Education Committee

Oral evidence: Department for Education Annual Report and Accounts, HC 1222
Wednesday 7 May 2014

Ordered by the House of Commons to be published on 7 May 2014.

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Members present: Mr Graham Stuart (Chair); Neil Carmichael; Alex Cunningham; Bill Esterson; Pat Glass; Siobhain McDonagh; Ian Mearns; Caroline Nokes; Dominic Raab; Craig Whittaker.

Questions 1-86

Witnesses: Paul Marshall, non-executive board member, Department for Education, David Meller, non-executive board member, Department for Education, Jim O’Neill, non-executive board member, Department for Education, and Dame Sue John, non-executive board member, Department for Education gave evidence. 

Q1   Chair: Good morning, and welcome.  Thank you for coming along to the Education Committee today to discuss the DfE annual report and accounts.  Sue, if I could start with you, you are the only surviving member of the board.  How do you think the board is functioning today compared with the way it was when you first joined?

Dame Sue John: Would you like to hear about the board and the performance committee as well? 

Chair: Yes.

Dame Sue John: The performance committee, which meets monthly, is now much more structured.  The information we receive and the layout of our reports are quite data-rich and highlight risks that we need to consider.  The meeting is chaired very efficiently by Theo.  There is a possibility of escalating things to the board, which is important.  That is a new thing that has been introduced.

As to the board, the discussion is very open; there is a lot of exchange.  I think the new set of Ministers is more actively involved in discussion and debate than the previous one.  It is efficient and well run.  We cover quite a lot of ground in the board, and I feel we are able to speak openly and freely and raise questions about implementation of policy.

Q2   Chair: Paul, you are now the lead member.  Obviously, you sit on a number of other boards.  What is your biggest frustration with the board and sub-committees underneath it?

Paul Marshall: I would not say that I am particularly frustrated.  I would echo what Sue says about the quality of the information.  Prior to about three months ago, I was frustrated with the quality of the data that went to the performance committee.  That has been fundamentally changed, and the quality of the data is now outstanding.  That was the biggest frustration, which has been dealt with.

Q3   Chair: What particular data are we talking about?

Paul Marshall: The KPIs around the 18 delivery priorities.  They are now excellent; they are first class.  That enables a very good discussion at that committee.  The other committees, which members of the board attend in different ways, function well.  As Sue says, issues are escalated to the main board well, and the discussions are robust.

Q4   Chair: Good.  Jim, are you the latest member?

Jim O’Neill: I am indeed.  I am still trying to understand it all.

Q5   Chair: What are your thoughts on the performance of the board and the way it interacts with the Department?  Does it seem as if it is functioning well?

Jim O’Neill: I have no direct comparison in terms of how non-exec boards work in other Departments.  Overall, it feels that we are all very welcome and are encouraged to state our opinions and offer judgments on the way we feel, which is a very nice feeling.  The purpose of having non-execs is highly welcome.  We are encouraged to test ongoing things and promote ideas for change, which was one of the reasons I accepted the role, so in that sense it is gratifying so far.

Q6   Chair: Good.  What about you, David?  We should not read into the change in membership the fact that people felt they were wasting their time and were unable to influence things as much as they would like.

David Meller: No.  I thoroughly enjoy it.  I think we are a good team working together.  We work very well with the people in the Department, and I am very enthusiastic about it.

Chair: Good.

Q7   Pat Glass: You will appreciate that the appointments system has come in for a bit of criticism.  From the outside, it feels a bit like the honours system: somebody’s name is put forward somewhere by somebody; there is a cosy chat with the permanent secretary and people are appointed, or not.  Do you accept the criticism that your influence and credibility is limited because you are not going through an open process?

Paul Marshall: It is not a normal public appointment, and it is not subject to the normal rules related to public appointments.  I know this is something you have discussed with the permanent secretary in previous meetings.  I am sure you can take it up with him later.

None of us was involved in the process behind our own appointments, but all four of us had considerable background in education as well as business.  We did not have a formal interview process; we did not have to be put through six or eight meetings.  Some of us probably would not have wanted to do it if we were subjected to that type of process, because it is an honour and pleasure to do it.  It is a satisfactory process as far as I am concerned.

Q8   Pat Glass: Sue, would you have felt more comfortable with an open process?

Dame Sue John: I echo what has been said here.  How that decision is made is not our decision, and it is not a public appointment.  My feeling is that, certainly in terms of people coming in from schools, there is a whole range of people who are supporting, helping and may be contributing to the system.  Many of them are chosen because of their expertise.  For example, somebody is going to be leading the ITT review.  I suspect that person was chosen to do that.  There are people selected from a range of different schools to come to the head teachers’ reference group.  When I was asked to do it, I thought that it was in that vein, and the people would have some expertise and be able to contribute to the debate but also raise important questions about the system.  In that respect, very often head teachers and other educational professionals are asked to do things in the system, but I understand your point.

Chair: I do not think we need answers from everybody.

Q9   Pat Glass: For those of you who have been non‑executive directors elsewhere, how has this worked in other organisations when choosing board members?  Which system works best: having an open process or otherwise?

David Meller: I have had other roles but only with a bank, which approached me.  Here I heard about the opportunity as I am involved in quite a few schools.  I volunteered; I put myself forward and I showed interest in being involved in this.

Paul Marshall: I have not served as a non-executive director anywhere else, but I have been involved in appointing them.  Sometimes we used a mix of headhunters and networks.  Generally, I find that personal networks are better than headhunters and, to be blunt, it is much less expensive in getting the right candidates.

Jim O’Neill: I was a non-executive of a plc, which was Manchester United when it was a publicly quoted company, but it is not overly different; it is similar.

Q10   Pat Glass: The Government have stated that by the end of this Parliament they want half of the board to be women.  Can I ask how that is going?

Paul Marshall: We are at 20% at the moment.

Pat Glass: It is work in progress.

Paul Marshall: Yes.

Q11   Ian Mearns: The appointments process is a tad opaque, is it not?  Some have been appointed by suggestion of the Secretary of State, or another Minister working with the Secretary of State; others are chosen from a list of names provided by officials.  The crucial question is: how is the list compiled?  Are current board members consulted about the provision of the list compiled by officials before appointments are made?  Does anybody see it as a fast track to the House of Lords?  Given recent experience, it is always worth asking the question.

Dame Sue John: I certainly do not have any ambitions to go to the House of Lords and I am not a member of a political party, but I cannot speak for my colleagues.

Paul Marshall: I think you should talk to the permanent secretary about that.

Ian Mearns: He is looking very inscrutable at the moment.

Paul Marshall: I was not involved in seeing a list of candidates, but I know that has been done in some cases.

Q12   Pat Glass: Is there any discussion among you as a group along the lines of: “We’ve got a vacancy.  What kind of person do we think would fill that gap?”

Dame Sue John: I do not recall having that discussion.  We have had discussions clearly about making sure the children’s agenda was covered, and I know you had questions about that before.

Pat Glass: We still have.

Dame Sue John: I am sure that is correct.  Paul, do you want to talk about the support we have on the children’s agenda?  My remit is very much to do with special needs.  My assistant head teacher, David Bartram, has quite a national following on special needs.  He has been able to give some advice to civil servants in that area.  I will hand over to Paul.

Chair: We will come back to that a little later.

Q13   Ian Mearns: Team selection, therefore, is entirely in the remit of the manager.  Is that how you would see it?

Paul Marshall: When I came into my role in March/April last year, I recommended Jim, and then there was a meeting with the Secretary of State and our Ministers.  The process of David’s appointment was already happening, so at that point we had five NEDs.  If it comes to the succession of any one of us, I would certainly want us to be involved in that process and contribute to it.

Q14   Mr Raab: I would see the role of non-executives as bringing some external objective view so that the Department and the policy does not become encased in a bubble.  Can any of you give me an indication of specific examples where either collectively or individually you feel that the experience you brought to bear changed something?

Dame Sue John: In terms of the national curriculum and qualifications review, some of the pace of that has been questioned.  Points were also made about accountability.  I think we will now have a much better accountability system with progress 8, which a lot of head teachers are welcoming.  Therefore, we can raise questions about the pace and sometimes the cumulative effects of the pressure on schools.

Q15   Mr Raab: Is that because you have a sense of the big picture that could be lost within the cogs of the Department?

Dame Sue John: I have my own school, which is a single academy.  It is not part of a chain but part of a large collaborative of over 250 schools in Challenge Partnership.  Therefore, I think I have a pretty good idea from the meetings with our senior partners what the temperature is like in the system and can raise questions about that.  It is now quite a long time ago, but in the context of Ofsted I was very vocal in speaking to Michael Wilshaw and Michael Gove about at least ensuring that schools had half a day to prepare for that inspection, as opposed to a dawn raid.

Q16   Mr Raab: Can anyone give me other examples, particularly where non-educational experience and expertise has been brought in and been useful in addressing a policy or structural issue within the Department?  Jim, do you have any thoughts?

Jim O’Neill: That is a dangerous question.  One thing that comes to mind in that regard is that I have encouraged the Department to think more precisely about and rank its priorities.  When I came on board, probably the same as the others, I was given a list of what the Department stood for.  I think there were 18 or 19 different things.  After some discussion with my colleagues here, I suggested that we should probably consider narrowing that down to a very small number, based on 20 years of commercial experience at Goldman Sachs.

Q17   Mr Raab: How many did you suggest?

Jim O’Neill: I suggested two or three.

Q18   Mr Raab: From 18 or 19?

Jim O’Neill: Yes, in terms of absolute priorities.  Linked to my answer at the start, people have responded positively to that.

Q19   Mr Raab: What were the three?  Can you give us a sense of that?

Jim O’Neill: Being a newcomer, I did not say what they should be, but they happened to be things I approved of.  I did not think it was for me to decide exactly what those three priorities should be.

Q20   Mr Raab: Your point was less about the choice of the priorities and more about the focus.

Jim O’Neill: Yes.  From my experience as a senior person in a big commercial organisation, you have to make everybody aware, internally as well as externally, what your priorities are.

Q21   Mr Raab: Are there any particular issues or concerns that you feel you have had to go back to systematically because they have slipped off the radar, for whatever reason, which are high priority but have been down the in-tray of the Department?

Paul Marshall: By way of background to answer that question, our primary responsibility as non-execs is not policy; it is to assist the Department in the effective delivery of policy.  We are primarily focused on the objectives that Lord Browne has set out in his annual report on capability, MI contracts, delivery and leadership.  The things that I personally go into a lot are MI and capability.

Mr Raab: MI?

Paul Marshall: Management information.  The Permanent Secretary totally buys into the agenda and is leading on it.

Q22   Mr Raab: On MI, could you give me a concrete example where you have tried to prise out more information or data?

Paul Marshall: In the summer/autumn of last year we put together a set of KPIs for all delivery priorities, which is a small enough set—it is still much longer than Jim’s two or three—to put in front of Ministers and the heads of department ahead of all committee meetings and so on.  That is now part of the material received for every meeting.  It has now been superseded to a significant degree by the quality of the data now produced by the new head of the strategy unit for the performance management meetings.

Q23   Mr Raab: Does anyone else want to add to that?

