Memorandum submitted by the Department
for Business, Innovation and Skills
INTRODUCTION
1. The Department for Business, Innovation
and Skills (BIS) creates the policy environment critical to grow
the economy, from higher education, skills and science to innovation,
enterprise and business. A strong and growing economy means new
industries and new jobs, improved public finances and supportive
public services. We know that investing in skills pays a double
dividend for society: skilled individuals have more options and
climb higher; they earn more, have greater job-satisfaction and
the wealth they create helps to stimulate the creation of more
jobs.
2. In the White Paper Skills for Growth
and the accompanying Skills Investment Strategy, which
we published in November 2009, we have made clear that skills
are a key part of our plan for economic recovery. The nation's
future can only be built by educated, enterprising people with
the right skills; skills demanded by modern work in a globalised
knowledge economy.
The Rationale for the changes to FE funding and
the establishment of the Skills Funding Agency
3. From April 2010, the Skills Funding Agency,
and the new Post-19 landscape serving employers and adult
learners, will support the Further Education (FE) sector to deliver
the skills the nation needs to prosper now, and in the future.
4. The Government's ambitions on skills
have been articulated in a family of policy documents from our
response to the Leitch Review of Skills in 2006 through to
Skills For Growth in November 2009.[1]
Throughout this time building our nation's future through a world
class skills base and clever investment in the real drivers of
competitiveness and productivity have been constant themes. The
proposal to create the Skills Funding Agency and the changes to
the wider skills landscape were first set out in the White Paper
Raising Expectations: Enabling the System to Deliver in
March 2008.
5. In Raising Expectations, we recognised
that the Learning and Skills Council (LSC) has been instrumental
in delivering improvements in adult education and training, but
that there was still much further to go if we are to have the
highly skilled workforce that we need to maintain and improve
our nation's competitiveness. With over 70% of our 2020 workforce
already having left full-time education, we need a sharper focus
on adult skills to ensure we have the right skills, in the right
place, and at the right time.
6. We must have a skills system that is
able to respond more quickly and more flexibly to the immediate
and future skills needs of the country. This includes young people
(aged 16-19) for whom we need to deliver the historic raising
of the participation age, improve attainment and equip Local Authorities
to give a coherent lead on all children's services from birth
to age 19. For adults (over the age of 19) we need a demand-led
system where funding is delivered by a more flexible and more
focused nationally consistent agency which acts on the actual
choices of learners and employers.
The Post 19 Landscape
7. The Skills Funding Agency needs to fit
into the wider post-19 learning and skills landscape, supporting
moves to significantly reduce the number of bodies whilst efficiency
and value for money are emphasised in those that remain. In designing
the Skills Funding Agency we have removed any potential duplication
or overlaps between it and other agencies, laying down clear respective
roles and responsibilities.
8. In particular, and as described in Skills
for Growth, we have realised synergies offered by the creation
of BIS to give Regional Development Agencies (RDAs), working in
partnership with local authority leader boards, sector skills
councils, Jobcentre Plus and others, the role of producing regional
skills strategies as part of the single integrated regional strategies.
This move means that, for the first time, there will be one document
detailing the integrated economic strategy, including skills in
each region. This ensures skills are embedded in wider economic
development thinking and that there are no overlaps between the
RDAs and the Skills Funding Agency. 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.
Design of the Skills Funding Agency
9. The Skills Funding Agency will be an
agency of BIS, its staff will be civil servants, but its Chief
Executive will be a statutory post holder. This model places the
Skills Funding Agency at a "shorter arms length" from
BIS than the LSC is currently, enabling a faster and more effective
response to policy, while reinforcing the autonomy of the FE sector
and ensuring no politicisation of individual funding decisions.
10. The Skills Funding Agency will channel
around £3.5 billion of funding to colleges and training
organisations, including the Third Sector, primarily in response
to customer (employer and learner) choice on programmes. It will
house all the Government's skills services including the National
Apprenticeship Service, Train to Gain including the National Employer
Service, and a range of Learner Services including a new Adult
Advancement and Careers Service.
