1. Skills & Employer Responsiveness Programme: Challenges, Opportunities and Priorities
Clive Howarth
Head of Employer Services

2. Purpose To update you on the changing skills ‘landscape’
To outline skills priorities for this region
To provide information on which the sector can make its own decisions and decide its own actions in response

3. Coalition Government:
Policy commitments set out in ‘The Coalition: Our Programme for Government’ (May 2010)……..against a backdrop of reducing public spending: £17 billion reduction in BIS spending by
BIS Secretary of State’s Grant Letter to the Skills Funding Agency (17 June 2010) set out the Government’s key goals and ambitions:
Supporting progression and strengthening supply of technician level skills, particularly through Level 3 Apprenticeships
Reducing the number of year-olds who are NEET
Opportunities for the unemployed to get the skills needed for work-readiness and sustainable employment
Inform and empower individuals and employers 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

4. Coalition Government (2)
To coincide with the issuing of the Revised Grant Letter, John Hayes also announced a range of freedoms and flexibilities:
Removal of the Summary Statement of Activity for post-19 provision
Single post 19 budgets
Streamlined Performance Management
These arrangements, alongside the refocusing of Train to Gain to support additional Apprenticeships and FE capital investment, aimed to free up providers to deliver a responsive and flexible offer to learners and employers
Skills Funding Agency confirmed operational arrangements through Guidance Note 4 and 5 (all Guidance notes available on Agency website)

5. Role of Skills Funding Agency
The policies of the new Government changes both the role of the Agency and the nature of the relationship:
Focus on funding and regulation
Limited intervention – only by exception- no ‘hand-holding’
Aiming for ‘the right balance between consistency, equity and new freedoms and flexibilities for the sector’
Providers assume much greater responsibility and autonomy…. for planning, prioritising, managing data queries, quality and responding to learner and employer need
Providers take on more active role in local communities – for example, Local Enterprise Partnerships and Employment & Skills Boards

6. The emerging landscape:
Budget announced £17 billion reduction in departmental spending by an average departmental real cut of 25%. Actual reduction known following outcome of the Comprehensive Spending Review (CSR) on 20th October.
Pressure on funding rates will intensify with the reducing cohort plus post-19 scenarios and priorities
HE funding also under pressure - it is part of the same overall BIS departmental settlement from the CSR.
Savings expected to be met as far as possible efficiencies, not frontline services.
Concern: the possible impact on the financial health of providers is immense with the potential for many to move into inadequate financial health

7. Budget impact on an ‘average’ college
This is based on an ‘average’ FE College, with a 19+ income of £6.4m

8. Impact of scenarios on College financial health
Scenario 1 (10% reduction)
Scenario 4 (25% reduction) .
These graphs show forecast of the proportions of colleges by financial health categories based on two scenarios and assuming that limited mitigating action has been taken by every college

9. Future opportunities
Increased opportunities for sub-contracting, collaboration and new organisational models as the number of providers with direct contracts reduces as minimum contract value is implemented from 2011/12.
Greater scope/need to increase co-funding through increased engagement with businesses and other partners
Government ambitions on growth of Apprenticeships (only 25% of this funding currently goes to Colleges)
More flexibility to respond to the needs of employers, stakeholders and the community
Freedoms and flexibilities help providers manage within tighter budgets  
Challenges are still great…

10. How providers are already responding
There is already good practice across the sector where providers are taking decisive action to cut costs and improve efficiency.
Need the sector to share this best practice and learn from each other to deliver greater efficiencies.
Examples of actions governing bodies are either taking or considering include improved efficiency of delivery:
Reduce staffing costs through redundancies, reducing use of variable hours staff, staff pay.
Improved floor space utilisation
Upgraded facilities
More effective procurement – such as joint procurement, including for example exam fees
Other delivery models and options

11. How providers are already responding
Developing organisational models with other providers
Taking on new sub-contractors
Federations
Shared services
Mergers/acquisitions
Repositioning their offer
Grow provision in areas of growth (e.g. Apprenticeships)
Increase market share on any or all programmes (and decrease in others?)
Review curriculum offer in light of market competition
Review curriculum in light of emerging sectors and skills priorities
Robust management of sub-contracting to remove poor provision and develop more ‘expert’ offer.
Securing increased investment from employers and learners
Benchmarking and peer review with others to improve efficiency.

12. Regional Priorities Regional Skills Priority Statement
Produced by each RDA following consultation across their region. Process led by Agency staff seconded to RDA.
Identifies key challenges and issues in region’s economy
Articulates priority skills for the region, not the only skills for the region

13. Regional Skills Priority Statement
Key points:
Good progress over past 10 years in improving adult skills and raising young people’s educational achievement
Still too many with no or low skills and too few with higher level skills
One challenge is to give those in work the skills to keep them there and to enable them to progress
Another challenge is to get people into the jobs market with skills and attitude to learning that will keep them there
Spatial imbalance of skills across the region and danger of communities being ‘left behind’
We lack clear ladder of progression and opportunity as an incentive to achievement of higher level skills

14. Regional Skills Priority Statement
Need to re-balance the economy by supporting private sector recovery and address impact of public sector cuts
Region wants to see:
investment directed to the right skill areas
intervention where the market fails
raising of business and individual aspirations for skills development
deployment of people’s skills effectively
strengthened case for sectoral targeting of skills investment
responses to geographical and local variations in skills demands through utilising supply side interventions aimed at improving productivity: outcome not output
commitment from the supply side to respond to demand side information and intelligence

15. Sectors driving the demand for skills
Group 1 – Rising employment at level 4 and 5 but declining employment at lower levels
Group 2 – Rising demand for intermediate skills (levels 2 and 3)
Group 3 – Rising demand at intermediate and higher level
Group 4 – Rising demand at level 2 and level 4
Group 1
Banking and Insurance. Other Financial and Business Services. Other (mainly Public) Services. Electrical and Optical Equipment. Chemicals Oil and Gas Extraction.
Agriculture, Forestry and Fishing.
Wood and Wood products.
Paper, Printing and Publishing.
Public Admin and Defence.
Group 2
Education
Health
Group 3
Retail
Group 4
Food, Drink and Tobacco. Other Manufacturing Construction.
Communications. Transport. Hotels and Catering.
Machinery & Equipment. Metals. Other Mining.
Textiles and Clothing. Rubber and Plastics.
Wholesaling. Business Services.

16. Sectors of Economic Significance
Volume Employment Sectors
Key support sectors and those of sub-regional importance
New Technology ‘Driver’ Sectors
Business Services
Health & Social Care
Retailing
Construction
Wholesaling
Financial and Business Services
Tourism
Distribution & Logistics
Advanced Manufacturing
Composites
Low Carbon: Carbon Capture & Storage
Low Carbon: Civil Nuclear
Low Carbon: Offshore Wind Technologies

17. Final key messages
Days of on-going budget growth are over for foreseeable future, if not forever!
Government expects to see an even bigger economic return on public investment and increasing shared investment between state: employer: individual
Budget pressures will change the structure of the sector within the life of this Parliament
but:
significant numbers of adults in our region still lack the skills they need to find and keep work and progress within work. The need is at least as great as ever.
the region needs to increase in prosperity and skills is seen as a major solution. The demand is still there and new markets are emerging.
freedoms and flexibilities offer a real opportunity for providers able to adapt and adopt new ways of working.