Positive Outlook in Skills Funding Letter

The latest Skills Funding Letter from the Skills Minister to the Chief Executive of the SFA sets out the budgets for skills for the next five years. These budgets are reviewed on an annual basis but the minister says that he hopes there will not be significant changes. It certainly sets a clear direction of travel.

The budget for Apprenticeships in 2016/17 is £926m which compares with £740m in 15/16. This increases to £1.485bn in 19/20 by which time employers will be paying the Levy. This figure will fund all 19+ apprenticeships including those not paying a Levy. It is not clear how much of the £1.485bn will come from the Levy. The Levy is expected to raise £2.5bn in England but that will also have to fund 16 -18 year old apprentices. What we do know is that there will be additional investment in the programme and many large employers not involved in the programme today will be paying the Levy and therefore very likely to get involved in Apprenticeships.

The minister reinforces the message that increasingly the customer and not the government or institutions (either national or local) will be making decisions around what gets delivered. On Apprenticeships, he says ‘It will be for businesses to make decisions about where the apprentices they employ are trained’. The minister has not repeated his statement that he wants colleges to deliver two thirds of the Apprenticeship starts. Instead he encourages all providers to deliver the high quality growth the programme needs, saying, ‘There are many exciting opportunities for agile providers to operate in this new, more market-style environment’.

Subcontracting continues to be a major focus. The letter reinforces the current controls of subcontracting but asks the SFA to review how lead providers add value through the process. AELP has produced a number of resources to improve supply chain management in the system and we will continue to work with AoC and the SFA to ensure that subcontracting arrangements focus on improving the delivery to the customer.

The budget for non-apprenticeship adult skills is £1.5bn which is about the same as this year because it includes Adult and Community Learning and the learner support funds. It is interesting to note that this budget remains higher than the current Apprenticeship budget despite some people saying that Apprenticeships are the only solution. The non-Apprenticeship budget is now called AEB (Adult Education Budget) and includes funding of Traineeships, programmes for the unemployed, first level 2 and 3 for younger people and English and maths. In other words, it funds the statutory entitlements of learning. Some of the co-funded learning for employed people will not be eligible from 2015/16.

Traineeships will remain a high priority within AEB. AELP has always tried to keep this a priority and we will push for this in the allocations of AEB for 16/17. All providers will be able to deliver Traineeships from August 2016 but we are also asking for an earlier implementation of this change. There seems no reason why those providers that want to deliver Traineeships should not be able to do so now.

The letter sets out a clear direction of travel for the management of the AEB. From 2016/17, block grant funded providers (colleges and local authorities) will be co-managed by the SFA and LEPs/Combined Authorities. SFA will do the allocations on behalf of the local areas and will work with LEPs etc on developing a more flexible contract that will be jointly managed and monitored. For ITPs, SFA will do the allocations and manage the contracts but providers will be expected to ensure their delivery is linked to LEP priorities etc. From 2017/18 the contracts for AEB will probably have to be retendered because of EU rules. There may be a de minimis which will mean that many providers could retain their contracts without retendering, but those arrangements will be discussed with AELP over the next few months. The signal is clear that AEB budgets will be progressively devolved over the next 2 or 3 years.

The letter leaves us with a very positive outlook for the next 5 years especially in terms of Traineeships and Apprenticeships where there is likely to be a significant increase in investment. However there is a lot of detail still to be agreed and we cannot help being cautious about how these plans will be implemented.

Stewart Segal is chief executive of the Association of Employment and Learning Providers