Dame Sue John: I think we have escalated ITT numbers.  I was concerned at one of the meetings of the National College for Teaching and Leadership about meeting the targets.  I discussed it with the NEDs in our meeting, and we made sure we got regular updates and feedback and looked at the ways in which the Department was trying to manage a potential shortfall.  I do not think it is going to be there; it is going to meet its target.  That is so important to us in terms of the quality of the teaching profession and the supply, so we sometimes look at that.

Q24   Mr Raab: Which areas of your prior external or professional experience to date have you found most useful in getting a grip on your role as a non‑executive?  David, I wonder whether you might address that one.  You have had quite a varied experience.

David Meller: I have worked with lots of big companies.  I am very interested in pace and that we make things happen, rather than get stuck in treacle.  I try to encourage people to make things happen, and that is what I have spent my life doing.

Q25   Mr Raab: Where have you brought that to bear particularly in your new role?

David Meller: I sit on the capital oversight board.  I observe what it is up to and where it spends money on capital programmes to make sure it gets spent in the right areas.  I am also involved in 16 to 19 apprenticeships.  I am now chairing the National Apprenticeship Ambassadors Network.  We are trying to increase the number of companies involved in apprenticeships from 100,000 to 200,000 in the next few years.

Q26   Mr Raab: Very good.  Do you feel there is a gap in the non‑executive experience or personnel you have got specifically for children’s services?

Paul Marshall: We anticipated the question and we have thought about it.  First, the primary reason for our appointment was the ability to help on the delivery aspects.  If you look at other Departments of Government, it would be very rare to have a non-exec board with so much experience in the policy area.  It is extremely rare to have four of us who have quite a big background in education.  Sue has some exposure to children’s services issues in her role, but none of us has experience that is as specific.

If you look at the coverage we bring to children’s services, the Department has just appointed Isabelle Trowler as chief social worker.  Martin Narey is a close adviser to the Secretary of State and has just produced a report on social work.  Clive Cowdery, who I encouraged and brought in effectively, is chair of the investment board for children’s work, deciding on new innovations and interventions.  He is chairman of the Resolution think-tank.  Therefore, we have some very important external advisers.  I would have wanted Clive Cowdery to be a non‑executive.  He did not want to be, but we have his expertise through that.  Therefore, we have three very good people advising.

In case you are worried that there is a neglect in any sense by Ministers, for Edward Timpson that is obviously his job; Michael Gove has a very strong personal interest; David Laws is engaged in it through the pupil premium work; Liz Truss is involved in early learning work; and John Nash took the Bill through the House of Lords.

Q27   Mr Raab: Does that mean that at non-executive level it does not matter so much?  Is that your conclusion?

Paul Marshall: We concluded that we did not need to seek another non-exec with that specific area of expertise.

Q28   Bill Esterson: As the issue of children’s services is becoming more prominent, we have seen a big increase in the number of children going into care and high-profile cases.  Do you feel that as board members there is a need for you to pay greater attention to children’s services through the work that you do as non-execs?

Paul Marshall: I think there is a need to give it a lot of attention.  Five of the 18 delivery priorities are to do with children’s services.  It would probably be wrong to neglect any of the 18 priority areas.  I could cite examples of why each of the priority areas is becoming more important in its way.  The key thing is that it is important we collectively are on top of any risks that arise in that area.  That comes to us primarily through the performance committee, and any issue that does come up there is, if necessary, escalated to the main board.

Q29   Craig Whittaker: I want to challenge that view.  As chairman of the All-Party Parliamentary Group for Looked-after Children and Care Leavers, there is a widely held view that there are quite a few areas that are time bombs waiting to explode.  I would also question the 18 KPIs.  That is a huge number.  I had a job in the real world before coming here but not at your level, but even I know that to keep your eyes on each of those balls is incredibly hard.  Do you not need to look at that again?  We have social workers who are massively overworked in regard to caseloads; we have a huge shortage of social workers; we need to focus more on families, which we are not doing because social workers do not have the time to do it.  Edward has done some great work in this area, but it is not enough.  Do you not think you need to make that a priority too?

Paul Marshall: There are 18 delivery areas.  We are happy to let you know what those 18 are.  They are all important and you cannot neglect any of them.  I completely take your point about the risks in this area, but equally you might have asked us about Birmingham schools.  All kinds of issues are constantly bubbling to the surface.

Q30   Craig Whittaker: You could also quite easily tie in the issues in Birmingham schools with the services for children.

Paul Marshall: It is all interlinked, but I am confident that it has the coverage and the amount of scrutiny and focus that it needs.  If that changes, either we will put more of our own efforts into it or ask the Permanent Secretary to put more Civil Service effort into it.

Dame Sue John: Your previous criticism was probably right in some respects, in that the performance committee did not have enough time devoted to looking at some of those very important issues.  I have looked back over the agendas before the performance committee since September, and on seven occasions we have looked at various aspects of the children’s agenda.  I do think it is getting a higher focus.  Isabelle Trowler came to the meeting, but you can never let your eye wander from it, for the reasons you are saying.  It is very important.

Q31   Bill Esterson: The board has five strategic aims; it also has a business plan with six priorities.  The strategic aims and priorities, while similar, are not the same things at all.  Should it be the strategic aims or the priorities against which the Department’s performance is judged?

Paul Marshall: You are referring to the strategic aims in the report of Cabinet.

Bill Esterson: I am going to have to check what they are now.  The annual report and the accounts identify two different sets of priorities.

Paul Marshall: Yes, items 2.2 and 2.6.  I was aware that they were in the report and accounts.  I would not say that informs the way we run our day-to-day business.  There are two over-arching aims, raising the bar and closing the gap, and then there are the 18 delivery priorities.  I have not come across that.

Q32   Bill Esterson: What would you want the Department’s performance to be judged against?  Two overarching themes really are not a way of judging performance.  Is that why you have the 18 KPIs?

Paul Marshall: Yes.  It is more than 18 KPIs, just to make it even more difficult.  There are 18 delivery priorities and a KPI supporting each of them.  Raising the bar and closing the gap encompasses the expectations of raising standards, which is the passion of everybody in the Department.  It also encompasses the importance of social justice and raising the standards for those least able to look after themselves.  You would argue that it probably does not capture every aspect of the education agenda.  That is the difficulty of reducing it to two.  There is always a challenge.  There is the communication challenge in having a small enough set of priorities that you can communicate them, and the delivery challenge in making sure nothing is neglected.  That is what we are trying to balance.

Q33   Bill Esterson: I am after the specific measures against which you want to be judged, because you have these two different sets.

Paul Marshall: It is encapsulated in the KPIs that we have for the 18 priority areas, but for me personally it would be eliminating illiteracy and innumeracy in this country.  That is what we should be aiming to do.  You may say that I am then neglecting the issue of children in care.  It is difficult to narrow it down to one or two objectives because the Department for Education has a very wide brief.

Jim O’Neill: Following on from what Paul said, within the context of how I answered earlier, my view is that we as non-execs should be judging everything in the context of those two things—raising the bar and closing the gap—so everybody knows that is what the purpose is, and that unifies all the specific individual things going on.

Q34   Bill Esterson: I understand that point, but unless you have specific measures, it is very difficult to assess.

Jim O’Neill: As Paul said, behind that there are probably hundreds.  Individual people obviously have to be held to account by specific targets underlying that, but that is the unifying rationale and purpose.

Paul Marshall: There are lots of targets in the public domain.  Targets got a bad name under the previous Administration.  Public targets can become very blunt and create false incentives, but there remain a significant number of targets in the public domain.  There are equally a lot of KPIs within the DfE.  It is right that not all of them are put in the public domain, because once you do that you get political criticism for every single KPI that you might or might not have missed and bogged down in debates about small KPIs. 

One of the things that interested me coming from the private sector is that in our business we have lots and lots of KPIs and objectives.  We do not have to publish them.  If we did, it would make our lives very difficult.  In politics you do have to publish quite a lot.  The tension is between what you publish in order to communicate internally and externally, and what you use as a management tool to make sure you deliver on all of your objectives.

Q35   Bill Esterson: Coming back to the issue of children’s services, the priorities in line with the business plan include the training and development of professionals who work with children, but it is not one of the strategic aims.  Do you agree that rather makes the point Craig and I were making in the previous set of questions?

Paul Marshall: I would suggest you take that up with the Permanent Secretary.  It is slightly invidious to have five strategic aims, and I think that is one for the Permanent Secretary.

Q36   Ian Mearns: Paul, I cannot help but observe that, when you say you want to eliminate innumeracy and illiteracy in this country, we have basic skills programmes for adults in tatters compared with what they were 10 years ago, and we have a Justice Secretary who is preventing families from sending books to people in prison.  Maybe you can start advising other arms of government about your aims and objectives.  That might be a useful start.  Do you believe the academies programme is being implemented too fast?  We have had a recent utterance from the Schools Commissioner.  At an independent academies conference he said they were looking towards a fully academised system.  Is that now the policy of the board and DfE?

Paul Marshall: A very big aspect of academisation is that it is voluntary; it is about schools being willing to and wishing to become academies, and I think that will remain the case.  The planning expectation is about 1,000 academies a year for the next few years, but with no specific endgame of every school being an academy.

Q37   Ian Mearns: Do you think the Education Funding Agency has the resources and skills to implement the academies programme at speed, given examples we have seen where there have been problems in individual academies over openness, transparency, good accounting and accountability in the use of public money?

Dame Sue John: There has been a review of the EFA, and you will probably hear a little later about that.  In terms of capacity and capability, that is an agenda the EFA is working on.  It has made great strides in terms of efficiency, even in terms of just the finance coming through.  As a secondary school we were supposed to be given our budget from the local authority at the end of March.  You got it in June or July when you were actually in the year.  Now the money is there; it is timely.  Sadly, it is going down rather than up, which is not good, but there are efficiencies.  There has been a review.  It has been looking at capital and those sorts of things, but clearly one has to look at the risks of trying to take on too much too soon.

In terms of academisation, it is certainly true that there has been some slowing on converter academies, but there are also very interesting collaborations developing in the system.  I think you looked at that in your report on partnerships.  There are all different kinds of federations and ways of working together in collaborative groups, as well as the academy programme.

Q38   Ian Mearns: But the collaborative groups themselves are a mixed bunch, are they not?  We have had different rates of success, sometimes failure, and some collaborative groups have schools taken away from them.  It is a mixed picture out there.

Dame Sue John: When I am in a collaborative group I mean people who just willingly join.

Ian Mearns: You are not talking about chains.

Dame Sue John: No.  Quite clearly, the Department has looked at dealing with some of those issues with chains, and quite rightly too.

Q39   Ian Mearns: From a formal perspective, how regularly does the departmental board discuss EFA’s capacity and capability to deliver on this roll-out programme and, importantly, make sure that public money, which is measured in billions in these programmes, is being spent effectively and in an open and transparent way?

Paul Marshall: It is discussed regularly between us and at board level, much more regularly than just every board meeting.  You are quite right to highlight it, and the NAO also highlighted concerns about overload.  We have been very focused on it in the last six months.  My personal perspective is that it is an agency that has had to embrace huge change and transform from being a policy-based unit primarily to being a delivery-based unit.  The number of academies has gone from 203 at the beginning of the Parliament to 4,000.  Each one has to be separately accounted for.  There has been a significant cut in staff.

