Funding prospects as at end June 2010

1. Funding prospectsas at end June 2010 BOB POWELL Executive Director, OHA Ltd and Chief Officer, HOLEX

2. Election aftermath • BIS still in place, and Vince Cable speaking warmly about FE (and HE) contribution to economic revival and financial wellbeing • Back to “Department for Education” • David Willetts and John Hayes • “Sharp”, “cute”, “clever” ministers • Taking time to determine policy direction and priorities – “unravelling two sets of manifesto commitments”

3. Coalition agreement • seeking ways to support the creation of apprenticeships, internships, work pairings, and college and workplace training places as part of our wider programme to get Britain working. • reviewing support for part-time students in terms of loans and fees. • improving the quality of vocational education, including increasing flexibility for 14–19 year olds and creating new Technical Academies as part of our plans to diversify schools provision. • publishing performance data on educational providers, as well as past exam papers. • setting colleges free from direct state control - ‘public funding should be fair and follow the choices of students’ – and abolishing many of the further education quangos. • drawing on a range of Service Academies to offer pre-employment training and work placements for unemployed people.

4. Vince Cable speech, 3 June • “... we face deep-seated problems. A very fragile recovery – both at home and in our continental European neighbours. A massive budget deficit. A dysfunctional banking system. An economy that is seriously unbalanced both in its sectoral mix and in its regions. That’s why we have deliberately projected this coalition’s ambitions over a full Parliament, because the task is that big. […] We cannot have sustainable growth without fiscal stabilisation. And fiscal stabilisation will only be successful if it leads to growth.” • “The Department’s central task, and my central task, is making sure that Britain is a place where enterprise and innovation are made easier and can succeed. Where ideas are generated and are turned into jobs. Where people have the skills we need.”

5. BIS priorities (1) • First, an agenda for cuts has to be offset by a clear focus on policy designed to be a stimulus to growth. Our challenge is to redefine growth policy for an age of constrained public spending. I want a genuine audit of what the state has taken upon itself to do in business support, higher and further education, science and research over the last decade and how it does it. This is our window for transformational change. You’ll see the results in the weeks ahead. • I’m specifically committed to getting rid of some of the BIS quangos. We had 74 last year. 13 are now being got rid of, merged or having their funding cut. I aim to merge or abolish another 20 or so within a year – that’s a third of the rest. And we will keep scrutinising the others – if they fail to perform or the world has moved on, I will take action.

6. BIS priorities (2) • Second, I will take a tougher line on regulation, because I believe that often the most useful thing governments can do is simply to get out of the way. Of course regulation can be necessary to protect consumers, the environment and the labour force. But it must be proportionate. This Government will embark on radical steps to remove and stop unnecessary and costly regulation. • Third, I want BIS to play a central role in putting Higher and Further Education on a sound footing for the future and linking both better into the economy. Bringing HE, skills and enterprise together under the one departmental roof is central to the ‘BIS dividend’. My priorities are an increased emphasis on lifelong learning, stripping out some of the bureaucracy around FE and making sure that the outdated value distinction between blue collar apprenticeships, and further education on one hand and university on the other is disposed of for good.

7. Vince’s broader vision • Education and learning are of course desirable in their own right. Education for education’s sake – learning how to learn - benefits the economy in the long term. Philistinism is bad economics. It is also fundamentally unacceptable. • A story from own life makes the point. My mother and father left school at fifteen to work in factories. My father eventually taught building trades in the local technical college: we need more people like him. My mother was a housewife and when I was ten she had a major nervous breakdown and spent time in a mental hospital. When she recovered she saved her mind through adult education – learning for the first time about history, literature, philosophy and art. We need more people like her too.

8. “Getting from where we are to a highly-skilled, enterprise-based entrepreneurial economy is a lot more difficult than making speeches about it. I recognise that we can’t make this leap from one day to the next. Regions with long histories of mass industrial employment, or large scale public employment can’t be turned into entrepreneurial silicon valleys of private enterprise overnight. “ • “To achieve that shift requires looking at enterprise in the widest sense. I have always believed that the value of mutualism, cooperatives and social enterprise lies precisely in the way they help people be self-motivated entrepreneurs with a clear stake in what they do for a living, while still remaining part of a supportive community of fellow workers. We will be encouraging more of them.”

