Ministerial Reply on the Non-levy Apprenticeship ITT Outcome

Members will be aware from Countdown and the sector press that following the outcome of the most recent non-levy ITT, AELP wrote to ministers calling for an urgent review.  In particular, we drew attention to the absurdity of high quality training providers being left without a contract despite ‘passing’ the tender because their contract value had been pro-rated down below the minimum £200,000 threshold.

On Thursday evening, we received a reply from the skills minister Anne Milton stating that the DfE was unable to conduct a review, having been advised that such an undertaking would require a restarting of the procurement.  AELP’s own legal advice would suggest otherwise but the government is refusing to change its position on the ITT’s outcome.

On members’ behalf, I tried to contact the minister last night only to be informed that her office was now closed for Christmas.  Nevertheless I have submitted an urgent request to meet her as early as possible in January to try and mitigate the likely consequences of the government’s actions.  I have made it clear that there will be many providers facing the prospect over Christmas of closing down, affecting their owners, their dedicated and expert staff and the many thousands of SMEs they support across the country – let alone a significant number of vulnerable and disadvantaged apprentices, as we have heard this week in the case of the leading children’s charity, Barnardo’s.

In the context of the government’s pinning of its colours to the mast in terms of increasing social mobility, improving workforce productivity and supporting its Industrial Strategy, the minister’s letter includes some contentious claims.  Firstly, she says that the procurement will provide SME employers with access to ‘high quality apprenticeship training, no matter where they are in the country or what sector they operate in’.  We know from the emails that we have received from members that this doesn’t simply stand up against the evidence and AELP would be very interested to hear of more examples where local employers and young people are going to be let down by the ITT’s outcome.

As one example, one disappointed member who passed the tender told us that she had pointed out to her ESFA account manager that she was the only provider in her area for plumbing, gas and renewable energy apprenticeships (yes, STEM provision) and was reassured that other providers would move into the area!  

AELP has no issue with this procurement allowing new entrants into the market but, as illustrated above, we will dispute the minister’s claim that it is also ensuring stability of provision.  Her letter says that the government appreciates that some providers “do not have sufficient company turnover to ensure a stable offer to employers”; this is despite the fact that many of these providers with good or outstanding Ofsted grades and a proven track record of delivery have operated on a sustainable footing for many years.  To lose them unnecessarily with only 15 months to go before the non-levy employers join the Apprenticeship Service makes no sense at all.

Subcontracting

The minister says that she values the contribution that smaller niche and specialist providers make to the market and, according to her letter, this is why the government continues to allow subcontracting.  AELP supports subcontracting where it adds value and does not involve unjustifiable management fees, and we are ready to say so when the House of Commons Education Committee examines the practice in the new year.  However, in an interesting nuancing of the government’s position from that adopted by her two immediate predecessors, the skills minister writes that “we want to increase the quality and value of subcontracting”, although she is careful not to say that she wants to increase the actual amount that is taking place.

We know that as a direct result of this procurement outcome, we will now see many smaller providers searching out for subcontracting arrangements simply to survive and this will make it a seller’s market.  As Barnardo’s have pointed out (http://bit.ly/2Blk87g), the consequence is that they and other providers could potentially lose 20% or more of the funding in management fees.  This would reduce the amount of funding available to deliver apprenticeships to the most vulnerable.

We should acknowledge the minister’s point that many existing subcontractors, who were successful in the tender, will be able to directly deliver for the first time in a number of years, although in many cases they only became subcontractors because of a previous, misguided SFA policy.  But this gain could have been achieved without terminating the contracts of other good quality providers and putting at risk the achievement of the government’s 3 million target.

We will look at how we can assist members in the new year, both as primes and potential subcontractors, to be put in touch with each other.

New contracts

Yesterday the ESFA issued to successful bidders the non-levy contracts which will begin in January.  We know that some members are already examining them for the amount of starts that they will be able to facilitate before April.  It is worth reiterating two points here: firstly, the new funding is for new starts as carry-in learners will be funded separately; and secondly the budgets are split into financial years and while there is absolutely no guarantee, with numbers as low as they are, it is likely all new starts will be funded if a provider has a contract.

Call to action

The confirmation in the minister’s letter that the government is not changing its position of the outcome of the procurement will make for a desperately unhappy Christmas when hard-working providers are supposed to be enjoying a break with their families.  The letter has arrived only a week after the Secretary of State described her new social mobility action plan as ‘a labour of love’.  Justine Greening also said that the aim of her policies were to engage the young people who are ‘farthest away’.

AELP believes that the procurement outcome fundamentally runs counter to that aim and we urge members to make it clear to their local MPs, especially members of the government, what the consequences will be for SME employers, sectors and the apprentices affected.  You can enter postcodes of where you are located or deliver apprenticeships here (http://www.parliament.uk/mps-lords-and-offices/mps/) to identify your local MPs and their contact details.  You should also make your local newspapers aware of the consequences.

Finally it is worth reminding MPs that in the last 12 months, Britain has moved from having one of fastest growing economies to one of the slowest among developed nations.  Providers are valued employers too and therefore a completely unnecessary culling of the apprenticeship supply market will add to unemployment and damage the economy.  Indeed this is counter to government procurement guidance which requires departments to encourage SMEs to bid rather than remove them.  Many local businesses, committed to improving productivity and meeting their recruitment post-Brexit needs via apprenticeships, will lose out.  Contrary to the misguided belief of some officials, it will take time for any new entrants to the market to fill the resulting gaps and some disaffected employers will walk away from the programme altogether.     

We will seek to enter into constructive dialogue with Anne Milton in January but right now, the picture could have been so much better for our disappointed members and for the government’s social mobility and productivity agendas.  AELP will do everything it can in the new year to see if matters can be improved and we will be engaging with the ESFA on proper oversight of subcontracting arrangements that are transparent and ensure value for money.

Mark Dawe
Chief Executive