Welcome

1. Colleges and Training Organisations Funding Conference 10 July 2012 Presented by Sir Geoff Hall Chair the information authority Welcome

2. Dr Susan Pember Director Further Education and Skills Investment, Department for Business Innovation and Skills

3. New Challenges, New Chances Further Educationand Skills System Reform Plan Building a World Class Skills System Dr Susan Pember – Director, FE & Skills Investment and Performance, BIS

4. Skills are central to delivering the Governments goals of balanced and sustainable growth and creating the Big Society Growing the Economy Growing People Skills are one of the key factors that drives productivity and employment both of which support balanced and sustainable growth. • The FE and skills system grows vocational capability and encourages social mobility and well being by providing opportunities for those who need additional help in order to progress, such as:- • young people with limited employability • those disengaged with education and the labour market • people with disabilities or severe mental health problems • offenders, • people with limited English. Competition Innovation Skills Enterprise Investment Productivity Employment The FE sector delivers - basic skills, vocational learning, Apprenticeships and progression into higher education – contributing to increased employment and productivity. It also supports groups at risk of social exclusion Supports the “Big Society” agenda – giving greater freedoms and flexibilities enabling the FE sector to better respond to the needs of learners and employers and encouraging people to take an active role in their community Sustainable GROWTH

5. Problems and Challenges • 1.Capability • OECD statistics show that despite recent progress, the UK remains a middle • ranking country in terms of qualifications, compared to • other OECD member states:- • 19th out of 33 in terms of the proportion of people qualified to upper secondary level and above (level 2) • 9th out of 34 in the proportion of people qualified to degree level and above • 2. Poor Choice • Student choice is hampered by lack of information on the value of qualifications including what salary and benefits qualifications brings • 3. Complicated and misunderstood skills system • Qualifications not valued or understood • Funding System over regulated and bureaucratic 4. The need to increase Employer ownership and engagement

6. The economic side of these problems • A more skilled population and workforce leads to: • More complex, high value jobs • Faster rates of innovation • Greater ability to absorb and adapt new ideas and processes • Higher levels of entrepreneurship • Globalisation and technological change has further increased the value of skills. • Around a fifth of UK’s growth between 1997-2007 is due to skills; and around a fifth of UK’s productivity gap with competitors is also due to poorer skills

7. Human side of these problems 1993 No quals 2008 1993 2008 Other quals 1993 GCSE 2008 1993 A Level or Eq. 2008 1993 HE 2008 1993 Degree or Eq. 2008 0% 20% 40% 60% 80% 100% Employment Unemployment Inactivity 7 • Those with poor skills are [1]:- • More likely to be in prison • More likely to be in debt • More likely to be unemployed • More likely to be unwell and have mental health problems • More likely to have a child who can’t read at 9 • More likely to be involved with or have to be supported by the State • Are less likely to vote • Are less likely to own their own homes • Are less likely to take up a community role such as school governor • Are less likely to hear their child read • Will never normally earn more £14,000 Those with no qualifications are on average 37ppt less likely to be in employment than those with HE [1] Centre for Research on the Wider Benefits of Learning, Research Brief, October 2006

8. Solutions and Reform Plan • Empowered funded Students at the heart of the system • First class advice delivered by the National Careers Service • A ladder of opportunity of comprehensive Vocational Education and Training Programmes • Excellence in Teaching and Learning • Relevant and Focused learning programmes and qualifications • Strategic governance for a Dynamic FE Sector • Freedoms and Flexibilities • Funding priorities through a simplified funding system • Empowered students making informed choices • Global FE

9. Empowered Funded Students at the heart of the system 2. Who did not complete their education by the age of 19. Young people aged 19 up to 24 can access full funding for Foundation Learning where they need that to progress into further learning or to get a job. They can also access full funding for their first qualifications at Level 2 (or 3), including an opportunity to get GCSE English and Maths. 3. Unemployed people on benefitswho are looking for work to access labour market relevant courses, which help them improve their skills or re-train to help them get a job. 4. At risk of social exclusionto support them to access community learning. We remain committed to safeguarding a range of learning opportunities that support access and progression for people who are disadvantaged and least likely to participate. To support learners and ensure employers have an appropriate, trained workforce, FE colleges and training providers will have more flexibility than ever before within their Adult Skills budget to respond to local learner and employer demand. As set out in Skills for Sustainable Growth, Government funding will be concentrated on supporting students where it can have most impact, with FE colleges and providers drawing on the knowledge of local government and Local Enterprise Partnerships about local labour markets. The Government will financially support those:- 1.Who did not achieve basic English and Maths in school. The Skills for Life programmes which enable adults to improve their basic literacy and numeracy skills will be expanded to include and fund those who need GCSE English and / or Maths Level 2.

