Ministear airson Cosnadh do dh'CigridhMinister for Youth EmploymentAngela Constance BPA/MSP

F/T:0845 7741741E: scottish.ministers@scotland.gsLgov.uk

John McClelland CBEChairSkills Development ScotlandAlhambra House45 Waterloo StreetGlasgowG26HS

cJ May 2012

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1. Following the Scottish Parliament's approval of the draft Budget Bill on 8 February2012, I am writing to confirm the allocation to Skills Development Scotland (SDS) for 2012-13. It is as follows:

Skills Development ScotlandII

2012-13 Budget£176.4m 1

2. Moreover, the Government has agreed a range of additional measures - andassociated funding - on which SDS should focus in the coming year. A further transfer of£22.9m to support these measures will be made at Autumn Budget Revision, subject toParliamentary approval.

3. This letter sets out my guidance to SDS on the policies and priorities I expect it to takeinto account as it develops its approach and activities during 2012-13.

Background

4. SDS's draft Corporate Plan for 2012-15 outlines four strategic goals. These are to:

• enable people to meet their potential;• make skills work for employers;• work together to improve the skills and learning system; and• achieve organisational excellence.

1 This allocation is as set out in SOS's Grant-in-Aid letterfor 2012-13

Cidhe Bhictoria, Dun Eideann, EH6 6QQVictoria Quay. Edinburgh EH6 6QQwww.scotland.gov.uk

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Over 2012-13, we expect SDS to achieve these goals by putting the customer at the centreof its services; by close engagement with employers - to ensure that their skills needs informSDS's services for individuals and employers; and by taking a lead in delivering andcoordinating coherent and accessible skills support in Scotland.

5. In particular, SDS must continue to make a significant contribution to delivering theGovernment Economic Strategy through developing Skills Investment Plans covering keyeconomic growth sectors; and, from 2012-13, taking into account the skills investment needsof the new Enterprise Areas.

6. As you know, budget reductions will continue to be felt across the public sector in2012-13. Building on your track record of delivering efficiencies, I expect SDS to maintainfront-line service delivery with its budget allocation and to report to Government, in line withyour standard arrangements, on how both your savings and your delivery targets have beenachieved.

Reform of post-16 education and training

7. SDS plays a central role in Ministers' ambitions for post 16 reform. It has specificroles in the following areas:

a) College Regionalisation: planning, funding and delivery

In 2012-13, we have made available to SDS £13.1m, specifically to commission collegeplaces on behalf of the Scottish Government. Further details on this scheme are in theAnnex to this letter.

b) Learner Journey

Mr Russell's statement to the Parliament on 29 February set out our response to theconsultation on Putting Learners at the Centre. In it, he made clear our intention to refocusexisting systems so they are driven by the needs of learners, not the needs of institutions.Our work to enhance the learner journey will involve close working on a number of areas,especially on continuing improvements to careers information, advice and guidance. Clearly,SDS will be at the heart of these changes.

However, we also want to make progress in setting out clearer pathways for learners.Learner journeys are not always linear and we must do more to map pathways to reflect thatfact. My officials will want to continue to work with SDS, learners and others to consider howbest to achieve that.

c) Youth Employment and Employability

In the coming year, a refreshed employability policy focusing on supporting economic growththrough better co-ordination, improving performance, and tackling inequalities will bepublished. In addition, our draft youth employment strategy published in January will shortlybe finalised and I expect SDS to be central to the delivery of the final version. Specifically, Iexpect SDS to work with Jobcentre Plus and Education Scotland jointly to develop staff -where that is appropriate - so as to support the delivery of both the employability policy andthe agreed youth employment strategy: ensuring services to individuals and employers arecoherent, efficient and effective will be fundamental to making this work. And, as keystrategic partners, SDS should work with SG officials and local partnerships to implementthese measures across Scotland.Cidhe Bhict6ria, Dun Eideann, EH6 6QQVictoria Quay, Edinburgh EH6 6QQwww.scotland.gov.uk

Further detail on both the employability policy and the draft youth employment strategy is inthe Annex.

It remains a priority in 2012-13 to continue to deliver and support a minimum of 46,500national training places, including 25,000 modern apprenticeship starts. Further details inrelation to training programmes is set out in the Annex.

