South Thames Training and Enterprise Council

HC Deb 24 January 1995 vol 253 cc264-72

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wood.]

11.42 pm

Mr. Simon Hughes (Southwark and Bermondsey)

I welcome the opportunity to debate—not before time—what has happened, is happening and will happen to the South Thames training and enterprise council. I also welcome my colleagues from south London who are present; I have received apologies from others who cannot be here, but are no less concerned about the matter than I am.

It is a paradox that yesterday London Pride launched its prospectus, containing a section called "Raising Skills". That section in turn contained a subsection entitled "Training", and read as follows: London's most pressing challenge is more fundamental. The capital has a very high requirement for basic skills and literacy training which is not being sufficiently met. Current programmes need to be extended to allow more Londoners to progress to medium and higher skill levels. The Partnership believes: Government must rectify the under-funding of the London TECs. Historically they have been substantially underfunded on key programmes relative to TECs elsewhere. If London is to achieve the targets set, it is essential that this differentiation is addressed. The partnership prospectus addressed the need for effective mechanisms for providing training in the capital city.

By way of background, training and enterprise councils have been in existence for four years, and there are 82 in this country. Scotland has a parallel system. They were a Government idea, and it was intended that they would pull together the various training agencies to provide training for school leavers and for the short and long-term unemployed. They would also help businesses to develop the skills necessary either to expand or to make themselves more efficient in the future.

TECs have been given certain jobs in relation to which they are effectively a Government agency. They are responsible for administering youth training, employment training, training for work for the long-term unemployed and for training credits. From the beginning, the Government made a commitment and statements were made of various objectives. All of us who were Members at that time were sent promotional material on the subject.

It was clear that the Government were encouraging participation from the private sector, and encouraging people to join in with help to target training on areas where long-term growth was expected. The private sector was encouraged to develop higher skills, and particularly to offer support in areas where there had been a decline in industry. South Thames is unique because it is definitely the most needy area for such an agency.

The first chairman of the South Thames TEC, when talking to a European training conference in 1992, said: South Thames exhibits all the characteristics of a deprived inner city area. The community we serve is made up of a million residents of whom one third come from the ethic minorities. In one school in Lambeth 115 languages are spoken. He added that the TEC covers some of the poorest and most deprived districts in London as he talked about the needs with which the South Thames TEC must deal.

Its budget of £46 million has successfully grown during the past four years from £25 million at the beginning. It was the pilot TEC for adult training credit, and it covers 13 per cent. of London's population and 11 per cent. of the work force. All four of the boroughs affected have urban priority areas, poor housing, high levels of crime, high unemployment and special training needs. We have been particular victims of a declining manufacturing industry, and the recession has hit us very hard.

It is not surprising then that, of the top 10 constituencies in Britain in terms of unemployment, four are within the area of the South Thames TEC. Those four include my constituency, which is now in the invidious position of being the fourth worst in the country.

Everything initially appeared to be going well with the South Thames TEC; so well that the Government regularly sang its praises. The current Chancellor of the Duchy even had a go at the hon. Member for Lewisham, West (Mr. Dowd) for not paying tribute to the tremendous amount of work being done by the South Thames training and enterprise council in providing opportunities to the long-term unemployed."—[Official Report, 30 November 1993; Vol. 233, c. 907.] It continued to be successful and respected until about a year ago, when there first appeared to be some financial difficulties.

During 1994, those difficulties became more and more obvious. In August, the chief executive resigned. In passing, I would like to pay tribute to Mike Hanson who—I think my colleagues would agree—did an excellent job in presenting and promoting south London locally and further afield. We were very sad that he went. When the history of this episode is written, I hope that no one will say that the fault lay at his door. He tried extremely hard to ensure that the TEC delivered, even though it did not always give the Government the messages that they wanted to hear, and continued to act independently, which is important.

The TEC continued to serve the local community, as the deprivation figures became worse in south Thames. Last year, we ended up as the TEC area in Britain with the highest levels of unemployment and the lowest levels of job availability. Let there be no mistake, therefore, about the importance of the TEC to south London.

In the autumn, a breach notice was issued because of various financial irregularities. Apparently, the TEC did not have the proper financial management structures in place to ensure that invoices that were presented were genuine. Further management changes took place and many assurances were given, on the record, that matters were being sorted out.

On 21 December, after the House had risen for the recess, the Under-Secretary of State for Employment, the hon. Member for Cambridgeshire, South-East (Mr. Paice) wound up South Thames TEC. On that day it went into receivership. The Government had two options: to come to the rescue and support the TEC; or, to pull the plug. All the information in the possession of those who were directly informed suggests that the Government specifically decided to withdraw their support and to pull the plug.