9. Third sector(Francis Maude speech, 9 June) • National Centres of Community Organising, and a Communities First Fund targeted towards the most disadvantaged areas • a National Citizenship Service to give 16 year olds the chance to develop skills needed to be active and responsible citizens • giving public sector workers a new right to form employee owned cooperatives and bid to take over services • making it easier to set up and run a charity, social enterprise or voluntary organisation • working straight away to reduce unnecessary red tape • resources to be directed via a Big Society Bank, using money from dormant accounts to invest in social goals • encouraging a social norm of volunteering and philanthropic giving, inc a national day to celebrate/encourage social action

10. Hayes during ALW • And adult education – make no mistake – brings hope and the promise of a better society founded on social mobility, social justice and social cohesion. It both enriches the lives of individuals and the communities of which they are a part.  Adult learning is not a luxury, it is an essential component of our education system.  If we want to build a bigger society as the Prime Minister has missioned us to, then we must recognise the value of community learning to civil society. • In all its forms, learning is a powerful glue that can bind us together as families, as friends, as communities.  Recognising, once again, that engagement learning leads to greater self-esteem, better health and greater community engagement.  And when parents are engaged in learning, then their children are more likely to value education and take more interest in school.

11. John Hayes speech, 10 June • FHE as a public service • Much previous investment wasted – spending rising faster than performance, lack of focus on teaching and learning • Education for adults must be about “giving the reality of opportunity, a driver of social, economic and personal improvement, not a means of keeping the unemployment statistics artificially low” • “... the most radical reform that skills has seen in at least a generation” • Three key priorities: • set colleges/providers free from central control • a robust attitude to value for money • focus on helping individuals as learners

12. “there are better ways of measuring outcomes than simply counting the number of qualifications gained. The emphasis must be put on progression, whether that’s to higher skills or to other forms of lifelong learning, including informal learning” • “what must continue is training in the workplace and public support for employers who want to offer it. Vocational qualifications delivered in the workplace provide better wage returns on average than qualifications delivered in colleges, while apprenticeships offer the highest returns of all” • “the contribution of post-compulsory education to [growth] is essential. I don’t just mean its contribution to economic growth, driven by the higher productivity that better work-related skills bring, but also its capacity to spark personal growth and the growth of a more developed sense of community that all learning brings”

13. Letter to VCs and Principals • Universities and colleges have a “central role to play” in rebuilding the economy and securing sustainable growth • BIS is committed to sustaining and building on proven strengths • But all who receive public funds to deliver public services must play a part in reducing public debt – this will require “strong leadership” • “We are all going to have to do more with less and stop doing some of the things we currently do” • Government respects provider autonomy and the freedom to decide mission, structures and strategies • Government will also remove unnecessary regulation and bureaucracy from colleges, and will be making practical plans to do so quickly

14. It is not for government to prescribe how individual providers should make savings, but note what the Department is doing: • 11% savings in running costs, with minimal impact on front-line services • apply restraint to all aspects of pay and bonuses, with a lead being given by senior staff • recruitment freeze • reductions in discretionary spend: IT projects, building projects, consultancy, travel and subsistence, hospitality, marketing, communications • “There will be a need in the next spending review to look again at options for further savings” • We expect “further acute financial pressures” over the next spending period

15. Bob Fryer open letter • Learning and skills sector “overfull” as a result of multiple initiatives and projects etc • Need a clear, limited set of priorities, co-ordinated cross-government by BIS • Don’t rush to replace SFA with “FEFC-lite” – structural change will happen, over time • Ensure simple, accessible fit-for-purpose funding for apprenticeships of all ages • Listen to UK CES, a “serious-minded, independent, critical and outspoken advisor”

16. Hold honest and robust discussion with employers, and legislate to ensure their contribution to the learning and development of their workforces: • time off to learn • make more of Union Learning Reps • transparency in company accounts re investment in learning • Stimulate a steady supply of well-managed, decently paid jobs and work with the social partners to secure this • Recommended reading: Blunkett’s introduction to The Learning Age and Delors’ Learning: The Treasure Within (UNESCO)

17. “Please always remember that learning and development is about much more than people’s jobs and skills, important though they are. It is about ensuring they can enjoy life in all its dimensions and thrive in a world of change and risk. It is about their sense of themselves and the meaning they give to their lives – practically, intellectually, aesthetically, morally and spiritually. It is about their families, the communities in which they live, about what counts as the good life, and about what it means to be a citizen, not just of this country but of a world facing huge international challenges of equality, fairness and sustainability.”

18. BIS summary, as of 16 June • Very early days – things may not be clear until December • No cuts to FE budget (yet) • Train to Gain being reduced, Apprenticeships up • Reducing NEETs is a key priority • “Real commitment to ACL, but not clear where this will take us” • Greater simplification • Freedoms and flexibilities for providers - full virement? • Looking at the whole funding system – expect a summer consultation paper • Transparency and accessibility of information on performance • No agreement on funding body structure • Working on investment priorities, with CSR in October

19. Cable remit to SFA, 17 June • supporting progression, and strengthening the supply of technician level skills(L3 apprenticeships); prioritising vocational qualifications that are understood and valued by employers; and working with employers/UKCES/ SSCs on promoting greater employer engagement and better utilisation of skills • reducing the number of 18-24 year old NEETs by funding a wide rage of FHE access routes which better support transition from education into productive work and fulfilling lives • securing high quality training opportunities for unemployed people – work-readiness, sustainable employment, progression in learning and work

