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Navigating Funding Uncertainty and Policy Changes in Education Sector

Keep abreast of new government rules, budget cuts, and provider implications in the education field. Stay competitive, adapt to changes, and ensure financial stability in uncertain times.

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Navigating Funding Uncertainty and Policy Changes in Education Sector

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  1. Survival and growth at a time of funding uncertaintyFor

  2. Changes in the Policy Context • New Government, New Rule Book • Changes in Structures • Less Money • Simplification of Funding • Qualification Reform

  3. New Government, New Rule Book New rules on how the public sector delivers and engages with customers • Less bureaucracy and micro-management • More freedoms and flexibilities • More consumer choice • More competition to raise standards • Payments for results and outcomes • More transparency on what is spent and achieved (Return on Investment)

  4. Implications for Providers • Single adult budget • Virement between adult learner and employer responsive streams allowed for most providers • Summary Statement of Activity not required, more responsive to local demand • No ‘in-year’ funding adjustments • Implications for performance management • More flexibilities • Relaxation of 14-19 entitlement • Freedom to choose which and how many 14-19 Diplomas to offer

  5. Implications for the Demand Led Funding Formula • Move away from the DLF where demand was largely determined by somebody other than the consumer to what learners and employers actually want • More transparent and accessible information on local skills needs and on what providers actually deliver, to enable rational choice • Improved IAG

  6. Changes in Structures • New Departments • Department for Education (DfE) • Department for Business, Innovation and Skills (BIS) • New Agencies • Young People’s Learning Agency • Skills Funding Agency

  7. YPLA responsibilities • Non Governmental Public Body • Fund and support Local Authorities to deliver the national entitlement in schools with sixth forms • Directly funds provision in FE and Sixth Form Colleges and Training Providers • Local Authorities still involved in strategic planning • National Commissioning Framework now discontinued • In 2010-11, £8,500 million investment in participation, learner support and capital projects

  8. Skills Funding Agency responsibilities • Agency of BIS • Also houses National Apprenticeship Service and National Employer Service • Funding adult responsive and employer responsive provisions • Identifying demand for strategic skills with key partners, e.g. UKCES, SSCs, DWP • In 2010/11, £3,000 million investment in learning programmes (ex. Programmes for Unemployed)

  9. Less Money 1 • Reductions in SLN rates for Adult and Employer Responsive already in place • Some cuts already in pre-employment budgets, e.g. Young Persons Guarantee • Seeking cuts of 25% over 4 years for most government departments • Spending Review in October may require reductions in funding rates from start of financial year (April 2011)

  10. Less Money 2 • BIS budget cut by 7% p.a. (25% over period) • FE resource budget reduced from £4.3b to £3.2b by 2014-15 • Cut in administration • RDAs abolished • Quangos under consideration, e.g. CITB, UKCES • Some protection for Adult and Community Learning

  11. Less Money 3 • Abolition of Train to Gain • Replaced by an SME focused training programme • Reprioritisations around apprenticeships and skills for life • Additional 75,000 adult apprenticeships (£250m p.a.) • Employer contributions? Voluntary training levies?

  12. Less Money 4 • HEFCE budget cut by 40% (£7.1b - £4.2b) • Biggest cuts in arts and humanities • Tuition fee increases • Implications for Access to HE provision • More student loans, including for those aged 24 and over on level 3 programmes

  13. Less Money 5 • DfE budgets see small cash increase • Cuts in central department costs • EMAs replaced by ‘targeted support’ for those facing financial barriers to education (£500m) • 16-18 funding maintained in cash terms but reductions in unit costs as growth in participation is not fully funded

  14. Implications for Providers • Focus public funds on key priorities, e.g. Apprenticeships, Skills for Life • Less secure financial position for providers • Some providers already getting support • Future cuts could be even more destabilising • Greater focus on outcomes, e.g. employment or progression to higher education, and the qualifications required • Greater focus on business objectives of employers, e.g. productivity, profitability, less waste

