Skills Funding Agency: making things happen A new landscape Andy Fawcett – Head of Provider Accounts

The new landscape Skills Funding Agency - Funding and regulating a system which is responsive to customer needs - Not a planning body and rarely intervening Colleges and Training Providers Responding to the demands and needs expressed by employers and learners (who in turn will be informed and advised by the new Integrated Adult Careers Service – Next Step) - Able to direct funding within and across programme areas Rewarded for performance and meeting priorities Stakeholders – Local Enterprise Partnerships (LEPs) and Sector Skills Councils (SSCs) - Expressing needs of their area/ sector and attempting to influence the provision of colleges and training organisations by using intelligence to ‘nudge’ it in the right direction NB. Reference to Stakeholders x ref to UK CES – language of “nudging”

How does this differ from the past? Skills Funding Agency is a national adult skills organisation with a single business model Single (national) Account Management Performance management – not partnership management A much lighter touch – proportionate to risk An expectation that colleges and providers will meet local, regional and national priorities as they see fit rather than top-down planning Empowerment of colleges and training organisations with greater funding flexibilities and freedoms Direct contracts with far fewer, bigger colleges/ training organisations Transition from LSC to SFA was the start of this journey….recent announcements/further changes to funding will take us further towards our destination

Goals and ambitions 10/11 BIS Secretary of State’s Revised Grant Letter to the Skills Funding Agency (17 June 2010) set out the Coalition Government’s key goals and ambitions: Supporting progression and strengthening supply of technician level skills, particularly through Level 3 Apprenticeships Reducing the number of 18-24 year-olds who are NEET Opportunities for the unemployed to get the skills needed for work-readiness and sustainable employment Inform and empower individuals through independent careers guidance and Lifelong Learning Accounts whilst giving colleges and training organisations the flexibility to respond Increased participation in adult and community learning Plus previous announcement of £200m out of Train to Gain and into Apprenticeships (£150m) and FE Capital (£50m) Policy commitments set out in The Coalition: Our Programme for Government (May 2010)……..against a backdrop of reducing public spending: £17 billion reduction in departmental spending by 2014-15 The Chancellor announced an average departmental real cut of 25% (the cash reduction could therefore be less but may also be at this level given that 25% is an average)

10/11 funding changes To coincide with the issuing of the Revised Grant Letter, John Hayes wrote to all Skills Funding Agency providers and Colleges: Removal of the 19+ Summary Statement of Activity Single budget for post-19 Adult Learner Responsive (LR) and 19+ Employer Responsive (ER) provision for Colleges (19+ ER only for other providers) No in-year performance management or reconciliation of activity in single College budget (quarterly for other providers) No Ofsted inspection for colleges with outstanding performance (in-line with the policy announced for schools) Colleges and training organisations are being freed to deliver a more responsive and flexible offer to learners and employers NB. Growing distinction in funding policy terms between Colleges and non-College training providers. Colleges will have greater flexibilities and a lighter touch approach in terms of inspection and performance management than non-Colleges will have. Departure from the past – LSC more about provider “neutrality” LINK TO JOHN HAYES LETTER http://www.bis.gov.uk/assets/biscore/corporate/docs/f/fe-letter-john-hayes-2010.pdf SEE ALSO GUIDANCE NOTE 4 FOR MORE DETAIL

What does this all mean? There will be more freedom for the FE skills providers, particularly colleges, to determine how they use funding they are allocated by the Skills Funding Agency This will bring greater responsibility to ensure that they are delivering what learner and employers want Requirement for more direct engagement between colleges/ providers and wider stakeholders (eg. LEPs) to ensure the skills offer is meeting their needs Greater sharing/ publishing of data, to set out what providers and Colleges are delivering and enable stakeholders to draw conclusions as to whether needs are being met Aim to achieve more for less Key message to stakeholders is that SFA will not be a planning body and will “rarely intervene”. If they want to influence the delivery of Colleges and training providers they will need to find other mechanisms for engaging with them – we will not be the go-between, intermediary etc X ref to UK CES report – language of “nudging”. SFA will not be planning – not yet clear to what extent and how we will be “nudging”. Some references to us using price as a lever – and also to commission provision if/where gaps emerge….but no detail as yet and not yet clear whether/how SFA will be resourced to perform this role in the longer term

