LGA response to DfE consultation: New Further Education Funding and Accountability System

Q1. Do you agree with our objectives for reforming adult skills funding?

Broadly. A reformed adult skills funding system should be simplified and streamlined. However there needs to be a balance between addressing productivity though higher and technical level skills with levelling up, social equity and mobility which also requires support to increase basic and entry level skills.

Q2. Do you agree with our reform objectives for an adult skills funding system, or are there other principles that should be included?

• Level 3 provision alone will not resolve the levelling up agenda, nor address longer-term productivity gaps in many areas of the country. A mixed and balanced skills funding offer is essential which enables support for community skills, basic and functional skills, technical skills, and higher-level skills. 
• A key omission is the principle that reforms should incentivise collaboration of a joined up local provider base, drawing upon the strength of each provider and creating pathways for adults to increase their skills from entry level through to higher level skills. Skills Escalators are a useful model developed by local authorities and their partners to achieve this.
• Outcome measures should not be limited to job outcomes or qualifications that deliver job outcomes as it will create a system in which providers primarily deliver Level 3, leaving many people with less opportunities to learn and gain skills. We would welcome the inclusion of other progression related outcomes, improving mental health, community integration, active citizenship, social mobility, intergenerational learning and family learning. 
• We support calls for a new lifelong learning strategy that underpins these reforms that supports learners of all ages, abilities and backgrounds lead more independent lives and progess in employment. Such a strategy should provide strategic direction, join up funding and delivery within the DfE, various Whitehall departments and with local and combined authorities. For example, green skills and education, supporting refugees, and training for the NHS sit with other departments but should be skills priorities, which need a national and a local response. 
• Local and combined authorities must be at the heart of the design, commissioning, delivery and oversight of skills for their local areas. This is best achieved through progressive skills devolution, including adult skills, to local and combined authorities. Even if Local Skills Improvement Plans (LSIPs) only partially cover the skills delivery sub-sector, at the very least, local and combined authorities should be core and strategic partners in Local Skills Improvement Plans partnerships alongside employer representative bodies and providers which are already named. We feel that local government missing from this should be rectified.
• With MCAs in the lead for adult skills in devolved areas, outside of devolution areas, councils should have a new ‘Community Skills Lead’ role with strategic responsibility for adult education planning and work with the proposed employer representative bodies and the provider base to align provision and ensure progression routes.
• Digital skills. Adults need to be digitally competent for many different reasons: to retrain through blended learning to secure new or better work, search for work, keep socially connected, and access online public and other services. But with 11.3 million people (in the UK) lacking full basic digital skills, this is a challenge. This was particularly visible during lockdowns when there was limited access to kit e.g. tablets and laptops, expensive data, poor connectivity, many unable to access public facilities. Linked to the above point of a lifelong learning strategy, digital skills is another area that needs far more coordination across Whitehall (DfE and DCMS), with local government and employers.

Q3. How can non-qualification-based provision most effectively be funded in the future?

Community learning helps ACE providers, institutes of adult learning and local authorities to support a return to learning, family learning and short non-accredited courses. These courses assist those furthest from the labour market and can help end generational disadvantage.  There is a risk that growth in technical provision could result in cuts to these courses, with harmful social and economic effects. Non-qualification-based provision could be set as a reasonable percentage of total spend and devolved to local delivery partnerships. They understand the cohorts that need to be supported and can that understand the cohorts that need to be supported and determine the most appropriate delivery metrics and set provision to meet local need. With MCAs in the lead for adult skills in devolved areas, outside of devolution areas, councils should have a new Community Skills Lead role with strategic responsibility for adult education planning.

Q4. How can we ensure this provision is of high-quality? 

N/A

Q5. We would welcome your ideas – particularly from employers – on how we could fund providers for innovative provision currently not funded by the system.

Flexibility should be built into any new growth system which should be devolved, allowing local providers to work with local employers to encourage new and novel local delivery patterns and programmes. Bidding should be avoided as too much time and resources has been wasted using this approach.

