Select Committee on Education and Skills Appendices to the Minutes of Evidence


Memorandum from the Learning and Skills Development Agency (ILA 18)

  1.  LSDA would like to draw the Select Committee's attention to a number of issues that could be considered in relation to the future development of ILAs.


  2.  The arrangements for ILAs—the policy framework, their administration and quality systems—lie outside the existing LSC framework for post-16 funding and planning. They are therefore disconnected from the mainstream delivery system in the Learning and Skills Sector.

  3.  Following the experience of the ILA pilot, we believe that there would be advantages to aligning or integrating its operation with the LSC to ensure coherent policy, particularly on fee subsidy and on the quality and accountability frameworks for providers. LSC mechanisms for approving new providers and for provider review could be the quality control mechanisms that learning accounts need to ensure that funds are only channelled to reputable providers. Such mechanisms are particularly important where some providers are operating on a commercial basis. LSC systems do encompass for-profit providers in the sector.

  4.  Equally, thinking on fees discounts and fee remission needs to considered in the context of developing policy on public sector fees. In short, a future role for ILAs should be developed within the mainstream of post-16 policy.


Course fees

  5.  ILAs offer account holders a contribution towards the fees for their chosen learning programme. Their role therefore needs to be examined within the wider context of course fee arrangements for adults. Adult courses receive a substantial public subsidy (around £2 billion) through the LSC funding system. Public funding for provision of learning opportunities for adults should be more clearly acknowledged as a subsidy for the cost of that provision.[1]

  6.  LSC funds providers based on a national rate for the provision delivered, on a per learner basis. This is deemed broadly to cover 75 per cent of the costs, with the client (the learner or their employer) contributing a further 25 per cent. Providers are not permitted to charge course fees to adult clients (or their dependants) on means-tested benefits or to those on basic skills programmes. Apart from this requirement, there is no national fees policy for adults and providers are free to set the course fees that they consider are appropriate in the context of their local learning market. In practice many colleges have a policy of not charging fees.

  7.  Therefore, in colleges, learners are generally subsidised at between 75 per cent and 100 per cent of the cost of the programme. Where fees are charged in colleges for LSC funded provision, these do not therefore reflect the real cost of the provision. Moreover learners are generally unaware of the extent of this public subsidy. The ILAs in contrast, do make clear the course fee subsidy being offered. However, there are a number of unsatisfactory aspects to current arrangements:

    —  Learners using the ILA to pay for LSC-funded programmes may be unaware of the full level of subsidy—ie both through the LSC and through the ILA

    —  The total level of subsidy will vary for individuals with identical personal circumstances and on identical courses, because of differing institutional policies on fees

    —  Providers may be encouraged to introduce fees inappropriately in order to claim the ILA discount, adding to the deadweight element.


  8.  A distinction needs to be understood between course fees and fees for examinations and assessment. Examination and assessment fees are additional to course fees. In December 2001, LSC confirmed that providers may not charge basic skills learners for any "hidden costs", including examination and assessment. The 10 per cent widening participation uplift for basic skills learners is deemed to cover all hidden costs.

  9.  However, providers have discretion over whether they charge examination and assessment fees to other learners exempt from course fees. For institutions with high numbers of learners exempt from course fees, the cost of absorbing the costs of examinations and assessment is considerable. Equally, examination and assessment fees represent a significant burden for individual learners, particularly those who are claimants of means-tested benefits.

  10.  The use of an ILA mechanism to cover examination and assessment fees for targeted learners could be considered. In addition the role, costs and flexibility of examining and awarding bodies is a neglected area of enquiry and in need of review.

  11.  From this analysis of course fees and examination and assessment fees we suggest that the current broad brush approach to fees for adults:

    —  Takes only a very general account of capacity to pay

    —  Takes little account of prior learning

    —  Does not discriminate by level of course—and therefore takes no account of potential returns to the individual

    —  Only reflects public policy priorities to a limited extent

    —  Hides the true level of public subsidy being provided.

  12.  We suggest that ideally a clear national fee policy should be established which makes clear where public subsidy is focused, in advance of the introduction of a reformed ILA system.

  13.  An option for future fees policy could be to reduce the level of subsidy provided through the LSC funding mechanism and to require providers to seek a higher fee contribution from those learners able to pay. This would be in line with government policy to encourage increased individual responsibility. However, fee remission arrangements could be maintained and the approach would be compatible with the introduction of an entitlement to free provision to level two.

  14.  Further, consideration could be given to distributing the fee subsidy on a more targeted basis through Individual Learning Accounts. There are challenges associated with targeting via the individual learner (as compared to subsidising the provision) that need to be taken into account. Research into the use of vouchers[2] suggested that to take advantage of the scheme, learners needed to have basic skills, self-confidence, existing motivation, and knowledge of the system (ie cultural capital). To be successful in attracting "new" learners or those who need basic skills, substantial encouragement and support needs to be available to individual learners (for example through providers or Trades Unions).

  15.  In addition, the use of ILAs to target provision would require a change of policy with regard to universality/targeting and would therefore have implications for the operation of the scheme. We suggest it could also have implications for institutional stability. These issues are explored below.


  16.  LSDA's research into the introduction of ILAs identified that one of their strengths was simplicity of operation. Because they were universally available, means-testing was not needed, allowing for relatively simple administrative systems. This was of particular benefit therefore to the providers delivering the scheme.

