The Skills Funding Agency and further education funding - Business, Innovation and Skills Committee Contents

2  Creation of the Skills Funding Agency


4. In 2004 the Government commissioned Lord Leitch to undertake an independent review of the UK's long-term skills needs. An interim report was published in December 2005 and the final report, Prosperity for all in the Global economy—world class skills, in December 2006.[1]

5. Lord Leitch's final Report concluded that "our nation's skills are not world class"[2] and proposed a series of objectives for 2020:

    95 per cent of adults to achieve the basic skills of functional literacy and numeracy, an increase from levels of 85 per cent literacy and 79 per cent numeracy in 2005;

    exceeding 90 per cent of adults qualified to at least Level 2, an increase from 69 per cent in 2005. A commitment to go further and achieve 95 per cent as soon as possible;

    shifting the balance of intermediate skills from Level 2 to Level 3. Improving the esteem, quantity and quality of intermediate skills. This means 1.9 million additional Level 3 attainments over the period and boosting the number of Apprentices to 500,000 a year; and

    exceeding 40 per cent of adults qualified to Level 4 and above, up from 29 per cent in 2005, with a commitment to continue progression.[3]

6. World Class Skills, the Government's response to the Leitch review, was published shortly after the formation of the new but short-lived Department of Innovation, Universities and Skills, in July 2007.[4] It committed the UK "to joining the world's 'premier league' for skills".[5] The response also set out the proposal for re-shaping of the Learning and Skills Council, noting that the newly created Department for Children, Schools and Families was bringing together policy (and funding) for children and young people. A commitment was given to consult on post-19 education and training arrangements.[6]

7. The Government's consultation paper, Raising Expectations: enabling the system to deliver, was published in March 2008.[7] It proposed the abolition of the Learning and Skills Council (LSC) and its replacement with two successor bodies, one of which was the Skills Funding Agency (SFA), by 2010:

    we will create a new Skills Funding Agency. It will be a focused, streamlined agency, close to Government and with an operational role. It will have national and regional presence, deploying its activities and resources flexibly to reflect the fact that skills needs are manifested in sectoral, regional and sub-regional patterns, and rarely follow local authority geographies.[8]

8. A key role of this new Skills Funding Agency would be to ensure that public money was routed swiftly, efficiently and securely to FE Colleges and providers:

    It will build on the considerable successes of the LSC. It will be responsible for ensuring that public funds are best used to complement the much larger private investment which is made in adult skills and training. The majority of its funding will flow in direct response to customer choices through Train to Gain and Skills Accounts."[9]

9. In late July 2008 the then Department for Innovation, Universities and Skills published Raising Expectations: Enabling the System to deliver, Update and next steps,[10] which gave further details on FE and Skills Reforms. The proposals to create the new Skills Funding Agency and a Young People's Learning Agency (YPLA)—to coordinate funding for children and young people under the age of 19—were then given effect by the Apprenticeships, Skills, Children and Learning Bill, which received Royal Assent in November 2009.[11]

The nature of the Skills Funding Agency

10. Unlike the Learning and Skills Council, which was a Non-Departmental Public Body, the Skills Funding Agency will be an agency of the Department for Business, Innovation and Skills. Its staff will be civil servants, and the Chief Executive of the Agency will be a statutory post holder.[12] The Department describes the status of the Agency as being at "shorter arms length" from the Department than its predecessor, which, it argued would enable it to provide "a faster and more effective response to policy, while reinforcing the autonomy of the FE sector."[13]

11. In its memorandum, the Department explained that Ministers would set the overall strategy and objectives for further education along with the budget available to achieve them.[14] The strategy and objectives will be published in an annual Skills Investment Strategy which will be informed by "bottom-up" issues coming from the regions and localities—through regional plans—alongside "top-down" issues informed by annual reports by the UK Commission for Employment and Skills.[15] We consider these plans in more detail in Section 3 of this Report. David Cragg, the interim Chief Executive of the Skills Funding Agency, explained that in formulating its policy for further education, the Department would "enshrine in a single priority statement" what the balance should be nationally, regionally and locally.[16]

12. Once the Government's strategy and budget has been decided, it will be the responsibility of the Chief Executive of the Skills Funding Agency to agree an annual delivery plan with Ministers[17] and for the SFA to deliver on that plan.[18]