10. Shared Funding Responsibility In partnership with employers and individuals, we will support those: 5. Who wish to undertake an Apprenticeship framework. We will refocus our Apprenticeships programme to target public funding more sharply where returns are greatest. 6. In SMEs who need further management training and workplace training to support their growth plans. 7. Individuals over 24 who want to retrain or up-skill at Level 2 in order to secure different employment and/or improve their life-chances. Through 24+ Advanced Learning loans, we will also support those: 8. Over 24 who wish to do full Level 3 (2 A-Levels or the vocational equivalent) or Level 4 (Higher Vocational Education) in order to qualify for a professional job and/or progress to higher education. 10 We will promote innovation and enterprise by: 9. Supporting FE colleges and providers to innovate and draw down funding for programmes that meet a particular employer skills need whilst they are simultaneously developed for the QCF. This “Innovation Code” was a recommendation from Baroness Sharp’s Report on Colleges in their Communities and will operate on the understanding that colleges and providers will work with appropriate partners to develop the programme to fit the specifications of the QCF so that over time it can become part of a nationally regulated offer. 10. Creating a new employer ownership fund which will be used to generate innovation and employer engagements and enhanced funding for work place education and training

11. Government Investment £3.8 billion Adult FE & Skills Budget in 2012-13 delivered through a simplified funding system

12. Summary of Innovation Pilots 12 Incentive Payments: At least 40,000 incentive payments of £1,500 for 16-24 Apprenticeships to be spent in the 2012-13 financial year (includes 20,000 commitment in the Youth Contract) Large Employer Programme: We have implemented a package of new measures to make it easier for large employers who directly contract with the Skills Funding Agency to take on apprentices. Employer Ownership Pilot: This programme which is jointly funded by BIS and DfE will enable employers to take direct ownership of the Skills and Apprenticeship agenda in their sector or supply chain in return for directly routing up to £250m of public investment over a two year period. Job Outcome Payments: In the 2012/13 academic year the Skills Funding Agency will trial making payments on the basis of job outcomes for unemployed learners, whose training is being fully funded.  Adult Community Learning: In the 2012/13 AY we will pilot Community Learning Trust models to enable funding to be available to selected local areas. If this proves successful we will look to extend it across England to begin full operation from summer 2013. Innovation Code: The Skills Funding Agency will introduce an "Innovation Code" that will enable colleges and training organisations to draw down funding for programmes while simultaneously developing the programme and qualifications. English and maths skills acquisition pilot The Skills funding Agency has been working with providers who want to be part of a pilot which will assess skills level at start and at the end of the course

13. Kim Thorneywork Chief Executive Skills Funding Agency

14. David Lawrence (OBE) Principal Easton College

15. A Sectoral Perspective on Funding Change

19. What is our objective? • To ensure we use public funds in the most effective and efficient way • The Skills Funding Agency, Government and we as providers share key objectives • For students • For employers • For communities • For the wider UK economy • We are a key part of ensuring economic recovery

20. Relationships • Effective working relationships are at the heart of success • Funding as an enabler • Making as many decisions as close to the action as possible • Stopping bureaucracy getting in the way • Using funds efficiently in times of challenge • A longer term core strategy

21. Funding External Technical Advisory Group • A genuine partnership and new way of working • Focus on effective use of public funds • Two way communication • Simplification? • Complexity • Direct engagement of those who will have to operate the system

22. Key Principles which I see as very important • Simplification is a key goal • But not at the expense of important provision • Simplification is not just about the number of rates but is also about the systems and rules • Pace of change and overall financial challenge are key issues at provider level • Ongoing and well understood methods of managing funding change are vital

23. Key Principles continued • Decisions need to be based on firm evidence wherever possible • We should take advice from respected practitioners • We have to concentrate on implementation • Make sure delivery to students and meeting industry needs are at the centre of our decisions

24. Things that are keeping me awake at night! • Scale, complexity and pace of change • Scale of potential funding change/reduction-16-19, ALR, ER, HE, Loans … • Recruiting technical level and managerial staff • Meeting industries needs • Managing quality expectations (Ofsted) with serious funding and demographic challenges • Volume of communications

25. Relationships are the key • They have to be two way • They have to be built on mutual trust and understanding • The relationship has to consider the impact on the whole business • The discussion needs to reflect the relative scale of the issue • Long term versus short term

26. In summary • The most challenging environment I have experienced in my 20 years as a Principal • We can get through it if we work together in a genuine partnership • We cannot afford wasted effort through flawed policy or implementation • It is a great honour to be working with Skills Funding Agency colleagues in this new way of working

27. Keith Smith Director Funding Policy Delivery, Skills Funding Agency

28. Funding policy to support a world class adult skills system Keith Smith

29. Funding for 2012/13 Single Adult Skills Budget – supports local decision making and enables responsiveness to employers/growth in Apprenticeships. New approach to ‘Funding Rules’ – replacing numerous guidance documents that have been unclear. Piloting payment by results with large employers. Testing an approach to recognise job outcomes in funding system. Testing a new Community Learning Trust model.

30. Funding for 2012/13 Introduction of the ‘Innovation Code’ – providing funding whilst developing innovative skills solutions. No further reductions to national funding rates – remain at 2011/12 levels. Working with the Information Authority to assess data requirements and review of 2013/14 ILR.

