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

3  Skills Strategies


71. As we set out at the beginning of this Report, the Government's decisions on priorities and objectives for further education will be informed by national and regional plans. The UK Commission for Employment and Skills (UKCES) will advise Government about the future strategic skills needed at the national level, with Regional Development Agencies (RDAs), working in partnership with Local Authority Leader Boards, Sector Skills Councils and others, producing regional skills strategies.

National Strategic Skills Audit

72. The National Strategic Skills Audit will be prepared for the Department by the UK Commission for Employment and Skills and will be delivered on an annual basis. The first National Strategic Skills Audit, Skills for Jobs: Today and Tomorrow, The National Strategic Skills Audit for England 2010, was published on Wednesday 17 March 2010.[107] In it, the UKCES articulated its hope that the Audit would:

    help those working in the skills system, employers and individuals not only to respond effectively to current needs, but to be better able to anticipate future requirements, and even to actively shape them.[108]

73. The annual Audits will take a long-term perspective on skills needs; provide clear messages about current and future skills needs in England; identify key drivers of change and important trends; and consider areas for action and direction for the future. Michael Davis, the Director of Strategy and Performance at the UK Commission for Employment and Skills, told us that the Audits would provide "insight and foresight about emerging skills needs for the medium term" and that this would be "informed by the work of Regional Development Agencies, the labour market and the Sector Skills Councils.[109] He also confirmed that they would assess "the long-term view about where we see future skills opportunities for the labour market and about where there may be mismatches in skills currently".[110]

74. Once published the Department would use the Audits, along with information on regional skills priorities, to determine its overall skills investment plan, which would in turn be delivered by the Skills Funding Agency.[111] In its memorandum, the Department explained how these Reports would influence funding strategies:

    the skills priorities identified by the UK Commission for Employment and Skills (UKCES) and set out in the regional strategies will be agreed by BIS and confirmed in the annual ministerial Skills Investment Strategy, against which the Skills Funding Agency will fund colleges and training organisations.[112]

75. Although the UKCES will produce Audits, the Minister confirmed that the policy decisions would be made by Ministers,[113] and made clear that there would be no obligation on Ministers to accept the findings of the Commission.[114] The Minister assured us that the Audits would be taken into account[115] but argued that:

    Ultimately, when that information comes to Government then Ministers will need to take decisions on what the priorities should be. It would be perverse not to take decisions based on all the information from a system set up to provide one with it, but as ever there are nuances with any decisions Ministers must take.[116]

Regional Skills Strategies

76. Regional Skills Strategies will be produced by Regional Development Agencies (RDAs), working in partnership with Local Authorities, with Local Authorities having joint sign-off responsibility for the plans.[117] Through their co-chairing of the Regional Planning Groups, Local Authorities and Regional Development Agencies will be expected to ensure a clear alignment between Local Authority 14-19 provision and the Skills Funding Agency provision of funding.[118]

77. The South East of England Regional Development Agency (SEEDA), the RDA which takes the lead on further education, argued that this new relationship:

    provides a significant new opportunity to streamline strategy setting; ensuring skills are embedded in economic development more widely and enabling all partners and stakeholders to contribute through a single process.[119]

78. SEEDA confirmed that in carrying out this role, RDAs would work with the new Skills Funding Agency to ensure the deliverability of regional priorities.[120] However, the LGA was concerned about the involvement of the SFA. It argued that there was a lack of clarity on the role of the SFA, in particular:

    how the new Skills Funding Agency will operate below the national level; and

    how the Skills Funding Agency will relate to the role of Regional Development Agencies (RDAs).[121]

SEEDA explained that the Regional Development Agencies were already working closely with the shadow Skills Funding Agency on how regional skills priorities could influence the planned spend of the Skills Funding Agency in 2010-11.[122] It went on to say that Regional Development Agencies would work with the UKCES to ensure that the Skills Funding Agency had access to both sectorally and spatially specific data.[123]

79. Both our witnesses from the UKCES and SEEDA were clear that close working between the two on the regional plans and the national strategy would be an important factor in their success. Pam Alexander, Chief Executive of the South East of England Development Agency explained that RDA research would "feed [...] into the work that the UKCES and the Sector Skills Councils are trying to do, as well as using it to drive our own regional skills strategies". [124]

80. Oona Muirhead, also from the South East of England Development Agency, stressed that there would be a significant level of information exchange between the UKCES and the RDAs:

    I would really want to stress that we are all intent on using the same data and evidence and sharing it. This is not about us each producing a strategy based on different evidence from employers, et cetera. […] We are pooling all of this […] so that we are basing that regional as well as national and local perspective on the same set of evidence and data".[125]

Tensions within the skills strategy system?

