£50m internet university a 'disgraceful waste'

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A failed Government scheme to offer British university degree courses over the internet was today condemned as a "disgraceful waste" of public money after it attracted just 900 students at a cost of £50 million.

A failed Government scheme to offer British university degree courses over the internet was today condemned as a "disgraceful waste" of public money after it attracted just 900 students at a cost of £50 million.

Studying at the UK e-University, which folded last year just six months after the launch of its first courses, cost an average of £44,000 per student - more expensive than going to Oxford or Cambridge - a report by the influential House of Commons Education Committee found.

The committee condemned as "wholly unacceptable and morally indefensible" the decision to award chief executive John Beaumont a bonus of £44,914 on top of his £180,000 annual salary, despite his failure to attract private sector backers for the venture.

The e-University was established in 2000 by the then Education Secretary David Blunkett as a vehicle for the online delivery of UK universities' higher education courses.

The Higher Education Funding Council for England, which oversaw the project for the Department of Education, said it was intended to be "the flagship provision of UK higher education excellence".

Mr Blunkett himself predicted that e-learning would be "big business".

But today's report found that those responsible for the project were caught up in the "general atmosphere of enthusiasm surrounding the dotcom boom" and assumed that students and profits would flood in once its doors were opened.

Initial business plans forecast rapid growth to 110,000 students within six years and a quarter of a million in a decade, with projected profits of more than £110 million after 10 years of operation.

Virtually no market research was done to determine the true demand for the e-University's services. Just £4.2 million was spent on worldwide sales and marketing of courses, compared to £14 million on developing a new technology platform.

The platform, developed by Sun Microsystems, swallowed up more than a quarter of the e-University's expenditure, but was used by just 200 students, with the rest preferring to work through the existing online sites of individual universities.

The e-University "blindly" pursued a policy of offering entirely Internet-based learning, despite evidence that students preferred to supplement online study with traditional lectures and seminars, the report found.

Although the project was required by the conditions of its grant to seek 50% funding from private sector partners, it in fact managed to sign up only one small investor other than Sun, securing only 0.5% of the private funding needed.

With no significant private investors and no direct accountability to a Government minister, the e-University had "too much freedom to spend public money as it wished", the report found.

The launch of courses was delayed until September 2003, and HEFCE pulled the plug on the venture in February last year when it became clear how few students had signed up.

Committee chairman Barry Sheerman said: "UK e-University 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 under-performance 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 UK e-University should have been held fully accountable for its spending as soon as private companies decided not to invest."

The report warned that the Government should not be scared off investment in innovative but potentially risky schemes by the failure of the e-University.

"The Government should learn the lessons from this disaster and develop a well-rounded e-learning strategy to support universities' existing online projects," said Mr Sheerman.

"The global market for e-learning is an estimated 18 billion US dollars (£9.4 billion) and the UK should not miss out."

Liberal Democrat Committee member Paul Holmes MP said: "Like the Individual Learning Accounts a few years ago, the UK e-University is yet another example of the Government taking taxpayers down a blind alley.

"The Government was once again too eager to involve the private sector when there were experienced educational providers within the public sector who could have lent greater expertise to this project at much less financial risk.

"There was no formal market research to establish the demand for the proposed remote learning package and the colleges and the Open University, who currently provide this type of training, were not properly involved.

"Instead, at the height of the dotcom boom, the Government wasted millions of pounds of public money on an ill-thought out, poorly planned white elephant. Frankly, taxpayers and people seeking distance learning from the UK's education system deserved better."