Schedule 4

– in a Public Bill Committee at 1:45 pm on 19th March 2009.

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The Chief Executive of Skills Funding

Photo of Nick Gibb Nick Gibb Shadow Minister (Education) (Schools)

I beg to move amendment 106, in schedule 4, page 161, line 30, at end insert—

‘(2A) The Chief Executive may not employ more than 1,800 people in total.’.

Schedule 4 and clause 78 establish the post of chief executive of skills funding. The organisation, according to the explanatory notes, will be referred to as the Skills Funding Agency, and it will delegate to the chief executive of the National Apprenticeship Service the apprenticeship  functions in clause 79. As far as I can tell, the Bill makes no mention of either the SFA or the NAS. I am sure that there are strange British legislative reasons for their omission, but it would help me if the Minister were to explain those traditions, which have resulted in the two terms not being included.

Our concern is not just about nomenclature. The amorphous nature of the legislation establishing the bodies lends weight—

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

In moving seats, I did not hear everything, so if the hon. Gentleman could recap the beginning of his speech, that would be great.

Photo of Nick Gibb Nick Gibb Shadow Minister (Education) (Schools)

Yes, of course. Clause 78 and schedule 4 establish the post of chief executive of these bodies. The explanatory notes refer to the Skills Funding Agency and the National Apprenticeship Service, but neither term appears in the legislation. From my reading of the Bill, all that appears is the term,

Chief Executive of Skills Funding.”

I assume that there is some strange House reason why the other terms are not included in the Bill, and I would be grateful if the Minister could explain what it is. This is not only about nomenclature but the amorphous nature of the legislation, which gives weight to the worry that we are sowing the seeds of two very large new bureaucratic empires. The Association of Colleges has expressed that worry, stating:

“We are concerned that Further Education Colleges will have to respond to at least two funding bodies - their local authority and the SFA.”.

It wants to be sure that

“Colleges do not spend even more time dealing with bureaucratic burdens and can concentrate maximum effort to teaching students” and feels that the process of abolishing the LSC and transferring its powers and functions to local authorities, the YPLA and the SFA should have been used as an opportunity to remove some of the duties and powers, not to reinforce them.

Amendment 106 would mean that the chief executive of the SFA could employ no more than 1,800 staff—the number that will be transferred from the LSC to the SFA, as confirmed by the Minister on Tuesday. The impact assessment states:

“As part of our thinking on the design of the new structures we are looking at opportunities for making administrative savings through centralisation of functions, including looking at the potential to share support services where possible, and greater use of new technology.”

It would assist the Committee if the Minister could expand on those matters and set out where he envisages cost savings being made, which support services are to be shared, and how new technology will help. We want to be reassured that the carefully crafted sentences in the impact assessment have behind them schedules and plans that will result in cost savings.

Before I talk about the cost implications for colleges, I have one further point to make on the cost of the plans to the Exchequer. As we heard on Tuesday, when we debated the transition costs of transferring staff from the LSC to the YPLA, the Under-Secretary of State for Innovation, Universities and Skills and the  Minister for Schools and Learners explicitly stated in evidence sessions that the costs were set out in the impact assessment budget. The Minister has, in effect, already apologised for that. The impact assessment states:

“Although on-going costs of the new system will be revenue neutral there are likely to be transition costs relating to premises and pensions and, potentially, the transfer of the people from the LSC to their new employers. There will be assets that can be realised to offset these costs, such as the premises, though the current economic climate will make the calculations more complex. Work on calculating these is on-going and will proceed alongside the development of the designs for the Young People’s Funding Agency and Skills Funding Agency.”

Alas, that is all that it says about transition costs. The Minister is not in the room at the moment, but he must have had the impact assessment in front of him when he said that it sets out the transition costs in full. Moments before he explicitly stated that the transitional costs were set out in the impact assessment, he said that

“we expect to make administrative savings through a centralisation of functions, including shared support services, the greater use of technology”——[Official Report, Apprenticeships, Skills, Children and Learning Public Bill Committee, 10 March 2009; c. 180, Q428.]

Those words were lifted directly from page 32 of the impact assessment. It has been 48 hours since we asked him to provide estimates from the DCSF and DIUS of the transition costs. I hope and expect that they will be supplied when the Government respond so that we do not have to return to the issue on Report.

On the cost to colleges of the new arrangements, it is depressing to see the vision set out in the impact assessment. We used to have one organisation—the LSC—but now its functions will be carried out by three or more bodies, including local authorities, the YPLA and the SFA. The impact assessment states:

“Best practice guidance will be produced to cover partnership working.”