There are two graphs you should look at to understand the ability to cope.  One is the reduction in staff and the other is the improvement in IT and systems.  The reason I am reasonably confident they are managing well and will continue to do so is that they are rapidly improving processes.  Most of this stuff is process-based and needs good IT systems and processes to deliver.  They are definitely getting there.

I would cite just a couple of things.  The accounts process itself involved over 2,100 different units that had to be consolidated.  It was the largest of its kind in Europe.  As to delivery on building projects, according to the NAO the cost of free school building projects is 40% to 45% below the equivalent BSF number, so they are delivering on the cost of building.  They are turning round a big ship of state in terms of the efficiency of the Department and its ability to deliver with fewer people.

Q40   Ian Mearns: On the annual revenue account in terms of the money disbursed among schools, do you think that the EFA has looked at what is required from schools, or is looking at schools from an audit perspective to make sure that public money is being properly spent?

Paul Marshall: I think so.  The numbers on accuracy of data have now gone from quite low numbers four years ago to close to 100%, and timeliness has also improved very significantly and is good.

Q41   Ian Mearns: Do you think, therefore, that the EFA is implementing its plans to increase capacity and capability fast enough to keep up with the rapidly rising demand?  Do you think it is on track to keep up with that increasing demand?

Paul Marshall: Broadly speaking, yes.  The critical thing is processes.  I cannot emphasise enough that historically a lot of the IT in the DfE was balkanised, with individuals doing their own Excel spreadsheets where they could and so on, rather than creating relational databases that would allow you to deliver at scale.  Once you have proper IT support with clear processes—you can talk to Peter Lauener about this—you can do this work.  Most of this work is very routine process-based work, and therefore we should be able to deliver it.

Q42   Chair: How far down the path are you?  You talked about a falling number of employees but improvements in systems.

Paul Marshall: We have a very good CRM system.  It is working on a payments delivery system and relational databases, and the schedule for delivery of those is 12 to 18 months, so you can see the partial endgame.

Q43   Ian Mearns: In terms of the medium to long term, do you think that the EFA is effective, and has the capacity to be more effective, in terms of managing any potential strategic risks?

Paul Marshall: It is not where it needs to be and will be, but the problems are relatively low level.  I do not think there are issues that will cause a major revenue hit, or any major loss of money.

Q44   Chair: You bring strategic oversight to the Department and you look at implementation rather than policy, but do you have a clear vision of what the education system will look like in some years’ time?  For example, for failing schools the solution typically has been academisation.  Once we get a mostly academised system, we need an alternative.  We have school chancellors, commissioners, call them what you like, set up with areas that are not coterminous with Ofsted’s regional areas, for reasons that are entirely inexplicable to me—you might be able to help me on that—and you have David Blunkett’s report the other day for the Labour party, described by The Guardian as sweeping away the Govite vision.  To me, it seemed more about filling in some of the obvious gaps.  What role do you play in setting out and challenging what kind of system we are going to have with the right parameters and supports in place where there is failure?

Paul Marshall: Predicting where the education system is going to go is dependent on the vagaries of politics.  We cannot predict that.  I know that you had Andreas Schleicher speak here.  He talked about four key drivers of educational improvement: standards; structures; teachers; and accountability and assessment.  I believe those are the four key drivers.  I have presented argument and advice to make sure that all four of those drivers are properly represented in and focused on in policy delivery.

Q45   Chair: Assume for these purposes that there was no change of government.  What would it look like in the future?  Do you recognise that there seems to be a gap in the middle tier, if you like?  We have a lot of partnerships, co‑operation and innumerable different models, but what we have not got is a coherent structure.  Is that a fair point, or am I wanting too much coherence?

Jim O’Neill: What I say is reflective of my own professional experience and history, and part of the role of serving as a non-exec.  I have spent a large part of my life in economic research.  There are three things related to this and your previous question.  First, I believe that the key to a higher rate of structural economic growth is productivity.  Of the many determinants of productivity, probably the most important one is education. 

Secondly, in that context that is partly why for much of my adult life I have been so interested in education, particularly for the disadvantaged, going back to the two priorities.  That is why in my judgment they happen to be the ones that responded to my suggestions.  They were the right ones. 

Thirdly, the specific area I am delving into more is trying to make sure that more attention is given to objective evidence, which you cannot change or see the impact of overnight, as to what might or might not work.  I am spending a lot of time on, and have been heavily involved in, the recruitment of a new head of research to help build these things.  In some ways, there is an ongoing inherent interplay between the goals of the sitting Ministers and what is right over the long term.  For me at least, I believe that the role of a non-exec is to try to help the Department deal with those inherent challenges all the while, but moving towards greater evidence of what is the right thing for our children and their future over the long term.

Dame Sue John: The school system is almost creating its own future in many respects.  There can be gaps, but I see a shift in local authorities in adopting a role where they are supporting schools to challenge themselves from within and to raise standards in that way.  They see themselves very much as doing that.  The Somerset Challenge, which is being put together at the moment, is a very good model.

When local authorities were responsible for school improvement, there was a tension between providing the improvement and then possibly taking some of the harsh decisions about underperformance of the schools they were meant to be supporting, so having objective individuals, as in the London Challenge, like the challenge advisers, was very helpful, looking from outside and being able to do that in a more objective way.  We need a system that has something local about it but also has an external challenge.  Whether eight regional school commissioners are enough and 40, or whatever, are too many, I do not know at the moment.  As to whether we have the right calibre of people to do the job anyway, there are not that many people like Professor David Woods who can analyse what needs to happen in a school that we know is not performing correctly.  How many people have the skill to say that you need to do x, y and z and you will improve? 

I feel a real sense in the system that people are getting legitimacy from their peers, and have got past that kind of soft and cosy challenge to make it much hard-edged but also supportive.  I am more optimistic, but it is not done and still needs a lot of research and thinking about what it could look like.

Q46   Pat Glass: I do not think any of us would disagree that peer-to-peer pressure and challenge is best.  I worked in a local authority and there were all those kinds of tensions for school improvement, but the impression we get as a panel is that is not coherent.  It might work well in your school and maybe yours and yours, but across the piece we are not seeing a coherent school improvement challenge.

Dame Sue John: That is why you still have to work with local authorities and look at what their role is to support schools to do that in their particular local areas.  Sometimes, if there is not strength in that area, you have to look outside and bring people in until you grow it.  However, it is very important that you grow it within.

Q47   Ian Mearns: As we move incrementally towards a fully academised system, where do local authorities get those resources to carry out that role?  Traditionally, in authorities that were proactive in such situations, advisory and school improvement staff would work with schools to try to find a way of helping the head teacher and management staff within the school to improve.  Where it was impossible, the local authority quite often would move with governors to change the leadership, which is crucially important.  That is an important thing to do.  Who is going to carry out that role in future in a fully academised system?

Dame Sue John: If you look at Somerset, the local authority has given the money to the schools; it has said, “We will give you some resource.  You can then organise yourselves and take that agenda,” but it wants to make sure that is working.  I think the days of local authority school improvement advisers in the system are gone.

Q48   Ian Mearns: Who provides the challenge, and how will the local authority fulfil its role when all the money is devolved to schools?

Dame Sue John: We have national leaders of education; we have teaching schools; we have specialist leaders of education.  Teachers like to work with other teachers.  It can be successful and can lead to a double lift in performance.

Q49   Chair: How do we make it successful everywhere?  Looking at the area I represent, there is one primary school as a teaching school.  It is a sparsely populated rural area of East Yorkshire, and coastal as well.  It might well be working well in some places.  We need a system that serves and works for everybody everywhere.

Dame Sue John: I do not think that 600 teaching schools, which at the moment is the aim, will give the coverage that you are talking about, so there are still challenges in that respect.

Q50   Chair: The national college has a key role in this.  I take one of the explicit or implicit criticisms from Ofsted to be a feeling that there has not been sufficient attention to getting the right strategic leadership capability in the areas that most need it.  We have lots where we do not need it very much and very little where we need it most.  What role do you play in challenging and ensuring the college and any other agencies involved make sure we get a better match between need and capability?

Dame Sue John: I do the quarterly reviews for the National College for Teaching and Leadership, and at the very last meeting I went to I challenged whether its ambition at the moment is realistic given what you have said.

Q51   Alex Cunningham: The Chair refers to capability.  I just wonder whether you are content that the Department has sufficient procedures in place to ensure individual academies, or academy chains, have the robust financial systems and experienced people to look after public money.  I ask this in the light of the situation last year, where I assume an inexperienced finance person in a school in the west country fell for an internet scam and lost over £1 million.  Is it robust enough?  Does the Department have a handle on it?

Paul Marshall: Those schools existed before academisation; the same risks existed in the previous system.  What is happening now is that there is much more sunlight and transparency about the finances of any individual school.  Undoubtedly, one or two things have come to the surface.

Q52   Alex Cunningham: Has the Department got in place a robust system to make sure that, when it allows academies to be set up, they have robust financial systems and people to avoid this sort of catastrophe?  It is paying off staff like nobody’s business down there as a direct result of somebody falling for a scam.

Dame Sue John: We are audited more regularly as academies than we were previously, but I certainly had to bring into my school a trained accountant to make sure everything was in place.  Maybe for the system as a whole, whether it is academies or not, we are going to need professionals coming in.  People have been trained as bursars and so on.  You need as much of that as possible across the system, so it is a challenge.

Q53   Alex Cunningham: There is still considerable risk in the system at the moment over the management of public money within some of these individual academies that have been set up.

Dame Sue John: I could not say.  I do not know what you feel as an academy chairman, Paul.

Paul Marshall: I think it is a very good question to put at the next session.

Q54   Chair: To turn to the national college for a second, it is absolutely critical to get that match.  Is it up to scratch?  Is the college doing its job?  What are you doing as a board to make sure, to pick up David’s earlier reference to pace, that we are moving at pace to get people where they are most needed?

Dame Sue John: To be perfectly frank with you, there is still a challenge.  The college has two main aims: to make sure we have the best teachers, which it is working very hard at and is working well, and support the system to lead itself.  There is still some way to go, and we probably need to generate more pace and better coverage in different parts of the country.

Q55   Chair: If we do not move quickly enough and some areas are left seriously behind, even if the central insight of a self-improving school-based system is right and offers long-term benefits, in a political world someone will come along and change it all.  What are you doing, and what do you think the Department is doing, to make sure that does not happen?

Dame Sue John: It is related to accountability as well, because to be a teaching school you have to be graded “outstanding”.  If you are in an area where there are not any “outstanding” schools, that is a difficulty in itself.  Therefore, I think you have to have a plan to try to create “good” and “outstanding” schools in those areas to get that coverage for that system, so it is still a challenge.

Q56   Ian Mearns: Could I draw your attention to the EFA review of Oldfield Academy Trust?  I suggest you all have a look at it and see some potential pitfalls within the overall academisation programme.  There are some salutary lessons within that review for all of us.

Q57   Chair: In your other organisations you very much look for a marriage between budget and priority; you look to get your money where it is most needed.  The Department has just ducked its promised national funding formula.  Ministers have said, and everyone can see, that you have a grossly unfair allocation system of funding not matched to need, and yet, rather than doing anything about it, the Government have put it off again and thrown £350 million, in a fairly poorly constructed way in my view, at some authorities.  Do you have any role in trying to get the Department to put its money where it is needed?  That seems pretty strategic to me.

