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

Conclusions and recommendations

1.  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. (Paragraph 24)

2.  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. (Paragraph 25)

3.  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. (Paragraph 29)

4.  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. (Paragraph 37)

5.  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. (Paragraph 38)

6.  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. (Paragraph 47)

7.  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. (Paragraph 48)

8.  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. (Paragraph 59)

9.  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. (Paragraph 66)

10.  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. (Paragraph 70)

11.  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. (Paragraph 87)

12.  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. (Paragraph 88)

13.  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. (Paragraph 94)

14.  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. (Paragraph 102)

15.  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. (Paragraph 105)

16.  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. (Paragraph 109)

17.  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. (Paragraph 114)

18.  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. (Paragraph 118)

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