Organisational effectiveness

8. SOS' statistics and evaluation evidence must be up-to-date, relevant and robust toallow accurate reporting against the Scottish Government's Performance Framework.Additionally, SOS' statistics, research and evaluation activity must be subject to the samequality control and publication protocols that guide the production of Scottish Governmentstatistics and research outputs. Consistent with recognised good practice, SOS should followthe UK Statistics Authority "Code of Practices for Official Statistics" when publishingstatistics. I would particularly welcome greater collaboration with my analytical officials to thisend. I am also asking SOS to collaborate with the Scottish Government and other partners,including the Strategic Forum bodies and, where appropriate, with the joint Scottish FundingCouncil/SOS Skills Committee, in developing a shared body of evidence and systems ofshared intelligence; this might be done through collaboration on your research plans and willhelp avoid duplication

9. More generally, given the continuing scrutiny of the probity of public bodies, SOSneeds to continue to be able to provide timely and high quality information to Government onits delivery, performance, and financial and human resources.

10. I am copying this letter to Oamien Yeates, Chief Executive of SOS, and to those listedbelow (including a further copy for you in your capacity as Chair of the Scottish FundingCouncil). A copy will also be placed in the Scottish Parliament Information Centre.

ANGELA CONSTANCE

Cidhe Bhict6ria, Dun Eideann, EH6 6QQVictoria Quay, Edinburgh EH6 6QQwww.scotland.gov.uk

COPY LIST

Stewart Maxwell MSP, Convener, Education and Culture Committee, Scottish ParliamentClerk to the Education and Culture Committee, Scottish ParliamentCOSLA: Rory Mair, Chief ExecutiveSE: Lena Wilson, Chief Executive; Crawford Gillies, ChairHIE: Alex Paterson, Chief Executive; Lome Crerar, ChairSFC: Mark Batho Chief Executive; John McClelland CBE ChairSFC/SDS Skills Committee: Paul McKelvie, CBE ChairUniversities Scotland: Alistair Sim, DirectorScotland's Colleges: John Henderson, Chief ExecutiveSTUC: Grahame Smith, Secretary GeneralSCVO: Martin Sime, Chief ExecutiveEducation Scotland: Bill Maxwell, Chief ExecutiveSQA: Dr Janet Brown, Chief ExecutiveSCQF: Aileen Ponton, Chief ExecutiveScottish Training Federation: Colin Dalrymple, Chief Executive; Stuart Leitch, ChairFederation of Small Businesses: Andy Willox OBE, Scottish Policy ConvenerCBI- Scotland: lain McMillan CBEADES: Glenn Rodger President; John Stodter General SecretaryVisit Scotland: Malcolm Roughead, Chief Executive; Mike Cantlay, ChairScottish Training Action Group: Bernadette Kerr

Cidhe Bhict6ria, Dun Eideann, EH6 6QQVictoria Quay, Edinburgh EH6 6QQwww.scotland.gov.uk

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ANNEX Scottish Government Policy Drivers Purpose 1. This paper is referred to in Skills Development Scotland’s (SDS) Letter of Guidance for 2012/13. Its purpose is to provide a summary of the high level policy drivers for SDS activity. It is not a definitive summary and, given the desire for Scotland to have a flexible and responsive skills system, SDS should anticipate additions to and changes in policy priorities. 2. SDS delivery of the national training programmes and supporting initiatives will reflect all relevant wider policy drivers. Developing a highly skilled workforce that matches the needs of our businesses is an essential contribution to ensuring we maximise Scotland’s economic performance. 3. For young people, Curriculum for Excellence and post-16 reform are critical overarching drivers, and ensuring the delivery of the relevant national training programmes is consistent with the four capacities and with young people’s entitlements is vital; in particular, young people’s entry to the national training programmes will depend on the effective implementation of 16+ Learning Choices. 4. SDS is also a central player in implementing the Youth Employment Strategy. This strategy outlines how the Government will continue to move forward on the issue, ensuring an all-Government, all-Scotland response to this national challenge. Post 16 reform 5. SDS has a key role to play in implementing and supporting post-16 reform, the main objectives of which are to provide a post-16 education and training system that helps deliver improved life chances, provides the best outcomes for learners, takes Scotland’s world-class research base to greater levels of success, and makes the maximum possible contribution to achieving greater levels of sustainable economic growth for Scotland. Specific areas of major activity in 2012-13 include: College Regionalisation: planning, funding and delivery 6. In 2012-13, SDS has been allocated funding of £13.1m, to commission college places on behalf of the Scottish Government. Commissioning should: target 16-24 year olds, with priority to 16-19 year olds not in full-time