So one organisation is taken, split into three separate organisations and then a 20-page document is issued, to be read by all the senior figures in each of those new organisations, about how they should all work together. It says:

“In line with existing practice, providers of both 16-18 and post-19 education and training will continue to have separate commissioning conversations but, instead of these being with the LSC they will be with both the Skills Funding Agency and a local authority. This will not, therefore, be an additional burden on these providers, as in many cases they currently have multiple commissioning conversations with the Learning and Skills Council regarding these separate areas.”

It goes on to say:

“In designing the new system we are looking for opportunities to streamline arrangements — for example by using a single performance management framework for both pre- and post-19 providers”.

So there will be a “single performance management framework”. What a good idea! Maybe in time, once the new arrangements have settled down, we can merge the management structures and even create one overarching organisation that performs the functions of all three organisations in a streamlined way, benefiting from synergies and further efficiency savings. Until that moment comes, can the Minister expand a little more on what is meant by a “single performance management framework”,  giving us a reassurance that that phrase is more than just a set of words drafted into a document for the impact assessment?

Amendment 106 would limit the number of staff that the SFA can employ to 1,800—the number that will transfer from the LSC. That should far exceed the number needed if costs are to be reduced. The SFA is not taking on any new functions, such as administering the academies, so the figure of 1,800 should leave it with maximum flexibility—apart from the flexibility to expand its empire and clock up ever-rising costs. I look forward to hearing the Minister’s response.

Photo of Stephen Williams Stephen Williams Shadow Secretary of State (Innovation, Universities and Skills)

Good afternoon, Mr. Chope.

I have a lot of sympathy with what the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) has said, because I, too, find it curious that the clause establishes the office of the chief executive of the SFA rather than the nature of the organisation over which he or she will preside.

The hon. Gentleman made various references to cost savings. When I was a member of the Education and Skills Committee—now the Children, Schools and Families Committee—the chief executive of the LSC, Mark Haysom, appeared before us. We questioned him several times on the nature of the cost savings that the LSC had had to make in its short life, with much upheaval having been visited on it by the Government. Its total staff complement has changed many times, as has the nature of the organisation. The amendment would therefore represent a good start in trying to limit the staff numbers of the new agency, the SFA.

It seems odd that we will have to wait for a memorandum from the Secretary of State that establishes exactly what form the SFA will take and what its functions will be. Perhaps the only saving grace in all this change is that it is clear that the SFA will be incorporated directly within the Department and that it will not be a separate agency, as the LSC is at the moment. If there are any potential future foul-ups and confusion over who has given approval for college capital expenditure budgets to be accelerated before the brakes are put on and an investigation is launched into the fact that one part of the Government did not know what another part was doing, it is to be hoped that such confusion will be avoided by the direct accountability to the permanent secretary and, through him, to the ministerial team. That might be an improvement in terms of college capital expenditure.

I support the Conservative amendment because it is important that we try to establish some parameters for this new body.

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills 2:00 pm, 19th March 2009

Beginning with amendment 106 itself, I understand what Opposition Members are trying to say. Clearly, we have no desire to create a bloated new bureaucracy. What we want is an SFA that can be responsive and adaptable, and that works with providers to meet the needs of employers and learners. But, as the hon. Member for Bristol, West said, it is essential that the chief executive is able to exercise his or her own  judgment about the number of staff needed to carry out the vital work. That judgment will be exercised and those staffing levels managed within an agreed administrative budget allocated by the Secretary of State. The funding will be accounted for in the Department’s expenditure plans. The Secretary of State will be accountable for that expenditure to Parliament. The SFA will also be subject to independent scrutiny by the National Audit Office which will also be required—

Photo of Nick Gibb Nick Gibb Shadow Minister (Education) (Schools)

Should the chief executive have the discretion to employ more than 18,000 people?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

The chief executive must have the discretion to make his or her own judgments about the number of staff needed to do the job. I think it very unlikely that the chief executive will have to employ more than 18,000 people. It would be very unusual and potentially counter-productive to put an arbitrary number such as that into the Bill. As I say, there is no intention to increase that number.

Photo of Stephen Williams Stephen Williams Shadow Secretary of State (Innovation, Universities and Skills)

In the past when Departments or quangos have reduced their staff complements they have often gone out and hired consultants to deal with some of those tasks. What consultancy budget does the Minister think this new agency will have?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

I am sure that hon. Gentleman does not seriously expect me to speculate on the consultancy budget of the new agency. Actually, he raises a very good point. If there were an 18,000 staff limit in the Bill and for reasons that we cannot currently imagine the chief executive required more work to be done—perhaps urgent, important and very value-for-money, cost-effective work in the national interests—than could be done by those 18,000 people, what would he or she do? I suspect the answer is that they would—

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

That remark from a sedentary position is a disappointingly cynical approach to very hard-working people in the LSC. If we put an arbitrary cap like this on the number of permanent staff, in the very unlikely event that extra capacity were needed, the SFA would be almost obliged to turn to consultants who might be more expensive.

