Official Report: Minutes of Evidence

The Chairperson (Mr Swann): The Committee will be briefed on the savings delivery plan by two groups. The first group will cover B/1, B/2, B/5, B/6, B/7, B/8 and B/9. I welcome Heather Cousins, deputy secretary; Stephen McMurray; director of finance; Billy Lyttle; head of higher education finance; and Mr Michael Camplisson, head of further education finance and funding.

Ms Heather Cousins (Department for Employment and Learning): Good morning, Chair and members. Thank you very much for inviting us today to talk to you about the savings delivery plan. As you said, we have a cast of thousands, which we split into two groups. Stephen and I will be here for both sessions, but, after Michael and Billy deliver their bit, Michael Gould and Brendan will come forward to deal with B/3 and B/4. So, bear with us; it could get a little bit confusing, but we will do our best. We will cover all the savings delivery plans today: B/1 through to B/10. I will give the highlights of each plan, and then the other officials will go into more detail.

We start with B/1, the savings carried forward from 2010 to 2011. The main points to highlight are that those savings were identified prior to the last spending review and that we were then able to utilise them in our baseline as cuts. Savings plan B/2 is a saving of £8·5 million, which was money that the Department had in its baseline but had not allocated to individual programmes. We took the decision that, as the money was not allocated to any specific programmes, it would be the contribution to departmental savings. The third plan, B/3, relates to reduced commitments in employment provision.

The Chairperson (Mr Swann): Sorry, Heather, are you covering B/3 now?

Ms Cousins: Just at a high level. I am giving the highlights of each, and then we will go through the detail.

B/3 relates to reduced commitments in employment provision. This was achieved mainly by reducing various programmes, including the back to work and skills development strands of the Steps to Work programme.

In plan B/4, the reduced commitment to training was delivered through the skills and industry division and the strategy, European and employment relations division. The strategy, European and employment relations division delivered savings of £0·6 million, with skills and industry delivering the remainder. Most notably, a revised policy change to 50% funding retained for adult apprentices achieved savings of £4·7 million in 2014-15. A further policy change to 50% funding for adult apprentices following a priority sector apprenticeship achieved savings of £0·44 million. Michael will talk about the impact of that later.

Under B/5, pay and price restraint, some £46 million was achieved in 2014-15 through absorbing inflation within existing baselines in both the Department and its arm's-length bodies and through pay increases being met by arm's-length bodies' own budget allocations.

In savings plan B/6, higher education budget easements refers to funding for activities that were ongoing in 2010-11 and had ceased or finished by 31 March 2011. That was no longer required. The funding associated with the activities was therefore removed from the higher education baseline. The activities in question were £5·8 million to strengthen the all-Ireland research base, £2 million for student finance and £0·2 million to fund additional PhD students at the two universities. Billy will talk about that later.

Plan B/7 relates to the further education colleges. The further education budget was not cut in the last spending review. To generate efficiencies, the colleges were asked to deliver more provision for the same funding. Specifically, £4 million of additional unfunded provision was provided per year over the four-year period, representing a cumulative target of £16 million across the four-year spending review period.

B/8 relates to higher education. To achieve the savings, the block grant payable to the four higher education institutions in Northern Ireland was reduced over the four years, culminating in 2014-15. This decrease in the block grant was applied equally across the sector and, in percentage terms, was just in excess of 15%. The institutions were able to absorb the savings without impacting their front-line services, which, in this case, is the number of students enrolled and the number of qualifications awarded. Again, Billy will speak more about that.

Plan B/9 relates to the notional loans subsidy. This subsidy represents the cost to government of issuing student loans. It estimates the opportunity cost of charging interest below the market rate and the likely value of loans that will be written off in future. The requirement for the notional loans subsidy for 2014-15 was higher than projected, but the difference was made up by additional Treasury funding.

The final plan, B/10, is in relation to staffing and accommodation efficiencies. This is a part of an efficiency programme across all our divisions whereby we task the divisions to contribute to £5 million of savings over four years. Those savings reflect some reductions in posts, which we monitor annually. There were also some accommodation savings. For example, we closed the office of the employment and skills adviser earlier in the period.

That was a quick run through the highlights of each of the plans. We will now take questions on the individual saving plans, starting with Stephen for B/1, B/2, B/5 and B/9.

Mr Stephen McMurray (Department for Employment and Learning): Briefly, I will give a bit more detail on what Heather was saying. As Heather mentioned, B/1 is carried forward savings from broadly four years. Back then, George Osborne came in as the new Chancellor and immediately introduced some spending cuts in that first year. For us as a Department, those were worth £6 million. Of that £6 million, we identified £3 million that we could roll forward into future years. So, our baseline was reinstated the next year by £6 million, but we were able to save £3 million that we had previously identified. We were able to carry that forward, and that was quite low-hanging fruit in the first port of call for the overall savings plan for the four years.

On B/2, as Heather mentioned, £8·5 million was not allocated to any specific projects. That was quite typical of the Department back in those years: we had money to use if there were big swings in unemployment levels or with inward investment or if we wanted to fund PhD places or something like that. The Minister had the scope to use those funds to do that. Eight and a half million pounds from that was used for the savings delivery plan. Obviously, that was not exactly the thing that we wanted to do at the time because that restricted the Minister, but, that said, looking back at the last four years, there is a number of funds that did come into the Department for the youth employment scheme, the economy-and-jobs initiatives and for Pathways to Success. You will all be well aware of those, and they did provide new funding over that period.