Paul Marshall: Specifically on the funding formula, I do not think any of us have been actively involved in that debate, and it has been pretty political.

Q58   Craig Whittaker: David, I know that you have strategic overview of capital spend.  I do not expect you to comment, but I just want to put a plug in for Calder and Todmorden high schools in the Calder Valley, which desperately need rebuilds.  My question to the panel is: how concerned are you about the Department’s management of staff?

Paul Marshall: That is probably primarily a reference to the staff survey.  The context is this is a Department where the headcount has fallen by 40% on a consolidated basis from the 2010 level and pay has been broadly frozen, so it has been a difficult environment.  If you look at the detail of the staff survey, which I know you are not able to do because it is not a public document, I can tell you with confidence that, on a matrix basis—one axis is the type of question and the other is the divisions—first, the low morale is essentially about issues to do with management of change and leadership.  Issues like personal motivation, fulfilment in job and learning on the job are all very good numbers. 

Secondly, if you look at it vertically in terms of division, the negative numbers are very concentrated in specific parts of the Department that are in the process of very radical change.  There is a lot of green and red.  There is green in a lot of areas and some very reddish areas, which are either just entering or are in the middle of change.

Q59   Craig Whittaker: Does that not tell you that the Department has probably managed change badly?

Paul Marshall: I think that in some cases that may have been the case, but the Department is now responding well to the criticism it has had and the concerns raised, particularly on leadership.  One of the issues we have raised is that there needs to be much more internal communication of change messages around all the sites.

Jim O’Neill: First, this reflects things that went on before my relatively short time as a non-exec, but this is among the reasons why I think it important to have greater prioritisation to help foster a stronger shared culture as to the purpose in the context of cutbacks.  Cutbacks in any large organisation are always challenging, but if there is a clearer shared vision and purpose, it would help. 

Secondly, who knows, but I would hope that the forthcoming ones will show a different picture.  I have been involved in the recruitment of two important research positions.  From what I could see, the quality of the people applying for both from across the rest of the Civil Service positively surprised everybody else involved.  It was quite a nice experience to go through having heard a lot of this sort of thing, so maybe it is changing.  I do not know, but I thought it was a rather encouraging sign.

Q60   Craig Whittaker: Let me ask you about the change.  Only one in five felt that change had been managed well, so 80% thought it had not been; one in six said that when changes are made in the DfE, they are usually for the better, so five out of six did not think it was.  What has gone wrong?  Jim, you said earlier that individuals needed to be held to account.  Who should be held to account for it going badly wrong for staff?

Jim O’Neill: I am not sure I did say that.

Craig Whittaker: I wrote it as you said it.

Jim O’Neill: Okay.  I have been doing this for only six months.  It would seem to me that the scale of changes being introduced is pretty dramatic, particularly in terms of heads.

Q61   Craig Whittaker: If you are a strategic leader within a large organisation like the DfE, surely you plan for that type of change.  It is all very well referring to the scale of change, but, if you do not have the morale of your staff bringing it forward with you, some of the issues we have seen, like the academisation programme with which they were absolutely inundated and overburdened, would not have happened.

Dame Sue John: I do not recall the figures being quite as stark as that.  I might have got that wrong.  In some of the data I have seen there might be an issue to do with apathy—so I take your point—with people sitting on the fence in quite a lot of those surveys, but there are clear messages for senior managers.

Q62   Craig Whittaker: What are you doing to challenge that?  That is what we are interested in.

Dame Sue John: I know that the management committee is putting quite a lot of training into change management for some of its staff and doing a lot more visibility between departments.  As a non-exec, a lot of my work is with more senior civil servants, and that is an issue.  I have been invited to go to an EFA directorate for a visibility chat so that people at all different grades can get to know and talk about what is happening in the Department.  That is a positive thing.  It is not difficult to go out and be visible and engage.  I think it is eminently doable with our backing and with training, but it is an issue we have looked at closely.

Paul Marshall: I agree with Sue.  I have not got the staff survey with me here, but I did write down the worst numbers.  Only 34% thought change was managed well, which is a slightly different number, and only 46% were satisfied with learning and development.  Our numbers may be compatible, but yours may be excluding a bunch of people who are reasonably satisfied.  The point is that they are still not good numbers.

Q63   Craig Whittaker: The survey is not released of course.

Paul Marshall: Yes.  The point is that they are not good numbers, but they are perhaps not as stark as you are suggesting.  Specific things have been undertaken in response to those numbers, including learning and development programmes, management of leadership programmes for grades six and seven and, as Sue says, much more visibility for the senior leadership team.

Q64   Craig Whittaker: It is said—we probably agree on this figure—that only 29% of staff believe the board has a clear vision for the future of the DfE.  That is 13 percentage points below the Civil Service average.  Does the board have a clear vision, or are you just failing to articulate it?

Paul Marshall: We do think we have a clear vision.

Dame Sue John: Yes.

Q65   Craig Whittaker: So, you are clearly not talking about it; you are not bringing your staff along with it.

Paul Marshall: You are absolutely right that there has been a weakness in communication within the Department, and that is why both the senior leadership team and the Secretary of State are much more active, for the last three to four months, with the meet-the-board programme and getting out to communicate the vision.

Q66   Craig Whittaker: Is it fair to say that you will challenge the DfE particularly on the staff survey issues, the good and bad but mainly the bad, because on paper it looks pretty horrific?

Paul Marshall: It is fair to say that, yes.

Jim O’Neill: If the results stay the same, whatever differences there are in the exact measurements, it goes without saying that one of our obligations will be to do that.

Q67   Mr Raab: Ministers are obviously driving through this transformational change with the overarching aim of driving up teaching standards in the way you have described.  On the one hand, we have got the staff survey suggesting that perhaps they have not carried everyone along with them.  On the other hand, you hear a narrative from Ministers about the blob and entrenched bureaucratic opposition to driving through any change.  Jim, is it cack-handed management or vested entrenched interest, or a bit of both?

Jim O’Neill: With the caveat I keep giving about my relatively recent appearance on the board, I suspect it is a whole host of things thrown together.  The scale of cuts is reasonably unprecedented, if not completely, so for everybody involved it is probably quite a novel experience.  There are a lot of things involved.  For us, going forward we have to make sure there is buy-in to the purpose of what it is trying to serve rather than too much reflection on what went wrong in the past, because we cannot undo what has been done.  If these surveys show the same again next time, for me that would be pretty concerning and we should definitely be trying to do things about it.

Q68   Chair: It has been steady for quite a long time.  The numbers have been very poor for at least three years.

Ian Mearns: And decreasing.

Jim O’Neill: You asked me earlier to speak from my own experience.  Very recently, I have been involved in recruitment for two very important positions.  Judging by the people who are applying from elsewhere, the standard of those who want to come into the Department and the reactions of those on the selection panel in the Department reflect a slightly more encouraging state of mind than has been discussed here.  I feel there might be a bit of a shift.

Q69   Pat Glass: This is the third year running we have raised this, and the figures are going down.  When we raised it last year, we were told it was a bit worrying and if it was like that next year you would be really worried.  Here we are next year, and it is worse.  As a board, what do you intend to do about it?

Paul Marshall: I do not know the date of the staff survey, but it was three or four months ago.  There have been a number of important initiatives since then to do something about it.

Q70   Alex Cunningham: What are they?

Paul Marshall: The meet-the-board communication programme, which is senior leadership on all sides on a regular weekly and monthly basis presenting to staff, and the Secretary of State also presenting to staff.  Then there are leadership training programmes and teaching and learning programmes for grades six and seven across the Department.  There is an ongoing constructive capability review process designed to upskill individuals.  There has been a lot of new initiatives in the last three months.

Q71   Pat Glass: Has the board met the unions or representatives of staff?  Some of us have, and they have given an insight into what they feel is going wrong.

Dame Sue John: We have not, but we could do.  I think that now is the time for such a lot of change.  It is the same in schools as well.  Referring to your point as well, we need some alignment in terms of making sure implementation is effective, because that is what we all want.  That is where we feel we are at the moment.

Q72   Mr Raab: Does anyone else have a view on the blob versus cack-handed management as the narrative here, or is that far too crude?

Paul Marshall: I think “the blob” is an unfortunate phrase.

Dame Sue John: It is.

Q73   Mr Raab: I could go into the detail about vested interest, but the idea of delivering change—you have got a lot of experience of that—in this context is much harder than perhaps other parts of the public sector, let alone business, as opposed to it being just poor management of transformational change.

Paul Marshall: If you look at those provinces of Canada that have delivered the best educational reform improvements, it has been quite heavily teacher-based.  You really have to bring the teaching force with you.  It has been difficult to carry the support of the teaching force as much as would have been ideal.  If you look at the Secretary of State’s speeches in the last year or year and a half—I try to read quite a few of them—it is full of praise for teachers.  It never gets reported.  He has a difficult communication issue around that, because the press are just not interested in the story “Michael Gove loves teachers”; the story is “Michael Gove criticises a teacher.”  There is a communication issue for the Department, which we have discussed as a group, that gets in the way of delivery.  We have talked about that issue.

Q74   Pat Glass: Secretaries of State are never particularly liked by the teaching profession, but this Secretary of State has a particular problem.  You just think that is down to poor press reporting.

Paul Marshall: I think the phrase “the blob” was unfortunate at the early stages.  In the last 18 months to two years it is more of a communications issue.

Q75   Pat Glass: Can I ask you about exit packages and value for money?  I have been looking at some of the Department’s figures.  In 2012-13 there were 347 exit packages at a cost of £23 million.  A third were over £50,000, and 60 of those were over £100,000 and 14 were between £150,000 and £200,000.  None of these was compulsory; they were all voluntary packages.  It is not quite the BBC, but we are talking about huge amounts of public money.  When we started to question this, initially in the Department for Education’s annual report for 2012-13 it was stated that the driver for the fast pace of voluntary exit schemes was to mop up underspends in funding.  That was changed later when we started to question some of that.  As a board, can you tell me how the value for money test for the voluntary exit scheme operated in 2012-13?

Paul Marshall: Sue was the only one of us who was there.

Dame Sue John: We did ask and were told very clearly that it was in line with Civil Service guidelines.  Some of the expense was because it related to more mature members of the Civil Service, and over a period of time, in terms of their salary, there would be value for money.  Those were the answers we received, but I am afraid I did not interrogate that any more.

Q76   Pat Glass: I leave aside the issue of the huge amounts of money.  Having been through this process in the past, one of the dangers of a drive to get rid of people and money quickly is that future capacity is endangered as a result.  I know that it can take years to recover from that.  What level of scrutiny did the board have on future capacity?  Who went, and what skills were being lost?

Dame Sue John: We certainly did not do it person by person by any means, but we did ask questions about the fact we wanted to keep the good people with the right capabilities.  We were given assurances that we would not be getting rid of a lot of expertise.

Having said that, there are still gaps in analysts in certain parts of the Department, and capability and matching those skills is important.  What the Department seems to have done, however, is develop a much more flexible working operation across its people so that, whenever there are changes, you are not losing expertise that is solely in one or two very important people.  You have to train people to be able to go between areas, but it is my recollection that we did ask the questions.