Photo of John Hayes John Hayes Shadow Minister (Education)

The outrage expressed by my hon. Friend the Member for Bognor Regis and Littlehampton about the absence of pertinent information is indicative of his passionate concern for the public interest. Does the Minister know whether any estimate was made of the cost savings to be made when the LSC was set up?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

Do I know whether estimates were made of the cost savings to be made before the LSC was set up in the late ’90s? I do not know the answer to that off the top of my head. I do know that in the first period of its operation the LSC saved £50 million a year on its original budget and another £40 million a year in the second period. The situation that the SFA will inherit  will by now be saving £90 million on the original budget. There is no intention that the complement of staff should grow.

Photo of John Hayes John Hayes Shadow Minister (Education)

All those figures are quite properly drawn from parliamentary answers. The Minister is right about the figure of £50 million. Does he know how long it took to pay for the reorganisation in terms of the clearing-up work due to the abolition of the training and enterprise councils?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

I am not going to spend the rest of the afternoon debating with the hon. Gentleman how long it took and how much it cost to put right the mess that we inherited from Conservative party. There were 72 TECs under the Conservatives, which we streamlined considerably. Any outcome now will be vastly fewer organisations than presided over the skills system under his party.

Let me make some progress. To constrain the chief executive in such a way could have an adverse impact in reducing his flexibility, and that is why we do not propose to do it.

Schedule 4 sets out the provisions relating to the chief executive’s status, tenure of office and terms of appointment. It also sets out provisions relating to staff and the delegation of functions of the office to staff; funding and payment of grants from the Secretary of State to the chief executive; arrangements for preparing annual reports and accounts, as well as the provisions on the supplementary powers that may be exercised by the chief executive in connection with the functions of the office and restrictions of those powers.

To answer the hon. Gentleman’s point about which bits of the new organisations are named in the Bill, there are two things going on. First, I am told that it is not normal to name agencies in legislation and that they are generally established administratively by Departments. In this case, we want to put duties on a statutory postholder to make it clear that there should be more separation between the postholder and the Secretary of State than in an Executive agency. That postholder is responsible for implementation and the allocation of resources on the ground. It is an unusual beast. The fair access regulator is quite similarly constructed but on a much smaller basis. There are other examples, but, as I say, it is a relatively unusual beast in Government.

Photo of Nick Gibb Nick Gibb Shadow Minister (Education) (Schools)

In this case the National Apprenticeship Service is an agency of an agency. It is not an agency established by the Department directly.

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

No, the National Apprenticeship Service is not an agency. It is a service that sits within the Skills Funding Agency. Its chief executive has a direct reporting responsibility to the two Secretaries of State because the National Apprenticeship Service job, with its planning and delivering of apprenticeships, is so important. The NAS is not an agency. The Skills Funding Agency, although we have called it an agency for the sake of explaining what it does, is not an Executive agency in the way that, for instance, Jobcentre Plus is. The statutory power is vested in the statutory officeholder, who is the chief executive of the Skills Funding Agency.

Photo of Nick Gibb Nick Gibb Shadow Minister (Education) (Schools)

Is the chief executive of the National Apprenticeship Service the accounting officer of that service?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

Before I answer that question, I will reply to the hon. Gentleman’s point on transition costs. He made that point very strongly in debate with my right hon. Friend the Member for South Dorset, who said that he would write to him before Report stage. I can confirm that he will write to Opposition Members about the details that were not included in the way that they would have liked in the impact assessment.

Photo of John Hayes John Hayes Shadow Minister (Education)

We want the letter to be as useful as possible for all members of the Committee. Will it include a schedule for the repayment of any costs? Relevant to my earlier intervention is the fact that in the 2006-07 budget line for costs, the reorganisation of text was still accounted for by the Learning and Skills Council. The last reorganisation was still being paid off six or seven years later.

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

I am afraid that we will have to wait for the letter to see what detail is in it. I simply do not know whether that level of detail will be available. If the information is available and can be got, then I am sure that my right hon. Friend will be happy to share it with members of the Committee.

To reply to the question from the hon. Member for Bognor Regis and Littlehampton about the single performance framework, it is the framework for excellence, which already exists, and is being developed and expanded. It covers the same performance indicators for participation, achievement and the drop rate, and will be implemented for 16 to 19 and adult providers by 2010.

On the relationship between DIUS and the SFA, and the SFA and its operational responsibilities, there is an outline of what the framework document will look like. If that document is in a state to be shared—I am pretty sure that it is—I will be happy to write to Members before Report stage to share it with them.

I remind hon. Members that we do not need to put the agency on the face of the Bill at all; we could have gone about this administratively. We want to put it in the Bill to create more distance in respect of the operational delivery.