  15. Implications for Providers • Providers need to know their costs and how to reduce them • More collaborative working to reduce overhead and back-office costs • More effective use of estate • Learning on employers’ premises • Bigger organisations will be more financially resilient and get economies of scale (not just by mergers)

  16. Implications for Providers • Increasing minimum contract levels for employer responsive funding means that providers will have to work together • Increased levels of co-investment • Those who can afford to will pay more • Differential fee rates • Innovative ways of delivering learning • More focus on learning technologies

  17. The Demand–Led Funding FormulaFor

  18. Different Funding Streams for Providers • Learner responsive • 16-18 • Adults (ALR) • Employer responsive (ER) • Train to Gain • Apprenticeships • Programmes for the Unemployed (PfU) • Employability and Skills Programmes • Six-month offer • Response to Redundancy

  19. Main Changes in Funding Streams for 2010/11 • Significant growth in apprenticeships funded from reallocations • Reductions in funding rates per SLN for adult learners, adult apprentices and Train to Gain learners • Funding focused on QCF provision • More flexibility in the 19+ funding streams • Removal of unnecessary regulation and bureaucracy

  20. Funding Formula The funding formula is applied to each learning aim taken by a learner: Provider Factor ALS £ National Rate £ Short Programme Modifier Large Employer Area Cost Uplift Success Factor (LR) x x = Programme Weighting Funding SLN Disadvantage Uplift +

  21. SLN Volume of learning measured in GLH or cost of activity National ratesbased on affordability NFR Reflecting different cost weightings and success rates PF ALS Partly based on formula (60%) and discretionary (40%) Funding Different funding streams for each market The impact The Formula in a Nutshell x x + =

  22. Train to Gain Provider

  23. Standard Learner Number (SLN) • SLN is the volume of learning measured in guided learning hours required for a learning aim (learner responsive) or by the cost of the activity (employer responsive) • Learners do not earn any funding until they become ‘starts’, i.e. attend for a minimum period of time • Learning aims can either be listed with a fixed value, e.g. NVQ, or unlisted, where the number of planned GLH determines the value, e.g. adult learner responsive skills for life

  24. How to calculate SLNs • Convert GLH into SLNs using the 450 GLH divisor 450 GLH = 1.00 SLN • Maximum size of any learner’s programme is 1.75 SLNs per year (no cap in employer responsive)

  25. Employer Responsive Model • Covers Train to Gain, Apprenticeships, adult employer-based NVQs • All learning aims are listed values (SLN) • Indicative contract values/minimum contract values • Payments on actual delivery in arrears • 75% instalments for retention • 25% instalment for achievement

  26. Calculation of rate for a single qualification • Activity cost research • Information from SSC and Sector Bodies • ILR data • Other information sources, e.g. Ofqual

  27. Employer Responsive Model for NVQ Two modes of NVQ delivery • Within Train to Gain • Within an apprenticeship framework

  28. Employer Responsive -Employer Engagement • NVQs delivered wholly or partially in the workplace through FE and NVQs delivered through Train to Gain have two rates • Level 2 and below • Level 3 and above • Skills for Life have different rates

  29. Train to Gain Rates 2010/11 • Rates for specific full level 2 and 3 aims can be different

  30. Employer Responsive –Apprenticeships • SLN value for Apprenticeships is divided into several elements • NVQ/Competence-based and apprenticeship • Knowledge based qualification (same values as in 16-18 and adult responsive models and same weightings) • Key/functional skills (same value as in 16-18 and adult responsive models) – key skills up to April 2011 • Employee Rights and Responsibilities/PLTS • Same SLN values used for adults as for 16-18 except for expected employer contribution for adults

  31. Examples of NVQ and Apprenticeship Element

  32. Employer Responsive – Programme and Achievement Funding • Programme funding of the NVQ (and apprenticeship) element of 75% is paid monthly over the duration of the NVQ (and apprenticeship) element • Balancing SLN instalment for early completers • Achievement funding of 25% of the NVQ (and apprenticeship) element is paid on successful completion of the NVQ (and whole framework)