The last area that I want to cover in this first bit is pay and price restraint, where there was £46 million in last year, which was a cumulative effect of the four years. We did get that money back from DFP but did not allocate it specifically for pay and price but, again, used it for other things that the Department had as priorities. That was a big part of the savings delivery plan. As I said, we did get the money back into the coffers to support our overall budget. I am happy enough to take any questions on that.

The Chairperson (Mr Swann): Stephen, will you go over the pay and price restraint in a bit more detail regarding the money coming back from DFP?

Mr McMurray: In the initial part of the Budget, Departments were told that there would be no allocations for pay and price, but, subsequently, the moneys did come back into the Department for pay and price. We did not allocate that to arm's-length bodies in particular. They consumed their own smoke, so to speak, by meeting any pay increases out of their budget without any additional allocation.

The Chairperson (Mr Swann): So, the pay and price money was not passed on to arm's-length bodies, but was it utilised within the Department for pay increases?

Mr McMurray: Yes, and I suppose that, indirectly, it went back to, in particular, HE and FE for other initiatives that were required.

The Chairperson (Mr Swann): I am just trying to get my head around this. If that money was delivered by DFP for a specific purpose for pay and price, where is the flexibility in the Department within the Minister's control? Where does the flexibility come in not to use it for what it was designated for?

Mr McMurray: It is like the overall budget, Chair. The Department decides on the allocation of that, obviously in consultation with all the relevant stakeholders. The final decision is taken from the Department's perspective.

The Chairperson (Mr Swann): It was £46·1 million that came back.

Mr McMurray: That is cumulative over three years. Each year, there were particular increases, broadly 6% overall.

The Chairperson (Mr Swann): Members, are there any questions on those four savings delivery plans? If not, we will move on.

Mr Billy Lyttle (Department for Employment and Learning): I will start with savings plan B/6. This is very straightforward. It refers to activities which were ongoing in 2010-11 and ceased or finished by 31 March 2011 when they were no longer required. The biggest element of that were the projects undertaken to strengthen the all-Ireland research base. They were collaborative research projects between institutions in Northern Ireland and the Republic. There were 20 projects in total. The funding for them came from the funding for innovation (FFI) stream, which ceased on 31 March 2011, so those projects and that programme ceased as well. However, since that, there has been a continuation of North/South research collaboration under different streams of research funding that are ongoing, and they are being funded from the grant or the block that we have now. It is not restricted funding like FFI was in the past. That is savings plan B/6.

Mr Anderson: Billy, in plan B/6, was £2 million student finance included? Did I pick that up somewhere?

Mr B Lyttle: There was a £2 million allocation for student finance for activities —

Mr Anderson: What knock-on effect is that having?

Mr B Lyttle: That had no knock-on effect on the students at all. The students continue to be financed either through a grant or maintenance loans. The only thing that has changed over recent years in student finance is that the education maintenance allowance (EMA) has been decreased, but that is not related to that, as far as I know.

Mr Anderson: There was no change there.

Mr B Lyttle: There was no change, no.

The Chairperson (Mr Swann): Of those research projects, because they were cross border, is there any opportunity for international or European funding that could be picked up to carry out similar projects or continue any of them?

Mr B Lyttle: The international funding that they are getting at the moment is under US-Ireland research funding, so there is money coming from the Science Foundation Ireland, DEL and US financing. That is ongoing. As regards European funding, we have put funding into the universities to help them maximise the amount of funding that they can extract from Europe, particularly for research purposes. I think that is called Horizon 2020, but I do not have the detail with me on what is involved in that.

The Chairperson (Mr Swann): OK. Do members have any other questions on those? If not, we will move on.

Mr B Lyttle: I will move to savings plan B/8. That saving was branded as an operational efficiency in the sector. As Heather said, they achieved efficiencies: the block grant to the four institutions in Northern Ireland was reduced over the four-year period and the savings were applied equally across the sector to all institutions. The percentage decrease in the block grant itself over the four years was just in excess of 15%. That ignores inflation, so the real reduction to the sector was higher than that. So, although we reduced the funding to the institutions, we wanted them to continue with their front-line activities, ie, student numbers and the number of qualifications delivered.

The institutions have been able to absorb those costs and move forward without impacting on those front-line services. There are a few statistics that we can give you just to back that up. The following figures come from the Higher Education Statistics Agency (HESA). Between 2010-11, the base year against which performance is being compared, and 2013-14, which is the last year for which we have a full set of statistics, the number of full-time, first-year, first-degree enrolments of Northern Ireland students in Northern Ireland institutions increased from 8,850 to 9,620. That is an increase of 8·7% in enrolments of Northern Ireland students over the first three years of the four-year period. As well as that, the total number of first-year enrolments by Northern Ireland students in all modes of study, which includes full-time and part-time, increased by over 10%. It went from 9,680 to 10,655. So, in the throughput of students, despite the 15% reduction, the institutions were still able to increase the numbers of students going through the system by 10%.

Look at the numbers of qualifications obtained over the same period. If you compare 2013-14 to 2010-11, you find that the number of full-time, first-degree qualifications obtained by Northern Ireland domiciled students rose by 7·3%. That was 6,740 of the 7,235. Not only did the throughput increase but the number of qualifications delivered also increased.