Future Scenarios Budget announced £17 billion reduction in departmental spending by 2014-15 The Chancellor announced an average departmental real cut of 25% Declining 16-19 cohort and the pressure to reduce funding rates in this area. ESF income could also be under pressure due to changes in exchange rates leading to a potential reduction of up to 5% Savings will be expected to be met as far as possible from efficiencies, not frontline services. Not all departments will face the same level of reduction and we will not know the actual reduction until the outcomes of the Spending Review in October 2010. However, a typical reduction of 10-15% does not seem unlikely given the average position.

Further changes The wider policy landscape The new DWP “Work” programme The abolition of RDAs and GOs NHS reform – abolition of SHAs/ PCTs (workforce development implications) Changes to policy re. business support (Business Link) SSCs – future role (LMI? Qualifications? NSAs?) Local Enterprise Partnerships (LEPs) Letter from SoS BIS and CLG to Local Authority inviting EoI by 6 September 2010 LEPs to provide “strategic leadership” in their areas Rebalancing economy towards the private sector Issues such as planning & housing, transport, employment and enterprise, low carbon economy …..but not yet clear what resources will be available LEPs ‘will want to work closely with Universities and Further Education Colleges’ Government not prescribing LEP footprint – bottom up

Further changes Quality and Intervention Greater freedoms Self Assessment High quality providers and provision Approved College and Training Organisation Register (ACTOR) Filtering of contractors Minimum Levels of Performance Emphasis on Data Fewer, bigger providers – question is…How few? How big? Which providers? What is the journey which will get us to this point….in part about signals which will be sent out by SFA (Eg, minimum contract values, sub-contracting guidance) and in part about actions taken with and between providers/Colleges themselves on a voluntary basis (eg. decisions to merge, sub-contract etc) ? What will our final destination (provider landscape) look like?

Further changes The FE System Moving away from “Programmes for the Unemployed” (beyond March 2011 when current programmes end) A new funding performance methodology which gives more emphasis to the “outcomes” and “impacts” of FE provision (eg. job entry) - details to be confirmed. The transition to “fewer, bigger providers” Expectation of more HE in FE – and HE reform Policy re. learning for personal, social and community benefit (Adult Safeguard/ Informal Adult Learning) Use of price (rates) as an incentive to providers and learners Fewer, bigger providers – question is…How few? How big? Which providers? What is the journey which will get us to this point….in part about signals which will be sent out by SFA (Eg, minimum contract values, sub-contracting guidance) and in part about actions taken with and between providers/Colleges themselves on a voluntary basis (eg. decisions to merge, sub-contract etc) ? What will our final destination (provider landscape) look like?

Further changes - Who pays? Redefining respective contributions of employers, individuals and the tax payer: Implementation of Fees Review recommendations Fee remission categories for specific groups (eg. JSA Claimants) BIS to match ‘co-investment contributions’ from individuals and employers up to a published “Maximum Contribution” (ie. FE Allocation) . BIS-funded colleges/ providers to clearly publicise the price of courses on offer inc. expected employer/ individual contribution Only contributions in cash will count – not in-kind FE funding to be reprioritised towards financial support for individuals (eg. CDL) CSR October 2010 – to determine level of Post-19 Skills investment and shape/ form of funding arrangements Chris Banks CBE Fees Review published July 2010 CDL – Career development loan Poss changes to SFA itself…various possible models. Bring together with HEFCE. Bring together with DWP Commissioning (ALP calling for this). Bringing back together pre and post 19. Any/all of the above! Mention current/short term pressures to reduce admin budget – ie. current VS scheme

