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Survival and growth at a time of funding uncertaintyFor

Changes in the Policy Context

•New Government, New Rule Book

•Changes in Structures•Less Money•Simplification of Funding•Qualification Reform

New Government, New Rule Book

New rules on how the public sector deliversand engages with customers• Less bureaucracy and micro-

management• More freedoms and flexibilities• More consumer choice• More competition to raise standards• Payments for results and outcomes• More transparency on what is spent and

achieved (Return on Investment)

Implications for Providers• Single adult budget

• Virement between adult learner and employer responsive streams allowed for most providers

• Summary Statement of Activity not required, more responsive to local demand

• No ‘in-year’ funding adjustments• Implications for performance management

• More flexibilities• Relaxation of 14-19 entitlement• Freedom to choose which and how many 14-19

Diplomas to offer

Implications for the Demand Led Funding Formula

• Move away from the DLF where demand was largely determined by somebody other than the consumer to what learners and employers actually want

• More transparent and accessible information on local skills needs and on what providers actually deliver, to enable rational choice• Improved IAG

Changes in Structures

• New Departments• Department for Education (DfE)• Department for Business, Innovation

and Skills (BIS)

• New Agencies• Young People’s Learning Agency• Skills Funding Agency

YPLA responsibilities• Non Governmental Public Body• Fund and support Local Authorities to deliver

the national entitlement in schools with sixth forms

• Directly funds provision in FE and Sixth Form Colleges and Training Providers• Local Authorities still involved in strategic planning

• National Commissioning Framework now discontinued

• In 2010-11, £8,500 million investment in participation, learner support and capital projects

Skills Funding Agency responsibilities

• Agency of BIS• Also houses National Apprenticeship

Service and National Employer Service• Funding adult responsive and employer

responsive provisions• Identifying demand for strategic skills

with key partners, e.g. UKCES, SSCs, DWP• In 2010/11, £3,000 million investment in

learning programmes (ex. Programmes for Unemployed)

Less Money 1• Reductions in SLN rates for Adult and

Employer Responsive already in place• Some cuts already in pre-employment

budgets, e.g. Young Persons Guarantee

• Seeking cuts of 25% over 4 years for most government departments

• Spending Review in October may require reductions in funding rates from start of financial year (April 2011)

Less Money 2• BIS budget cut by 7% p.a. (25% over

period)• FE resource budget reduced from £4.3b

to £3.2b by 2014-15• Cut in administration

– RDAs abolished– Quangos under consideration, e.g.

CITB, UKCES• Some protection for Adult and

Community Learning

Less Money 3• Abolition of Train to Gain

– Replaced by an SME focused training programme

– Reprioritisations around apprenticeships and skills for life

• Additional 75,000 adult apprenticeships (£250m p.a.)– Employer contributions? Voluntary

training levies?

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Less Money 4• HEFCE budget cut by 40% (£7.1b -

£4.2b)• Biggest cuts in arts and humanities• Tuition fee increases• Implications for Access to HE

provision• More student loans, including for

those aged 24 and over on level 3 programmes

Less Money 5• DfE budgets see small cash increase• Cuts in central department costs• EMAs replaced by ‘targeted support’

for those facing financial barriers to education (£500m)

• 16-18 funding maintained in cash terms but reductions in unit costs as growth in participation is not fully funded

Implications for Providers• Focus public funds on key priorities, e.g.

Apprenticeships, Skills for Life• Less secure financial position for providers

• Some providers already getting support• Future cuts could be even more destabilising

• Greater focus on outcomes, e.g. employment or progression to higher education, and the qualifications required

• Greater focus on business objectives of employers, e.g. productivity, profitability, less waste

Implications for Providers• Providers need to know their costs

and how to reduce them• More collaborative working to reduce

overhead and back-office costs• More effective use of estate

• Learning on employers’ premises

• Bigger organisations will be more financially resilient and get economies of scale (not just by mergers)

Implications for Providers• Increasing minimum contract levels for

employer responsive funding means that providers will have to work together

• Increased levels of co-investment• Those who can afford to will pay more• Differential fee rates

• Innovative ways of delivering learning• More focus on learning technologies

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The Demand–Led Funding FormulaFor

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Different Funding Streams for Providers

• Learner responsive– 16-18– Adults (ALR)