The story is even better when you look at the projected performance of Northern Ireland institutions compared with the UK average. The UK average for full-time students starting first-degree courses who are expected to qualify at the end of the period is 81·8%. However, in Northern Ireland, it is 84·3%. You can say that, in Northern Ireland, a higher number of students are expected to qualify than elsewhere in the UK. In the same period, full-time and part-time postgraduate qualifications rose by 4·6%. It went from 3,010 to 3,150 over the period. Finally, for participation from under-represented groups — we are talking about NS-SEC group 4 to 7 — the UK average is 32·6% whereas, in Northern Ireland, the institutions have achieved 39·5%. Again, when we compare Northern Ireland across the years in which we are making the reductions, we see that the number of people coming from those NS-SEC groups 4 to 7 was higher than what was achieved elsewhere in the UK. I am simply trying to show that, despite the reductions in the funding, the institutions, with fewer resources from the public sector, were able to move forward and increase the throughput in students, increase the qualifications and maintain a higher representation from the lower-represented socio-economic groups.

The Chairperson (Mr Swann): Thanks, Billy. There is a phrase about statistics that I will not use given what you have presented to us today.

Mr B Lyttle: I know the one that you are referring to.

The Chairperson (Mr Swann): One of the problems is that we are looking at the savings plan for up to 2015, so it does not really take into account the budget cuts that have been forced on the higher and further education sectors. Heather, have any targets been set for 2015-16 yet?

Mr B Lyttle: In what sense?

The Chairperson (Mr Swann): With regard to savings delivery plans or how they will be met.

Mr B Lyttle: You will know that higher education funding has gone down by £16.1 million in the sector. The institutions have indicated that that will result in fewer places and in job losses, but, as a Department, we have not yet developed the savings delivery plans to deliver that.

The Chairperson (Mr Swann): And to reflect that and how it will look. Billy, you are saying that the institutions have been able to absorb those savings —

Mr B Lyttle: So far, yes.

The Chairperson (Mr Swann): — because they were planned over that period, whereas they are looking at a larger reduction in core funding in a one-year period. Is it your feeling that any of the advances and progression in numbers that you are reporting today will be severely affected by what is happening in this financial year?

Mr B Lyttle: There is no doubt that there will be an impact. The impact already is that, as far back as last November, the institutions indicated that there could be up to 1,000 places not available in 2015-16. Since that, Queen's has announced that the actual number of places that it is not offering next year is 290, and we expect the University of Ulster to come in at a figure around or slightly below that. In the first year, 2015-16, we could be looking at between 500 and 600 places not being offered, and that will impact mostly on Northern Ireland domiciled students. As you go forward in the next couple of years, that number will rise to well over 1,000 and could approach 1,500. So, yes, the figures will be impacted by the current budgetary situation.

Mr F McCann: The figures are impressive. It is always good to hear. I have a couple of questions. You talk about the socio-economic background of the students, but are you able to determine the geographical spread of where those students come from?

Mr B Lyttle: As far as I understand it, the home addresses and postcodes are there for all the students in the system. So, it can be drilled down to street level.

Mr F McCann: It would be interesting to know. In the past, we looked at how you encourage people from the most socially deprived communities across the North into education. It would be good to see whether, with increased figures, it is having the desired impact.

As I said, the figures are impressive. Are those individual students attending or is it broken down into multiple degrees?

Mr B Lyttle: I think that we are talking about individual students.

Mr F McCann: Somebody might go for two degrees.

Mr B Lyttle: The figures that we are talking about are enrolments and first-year degree students. We can break it down into first-year students, full-time, part-time or all students and at different levels, that is, postgraduate, undergraduate and other undergraduate as well.

Ms Lo: We need to congratulate the institutions and all the universities for doing so well in the last few years with the reduction of 15% and being able to achieve the number of students and qualifications. Are you saying that they are all home-grown students or are you counting overseas students as well?

Mr B Lyttle: Yes. Overseas students are included in the numbers. The funding provided by the Department from the Executive is only to fund domicile students in Northern Ireland, so it is for Northern Ireland students and other EU students. International students and students from GB are self-funding, and they are not supported by the funding that we have.

Ms Lo: They are not counted in this.

Mr B Lyttle: No, but we do have the numbers.

Ms Lo: OK. Are you aware of how they managed over the last few years? They have had reductions in income and yet they have been able to provide the same front-line services.

Mr B Lyttle: They are doing that through efficiency programmes that they are running. We have information from all four institutions for the first three years up to July 2014, which shows very clearly that the institutions across a number of areas have saved around £35 million in efficiencies, and they have reported that to us.

Ms Lo: What type of efficiencies? Is it administration staff?

Mr B Lyttle: It includes staff. There have been voluntary exit schemes and early severance schemes in place. There have been no compulsory redundancies. They have made savings through the more efficient use of procurement and collaborative procurement approaches. They have made savings through reductions in their academic and individual departmental school budgets. I am trying to think where else they came from.

Ms Lo: Are they thinking of the use of fuel or environmental things?

Mr B Lyttle: Yes. They have thought of that as well.

Ms Lo: They have such huge estates and premises.

Mr B Lyttle: They have re-tendered and achieved savings through, for example, electricity contracts. The institutions, particularly the universities, are very mindful of their CO2 emissions. They have the statistics to show that they are driving those down as well, and there is a requirement under the Climate Change Act 2008 to get down to a particular level by 2020.

