Individual Learning Accounts Public Accounts Committee 04 Nov 2002

Examination of Witnesses

Mr Steinberg: I think you have got the Department off the hook this afternoon by your apologetic attitude to the Committee which is very commendable because we do not often get it. On the other hand I think you are getting away with murder, frankly, because I think this is absolute incompetence on the part of your Department, which I think needs saying. What is unforgivable is you were given advice and you ignored that advice and you pushed that aside. You thought "Well, okay, we have got that advice" but you did not take it. You were given advice from this particular Committee in fact because we looked into some of the fraud and Mr Trickett is absolutely right, there was fraud rife throughout the country in further education colleges in franchising learning. Halton College appeared in front of us where it was an absolute disgrace what was happening there. We were given guarantees when we made that report that it would not happen again through the FEFC and your Department. Again you ignored that advice and went ahead willy nilly on this scheme which was doomed to failure.

Mr Normington: There are only a certain number of ways, Mr Steinberg, I can say I am sorry.

Mr Steinberg: I am not interested to hear you say sorry, Mr Normington. I want to know why you ignored the advice when it was clearly in reports which said that there was huge scale fraud taking place with learning providers in further education colleges. We made a report on that and we pointed out what was happening. We were given assurances - it was not another department, this was the Education Department - we have minutes of where the Treasury have responded to the recommendations that we have made and you ignored the Public Accounts Committee. You totally ignored us and went ahead.

Mr Normington: We did not ignore the Public Accounts Committee, we did not ignore that report. We did not believe that the lessons from that report were relevant to this. I am sorry if that was wrong, it may well have been wrong because it was a quite different sort of scheme from the case where Halton was franchising learning. I am quite prepared to say that was wrong but we believed these were two different cases. We did look at the providers which had been in question in the Halton case and only one became a provider in the Individual Learning Accounts case.

Mr Steinberg: The Further Education Funding Council actually gave you advice and you ignored that, totally ignored that. How you can say that there were no similarities I cannot understand because it was exactly virtually what we said was happening in the further education colleges. It was exactly what happened at Halton. It is almost an exact scenario.

Mr Normington: We did take on some of the lessons. We did not take on enough of them. We did not take the advice of the Further Education Funding Council and others about the risk to the scheme. I am sorry, we did not do it.

Mr Steinberg: Not only did you not take advice on this particular episode but you did not take advice, again, from this Committee when we did the report on the cancellation of the benefits fraud card project. We said in that report, if I remember correctly, that there was a need for the Department and the proposed partners to be honest with each other in terms of risk. You were not honest with each other in that. It is not a partnership, is it? Why did you ignore that report, presumably one assumes that chief officers or permanent secretaries read the Public Accounts reports, why was that ignored?

Mr Normington: I do not know why that specific thing was ignored.

Mr Steinberg: We sit here and make recommendations, it is all just: "Well, it is the Public Accounts Committee, we will just ignore it" and that is just not on to be quite honest. We sit here for hours making recommendations and they are just ignored, they should not be ignored. It cost the taxpayer £60 million. If it had been listened to and advice had been taken then we would not have a situation now where £60 million has been washed down the drain.

Mr Normington: All I can say to you is I am committed to making sure these lessons are learnt in the future. I have accepted that there were serious mistakes made in this scheme. I will make sure that we learn these lessons across the Department. I have set in place the arrangements to make sure that everybody who is engaged with supplier and contractor management is properly trained in that. I have set up a proper unit to support project management. I am doing risk assessment from the bottom to the top of the Department. I have learnt the lessons, that is all I can say.

Mr Steinberg: Let us talk to Mr Aldridge. Mr Aldridge, you are just as much to blame as the Department to be quite honest as well. You should have insisted that you should be listened to. Why did you not insist?

Mr Aldridge: It has been quite interesting listening to the conversation that has been going on because in a sense it is part of the issue. What we are talking about is not PFI but public/private partnerships and this whole area of how the public and private sector interacts is a very, very big point. It is not a point about the Department for Education and Skills, it is a bigger point.

Mr Steinberg: Mr Aldridge, you are waffling.

Mr Aldridge: I am not waffling.

Mr Steinberg: Why did you not insist, get the Department to say "Look, the risks here are enormous"? You knew they were because you were saying that in a very soft tone. You were saying that. You did not insist. What was more important: the contract or getting the job right?

Mr Aldridge: We were managed at the contract level. We were not on the project board and we asked to be on the project board, and we asked on numerous occasions. The experience and power of what we have got is actually being controlled by somebody who, frankly, is not up where the policy is going to be decided. Systematically over a period, and we made a comment about that, and Mr Normington has accepted that, when different decisions were made, we were not a party to those decisions. We actually looked in on 16 different occasions.

Mr Steinberg: I am saying why did you not say "This scheme is crap. It is going to fail. The taxpayer is going to be robbed blind but we will still make our lucrative contract out of it?. How much profit did you make out of this?

Mr Aldridge: Because you look at something, you asked that question, you have to think about what is happening over time. Over time you make those comments. What I have accepted I should have done is I should have escalated that to the Permanent Secretary or to a senior person within the Department. I should have escalated it to the minister also. I have to say to you it is not easy to get to the minister, you must really understand that in these public/private partnerships.

Mr Steinberg: This will be picked up this afternoon.

Mr Aldridge: You can say you want to escalate something, and I feel mortified that I did not because I think this is a very good scheme and I hear what Mr Normington has said about it so I should have done that, I accept that. It is not an easy process and it is about having skills, also, and the experience of the people you are dealing with on the other side of this divide which has got to be increased and improved, and Mr Normington made the point about that. That is a big point and again it cannot be ignored in any of these debates that you are having because it comes back to the same thing every time.

Mr Steinberg: Would you agree that it looks very much to me in these public/private partnerships that they are not so much a partnership really as what they are is the public sector take all the risks and you take no risks at all and you end up with your profit at the end of the day?

Mr Aldridge: I listened to the debate about risk. You take risk where you have an ability to be able to influence the decisions around it. Where you cannot influence those decisions commercially nobody is going to take a risk, you cannot possibly do that. You assess what your risk is. The greatest risk we have in this, and it is not something that has been touched on, is the reputation side of us. That is something you cannot always price in. You do not take risks where you do not feel that you have control. We had no control over the decisions that were going to be made. What we have said going forward is that we are not going to bid in those circumstances again.

Mr Steinberg: That is very refreshing. How many contracts do you have with government just as a matter of interest.

Mr Aldridge: We have in all about 300 contracts.

Mr Steinberg: What are they worth?

Mr Aldridge: We have about ten contracts with government.

Mr Steinberg: And what are they worth?

Mr Aldridge: They are worth just short of a billion over the life of the contracts.

Mr Steinberg: I have only got a few seconds left, I suspect. How much money do you expect to recover from this scandal and the fraud? How much do you expect to recover as a matter of interest?

Mr Normington: I do not know, I am afraid. I just cannot say that yet. We are pursuing it and we will seek to recover tens of millions of pounds. I do not know whether we will do that, partly because the big money is probably with the 150 providers who are in the serious category and 99 of those are with the police and we have to pursue the criminal case first.

Mr Steinberg: Thank you.