• Employer responsive (ER)– Train to Gain– Apprenticeships

• Programmes for the Unemployed (PfU)– Employability and Skills Programmes– Six-month offer– Response to Redundancy

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Main Changes in Funding Streams for 2010/11

• Significant growth in apprenticeships funded from reallocations

• Reductions in funding rates per SLN for adult learners, adult apprentices and Train to Gain learners

• Funding focused on QCF provision• More flexibility in the 19+ funding streams• Removal of unnecessary regulation and

bureaucracy

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Funding Formula

The funding formula is applied to each learning aim taken by a learner:

xxFunding = SLN

National

Rate

£

Provider Factor

Programme Weighting

Disadvantage

Uplift

Area Cost Uplift

Short Programme

Modifier

Large Employer

Success Factor (LR)

+

ALS

£

The impact

The Formula in a Nutshell

x

x

+

=SLN Volume of learning measured in GLH or cost of activity

NFR National rates based on affordability

PF Reflecting different cost weightings and success rates

ALS Partly based on formula (60%) and discretionary (40%)

Funding Different funding streams for each market

Train to Gain Provider

No of Starts

SLN Rate £ Provider Factor

Total Funding £

200 NVQ2 85.8 2,727 1.38 322,888

100 Lit/Num

19.3 2,727 1.68 88,420

300 105.1 411,308

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Standard Learner Number (SLN)

• SLN is the volume of learning measured in guided learning hours required for a learning aim (learner responsive) or by the cost of the activity (employer responsive)

• Learners do not earn any funding until they become ‘starts’, i.e. attend for a minimum period of time

• Learning aims can either be listed with a fixed value, e.g. NVQ, or unlisted, where the number of planned GLH determines the value, e.g. adult learner responsive skills for life

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How to calculate SLNs• Convert GLH into SLNs using the 450

GLH divisor

450 GLH = 1.00 SLN

• Maximum size of any learner’s programme is 1.75 SLNs per year (no cap in employer responsive)

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Employer Responsive Model

• Covers Train to Gain, Apprenticeships, adult employer-based NVQs

• All learning aims are listed values (SLN)• Indicative contract values/minimum

contract values• Payments on actual delivery in arrears• 75% instalments for retention• 25% instalment for achievement

Calculation of rate for a single qualification

• Activity cost research• Information from SSC and Sector

Bodies• ILR data• Other information sources, e.g. Ofqual

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Employer Responsive Model for NVQ

Two modes of NVQ delivery

• Within Train to Gain

• Within an apprenticeship framework

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Employer Responsive -Employer Engagement

• NVQs delivered wholly or partially in the workplace through FE and NVQs delivered through Train to Gain have two rates– Level 2 and below– Level 3 and above

• Skills for Life have different rates

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Train to Gain Rates 2010/11

Programme SLN

Full level 2 or below 0.429

Full level 3 or above 0.644

Literacy and numeracy 0.193

ESOL (co-funded) 0.193

• Rates for specific full level 2 and 3 aims can be different

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Employer Responsive –Apprenticeships

• SLN value for Apprenticeships is divided into several elements– NVQ/Competence-based and apprenticeship– Knowledge based qualification (same values as in 16-

18 and adult responsive models and same weightings)

– Key/functional skills (same value as in 16-18 and adult responsive models) – key skills up to April 2011

– Employee Rights and Responsibilities/PLTS

• Same SLN values used for adults as for 16-18 except for expected employer contribution for adults

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Examples of NVQ and Apprenticeship Element

F’work Code

F’work Name NVQ2 SLN* NVQ3 SLN*

102 Business Administration

0.968 1.091

106 Engineering 1.333 2.257

116 Construction 1.064 0.986

217 Hairdressing 1.631 1.615

220 Hospitality 1.511 2.189

236 Health & Social Care

0.928 1.173

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Employer Responsive – Programme and Achievement

Funding• Programme funding of the NVQ (and

apprenticeship) element of 75% is paid monthly over the duration of the NVQ (and apprenticeship) element

• Balancing SLN instalment for early completers

• Achievement funding of 25% of the NVQ (and apprenticeship) element is paid on successful completion of the NVQ (and whole framework)

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Employer Responsive – Programme and Achievement

Funding• Knowledge based qualifications and

key/functional skills do not have an achievement element

• These are paid in full by monthly instalments

• Integrated qualifications, where competency and knowledge based are delivered together, have a 25% achievement element