The Chairperson (Mr Swann): OK. Michael is next.

Mr Michael Camplisson (Department for Employment and Learning): Chair, I will give an update on B/7, which is operational efficiency in further education. It is probably worth pointing out that the FE budget was not cut in the last spending review, so, to generate efficiencies, the FE colleges were asked to deliver more provision for the same funding. Specifically, they were set a target of delivering an additional £4 million per year of additional unfunded provision over the four-year period. So, cumulatively, across the four-year period, it represented a target of an extra £16 million of unfunded provision. I refer to that as overdelivery, but, effectively, we are talking about additional student enrolments. So, year 1 was 2011-12 and year 4 was 2014-15.

We are still in year 4 going by the academic year, which does not end until late summer 2014-15, so we do not have end-of-year data for year 4. However, for years 1 to 3, the value of the overdelivery was as follows: in 2011-12, the amount of overdelivery was £5 million; in 2012-13, it was £6 million; and in 2013-14, it was £2 million. So, across years 1 to 3, that adds up to £13 million of overdelivery, and we are on track to deliver on the efficiency target or to substantially deliver on it.

I also want to give you some additional information by way of context. Student enrolment numbers in FE colleges have increased. Between 2011-12 and 2013-14, the numbers of regulated student enrolments increased by almost 1,000. FE colleges get their funding from several sources, including, for example, fee income, but the main funding is in the form of the annual block grant from DEL, which has been frozen for the last number of years. However, aside from the block grant, there are some additional smaller sources of FE funding, such as Training for Success funding, which has decreased over the last number of years. In 2010-11, funding for Training for Success to the FE colleges was £32 million, and last year that dropped to £29 million. They also get some funding from the Department of Education (DE) for the entitlement framework. In 2010-11, that was £8 million, but, in the current year, that dropped to £6 million.

It is also worth highlighting that, over the last eight years, inflation, cumulatively, has been running roughly at 20%, in terms of pay and prices. That has more or less been absorbed by the six FE colleges. Staff numbers have been decreasing in the FE colleges. For example, in 2009-2010, there was 4,700 staff in the six FE colleges and, in 2013-14, that dropped to 4,100. There has been increasing collaboration, with, for example, shared back-office services, IT, course development etc. That sort of collaboration has helped to deliver efficiencies and reduce costs.

As part of the context, it is also worth highlighting the merger. It was not that long ago — it was back in 2007— that the FE colleges merged: they went from 16 to six. I suppose that it has been a continuous journey of more and more efficiency.

To conclude, over the last number of years, the block grant has been frozen. In fact, there has been reduced funding from other sources, and I mentioned Training for Success and the funding from DE. Inflation on pay and prices has been absorbed, there are fewer members of staff and efficiencies have had to be made. Despite those factors, the colleges have still managed to overdeliver. The colleges have delivered more in student enrolments but with less funding and fewer members of staff.

The Chairperson (Mr Swann): Michael, how do you measure the £5 million or £6 million overcommitment or overdelivery? It is basically on student numbers?

Mr Camplisson: We have a unit of resource called a funded learning unit (FLU). Quite good management information on student enrolments is reported throughout the year, and that is more of less converted into a monetary value for overdelivery. That is monitored throughout the year and that is how we know.

The Chairperson (Mr Swann): I think that you said that 1,000 additional students have been enrolled. Are those full-time or part-time students?

Mr Camplisson: It is a mixture.

The Chairperson (Mr Swann): I am trying to get to whether a college could enrol 800 part-time students and increase its FLU value on paper without actually delivering.

Mr Camplisson: No. It is a genuine increase in student enrolments. It was a mixture.

The Chairperson (Mr Swann): When it comes to the next stage — the 2015-16 cuts — is it a simple matter of colleges cutting back on the overspend to their original 2010-11 positions?

Mr Camplisson: Over the last four years, there has been a positive story on overdelivery against reduced resources. Going forward, it will be much more severe. As it stands, cuts of £12 million are being imposed to the block grant in 2015-16. That will have quite a detrimental impact on student numbers and staff. We are still working with colleges to understand more fully the impact of that, but it will be severe.

The Chairperson (Mr Swann): Colleges have been allowed to overdeliver and claim that as investment rather than savings, I suppose, to use Department language. Next year, they could just stop overdelivering.

Mr Camplisson: Very much so. In fact, it is going the other way; it will be a cut in funding. It is a double whammy, with reduced funding and the inescapable pressures, such as pension increases, inflation, pay and prices. Because of the double whammy, there will be reduced student enrolments.

The Chairperson (Mr Swann): Will the entitlement framework funding coming from DE be hit further?

Mr Camplisson: It probably will be. Over the past number of years, the trend has been towards a gradual decrease. So, I imagine that the trend will continue.

The Chairperson (Mr Swann): Is there any stage at which a college can say, "It's no longer worth our while delivering entitlement framework courses for some of local schools", and simply remove themselves from that offer?

Mr Camplisson: Presumably, there would be a tipping point that could get reached, Chair; yes, definitely.

Mr Anderson: You certainly paint a very good picture in the figures. The Chair has touched on the 1,000 more places and the 600 fewer staff. That has been done with a frozen block grant and less funding. I think you mentioned that it would be severe, going forward. We are going from a very good position. How quickly do you think this could kick into a severe situation? Will it be 2015-16? How many student places do you envisage will be lost? How many staff will be lost to the colleges? I would like your opinion on going from this position to what we will face down the line.