20. providing independent careers advice – better choices • developing a programme of Lifelong Learning Accounts to create informed and empowered learners • encouraging an increased number of people to participate in adult and community learning – re-engagement, entry point and life enrichment • implementing sector-based joint investment proposals in high-growth and dynamic areas  new growth and innovation fund

21. The Skills Funding Agency will be expected to take a lead role in ensuring that colleges and training organisations ‘have greater freedom to innovate and excel, within a rigorous and transparent process of accountability through information on quality and performance’ • ‘clear, comparable and consistent’ information about provider performance including learner success rates, learner and employer satisfaction and learner destinations • ‘light touch, integrated quality assurance’

22. THE QUALITY ASSURANCE SYSTEM : A HIGH LEVEL OVERVIEW Rewards Standard setting inc MLPs Satisfactory performance – or better Commissioning / Contracting through NCF or ACTOR Continual quality improvement and self-evaluation Evidence of performance Self-Assessment - informed by Ofsted, FfE and labelling Performance Reviews (annual + in year) Delivery Re-recognition as an approved provider Unsatisfactory performance – or cause for concern Unsatisfactory improvement Recovery planning Improvement Support Strategic solutions Satisfactory improvement

23. Hayes 17 June speech • New freedoms, including: • ALR/ER virement (other than for poor providers) • an end to Summary Statement of Activity • no inspection of “outstanding” providers • PQP no longer a requirement • ‘Responsiveness is crucial if we are to provide the skills that employers need and students want. Removing unnecessary burdens and freeing colleges to react to local demand will help achieve just that.’

24. in my view, no learning should be treated as if it were without point and every new element added to our collective stock of knowledge and skill should be applauded. Everything any of us learns adds a new brick to the edifice of civilised life. Those with the will and commitment to learn, however they do it and whatever they choose to study, should be admired and encouraged. None should be disparaged as one of Browning’s “picker-up of learning’s crumbs”. • it’s the economic rather than the social or cultural case for skills that has been used by some not just to downgrade learning for its own sake, but as an excuse for the centralised command and control arrangements that have been foisted on adult educators over the past decade and more. Now we must finally acknowledge that this approach, even in the terms of its own narrow criteria, has failed.

25. WEA Parliamentary Reception, 22 June • Lifelong learning brings with it hope and the promise of a better society because it feeds social mobility helping to create a just and cohesive society. If we are to build a bigger, better society then we must ensure that everyone has the chance to participate in education and training. I want to construct a ladder of learning that helps even the most disengaged climb all the way up to high level skills. And to build this ladder we must see learning not as a series of self contained silos but a coherent whole. • It’s time we looked beyond often artificial distinctions between economic, social and cultural learning and once again value learning for its own sake. The fire that drove adult education’s pioneers still burns. And it drives my plans for further education and skills.

26. Learning that enriches the fabric of community life. • We need to make it easier for front line organisations to deliver these benefits. I’m keen to have discussions … on how we can lighten the regulatory burden to support flexible delivery. The transformation we need to build a truly inclusive society is not only economic, it’s social, too. And that’s why I see learning not as something that can be carved up into useful and less useful pieces, but as a continuum. Unless every part is healthy, the whole can only be diminished. • And that’s we see adult and community learning as such a priority. Learning, once again at the heart of life in every town and village. Every city. Helping everyone to be their best.

27. Hiatus • “it looks like we are going to have to postpone yet again our session [a workshop for HOLEX LSF managers, planned for 10 June].  It looks like there are going to be possible changes to Adult Policy which will mean that whatever is said next week could quite well change over the course of the next few weeks. I'm so sorry but do hope you understand that one hour is a long time in Government circles at the moment and anything can happen! ” • “we’re aware though the new Government are looking at every policy area and during this period we have been asked not to promote or to discuss/seek views on, possible future developments of individual programmes”

28. SFA/YPLA meeting, 28 June • Freedoms and flexibilities (Guidance Note 4) • strong onus on providers to "do the right thing“: ensure evidence of real demand, and a rationale for using the 19+ SFA money in ways you determine • note the continuing volume/frequency of data returns, and SFA intent to publish periodic information on sector-wide and individual provider performance • post-hoc accountability , and the “trust” agenda • Consultation paper in July about simplification of the funding system: BIS/SFA field visits • Guidance Note 5, within next few weeks, will focus on performance and take a "robust and challenging" line on MLP (expect baselines to increase)

29. Show me the money • Early announcement about in-year savings of £6.2bn (ie savings to be realised by March 2011) • BECTA and QCDA closed with immediate effect • 16-18 budgets protected • £200m taken from Train to Gain, £11m from QCF implementation • General 11.2% savings in Departmental expenditure will have impact ... eg. cut in LSIS budget • Some expansion in Adult Apprenticeships, via transfer from Train to Gain budget • Emergency Budget held 22nd June – forecasts 25% departmental savings • Civil servants already gearing up for CSR this autumn

