MR DAVID BELL AND MR JON THOMPSON

11 JULY 2007

  Q120  STEPHEN WILLIAMS: Can I just clarify a conflict in the figures which are available to us. According to the NAO, the Department has made £1 billion out of the £4.3 billion target savings by September 2006 and obviously the DfES's latest Annual Report goes up to March 2006 and you are claiming a higher figure in that report. Who is right, the NAO or the Department?

  MR THOMPSON: Sorry, the NAO figure for September 2006 was overtaken by our Annual Report which runs to March 2007. In the six months in between, some of the efficiency measures which are referred to where there is a time-lag, particularly in schools, are recorded in that six-month window, so our number would have risen significantly in that six months. That is the reason why they are different; they are for different time periods.

  MR BELL: Perhaps I could also add the supplementary point that it feels very much as if our feet are held to the fire on this because we are constantly monitored by what was or what is the Office of Government Commerce sitting in the Treasury, so every time we have the Board reviewing this, these figures and the progress we are making. I think it is important, if I can repeat the point which Jon has made, that the Treasury assessment now of our likelihood of achieving the target and exceeding it has gone from amber-red to amber-green, so, in other words, there is a high degree of probability that we will meet that. Our problem, I think, is that quite a lot of this has just been time-lags, getting the information back from the school system to be able to demonstrate that we have actually made those changes.

  Q121  STEPHEN WILLIAMS: Do you Permanent Secretaries compare your traffic lights?

  MR BELL: We are a highly competitive bunch.

  Q122  STEPHEN WILLIAMS: Where do you rank in that?

  MR BELL: I am not sure where other Departments are at the moment, but we are certainly on the amber-green. To be honest, my only priority on the efficiencies is ensuring that the DfES has met its targets and, as Jon just said, that the allocated targets to DCSF are met by 2008.

  Q123  MR MARSDEN: I just wanted, David, to ask you a couple of questions again on the financial implications particularly of what the Secretary of State said in his statement yesterday about Academies and again I just wanted to touch on the universities side of things. He made it very clear in his statement yesterday that the £2 million requirement for sponsorship would be abolished as far as Academies are concerned for universities and high-performing schools and colleges, and that is quoting from his statement. That begs the question as to what the implications are for the funding of the expansion of the Academies Programme if you are going to have a series of people who are not making an absolute financial commitment. Also, I would be interested to know what has been considered about what sort of commitments these other organisations, and I am not against them, it is a highly laudable proposal, but I would be interested to know what other commitments are going to be asked for from these bodies. Are they going to be contributions in kind, staff time, student involvement, things which will be costed up? Where have we got to on this?

  MR BELL: I think the answer is that it would be all of those things because actually existing sponsors provide those, leadership, management experience, technical support, trying to create a particular sort of ethos and mission around, and I think what the Secretary of State announced yesterday was to ensure that those sorts of characteristics or attributes were not just confined to those over £2 million. As far as the detail of all of that is concerned, the Secretary of State said in answer to a question yesterday in the House that obviously we will now go out and consult in more detail on this, but it is already clear from his statement yesterday that a number of higher education institutions are coming in right behind this initiative.

  Q124  MR MARSDEN: Yes, and you can see why I asked the question because, on the one hand, you have got all those things hopefully being provided by the present commercial sponsors and £2 million, and now we have got a situation where there is no guarantee of any money going in from the other organisations, so that would surely make it more important that you can put proper costings and cost benefits on the contribution they make. Otherwise, you will have two types of Academies, those that are well-funded and those that are not funded at all.

  MR BELL: I think it is worth making the point of course that the contribution made by the sponsors under the existing system, the £2 million, for the average cost of Academy only represented about 10% of the capital costs, important though that is, but the sponsors that will be coming in and are, therefore, not going to be funding a financial contribution will be very active partners because, in a sense, you cannot be a sleeping partner in an Academy as a sponsor. The whole point of a sponsorship programme and the one going forward is that these are very active partners. Now, we will cost up the in-kind support, but, do not forget, the Academies Programme is part of the wider Building Schools for the Future Programme which is over the 15-year timescale, so we will have to do all the calculations about managing all of that.