Mr Camplisson: As I mentioned, we are still considering the impact of this. It is a fluid situation. Recently, we have been having bilateral meetings with the six colleges to discuss their budgets and the initial views on the possible impact. The worse-case impact of a £12 million cut could be a reduction of 26,000 part-time students for 2015-16. About half of them would be part-time students in leisure and hobbies. A number of weeks ago, Colleges NI issued a press release indicating that around 500 staff could be released under the public sector voluntary exit scheme. Those are the sorts of figures that we could be talking about.

Mr Anderson: They would be severe.

Mr Camplisson: It is very, very severe, but it is fluid at the moment, and the figures are still being refined.

Ms Lo: I think we have a very good picture of the FE colleges. You are to be congratulated. You mentioned the overdelivery of £13 million and an increase of student numbers by 1,000. Do you look at the outcome as well? These are student enrolments. At the end of it, do they get the qualifications?

Mr Camplisson: Yes. Over the past number of years, we have applied a quality performance adjustment (QPA) as part of the funding model that is in place. It links the funding with the outcomes. It is basically set to pass rates of 60% or higher. If the number of pass rates is less than 60%, there is a clawback of funding. That funding model has been successful over the past number of years, and the outcomes have been positive. I do not have the figures for the pass rates with me, but the retention levels have been very high.

Ms Lo: What is the retention level?

Mr Camplisson: It is 90% and above. Outcomes are similar. Percentages for the 60% or higher pass rates are in the 90% category. I am sorry; I do not have the specific figures, but I can get them for you if you want.

Ms Lo: It would be interesting to see the figures. They are all academic courses: do you include leisure courses such as gardening?

Mr Camplisson: The outcomes are down to accredited provision. The vast bulk of provision is accredited provision. The leisure and hobbies courses are non-accredited and would not be applied to that.

Ms Sugden: I apologise for coming in late. If the Budget cuts are seemingly making staff and course cuts inevitable, do you have any idea at this stage of how and where you will apply them across the six colleges? The background to my question is that if it is based on the numbers — the bums on seats — of students attending the colleges at present, will that reflect in cuts for staff in those colleges? I am concerned about this because there are some colleges across Northern Ireland that require a newbuild — you probably know which one I am referring to. That, in itself, would have an impact on numbers because the facility is not there currently. I am curious to know how the cuts will be applied or how you feel you would approach that.

Mr Camplisson: The Minister decided, in discussions with the colleges, that there would be a combination of a top-down and bottom-up approach. The top-down approach involved the Department's views of its priorities and the arguably less-painful areas to cut. The bottom-up approach involved allowing the colleges to make decisions based on local needs. In the top-down approach, the £2 million government subsidy for leisure and hobbies provision was removed because it was deemed to be a lesser priority. The learner access and engagement programme, which was funded by £1·3 million a year, was stopped. The funding for essential skills was cut by £0·5 million. The context for this was that demand had been falling over the past number of years for essential skills, so that was taken out of the account. There was also a £700,000 cut to the harmonisation of full-time HE fees. The balance of the cuts was left to colleges to decide on based on their assessment of their local priorities.

Ms Sugden: There would probably be elements of all the areas you have outlined in each college. I am concerned about whether there is an approach in terms of current numbers.

Mr Camplisson: That is still being impacted at the moment. We are having ongoing discussions with the colleges about that and the impact locally in each college on staff and students.

Ms Sugden: Will it be a consideration, however, that the current facilities may have an impact on those numbers if that is going to be the case? I am concerned that there is a college in my area that does not have a newbuild and people are not attending that college because the facility is not there. I would not like to think that because of that we are going to have a detriment —

Mr Camplisson: No, there will be no detrimental impact there.

Ms McGahan: Thank you for your presentation. I am concerned that the cuts to the leisure and hobbies courses, which you defined as non-accredited courses, will have an impact on special needs. Will a full equality impact assessment (EQIA) be carried out on that decision? At the moment, provision for special needs is very limited. I would be concerned about those non-accredited courses.

Mr Camplisson: The total annual DEL subsidy for non-accredited or recreational courses was £3 million a year. Of that £3 million, £1 million was for special needs, which has been ring-fenced and protected, at least for 2015-16. The £2 million cut that I was referring to excludes the special needs category because the Minister obviously wanted to give that protection.

The Chairperson (Mr Swann): How was the overdelivery across all the colleges managed? Was each college set a target to overdeliver?

Mr Camplisson: Yes. Targets were set and monitoring took place during the year. Data lifts were taken at different intervals each year and were monitored accordingly.

The Chairperson (Mr Swann): Did each college meet its overdelivery targets? I am thinking about FLUs specifically.

Mr Camplisson: It would have been a little bit fluid; some of them would have been better than others. The year-on-year figures were fluid and there was fluidity across the six colleges. Some colleges, as you would imagine, are a little bit more efficient than others, which would be reflected in the delivery performance.

The Chairperson (Mr Swann): I am sorry, Michael; did you want to finish on something?

Mr Camplisson: No, I wanted to make sure that there were no more questions before I passed back to Stephen.