There are two possible explanations. The first is that the Government were initially complacent and unprepared and then had not taken seriously the concerns expressed locally, or given local management the chance to respond to the breach notice. If it was due to a lack of preparedness, the manifestations are as serious for jobs and training in south London as the lack of preparedness of the Japanese Government to deal with recent emergencies in Japan—and I am not being flippant. The Government were not ready to pick up the pieces and to deal with the problem.

The second explanation is that the Government intended to pull the plug because they were not happy with a high-spending TEC that was trying to ensure that the Government kept on putting the money in and, not least, because the Secretary of State does not like TECs very much, to set an example to the other TECs. I do not take a view one way or the other. I know, however, that the right solution was not to allow the TEC suddenly to disappear.

An extraordinary situation has resulted from that December disappearance. I understand that it has also happened once in Scotland, but I do not remember an occasion in England when a body which everyone who had contracted with it thought was a Government agency suddenly went bust. Yes, it was, formally, a private sector company, but everyone dealing with it assumed that it had Government backing.

Suddenly, a bit like a south Thames bubble—it burst. The Minister may nod his head, but people were subsequently told that they must wait in line, as one does when a company goes bust, and hope that there would be enough to pay them out. That is true, and all of my south Thames colleagues will testify to the fact that we have been contacted by people who are waiting for the money that the Government said that they would receive⁁I have a file full of contacts here.

First, assurances were given. In the week before Christmas, the Department of Employment said that training obligations would be maintained, but might be transferred, and a letter of comfort was issued. The Under-Secretary said later in a written answer: As foreshadowed in the minute laid before the House on 21 December 1994 … letters of comfort have been issued to certain providers of training and business support programmes within the area covered by South Thames training and enterprise council. That process is continuing. The minute said, that some of the indemnities were likely to be called in and that has now occurred."—[Official Report, 16 January 1995; Vol. 252, c. 331.] I think that £9 million was made available, as a Government grant, so that honouring the obligations could commence. That was welcome.

One sometimes wonders whether debating an issue in this House serves any use. The Minister and I have had a word and he says that the following facts are unrelated. But the fact that we were due to debate the matter today has produced a flurry of activity in the past day or two, including the tabling of a revised minute yesterday and ministerial letters arriving at near to the speed of light. I have received two letters from the Minister today, both of which are welcome.

My colleagues and I have also received an invitation to meet the Minister before Thursday to discuss the matter. I understand that the revised minute includes individuals who were not included in the original minute. Obviously, that is welcome, but it does not provide all the answers and has certainly not produced money for everyone waiting in the queue.

I shall list some examples of organisations that are in the queue and then ask some questions. Although the hon. Member for Greenwich (Mr. Raynsford) will say a few words if he catches your eye, Mr. Deputy Speaker, in reality all that we can do tonight is express our huge concerns on the Floor of the House while accepting that we do not expect the Minister to answer tonight the huge number of questions that need to be answered.

Some of the people in the queue are owed a very large sum of money. Southwark college, the major further education college in my borough, is owed —1.4 million for training credits, work-related further education, capital works schemes, student hardship funds and the like. I have a list of some 20 organisations in Southwark that have various contracts. Many of them have contacted me in some way. They range from large public agencies like colleges to individual who were employees or for whom a contract worth £50 makes a huge difference.

For example, a firm called Martyn Dawes Associates is waiting for £17,000. Its suppliers are chasing it, and unless it can pay off the people to whom it owes money it must either lay people off or get into financial difficulty. It has had verbal commitments but nothing in writing and no letters answered by the receiver, Grant Thornton. The firm also tells me that it received the letter saying that Grant Thornton was the receiver only after the statutory 28-day period in which the letter should be sent. That is at best a technical—if not more serious—breach of the law.

An organisation called Springboard Southwark is also owed money. Like many other bodies, it is effectively now a Government paying agency. As a charity, it is being asked to fund the obligation of a Government agency and is using its funding to provide training allowances for other people. If that is not an example of bad practice by an agency that is meant to be about good business practice, I do not know what is. The real concern is that the death of the TEC will give rise to a considerable loss of credibility.

Training for Change has also contacted me. It is owed £22,000 in outstanding invoices. It has had many conversations with the Government office for London, and some matters have been secured while others have not.

The big sector that has not yet been secured is all the money due for the investors in people programme, none of which looks like being secured. That is bad news because many investors have responded to the call to be partners and are now left effectively unprotected and unsecured. If that does not put people off becoming partners in training and enterprise, I do not know 'what will.

The list includes little local organisations like Southwark Heritage, which develops tourism. The consequence of the Government's action is also shown by the words of the head teacher of a secondary school in my constituency, St. Saviour's and St. Olave's school, who wrote to me saying: We are sure you share our dismay at the unreliability of a government funded agency". The school was expecting to be supported by the schools' effectiveness project.

