MPs have condemned the UK e-University as a "disgraceful waste" of public funds in a long-awaited report unveiled today.
The Commons Education and Skills Select Committee inquiry has found that at a cost of £44,000 per student, studying at UKeU was more expensive than studying at Oxbridge.
The MPs also label the bonuses paid to key senior staff of the failed UKeU "wholly unacceptable and morally indefensible".
"The argument that they reflect private-sector practice does not stand up to scrutiny," the MPs say. "Any company that paid bonuses of this kind, having underperformed in the way that UKeU did, would face severe criticism from its shareholders."
The report also says that non-executive directors, including Sir Alan Wilson, director-general for higher education at the Department for Education and Skills - who approved the bonuses - "cannot escape criticism".
Some staff were paid bonuses of more than £40,000 each. But the venture did not carry the market risk that would have made the size of these payments appropriate, argue the MPs. "It was backed with £50 million of public money - the risk was to that public investment, not to the company," they say.
The UkeU was launched by the Government as a flagship initiative five years ago and wound up last year after attracting 900 out of a projected 5,600 students. The committee's report places the blame squarely on the supply-driven, rather than demand-led, approach taken by those managing the venture.
"A supply driven-approach, combined with the very ambitious nature of the venture in an emerging market that did not sustain the high expectations of demand, and an inability to work in effective partnership with the private sector, led to the failure of UKeU to meet its targets, aims and objectives," the report says.
The failure to find private investors, in particular, should have raised concerns among the holding company, the Higher Education Funding Council for England and the DFES sooner rather than later about the viability of the project, argue the MPs.
"Alarm bells should have rung at Hefce a lot earlier. They should have picked up the distinctly lukewarm attitude of participants. Everyone was too terrified to say this wasn't working," Barry Sheerman, select committee chairman, said.
Sir Howard Newby, Hefce chief executive, told the select committee inquiry that he had not felt in a position to act earlier.
The committee recommends establishing a group of expert advisers to help assess such public-private ventures against agreed benchmarks and criteria for success in the future.
The UKeU also suffered from a woeful lack of formal market research, a skewed focus on developing the technology platform and a too-narrowly focused definition of e-learning, according to MPs.
"It is inexplicable to us that UKeU did not seek to forge a partnership with the British Council to help it to understand the markets that it was trying to enter and to develop strategies for selling its products in them."
Of the £62 million of public funds given to the UKeU project, £50 million was spent. David Young, Hefce chairman, said: "We have already been actively considering the lessons to be learnt, but were waiting for the publication of this report before completing our own review.
"The Hefce board will be discussing these lessons and related issues at its meeting in April, after which we plan to publish our conclusions."
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