13. David Cragg made clear that the statutory role of the Chief Executive of the Skills Funding Agency was to deliver on the guidance and policy of the Secretary of State.[19] Unlike the Learning and Skills Council, the Skills Funding Agency would not respond individually to the nine individual Regional Development Agencies, nor would it respond separately to the UK Commission for Employment and Skills. David Cragg believed that this approach provided a direct link with Government which would provide "much better integration taking on board the big, long-term issues in terms of economic and business priorities as well as some of the spatial and contextual issues which will come bottom up from the regions."[20]

14. The Department has placed significant emphasis on the delivery function of the SFA. It told us that the Agency would be "customer focused" and would concentrate on "promoting the services it houses to the right customers."[21] It asserted that this change of emphasis would simplify the administration of further education for both learners and employers, so that each could easily "identify the service which is right for them, rather than the organisation which funds the system."[22]

15. The Skills Funding Agency will provide these services through what the Department describes as four 'gateways':

  • Train to Gain—a service available to employers through Businesslink advice, a national database website and local training organisations or, for large employers, from the National Employer Service;
  • National Apprenticeship Service—a service available to employers and learners through a national field force, a web-based vacancy matching service and local training organisations;
  • Adult Advancement and Careers Service—a service available to people through a national telephone helpline and face-to-face support through sub-contracted expert advice and guidance providers; and
  • Direct access to provision—people will continue to have direct access to learning through local colleges and training organisations.[23]

The Skills Funding Agency: management of further education funding

16. The Skills Funding Agency will deliver the Government's priorities and objectives for further education within a budget set by the Department.[24] Funding will be managed through a new single account management system and unlike the Learning and Skills Council it will be managed at a national level in order to remove "the current regional variations used in the LSC, which add to bureaucracy".[25]

17. In general, colleges and training organisations will be allocated a "funding envelope", with contracts lasting up to three years for the highest performing organisations. The Department argued that:

    Within that overall envelope, colleges and training organisations will have the freedom to respond to individual and employer demand, including the demand articulated in regional strategies, drawing-down funding when individuals enrol and complete their courses.[26]

18. The Skills Funding Agency will maintain a list of approved colleges and training organisations to enable them to deliver publicly funded learning.[27] The level of financial autonomy given to those colleges and organisations will depend upon their track record and performance.[28]

19. The highest performing training organisations will be given greater autonomy through what the Department described as "simpler funding and monitoring arrangements, based on proportionate inspection and assurance".[29] However, those organisations will be under an obligation to provide higher levels of information on their performance so that "employers, learners, funders, commissioners, inspectors and auditors can make good decisions that give them, and their stakeholders, value for money".[30]

20. SFA funding will be administered by a dedicated Account Manager, assigned to individual colleges or organisations.[31] According to the Department, the Account Manager will manage "all the activity being funded, including Apprenticeships."[32]

21. In oral evidence Martin Doel, Chief Executive of the Association of Colleges, gave a general welcome to the introduction of Account Manager and reported that "the only conversations that colleges have had regarding the single account manager within the SFA have been positive".[33] However, he was concerned that it could be undermined by the existence of different account managers operating in a similar fashion in other parts of the funding structure:

    There is a single account manager within the SFA, there is also a single account manager within the local authority, there is a single account manager within HEFCE and there is a single account manager when you are dealing with individual businesses that you deal with. That adds up to four, at least, as we begin.[34]

22. The University and College Union also gave a cautious welcome to the creation of Account Managers. It supported the concept of a single point of contact which, it believed, could "cut down at least some of the bureaucracy of the previous LSC-provider relationship."[35] However, the Union believed there was insufficient clarity on the Account Manager's role:

    We are concerned that the Account Management Teams will be grouped into three portfolio areas, each covering three regions. This may not be the kind of personal single contact that providers were looking to. [36]

23. The management system for funding further education appears to be an improvement on that of the Learning and Skills Council. However, the division of the LSC's funding responsibilities between the SFA and the YPLA, which we consider in more detail later in this Report, could undermine this positive development.

24. The single account system has the potential to simplify the administration of funding by introducing national standards for the allocation of resources which were absent under the Learning and Skills Council. However, the fact that funding will no longer come from a single Government source but from two Departments has the potential to seriously undermine any benefits which may accrue from this change.

25. Equally, the introduction of SFA Account Managers for individual colleges has the potential to assist colleges and to simplify their contact with the funding bureaucracy. That said, SFA Account Managers have been presented as the single point of contact for colleges and providers. This is not the reality of further education, as colleges already deal with account managers from other organisations, especially Local Authorities. It is vital that SFA Account Managers work in a way that simplifies the process rather than adds to its complexity. We recommend that the Government provide an early update on the effectiveness of this single point of contact for colleges.

