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

4  Administration of the Change Programme


89. As part of this inquiry we undertook to scrutinise the way in which Government approached the reorganisation of further education. In this section we consider the involvement of delivery partners in the creation of the SFA, the transitional arrangements which the Department put in place, the management of staff and the costs of the change programme.

Consultation on the design of the SFA

90. The Department asserted that during the design phase of the SFA, it had worked closely with employers and other partners in the FE sector to ensure that they could "influence the design of the Skills Funding Agency and provide early feedback on the impact of the changes; ensuring services are not compromised."[140] David Cragg, the interim Chief Executive of the SFA, told us that "there was a good deal of consultation and a series of regionally-based events around the original formulation of the policy."[141] In addition to these events, oversight of the policy had been led by both the then Department for Innovation, Universities and Skills, and later by the Department for Business, Innovation and Skills through a "fairly broad-ranging stakeholder group" which included the "Local Government Association, nominations from the colleges, the provider sector and senior business people."[142] In the summer of 2009, when the design of the SFA was in its final iterations, a "whole roadshow of activities", was led by both Ministers and senior officials.[143] Particular attention had been placed on consultation with the Association of Colleges and the Association of Learning Providers in order to develop what David Cragg described as "intensive working arrangements".[144] David Cragg concluded that this approach had "significantly improved" the Agency's relationship with both Associations.[145]

91. Martin Doel, Chief Executive of the Association of Colleges agreed that, in general, the consultation process had been a positive experience and that there had been a determined effort to involve his Association in the design of the SFA. However, he cautioned that while the design of the SFA was important, the need for cultural change in the new Agency should not be underestimated.[146] In a similar vein, both SEEDA and the UKCES appeared to be content with their involvement with the SFA.[147]

92. By contrast, Councillor Sparks, representing the Local Government Association was less impressed. When asked about the LGA's involvement in that consultation he responded "I can report back that councils are reporting that the SFA has not been in touch, in marked contrast to other agencies in relation to this".[148]

93. David Cragg declared himself "amazed" when presented with the LGA's assertion.[149] He explained that, at a senior official level "the LGA was on the steering group for the establishment of the Skills Funding Agency from day one".[150] Not only did he believe that the LGA was consulted, he asserted that it was "very much in the middle of the process".[151] Peter Laueuner stated that the LGA had also been heavily involved in the design of the YPLA structure:

The regional role was clear from the start and that is where we inject the skills and economic dimension to make sure it all adds up. Because 16-19 learners travel a lot we needed a sub­regional level. We did not lay down the design of that; it came from local authorities. They were invited to say what the right grouping was in their areas. The answer was 43 sub­regional groups as it happens. [152]

94. We welcome the fact that, on the whole, the delivery partners consider that the Government conducted genuine consultation with them in the design stage of the Skills Funding Agency. Although we have serious reservations about the ability of the new structures to deliver a streamlined funding system, we welcome the fact that the Government has sought to engage with its delivery partners at an early stage.

Transitional Arrangements

95. Planning for the handover of responsibilities from the LSC to the SFA has been a long time in preparation. In May 2008, a joint Departmental Machinery of Government Programme was established to ensure consistent and co-ordinated implementation of the new structures and processes.[153] A Joint Transition Management Group was also established to "ensure that all of the detailed tasks regarding organisational structures, staff and resourcing for the Skills Funding Agency, Young People's Learning Agency and Local Authorities were completed in a timely, coherent and consistent way".[154]

96. Early in the transition process, it was recognised that in a number of critical areas it would be essential to establish strong joint working arrangements between the Skills Funding Agency and the Young People's Learning Agency. In its memorandum, the Learning and Skills Council argued that this work was "fully scoped" as part of the Transition Plan, and that working arrangements were agreed with those concerned in order to "avoid confusion or duplication at provider level, particularly for colleges". This work included:

a. Joint capital planning

b. Performance management including implementation of Framework for Excellence and FE intervention

c. FE regulation/sponsorship including mergers, federations etc

d. National Apprenticeship Service 16-18 commissioning in conjunction with Local Authorities.[155]

97. In September 2009, a 'shadow' SFA was established to work in parallel to the LSC.[156] The Department argued that this "lead-in time" has allowed the Agency to begin work on "embedding the new system and culture" which would enable the SFA to be fully functional "from day one." [157]

98. In its memorandum, the Learning and Skills Council asserted that despite the "complex and challenging" nature of the transition programme it had proved to be a success and had delivered "many positive outcomes".[158] Furthermore, it was confident that learners, employers and colleges and providers had not experienced any interruption of service during the transition".[159] The Department cited two Office of Government Commerce (OGC) reviews as evidence of the success of the transition process:

    the last one in Summer 2009 confirmed that the programme was well on track and received an amber green rating. Since then, the programme has assessed the set up of the Skills Funding Agency (and the Young People's Learning Agency (YPLA)) against the good practice criteria developed by the National Audit Office, this showed that the Skills Funding Agency and the YPLA are both on track to be fully operational by the end of March 2010.[160]

