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Further Education: Capital Investment

Volume 709: debated on Wednesday 1 April 2009

Statement

Today my right honourable friend the Secretary of State for Innovation, Universities and Skills (John Denham) made the following Written Ministerial Statement.

In 1997 there was no capital budget for further education (FE) colleges and the National Audit Office (NAO) described FE college buildings as “ageing and their quality and fitness for purpose was often unsatisfactory, affecting the reputation of the sector”.

Between then and 2006-07, more than £2 billion has been invested in modernising FE facilities. My department will spend another £2.3 billion in the current spending review period. We have been able to bring forward over £110 million of future investment in 2008-09 as part of the Government’s response to boost the economy. Last summer the NAO reported the capital programme was making good progress with the renewal and modernisation of the FE estate with the great majority of projects coming in on budget and delivering improvements for learners.

In December, the Learning and Skills Council (LSC), which runs the programme, decided to defer further approvals of schemes while assessing the programme overall. The LSC’s assessment, which I reported to the House on 4 March 2009, was that there were many more schemes in preparation than can be funded in this spending round. Before this assessment had been completed, I had agreed with the LSC in January to appoint Sir Andrew Foster to conduct an independent review of the LSC’s handling of its capital programme and to make recommendations for the future.

Sir Andrew’s report is published today and copies have been placed in the Library of the House. I am also writing to all Members enclosing a copy of the report.

Sir Andrew’s report is very clear and he has gone through the issues with great care. My department and the LSC will accept all of his recommendations. I also wish to record my thanks for the speed and efficiency with which he has conducted his review. His key finding is that “a good policy has been compromised by the manner of its implementation.” He goes on to explain that “the policy intent to transform the FE estate is clear and positive. But the implementation approach did not include a robust financial strategy or a regional or national approach to prioritisation”.

Recognising the deficiencies in how the LSC has managed the programme, its former chief executive, Mark Haysom, resigned on Monday 23 March. Geoffrey Russell was appointed as acting chief executive on the same day. He said that his first task was urgently to increase the certainty and clarity around the capital funding programme.

He has immediately appointed an external team from the firm Grant Thornton to review the financial data held by the LSC about capital projects to ensure, as Sir Andrew recommends, that “the process is grounded in fully accurate and detailed information about capital schemes in the pipeline”.

Mr Russell has appointed a director to be personally responsible for the capital programme, responding to Sir Andrew’s conclusion that there was no clear overall responsibility for the capital programme within the LSC.

Sir Andrew recommends that the priority is “to agree how the present demand-led approach to the programme is replaced by a needs-based approach with explicit priorities and choice criteria”. The LSC is now consulting the sector on the approach which should be used in prioritising schemes. Sir Andrew also recommends that it will be essential to have early and open engagement with the sector in finding ways forward on the most pressing matters. The LSC has therefore established a reference panel of college principals convened by the Association of Colleges. 

Mr Russell is also appointing an external team of property specialists to assist the LSC as it begins shortly to meet with each college to ensure that the information held by the LSC is accurate and comprehensive and a sound basis for taking future decisions.

While that work is going on, we have already made clear to all college principals that we will not allow any college to get into a situation where it cannot meet its financial obligations as a result of decisions taken by the LSC on the capital programme. The LSC monitors financial risk in colleges and there are well-established procedures for dealing with any college judged to be at risk. Any college that is concerned should speak to its local LSC which will work with the college to agree an appropriate financial plan.

Finally, Sir Andrew’s report also concludes that the scrutiny of the LSC capital programme by my department was insufficiently rigorous. Many of my department’s objectives are achieved via arm’s-length bodies. It is vitally important that my department is able to exercise proper scrutiny of their work. I have asked the Permanent Secretary to carry out a review of DIUS relationships with our non-departmental public bodies to ensure that there is clarity about accountability and responsibility.

I will make a further Statement to the House after the Recess and report on the progress made in ensuring that the record investment we have made in FE continues to develop the skills of the nation.