11. We have designed the Skills Funding
Agency to be customer focused and to make things simpler for learners
and employers, so that they can identify the service which is
right for them, rather than the organisation which funds the system.
As such, the Skills Funding Agency's presence as a "public"
corporate identity will be minimal, concentrating instead on promoting
the services it houses to the right customers. There will be four
gateways into the new system:
(a) 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.
(b) 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.
(c) 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.
(d) Direct access to provision—People will
continue to have direct access to learning through local colleges
and training organisations. This will ensure that learning is
easily accessible to all that need it and freely available to
those with entitlements. There will also be Integrated services
with Jobcentre Plus for those who are unemployed and specialist
services for those with special needs such as offenders or people
with learning difficulties. In future, this learning will become
accessible through skills accounts.
12. The Skills Funding Agency will manage
relationships with colleges and training organisations through
a new single account management system, which will operate nationally.
This will ensure the same processes are used across the country;
removing the current regional variations used in the LSC, which
add to bureaucracy.
13. This approach will establish a single
point of contact (the account manager) for each college or training
organisation and enable a single contract with the Skills Funding
Agency covering all the activity being funded, including Apprenticeships.
It will encompass the negotiation and allocation of funding, performance
management, monitoring and review.
14. The Skills Funding Agency will maintain
a list of approved colleges and training organisations that have
reached a minimum standard to enable them to deliver publicly
funded learning. Under the demand-led approach, each approved
college and training organisation will be allocated a funding
envelope based on their track record (with contracts lasting up
to three years for the highest performing organisations). 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. This
will be administered by their dedicated account manager.
15. Excellent training organisations will
earn and be rewarded with greater autonomy through simpler funding
and monitoring arrangements, based on proportionate inspection
and assurance. In return training organisations will make more
information available on their performance so employers, learners,
funders, commissioners, inspectors and auditors can make good
decisions that give them, and their stakeholders, value for money.
16. The Skills Funding Agency will be a
national organisation, with a main office located in Coventry
and 20 other offices around the country. The National Apprenticeship
Service will be based in these offices but because it also has
a field-force working directly with employers and learners, its
staff will occasionally also work out of offices of some of the
organisations it works with, such as local authorities and Businesslink.
Transitional arrangements
17. Following the Raising Expectations:
enabling the system to deliver public consultation, a joint
BIS and DCSF Machinery of Government Programme was established
in May 2008 with representation from the LSC, the Association
of Directors of Children's Services and the Local Government Association
to ensure consistent and co-ordinated implementation of the new
pre and post 19 structures and processes.
18. The programme oversees the transfer
of responsibilities and the implementation of the new structures
including the transfer of staff and property and the development
of shared and interdependent services between the Skills Funding
Agency, Local Authorities and the Young People's Learning Agency.
The programme ensures that commitments which will simplify processes
are met eg that colleges and training organisations only need
to provide data once and that the data services for schools and
FE will manage appropriate sharing in line with the Apprenticeships,
Skills, Children and Learning (ASCL) Act. Similarly, there will
be a common performance framework for all training organisations
delivering post 16 education and skills.
19. The legislative framework for the change
is now in place through the ASCL Act 2009. LSC staff will transfer
under the Transfer of Undertakings (Protection of Employment)
Regulations (TUPE) to the new structures. There has been good
progress on the staff transfer arrangements, with all but about
10 of the 3,300 staff being clear on which organisation
they will transfer to. This has meant that, as planned, the Skills
Funding Agency was able to set up in shadow form in November.
The move to shadow running has enabled work to begin on embedding
the new system and culture which will enable the Skills Funding
Agency to begin delivering the planned benefits for learners,
employers and the FE sector from day one.