employment. I also expect you to fund opportunities for older learners in key economic growth sectors, particularly where this builds on existing links with relevant employers;

align with existing SDS/Scottish Funding Council (SFC) and local authority

provision, and support people towards a higher level of learning, employment and meet the skills needs of employers;

be consistent with other SDS training programmes, with provision measured in

terms of learners starting the programme. I expect you to secure 5,800 new starts in 2012-13, and work with colleges to determine the nature of the courses to be funded, in line with their local demand;

see 64% of your indicative baseline contract awards allocated on a pro-rata basis

to all colleges and their regions, subject to submission of successful bids and the agreement of outcomes-related contracts;

be competitive, and require bids to be submitted by colleges. Colleges require

certainty over their funding in 2012-13, so I expect you to publish indicative funding allocations for the 65% pro rata funding for all colleges;

see the remaining 36% of funding subject to competitive bidding, to ensure that it

meets the needs of learners in those college regions with the most significant gap between current demand and provision; and

where possible, consider maximising the use of European Structural Funds to

support and enhance the delivery of additional starts (subject to eligibility) within this commissioning model.

SDS should work closely with SFC in commissioning these places, particularly in support of SFC’s development and delivery of Regional College Outcome Agreements in 2012-13. Opportunities for All 7. SDS currently delivers a wide range of services to young people. It will play a central role in Opportunities for All through the modernisation of its careers service; development of new services, and augmentation of existing provision; and by ensuring its staff understand the principles of Opportunities for All, and the priority for 16-19 year olds. This will include:

an learning and development programme implemented to support frontline staff;

the introduction of Work Coaches, providing one-to-one intensive coaching,

mentoring and employability support. Work Coaching will be introduced from April and by August, over 200 will be delivering to an estimated annual cohort of 7,500 individuals;

support to all local authorities (LAs) to facilitate access and use of My World of

Work, ensuring school pupils can use the service to develop career management skills;

in partnership with SQA and employers, developing a new national certificate

valued by employers, and recognising the work readiness of 16-19 year olds. This will build on existing good practice and will respond to the SQA’s recent employer-based research.

Tracking, Monitoring and Engagement 8. Effective delivery of post-16 transitions is underpinned by robust tracking and monitoring of individual young people. SDS will continue to develop the 16+ Learning Choices Data Hub to support the planning and articulation of the post 16 learning journey. This will require greater collaboration between data partners, and joint work to target support to those that need it most, when they need it, in a cohesive and collective manner.

9. Its primary purpose is supporting the learner journey, but the Data Hub should also provide important longitudinal data to enable informed evaluation of service delivery and customer experience in relation to an individual’s successful outcomes. Such analysis will allow partners to develop their services and gain a better understanding of impact. Career Services 10. As part of continued work to modernise and improve career information, advice and guidance (CIAG) services across Scotland, SDS will develop new services and augment existing provision. In particular, SDS will:

work with Education Scotland, Schools and Local Authorities to clarify respective contributions to Curriculum for Excellence and Building the Curriculum 4. Through introducing a mutually agreed Career Management Skills Framework, SDS will support people to develop skills for learning, life and work as they progress toward and into employment;

in partnership with Education Scotland, develop a Quality Assurance

Framework, including appropriate inspection, for SDS CIAG Services. This framework should be discussed with stakeholders in advance of finalisation to ensure it is fit for purpose;

contribute to discussions on the skills and qualifications framework for

professionals working with young people and deliver a Qualifications Framework for the career services in Scotland;

Better Alignment of Scotland’s Employability Service (BASES) 11. Better integration of our employment and skills system, bringing together a coherent offer of employability services to jobseekers and employers, is a priority for the Government. In 2012-13, SDS should continue to build on its Integrated Employment and Skills (IES) service work with Jobcentre Plus, taking a lead role with delivery partners in improving employability services through better alignment, reducing duplication and promotion of co-location and other shared service arrangements where possible. In particular SDS should: continue to assume a prominent role in both the BASES Customer Journey and

Employer Offer Workstreams; complete agreed activities on developing a better co-ordinated offer to

employers, including hosting a combined public sector offer on the SDS website; and using the existing SDS contact centre to help fulfil this offer to employers. This model must reflect both national and local services to employers; and

complete agreed activities on better alignment and simplification of the customer

journey to achieve better outcomes, including planned development work to ensure that employability services are delivered to agreed national standards.