  33. Employer Responsive – Programme and Achievement Funding • Knowledge based qualifications and key/functional skills do not have an achievement element • These are paid in full by monthly instalments • Integrated qualifications, where competency and knowledge based are delivered together, have a 25% achievement element

  34. ILR Field A51a • Proportion of funding remaining • Amended for any prior learning or qualifications, e.g. exemptions and credit transfer • Only applies to on-programme instalments and not achievement • Used to reduce costs of frameworks, e.g. pre-apprenticeship programmes

  35. Provider Factor • Weightings applied to SLN to reflect relative costs of programmes and learners • Also reflects importance of success rates (retention and achievement for ER) • Product of the composite elements • Different for each of the funding streams • Large employer factor applies in ER (25% reduction for over 1000 employees)

  36. Relevance to Employer Responsive provision • Programme weightings • Reflect differences in costs • Different from Learner Responsive • Disadvantage uplift • Based on learner’s home post code • Does not apply to Train to Gain • Area cost uplift • Based on where the learner is employed

  37. Importance of Minimum Levels of Performance in the Formula • Move provision away from providers who fail to deliver MLPs (success rates) • 50% for Apprenticeships and Advanced Apprenticeships • 65% for Train to Gain

  38. National Funding Rate • Set by LSC taking account of amount of provision needed and desired average funding/learner as well as priorities and AFFORDABILITY • Two rates • Youth/16-18 rate • Adult rate

  39. National Funding Rate • Two adult rates • Fully funded rate for those on means tested benefits or first full level 2 • Co-funded rate for adults to take account of tuition fee assumptions • Cash value can vary over duration of programme • The assumed tuition fee rate for learner/employer responsive is 50%

  40. Tuition Fee Assumptions for Train to Gain Full funding for • Level 1 • First level 2 • First level 3 if aged 19-24 • Skills for Life (excluding ESOL) All other qualifications are subject to eligibility and expected employer contribution.

  41. Implications of Tuition Fee increases • Assumed co-investment rate in the future? • Price sensitivity of demand varies according to market and qualifications • Some learning aims on QCF are not eligible for any public funding • Charges for exam fees and materials can differentiate your offer • More progress required on providers achieving fee income targets (cash not in-kind)

  42. SLN Funding Rates for 2010/11

  43. Advanced Apprenticeship 19+

  44. Pre-Apprenticeships • Elements of a full apprenticeship framework delivered before the learner gets employment • Can include knowledge based units, functional skills, employee rights and responsibilities, personal learning and thinking skills • These elements will not be repeated or funded again on the full apprenticeship programme

  45. Programmes for the Unemployed • On programme payments depending on duration (GLH): e.g. £585 for ESP • Additional payments for job start and/or progression to Train to Gain or Apprenticeship • Significant reductions in Young Persons Guarantee (FJF)

  46. The Single Adult Funding BudgetFor

  47. Simplification • Simplified budget lines with greater flexibilities and the removal of Summary Statements of Activity and detailed planning assumptions. • Colleges paid on monthly profile for single adult budget with no in-year reconciliation. • Training organisations paid on actual delivery, in arrears, against a national standard profile, with automated quarterly reconciliation to reflect performance.

  48. Simplified Funding FormulaFor

  49. Principles • Maximum flexibility for providers to respond to customer needs (not just qualifications) • Minimise processes and costs of drawing down public funding • Single route for adult funding to minimise transaction costs • Streamline funding system to focus on quality outcomes • Remove regulatory constraints to innovation by providers • Overhaul complex performance management system

  50. Key Issues for Consultation • Single post-19 budget including PfU (ex. ASL, ESF, OLAS) • Move away from input/cost driven to output/credit driven funding formula • Retaining elements of existing formula, e.g. SLN, PF • Premium funding for priority learners, e.g. unemployed, 18-24 NEETs • Differential fee assumptions to reflect popularity of programme, size of employer, needs of learner • More co-investment or fees in cash terms

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