  Q125  MR MARSDEN: But that is something you will be able to come back to us on?

  MR BELL: Absolutely.

  Q126  MR MARSDEN: Finally on Academies, again the Secretary of State said yesterday, and it was very welcome certainly from my perspective, that all new Academies will now follow the national curriculum in English, maths, science and ICT, but that begs the question as to what is going to happen with the existing ones and, if they are not to follow the core national curriculum, again are we not going to get two different types of Academy?

  MR BELL: I think it is important just to think about why Academies have had slightly more flexibility and freedom in this respect. The first point to make is they have not abandoned the national curriculum and in actual fact the existing Academies have broadly followed the content of the national curriculum.

  Q127  MR MARSDEN: So, if it is working so well, why are we changing it?

  MR BELL: Well, where the flexibility has been is particularly with those young people who have not actually achieved the required standard, particularly at the beginning of secondary education, because many of those Academies are serving youngsters from the most deprived backgrounds. What the Secretary of State said yesterday in relation to following the programmes of study under English, science, maths and ICT is that the Academies will do that, but, even following the programmes of study, Academies and other schools have a degree of freedom, and there will be an announcement later this week about the Key Stage 3 review which takes that further forward, so it is about providing the core curriculum across the programmes of study, but enabling schools to have the freedom to meet the particular needs of their children. Again, just to reinforce the point, the Academies are set up in areas where we often have a huge legacy of significant under-achievement on the part of those arriving in the Academies from the predecessor schools.

  Q128  STEPHEN WILLIAMS: Now some unfluffy questions on money. You were given your CSR settlement effectively in the former Chancellor's Budget in March which showed that expenditure in the old Department anyway was going to go up from £64 billion in the current year to £75.2 billion by the end of 2011, which is a 5.3% nominal increase year on year, but 2.5% in real terms. Why was the DfES given its CSR settlement six months before everybody else because all other Departments were having to wait until October, so why did you get yours early?

  MR BELL: I think that probably I am not the right person to ask that question.

  Q129  STEPHEN WILLIAMS: Did you ask for it earlier?

  MR BELL: No. Well, we did not have a view either way about whether we wanted it; it was a political decision made by the Chancellor.

  Q130  STEPHEN WILLIAMS: Has it been helpful to have it earlier than everybody else?

  MR BELL: My view is that it has been helpful not least for planning purposes. Previous CSRs have given us a slightly longer lead-in time and this one of course kicks off from next April. Our view is that we have been able to make the decisions we need to make and, crucially on the school funding side, I think the anxiety I had about the possibility of the CSR being put back to the autumn for education was that we would then have had to do some really late calculations for issuing the schools funding numbers to local authorities and schools, so it is a good thing that we have the settlement early, but that was a political decision, not a decision I influenced in any way.

  Q131  STEPHEN WILLIAMS: When we were asking you and the Secretary of State in separate sessions about this six or nine months ago, whenever it was, you were both predicting a tough settlement, that it would be difficult in the future, much more difficult than it had been in the previous eight years in particular, and it is notable that, as a percentage of GDP projections in the future, education expenditure was effectively frozen to about 5.6% of the national economy. Do you think that is a good settlement for education—

  MR BELL: Yes.

  Q132  STEPHEN WILLIAMS:— compared to health?

  MR BELL: It is a good settlement for education. I was quite surprised, if I might say, the way that my comments were reported the last time I was here when I made the point that it was a tough settlement because there really was not any news there, but this is still a good settlement for education. The overall increase in the CSR period of 2.5% real over and above inflation, that is very significant in the tighter macroeconomic climate that we are in, so this is a good settlement. The responsibility of course, not just on the Department but for everyone who benefits from this settlement, is to make the most efficient use of what it is that is allocated, but this is a good settlement.