Q77   Alex Cunningham: Local authorities are reeling under some of the most savage cuts for decades.  Children’s services are under considerable strain and councils fret about what the future is for those services.  Do you agree that the underspend of 20% of the children’s services budget in the supplementary estimates indicates that something is wrong, or is it something to celebrate?

Dame Sue John: I cannot answer that question.

Paul Marshall: Nor can I.

Q78   Alex Cunningham: There is a 20% underspend in the Department.  We have a situation where people are crying out for resources, and you cannot tell me whether you think there is something wrong, or otherwise.

Paul Marshall: I do not recognise the figure of 20%.  Rather than try to give an answer, I would rather leave it to the Permanent Secretary.

Dame Sue John: The Permanent Secretary will be able to answer that.

Q79   Alex Cunningham: Fair enough.  None of you has specific skills—I think this was covered when I was out of the room—in children’s services, but, in the light of massive underspends, how can we be content that resources are being deployed effectively in the system when it appears some people are claiming they are starved of cash?

Paul Marshall: The premise of the question may be incorrect, in the sense of underspend.  I do not think there has been an underspend.  I am not sure if this is a supplementary question to what we answered earlier about—

Q80   Chair: There are two aspects to it.  One was the underspend of £86 million, and the other was the decision about what to do about that, which was to take it out of children’s services—Alex makes the case that this is an area under particular strain—and spend it on additional school places.  It fits with the general narrative of the obsession with schools and the sidelining of the very important area of children’s services.  It seems material to us that an £86 million underspend is shipped straight out of the children’s services department.  We wondered what that indicates.

Dame Sue John: I do not know whether or not that was to do with restructuring of the Department, but I am sure they will be able to answer.

Q81   Alex Cunningham: It is rather surprising that non-executive directors do not know what the situation is in relation to this tremendous underspend within the children’s services budget, particularly in the light of what is happening across the country.  Are you aware of what delays there are in children’s services programmes as a result of what is happening across the budgets?  Is anybody on top of what is happening in children’s services from a non-executive director point of view?  I take that as a “no”. 

Dame Sue John: It is not my area.

Alex Cunningham: That probably demonstrates very clearly that it is time we had people on the board with specific skills related to children’s services.  Have you got anything to say about children’s services at all, maybe about where additional resources could be used?

Bill Esterson: Silence.

Q82   Alex Cunningham: Have options for spending on children’s services been discussed by the board?

Paul Marshall: No.  The £86 million is in the context of a budget of £2.7 billion.

Q83   Alex Cunningham: Never mind the £86 million.  Has the board actually discussed the priorities or investment in children’s services?

Paul Marshall: It would have been discussed at the performance committee, but not the main board.

Q84   Alex Cunningham: Does anybody have a handle on it?

Dame Sue John: I would imagine Ministers and civil servants will have a handle on it.

Q85   Chair: Who takes the lead on children’s services on the board—nobody?

Dame Sue John: I do not; I do the Standards and Testing Agency.

Paul Marshall: Effectively, Theodore does because he chairs the performance committee.

Q86   Alex Cunningham: Why should an £86 million underspend on children’s services be transferred to the education budget when we know there is need in the system for resources for children’s services?

Paul Marshall: I think you have established that none of us is in a position to answer that question, so I think it is better to put it to the Permanent Secretary.

Chair: I thank you all very much for coming along this morning.

Questions 87-149

Witness[es]: Chris Wormald, Permanent Secretary, Department for Education, and Peter Lauener, Chief Executive and Accounting Officer, Education Funding Agency.

Q87   Chair: Good morning, and welcome to both of you.  I know you were able to sit through the previous session.  Permanent Secretary, when Tim Loughton was a Minister in the Department he provided a breakdown of the October 2011 DfE Civil Service people survey results by directorate in a parliamentary question, but when I asked you to give us a breakdown of the latest survey, you wrote to me to say that no Departments publish a breakdown and you wanted to maintain DfE policy of publishing information only at departmental level.  Am I alone in seeing that as a contradiction?

Chris Wormald: I am not aware of that parliamentary answer.  The letter I wrote to you was after we had checked the overall position with the Cabinet Office about what we should do across government, but I will check that.

Q88   Chair: Will you provide us with a breakdown of the results by directorate as Tim Loughton did in June 2012?  Precedent is important, and there is one.

Chris Wormald: I will need to check that question and why it was answered in that way.  I have to follow wider government policy on the provision of those results, but I will go away and look at that in the light of what you have just raised.

Q89   Ian Mearns: The audit office report of 2014 when looking at the Education Funding Agency highlighted the need for particular tasks to be conducted to make sure the EFA was capable of producing what it needed to produce.  From your perspective, has the EFA now speeded up the implementation of its plans to increase capacity and capability since January 2014?

Peter Lauener: Mr Mearns, were you referring to the National audit Office report?

Ian Mearns: Yes.

Peter Lauener: First, I thought this was a very useful and helpful report, and we have been acting on the recommendations.  There was a hearing about this before the Public Accounts Committee in March, which Chris and I went to as well.

As to the main things we have been tackling since the National Audit Office report, first, I have prepared with my senior leadership team a report, which we have sent to all our staff, called “Developing the EFA”, which sets out where we are now in 2014 and where we look to be in 2016 in terms of capability, capacity and effectiveness.

We identified four things in that report that interlock and are all about improving our capacity and effectiveness.  The first is how we are going to improve customer service and the way we deal with all the institutions that we fund.  Secondly, looking at our business processes, systems and ICT, we are in the fortunate position that the Department’s board has committed £26 million to an investment programme to upgrade the systems that we use because of the scale of challenge we face.  We are expecting to finish that a year ahead of schedule in about March 2015.  That is good news; I am very pleased with the way that is going.  We have hired a chief information officer with commercial experience who has made a major difference to our work there.  The third area is working with our suppliers, in particular accountancy firms who audit academy trusts.  There was reference in the earlier discussion to the importance of that role.  The fourth thing is improving the capability, effectiveness and skills of all our staff, so it is four bits of a jigsaw that add together. 

I think we are motoring quite fast with the programme of change that we need to undertake.  As it happens, I started two last week, and over the next three weeks I am visiting all our sites with some of my senior colleagues with a road-show discussion to discuss with all my staff the aspects of that plan and how we are going to take things forward.

Q90   Ian Mearns: So EFA staff who have been within the Department now are covered by the results of the staff survey.

Peter Lauener: Yes, they are.

Q91   Ian Mearns: In terms of the EFA side of things, do you believe that EFA staff, as opposed to DfE staff in total, are happier or less happy bunnies?

Peter Lauener: The results are not as good as I would like to see in the Education Funding Agency.  I would expect to see some improvements over next year.  Over the last year we did target two areas in particular.  One was the effectiveness of learning and development, where we saw some very welcome increases.  The second is a particularly important question that I asked to be put in the survey, which is about continuous improvement.  The question was perhaps slightly oddly worded, but it was, “Do you agree that everyone has got two jobs: their day job and how to do their day job better?”  That is really important in the work of the EFA.  I was very pleased with the results of that.  A lot of people in the EFA identified with that.  I think the reason people identified with it was that it gets to the heart of what they are doing day by day.  We have had a big focus on those aspects in terms of improving our business processes, and I will happily talk about some aspects of that.

Q92   Ian Mearns: You have talked about a number of changes that are already on track.  Is there anything else significant that you think needs to be done to get the EFA to where it needs to be?  How long do you think it will take to reach the target operating model as outlined in the NAO report?

Peter Lauener: The development plan I referred to, which starts in 2014 and takes us up to 2016, sets out the changes that I and my senior leadership team think need to be made over that period.  I would not want to give the impression that we are starting from a point where we are not effective.  What we set out is how we can be more effective and improve our capacity and effectiveness.  I am very proud of some of the changes my staff have made over the last couple of years.  To take two examples, one is that we have cut out a lot of work that we used to do on young people’s planning, so we are no longer in a planning system.  We have saved a lot of staff resource there.  At the start of the YPLA, which I was in before the EFA, we had 500 staff; we now have 170, and I think we are doing just as good a job in terms of the core funding role.

On academies, we have quotas.  Paul Marshall referred to the rise from 203 to 4,000.  Three years ago we thought the answer to dealing with the ever-increasing number of allocations and getting the money out was to increase staff.  We doubled the number of staff in allocations.  We have since halved it again, because we put in place a much better system as part of the overall process of school funding reform, so we are managing that and we are able to control that process and get a higher degree of accuracy.  I have to say that it is a challenging role in the Education Funding Agency, but I believe we have made significant improvements.  There is more to do.  It is a bit like doing a hill walk.  You can see the summit.  You get to the summit and there is another one further up, so we are under no illusion that there is still a long way for us to go.

Q93   Ian Mearns: Do you think that EFA is well on the road to realising the aim of the Schools Commissioner, who talked about a fully academised system?

Peter Lauener: That is not part of our remit.  Our remit is to cope with the expected number of academies.

Ian Mearns: I have to ask you.

Peter Lauener: I understand.  We are planning for the current trends in the increase in the number of academies.  As the National Audit Office report sets out, that has been increasing by about 1,000 a year, but we do not deal with just academies.  It has not been within our ambit to plan for a fully academised system.

Q94   Ian Mearns: One other crucial question is that you have streamlined and you have had much more success in getting the money out to academies.  Do you see the EFA having a role in making sure that the academies are spending money on what it is meant to be spent on, which is educating children?

Peter Lauener: We certainly have a role in how the money is spent.  We do not have a role in standards in schools.  Ofsted do the inspection and our colleagues in other parts of the Department look at brokering new sponsors and so on, but we have a very important role in satisfying ourselves and Parliament that the money is being properly spent.  As to that, we rely increasingly on the role of independent auditors.  We have done a lot of work over the last couple of years with the accountancy firms that provide audit services to try to make sure there is a common understanding.  We secure an opinion on regularity, which is also an opinion for us, not just the academy trust.  No system can guarantee that the money will always be well spent.  Previously, there were a couple of references to cases where things had gone wrong.  In addition to that, we need smart systems for identifying problems where they occur.  We have used whistleblowers.  I am always very pleased when whistleblowers contact us.  We have well-established procedures for dealing with whistleblowers.

Increasingly, we are trying to draw on information by looking at risk factors.  We have developed a risk assessment tool where we put in all the data we have and ask: is this likely to be an academy of concern?  There is always a high profile in cases of irregularity and possible fraud, but we are equally concerned about deficit.  We think that this analytical approach to data, which is one that commercial firms are using in the financial sector anyway, is one that will help us to be smarter and more effective in identifying cases where maybe we need to intervene.

Q95   Ian Mearns: When it comes to the use of public money and making sure it is spent effectively, whistleblowers are very welcome but they are not a universal safety net.  The preponderance of the cases that have come to light have been via whistleblowers.  When you say that the cases that have come out have been via whistleblowers and less by other means, that can raise a concern in terms of who is shining the spotlight where a whistleblower does not emerge.

Peter Lauener: That is a very fair challenge.  I certainly did not want to give the impression that we are relying on whistleblowers.  We have established very good procedures for dealing with whistleblowers, because to be a whistleblower is a very difficult thing.  We have trained all our staff who might have front-line contact in the correct procedures to follow. 