SFA management of the further education capital budget

26. The FE capital programme has been the subject of reports from other select committees. In 2008, the Innovation, Universities, Science and Skills Committee scrutinised the debacle of the LSC's management of capital funding. Its Report concluded that:

    there was a catastrophic mismanagement of the LSC capital budget during 2008 and neglect of oversight by those in the most senior positions in the LSC.[37]

27. The Department was at pains to point out that in transferring this role to the SFA it has learned the lessons of the LSC's failure to manage the capital budget. It asserted that it has put in place "robust forecasting models and measures to strengthen the financial management of the programme."[38] As a result, the Department believed that the programme was now on "a firm footing for the future and that the previous problems with the programme will not be repeated."[39]

28. Geoff Russell was appointed Chief Executive of the LSC in the aftermath of that mismanagement. He believed that a major factor behind the problems with LSC management of the capital fund was that while it was "very well placed to deliver money on a regional basis" it was not well placed "to do a rationing exercise with centralised command and control."[40] He explained that when he took over the running of the LSC this was one of the first problems he addressed:

    I changed that very quickly. I put one person in charge of it. The budgeting, modelling and decision-making was done by a small team with one person reporting to me and we put in a much improved system of financial control and budgeting."[41]

Geoff Russell will transfer to the SFA on 1 April which will provide the SFA with some much-needed continuity in the oversight of the capital budget. However, the split between the SFA and the YPLA may yet prove to be an equally difficult challenge, as we discuss in more detail later in this Report.

29. We note the Government's assertion that additional controls have been introduced to manage the further education capital budget. It is vital that these new controls stop the possibility of a repeat of the Learning and Skills Council's lamentable mismanagement of the capital budget. We expect the Department to update our successor Committee, on a regular basis, on the management of that budget.

Complexity in the FE system


30. The SFA is just one of a number of organisations and agencies which will deliver the Government's strategy and objectives for skills. Our witnesses expressed concerns that problems were likely to arise from complexity of the new arrangements, and in particular the split at 19. We consider these concerns below.

31. Set out below is an extract from a Departmental update on the establishment of the SFA. It details how the new functions and responsibilities will be delivered in the new FE and skills structure:[42]
Post 2010
Responsibility for delivery of targets Learning and Skills Council Department for Business, Innovation and Skills
Funding Colleges, providers and NSAs Learning and Skills Council Skills Funding Agency
Sponsorship of FEDepartment for Business, Innovation and Skills/ Learning and Skills Council Department for Business, Innovation and Skills
Performance Management Learning and Skills Council Department for Business, Innovation and Skills—determining the system Skills Funding Agency, liaising with Young People's Learning Agency on 16-19
Supporting colleges and providers performance Learning and Skills Council/Learning and Skills Improvement Service Learning and Skills Improvement Service
Advising on skills needs, including regional skills needs Learning and Skills Council UK Commission for Employment and Skills
Determining regional skills


Learning and Skills Council Skills Funding Agency—in the light of UK Commission for Employment and Skills analysis
Developing regional skills and employment plans Learning and Skills Council Skills Funding Agency working with Regional Development Agencies, Regional Skills

Partnerships etc

Responding to individual and employer skills needs and providing a efficient and effective support services Learning and Skills Council with Regional Development Agencies, Regional Skills Partnerships etc Colleges and providers cooperating with Local Authorities, Education Standards Boards and each other
Working with Local Authorities on Multi Area Agreements Colleges and providers Skills Funding Agency
Marketing and Communications Learning and Skills Council Department for Business, Innovation and Skills
Regulate qualifications Learning and Skills Council Office of Qualifications and Examination Regulation
Provide management information and strategic analysis to inform strategic and commissioning


Qualifications and Curriculum Authority Skills Funding Agency
ResearchDepartment for Business, Innovation and Skills/ Learning and Skills Council Department for Business, Innovation and Skills— strategic skills

UK Commission for Employment and Skills— managing skills research function

EvaluationDepartment for Business, Innovation and Skills/ Learning and Skills Council Department for Business, Innovation and Skills