31. Simplification - where are we now? An approach that enables all providers to test changes – ‘shadow running’. What we are testing: A simple funding formula – based on £ (x Area x Disadvantage). Simplified funding rates – an end to 000s of variables. Rates set based on credit values. A single earnings methodology covering all provision (an end ALR and ER). Streamlined support funding – ALS/Learner Support.

32. Lunch

33. Jaine Bolton Director Business Development National Apprenticeships Service

34. Jaine Bolton • Director Business Development • National Apprenticeship Service

35. Lesley Giles Deputy Director, UK Commission for Employment and Skills

36. Responding to Employer Demand: The UK Commission’s Employer Skills Survey 2011 Lesley Giles Deputy Director, UK Commission

37. About the UK Commission for Employment and Skills Aim: Transform the UK’s approach to investing in the skills of people as an intrinsic part of securing jobs and growth Impact Investment Intelligence Maximise the impact of employment and skills policies and employer behaviour to support jobs and growth Work with businesses to leverage greater investment in skills Provide outstanding labour market intelligence which helps businesses and people make the best choices for them More employers investing in the skills of their people More career opportunities for young people More collective action by employers through stronger sectors and local networks More employers taking ownership of skills Five assets and 100 staff to deliver on outcomes

38. UK Commission’s Employer Skills Survey • Sits in the wider suite of UK Commission products: • Employer Perspective Survey, Working Futures, Sectoral LMI, Thematic Reviews • Used across the UK Commission • Resource for training providers to understand operation of markets alongside own bottom up intelligence 87,500businesses of 1+ employers interviewed First ever UK wide survey

39. What is the story?Understanding Skills Demand Significant training investment but long term decline in training levels World class performers but are enough employers investing wisely? Strong sector, size and spatial variations in labour market National picture conceals underlying trends and persistent, concentrated pockets of skill deficiencies which impact on business performance Can we more effectively anticipate skills needs? How can we improve partnerships to ensure future investment really adds value?

40. Key messagesEmployer investment in training There are 1.5 millionbusinesses with a headcount of 2+ across England. Of which... 66% train 34% do not train 64% 36% Of those who do not train: Said they had no training need Reported barriers £ Barriers cited include: i Lack of information about what is available Cost Time Affected further groups who wanted to train more too....

41. Key messages Is investment wise? Understanding the market Across England £40.5 Billion Is spent on training. However: £8.8 Billion Is non-tradeable (i.e. Elements of training that cannot be outsourced) £11.3 Billion Is tradeable costs (i.e. Elements of training that can be outsourced) £20.3 Billion Is the wages of those being trained. £20.2 Billion Is spent on the direct costs of training. £3.1 Billion on payments to external providers £2.3 Billion on course fees £825m Other activity

42. Key messagesIs investment wise? Understanding the market Product markets: 52% medium to very low product strategies Nature of training 53% of total workforce or 12 million staff were trained in the 12 months prior to the survey Reaches more skilled? 12% Of employees were being training towards a qualification overall

43. Key messagesIs investment wise? Tackling skill deficiencies Across England skills deficiencies are not universal (20% of establishments have them) BUT are concentrated and persistent and employers report significant impacts. For example, Skilled trades occupations experience a persistent concentration of skill shortage vacancies (33% of all vacancies caused by skill shortages in 2011). • Majority of businesses facing skill deficiencies say it impacts on the way their business functions, issues cited include: • Increased workload for other staff • Delays developing new products and services • Losing business to competitors Opportunities for curriculum planning.....

44. 59% 74% 82% 18% 34% 41% 66% Young people leaving HE 17-18 yr olds leaving FE 17-18 yr olds leaving school 16 yr olds 26% Key messages‘An inconvenient truth’ Across England, 30% of businesses had recruited education leaversin the past 2-3 yrs. Most businesses found education leavers well prepared for work (with preparedness increasing with age) The minority of employers report issues with education leavers. The two key issues were: Experience of world of work Poor attitude/ Personality

45. Key messagesSectors matter When we look at investment in training provided by employers across different sectors, there is considerable variation: Sector Provides Training Provides no training Construction 56% 44% Transport & Communications 60% 40% Manufacturing 61% 39% Business Services 70% 30% Electricity, Gas & Water 29% 71% Public Administration 85% 15% Education 88% 12% Health & Social Work 89% 11%

46. Key messagesSize matters Mid-size establishments are feeling skills pressures more than others. Reviewing the level of skills shortage vacancies by business size between 2005-11 shows that there is an increase in mid-sized establishments compared to an overall decline across other business sizes.

47. Key messagesGeography matters We can show variation at the local level by LEA and LEP. For example the diagram below shows the incidence of training by local authority area in London. Key 50-54% 55-59% 60-64% 65-70%

48. Thank you Find out more: Read the report: http://www.ukces.org.uk/publications/employer-skills-survey-2011 UK Employer Surveys site: http://employersurveys.ukces.org.uk UK Commission research: http://www.ukces.org.uk/ourwork/research

49. Martin Doel (OBE) Chief Executive the Association of Colleges

50. Skills Funding Agency National Funding Policy Conference Martin Doel OBE Chief Executive Association of Colleges