Education and Skills Committee

3 March 2005

£ 50 million wasted on E University

A report by the Education and Skills Committee has condemned the DFES’s online degree scheme as a ‘disgraceful waste’ of tens of millions of pounds of public money.

Their investigation found that, at a cost of £44, 000 per student, studying with UK e-University was more expensive than going to either Oxford or Cambridge.

The online university was launched in September 2003 but after attracting just 900 students was eventually dismantled last year at a cost of £50 million.

Committee Chairman, Barry Sheerman said: “UKeU was a terrible waste of public money. The senior executives failed to interest any private investors and showed an extraordinary over confidence in their ability to attract students to the scheme. Any private company which rewards underperformance of this scale would normally face severe criticism from its shareholders.

Alarm bells should have started ringing as soon as private investment failed to materialise. Despite this, executives ploughed on believing their product would pull through in the end. The UKeU should have been held fully accountable for its spending as soon as private companies decided not to invest.

The Government should learn the lessons from this disaster and develop a well rounded e-learning strategy to support Universities existing online projects. The global market for e-learning is an estimated $18 billion and the UK should not miss out.

The committee’s report found that the UKeU:

•Failed to conduct sufficient market research to determine levels of demand for online education. Their approach was to simply ‘draw on their contacts’ by visiting the Far East instead of conducting a systematic review of the market.

•Awarded large bonuses to senior executives despite their failure to attract private investment for the scheme. UKeU's £2m-plus wage bill for 2002 to 2003 included chief executive John Beaumont's £180,000 salary. He was also paid a performance-related bonus of £44,914 despite UKeU receiving just 0.5% of the private investment needed and only attracting 900 students.

•Blindly pursued wholly internet based e-learning despite evidence suggesting students prefer to supplement their learning with traditional lectures and seminars. UKeU did not consult the Open University or the British Council on this matter.

•Focussed too heavily upon the technology needed to set up an ‘integrated learning platform’ (the virtual environment through which students would study over the internet). After spending £14.5 million in partnership with Sun Microsystems only 200 students ended up using the platform. At present it’s unclear how much of this investment can be rescued.

•Was not directly accountable to Government ministers. The Chief Executive of HEFCE (Higher Education Funding Council for England) was the Accounting Officer responsible for the expenditure of public money, but not for the operating decisions of UKeU. With no private investors, UKeU had too much freedom to spend public money as it wished.

MPs do not want the government to become risk averse as a result of the UKeU experience. They do, however, believe that a more experimental approach to such high risk ventures is necessary. Departments should test out different strategies before committing large sums of public money.

The Committee also recognises the great potential of e-learning and recommends that the Government introduces an overarching national strategy to ensure consistency, coherence and clarity of purpose in developments across the sector.

Notes for Editors

1.Embargoed hard copies of the report will be available from the House of Commons Press Gallery and the Reception 7 Millbank SW1P 3JA from 1030hrs on Thursday 3rd March 2005.

2.Media Bids/Request for interviews with the Chairman should be directed to Luke Robinson on 07834 312 705

3.UKeU was intended as a vehicle for the delivery of UK Universities’ HE programmes over the internet. It was to be a single point of reference for all the UK universities and was to provide the technological platform to make it happen.

4.For detailed information the Education and Skills Committee can be contacted on 020 7219 6243.

5.The report’s title is UK e-University and will be published as the Committee’s Third Report, Session 2004-2005 (HC 385). The report will be available on the Committee’s website from 1530 on Thursday 3rd March.