We are shifting more to using the annual audit.  That is where there is a very high degree of transparency about the arrangements.  All the academy trusts have to publish their independent audited financial statements on their website, and we also publish them on the Department’s website.  When these statements come in we have a triage to see if there are any issues we should follow up, and there are quite a number from the last set of accounts, which came in at the end of December for the 2012-13 year that we are following up with individual academies. 

We are then putting that together with data on student numbers for deficits.  If numbers are falling, then you get into financial problems, so we are putting that kind of material together with student numbers to develop what we are calling a risk assessment tool, which is saying, “Which academies in the system should we be worrying about ourselves before anyone might tell us?”  There is a lot of potential in that system, and we have made some good progress with that.  We also operate through our territories as well, so that we have a system for filtering the information up to national level.

Chris Wormald: Could I add just a couple of things?  On EFA capacity—this was when we did our review of the Department 18 months ago—the question of how we were going to cope with increasing numbers of academies and, therefore, what the capacity of the EFA needed to be was absolutely central to that.  Indeed, even with the reductions in budget that we have seen across the Department, we decided to invest more in the EFA, and particularly in the EFA’s IT system.  We protected from reduction some of the key functions of the EFA, so that question was looked at very explicitly. 

Our planning basis was the continuation of the current Government policy: that the expansion of the academies programme is demand-led.  We were not and have not been planning on the basis of a fully academised system.

Ian Mearns: That is not the case in school failure; it is hardly demand‑led.

Chris Wormald: In terms of the sponsored-academy programme, that is a proactive choice by the Department to academise, but, of course, the vast majority of academies are converters and the overall number of academies is driven by the number of people who choose to convert, which has been about 1,000 a year.  I do not know exactly what the Schools Commissioner said in the reference you make.  It is obviously a matter of public debate how far you should go.

Ian Mearns: It is worth looking it up.

Chris Wormald: Yes, and I am sure politicians will debate it over the next year and in future.  The basis on which we planned was what we needed to do over the course of this Parliament, so we looked at what the necessary capacity was of the EFA to 2015.  There were questions, depending on policy choices, about what one might do after that.

On the finances of academies, I just want to add one thing to what Peter said.  Academies and free schools are, of course, the most financially transparent schools anywhere in the country.  They are the only ones that produce annual accounts that are externally audited.  When we look across the education system, what we have done on academies is put considerably more financial data into the public domain, so it can be scrutinised, which I think is entirely right, than has ever been done before.

In terms of the individual cases that Mr Cunningham and others point to, each one of those is, of course, very serious and has to be dealt with.  The one point I wanted to make is that those sorts of issues are not restricted to academy schools.  The Audit Commission, last year, reported 191 cases of fraud or irregularity in maintained schools, and I think that is the first year they have ever reported that amount.  There is certainly no evidence that these issues, as serious as they are, are more prevalent in academies than in other types of school.

Q96   Ian Mearns: There is, however, an issue with that, Chris, because of the way in which the EFA deals with these situations.  There was a school in County Durham, and I went to see Lord Nash with my colleague, the Member for Easington, about it, because the school in his area had lost £160,000 through misuse of funds internally.  Having lost £160,000, the EFA thought it would be a good idea to claw back another £160,000 to punish the school for losing the first £160,000.  Of course, that means that the kids in the school, not having done anything wrong at all, have lost £320,000 from the budget that was meant to be spent on their education.  That might be open and transparent but it does not seem dreadfully fair for kids coming from a fairly impoverished background with profound special educational needs.

Chris Wormald: I do not know that individual case—I don’t know if you do, Peter—but you have to look at these cases on their own merits.  Do you know that particular case?

Peter Lauener: I do not know the case.

Chris Wormald: We will go away and look at that specific case for you.  It is right, however, that we intervene decisively where problems arise, and that is the model that we use.  There was one other thing I was going to say, which has now gone out of mind. It might come back to me.

Chair: I will bring Alex in.

Q97   Alex Cunningham: You heard my earlier question in relation to a school in the west country where someone fell for a fraud and lost more than £1 million.  The question to you is: how is the Department ensuring that the people who take on responsibility for huge amounts of public money are properly trained and should not be falling for this sort of fraud?

Peter Lauener: I am aware of the case you refer to, and I think you have had some correspondence with Lord Nash about the particular case.  It has also been on our national concern list in terms of the standards it is offering; it has had a pre-warning notice and a warning notice, and it has also had a financial notice to improve.

Q98   Alex Cunningham: It is now sacking lots of people because they do not have the money.

Peter Lauener: It has had a financial deficit, because of falling numbers, so there is a very serious set of issues at the school concerned, and we are looking for another sponsor for that particular school.  It is very much a focus of national concern.  The question you asked was how we ensure that the understanding and skills are there.  If I can highlight three or four things that we are doing, the first is that we do set out, in the Academies Financial Handbook, I think in a very plain-English way, the responsibilities of the principal/chief executive, the trustees and the governing body.  It is a very clear document, which has been widely welcomed.

Secondly, when something goes wrong, we publish the results, so there is information, on GOV.UK, on the Department’s website, on all the investigation and other reports that we have published.  I am preparing a letter to go out to accounting officers of academies to say, “Here are a whole set of things that you should be looking at.”

Thirdly, when the particular case that you refer to happened, it was a simple mandate fraud, and we immediately included in our e-bulletin advice to check these things.  It is probably a product of transparency.

Alex Cunningham: It was an elementary mistake.

Peter Lauener: Fourthly, we do work very closely, as I have referred to already, with academy financial directors and the audit firms.  It is not just that we set everything under way and we come back and look afterwards; we work with all the partners in the system to try to reinforce the understanding of roles and responsibilities and capabilities.

Chris Wormald: I have remembered the other thing I was going to say, which was about publication.  I was going to come back to what Mr Mearns said earlier about the salutary lessons of reading the report that he noted.  The fact that we are publishing all our investigation reports, so that they can be read and lessons learned, is a very important part of the process, which, again, has not been done before.

The final thing I wanted to add was that, as I said, all these issues are serious, and any misuse of public money is serious, but the issues that arise do relate to a very small number of academies.  The EFA maintains a list of the academy trusts that it is concerned about, for one reason or another, at any one time, which is normally deficit but also some of the other issues the Committee has raised.  There are normally about 40 trusts on that list at any given moment, and that is out of a total of nearly 4,000 trusts.  Although all these individual cases are serious and need to be dealt with properly, the vast majority of academies are managing their finances properly.

Q99   Ian Mearns: Going forward, if you can be objective and stand outside yourselves, what would you say are the key risks from a strategic perspective for the EFA?

Peter Lauener: That is a very good question.  If I look forward, I think we made enormous progress with the system of allocations of money—getting the money out.  It is massively simpler, we are making fewer mistakes and it is on time—in fact, it is a bit ahead of time.  That feels eminently manageable as the system develops.  I think the core accountability system of independent audit and transparency is now increasingly well established.  I think the challenge for us is to get very smart about risk identification, as I referred to, and then about managing the casework.

I was about to say that they are all different—and, yes, they are—but, of course, we have to look at the process we use for managing that casework to make sure we are pushing things through as quickly as we can and learning the lessons, not just for ourselves but for the system that I referred to.  There are lots of other challenges in terms of our capital funding and so on, but, in terms of the conversation so far, I think those are the main challenges looking ahead.  It is about casework and it is about risk assessment.

Q100   Ian Mearns: I understand exactly where you are coming from, Peter, but with the management of change—and there has been significant turnover and change in staff—has the loss of corporate memory been a problem from your perspective?

Peter Lauener: That is a very interesting question, partly because my time in this role goes back to the Young People’s Learning Agency.  We took in people from the then Learning and Skills Council.  I can do the history of organisations in this area at any time the Committee would like.  We had people with a particular background and we then used a lot of these people, as we streamlined funding on young people, to work on academies.  We did find it very useful to bring in people from the rest of the Department who had already been working on academies, as opportunities opened up.  As we then came into the Department from the YPLA—the Education Funding Agency is part of the Department; the YPLA was separate—it became all the more important to ensure there was a strong corporate understanding of Civil Service ways of working and so on, and supporting Ministers.

Just to say a word on capital, we have brought in a lot of people with commercial and industry experience of building projects, because that is a different aspect of our work again.

Q101   Chair: This is a “no”, then, to Ian’s question, is it?

Peter Lauener: It is a slightly long answer, isn’t it?

Q102   Chair: It is a bit, Peter.  Going back to the issue of the transparency of the audit of academies and the concern about where things go wrong, are there any plans to increase transparency of schools that are not academies?  You mentioned that, last year, 191 were being published for the first time.  How do we get an overview so we can assess whether the level of fraud and misuse of public money is higher in academies—or lower—compared with the rest of schools?

Peter Lauener: I think that is something we might want to look at.  Clearly, our focus over the last two years has been on establishing and building the system that I have talked about in relation to academies.  There are some interesting lessons for the rest of the sector—the maintained-school sector.

Q103   Chair: Parliament wants to know.  There are concerns that, perhaps, the autonomy is allowing greater misuse of public funds.  If that is, in fact, completely untrue and you view it in the round, surely it is important that the Department makes sure that Parliament and the public can see, and compare and contrast, what is going on.  Permanent Secretary, that is a question for you, I think.

Chris Wormald: That is not quite what I said.  I said we have not seen any evidence that there was a difference between maintained schools and academies.  We do account for them in very different ways: maintained schools are accounted for via the local-government system.  Producing individual sets of audited accounts is quite an expensive business.  We do it for a very specific purpose in the academies programme, for reasons we have explained.  We do not have any current plans to do that across maintained schools.

Q104   Chair: That might not be the only way in which to do it.  Given it is an issue of public and parliamentary concern, what can you do to allow us and this Committee, in scrutinising what you do, to have a sense of whether or not there is a particular issue with academies as compared with maintained schools?  Indeed, it may be that, hidden from sight, there is a level of fraud and expense in maintained schools.  If we cannot see that and compare it with the individually audited academies, we cannot identify that is the problem area and where we should go to work on scrutiny.

Chris Wormald: I can see that is a challenge.  I might have to take that away and discuss it with my colleagues at the Department for Communities and Local Government.  The Audit Commission does report on these things.

Q105   Bill Esterson: In the last session, Dame Sue talked about the fact that some schools are now employing an accountant or a bursar for the sorts of reasons you have just been talking about.  That implied, to me, quite a significant additional cost.  Is it inevitable that there is going to be this additional cost?

Chris Wormald: As with all these questions, there is a balance here.  If I put together the questions we have just been asked with those ones, there is a cost to financial transparency, and we do not shy away from that at all.  When we are talking about a school that we have established as an autonomous institution that runs its own affairs and is accountable for its own money, that seems to me to be an investment that is well worth making.  It is less clear-cut for a maintained school, as I was just discussing.  Yes, there is an additional cost, but certainly we think that cost is well worth the increased transparency we get for public money at these autonomous institutions.  It is probably our biggest single defence that public money is being used correctly.

Q106   Bill Esterson: I will not ask you about the impact on teaching and learning that results from money being spent on these things.

