments I said to
you: such as they inherited a liability for VAT that the TECs
did not have; that we had actually got the baseline wrong and
that the cost of some staff under TUPE was greater than we had
assumed in assessing their original budget; that they had got
additional responsibilities which we had given to them which were
not reflected in the original administration. Equally, I am determined
to bear down on administration costs over time. Now we have got
the baseline right.
498. So the baseline is £188 million?
(Margaret Hodge) Plus the £25 million, so that
is £213 million.
499. What is the figure you expect in terms
of percentage of turnover on administrative costs? One per cent?
Two per cent?
(Margaret Hodge) I have not got a view on that and
I would not like to give you one. This is a new animal which has
been in existence for nine months