One person wrote to me that she had submitted a business plan and had expected 40 quid a week for six months. Last week, someone who lives in Rotherhithe came to my surgery and explained that he was in exactly the same position as that woman, only worse. He had been told that there would no problem and that he could expect 40 quid a week. He entered into various commitments on the basis of that assurance, including loans from the bank, which he now has no capacity to pay off.

The hon. Member for Lewisham, East (Mrs. Prentice), who cannot be present tonight, asked me to mention someone at the bottom end of the financial scale. Someone was due 50 quid and was sent a cheque that bounced. Many other people I have seen were also sent cheques that bounced.

I have given the range of the practical, real, suddenly-left-singing-for-our-money implications. We must have a mechanism to guarantee all outstanding invoices. Nothing less than a decision by the Government to honour all the obligations will satisfy those hon. Members who are present and all the other interested people who will read the debate. We must do something to restore the good faith of the TEC system with all the people who are needed to be partners in it. We must ensure that no one is left out of pocket for the period for which people are now subsidising the current shortfall in funding. We must ensure that such financial difficulties, with their consequences, are not repeated.

What are we to do now to ensure that those in training programmes can continue in them when the current contract comes to an end? I know that the Minister will offer a partial response to that question. What are we to do now to honour those who have delivered the work? What will happen to payments for work from now until the end of the financial year and to outstanding payments to people for last October and November, before the receivers were sent in? What role does the Government office for London play, as opposed to the Department or the TEC successor?

I and my colleagues are extremely concerned to know about the new arrangements. Any arrangement that merely carves up the South Thames TEC and makes, for example, my borough an appendage to central London and the boroughs of Lewisham and Greenwich appendages to the borough of Bromley and those further out of London would be unsatisfactory. There was a logic in the South Thames TEC being constituted of boroughs with a common tradition—that logic is no less valid today.

We want the present TEC area to remain. We want the public to be told what is going on. We want anyone who has a concern to be given a direct answer. We want contracts to be honoured and debts paid. We want an assurance that what has happened to our TEC will never be repeated.

If one goes to watch Millwall, one of the chants is, "No one likes us, we don't care." It feels now as though the Government are saying that to south London. My colleagues and I do care and the Government should care. I hope that tonight they will pledge to put right quickly an avoidable fiasco that should never have happened.

12.2 am

Mr. Nick Raynsford (Greenwich)

rose—

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

In the time available, does the Minister agree that the hon. Member for Greenwich (Mr. Raynsford) should speak?

The Parliamentary Under-Secretary of State for Employment (Mr. James Paice)

Briefly.

Mr. Raynsford

I am grateful to the Minister and the hon. Member for Southwark and Bermondsey (Mr. Hughes) for allowing me to intervene briefly in the debate.

I should like to reinforce the case made by the hon. Gentleman. Important training operations are threatened with closure at any moment as a result of the situation that has arisen. I have written to the Minister about the Greenwich Training Company, which has established an excellent reputation and currently has about 450 trainees and employs 42 staff.

Last Friday it was uncertain about whether it would be able to pay its 150 youth trainees their weekly allowance. It is now seeking legal advice as to whether it is able to continue to trade because it might be insolvent. It is unsatisfactory that such worthwhile training operations should be threatened with insolvency because of a situation created by the Minister's decision and the Government's failure to put suitable mechanisms in place to ensure the survival of training.

I hope that the Minister will give us an assurance that that type of venture will be enabled to survive, at least in the short term, until a more appropriate long-term framework is in place to guarantee the survival of training. Otherwise, large numbers of people whose future livelihoods depend on that type of venture will be left in the lurch; that would be unacceptable.

12.4 am

The Parliamentary Under-Secretary of State for Employment (Mr. James Paice)

The debate that the hon. Member for Southwark and Bermondsey (Mr. Hughes) has initiated gives us a chance, as he rightly said, to examine some of the issues surrounding South Thames training and enterprise council. I am afraid that, in the time that remains, I shall not be able to discuss all the issues that he mentioned, and I hope that he will understand that perhaps I can pursue them in correspondence or, if he wishes, at a meeting with him, and with his colleagues if he so desires.

The decision that I took on 21 December 1994, to which the hon. Gentleman referred, was not easy, but I am convinced that it was the right and necessary decision. It took place against a background, which we should not forget, of there being 82 TECs in England and Wales—the hon. Gentleman said "this country". It is a good job that hon. Members who usually sit on the Bench behind him were not present. They might not have liked that, because it includes Wales in the total. As the hon. Gentleman said, those TECs are about three to four years old.

