MPs attack e-university bonus payments

The "scandal" of paying bonuses to the chief executive and staff of Britain's e-university, which has folded with the loss of ?50m of taxpayers' money, was strongly condemned by MPs today.

The House of Commons education committee was seeking explanations for the debacle from Sir Howard Newby, chief executive of the funding council Hefce, and his chairman, David Young, on how the venture they financed to market online degrees worldwide had only managed to recruit 900 students - at an estimated ?32,000 each - and is now being wound up.

Despite the failure of the operating company, UKeU, to meet its target of 5,600 students, its chief executive, John Beaumont, collected a bonus of nearly ?45,000 on top of his ?186,000 salary. Both Sir Howard and Mr Young admitted they were "uncomfortable" about the bonus scheme, which they only learned about when the company was being wound up after a devastating consultants' report in December 2003. They said they received legal advice that the bonuses to Mr Beaumont and other members of staff had to be paid.

Barry Sheerman, chairman of the committee, said MPs understood that a high risk venture might fail and lessons be learned from it. "Where it becomes scandalous is this bonus thing," he said. His Huddersfield constituents would understand a bonus for some kind of success but there was not in this case. "What on earth was going on? Wasn't someone in the system whistleblowing, some scuttlebutt going around, that the company was paying bonuses when there wasn't any success?"

Mr Young said the performance targets for the UKeU bonus scheme were "rather loose". Of the company's 75 staff, 31 were eligible for bonuses of between 3% and 100%, although the highest actually paid was 50%. "I have some personal unhappiness about what was done," he added. Sir Howard said the bonus scheme was introduced to attract and retain talent from private sector when public sector pay was lower.

Launched at the height of the dotcom boom in 2000 by David Blunkett, then education secretary, the e-university was set up the following year with all but four universities in the UK taking a ?1 share. It launched its first courses in September 2002.

Sir Howard insisted there had been a lot of enthusiasm in the sector for the idea and there would have been resentment if the e-university had been awarded to the Open University or another institution. In hindsight it was clear that online learning on its own was not as popular as predicted and there had been a number of e-learning failures by universities in the US, he said. What students wanted was "blended" learning where online materials were backed up by conventional teaching.

He still hopes to salvage the e-learning platform technology, developed at a cost of ?20m with Sun Microsystems for use by UK universities, although no one has yet come forward to buy it as UKeU is being wound down.