  17.  However, this universality was also a limitation—there appear to have been high levels of deadweight. From the DfES study[3], only 18 per cent of "recent redeemers" had no qualification at all, 36 per cent had NVQ Level four or above and 54 per cent said they would have been able to pay without the ILA.

  18.  There is a clear tension between simplicity of operation and closer targeting to those in greatest need—increased targeting inevitably requires more complex administrative systems. While a universal system will avoid stigma and may therefore be more attractive, a clear consequence is that it will also incur substantial deadweight.

  19.  There is a policy choice between tolerance of a rising level of deadweight in the interests of widening participation or development of increasingly fine tuned targeting and the administrative costs associated with such a system. If the policy intentions of lifelong learning are realised and levels of participation increase significantly, the capacity of systems to target public subsidy and minimise deadweight is likely to become increasingly an issue.


  20.  If ILAs are to be more targeted on those with low levels of skills—for example, to support the implementation of a level two entitlement—access to reliable information about learners' prior achievement will be needed. However, collection of reliable data is notoriously difficult. In current arrangements there are no incentives for individuals or providers. Whereas in the longer term a unique learner identifier introduced at school age may be developed, this will not help in the short term.

  21.  The potential of ILAs to act as a mechanism for the systematic collection of individual learner data at a national level could be explored. At the moment the Individual Learner Record contains much of the detail about course programmes that the ILA record lacks and needs in order to be able to play the role we envisage. On the other hand the ILR does not track individuals. Bringing the LSC and ILA mechanisms together could have significant benefits.

  22.  Smartcard technology, associated with a unique learner identifier, may have potential in this area. Such technology is increasingly familiar to people. Young people will soon be aware of the connexions card; adults are already aware of supermarket loyalty cards, Air Miles and similar schemes which are based on a record (an account) of transactions. Perhaps the most important learning from these arrangements is that people co-operate willingly in the maintenance of their individual record because it is clear that benefits derive from it. This is not always the case with current enrolment procedures.

  23.  However, irrespective of any longer-term systems solutions, targeting of ILAs will require more complex administrative systems to assess individual eligibility for the additional ILA subsidy. In summary, if ILAs are to be targeted there will be a need for:

    —  Improved mechanisms for tracking individual learners' achievements

    —  Mechanism within the ILA system for verifying evidence of individual learner circumstances (for example, verifying if a learner is in receipt of a means-tested benefit).


  24.  If the decision is taken to direct a greater proportion of the fee subsidy through the ILA mechanism rather than direct to institutions, there will be an impact on the stability of providers. Payment will come after the actual recruitment of learners on to programmes whereas in the current LSC system payment is based on a projected delivery plan and adjusted in the light of actual recruitment in a future year.

  25.  The instability this might cause could in turn have an adverse impact on the capacity of providers to remain financially viable and to maintain and develop the quality of their provision. Serious consideration will need to be given to this matter. Rather than creating a responsive provider network committed to meeting individual needs it could diminish the diversity of the provider network and undermine long-term quality improvement strategies.

  26.  Careful modelling needs to be carried out on the likely impact on the range of providers. Consideration may need to be given in the longer-term to a funding system that establishes a notion of core institutional funding in addition to the learner-driven element. This might secure an appropriate level of stability within the provider network.


  27.  The amount spent on supporting learners in the FE sector with indirect costs (travel, childcare, materials, etc) is in the order of £50 million. This support is more directly targeted at those in need of financial support but again has a strong element of local discretion and is not supported by a national entitlement.

  28.  If course fee subsidy were targeted more carefully some of the savings might be available to strengthen learner support and create a clearer entitlement for adults. Support for adults in the Learning and Skills Sector is very limited compared with HE where there are grants and loans, or with under-19s where, in addition to parental support, there is the possibility of EMAs in pilot areas.

  29.  Consideration could be given to ILAs being used to distribute learner support. In order to carry out this function ILAs would need mechanisms for paying actual money to the individual to meet costs such as transport, materials and childcare. ILAs may therefore need to work through a payment agency. LEAs have well-established arrangements for means-testing and making payments for both HE support and EMAs; and there are clear grounds for their playing a central role in support with transport. The ILA centre would determine whether an individual, in the light of their learning to date, and policy priorities, were eligible for a type of support. They would then agree with a payment agency to meet the cost.

  30.  Using an ILA in this way would not completely remove the need for college based access funds, which provide a way of dealing quickly with unusual and emergency needs. It could however be the vehicle for delivering national entitlements, for which there is no rationale for or benefit to administration at the level of the individual provider.

  31.  The development of ILAs for this purpose might be feasible but consideration should be given to the consequences of spreading responsibility between different agencies and whether this would aid efficiency.


  32.  We suggest that the potential of an Individual Learning Accounts mechanism could be developed to:

    —  Target resources more finely towards priority individuals and types of learning

    —  Track learners and their achievements

    —  Make clearer to individual learners the level of subsidy that is being provided.

  33.  However, to achieve this, the development of the ILA mechanism should be based on:

    —  A national fees policy to:

      —  Secure more effective targeting of subsidy and reduce deadweight

      —  Clarify and make more evident the level of actual public subsidy being provided.

    —  Integration with mainstream systems of the Learning and Skills Council.

Learning and Skills Development Agency

February 2002

1   In this paper, where we use the term fee subsidy we are referring to the subsidy through course funding as well as that through fee remission. Back

2   Triumphs and Tears, P. Hodkinson, A. Sparkes and H. Hodkinson, (London, David Fulton), 1996. Back

3   Individuals Learning Accounts-follow up study, DfES research brief No RBX 01-02; January 2002. Back

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