32. In its supplementary memorandum, the Department provided further information on the role that would be played by the Department for Business, Innovation and Skills, the UK Commission for Employment and Skills, Sector Skills Councils, Regional Development Agencies, the Skills Funding Agency, Employment and Skills Boards, Local Authorities, Colleges and Training Organisations, Ofqual, the Learning and Skills Improvement Services, Betca[43] and Ofsted.[44] However, that list, despite its length, does not include the Department for Children, Schools and Families, the Young People's Learning Agency or HEFCE, which has a direct influence in a small number of cases.[45]


33. When we discussed the new structure with our witnesses, those outside of Government were not convinced that the process was being either simplified or streamlined. Martin Doel, Chief Executive of the Association of Colleges, was aware that the range of services provided by colleges and other providers—and the breadth of the skills agenda—meant that any further education structure would have "an inherent complexity",[46] but argued that it was "very hard to see how the totality of the system will be more streamlined."[47] This view was supported by the Local Government Association who believed that the complexity of bodies did not indicate "a streamlining" of the system.[48] Ioan Morgan, representing the Association of Colleges, also questioned the assertion that the new structure would simplify FE provision. He argued that "we do not see this as streamlining, we see it as, potentially, muddying the waters."[49] These views were only partly tempered by Michael Davis from the UK Commission for Employment and Skills, who believed that in some respects the new system represented an improvement. However, he also noted that further work needed to be done to both streamline the system and to remove unnecessary complexities.[50]

34. Geoff Russell, the incoming Chief Executive of the SFA, acknowledged that retaining the status quo—such as a single organisation along similar lines to the LSC—was a model that the Government could have chosen, and added that the LSC had worked well in that guise when funding was less constrained. However, he argued that it was not a suitable design for times of financial stringency:

    It was remarkably well designed at a time when there was a lot of money and it was devolved with nine autonomous regions. That was why it worked even though it was so large. It had nine independent regions. [...] but money began to get tighter and suddenly you could not afford to have nine independent decisions being made with pots of money that would lead to disparities across the country and the LSC needed to change its organisational design very quickly and that is the territory in which we find ourselves now.[51]

He went on to argue that a large single organisation, like the LSC, was unable to react quickly enough, given its size and complexity, to the "changed environment in which we operate".[52] He concluded that it was "too large to be sufficiently agile to react to changed circumstances in terms of the economy and increasing participation and, therefore, there is a benefit to focus."[53]

35. The Minister also acknowledged that the system of administration was "incredibly complicated" with a large number of bodies involved in the delivery of further education. However, he believed that the reorganisation of FE funding and policy was designed to address that problem:

    One of the themes of what we are trying to do is to find ways to simplify it, but that in itself is complicated. One can simplify things by creating one huge body, which was what the LSC was originally, but sometimes simplification means having a body with a mission that everybody understands rather than just reducing everything into a single body.[54]

36. When challenged to list all the organisations involved in the funding, delivery and strategy for skills, the Minister conceded that it was "massively complicated"[55] but asserted that the Government was committed to "reducing the number of bodies involved in the skills world by up to 30."[56]

37. The new structure for further education was due to go live on 1 April—shortly after we agreed this Report. It would therefore be premature for us to pass judgement at this time on its ability to deliver a seamless and efficient service. However, the restructuring undertaken by Government has clearly increased the complexity in the system rather than simplified it and there is a danger that this will make it more difficult for the system as a whole to deliver the Government's objectives, or to meet the expectations of learners and employers.

38. We would welcome the realisation of the Government's commitment to reducing the number of bodies involved in the skills world "by up to 30", but we are highly sceptical that this will be achieved. Indeed, the current expansion in the number of bodies involved in the skills agenda has been brought about by the Government itself. We recommend that the Government provide us with details on the work it has done to realise this aspiration, together with an indicative list of those bodies it believes it can remove from the system.

The Skills Funding Agency and the Young People's Learning Agency

39. At the centre of the concerns about the new structure is the decision to split the work of the Learning and Skills Council into two new organisations, the Skills Funding Agency (SFA) and the Young People's Learning Agency (YPLA). The SFA will have responsibility for 19+ provision and will be overseen by the Department for Business, Innovation and Skills while the YPLA will have responsibility for 14-19 provision and will report to the Department for Children, Schools and Families.[57] Unlike the SFA, the YPLA will be established as a Non-Departmental Public Body (NDPB) with a remit to support Local Authorities in the discharge of their planning and commissioning functions and to ensure funding and budgetary control within the system.[58] The YPLA will set the budgetary framework but the delivery of that funding will be delegated to Local Authorities (LAs).