Mr McMurray: I will do the last bit of this session before others join the table. It is on the notional loans subsidy element which is, to be honest, the most complex bit of the whole thing. The area itself is complex.

It is administered by GB on our behalf. Whilst it is part of our budget, it sits slightly outside it because it is a different type of budget. It comes about for two reasons. In terms of loans being subsidised, it is the difference between what people pay and the commercial rate at the time. More importantly, it takes into account impairments, which are loans that are not being repaid in line with forecasts for the overall repayments.

Last year, our overall baseline was not enough to cover the total amount required. That happened previously as well. In such cases, DFP negotiates with the Treasury on our behalf, because this is a GB-wide issue and not just a Northern Ireland issue. We submitted a bid that was met to cover the total amount of funding required for the notional loans subsidy last year.

Whilst we made up some of the shortfall in previous years, last year was a different story and not such a good news story. The Treasury and DFP are well aware of this issue and it needs to be carefully monitored as more loans potentially do not get repaid. There is an element of risk associated with it.

The Chairperson (Mr Swann): Are we completely in the hands of the Treasury over this?

Mr McMurray: Yes, Chair, we are. We have to bid. For 2015-16, we agreed a higher baseline, which is around £140 million. This is in line with current forecasts, so we are hoping that it will come in very close to that this year. Last year, there was a shortfall.

The Chairperson (Mr Swann): The indication is that if the loans are not being repaid and are increasing year on year then the graduates are not getting the jobs that are attracting the salaries to repay those loans. Is that correct?

Mr McMurray: That is one element. People also go abroad and the loans do not get repaid. There are a number of elements to this.

Mr Anderson: How does the baseline of £140 million compare to previous years?

Mr McMurray: In the previous year, it was £100 million; so it has gone up by £40 million.

The Chairperson (Mr Swann): OK, thank you, Heather.

Ms Cousins: If those are all the further and higher education questions, Billy and Michael can go and we can welcome Michael and Brendan.

The Chairperson (Mr Swann): We welcome Brendan McCann, head of the new employment team, and Michael Gould, assistant director of skills in the industry division.

Ms Cousins: We are going to start with Brendan and B/3.

Mr Brendan McCann (Department for Employment and Learning): These savings relate to the Steps to Work programme, the predecessor to Steps 2 Success. The programme was introduced in September 2008. The savings started in 2011 after we got information about what was happening on the programme, the volumes going through, and so on. We took a view as to what the levels of payments should be in a number of activities. I will outline the outcome of that review.

We decided to reduce the back-to-work strand from 13 weeks to eight weeks, which gave rise to a saving of £1·7 million. In doing this, we were conscious of the fact that we were dealing with different groups of clients from when the programme was introduced in 2008. With the economic recession, we were dealing with a lot more people who were closer to the labour market — young professionals and so on — who, perhaps, did not need the full 13 weeks. There was a feeling that eight weeks was more appropriate. We did it in consultation with a number of stakeholders, and, in fact, the results show that the same number of people were found in sustained employment as a result of the eight-week provision. We were therefore quite satisfied with that.

When it came to the second measure, reducing the short accredited training courses, we looked at the range of courses available, their pricing, and the appropriate levels for the Department to pay. We decided to introduce a ceiling of £1,000, but with the potential to increase it to £2,000 if someone needed a particular course and there was a clear business case for it. As a result of that measure, we achieved savings of £161,000.

The third measure deals with introducing greater flexibility to core gateway and was something we were encouraged to do. Again, because of the number of people who were closer to the labour market, it was felt that a 10-day core gateway course dealing with soft skills issues was not appropriate for everyone and that a shorter period would be more appropriate for someone who was closer to the labour market. We decided, therefore, to reduce it to five days, with the possibility of an extension for those who needed more in-depth training. As a result, we achieved a saving of £90,000.

We changed a number of funding streams to providers based on volumetrics. The numbers going through in 2011 were substantially higher than had been forecast in 2008. Therefore, because of the increased volume, we felt that there was the capacity for providers to absorb less income from the Department, and so we reduced the qualification strand, for example, by £600 per participant. Again, the figures from the Northern Ireland Statistics and Research Agency (NISRA) demonstrate that there was no decrease in the number of participants availing themselves of the strand as a result of this.

We reduced the funding for essential skills by around £600 per participant. Again, there was no decrease in the number of participants availing themselves of the provision. In fact, there was a slight increase, which resulted in savings of around £262,000.

Self-employment was one of the more successful elements of Steps to Work, although it was availed of by a small number of people. We cut the funding by £200. There was no decrease in the number of participants; the number stayed pretty much the same throughout the period of Steps to Work. As a result, we achieved savings of £171,000.

Finally, I come to the skills development strand of Steps to Work, which was introduced in September 2013. We modelled the payment structure on the previous qualification strand, achieving a reduction of £350 per participant, which saved £1·25 million. Through these measures we were able to achieve our target for efficiency savings in the year, Chair.

The Chairperson (Mr Swann): With respect to the reductions of £600 in essential skills; £200 for the self-employed, and £350 for the skills development strand, how many people were affected by the reduced fees?

Mr B McCann: For example, the figure we are talking about for qualifications is just over 500. It is the same for essential skills. I am happy to provide some of the detailed figures from the NISRA bulletin, if that would be helpful.

The Chairperson (Mr Swann): OK. In point 5, you mentioned the essential skills strand to the Steps to Work programme. Did you say 500 people?