99. When asked if the SFA was in a position to deliver on 1 April 2010, David Craig asserted that the SFA was "absolutely up to speed and on track".[161] In general, this view was shared by our witnesses representing the delivery organisations. Oona Muirhead, Executive Director for Strategy and Resources, South East of England Development Agency was confident that the transition from the LSC to the new structures would not be problematic. In particular, she asserted that SEEDA had its arrangements "well in hand" and that the transition was "going pretty smoothly".[162] A similar view was given by Councillor Sparks who told us that, in relation to the LGA's involvement with the DCSF, reports from local authorities on preparedness had been "satisfactory".[163]

100. The Association of Colleges agreed that the handover of responsibilities from the LSC to the SFA on 1 April would be a "relatively smooth event". However, the Association's Chief Executive, Martin Doel, believed that the acid test for the Skills Funding Agency would not be its formal creation on 1 April but in the following year when it would, for the first time, deliver the Government's funding arrangements for further education.[164]

101. Despite the general view that the handover would be smooth, Ioan Morgan, Principal of Warwickshire College, representing the Association of Colleges highlighted one particular area of concern, that of payments to colleges on 1 April, which he asserted had been given "fairly late consideration".[165] Peter Lauener acknowledged that payments to colleges were an immediate concern but remained "absolutely confident" that they would be made.[166] Furthermore, he was well aware that it was extremely important in terms of reputation that all payments were made on time,[167] and that any mistake would become a "cause célèbre".[168]

102. We welcome the confidence of both the Government and the delivery partners that the handover of responsibility to the SFA on 1 April will run smoothly. However, mistakes and errors at the outset have the potential to undermine confidence in the new structures. We expect the SFA to update our successor Committee on its experience of the handover early in the new Parliament.

Costs of transition

103. In May and October, the Department wrote to the Public Bill Committee scrutinising the Apprenticeships, Skills, Children and Learning Bill with updates on the costs of transition from the LSC to the new structure. In May, the Department told that Committee that the Department's expectation was that "the transfer to the new arrangements would be cost neutral".[169] This was followed-up in October when the Department stated that:

the costs of running the new arrangement will be cost-neutral with an indicative administrative cost budget set at the same level as the LSC currently operates within.[170]

104. In addition to this, the Department told us that it also intended to make efficiency and value for money savings through a range of services which will be shared by a range of organisations:

For example, the Skills Funding Agency will be responsible for delivering the following shared services to the Young People's Learning Agency: HR, facilities and internal IM requirements. The Skills Funding Agency will also deliver a range of sector wide services which will support further efficiencies. These include the FE data service which collects, disseminates and reports on FE data, the learner registration service which assigns the unique learner number enabling the 14-19 diploma and the Qualifications and Credit Framework, and the Framework for Excellence which measures the performance of colleges and training organisations.[171]

The Department also asserted that the costs associated with the restructuring would be met from "within current LSC, BIS and DCSF resources with some re-prioritisation".[172] The Minister explained that this "re-prioritisation" would involve budgets being moved away from funding repeat qualifications for adults towards funding of first qualifications for adults.[173]

105. We note that the "re-prioritisation" of adult education is not without its own significant consequences and has involved some painful choices for FE colleges. While we appreciate that, in a tough climate for public spending, difficult choices must be made, we are not convinced that, in a rapidly changing world where the Government seeks an increasingly flexible labour market, it is right to pay for bureaucratic change by denying many adults the new skills they need to meet the challenges of that world.

106. In addition to this, the Department stated that it expected to achieve cost savings in the next few years following a reduction in the LSC estate from 50 buildings down to 21.[174] Those savings, we were told, would be "used to support [the Government's] reforms and deliver significant benefits to learners and employers".

107. The Minister acknowledged that the Department had incurred transition costs, which were estimated at £3 million to standardise transfer terms to Local Authorities; £2-3 million for pensions; and £36.8 million for premises.[175] He also confirmed that these costs would be met from existing budgets,[176] and that the new structures would be "cost neutral for the Exchequer".[177]

108. The Minister confirmed that savings would be made from the reduction in the size of the LSC estate.[178] In a supplementary memorandum the Department estimated that it expected to generate approximately £17 million in annual savings from the rationalisation of premises, IT and shared services, and streamlined contracting and data collection processes.[179]

109. The Department is confident that not only will the transition process be cost-neutral but that the new structure will make year-on-year savings. The transition process will conclude on 1 April. We are deeply sceptical that the creation of two agencies to replace one can possibly achieve long-term cost savings. We recommend that the Department, at the earliest opportunity, provide our successor Committee with a full breakdown of the costs of transition together with confirmation that these costs were borne out of existing budgets. This breakdown should also include an assessment of any additional costs imposed on Local Authorities and on individual colleges, both transitional and on-going.


