Rising costs mean skills funding rates must be reviewed more often

Next week, AELP will host our National Conference 2022 in London. Taking place 27-28 June, AELP’s National Conference is one of the must-attend events in the skills and employability sector’s calendar.

As ever we have a fantastic set of speakers confirmed– including the Minister for Skills, Alex Burghart MP – and a wide range of engaging workshops for delegates to attend. This year we will be focusing on five important themes which cover the opportunities and challenges our sector faces. These themes are strategic priorities; devolution and levelling up; employer-led system; ensuring quality provision; and looking forward.

Delivering high-quality skills provision in a time of rising costs

Bringing together these themes is the context we are all operating in and undoubtedly that means Conference will spend time focusing on the impact rising costs are having on further education and skills providers. Continuing to deliver the high-quality skills provision that our learners and employers deserve will be a huge challenge, at this time. Last week, we saw research from the Learning and Work Institute reveal that high inflation rates threatens to wipe out £850m of the government’s skills funding in the coming few years – and this certainly chimes with what our members are telling us. We are now seeing many organisations within the sector suffering due to the effects of inflation – including rising energy bills and other operating costs.

On top of this training providers face challenges recruiting and retaining the staff they need. Labour market figures currently show vacancies outnumbering those seeking work, so this is having an upwards pressure on wage claims as training providers compete for staff – contributing to problems with rising costs. Over the last few months, we have been carrying out a survey with our members on this issue, which closes at the end of June. This is already helping us to understand in greater detail the pressures our members are finding with employee recruitment and retention. We hope to release some of the preliminary findings very soon.

AELP members were hoping that the recent Spring Statement – and follow up announcements – would see some support offered by the Chancellor to help with rising costs. There have been some attempts to shield business from these pressures – such as the 5p per litre cut to fuel duty – but this has only helped in a very limited manner. This only partially mitigates added costs – such as the rise in employers’ National Insurance contributions which increased from 12% to 13.25% back in April.

Fixed funding rates mean inflation is hitting hard

Our sector is hit particularly hard by high inflation rates. Training providers rely on funding from regional and central government for large proportions of their income so, unlike many businesses, they cannot always unilaterally raise their fees to match rising costs. To make matters worse, many of the qualification funding rates have not been regularly reviewed in recent years. For example, the funding rate for delivering English and maths functional skills qualifications as part of an apprenticeship hasn’t been increased since 2014, and remains at half of the funding available for delivering English and maths in classrooms. This threatens the viability of delivering programmes which are crucial for individuals and businesses at the best of times. With inflation so high, the Learning and Work Institute estimate that up to 250,000 learning places could be at risk over the next three years.

It’s becoming clear that if we’re to avoid a crisis in the skills sector, we need action – and soon. AELP want to see a skills system where the amount providers receive for each qualification reflects the real cost of delivery. Given high inflation rates across the economy, a solution would be for all skills programme funding rates to be reviewed and adjusted, at least annually.

Lobbying government at our conference and beyond

Lobbying government ministers and their officials on the issue of rising costs is a huge priority for AELP. We know from our members how much this is impacting their organisations and our National Conference will be an opportunity to get our views heard by the Minister for Skills and officials at the Department for Education (DfE) and Institute for Apprenticeships and Technical Education (IfATE). In addition, we meet regularly with officials in the Treasury, DfE and the Education and Skills Funding Agency (ESFA) to explain how serious this issue is, as well as to argue for a better response to protect the sector. If the government is serious about delivering a world-class skills system, the true cost of delivering skills programmes must be reflected in their funding rates.

Once we reach the autumn and winter months, and the cost of heating and lighting rises, there will even more pressure on training providers. More action to support businesses in the run up to this period would be welcome – as would a government commitment to reviewing funding rates to ensure they take account of the costs of delivering courses. If support isn’t forthcoming, then I worry about our sector’s ability to continue doing what it does best- delivering high quality, sustainable and flexible provision for every learner and employer.  

By Jane Hickie, Chief Executive of the Association of Employment and Learning Providers (AELP)