Chris Wormald: As I say, it is a balancing act.  Any money that one spends on any form of administration is, of course, money that you are not then spending on teachers.  That is simply a statement of fact.  Inevitably, we have to strike a balance between what we need to do for proper accountability of public money while keeping as much money as possible for the day job of teaching people, which is, of course, the vast majority of schools’ spending.

Q107   Bill Esterson: Another aspect of this, of course, is the accuracy of the way in which you account for spending.  You talked about audited accounts and so on.  We received information in response to one of our questions about the annual report and accounts indicating that £710,000 was spent on professional fees and technical advisers on two free-school projects that were cancelled. 

Chris Wormald: Yes, we got that number wrong, for which I apologise.

Q108   Bill Esterson: Yes, I am coming to that.  It subsequently emerged that this was only £136,000, not £710,000.  It raises a number of concerns, not least why the figure was wrong and whether we should have other concerns about the accuracy of the figures.

Chris Wormald: I can do nothing other than hold my hand up on this one.  I am very embarrassed that that number was wrong.  I realised that last night, when I was preparing for this Committee, and we felt, therefore, we should inform you straight away that we had got that number wrong.  I will be looking into how that happened.

Q109   Bill Esterson: Are you concerned there might be other figures that are wrong?

Chris Wormald: I will look into that specific number.  In terms of our overall annual accounts, those are, of course, signed off and audited by the National Audit Office, so we have external validation of that, and that goes through a very rigorous process of audit by the National Audit Office.

Q110   Bill Esterson: I will take that as a qualified “yes”, I think.  Moving on to the professional fees that are spent on free-school projects, how much do you spend on a typical free-school project?

Chris Wormald: I am not sure there is a typical free-school project.  Do you have the average, Peter?

Peter Lauener: I can quote you some numbers for 2012-13, which give you the overall picture and which I shall just find in a moment.  The figures that you have just referred to were, of course, for free schools that have not gone ahead, and we accrue these as administrative costs.  The total costs for free schools, UTCs and studio schools in 2012-13 were £18.4 million for professional services.  Those costs are then accrued to the capital costs of establishing the premises for free schools, university technical colleges and studio schools.  That is the 2012-13 figure.

Q111   Bill Esterson: Per school, then, how much is that?

Peter Lauener: It will relate to a whole series of schools, some of which started in 2012-13 and some of which will be starting in 2014.  I would have to take that away to give you an average.  There will be so many different circumstances that even an average would be rather misleading but, if you would like, I would happily give you a bit more information on that.

Chris Wormald: Just to be clear, however, those are part of the cost of building schools.  As I think one of the non-executive directors quoted, our overall costs for building, of which those are part, are considerably reduced on previous levels.  If we can work out an average that is meaningful, we will send it through.

Q112   Bill Esterson: I take your point that you are comparing different types of schools, but if you could give us a breakdown by school, that would probably allow us to draw our own conclusions.

Peter Lauener: We could probably find a way of illustrating some typical examples.

Q113   Bill Esterson: Do you plan to bring any of the professional skills in-house in your target operating model?

Peter Lauener: We do have quite a number of professional skills in-house.

Q114   Chair: Where you are spending on professional fees at the moment, would there be any intention of bringing that capacity in-house at all?

Peter Lauener: We have quite a bit of in-house capacity as well, because we have recruited from the building industry, as I referred to earlier.  In fact, my Director of Capital was formerly head of property on the Boots estate and brings real commercial acumen.  We need a mix of internal and external.  We employ quite a number of contractors to manage particular programmes.  I would not want to build up an enormous, in-house, EFA-direct-construction service, so we have a mix of internal and external.

Q115   Chair: You have no real intention to bring that capacity in-house.

Peter Lauener: No, not wholly, but we do need some internal skills to make sure we are on track.

Chair: We are clear on that.  I was just trying to work out whether that was the direction of travel. 

Q116   Craig Whittaker: I just want to ask you, Peter, about the Comptroller and Auditor General’s report that talked about you not having “the requisite data” to make “strategic … management decisions affecting the sector” going forward.  He also mentioned the risk of financial sustainability within the sector being compromised because you have this lack of data.  How are you looking at strengthening the ways in which the EFA strengthens its approach to managing late or inaccurate data received from academies in particular?

Peter Lauener: I think there are two aspects to that.  The first, which I have already talked a little about, is using data to identify risk in the sector.  We are pulling together all the data that we have and we have put it into what we call a risk assessment tool to see if we can use it as a predictive tool to identify risks before they come and hit us around the face.

The second aspect is improving the accuracy and timeliness of data from the academies sector.  Again, there, I think we have made good strides in recent years.  Over the last three sets of audited accounts, the percentage coming in on time has gone from 83% to 87% and to 91%.  We are, however, not happy at 91% and we are looking to push that up further.  The key thing we have been doing is just building the understanding of the system in the way that I referred to earlier, with academy chief executives but also, critically, with academy finance directors and the accountancy sector—the firms that do the audit. 

There is a very technical document we issue once a year, which is the Academies Accounts Direction, which provides the framework against which financial statements are returned.  It is very important that we do not just send that out the door but prepare the way, talk about any difficult issues and make sure that people have a good understanding of that.  All the time, we are looking to build that capacity in the system.

Q117   Craig Whittaker: What about the online tools?  Sorry, Chris.

Chris Wormald: I was going to say that there is one point of context in what the National Audit Office and the Auditor General reported.  One of our big challenges in this area—although it almost sounds slightly ridiculous, it does turn into a real-world challenge—is academies rightly account for themselves on an academic-year basis, and we report to Parliament on all our control totals, etc., on a financial-year basis.  We, and particularly the EFA, have to do some rather complex—I am not quite sure what the right phrase is—cutting-edge accountancy to create the financial-year position from a set of accounts done on an academic year.  That is a genuinely huge technical challenge; as I said, it sounds straightforward but it is extremely complicated.  One of the things he was pointing to is our challenge in doing that in a way that then allows us to report to Parliament against the control totals that you set us, which, as I said, are on a financial-year basis.

Q118   Craig Whittaker: Is there a simple solution to this?  Why do you not just bring the two into line?

Chris Wormald: You would think.  Parliament, of course, and the whole of Government, accounts for itself on a financial-year basis, and I do not think it is going to change itself for the purposes of schools.  In terms of academies, it would, of course, be open to us to insist that they account for themselves on a financial-year basis; however, the view that we took was the most important thing was the local transparency, and everything else that a school does is, of course, planned on an academic year.  That is how you set your budget and do your staffing, your income, your pupil projections and your teacher recruitment.  We wanted local academy accounts, for transparency purposes, to equate to the academic year.  Bluntly, we took the view that, if there was some pain to be had, the Department should take it rather than individual schools, so they should account on the basis that was most sensible to them, and we would take some pain.

Q119   Craig Whittaker: Are the online tools helping improve that?  I know, Peter, you said you went from 83% to 87% and to 91%, but are the facilities there for the academies?

Peter Lauener: Yes.  One of the aspects of the system improvement that we are making will make it easier for academies to make their returns online.  We will put some self-validation software into that, which has two effects.  First, it makes it more likely that they will be accurate; secondly, if there is an odd figure, it says to the figure, “This is a rather odd figure.  Why do you not have a look at it?”

Q120   Craig Whittaker: Chris, I want to take you back to the staff survey.  The Department’s scores in leadership and managing change plummeted; in fact, they were a disaster.  In any way you want to put any spin on it, it was appalling.  What went wrong?

Chris Wormald: I am not going to accept that they were appalling and I do want to say something about the staff survey.

Craig Whittaker: You do not accept that they were appalling.

Chris Wormald: No.  They are a big concern to me but, to be honest, they were not a colossal surprise.  We asked the Department, during that period, to do a lot of extremely painful things: we asked it to reduce in size; we reduced our number of sites by six; we put a large number of staff through selection exercises; we had continuing pay restraint; and we implemented considerably tougher performance standards.

Q121   Craig Whittaker: You are the head of that.  How are you managing it?  You knew the colossal task ahead of you.

Chris Wormald: Yes.  As I say, we went into that with our eyes open, knowing that would not be popular with a number of people, so it was not a surprise.  It is, however, a big concern for me and my senior managers going forward.  There are some things that, undoubtedly, we could have done better, some of them pointed to by the non-executive directors.  I do not think we communicated enough about those changes.  One of the scores that particularly worried me was the one on leadership visibility, and we certainly want to be doing some things around that.  I am not, then, saying that there were things that, if I were doing it again, we could not have done better.  However, this was all within the context of asking the organisation to do some quite painful things, and it is not unusual to see those sorts of results go down in organisations when you are doing radical change.

Chair: I am sorry to be so rude, but I am going to cut you off.  We have very limited time left and still quite a few things to do, so short and sharp questions and answers from everybody, please.  Thank you.

Q122   Craig Whittaker: You have admitted that it probably was not managed correctly.

Chris Wormald: I think we could have done it better.

Q123   Craig Whittaker: That is your interpretation on words, but you told this Committee that you would provide staff forms for staff to express their views, yet we saw that only 29% of your staff felt that they had had the opportunity to contribute their views before decisions were made about them.  How do you explain that?

Chris Wormald: We need to do better on that.  We have put in place a lot of things and we are going to do a lot more going forward, which were described to you by the non-executive directors, so I will not go over that again, for shortness.  We need to do better at those things.  What I do want to say, however, about the staff survey is that that result was disappointing and I want to do better at it.  When we looked across the staff survey as a whole, on the nine themes that we look at, we were above the Civil Service average on four, and below on five, so it was not a universal picture.

One thing I did want to say, because it came up in the earlier conversation, is that what we see when we look at the staff survey results is that people have quite a strong affinity for the direct work that they do.  Our score around the “My Work” theme was 74% of staff giving positive answers, so we are not seeing any drop in commitment to people getting on with the day job, which I know came up earlier.  Our challenging results are the ones that you point to around the management of change and, as I said, there has been a very radical change.  There are things we can do better, but that is always a painful process that we need to improve on.

Q124   Pat Glass: I do not want to dwell on this, Chris, but you will recall last year, when we had the self-same conversation, you told us all the things that were going to be put in place communication-wise and that it was going to be better, but it is worse.  Hopefully, we are not having this conversation again next time.

Chris Wormald: No, and I share that hope. 

Q125   Pat Glass: You sat in on the earlier discussions, so you will have heard my questions around exit packages and value for money.  I am not going to dwell on the £23 million spent on 347 people, or the answers that I got in relation to value for money.  I am more concerned about the issues about capability for the future and succession planning.  Who is going to succeed Dominic Herrington?

Chris Wormald: We have not made that decision yet, and he has not taken up his new role.  With the creation of the Regional Schools Commissioner, which is causing his move, we are going to have to think about how that bit of the operation works, because a lot of what is done currently by Dominic Herrington will now be done by the Regional Schools Commissioner, so we will probably be restructuring that job a bit.  I do not, however, have a name for you right now.

Q126   Pat Glass: We will watch with interest.  Within the Department, as you heard earlier, only one non-executive director had been in position for more than a year.  You will recall that, when we have met with your Board, only one person was there in 2010 and has remained.

Chris Wormald: Yes, I think that is…

Q127   Pat Glass: I think there is only one.

Chris Wormald: Yes, I know.  I was just going through the names.