110. The Learning and Skills Council employed around 3,330 members of staff.[180] A significant amount of planning was undertaken to transfer this workforce to the SFA, YPLA and other organisations. In a supplementary memorandum the Department set out how the staff would be relocated:

    DIUS and DCSF Ministers have agreed an overall staffing need of some 3,300 for the new 16-19 and post-19 systems. These numbers are in line with existing LSC staffing levels and reaffirms our commitment to retain the expertise of LSC staff in the new arrangements wherever possible.

    We expect around 1,000 posts to transfer to local authorities, 500 to be in the YPLA and 1,800 to be in the Skills Funding Agency including 400 posts in the National Apprenticeship Service.

    Since then, as part of the new role for RDAs in regional strategic skills, over 50 posts have been transferred to them.[181]

111. In written evidence LSC set out in detail how it managed the transfer of staff from the LSC to these organisations. Its Transition Plan, endorsed by both the Department for Business, Innovation and Skills and the Department for Children, Schools and Families, set out the principles which would be adhered to throughout the process. This approach sought to maximise the retention of LSC staff and their expertise.[182]

112. There were four phases of the transition:

Phase 1, matching functional blocks within the LSC to be transferred to other organisations.

Phase 2, matching individual posts to the new structures. This included individuals being matched to available roles.

Phase 3, review of individual matching and review process.

Phase 4, confirmation of individuals' new positions and posts.

The LSC concluded that the process was successful with the overwhelming majority of LSC staff now confirmed "in a post in the Skills Funding Agency, the Young People's Learning Agency, a Local Authority or other organisation".[183]

113. The Department explained that in reallocating staff, it was "clear that we were not seeking to make staffing reductions at the same time as implementing this complex change".[184] The Minister confirmed that the restructuring "was not designed to lead to staff reductions but to place all of those people within the current system in the new one."[185] However, he went on to say that "having got to this stage, obviously all the organisations will have to look from here on in at the administrative savings that can be made now they have been put in place."[186]

114. We recognise the benefits of retaining experienced and specialist staff within the further education structure. However, given the level of shared services in the new structure, we are surprised that the reorganisation of further education did not deliver a solitary reduction in overall staffing levels. The Government has confirmed that administrative savings will be made in the future and we recommend that it provides our successor Committee with an early update on proposals for those savings early in the next Parliament.


115. A number of our witnesses regarded the approach taken by staff in the new organisations as being vital to the success of the new Agency. In particular, they highlighted the need for a "culture change" in approach. Martin Doel recognised the fact that there was a demonstrable effort at the top to change but added that instilling that change throughout the Agency would be more difficult to achieve.[187] He believed this to be a crucial aspect of the new Agency, "I would not underestimate the degree of cultural change that is required in some of the people involved in the process".[188]

116. Pam Alexander from SEEDA also recognised the need for a change in approach

    of course, there are always barriers to culture shifting, but the directing of the funding, the traction that the different objectives has on the funding and the targets about the outcomes will be what, at the end of the day, drives culture to change".[189]

117. However, Councillor Sparks was less enthusiastic. He described the SFA in the following terms:

    It might be a different flavour, it might be in a different bottle, but it is the same building and virtually the same people. What has changed?[190]

118. It is clear from our witnesses that for the new Agency to be successful there will need to be a significant change in its culture, and in its staff's engagement with colleges. We welcome the Association of College's endorsement of a change in approach at the top of the organisation. Equally we recognise that this needs to be forced through the entire organisation.

140   Ev 43 Back

141   Q 100 Back

142   Q 110 Back

143   Q 110 Back

144   Q 110 Back

145   Q 110 Back

146   Q 13 Back

147   Qq 13-15 Back

148   Q 15 Back

149   Q 112 Back

150   Q 112 Back

151   Q 113 Back

152   Q 113 Back

153   Ev 42 Back

154   Ev 77 Back

155   Ev 80 Back

156   Ev 78 Back

157   Ev 43 Back

158   Ev 77 Back

159   Ev 77 Back

160   Ev 43 Back

161   Q 100 Back

162   Q 28 Back

163   Q 31 Back

164   Q 29 Back

165   Q 30 Back

166   Q 107 Back

167   Q 108 Back

168   Q 109 Back

169   Letter to Public Bill Committee, May 2009 Back

170   Letter to Public Bill Committee, October 2009 Back

171   Ev 43 Back

172   Ev 43 Back

173   Q 174 Back

174   Ev 43 Back

175   Ev 45 Back

176   Ev 45 Back

177   Ev 45 Back

178   Q 178 Back

179   Ev 45 Back

180   Ev 45 Back

181   Ev 45 Back

182   Ev 78 Back

183   Ev 79 Back

184   Ev 45 Back

185   Q 181 Back

186   Q 181 Back

187   Q 13 Back

188   Q 13 Back

189   Q 35 Back

190   Q 15 Back

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