20. There are robust governance and independent
assurance arrangements in place to oversee the programme. The
programme has received two Office of Government Commerce (OGC)
reviews; 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. The expected
beneficial impact on learners, employers, the FE sector and in
terms of improved policy and implementation has been mapped out.
The programme will be continuously reviewed and measured against
this benefits map over the next few years.
Transition costs
21. The House of Commons Committee which
scrutinised the Apprenticeships, Skills, Children and Learning
Act received two written updates on the costs associated with
the transition from the Learning and Skills Council to the new
structures for adults and young people (letters dated 5 May
and 30 October 2009).
22. These letters described the costs associated
with the transfer and confirmed that we expect to meet these costs
from within current LSC, BIS and DCSF resources with some re-prioritisation.
23. As part of this change, we are reducing
the LSC's premises estate of 50 properties to 21 to
meet the requirements of the new structures. This change reduces
the annual running costs required for the new structures in comparison
to those required currently for the LSC. Clearly such change cannot
be achieved overnight, but our expectation is that this will,
within a few years, generate savings which will then be used to
support our reforms and deliver significant benefits to learners
and employers.
24. In addition, and as part of our work
to secure efficiencies and value for money, a range of shared
services are being developed which will service the needs of 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.
Continuity of service
25. Since the announcement of these changes
we have publicly recognised the importance of retaining the valuable
expertise of LSC staff in the skill system and committed to avoiding
compulsory redundancies.
26. We have also worked 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 feed
back on the impact of the changes; ensuring services are not compromised.
An employer reference group was set up at an early stage to help
shape the work of the Skills Funding Agency and continues to meet
under the chairmanship of the shadow Skills Funding Agency. In
addition, the FE Ministerial Standing Group and the FE Reform
and Performance Programme Board, on which key stakeholders including
representatives from the FE sector sit, have received regular
reports on progress and been able to steer developments.
27. We have been working closely with colleges
and training organisations throughout the implementation process
and are ensuring they are fully prepared for the changes that
will come into effect in April. For example, all LSC contracted
training organisations for adult skills have been informed who
their single account manager will be and regional briefing events
have been held with colleges and training organisations on the
future funding and operational arrangements.
28. These briefings have described the new
simpler and more efficient funding systems being put in place,
with account management at its heart. The new account management
system will enable more mature and timely discussions about funding
and performance because both the account manager and the college
or training organisation will have access to the same on-line
information about the contract.
Governance and accountability
29. Ministers will set the overall strategy
and objectives for the Skills Funding Agency and the budget needed
to achieve them and will publish these in an annual Skills
Investment Strategy. The Chief Executive will agree an annual
delivery plan with Ministers and he or she will be accountable
to them and the Permanent Secretary, supported by the Director-General
for Universities and Skills, for delivery of services by the Skills
Funding Agency, including delivery of its targets and objectives.
The Chief Executive will be responsible for ensuring that resources
authorised by Parliament in respect of the Skills Funding Agency
are used for the purposes intended and will produce an annual
report on the performance of the functions of the office of the
Chief Executive for each financial year, which will be laid before
Parliament.
30. The Skills Funding Agency, through its
FE Data Service, will also publish quarterly data on performance
across all of its main skills programmes, in line with national
statistical standards. In addition, we are looking for ways to
build further on the timeliness and range of information that
is available, to ensure that Parliament and the wider public have
as much information as possible about the delivery of these programmes.
INVESTMENT IN
SKILLS
31. Total government investment in adult
skills for 2010-11 is £4.4 billion; this figure
includes £340 million of efficiency savings agreed as
part of Budget 2009. This total includes more than £3.5 billion
for training places funded through the Skills Funding Agency,
supporting a planned 3.4 million adult learners in the 2010-11 academic
year. The Skills Investment Strategy, published on 16 November
2009 sets out our funding priorities for 2010-11, building
on the commitments set out in the White Paper Skills for Growth.