Q128   Pat Glass: In the ministerial team, only one has been there since 2010.  I do not hold you responsible for the ministerial team or the non-executive directors.

Chris Wormald: Thank you.

Pat Glass: However, in relation to your own team, what are you doing to ensure that you are keeping key personnel in post and that, in your rush to get rid of staff, you are not losing that future capability?

Chris Wormald: I will say something about the voluntary exit.  We do not allow any member of staff who is in the top-performance box to take a voluntary-exit package.  If you are a star of the organisation, those people, except in very exceptional circumstances, are not eligible for those schemes, so we make sure we retain our highest performers.  In terms of the board, at the point I arrived—and I think this Committee has gone through the history of this previously—every single member of the board, I think, was, at that point, on a temporary appointment.  I decided to retain that temporary structure for the period of the review and then fill the posts permanently, which we have now done.  One of those director general appointments went to the person who was doing it temporarily, which gives us a level of consistency, and the other went to a new appointee who had previously been at the Department for Communities and Local Government.  We now have a board that is comprised of permanently appointed staff.

Q129   Chair: Keep appreciating Peter; I think that is the message from her.

Chris Wormald: Peter has not been here a long time.  Peter arrived in 2012.

Q130   Pat Glass: Regarding Peter, what are you doing about maintaining that collective memory that exists?  It is so important in a Department like the Department for Education.

Chris Wormald: We are putting a lot of emphasis—and this is something that the Civil Service generally has not done well enough, and the Department is not doing well enough—on knowledge transfer.  We have, in fact, relied too much on people who happened to be there last time this was done, so we are putting quite a lot of work in the EFA, which is at the forefront of this, in making sure that knowledge transfer is done properly.  When I look at the Department, I do not tend to worry about the collective memory, and certainly, when I look at the director cadre and up, we have quite a nice mix of people who grew up in the Department and people who have brought in fresh thinking from outside.

Q131   Alex Cunningham: Chris, did it surprise you that the non-executive directors were so ill-equipped and had nothing at all to say about children’s services priorities and budgets?

Chris Wormald: I think they were caught out, as, indeed, was I and my Finance Director behind me, by the emphasis on that £86 million figure.  When I look at children’s services spending across the board—and, of course, the vast majority of it is carried out by local authorities—we have not seen, despite the financial pressures on local authorities, a fall-off in what is spent in the children’s services space.  It has remained a bit above £7 billion for the last three years.

Q132   Alex Cunningham: Does it not concern you, Chris, that your non-executive directors could not talk about the strategic priorities for children’s services and the budgets associated with them?

Chris Wormald: As I say, I think they were caught out by your questions and emphasis on the £86 million.

Q133   Alex Cunningham: They are professional people with vast experience, so I will ask a different question.  What action, in view of their performance, will you be taking to replace some of them and get somebody on the board who has expertise in children’s services?

Chris Wormald: As they said, when we looked at the expertise available to the Department as a whole—and, as they said, none of those individuals is an expert in children’s services and we did not recruit a non-executive director who did have expertise in that area—what we did and what we have done over the last year is considerably enhance the expertise available to the Department as a whole around children’s services, and we do devote considerable resource to it.  We have a director general—the one you were referring to—who has been there since 2010 and is very experienced in this: Tom Jeffery.  We have four directors who focus on children’s services.  We have 260 staff working in that area.

Q134   Alex Cunningham: I have been a non-executive director of organisations myself in health, and my role was to be able to challenge across the piece, whereas we have four non-executive directors and none of them can offer the executive directors that level of challenge.

Chris Wormald: We get that challenge from elsewhere, and that is why we have enhanced the Department more widely in this area.  They mentioned some of the individuals involved.

Chair: You will understand that the Committee’s view on this has not changed as a result of this morning’s session.  We will move on to Ian.

Q135   Ian Mearns: If I can quickly move back, Chris, we talked about staff morale, retention and moving things forward.  When voluntary redundancy packages were out there and on the table, from your perspective, as head of the paid service within the DfE, were you at all regretful of the fact that 650 of your staff applied for voluntary redundancy as opposed to the anticipated 200?  Does that not tell you something about morale within the Department?

Chris Wormald: No.  We had announced that we wished to downsize the Department by up to 1,000 members of staff, which was, of course, a tough message for people, and we wanted as many of those exits as possible to be voluntary as opposed to other, even more painful methods.  We were reasonably encouraged that we could get a long way to the reductions that we needed by voluntary means.  As I said, it was not a case of simply accepting any voluntary release that was proposed to us; we carry out both a value-for-money test and a value-for-the-organisation test before we agree them.  Personally, I was pleased that we could do a lot of the downsizing we needed to do by agreement with staff rather than via other methods.

Q136   Ian Mearns: Moving back to children’s services, which are, from my perspective, vitally important, and given the problems that have been highlighted this morning—if they are problems; we wait to receive your answers—why have there recently been so many delays in children’s services?  Is there a lack of senior-management and ministerial oversight of children’s services that is causing this, or a lack of focus on children’s services?

Chris Wormald: No, I do not agree there has been a lack of focus at all.  The Government, as everyone knows, is pursuing a very different policy towards children’s services from its predecessor.  I make no comment about this; it is a ministerial decision.  The previous Government had a very expansive policy on children’s services around the Children’s Plan; this Administration has focused pretty relentlessly on five key objectives in children’s services and has a radical reform programme in each.

We have just taken the Children and Families Bill through the House, on which I know this Committee has commented.  We are pursuing some radical changes and improvements to adoption.  We have radical proposals around the improvement of the children’s workforce.  We are putting a lot of emphasis on children in care and all the issues around that, and a big expansion of early-years education.  The Government decided that it would focus on those five very specific things.  I do not accept there have been delays across those things.  I think most people would think we have pursued a rather radical course.

Q137   Bill Esterson: When you were answering Alex earlier, you said that you were surprised by the questions about the £86 million.  Can you just clarify that?  It sounded like you did not know about it either.

Chris Wormald: We were looking at that.  I will write to you specifically about the £86 million.  It is not a number we specifically recognised. 

Q138   Bill Esterson: I think the figures came from your Department, Chris.

Chris Wormald: There are a lot of numbers in—

Bill Esterson: We will wait to hear from you.

Chris Wormald: What we have done around the children’s services budget is that a lot of the changes you see are about the reorganisation of budgets rather than a reduction of budgets, so we have put quite a lot in the direct schools grant, for example.

Q139   Bill Esterson: A final question from me: why do you have 24 impact indicators for education and just three for children’s services, and even those are linked to education?

Chris Wormald: I am not sure I can answer that question.  We have had those KPIs for some time.  I will look at that specifically and come back to you. 

Bill Esterson: Another “I’ll look into it”.

Chris Wormald: No.  The way we manage the Department is as the non-executive directors described.  We have 19 delivery areas, five of which are in the children’s services area.  They are largely the five areas I just listed.  We track a large number of KPIs against all those indicators.

Q140   Alex Cunningham: We are seeing a near collapse of good-quality career support and guidance in schools.  How is the Department working to try to drive that quality up?

Chris Wormald: I will need to look at some of my notes on that particular issue.  We took the decision, as you know, that careers should be led at school level rather than the previous approach of using the Connexions service.  We have just issued further statutory guidance on how they should do that.

Q141   Alex Cunningham: They certainly need it.  It is a bit of a disaster.

Chris Wormald: I do not accept that it is a disaster.

Q142   Ian Mearns: Nobody knows because nobody is looking at it.  We have lots of anecdotal evidence that it is a disaster, but nobody is looking at it.

Chris Wormald: Ofsted does look at it and has done, and that is what our statutory guidance was based on.

Q143   Chair: The picture they painted was not a golden and glowing one, was it?

Chris Wormald: Sorry, I am not trying to argue that that position was very good.  It was very patchy.  We are clear that having it led at school level is the right way forward and, indeed, there had been concerns about careers advice for quite some time, even when we did have big national services.  There is more to be done to improve it at school level, and particularly to make it consistent.

Q144   Alex Cunningham: Finally from me, what legislation and guidance has been revised or scrapped to reduce red tape around work-experience placements?

Chris Wormald: I am sorry, I do not know off the top of my head.

Alex Cunningham: Could you write to me on that point?

Chris Wormald: I will write to you on that.

Peter Lauener: Could I make one point on work experience?  One of the biggest changes with the new study programmes for 16 to 19-year-olds has been to embed the work experience in the programme, but we will address the specific question that you raised.  I think that is the right way of managing work experience, rather than having it as a standalone taster thing.

Q145   Pat Glass: Can I ask you very briefly about the Pupil Premium?  Over the last couple of years, the attainment gap has reduced by 3.2% up to age 11, but less than 1% at 16 and almost 0.5% at 19.  Was this what you expected or were you expecting a bigger impact with the Pupil Premium?

Chris Wormald: No, we were not expecting to see a big impact this early.  Those numbers, particularly at 11 and 16, have been getting closer very slowly, certainly since 2009, not at the speed that anyone wants to see.  The Pupil Premium is a big intervention.

Q146   Pat Glass: It is big money.

Chris Wormald: Yes, it is big money, but, as I know you know, the attainment gap between disadvantaged and advantaged pupils builds up over pupils’ entire lives up to 16, and you cannot put it right in one or two years.  The impact we would expect to see from the Pupil Premium will take some time to come in.

Q147   Pat Glass: How much will make it a success, and over what period of time?

Chris Wormald: What we have said is we want to see the gap closing.  We have not set a specific target.

Q148   Pat Glass: I know this is a political issue but, just from the point of view of somebody who is managing the system, it is a lot of public money going into the system.

Chris Wormald: Yes.

Pat Glass: You must have some idea of what level of reduction in the gap you would want to see—over two years, over three years or over five years—just to check whether it is successful or not.

Chris Wormald: We want to see the gap coming down faster than it has been.  This Government, as you know, has not gone about setting targets for those sorts of things, because it sees that those targets frequently distort activity.  Our focus has been—because, as you said, it is a lot of money—on ensuring that that money is spent wisely.

Q149   Pat Glass: Chris, as a manager of the system—and I am not blaming you politically for this at all—at what point would you say to the Secretary of State, “Look, this is just not working.  We are throwing money in a hole here and it is not making a difference”, if you do not measure it?

Chris Wormald: There is a difference between measurement and targets.  We measure it very carefully and, indeed, the figures you are quoting are the evidence that we are measuring it.  We want to see that gap closing, and closing faster than it has been previously.  That will be one of the tests we apply to the Pupil Premium.  We will combine that with what Ofsted tell us when we are looking at how this money is used in individual institutions, and a series of other evaluations, but we are not going to set a new miracle target: “If you pass this level, it is a success, and if you do not, it is a fail.”  That is not how we have gone about doing it.

The final thing I want to say on the Pupil Premium is that the absolutely key thing is that people adopt good practice.  One of the most important things that we have done, which does not get a lot of coverage, is the work being done by the Education Endowment Foundation, published on their excellent website and showing which types of intervention lead to the most cost-effective improvements.  One of the biggest things that we want to happen in this area is more and more people consulting that kind of excellent research evidence and then applying it in their institutions.

Chair: That is a positive note on which to end.  Thank you both very much indeed.

              Oral evidence: DfE Annual Report and Accounts 2012-13, HC 1222                            39