12. Local employability partnerships and colleges must be central partners in this effort to ensure a more coherent offer of support across Scotland.

Modern Apprenticeships 13. Modern Apprenticeships remain an excellent example of employers and Government working together to ensure businesses have the skilled employees they need while providing Scotland with a deployable and flexible workforce. That is why we have invested in a further 25,000 apprenticeship places for 2012/13. Our priority is to ensure that an employed modern apprenticeship opportunity in Scotland leads to sustainable employment opportunities for individuals. 14. We recognise a need to prioritise resources within the MA area. Given the continuing challenges within the labour market for young people, SDS should maximise the number of 16-24 year olds moving into employed apprenticeships. We expect SDS to continue to ensure the availability of a significant number of MA opportunities for young people aged 16-19, given that ensuring post school transition into the labour market remains a priority, 15. We also remain committed to ensuring that the key and supporting sectors have access to a wide range of all age skills (20+) development tools including apprenticeship opportunities. In particular we have maintained our commitment to at least 500 modern apprenticeship starts in the energy sector in 2012/13. Adopt an Apprentice 16. The Government expects SDS to continue the provision of the Adopt an Apprentice initiative throughout 2012-13. This means continued support for apprentices affected by redundancy until March 2013. Targeted Pathways 17. The Government introduced this programme in partnership with SDS in direct response to a reduction in the number of employment opportunities for young people aged 16-18 as a result of the recession in 2009. It should continue to provide entry level training opportunities for young people based on demand from employers at local and or national levels, as appropriate. Its success should be measured by the number of young people entering an apprenticeship or employment following participation in the programme. Get Ready for Work 18. Get Ready for Work is a national work based training framework to provide young people with the confidence and transferable skills needed to gain a positive and sustained outcome including employment. Continuing to develop the partnership working between SDS and CPPs will ensure provision across local areas meets needs and increases the level of positive progression of participants into employment. Following the conclusions of the Making Training Work Better review, SDS should consider the inclusion of a certificate of workplace core skills (or similar mechanism) to provide evidence to employers of participants’ work readiness and reflect feedback that young people would benefit from more work experience within the programme. Lifeskills and Activity Agreements 19. The Lifeskills strand of Get Ready for Work supports those young people who are further from the labour market, and need help to address a range of issues

excluding them from learning or work. Activity Agreements are now being delivered across Scotland and their continued delivery will require close partnership working between SDS, training providers, local authorities and other partners to ensure that the range of options available – including ensuring coherence between Activity Agreements and Lifeskills – is well understood and meets the needs of young people. Training for Work 20. The programme should continue to focus on clients who are closer to the labour market and job outcomes should be the key determinant of providers’ success. Provision should be aligned to local employability goals, and CPPs should be encouraged to play an active role in the commissioning of training provision that meets the needs of their employability pipelines and local labour markets. There should continue to be the possibility of matching with other sources of funding locally. A close partnership between SDS and JCP will strengthen the focus on the needs of JCP customers, ensure a fit with JCP programmes, and enable all suitable and eligible JCP customers to access SDS programmes. 7000 Flexible Training Opportunities 21. Flexible Training Opportunities are an important tool to support small Scottish businesses with up to 100 employees to improve their business skills base and their productivity. This is evidenced in the fact that employer funding supports 50% of the total employee training cost, up to a value of £500. The Government is committed to continuing to provide this support in partnership with employers and have therefore maintained the number of places available to business/employers in 2012/13 at 7000. Individual Learning Accounts 22. Individual Learning Accounts (ILAs) are a demand-led source of funding available to all Scottish residents with an annual income of £22,000 or less, or who are on benefits. The delivery of ILAs is the responsibility of SDS working in partnership with SAAS. Following the conclusions of the Making Training Work Better review, ILAs are being refocused on the low paid and low skilled, meaning that individuals already qualified to first degree level will no longer fall within the target group. In addition, individuals already engaged in secondary, further or higher education, or participating on a national training programme, will no longer be eligible for ILA funding. SDS should ensure all operating guidance in relation to both learners and providers is updated to support the implementation and communication of these changes on 1 July 2012 subject to the agreement of Parliament. Low Carbon Skills Fund / Transitional Training 23. SDS introduced a Low Carbon Fund specifically to support the requirements of new and emerging skills within the low carbon sector. The fund was based on principles outlined above for Flexible Training Opportunities. As the covering letter makes clear, the Government has made available new investment of £2m to support at least an addition 1,000 flexible training places for Scotland’s energy and low carbon sector in 2012/13 through a continuation of the Low Carbon Skills Fund and new Transitional Training activity. . Work Programme

