High-quality skills provision needs proper funding – not just temporary respite

High rates of inflation are causing difficulties right across the economy, and for government that means having to make extremely tough choices over spending commitments. Skills investment can drive economic growth – but this week’s announcement on temporary funding uplifts needs to be the start of the conversation on funding, not the end.

High rates of inflation are causing difficulties right across the economy, and for government that means having to make extremely tough choices over spending commitments. Any of us in charge of budgetary decisions in our work or home life will understand how difficult that can be right now, but we must be careful not to cut the things that drive economic growth – and skills is one of those areas.

Rising costs are starting to bite

We have been aware of rising inflation rates for over a year now and we have consistently raised this with both ministers and officials whenever we can. Back in the autumn, we were keen to bring an evidence base to highlight the issues providers were having with rising costs. That’s why ahead of our Autumn Conference in Manchester, we carried out a survey of our members which revealed how rising costs were impacting the skills sector. This new evidence gave added extra weight to our arguments that skills spending must be protected if the country is to achieve significant economic growth in the coming years.

The results of the survey came as little surprise to those on the front line of skills provision. Major findings in the research included 86% of AELP members citing rising salary costs as adversely impacting providers. 82% report that rising premises and facilities costs were also having a major impact. Not all sectors are affected equally though. Care, hospitality, and transport/logistics were identified in the survey as the most vulnerable to adverse impact from rises in costs of delivery – as were sectors with high capital or resource outlays.

Temporary funding uplifts welcome, but the whole sector needs to be properly funded

At our Autumn Conference, the Department for Education (DfE) and the Institute for Apprenticeships and Technical Education announced they would be introducing a framework for targeting certain standards to be able to bring forward evidence to support a temporary funding uplift. This week we finally heard from the Institute for Apprenticeship for Technical Education (IfATE) on how this accelerated path for changes to apprenticeship funding will work. With the apprenticeship programme spend closing right up last year, increases in rates along with driving up the number of apprentices completing all adds pressure to the funds available.

The main headline from the announcement is that despite only 20 standards being in scope for funding band uplift reviews, these standards represent around 20% of all apprenticeship starts. That’s step in the right direction, – and it is absolutely right that sectors such as adult care, hospitality, transport/logistics and construction, are being reviewed early on given the existing poor funding levels and labour shortages there. Indeed, most of the sectors covered by today’s announcement were those highlighted as having the most pressing need for intervention in the survey we carried out in the autumn. There is a formal IfATE process for reviewing funding bands outside of this accelerated and targeted project, that can still trigger a change in funding band, so those standards not in scope are not excluded completely.

IfATE’s announcement this week is the firing of the starting gun – and it is critical that over the next few weeks providers mobilise to support trailblazer employers with the evidence of increased costs they need to support their submissions. Without the appropriate evidence the process cannot be crystallised and this opportunity will be lost.

Nevertheless there will, of course, be standards which fall outside of this announcement that are in dire need of extra funding. So, although these changes are welcome, it is important to understand the impact high inflation rates are having across the entire sector. In too many cases, funding rates for providers no longer match the actual costs of delivery and in turn that’s having an impact on the ability of providers to recruit and retain staff. Recruitment and retention of staff has been difficult in the skills sector for a while, but financial restraints – combined with the cost of living – are making things worse, with many people opting to earn more by returning to work in industry.

Long-term intervention needed to protect employer and learner choice

We’re already seeing some providers start to leave the market – meaning there will be less choice for both employers and learners. The squeeze on funding also makes it harder to maintain a quality and compliant programme.  We all want to avoid these problems but that means the whole sector needs to be properly funded on a long-term basis. To help with this, the DfE and IfATE should speed up the process for reviewing funding levels and we would also like to see a minimum baseline funding level. This would mean that all apprenticeship standards attract a level of funding that ensures high quality training and assessment can be delivered across all sectors.

We hope having an accelerated process is a sign of things to come, with a route towards regular reviews of funding rates rather than the current situation of waiting far, far too long for reviews to be completed. The current situation is simply not sustainable, and we need urgent intervention to ensure funding matches real world delivery costs.

By Paul Warner, AELP’s Director of Strategy and Business Development.