81. The skills strategies offer the potential to provide Government with much needed evidence-based information on the future skills needs of the UK at both a national and regional level. However, for that to be realised, wide and relevant consultation with interested parties, organisations and business will be a vital component. A number of organisations wrote to us with their concerns about this engagement.

82. The University and College Union gave a cautious welcome to the new responsibilities but was concerned that the system would be "cumbersome and somewhat opaque".[126] It argued that "a clear communications strategy on the part of the Government, RDAs, the SFA and Local Authorities will be essential and an urgent requirement".[127] In a similar vein, the Association of Colleges questioned "the viability of such a complicated chain for consultation".[128] It was also concerned that the relationship between the SFA, RDAs and Local Authorities would vary from region to region which could undermine the delivery of further education:

    Some regions are more cohesive entities than others; some are more effective than others. There is a risk that a greater role for RDAs in an already complicated system could slow up decision-making and make it more difficult for Colleges to respond to employer and community demand.[129]

83. Other organisations were concerned about the level of input from colleges and business. The 157 Group warned that involvement by colleges was crucial to the success of the strategies:

    Colleges are central to the regional skills strategies and to the proposed single integrated strategies. We would encourage discussion on how FE should be represented at the table.[130]

84. At the same time, the Alliance of Sector Skills Councils was of the view that "listening to the needs of employers will be key to achieving the aims of the Skills Funding Agency".[131] The Alliance was unconvinced that the new structure would be able to engage with business:

    There is a real danger that the new system will be just as complex and baffling as the old one, with too many organisations with overlapping and unclear roles. There are an increasing number of employer-facing organisations working in each region, and this poses significant difficulties for clear and consistent engagement and communication with industry.[132]

Furthermore, the Alliance highlighted its own expertise in Labour Market Intelligence (LMI) which it believed was currently underused by Government. It wanted to see that part of its work used "as a primary resource to inform future planning and funding rounds".[133]

85. Pam Alexander, Chief Executive of the South East of England Development Agency, was confident that the new approach would be to the benefit of employers and business. She asserted that the RDAs were established to:

    represent the business voice and we work with businesses all the time. They are the key players in determining what we see as the business needs that will drive economic development.[134]

SEEDA also acknowledged the importance of drawing on the expertise and knowledge of the FE sector when shaping these skills strategies and priorities. [135]

86. The Minister was of the view that it was "absolutely essential" that business had a strong voice through both the Regional Development Agencies and the Sector Skills Councils[136] and that without it "the plans will not be effective".[137] He also acknowledged that tensions between national and regional priorities were a possibility but asserted that his role was to ensure that the system worked. He told us that he had made clear to the Regional Development Agencies, the Local Government Association and the Sector Skills Councils that they were expected to work together and not propose "special pleading for their particular sectors or the bodies they represent".[138] Furthermore, he made clear that he was "last resort to resolve any difficulties".[139]

87. The national and regional plans produced by the UKCES, the RDAs and Local Authorities have the potential to provide the Department and the SFA with a valuable insight into the skills needs of the UK at a national, regional and local level. However, the structures which have been put in place appear complex and cumbersome. They also appear to be highly concentrated on public sector organisations. It is vital that the views and needs of business are represented to the fullest extent, not just through the Sector Skills Councils, which are also part of the process, or through their involvement with RDAs, but at local level as well. If they are not, then the plans will be of little use to learners, employers or colleges and will not be able to inform the priorities of the Government and the SFA. The Government needs to demonstrate that these plans have the full engagement and support of the business community.

88. The Government must also be prepared to move quickly to simplify the process underpinning the national and regional skills plans should the fears of some of the partners in that process be realised and the increased complexity prevent effective delivery of a skills strategy in specific local labour markets.

107   UK Commission for Employment and Skills, Skills for Jobs: Today and Tomorrow, The National Strategic Skills Audit for England 2010, March 2010 Back

108   UK Commission for Employment and Skills, Skills for Jobs: Today and Tomorrow, The National Strategic Skills Audit for England 2010, March 2010, p 4 Back

109   Q 48 Back

110   Q 60 Back

111   Q 48 Back

112   Ev 41 Back

113   Q 197 Back

114   Q 198 Back

115   Q 199 Back

116   Q 197 Back

117   Ev 102 Back

118   Ev 102 Back

119   Ev 100 Back

120   Ev 100 Back

121   Ev 82 Back

122   Ev 101 Back

123   Ev 101 Back

124   Q 80 Back

125   Q 81 Back

126   Ev 110 Back

127   Ev 110 Back

128   Ev 109 Back

129   Ev 52 Back

130   Ev 114 Back

131   Ev 47 Back

132   Ev 48 Back

133   Ev 49 Back

134   Q 91 Back

135   Ev 101 Back

136   Q 201 Back

137   Q 201 Back

138   Q 200 Back

139   Q 200 Back

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