40. A number of our witnesses were either critical of this move or confused about the rationale behind it. Martin Doel, Chief Executive of the Association of Colleges, argued that this division of responsibilities was borne out of a false distinction between the skills agenda for 16-19 year olds and the agenda for 19 year olds and older.[59] He believed that there was "precious little logic or demonstrated requirement for the overall design to split the funding groups up",[60] and concluded that the split owed more to the division of the then Department for Education and Skills into two separate Departments:

    If one were just to take a dispassionate view looking backwards on that, one might go back to the division of the Department for Education and Skills into two departments. It almost all follows, as an ineluctable logic, that you will have two different funding agencies corresponding with two government departments. I do not know if that is the rationale that operated in ministers' minds, but it is very difficult to actually find a trail back to the original decision.[61]

41. The Association of Colleges further asserted that this artificial division would make a complicated further education system "more rather than less confusing" because colleges would now have to work with "two national agencies where there was previously one".[62]

42. The University and College Union, which represents academic staff in further education, was also wary of this division of responsibilities:

    Under the 'old' LSC system, colleges faced one bureaucracy and one body that required statistics and returns; they will now need to feed statistics and data to at least two systems. FE colleges could also face dealing with up to five new bureaucracies or 'sub' bureaucracies—the SFA, the YPLA, the National Apprenticeship System, the Adult Advancement and Careers Service and the National Employer Service, while meeting the demands of over 140 local authorities. UCU remains sceptical that the stated aim of reducing bureaucracy will be met given the aforementioned system.[63]

43. The 157 Group[64] also described this separation as "extremely unhelpful" and believed that it would "undoubtedly have an impact upon FE providers".[65] In a similar vein, the Alliance of Sector Skills Councils expressed its concern about the complexity of the new arrangements, in particular the split between the SFA and the YPLA and the handing over of responsibility of pre-19 funding to Local Authorities.[66]

44. In our second evidence session we discussed the working arrangements with Peter Lauener, Chief Executive of the Young People's Learning Agency, and David Cragg and Geoff Russell, from the SFA.

45. David Cragg acknowledged the concerns of the college representatives and declared that the two agencies would need to be "very closely aligned".[67] He also was well aware of the fact that a close working relationship between the two was "crucial" to the success of the new structure.[68] Peter Lauener told us that the two bodies already had "done a lot of work to put in place practical arrangements over the past few months" and that those arrangements had already begun to be embedded in the two organisations.[69] Geoff Russell also highlighted the importance of these working relationships:

    We are inextricably bound because if we do not work together on the funding young people will not have delivery vehicles for their training and education and if the SFA and YPLA do not ensure funding is balanced out in a sensible way colleges fall over.[70]

David Cragg explained that arrangements were underway to ensure that the SFA and the YPLA would benefit from shared services in a number of areas; for example a single source of information management and data on colleges both for "learner information" and finance. Furthermore, he told us that the joint agreements would also be signed with Local Authorities on audit arrangements so that they:

    do not duplicate the number of audits that take place. In that regard there will be a code of practice and mutual acceptance of lead audit bodies between local authorities, the Young People's Learning Agency and the Skills Funding Agency. [71]

46. In explaining the rationale behind the establishment of two agencies, the Minister refuted claims that it was merely a reflection of the different responsibilities of two Government departments.[72] While he gave us a detailed analysis of the logic behind each Agency, we remain unclear as to the need for two separate organisations rather than a single organisation with clear direction and better management.

47. A key aspect of the new structure is the creation of the Skills Funding Agency and the Young People's Learning Agency to administer the role previously held by the Learning and Skills Council. These two organisations represent the division of responsibilities between the Department for Business, Innovation and Skills and the Department for Children, Schools and Families, although the existence of different departments is not the justification given for having two agencies. We have grave reservations about the logic or probable effectiveness of having two organisations running further education, given the degree of overlap between the two. We have been given no convincing argument in support of this approach. We are particularly concerned that the need to co-ordinate the work of the SFA and YPLA on many issues of policy, shared services and management will lead to unnecessary long-term costs and bureaucracy.

48. We cannot yet come to a conclusion on the efficiency of this approach, because neither the SFA nor the YPLA have a record to judge. However, we urge our successor Committee to monitor closely the relationships between the SFA and the YPLA at an early point in the next Parliament.