32. The Skills Investment Strategy 2010-11
sets out how we will support greater numbers of Advanced Apprenticeship
places, as part of the Government's plans to build intermediate
and technician level skills. It also confirmed that we will continue
to increase support to meet the needs of those individuals who
have yet to acquire literacy and numeracy skills, or a first full
Level 2 or Level 3 qualification. There is also greater
support for the unemployed, to support the acquisition of the
skills they require to progress into sustainable employment.
33. New Industry, New Jobs and Skills
for Growth identify sectors which are likely to underpin our
future economic growth and affirm our position within a globalised
knowledge economy; this sector identification will be refined
further in January 2010 when the first report of the UKCES
is published.
34. Regional priorities will be articulated
as part of Single Integrated Regional Strategies. The processes
of defining both national and regional Skills Strategies and ensuring
their coherence with sector needs will be undertaken annually
and the funding priorities of the Skills Funding Agency will reflect
these processes. There is also a commitment within Skills for
Growth for greater capacity within Train to Gain delivery
for the sectors identified in New Industry, New Jobs.
35. Skills for Growth emphasised
the importance of increasing contributions from employers who
are one of the main beneficiaries of the skills system; as public
funding is prioritised to support both national and regional priorities
it will become increasingly important that investment from employers
is optimised. In order to delineate the appropriate parameters
of co-investment between employers and Government, and indeed
learners themselves, we have commissioned an independent Review
of Fees and Co-Funding in Further Education reporting in June
2010.
36. The Skills Funding Agency's Delivery
Plan, the first iteration of which will be available shortly,
will set out the next steps for delivering the commitments set
out in the Skills Investment Strategy and Skills for
Growth, including plans for focusing on the priority sectors.
FE CAPITAL PROGRAMME
37. The Skills Funding Agency will take
over responsibility for managing the FE capital programme, following
the principles laid out in Sir Andrew Foster's report on the LSC's
FE sector building programme. It will learn the lessons of the
LSC, putting in place robust forecasting models and measures to
strengthen the financial management of the programme. In preparation
for the next spending review period, the sector is being consulted,
through the Association of Colleges' Capital Task Group, on how
future funds should be best allocated. Early next year a process
will be finalised for determining how future funds will be allocated
to achieve the best value for money possible whilst keeping bureaucracy
to a minimum. Through these measures the Government has every
confidence that the programme is now on a firm footing for the
future and that the previous problems with the programme will
not be repeated.
38. It is recognised that it is critical
that capital investment plans are coherent across post-16 provision,
so that investment decisions for FE capital and 16-19 capital
are able to support development of the infrastructure necessary
to deliver increased participation, the full curriculum and qualification
entitlement, and the skills required by employers in the changing
economy. It is for this reason that we have given a commitment
to publish an overarching single capital strategy for post 16 education
and training in England—excluding the higher education sector—and
that we will consult with both the Young People's Learning Agency
and the Skills Funding Agency when doing so.
CONCLUSIONS
39. The above statement confirms that the
Skills Funding Agency is on track to be fully operational from
the beginning of April 2010. The creation of the new agency has
been achieved with no adverse impact on learners, employers and
the FE sector. We expect the benefits of the change to start being
realised soon through improved services to learners and employers
delivered through customer focused gateways; simpler and automated
account management systems for colleges and training organisations;
and better policy and implementation from BIS and the Skills Funding
Agency, because there is a closer relationship between Ministers
and the agency.
40. The Skills Investment Strategy
2010-11 sets out the Government's FE funding priorities
and its publication in November is ensuring that the Skills Funding
Agency is already able to begin working in shadow form to support
colleges and training organisations to prepare for the 2010-11 academic
year.
12 January 2010
1 Leitch Review > Raising Expectations > Enabling
the System to Deliver > New Industry New Jobs > Building
Britain's Future > Skills for Growth > Skills Investment
Strategy 2010-11 Back
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