ILR Field A51a

• Proportion of funding remaining• Amended for any prior learning or

qualifications, e.g. exemptions and credit transfer

• Only applies to on-programme instalments and not achievement

• Used to reduce costs of frameworks, e.g. pre-apprenticeship programmes

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Provider Factor

• Weightings applied to SLN to reflect relative costs of programmes and learners

• Also reflects importance of success rates (retention and achievement for ER)

• Product of the composite elements• Different for each of the funding streams• Large employer factor applies in ER (25%

reduction for over 1000 employees)

Relevance to Employer Responsive provision

• Programme weightings– Reflect differences in costs– Different from Learner Responsive

• Disadvantage uplift– Based on learner’s home post code– Does not apply to Train to Gain

• Area cost uplift– Based on where the learner is employed

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Importance of Minimum Levels of Performance in the

Formula• Move provision away from

providers who fail to deliver MLPs (success rates)

• 50% for Apprenticeships and Advanced Apprenticeships

• 65% for Train to Gain

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National Funding Rate

• Set by LSC taking account of amount of provision needed and desired average funding/learner as well as priorities and AFFORDABILITY

• Two rates– Youth/16-18 rate– Adult rate

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National Funding Rate• Two adult rates

– Fully funded rate for those on means tested benefits or first full level 2

– Co-funded rate for adults to take account of tuition fee assumptions

• Cash value can vary over duration of programme

• The assumed tuition fee rate for learner/employer responsive is 50%

Tuition Fee Assumptions for Train to Gain

Full funding for • Level 1• First level 2• First level 3 if aged 19-24• Skills for Life (excluding ESOL)

All other qualifications are subject to eligibility

and expected employer contribution.

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Implications of Tuition Fee increases

• Assumed co-investment rate in the future?• Price sensitivity of demand varies according

to market and qualifications• Some learning aims on QCF are not eligible

for any public funding• Charges for exam fees and materials can

differentiate your offer• More progress required on providers

achieving fee income targets (cash not in-kind)

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SLN Funding Rates for 2010/11

16-18 learner responsive and apprentices

£2920

Adult learner responsive £2732

19-24 apprentices £2732

25+ apprentices £2186

Train to Gain £2727

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Advanced Apprenticeship 19+

Framework element

SLN PW National Rate

£

Fee element

%

Funding£

Diploma in Work-based Animal Care (QCF)

1.836 1.15 2732 50.0 2884

Functional Skills - Maths

0.08 1.0 2732 17.5 180

Functional Skills - English

0.08 1.0 2732 17.5 180

Total 1.996 3244

Pre-Apprenticeships• Elements of a full apprenticeship

framework delivered before the learner gets employment

• Can include knowledge based units, functional skills, employee rights and responsibilities, personal learning and thinking skills

• These elements will not be repeated or funded again on the full apprenticeship programme

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Programmes for the Unemployed

• On programme payments depending on duration (GLH): e.g. £585 for ESP

• Additional payments for job start and/or progression to Train to Gain or Apprenticeship

• Significant reductions in Young Persons Guarantee (FJF)

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The Single Adult Funding BudgetFor

Simplification

• Simplified budget lines with greater flexibilities and the removal of Summary Statements of Activity and detailed planning assumptions.

• Colleges paid on monthly profile for single adult budget with no in-year reconciliation.

• Training organisations paid on actual delivery, in arrears, against a national standard profile, with automated quarterly reconciliation to reflect performance.

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Simplified Funding FormulaFor

Principles• Maximum flexibility for providers to respond to

customer needs (not just qualifications)• Minimise processes and costs of drawing down

public funding• Single route for adult funding to minimise

transaction costs• Streamline funding system to focus on quality

outcomes• Remove regulatory constraints to innovation

by providers• Overhaul complex performance management

system

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Key Issues for Consultation

• Single post-19 budget including PfU (ex. ASL, ESF, OLAS)

• Move away from input/cost driven to output/credit driven funding formula

• Retaining elements of existing formula, e.g. SLN, PF

• Premium funding for priority learners, e.g. unemployed, 18-24 NEETs

• Differential fee assumptions to reflect popularity of programme, size of employer, needs of learner

• More co-investment or fees in cash terms

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