NW skills priorities Local community engagement including disadvantaged groups Supporting developing sectors and the growth in demand for L3 skills Providing progression opportunities Cost effective delivery Stimulating demand Effective information, advice and guidance Maximizing employer and individual investment Promoting innovation, enterprise and management skills Although the Skills Funding Agency and NWDA would not wish to specify how providers should plan future delivery, both organisations would wish them to work collaboratively to provide real solutions for the following issues; How can the provision delivered make a real economic and social impact on local communities (including working with disadvantaged groups such as NEET, offenders, BME communities and workless individuals)? How will the evidence base findings and the North West Priorities Statement influence providers and partners in their planning of skills provision? How will the region, sub-region and local communities support the developing growth sectors, such as low carbon and the growth in demand for technical level skills (L3) including apprenticeships and STEM subjects? How are providers and partners working collectively to ensure there are progression opportunities, both for further learning and onto employment, particularly for young people? (This will include employability provision, Adult and Community Learning, Skills for Life provision, in particular numeracy and HE provision delivered in local communities.) Is existing provision supporting both learner and employer demand being delivered in the most cost effective way for high employment and high growth sectors? (E.g. range of delivery models available to ensure SME and micro-business community can access provision, collaborative working with other providers/partners, promotion of joint investment) How will demand for skills development be stimulated effectively in a strategic and focussed way? How will providers and others ensure Information Advice and Guidance (working with Next Step) is effective in promoting a better match between skills development and skills demand? What will providers do to maximise employer and individual investment (in line with national policy) in training (20% - 50% contribution)? How are providers promoting innovation and enterprise skills? Including Leadership and management skills delivery for SMEs.

Labour Market Intelligence Reduced top down planning but: UKCES and Sector Skills Councils continuing role Reduced regional planning NO RDAs Slimmed down Business link – reduced brokerage Regional Intelligence Unit functions under discussion Opportunities to enhance LMI Collaborative networks – sub contracting Cross selling Although the Skills Funding Agency and NWDA would not wish to specify how providers should plan future delivery, both organisations would wish them to work collaboratively to provide real solutions for the following issues; How can the provision delivered make a real economic and social impact on local communities (including working with disadvantaged groups such as NEET, offenders, BME communities and workless individuals)? How will the evidence base findings and the North West Priorities Statement influence providers and partners in their planning of skills provision? How will the region, sub-region and local communities support the developing growth sectors, such as low carbon and the growth in demand for technical level skills (L3) including apprenticeships and STEM subjects? How are providers and partners working collectively to ensure there are progression opportunities, both for further learning and onto employment, particularly for young people? (This will include employability provision, Adult and Community Learning, Skills for Life provision, in particular numeracy and HE provision delivered in local communities.) Is existing provision supporting both learner and employer demand being delivered in the most cost effective way for high employment and high growth sectors? (E.g. range of delivery models available to ensure SME and micro-business community can access provision, collaborative working with other providers/partners, promotion of joint investment) How will demand for skills development be stimulated effectively in a strategic and focussed way? How will providers and others ensure Information Advice and Guidance (working with Next Step) is effective in promoting a better match between skills development and skills demand? What will providers do to maximise employer and individual investment (in line with national policy) in training (20% - 50% contribution)? How are providers promoting innovation and enterprise skills? Including Leadership and management skills delivery for SMEs.

What happens next? Consultation exercise on the Coalition Government’s Skills Strategy, Skills for Sustainable Growth and FE Funding methodology, A Simplified Further Education and Skills Funding System and Methodology Launched 22 July 2010 and will lead to publications in late November

Consultations Skills for Sustainable Growth outlines BIS’s vision for skills and what are expected to be the key elements of a strategy for delivering it Complemented by the consultation A Simplified Further Education and Skills Funding System and Methodology for FE colleges and training organisations, following an independent review by Chris Banks, CBE

Thank You – Questions?