How to make the skills system more responsive to employer demand

Graham Hoyle argues that unused monies must be transferred in year to those providers best positioned to meet priority demand.

The recent mid-term review published by the coalition government included a commitment to ‘ensure that skills provision is more responsive to employer demand’.  It was good to see these words again but progress towards the demand-led goal has been frustratingly slow since Lord Leitch made his recommendations in 2006.

Policymakers will occasionally acknowledge the lack of progress and will try to kickstart the process with initiatives such as the UKCES employer ownership pilots.  But the solution is more obvious even if it may not be quite so palatable in the political sense.  The key is to make sure all monies in the FE system are available to respond to priority demand from employers and individuals seeking sustainable employment.

Fixing the current funding system

The principal issue to address is that even within a finite budget, contract constraints are at the heart of the problem, not the current funding system itself.  Right now, my members can evidence employer demand for more apprenticeships and other forms of training, including skills for the unemployed, but their contract growth requests are being turned down when many other underperforming colleges and providers are having their contract values protected.  This form of protection has been around for far too long and can no longer be justified, especially when the overall FE budget is being reduced by 25% in the current spending period.

The available monies must go to the most appropriate frontline providers able to deliver the government priorities.  At present, independent training organisations are subject to mandatory reallocations within an academic year if they underperform, but for colleges this is only a voluntary practice.  In the current fiscal climate when every penny should be reaching frontline training, this policy has to be reviewed as a matter of urgency.  The relaxing of the so-called reconciliation rules last year for underperforming institutions was also a backward step and this should never be repeated.

As happened last year, many millions of pounds are again languishing unspent in institutions, whilst other providers are turning away business and even making staff redundant, depleting priority delivery capacity.

While the current system failings remain unchecked, we are still seeing institutions trying to protect their contract values by subcontracting many millions of pounds’ worth of provision out to training providers when often direct contracting to already approved providers would offer better value.

Despite this, AELP opposes an outright ban on subcontracting because effective supply chain management can, for example, allow good providers to enter new business sectors or geographical areas more easily.  But we have seen cases where in the rush to subcontract, proper due diligence has not been undertaken and management fees have been imposed which have not reflected the costs of services offered by the lead contractor.  This is why AELP and AoC have jointly produced a Common Accord for promoting best practice in supply chain management which complements the SFA’s new rules on subcontracting.  In the rules, the SFA strongly recommends that all colleges and providers should refer to the Accord at all stages of a delivery partnership.

With these measures and a commitment by the authorities to correct the inefficiencies in the current contract reallocation and reconciliation arrangements, which act as a disincentive for underperformers to improve, the coalition government can start to achieve its demand-led ambitions for skills.

Copies of the Common Accord and the Supply Chain Management Guide are available at: http://www.aelp.org.uk/supply/.

Graham Hoyle OBE is chief executive of the Association of Employment and Learning Providers