Supplementary memorandum submitted by
the Department for Education and Skills
CONNEXIONS PARTNERSHIPS FUNDING 2004-05
PURPOSE
1. At the National Skills Strategy: 14-19
Education oral evidence session at the Education and Skills Committee
on 29 March, Valerie Davey requested a note explaining how £25
million would be removed from the Connexions budget.
2. This note aims to give the current position
on Connexions funding.
ISSUE & SUMMARY
3. In February 2004, Margaret Hodge, Minister
for Children, Young People and Families, secured funding of £25
million from a £40 million VAT subsidy aimed at supporting
Connexions Partnerships over the next two years. The £25
million has been identified to provide a vital contribution to
the successful implementation of Every Child Matters, helping
to fund new initiatives such as the creation of a Children's Commissioner
and establishing a Local Authority Safeguarding Children's Board
in each Local Authority.
4. This is not a cut in the Connexions core
budget—it is a reduction in the temporary support the Department
made available in supporting Partnerships with changes to their
VAT liabilities.
5. Connexions Partnerships have been asked
to find a contribution of £25 million. The £25 million
will be found from the VAT transition support funding previously
identified to support to Partnerships following a change in 2004-05
to their VAT status.
6. In reducing the VAT pot rather than the
Connexions core Grant, we have tried to find a solution that minimises
the impact on delivery, and do not expect that this will lead
to inevitable damage to Connexions front line delivery. We acknowledge
that this will be easier for some more than others. But faced
with a choice of funding a VAT bill in excess of £36 million
and supporting the effective implementation of the Green Paper,
it is hard to defend any decision that prioritises the former
over the latter.
7. We estimate the Department can fund at
least 30% of Connexions Partnerships VAT liability. However, we
expect partnerships to put in place measures to become more tax
efficient, and to use other funds, for example their underspends
from 2003-04 to fill any gap left, without impacting on frontline
delivery services.
8. We know that some Partnerships are looking
at how they structure themselves—some models are more tax
efficient than others. The Department has provided Connexions
Partnerships with guidance on the structural options they may
wish to consider following the change in VAT status and has invited
Partnership and GO colleagues to attend a VAT workshop on 20 April.
The guidance and workshop have been agreed jointly with HMCE.
9. In addition, the National Association
of Connexions Partnerships (NACP) are providing information on
structures to partnerships affected and offering advice and guidance.
13 April 2004
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