Ensuring adults (re)enter the workforce with soft skills that employers require is important, and may need to be developed in advance of, or alongside sector specific training developed in Sector Based Work Academies. Local authorities would be in prime position to deliver this if adequately funded. Longer term thinking about soft skills and employment growth would lead to higher level of role take up and give those successful a better chance of sustaining such work. 

Q6. We would welcome your views on our proposal for a single Skills Fund: do you agree that we should formally merge the existing AEB including community learning, and National Skills Fund (NSF) investment into a single stream of funding?

No, we do not think that Community Learning should be merged into the National Skills Fund, or at the very this element should be ringfenced within it so that this provision is protected. The two funds have a very different focus. The Skills Fund quite rightly focuses on productivity, while Community Learning funding aimed at the most disadvantaged should remain focused on inclusion and community engagement. The LGA is concerned that any amalgamation risks losing significant community capacity, especially at a time when local authorities and their partners are already experiencing a tailing off European Social Fund, coupled with delays in replacing ESF with an uncertain quantum of Shared Prosperity Fund.

All local authorities felt that there is now an urgent need to prioritise and fund activity to help adults progress from community-based, pre-entry level learning through to Level 2. Providers can best support adults to reach Level 3 equivalency by being encouraged to work with existing Level 2 and below fully funded provision, which are in the main provided by local authority adult and community learning (ACL) services who are expert in delivering community outreach and intensive work required to meet need below Level 3. Current FE reforms should enhance rather than restrict this activity. 

Funding for adult skills mainly comes from the £1.5 billion annual Adult Education Budget (AEB), which has been vital in providing support for those without Level 2 to improve their basic skills and gain essential qualifications, and we know that where it is devolved, MCAs have used it innovatively. The overall AEB funding pot has reduced by 50 per cent over the last decade, which has coincided with a drop in learner numbers. The Government should:

• at the very least restore adult skills funding (Level 2 and below) to 2010 levels and devolve it to all local and combined authorities
• focus efforts on supporting and funding both parts of the training network (those specialising in below L3 and those delivering above level 3) to work together and better align their respective provision to maximise the throughput to Level 3
• ensure the complementary role of local authority adult education provision is understood, resourced and integral to a joined up local provider base and recognised in proposals to reform the FE system.
• with MCAs in the lead for adult skills in devolved areas, outside of devolution areas, councils should have a new ‘Community Skills Lead’ role with strategic responsibility for adult education planning and work with the proposed employer representative bodies and the provider base to align provision and ensure progression routes
• this should include adequacy of ESOL language tuition, when English is not the first language.

Q7. How can we implement this Skills Fund in a way which best supports individuals to access skills which meet the needs of local employers?

Depending entirely on employer representative bodies  to articulate skills needs for a whole area risks focusing on current need only, and we have raised separately that it needs to include the needs of all employers – large to small, public, private and third sector. Care must be taken to ensure that employers of all sizes are included in articulating which skills are required within a region both now and for the future. Not all employers especially smaller ones will have the capacity or capability to do this.

Local authorities and the Employment and Skills Boards / Panels (or similar that they facilitate to bring businesses and educationalist in local areas) are uniquely placed to do this given its role working with incoming and existing businesses of all sizes: insight into current / pipeline employer skills demand, lead authority for infrastructure, and leadership of regeneration, employment, and trade and investment strategies as well as being the largest employers in many local areas, who also have their own skills challenges. These are the organisations that know their people and economy the best and can really match qualifications to local jobs needs. They should play a lead role in helping them to contribute.

A clear process of devolution to local delivery partnerships which bring together businesses, providers, local government / and wider stakeholders would however be the best way to determine what is needed for a local area. LSIPs as they currently stand fall short of this.

Reports

Democratically elected local authorities, working in partnership with local and national partners should have the powers and funding to design a locally determined offer which would plan, commission and oversee a joined-up careers advice and guidance, employment, skills, apprenticeships and business support service for individuals and employers. This should include the Skills Fund. It would be underpinned by multiyear local labour market and skills outcome agreements. The LGA has a framework for this to happen.