Photo of Nick Gibb Nick Gibb Shadow Minister (Education) (Schools)

I understand that point very well, but I wonder whether before the Minister concludes he can return to the names of the accounting officers who will be accountable to the Public Accounts Committee for the performance of the NAS and the SFA?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

Sorry, I forgot that bit. The chief executive of the SFA will be the accounting officer for both.

Photo of John Hayes John Hayes Shadow Minister (Education)

That is a useful answer to the question of my hon. Friend the Member for Bognor Regis and Littlehampton, but given that the NAS reports to two Departments, what line of political responsibility will it be in terms of the proper scrutiny from organisations such as the Public Accounts Committee?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

I am not sure that I understand the hon. Gentleman’s question. Is he asking whether the chief executive of the NAS will appear before the Public Accounts Committee? In that case, as he is not the accounting officer, then the answer is no.

Photo of John Hayes John Hayes Shadow Minister (Education)

I will clarify my intervention. My hon. Friend the Member for Bognor Regis and Littlehampton asked about the responsibilities of the Public Accounts Committee regarding the officers of the NAS. The point that I was making is that there is also a line of political accountability, given that the NAS reports to two separate Departments. What is that line of political accountability? Which Ministers will take responsibility regarding the Public Accounts Committee’s scrutiny of the NAS?

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

I am not sure whether it is for me to determine which Ministers will appear before the Public Accounts Committee. However, I envision that, given that the chief executive of the NAS will make a dual political report, to each Secretary of State, if there were to be officers from that organisation or Ministers appearing before Select Committees to answer for that organisation, it will be Ministers from both Departments. However, the ultimate answer is that the chief executive of the SFA is the accounting officer, and that is where the ultimate accountability for the operation of the NAS, which is housed statutorily within the SFA, will lie.

Photo of John Hayes John Hayes Shadow Minister (Education) 2:15 pm, 19th March 2009

I do not want to be unnecessarily inquisitive about this, although I suppose to be so is our purpose. The NAS relationship with the SFA is becoming clearer as a result of the Minister’s comments. However, I understand that the SFA does not report to both Departments, so presumably if the accountability is assured through the SFA, it is hard to understand why Ministers from a Department with which the SFA has no relationship would be involved in an inquiry concerning those matters by a body such as the Public Accounts Committee.

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

I now understand the point that the hon. Gentleman is making. The distinction, which I perhaps have explained better, is that the statutory relationship is through the chief executive of Skills Funding, who is a civil servant accountable to the permanent secretary at DIUS. Beneath that, there is a relatively unusual dual report from the chief executive of the NAS directly to the two Secretaries of State. As for how that reporting line would manifest itself in ministerial responsibilities to Select Committees

Photo of John Hayes John Hayes Shadow Minister (Education)

If that were to be drawn, it would be a mix of Jackson Pollock and Heath Robinson. We need to know how that political line of responsibility marries with the administrative responsibility, which the hon. Gentleman has made clear. It might be more straightforward if the Minister were to write to me about that, so that we could make progress.

Photo of Siôn Simon Siôn Simon Parliamentary Under-Secretary, Department for Innovation, Universities and Skills

I will be happy to reflect and write to the hon. Gentleman, should I have any inspired thoughts of anything that I have not said. However, I do not want to  promise to write to him with new information that I do not have. I have explained the situation to him as best I can and as it is envisaged. On that basis, and on the basis of everything else, I hope that Opposition Members will feel able to withdraw their amendment and that we might make some progress.

Photo of Nick Gibb Nick Gibb Shadow Minister (Education) (Schools)

It was nice to hear the Minister say that he has no desire to create a bloated new bureaucracy. I have never heard a Minister say that he would like to create a bloated new bureaucracy, yet our country is riddled with them and, I suspect, will continue to be so. He went on to say that the chief executive must have discretion to employ numbers as he sees fit—he saw no reason to have an upper limit on those numbers. However he said that he thought that there was no intention to increase that number, which is assuring. Perhaps that is a phrase that the Public Accounts Committee can use when quizzing the various accounting officers who come before them, following the establishment of these organisations.

I get depressed when we have these debates. I read the impact assessment and I see phrases about setting up a single performance management framework, which I now understand is going to create excellence. If one looks at our state sector, one can see the waste, and the reorganisations that seem to take place every five, six or seven years. I am not assured by this debate that we have got this right and that our management techniques within the state sector will produce a streamlined, highly efficient operation. However, we will wait to see the letter that has been promised from the Minister for Schools and Learners setting out some proper facts and figures about the transition costs of transferring these operations from the LSC to the YPLA and the SFA. Pending the arrival of that letter, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn

Amendment made: 306, in schedule 4, page 163, line 28, leave out ‘this or any other’ and insert ‘any’.—(Jim Knight.)

See Member’s explanatory statement for amendment 291.

Schedule 4, as amended, agreed to.