Mr B McCann: Yes.

The Chairperson (Mr Swann): So, it is 500 multiplied by £650. My maths —

Mr B McCann: Sorry, I am talking about on a monthly basis. You are talking about cumulative. I will have to get you the cumulative figure for the period.

The Chairperson (Mr Swann): That is OK, because I was trying to get to those figures.

We asked before about reducing the back-to-work strand from 13 weeks to eight weeks, and about reducing the time for the core gateway. You said that you were encouraged to do that.

Mr B McCann: Yes.

The Chairperson (Mr Swann): Who by?

Mr B McCann: It was a range of people, including participants, whom we spoke to when we did surveys. We spoke to the lead contractors and employers, and tried to get the optimum time through which people would benefit, without locking them in for a period that was not productive for them or the employer.

The Chairperson (Mr Swann): So, it was not savings driven.

Mr B McCann: It was not savings driven. In fact, the savings were a spin-off of, perhaps, a good policy decision.

The Chairperson (Mr Swann): OK. Members, are there any other questions on that?

Ms Lo: I have a quick question. I have been lobbied by ethnic minority communities about including the learning of English as a second language within essential skills. Is this going to be considered again? At that time, we were told that it was not to be accepted as such.

Mr B McCann: That is something that I will have to take back and reflect on. I am happy to come back to you separately on that.

Ms Lo: For those people, learning English is an essential skill.

Mr B McCann: We hope that the providers will pick that up as a need through Steps 2 Success, but I will need to double-check what is happening in relation to that. I will come back to you separately on that point.

The Chairperson (Mr Swann): Steps 2 Success has been in since October.

Mr B McCann: Yes.

The Chairperson (Mr Swann): It has not picked this up as a need as of yet.

Mr B McCann: That is what I am going to check before I give an answer. I will come back. I need to check with each of the three providers.

Ms Cousins: We now move on to B/4.

Mr Michael Gould (Department for Employment and Learning): Our commitment from the two divisions to the overall savings plan was £7·5 million over the period. We achieved that, mainly through a change of policy in relation to our funding of adult apprenticeships and through the cessation of a number of activities which were no longer felt to be viable or worthwhile continuing. I can go through the details if you and members wish me to do so.

The Chairperson (Mr Swann): Please do, Michael, especially on the apprenticeship side of things.

Mr Gould: The strategy, European and employment relations division cumulated a number of cuts to give a £0·6 million saving each year over the period.

The skills and industry division works with all businesses, encouraging and supporting pre-employment and in-employment training. In 2007, Northern Ireland had a full labour market, the economy was booming, and we had had 10 years of growth. We were trying to encourage employers to upskill their workforces. The skills strategy, which was launched in 2006, had shown that we needed to upskill the current workforce. As a result of that, we came up with a policy through which we would open up the age group for apprenticeships. Traditionally, apprenticeships had been from ages 16 or 18 to 24. As a way of upskilling the workforce, our policy decision was to open it up to over-25s. We found that the numbers increased significantly, but, in the main, these were people who were already in work. They were being put on apprenticeship frameworks, and the Department was paying for the full training. They were in non-priority economic sectors mainly, and, anecdotally, we saw people going through the frameworks much faster but still being able to draw down the full amount of money. As a result of that, when we were asked to make savings, we looked at the policy that we had for the over-25s, and it was decided that we would reduce the funding. One of the policy options was to reduce it to zero, but the Minister took a decision that we would retain 50% funding for the over-25s in the priority economic sectors. So, the savings achieved from those provided the bulk of the savings for the division for the overall plan.

We also had a cessation of other activities. In those days, there were workforce development forums associated with each of the regional colleges. These were chaired by, and populated by, employers, and the idea was that they would convert local labour market information and influence the curriculum and courses offered by the colleges. We had supported them since 2006 but they were not as successful as we had hoped. We had supported them with a financial resource, and so we decided to stop them.

We also reduced, or cut completely, some of the work we were doing with sector skills councils at the time. We also reduced funding to the Careers Service and what was then the educational guidance service for adults. That funding was ceased.

Another activity we had previously initiated was called future skills action groups, which, again, involved working with employers to try to refine the training offering and working through projects, one of which was on STEM through the alliance of sector skills councils. We decided that that had not been as successful as we had wished and so we ceased that activity.

We reduced the level of funding and activity for some of our own training, such as Bridge to Employment and the customised training, and we cut a number of programmes, particularly in the management and leadership field, one of which was Leaders for Tomorrow and another that was called Meridian. The final piece of cessation was closing the office of the adviser on employment and skills.

The Chairperson (Mr Swann): Michael, the biggest concern about the figures in the savings delivery plan to date is the reduction in the number of apprenticeships, with circa 12,850 participants down to 6,779. Is this the baseline that the Department and Minister are now working from?

Mr Gould: I would need to check the exact number, but we are in and around 6,000 to 7,000 apprenticeships.

The Chairperson (Mr Swann): So, when we now hear of an increase, is it working from a greatly reduced 2011 figure?

Mr Gould: The 2011 figure included the over-25s, which inflated the numbers to over 12,000. Many of those were adults, obviously, who were over 25. At that time, the oldest apprentice was 82 and so —

Ms Lo: Good for them.

Mr Gould: Absolutely. They were not in the priority economic areas. This was in common with what was happening in GB. I think that the process was being used to fund training that was already being provided or could have been provided in a different way.