Now is the time to put Work Local into action through the Levelling Up White Paper. The Government should use it to back and fund pathfinders across rural, coastal and metropolitan areas and deepen existing devolution deals whilst not forgetting London and the areas of deprivation. For a medium-sized combined authority each year, our Work Local model could lead to an additional 8,500 people leaving benefits and 5,700 people increasing their qualification levels, with additional local fiscal benefits of £280 million per year and £420 million to the economy.

Q8. We would welcome your views on our proposal to fund devolve authorities through a needs-based relative assessment. Do you agree with this approach?

Devolved authorities are best placed to respond to this. 

Q9. What elements do you think are important to include in such an assessment?

Devolved authorities are best placed to respond to this. 

Q10. Do you agree that an activity-based system of funding colleges based on the learners they provide for should be continued or are there other approaches which would be more effective or should be considered?

We assume this question covers all providers in receipt of ESFA funding, not just colleges. Current historical allocations neither promote good practice, nor encourage investment. Ideally, funding should be allocated on an activity-based system, but underpinned by either a plan based or needs based approach. To avoid unpredictability in income, DfE should combine an activity-based system with a number of measures: 

• a lagged funding system which allows time to adjust staffing if demand falls
• ability to account for funds across more than a single year to allow for short-term under-delivery to be made up within the multi-year period
• multi-year allocations to underpin longer-term investments in people and buildings and programme security 
• capital investment for all providers expand capacity in growth or high demand areas.

Q11. What are your views on the potential elements (set out above) to include in a simpler funding formula? Are there other elements which should be included?

We welcome a simplified funding formula model and a multi-year funding regime, providing both increase certainty and a greater ability to plan. Our member authorities told us that the use of a standard unit of activity approach makes sense, and that simplification of funding rates for qualifications at the same level removes some of the current distortive behaviours around qualifications in high supply, but lower demand across the economy. Additional needs and area costs should cover costs associated with transport, childcare, caring duties and supporting specific cohorts.

Consideration should be given to recruitment challenges and higher staffing costs due to labour market competition, which can be more acute in rural and coastal locations. The ‘relative value’ of provision should be determined at a regional level rather than national by ERBs, Combined Authorities and local authorities depending on whether they see it as a priority sector in their region. Any new system would need a detailed impact assessment and a transitional funding system that does not put strain on the system or the provider base.

Q12. Do you agree that we should use the same needs-based formula between all areas of the country? How should we balance responsiveness to activity delivered and equal opportunity to access training?

A differentiated formula for a high density populated urban area verses a less densely populated rural or coastal area could be explored recognising the delivery costs will differ.

Q13. How can we introduce these changes most effectively?

Before any proposed changes to funding rates are introduced, an impact assessment should be carried out and published, with details of transitional funding for providers with time frames for how long this protection will remain in place. This should then be piloted and assessed before any roll out in 2023. Alongside this there should be firm plans for local devolution of all skills funding and powers (see response to Question 7).

Q14. Do you agree with our proposal to bring together disadvantage funding, learning support and learner support into one element?

We assume this question covers all providers in receipt of ESFA funding, not just colleges. Yes, it makes sense to combine the funding into a single fund. Local authorities told us that providers use the fund interchangeably but find the current menu difficult to manage at times. Consolidation should not result in cuts to funding that risk reduced support for people that most need it to engage and benefit from learning.

Collaboration between relevant bodies is essential in coordinating a support offer with clear and consistent messages across a subregion / travel to learn area. Local authorities have the expertise to coordinate this given their adult and community learning role, and because many adults already engage with local authority services such as housing and welfare support.

DfE should continue to work with HM Treasury and DWP to review financial support to adults while learning. There are two areas to focus on: 

• As many adults are unable to access Level 3 entitlements because there is no support for living costs, explore how maintenance funding can be extended so that training is not economically punitive to learners.  
• Current Universal Credit rules disincentivise adults out of work to upskill or retrain as they will lose their benefits. This is counterproductive and indicative of a fragmented policy design at national level. It needs reform.

Q15. Are there likely to be unintended consequences we would need to manage?