49. Our witnesses believed that the impact of the split between the SFA and the YPLA will be most keenly felt in the provision of funding for colleges. The Association of Colleges highlighted the fact that:

the SFA will regulate the 260 further education colleges but will provide less than 50% of their revenue funding. The largest share of College funding will come via local authorities and will be paid for the education of 16-18 year olds.[73]

In a similar vein, Ioan Morgan, Principal of Warwickshire College, highlighted the fact that colleges would not deal with just one Local Authority:

    We deal with something like 86 local authorities as a college; we have students from 86 authorities.[74]

50. This point was echoed by the 157 Group which described the two funding streams as "extremely unhelpful" and believed that the separation would "undoubtedly have an impact on FE providers."[75]

51. The Minister explained that the reorganisation would make the funding system "more flexible".[76] He gave the following example of how this flexibility would work in practice:

    Taking the adult learner-responsive budget, up until now there has been very little flexibility to transfer between different headings within it. If you look at the Skills Investment Strategy document you will see headings like Skills for Life: full level 2, level 3 and level 4, and up until now colleges have had very little leeway to transfer within that. From now on colleges will be able to work freely within the adult learner-responsive section and the employer-responsive section of their budgets, which is the bit to do with employers rather than learners who come to the college."[77]

Furthermore, if a college is judged to be outstanding it would be given even greater flexibility to "work freely within the whole of that picture".[78]

52. This flexibility has been given a partial welcome from colleges. Ioan Morgan, Principal of Warwickshire College, representing the Association of Colleges, explained its importance:

    If we are forced to have money in boxes, principals of trusted colleges have got to be allowed to open those boxes and share that money around to local and regional priorities."[79]

53. David Cragg, the interim Chief Executive of the SFA, argued that the new structure would assist in the exploitation of "further opportunities for simplification, for example simplification of budgets which have been excessively complex with lots of ring-fenced blocks".[80] Geoff Russell, who will succeed David Cragg on 1 April, supported this view. He believed that "it would be crazy for a college to fall over with money in its bank account because it could not use that money to deal with other issues.[81]

54. When presented with the example of a provider which had to sack staff in one area of adult learning despite the fact that it had under-spends in other areas of adult learning Geoff Russell responded "that is exactly what we are trying to remove. The sector has asked for it and we have committed to doing it in the Skills Investment Strategy".[82]

55. Martin Doel acknowledged that the Government had made some progress[83] but pointed out that although this new flexibility had been extended to areas such as Adult Responsive Learning and Employer Responsive Learning,[84] it did not extend to managing funding between the SFA and the YPLA. He argued that this was a significant issue for colleges as there was:

    no ability to buy money from 16-19 [to] adult provision. Everyone we have talked about so far is just working in the 19-plus. The ability to move money around between those two, effectively, departmental stovepipes is missing.[85]

56. Ioan Morgan believed that if colleges had the ability to move funds between 14-19 provision—provided by the YPLA through Local Authorities—and SFA funding, there would be "a much greater chance of achieving the Leitch targets".[86] He was strongly of the view that greater autonomy was the answer for colleges:

    For heaven's sake, give us the freedom, give us the tools to get on and deliver for industry and for the social agendas that we can deliver.[87]

57. The Minister was aware that the Association of Colleges wanted greater flexibility, and asserted that colleges were "free to spend [their funding] as they wish according to their managerial judgment."[88] However, this came with the caveat that colleges "deliver on what they say they will do in relation to numbers of adult learners and young people".[89]

58. It is clear that the Department has yet to be convinced of the arguments to extend flexibility across YPLA and SFA funding streams, though the Minister did offer some comfort to the Association of Colleges in this area:

    I am aware they would like us to go further. Clearly, that will be the direction of travel as more and more colleges gain that outstanding status and are given greater flexibility beyond what is available to all colleges.[90]

59. Simplification of funding for colleges is a very important objective, so we welcome the steps that the Government has taken to build flexibility into the system. However, we are fully aware that the Government's plans fall short of the expectations of colleges. Not only will they now have separate funding streams from the SFA and the YPLA, they will also have to deal with multiple numbers of Local Authorities. We look to the Government to build on its plans and to introduce greater flexibility in the future, including the ability to transfer funds between Local Authority provision and SFA provision. Should these separate funding streams cause difficulties, we will expect the Government to review the relationship between the SFA and YPLA as a matter of urgency.