The Chairperson (Mr Swann): So, employers were abusing the system: is that what you are intimating?

Mr Gould: Anecdotally, we heard about people who went through a framework that we expected to take two or three years in, in one case, eight weeks while drawing down the full amount. For us, the policy change was to improve the system. When the policy was opened, we thought that people who had no training and no qualifications would be put through the system, but experienced workers will go through more quickly anyway. The system was not as we intended it, and the policy change helped to address that. The Minister wanted to retain training for adults in the priority sectors, but his main focus was on trying to offer young people apprenticeships, and we still provide 100% funding for apprentices under 24 years of age.

Mr F McCann: I want to pick up on the Internet and employers who abuse the system. By and large, it seems that, in many ways, over-25s are written out of the system. I remember a showcase in the Long Gallery, and there were bakers there. They wanted to enhance their skills but could not get anybody to take them on because of the low level of grant available, as with the under-25s.

Why is there such a distinction? Most of the long-term unemployed lie within the 25-plus bracket. Why would we show such a difference? Have we the figures for how many people would be impacted by the 50%?

Mr Gould: I will address the first question about those who are in work who are over 25. We had alternative training provision for them through what was then the skills solution service, so, through what we call customised training, an employer could say that they had a group of six, seven or 10 bakers who need trained up to a certain level, and that service was there to get the training to meet the employer's needs and to get the individual's qualifications. There was an alternative provision already there for the over-25s. It was not that we were withdrawing training for those in work who are over 25 years old; we were just steering them down a more cost-effective route.

Mr F McCann: Have we got examples of where that has worked? I raise that because, at the showcase, I brought the Minister over to talk to the bakers, and he gave certain guarantees that he would look into it, and he acknowledged that there was an anomaly. What you are saying is probably the complete opposite to what the Minister said to the people at the showcase.

Mr Gould: I cannot talk about the details until I look into it.

Mr F McCann: If you could, please.

Mr Gould: The Minister has certainly put a focus on the food and drinks manufacturing sector. He co-chairs a group with Tony O'Neill, who is a major employer in the sector and chair of the Agri-Food Strategy Board. The purpose of that group is to address the training needs, including apprenticeships, in the food and drinks manufacturing industry, given its importance to the economy in Northern Ireland.

Mr F McCann: I have to re-emphasise that this Committee has been a champion of apprenticeships over the past number of years, but I think that it is a bit difficult to accept that it would have such an impact on the over-25s. Again, it would be interesting to find out the other pathways because a couple of people have approached me about the impact that 50% would have on them.

Mr Gould: I will happily provide any information that you need. The apprenticeship means that you are employed from day one. To be on ApprenticeshipsNI, you have to be in employment. Steps 2 Success and its predecessor, Steps to Work, were the alternative provision for an unemployed person to get into work. We also have the Bridge to Employment scheme, which is there to train people of all ages and give them pre-employment training to allow them to compete and be interviewed for jobs. That has been a very successful scheme, and I think that over 1,200 people have been employed in the last few years through that scheme alone.

Ms Lo: It is good to hear that the Department reviews and evaluates the value for money of its spending. What funding cuts are you making to the sector skills councils?

Mr Gould: Previously, the sector skills councils had a pot of money that they could have bid into. In those days, there were 24 of them, and they would have bid for projects such as creating a DVD to attract people into their sector. When we came to the point of looking at what the impact was of some of those activities, we decided that the money might be better spent in other ways. Subsequently, over a period of time, both here and in the UK, the number of sector skills councils has decreased, and they no longer receive funding from government in the way that they did in the past. Everything now is a competitive process, and they have to bid for projects.

Ms Lo: Are you still in partnership with them?

Mr Gould: We encourage collaboration all the time with them, and we still work with them on labour market information. On some of the activities that we have in the likes of the IT sector, the food sector and the advanced manufacturing and engineering sectors, we work very closely with the sector skills councils.

Ms Lo: It would be a shame to lose that partnership with them.

Mr Anderson: What did the closing of the office of the adviser on skills entail? What savings were effected there?

Mr Gould: The monetary savings are over £300,000 a year. I think that Heather alluded to the fact that a separate office, part of the DEL estate, was used by the office of the Northern Ireland skills and employment adviser. That office had a support staff of six or seven officials. The cost was reduced by giving up the lease on the property, and then we brought the support staff into the Department and provided the adviser with a more structured and focused support mechanism.

Mr Anderson: So you did not really save on staff, you brought them —

Mr Gould: They were redeployed within the Department.

Mr Anderson: So the saving was not on staff.

Mr Gould: But the staff were not, then, solely working on his office. They were used in other parts of skills policy, for example. They have been used there since.

Mr Anderson: What effect will the closing of that office have? Will it have a big effect going forward?

Mr Gould: No, because the Minister has just appointed Mark Huddleston as the Northern Ireland Commissioner for Employment and Skills.

Mr Anderson: I know that he has; I raised it with him in a question at the beginning of the week. Will we still have that service going forward?

Mr Gould: Yes, and Mark will be our representative to the UK Commission for Employment and Skills.

Mr Anderson: We still have a saving of £300,000.

Mr Gould: Yes.

Mr Anderson: OK. Thank you.

The Chairperson (Mr Swann): Heather, thank you and your team very much for coming along and going through the issues.