1. FE Funding Update 2007/08 5 June 2007 16.45 - 17.45 Hinckley Island Hotel Nick Linford Head of Planning and Funding

2. Overview This presentation focuses on the LSC grant for FE provision, which on average accounts for more than 80% of GFE and SF College income The LSC had planned to introduce a new FE funding formula in 2007/08, but a new ‘Demand Led’ funding formula is now planned for 2008/09 Therefore, the FE funding formula for 2007/08 remains unchanged However, for 2007/08 there are some significant changes to: Values within the FE formula Fee remission eligibility Commissioning

3. Presentation contents Inflation and the 16-18 MFG National Base Rates (NBR) Programme Weightings (PW) The Assumed Fee Income (AFI) Skills for Life and ESOL The Level 3 entitlement for 19 -24 year olds Negotiated and Tendered provision Demand Led and the funding priorities Changes to values within the formula Changes to fee eligibility Changes to contestability

4. Inflation and the MFG Base rates will be increased by 2.5% in 2007/08 (inflation) However, the DfES guarantee schools a rate increase which is above inflation, known as the Minimum Funding Guarantee (MFG) In 2007/08 the MFG is a 3.7% increase (including inflation) Since 2006/07 the LSC have applied this MFG to 16-18 year old enrolments as an additional uplift within the FE funding formula The uplift (applied within the Learner Information Suite) in 2007/08 is 2.059%, calculated as follows: MFG Inflation 2006/072007/08 1.0341.037 1.025 x x = 1.02059

5. Base rate and PW changes Listed base rates 116 learning aim rates have increased above inflation 115 learning aim rates have reduced below inflation 9 learning aims have become loadbanded Loadbanded base rates Programme Weightings (PWs) 7 learning aims given higher PWs 32 learning aims given lower PWs (mostly Skills for Life) In all there are currently 23,315 FE funded learning aims for 2007/08, so what do these changes mean for providers? 63 learning aims have been given listed rates

6. NBR and PW changes The financial impact will depend on how many enrolments are attached to the learning aims that have NBR or PW changes Forecast financial impact for Lewisham College (07/08 rates): Learning aimChangeImpact Cert in Prep for Working Life (10022922)Listed to loadbanded- £60,527 Total impact - £60,527- £101,695- £109,968- £114,547- £122,591- £37,886 - £37,886 Computerised Accounts (1005621X)Listed reduction- £41,168 Cert in Plumbing (10033579)Listed reduction- £8,273 Cert for ESOL Subject Specialists (1003450X)Listed reduction- £4,579 Cert in Childcare and Education (1000645X)Listed reduction- £8,044 BTEC First Diploma in Music (10057134)PW from 1.12 to 1.72+ 84,705

7. Assumed Fee Income (AFI) National Base Rate (NBR) AFI %AFI £ 2004/05£2,39425%£598 Funding rate increase in three years = 10% Assumed fee increase in three years = 66% The AFI is a funding value deducted for learners ineligible for fee remission The LSC ‘assume’ learner fees will replace this reduction in funding The LSC have increased the AFI each year since 2004/05 NBR £ increase AFI £ increase 5%15% 2005/06£2,51327.5%£691 2006/07£2,57632.5%£837 2007/08£2,64137.5%£990 2.5%21% 2.5%18%

8. Assumed Fee Income (AFI) £0 £500 £1,000 £1,500 £2,000 £2,500 £3,000 04/0505/0606/07 07/08 08/0909/1010/11 25%27.5%32.5%37.5%42.5%47.5%50% Current forecastPublished rates (450glh) Lewisham College fee Thus in six years rates increase by 19% and assumed fees by 138% Forecast is that the AFI £ will rise a further 44% in the next three years Academic Year

9. Skills for Life and ESOL changes Non-approved (non-NQF) Skills for Life learning aims at Level 1 and 2 will: See the programme weighting fall from 1.4 to 1.0 No longer be eligible for fee remission No longer be eligible for disadvantage uplift However, it is unlikely any provision will remain non-NQF at the higher levels Skills for Life changes ESOL learning aims for adults will no longer attract automatic fee remission ESOL specific changes New ESOL for work qualifications will be introduced which: Will have a listed rate Will have a 1.0 programme weighting Will not contribute to PSA target

10. Fee eligibility changes ESOL The removal of automatic fee remission for ESOL learning aims will clearly be significant to relevant provider and adult learners For example, every full time enrolment without remission will generate £990 less funding, which the LSC ‘assume’ the learner will pay The School of ESOL at Lewisham College plans to generate £4.4m in 2007/08 and forecasting the impact of this change is very difficult Level 3 Entitlement and Adult Learning Grant Automatic fee remission for 19-24 year olds on their first full Level 3 LSC predicts 45,000 learners will benefit in 2007/08 Adult Learner Grant introduced for full time adults on first full level 2s and 3s

11. Negotiated and Tendered Provision When planning 2007/08 the LSC referred to ‘commissioning’ provision However, the LSC are now differentiating between: > Negotiated commissioning These allocations are for providers who already have a contract to deliver provision, although there may be a cap on growth funds (includes FE mainstream, Work Based Learning and any time limited contracts such as Train to Gain, OLASS and Learning Agreement Pilots) > Tendered commissioning These allocations are ‘contestable’, in that they are put out to tender via an online procurement portal. They present opportunities to expand existing provision (e.g. WBL), new providers to gain a contract (e.g. TtG or E2E) and for the funding of new provision (e.g. WBL 25+)

12. Demand Led and the funding priorities ‘As it may look, based on Government priorities’ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2006/072008/092010/112012/2013 Train to Gain Learner accounts FE (planned) The following is an LSC slide entitled ‘Future LSC Funding World’: The funding future looks more competitive and less predictable? This funding shift is happening for 2007/08 Adult FE funding Take a look at your new Demand Led Calculator (DLC)

13. Closing remarks Whilst the funding formula remains the same, there are potentially significant changes to rates and fee eligibility – provider dependant Modelling can be undertaken to measure the impact of rate changes, but predicting potentially significant funding decreases (ESOL) and increases (FL2 and FL3 entitlement) relating to fee eligibility is difficult There are also fee policies, fee targets and the impact on fee income to consider (including price elasticises and local competition) Accurate ILR records and a sophisticated planning tool will assist in modelling the impact of changes to the budget and the ability to achieve negotiated and/or tendered funding allocations and related targets Questions?