60. Martin Doel, representing the Association of Colleges, believed that the split between SFA funding and YPLA funding was not a practical solution to the problems which colleges had to address in managing their capital budgets:

    You do not, when you are in a college, manage a little building over here that is for the SFA and a little building that is over there for the YPLA, a little bit of the estate for 16-19 year olds, one bit for apprenticeships and one bit for adults. It does not work like that.[91]

61. He continued:

    What we have insisted […] is that we do not have a building that has a YPLA part of the building and an SFA part of the building separately funded. You will need to have a combined capital strategy applying to the college sector, because you will need to combine those funds in order to come together to build a single building. In terms of going forward, therefore, you need a combined capital strategy."[92]

62. Martin Doel told us that he had already made this point to both the Secretaries of State for Business, Innovation and Skills and Children, Schools and Families who had "acknowledged" these concerns.[93]

63. Ioan Morgan also believed that the arrangements for colleges' capital budgets had been made more complicated. In particular, he was concerned that even if a college's plans were approved by the SFA, they could now be overruled by a Local Authority that "does not support a particular development linked to 14 to 19".[94] He described this as "a huge anomaly" which would allow Local Authorities to intervene and veto colleges' plans.[95] Councillor Sparks defended the role of Local Authorities in this respect. He believed that the way forward was for all interested parties to "[get] round the table in a local partnership to ensure that everybody is agreed on what the objectives are".[96]

64. The Department was well aware of these concerns, but asserted that it had addressed them in the working arrangements for SFA planning of capital budgets. It explained that it would publish an overarching single capital strategy for post-16 education and training in England—excluding the higher education sector—in which it would consult with both the Young People's Learning Agency and the Skills Funding Agency.[97] The FE sector is currently being consulted, through the Association of Colleges' Capital Task Group, on how future funds should be best allocated and the Department was confident that it will achieve the best possible value for money while at the same time keeping bureaucracy to a minimum.[98]

65. In addition, David Cragg explained that there would be a joint capital strategy between the two Government Departments which would be given effect via a joint implementation strategy between the SFA and the YPLA. He asserted that if the capital project related to further education it would "sit four square with the Skills Funding Agency's responsibilities" but acknowledged that "a joint approach with Local Authorities that looks at the whole fabric of the post-16 education and training estate" would also be necessary. He told us that arrangements to develop this approach were already being put in place.[99]

66. The previous mismanagement of the capital fund by the LSC resulted in significant damage and disruption to colleges. Although the Government is confident that it has strengthened oversight of the capital budget, it has also introduced a more complex system, with many more stakeholders. It is vital that the various funding streams which make up a college's capital budget do not affect a college's ability to expand or enhance its estate. While we welcome the close working between the YPLA and the SFA we remain deeply concerned that capital funding streams from both organisations, together with Local Authority involvement, just cannot deliver a simplified or efficient system of capital investment for colleges. Indeed, the management of capital budgets at college level has been made significantly more complex.

The National Apprenticeship Service

67. The National Apprenticeship Service (NAS) has end-to-end responsibility for Apprenticeships in England. It employs 400 people[100] who provide a dedicated, responsive service for both employers and learners with an additional responsibility to increase the number of apprenticeship opportunities.[101] As part of the restructuring, the NAS will be 'housed' within the SFA. However, it will have a separate identity and will work independently to the SFA.

68. Geoff Russell told us that while the NAS was located in the SFA, "the authority, responsibility and power for the delivery of apprenticeships" resided with the Chief Executive of the NAS.[102] Furthermore, as Chief Executive of the SFA he will not be responsible for the NAS budget which has also been delegated to the Chief Executive of the Service.[103]

69. When we questioned Geoff Russell about the logic of this move, he responded that it was a "trade-off" between centralised control on the one hand and "specialisation, focus and tailored delivery of a particular product" on the other.[104] David Cragg, the interim Chief Executive of the SFA, believed that the most important factor was that "there is an integrated process for the delivery of the apprenticeship programme".[105] In respect of the SFA and the NAS, he provided the following illustrative division of responsibilities:

    The National Apprenticeship Service has the overall externally-facing responsibility for generating demand and managing that relationship in the marketplace. The management of the college and provider network that delivers apprenticeships is absolutely and explicitly in only one place, and only in one place, which is the core of the Skills Funding Agency.[106]

70. We do not see the logic behind bringing the National Apprenticeship Service within the Skills Funding Agency whilst allowing it to retain its autonomy—including budgetary control. Either the NAS should be part of the delivery service of the SFA or it should be a separate body. We believe that having a separate entity working within the SFA will only add to the already complex structure of further education delivery. It will also pose significant management and accountability issues for the Chief Executive of the SFA which concern us deeply.