24. Scottish Government funded training should not be used to support Work Programme participants. This approach ensures no duplication of funding between SG and DWP for support for unemployed people in Scotland. Our funding for employability-related training for unemployed adults should now be focused on the period prior to their eligibility for the Work Programme. However, Work Programme providers may approach training providers directly about the possibility of buying additional provision for their participants. Employer Recruitment Incentive (ERI) 25. In December 2011 the Government announced it would support 1000 of the most disadvantaged young people, including, care leavers, young carers and young ex-offenders, to enter the labour market, including through the Modern Apprenticeship programme, over the next three years. SDS should develop an approach to delivering ‘wrap-around support’, including ERIs to support participation in the labour market. Given that this is a three year commitment, we expect around 330 young people supported in the first year. 26. To support the skills legacy of the Commonwealth Games, SDS should deliver a £1,500 ERI for a maximum of 300 16-19 year olds in 2012/13 for all sports-related MA frameworks across Scotland. This includes all frameworks that feature an element of sport, or those such as retail, events management and hospitality which support the sports industry in Scotland. Support for the Commonwealth Games 27. SDS should work with partners to ensure they maximise the skills and employment opportunities resulting from the hosting of the Commonwealth Games in 2014. This work will be captured through the Government’s Commonwealth Games Flourishing Group. Community Jobs Scotland 28. The Government is currently working with the SCVO and Social Enterprise Scotland to continue the Community Jobs Scotland programme in 2012-13, as recently announced by the Minister for Youth Employment. This programme will consist of paid work experience within the third sector for up to 1000 unemployed 16-19 year olds, augmented by on-the-job and wider employability training. SDS should help make 16-18 year olds aware of the opportunities available through Community Jobs Scotland as part of the wider offer to young people. SG officials will discuss the detail with SDS colleagues as the development of the programme progresses. Social Enterprise and Third Sector Challenge Fund 29. The Minister for Youth Employment also announced £2.5m for a Challenge Fund to support social enterprises and specialist third sector organisations who are well placed to provide strong support into jobs for young people across the youth unemployment cohort. SDS will be asked to take on the responsibility for contracting and managing the fund. PACE 30. Our Partnership Action for Continuing Employment (PACE) is central to providing timely and flexible support to individuals and businesses facing redundancies.. SDS is the key partner in delivering PACE and it is important it

continues to play a leading role in its operation and development, and in implementing the continuous improvement programme overseen by the national PACE Partnership, to minimise the time people affected by redundancy are out of work. Workforce Development Policy Implementation 31. Working in partnership, SDS should play a key role in helping to bring about a transformational shift in Scotland's workforce development to increase employability, participation, productivity and well-being. Building upon the work undertaken for the Workforce Development in Scotland: A Framework for Action, complementing work by Scottish Enterprise on leadership, and working with partners including Investors in People Scotland and others, SDS will lead activity on helping develop an environment wherein workforce development, effective skills use and employee engagement become the norm across the public, private and third sectors. Other priorities 32. I expect SDS to continue to help implement our Adult Literacies in Scotland 2020 strategy, including managing awareness-raising of Big Plus and continued representation on the ALIS 2020 strategic implementation group. SDS should also continue to develop and build relationships with the UKCES (specifically the incoming Scottish UKCES Commissioner), Sector Skills Councils and other employer led bodies, on areas of mutual interest. Scottish Government April 2012