In the time that they have existed, TECs have demonstrated that they are able to provide significant improvements in the delivery of a range of Government programmes. They are local organisations; they are in the private sector; they are run by local business people. Two or three times, the hon. Gentleman used the words, "the Government agency". TECs are not Government agencies and never have been. They were set up as private companies limited by guarantee. They have a contract with the Government to deliver Government programmes but, beyond that contract, they have considerable flexibility to generate margins and to use those margins for any other purpose in their overall strategy agreement.

I shall say a word about audit and control arrangements, which the hon. Gentleman rightly mentioned. All TECs are required, by annual contract with our Department, to operate sound financial management control systems. Teams of departmental staff carry out regular risk assessments of all TECs. They examine their financial controls and systems, and their means of demonstrating by documentary evidence that they have delivered the training for which they have claimed funding.

Each TEC is allocated to a risk band. All the other TECs in the country bar one are in the low-risk category; one is in the medium-risk category. Only South Thames TEC has been in the high-risk category, and the rest is history, to which I shall return later.

I emphasise that it was a licensing requirement—and we are embarked on the licensing of all TECs—that TECs should be in the low-risk category. Therefore, no TEC will be able to be licensed without being in that category, and all TECs will be required to be licensed in the next two years.

I should also make it clear that the Comptroller and Auditor General's report from the National Audit Office on our own departmental accounts for 1993–94 specifically highlighted South Thames TEC; the report also referred to significant improvements in the technical audit and financial control systems.

I shall discuss South Thames TEC specifically. The history of the case is that weaknesses were found as long ago as July 1993, and the TEC was told about those weaknesses in its financial accounting systems. Our London Government regional office worked with the TEC to try to obtain improvements to its systems.

In very early 1994, the TEC was told that it would have to be placed in the high-risk category, and it was asked in fairly strong terms to implement an action plan to return it to a low-risk category. When it became demonstrably clear that it was failing to do so, the breach of contract notice to which the hon. Gentleman referred was issued, on 3 October 1994.

Following that, in spite of the changes in management to which the hon. Gentleman also referred, we began to have serious doubts that even that breach would be remedied, and we sent in a team of accountants from our Department and from Messrs Grant Thornton. They submitted a report to the Department on 16 December 1994, a copy of which is in the Library and therefore available for all hon. Members to read.

In summary, the main points are as follows. The report demonstrated a very serious loss of about £million in the previous accounting period. It demonstrated an incorrect balance sheet, which itself was bad. It demonstrated—perhaps more seriously—that the forecast for 1995–96 was for continuing very serious losses. Perhaps most significantly, the management accounts could not be substantiated by the information available.

The hon. Gentleman suggested that I could, at that stage, have decided to bail out the TEC, and he is right—of course that was an option. But given all the information that I received from the accountants and the glaring weaknesses in the financial control systems that had not been remedied despite all the many months of pressure from my Department, I do not believe that I would have been fulfilling my duty to the taxpayer if I had put more public money into an organisation that had shown itself to be completely incapable of managing that public money.

Ms Joan Ruddock (Lewisham, Deptford)

Will the Minister give way?

Mr. Paice

I am sorry, but I have not got time to give way. I have many questions to answer.

On 21 December—just five days after we had the report—I appointed the receiver. On the same day, I issued letters of comfort to the providers.

Ms Ruddock

Will the Minister give way?

Mr. Paice

No, I am sorry. I will not give way as I have very little time to respond to many points.

I laid a minute before the House. As required. I also informed the Chairman of the Public Accounts Committee of the events as they transpired. Letters of comfort were initially provided to the providers of youth training and training for work. The letters demonstrated that we would provide funds for the receiver for the three months following—up to the end of the present contracting year, the end of March.

In addition, we would also make payments for accounting period nine, from 7 November—six weeks earlier than when the receiver went in. The reason for the choice of 7 November—which I have seen questioned—was clearly because at that stage we had not paid any money to the TEC for that period, so there was no question of double funding, which is important.

Since then, we have extended the letter of comfort to child care, work-related further education and various aspects of the career service. The Department of the Environment has extended it to business start-up schemes, education and business partnerships, compacts and teacher placements—it is important to stress that point as the hon. Gentleman raised a particular case.

We are still looking at all aspects of how we can provide comfort for the providers and we propose to lay a further minute before the House in line with the procedures and to issue a further letter of comfort to providers, guaranteeing that if their existing contracts with the TEC are not renewed, they will nevertheless be paid for outputs achieved in relation to training completed prior to 26 March under the existing contracts. We will pay for output-related funding even though it may not occur to be paid until after the period for which we have already issued comfort.

Of course I am aware that many providers are owed money by the TEC for the period before then. I could give a more detailed explanation, but in my final minute I shall just say that the payment of those debts is a matter for the receiver. It would not be appropriate for the Government to make payments to providers for money owed to them prior to period nine. We have already made that money available—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned accordingly at twelve minutes past Twelve midnight.