Fair funding needed for post-18 education and skills

NCFE and the Campaign for Learning consider the future of post-18 education, in their recent volume of opinion pieces: ‘The post-18 review of education and funding: a review of a lifetime’ , where Mark Corney reiterates the need for fair funding for post-18 education and skills:

Total spending on higher education, adult further education and adult apprenticeships in England, covering tuition and maintenance, is approximately £20bn and rising.

Over 80% is spent on prescribed higher education (from Level 4-8). More than 70% is spent on fee and maintenance loans for full-time HE students. And perhaps as much as 65% – some £13bn – is allocated to 18-24 year olds in full-time higher education, whilst 90% of total funding allocated to 18-24 year olds is spent on full-time students in higher education.

Meanwhile, there is no guaranteed access to high-value maintenance support for adults in full-time or part-time further education on first Level 4-6 qualifications, let alone first Level 3 qualifications.

Although difficult to be precise, the vast majority of the £20bn of taxpayer support for post-18 education and skills is used to support upskilling – first full Level 2 to first full Level 8 qualifications – rather than reskilling – second Level 2 to Level 6 qualifications.

The National Retraining Scheme has the potential to support reskilling as well as upskilling, but with funding only reaching £80m in 2021/21, the Treasury will have to dig deep if funding is to reach the £0.9bn allocated to Train to Gain way back in 2009/10.

From a funding perspective, a potential bright spot for the funding of post-18 education and skills is the UK apprenticeship levy.

Forecast receipts have been revised upwards by the Office for Budget Responsibility in the Autumn Budget to £8.4bn between 2017/18 and 2019/20, and £9.3bn between 2020/21 and 2022/23.

Nearly 80% of levy receipts are allocated by the Treasury to fund apprenticeships in England. At present, levy-paying employers choose whether to train existing staff or recruit new employees as apprentices, choose the level of apprenticeship and, most crucially of all, choose the age of the apprentice.

The present design of the levy as it operates in England has the potential to act as a reskilling as well as an upskilling measure for younger and older adults.

The downside is that the new employer-led funding system for apprenticeships is resulting in fewer 16 and 17 year olds able to access an apprenticeship, even though they are expected to participate in some form of education and training until their 18th birthday.

The challenge of automation and longer working lives as the state pension age climbs to 67 in the late 2020s will require a retraining revolution.

To meet the challenge, Whitehall will need to sing from the same hymn sheet.

We cannot have a situation where one department believes the road to higher earnings is through investment in human capital – the Department for Education – and another believes it is through working more hours – the Department for Work and Pensions.

In the context of short-term and medium-term fiscal pressures, the cost of extending free education to adults aged 25 and over could prove difficult. Extension of maintenance loans will also need to be reasonable as total loan outlays are expected to reach £19.5bn by 2021/22 and the scoring on loans in the public finances remains uncertain.

Seeking extra funding from large employers might also be constrained. Although corporation tax is heading towards 17%, the UK apprenticeship levy is forecast to raise £9.3bn between 2020/21 and 2022/23, a real terms increase compared to 2017/18-2019/20. And bringing medium-sized employers in scope of the levy could be controversial as well as difficult, given rising business rates and other costs. Adults will have to contribute, too.

A must do reform: Introduce maintenance loans for 19-24 year olds on first full Level 3 courses

The cost of achieving a first full Level 3 is free to 19-24 year olds studying full-time or part-time. Participation is stymied because access is restricted to small budget, low-value and uncertain maintenance grants. To create a step change in participation by 19-24 year olds on full-time T-levels, and full-time and parttime Access to HE, A levels and other Level 3 qualifications, a national system of maintenance loans should be introduced.

Recommendation 1: A minister for post-18 education and employment

A new DfE/DWP ‘minister of state’ should be created with responsibility for post-18 education and employment, covering adult further education, higher education, apprenticeships, Universal Credit and employment.

This would be a big job but it is vital that Universal Credit is designed to support the retraining of low-paid workers. Ministers of state should also be appointed for 16-18 education and 5-15 education.

Recommendation 2: Create a post-18 apprenticeship levy in England

The government should guarantee full funding to employers in England for Level 2 and 3 apprenticeships started before the 18th birthday, irrespective of size and whether they are a levy-payer or not.

This would create a post-18 apprenticeship levy operating in England, supporting firm-level upskilling and reskilling.

Recommendation 3: Introduce auto-enrolment into Adult Learning Accounts

The government should consider creating Adult Learning Accounts funded through auto-enrolment along the lines of workplace pensions.

Withdrawals could be used to fund the tuition costs associated with reskilling and unspent balances could be transferred to second pensions on reaching state pension age, but the HE and adult FE world would need to be quick or the extension of auto-enrolment could be grabbed to fund adult social care.

Mark Corney, Post-16 Policy Consultant and Director of MC Consultancy