Employer-responsive (ER) funding (Apprenticeships and Train to Gain) Nick Linford WBL Residential 10-11am Thursday 17 September ER Funding - 17/09/09

Contents 16-18 Apprenticeships (DCSF) Provider landscape Funding for 2009/10 16-18 Apprenticeship future Provider landscape 19+ Apprenticeship funding 19+ Apprenticeship future TtG funding history TtG funding pressures TtG funding for 2009/10 TtG cash-flow issues TtG future 19+ Apprenticeships and Train to Gain (BIS)

16-18 Apprenticeships

2008/09 Maximum Contract Values (MCVs) Academic year (Aug 08 – Jul 09) Provider landscape 2008/09 Maximum Contract Values (MCVs) Academic year (Aug 08 – Jul 09) Local Authority £18m (3%) FE £210m (32%) Number of MCVs: 1161 Total MCV value: £664m Average MCV value: £572k Other public £30m (4%) Private £316m (47%) Charities £90m (14%) Largest MCV value by provider type: Charities: £41m (CITB) Other public: £15m (MoD) Private: £9m (Carillion Construction) FE: £6m (City of Bristol College) LA: £2m (Kingston Upon Hull City Council) Source: LSC provider Allocations Spreadsheet (Feb 2009), 16-18 ER Total

Funding for 2009/10 16–18 Apprenticeships 2008/09 2009/10 Increase Starts (academic year) 108k 116k 7% Completions (academic year) 68k 72k 6% Participation (academic year) 213k 223k 5% DCSF Funding (financial year) £628m £675m 11% Source: Statement of Priorities, LSC (November 2008) It should come as no surprise that 16-18 Apprenticeships remain a high priority and a significant growth market

16-18 Apprenticeship future Raising the Participation Age (RPA) and the Apprenticeship Entitlement “The ambition is that, by 2019/20, one in five young people will have started an Apprenticeship before the end of the academic year in which they reach their 18th birthday [from one in 15 at present]” Source: Statement of Priorities, LSC (November 2008) Role of the DCSF, YPLA, RPG, SRG, LAs, NAS and SFA in the planning, commissioning and payment processes from April 2010…..

Train to Gain and 19+ Apprenticeships

2008/09 Maximum Contract Values (MCVs) Academic year (Aug 08 – Jul 09) Provider landscape 2008/09 Maximum Contract Values (MCVs) Academic year (Aug 08 – Jul 09) FE £494m (46%) Number of MCVs: 2073 Total MCV value: £1bn Average MCV value: £515k Local Authority £21m (2%) Largest MCV value by provider type: Charities: £16m (CITB) FE: £11m (West Nott College) Other public: £11m (MoD) Private: £6m (Economic Solutions Ltd) LA: £1m (Lancashire County Council) Other public £28m (3%) Private £479m (45%) Charities £44m (4%) Source: LSC provider Allocations Spreadsheet (Feb 2009), 19+ ER Total

19+ Apprenticeship funding 19+ Apprenticeships 2008/09 2009/10 Increase Starts (academic year) 120k 122k 2% Completions (academic year) 51k 57k 12% Participation (academic year) 243k 254k 5% DCSF Funding (financial year) £328m £367m Source: Statement of Priorities, LSC (November 2008) Nearly 50% rate reduction for ‘employer contribution’ 25+ Apprenticeship rate reduced a further 10% All 25+ budgets being squeezed

19+ Apprenticeship future Employer contribution (rate reduction) will rise further Questions will be asked about whether providers are delivering 25+ Apprenticeships instead of TtG, as they tend to generate more funding Questions will be asked about whether employers are making a financial contribution TtG and Apprenticeship funding rules, rates and contracts likely to be more closely aligned Pressure will be on to find savings and prioritise the younger apprenticeships (particularly 16-24 year olds) 25+ Apprenticeship may simply prove too expensive

TtG funding history National roll-out from Aug 2007, and by August 2008 £100m under-spend went to HE FE Focus 08/08/08 and 29/08/08 TtG ‘flexibilities’ introduced from August 2008 and before long demand outstripped supply FE Focus 03/07/09 and 04/09/09

TtG funding pressures The flexibilities Payment profile More providers “it is unlikely that there will be sufficient funding to meet the high level of demand from employers and learners for new starts, particularly in the August-March period of the 2009/10 academic year” Source: Geoff Russell’s LSC letter to providers (11/06/09)

Pressures > flexibilities For 2008/09 ‘flexibilities’ were introduced to stimulate both demand and supply. These included: Skills for Life at Entry Level Non-first full level 2s fully-funded (free) Level 3 (incl.19-24 ‘first’ fully-funded) Selection of thin and unitised QCF quals The policy worked > perhaps too well! and 3% TtG premium has already been scrapped

Example for 1 NVQ in Construction Pressures > payment profile The payment profile for TtG changed in 2008/09 Example for 1 NVQ in Construction Consequences Monthly instalments Instalments quickly ramp up Funding for achievement is now starting to be claimed in big numbers Big ‘carry-in’ funding commitments £100 £200 £300 £400 £500 £0 Jan Feb Mar Apr May Jun Jul 09/10 08/09 07/08 Also Cumulative instalments Qualification rates simplified for 09/10, which will be expensive for LSC £0 £400 £800 £1,200 £1,600 £2,000 Jan Feb Mar Apr May Jun Jul 09/10 08/09 07/08 LSC and providers really struggle to forecast monthly instalment profile

Pressures > more providers Number of 19+ ER contracts (TtG and Apprenticeship) 2073 1212 920 2006/07 2007/08 2008/09 Nearly all the additional contracts have been for new providers of TtG Source: LSC provider Allocations Spreadsheet (Feb 2009)

TtG funding for 2009/10 £925m 09-10 TtG budget in Grant Letter (more than last financial year but less than last academic year) Financial year Grant Letter (government budgets) Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Academic year provider contracts (MCVs) About half of 09-10 financial year spent on last four months of 08/09 academic year. The eight months (67%) left of 09-10 financial year only covers 47% of 09/10 academic year commitments

TtG cash-flow issues Providers are paid after monthly data submissions Example for the first month (period one) payment for August ILR W01 04/09/09 Submit monthly on 4th working day OLDC portal and AMPS LSC data collection and payment systems Provider paid 14/09/09 BACS payment on 10th working day 47% cap for first 8 months will cause cash-flow problems and lead to stop-start enrolment patterns Carry-in funding commitments may also result in few new starts until April 2010

TtG future is uncertain Providers waiting for confirmed 09/10 contracts (MCVs) Lack of funding and cash-flow issues mean many likely to go out of business Government likely to scrap some flexibilities (possibly in-year for 2009/10) Uncertain impact of QCF and interim ‘fullness’ definitions NAO report said poor value for money (21/07/09) Conservatives say they would scrap TtG Skills Funding Agency (SFA) will take it over from LSC from April 2010

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