Survival and growth
at a time of funding
uncertainty
For
1
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 delivers
and 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?
11
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
The Demand–Led
Funding Formula
For
17
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
18
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
19
Funding Formula
The funding formula is applied to each
learning aim taken by a learner:
Provider Factor
National
Funding
=
SLN
x
Rate
£
x
Short
Programme Disadvantage Area Programme
Cost
Weighting
Modifier
Uplift
Uplift
A
L
Success
Factor + S
(LR)
Large
Employer
£
20
The impact
The Formula in a Nutshell
SLN
Volume of learning measured in GLH or cost of activity
x
NFR
x
National rates based on affordability
PF
+
ALS
Reflecting different cost weightings and success rates
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
22
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
23
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)
24
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
25
Calculation of rate for a single
qualification
•
•
•
•
Activity cost research
Information from SSC and Sector Bodies
ILR data
Other information sources, e.g. Ofqual
26
Employer Responsive Model for
NVQ
Two modes of NVQ delivery
•
Within Train to Gain
•
Within an apprenticeship framework
27
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
28
Train to Gain Rates 2010/11
• Rates for specific full level 2 and 3 aims can be different
Programme
SLN
Full level 2 or below
0.429
Full level 3 or above
0.644
Literacy and numeracy
ESOL (co-funded)
0.193
0.193
29
Employer Responsive –
Apprenticeships
• SLN value for Apprenticeships is divided into
several elements
– NVQ/Competence-based and apprenticeship
– Knowledge based qualification (same values as in 1618 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
30
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
31
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)
32
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
33
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
34
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)
35
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
36
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
37
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
38
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%
39
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.
40
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)
41
SLN Funding Rates for 2010/11
16-18 learner responsive
and apprentices
Adult learner responsive
£2920
19-24 apprentices
£2732
25+ apprentices
£2186
Train to Gain
£2727
£2732
42
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
43
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
44
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)
45
The Single Adult
Funding Budget
For
46
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.
47
Simplified Funding
Formula
For
48
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
49
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
50