30. CSR Framework • This Spending Review is not envisaged to be solely about cutting spending and setting budgets, but rather “a complete re-evaluation of the Government’s role in providing public services” • Application of a new set of criteria to deliver value for money: • is the activity being funded essential to the Government’s priorities? • does the Government need to fund the activity? • can it be provided more efficiently? • Open consultation • Star Chamber, and a Spending Review Challenge Group of experts • A comprehensive examination of areas such as social security, tax credits and public service pensions • Ending Public Service Agreements and an over-reliance on targets - Departments are to publish business plans that show the resources they need to put in place in order to protect key frontline services and deliver on their objectives

31. Review of past spending decisions • Projects have been cancelled where ‘they were not affordable, did not represent good value for money, or where they did not reflect the [new] Government’s priorities’ • Rollout of the Future Jobs Fund (lifetime cost of £290m) • Six month offer recruitment subsidies (£30m) • Extension of Young Person's Guarantee to 2011/12 (£450m) • 2-year Jobseeker’s Guarantee (£515m) • Building Schools for the Future programme also under fundamental review

32. 2010/11 – funding overview • 16-18: • new monies found, and general response is positive – but some big changes as a result of demographic shifts being taken into account, and still a schools/colleges funding gap • ALR cuts: • 14% in fEIs, 16% in General FE Colleges, up to 24% in specialist college providers … ameliorated somewhat after national moderation • concern about transfer of qualifications onto the QCF, and SfL, and LDD • fees review (chaired by Chris Banks: report early July 2010) • Employer responsive: • withdrawal of contracts • Large Employer Rate – 25% reduction in the TTG funding rates for work with large employers (over 1000 employees) • Steady state for ASL budgets (but some pressure to increase “first steps”)

33. Pressure issues • The YPLA and SFA will start to make different decisions on priorities (eg fees, disadvantage etc) and the formula is likely to diverge  different funding rates for the same provision, depending on whether learners are 16-18 or 19+ • Adult Education providers (fEIs) with small 16-18 allocations … • Sixth form colleges with small 19+ numbers … • This “marginal” funding may be subsumed - a paper will be prepared “for consultation” • Minimum contract values (currently only in respect of TtG, and not until 2011/12, but….) – must raise questions about viability of small and/or niche providers

34. Priorities • No longer an “in” word • Steering via funding incentives: who, what, where • Otherwise, market rules apply in a demand-led system • Providers need to be : • financially robust (large?) enough to cope with volatility • canny enough to generate a gap between cost and income • confident in their planning • able to justify their spending decisions to funders • ensure they keep up/improve their performance

35. UKCES Sector Priority Matrix High economic significance High skills deficits Low economic significance High skills deficits Low economic significance Low skills deficits High economic significance Low skills deficits

36. UKCES findings - overview • The size, value and maturity of the NINJ sectors varies, but there is a degree of interdependence between them • Low Carbon Economy - Financial and Professional Services • Advanced Manufacturing - Digital Economy • Engineering Construction - Life Sciences • Together, these sectors are seen as catalysts for future economic growth • There is some commonality between them in terms of skills needs: • Importance of R&D and STEM skills • Importance of skills at levels 3, 4 and 5 • Management and leadership skills • Commercialisation skills • Project management skills • Focus on re-skilling and upskilling existing workforces • Analysis of SSC research reveals additional 4 key sectors: Creative, Social Care, Retail and Hospitality

37. Priority REDHigh priority skill needs with scale and/or long lead time – for immediate action

38. Priority RED High priority skill needs with scale and/or long lead time – for immediate action

39. Future prospects • 2010/11 is “year zero” of a 3-5 year project to reduce the national debt - speed of change is the key question • Various agencies getting strident about where the cuts should fall (eg CBI call to cease ASL, reduce literacy funding) • Working SFA assumption is 100 fewer colleges … no prognosis for other types of provider … but minimum contract values being introduced, guidance on franchising being developed etc • New and different ways of working, and of organising, will be required • “Invest to Save” – an SFA loans scheme, to offset institutional collapse

40. Learning Revolution* • Lead Accountable Bodies for IAL (as intended) • 2010/11 a “shadow” year, but will require pooling of information and agreeing on future priorities  a planning document • from 2011/12, SFA to contract with LAB • local pooling of ASL/PCDL budgets • Year 2 Learning Champions support • Showing the outputs from work over the last year • Local Authorities in the driving seat, if they choose to be • Provision likely to be very different • Inspection arrangements • Workforce qualifications * NOTE: BIS now indicates that the “Learning Revolution” branding is discontinued