1   Leitch Review of Skills, Prosperity for all in the global economy-world class skills: Final Report, December 2006 Back

2   Leitch Review of Skills, Prosperity for all in the global economy-world class skills: Final Report, December 2006, Foreword Back

3   Leitch Review of Skills, Prosperity for all in the global economy-world class skills: Final Report, December 2006. Executive Summary Back

4   Department for Universities, Innovation and Skills, World Class Skills: Implementation of the Leitch Review of Skills in England, CM 7181, July 2007 Back

5   Department for Universities, Innovation and Skills, World Class Skills: Implementation of the Leitch Review of Skills in England, CM 7181, July 2007 , Foreword Back

6   Department for Universities, Innovation and Skills, World Class Skills: Implementation of the Leitch Review of Skills in England, CM 7181, July 2007, para 3.52 Back

7   Department for Universities, Innovation and Skills, Raising Expectations: enabling the system to deliver, Cm 7348, March 2008 Back

8   Department for Universities, Innovation and Skills, Raising Expectations: enabling the system to deliver, Cm 7348, March 2008, para 26 Back

9   Department for Universities, Innovation and Skills, Raising Expectations: enabling the system to deliver, Cm 7348, March 2008, para 27 Back

10   Department for Universities, Innovation and Skills, Raising Expectations: enabling the system to deliver: Update and next steps, Cm 7348, July 2008 Back

11   Apprenticeships, Skills, Children and Learning Act 2009 Back

12   Ev 41 Back


14   Ev 41-45 Back

15   Q 124 Back

16   Q 124 Back

17   Ev 43-44 Back

18   Q 124 Back

19   Q 124 Back

20   Q 124 Back

21   Ev 42 Back

22   Ev 42 Back

23   Ev 42 Back

24   Ev 43-44 Back

25   Ev 42 Back

26   Ev 42 Back

27   Ev 42 Back

28   Ev 42 Back

29   Ev 42 Back

30   Ev 42 Back

31   Ev 42 Back

32   Ev 42 Back

33   Q 41 Back

34   Q 40 Back

35   Ev 109 Back

36   Ev 109 Back

37   Innovation, Universities, Science and Skills Committee, Seventh Report of Session 2008-09, Spend, spend, spend? - the mismanagement of the Learning and Skills Council's capital programme in further education colleges, HC530, para 40 Back

38   Ev 44 Back

39   Ev 44 Back

40   Q 140 Back

41   Q 140 Back

42   Reforms (acronyms have been spelt out in full in this Report)  Back

43   Becta is the government agency leading the national drive to ensure the effective and innovative use of technology throughout learning. Back

44   See Appendix. Back

45   See Q138. Back

46   Q 11 Back

47   Q 4 Back

48   Q 4 Back

49   Q 4 Back

50   Q 4 Back

51   Q 116 Back

52   Q 122 Back

53   Q 123 Back

54   Q 154 Back

55   Q 154 Back

56   Q 155 Back

57   For further information see Back

58  Back

59   Q 11 Back

60   Q 11 Back

61   Q27 Back

62   Ev 51 Back

63   Ev 108 Back

64   The 157 Group consists of 27 of the largest General FE Colleges in England. Back

65   Ev 112 Back

66   Ev 48 Back

67   Q 102 Back

68   Q 102 Back

69   Q 125 Back

70   Q 125 Back

71   Q 125 Back

72   Q 159 Back

73   AoC calculations from College accounts and LSC funding allocations. Back

74   Q 31 Back

75   Ev 112 Back

76   Q 183 Back

77   Q 183 Back

78   Q 183 Back

79   Q 5 Back

80   Q 132 Back

81   Q 134 Back

82   Q 136 Back

83   Q 44 Back

84   Ev 56 Back

85   Q 44 Back

86   Q 5 Back

87   Q 43 Back

88   Q 183 Back

89   Q 183 Back

90   Q 183 Back

91   Q 11 Back

92   Q 49 Back

93   Q 44 Back

94   Q 51 Back

95   Q 51 Back

96   Q 51 Back

97   Ev 44 Back

98   Ev 44 Back

99   Q 143 Back

100   Ev 45 Back

101 Back

102   Q 118 Back

103   Q 119 Back

104   Q 120 Back

105   Q 121 Back

106   Q 121 Back

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