  Q133  STEPHEN WILLIAMS: Given the policy objectives that the Department has, does that mean that all of them will be able to be met within that settlement or are some things going to have to be reined back?

  MR BELL: Well, I think that is a very interesting question because we were very keen in planning for the CSR to ensure that we were able to cost quite carefully the various policy objectives of the Department and I think we have really taken that to quite a sophisticated level in the last CSR round to get us to that point. What we have to do now of course is just to do some decoupling, should I say, of the funding that is for the DCSF and the funding that is for the DIUS and quite a lot of that, as you might imagine, has been quite straightforward because you have got monies allocated to the programmes that are easily allocated one side of the fence or the other, but there are some continuations largely around the corporate functions of the old DfES and how they are allocated to DCSF.

  Q134  STEPHEN WILLIAMS: I was going to come to that in a second, but I just wanted to ask you about the settlement first. Where does it leave one particular policy pledge, one made by the current Prime Minister about matching state school expenditure to private school expenditure? Is that going to be achievable within this settlement?

  MR BELL: Well, the Secretary of State said yesterday that this settlement allows us to make progress towards that objective and that was what he said yesterday. We can only comment of course for the lifetime of this CSR period because it would not be appropriate to comment beyond that, but, because we have got the real-terms growth that I have described, yes, it helps us to make progress towards that objective.

  Q135  STEPHEN WILLIAMS: So by the end of this CSR period, what do you think the expenditure per pupil in the state sector will be compared to the private sector as a proportion?

  MR BELL: I cannot answer that off the top of my head, but I will come back to you on that, Mr Williams.[6]

  Q136 STEPHEN WILLIAMS: Do you think it will be half, three-quarters or 90% of what the private sector will be currently investing?

  MR BELL: Perhaps I can ask Mr Thompson.

  MR THOMPSON: I think we will close the gap in relation to capital investment spending much faster than we will in terms of annual resource. I would not be surprised if we were able to close the capital investment to being very close to the levels of, if you like, independent sector spend, but on resource, even though our aspiration is to make progress and there will be real-terms increases in schools' budgets, it is also very difficult to say what the comparator will be, so I think when I was here the last time somebody said that it would take £17 billion to fully close the gap—

  Q137  STEPHEN WILLIAMS: I think that was the Institute for Fiscal Studies.

  MR THOMPSON: Clearly, there will not be £17 billion in the CSR period, but we will make progress at closing the gap, so at this point I could not tell you how fast we will be able to close it, but it will close.

  Q138  CHAIRMAN: Just on that point, before you move on, that is the capital sum, that is the capital spend compared to the independent sector.

  MR THOMPSON: Yes, you can compare the two, so in relation to capital investment, because of the huge growth in capital investment, Buildings Schools for the Future and so on, we are not that far apart now and we are much closer than we are in terms of the annual spend.

  Q139  CHAIRMAN: Yes, but can we have a view though from the Permanent Secretary on this. There is no doubt, you have got the figures, that we are moving to a situation of plus 66% spending per capita in 1997 through to 2006/07 of what is now the Department for Children, Schools and Families' sector, so that is a two-thirds increase, and the Department for Innovation, Universities and Skills is plus 34%, so it is half basically. However, in the last three years, 2003-2004 to 2006-07, it has almost reversed and the expenditure has gone up 11.2% for what is now Children, Schools and Families, but 15.1% for Innovation, Universities and Skills, so the other Department, not your Department, is doing better now in the last three years. Does that worry you, David?

  MR BELL: I think you have to take it in the period over the 10 years, as you rightly did, to look at the massive expenditure that has gone in on the schools side. We have obviously at the same time for the old DfES been increasing participation rates in higher education and in further education, so I never really saw it as a kind of competition between the two sides of the old DfES. What this settlement does, the CSR going forward, is enable us to make that continuing real-terms increase across education as a whole, which includes the functions of the new DCSF as well as the functions of DIUS.