There is a risk that a combined fund could result in reduced budget overall for disadvantaged learners, and costs varying in different geographical areas. This would need to be closely monitored for any unintended consequences. DfE should ensure providers either individually or in collaboration with others publish a policy explaining how they are using the funding. 

Q16. Is there a different approach we should explore?

No, the approach seems sensible.

Q17. What factors do you think should be incorporated in a measure of additional needs?

N/A

Q18. Will this help reduce requirements on colleges and enable them to support their learners better? Yes. We support the aim to reduce requirements and claims procedures. As above DfE should ensure providers either individually or in collaboration with others publish a policy explaining how they are using the funding. Providers should work together with local commissioners and local authorities to share best practice and outcomes.

Q19. Do you think we should move to a lagged system for the core funding or continue with the current “allocation and reconciliation” approach?

Unsure. In theory a lagged system, with a transitionary period, combined with a three-year indicative settlement could provide maximum surety for providers. 

Q20. Is there another method, not outlined here, that you would prefer?

Unsure.

Q21. Do you agree with our proposal for a mechanism within the Skills Fund to provide up-front funding for specific growth areas?

While this approach would allow new initiatives to be developed in a more planned way, growth activity usually differs from place to place and is needed at different times so a one size fits all approach will not be appropriate. The proposal therefore misses the essential expertise and knowledge of local and combined authorities, who can spot these opportunities well in advance. They should be involved in discussions from the outset given their unique insight into current and pipeline employer skills demand based on the fact they:

• work directly with existing and incoming businesses (large - micro) and representative bodies through Section 106, capital projects, inward investment, regeneration, planning, and are major employers in their own right
• analyse and generate data to create bottom-up strategies for regeneration, inward investment, SME growth and employability
• are lead authorities for Levelling Up, Community Renewal and Shared Prosperity Funds.

Growth areas need to be agreed and investment plans in place to enable funding bodies and providers to prepare for in-year funding, ensure provider capacity is in place and align curriculum plans to the defined growth areas. The timing of ‘in year’ funding allocations would need to be defined to align procurement exercises and commissioning arrangements. Lessons should be learned from the introduction of the Level 3 entitlement in year which gave funding bodies and providers little time to grow capacity and curriculum plan to deliver on the qualifications/sectors included in the offer. 

We also note local and combined authorities are missing from Government LSIP and ERB proposals. Local authorities should at the very least be a core, strategic partner, with devolved areas afforded a lead role.

Q22. Are there other mechanisms which we could explore to achieve this aim of supporting growth in specific skills areas?

See response to Question 21.

Q23. We welcome views on our proposed multi-year approach, including how this might affect colleges’ behaviour.

Again, we assume this covers all grant funded providers. Multi-year funding settlements would allow providers to plan with more certainty, consider areas of growth and demand more sensibly, and take risks in adapting to changing employment needs and community needs. We should avoid a process of time-consuming bidding processes. Providers should be incentivised to work together locally to identify the multi-year investment priorities that will benefit local economies and communities. Local and combined authorities are in a unique position to facilitate this.

Q24. How else could the funding system be improved to make strategic planning and year to year managing of funding and expenditure easier for providers?

See response to Question 23.

Q25. Which entitlements and eligibility rules should be maintained in the new system, and why?

The statutory entitlement to free literacy and numeracy and digital should remain. We would like to see a clear statement on who the Government is willing to support. Devolved areas should continue to be able to use their funds innovatively to deliver support for their residents. In light of the Levelling Up White Paper, we look forward to an expansion of devolved skills to more areas.

Q26. If entitlements and rules are significantly reduced in number, in the context of an activity-based and lagged system, how would you expect colleges to allocate funds when the available budget is limited? Are there specific additional rules that you think should be introduced to constrain their activity?

See response to Question 25.

Q27. In what circumstances should direct procurement of skills provision be used by government?

None. The Government should not be involved in the national procurement of provision of skills activity. This is best determined and delivered at a local level. DfE should use grant funded assured providers to be the main route for funding and make more use of the local authority adult and community learning commissioning role to expand any provision using voluntary and independent specialist providers as appropriate to work with target groups.

In devolved areas, MCAs/GLA have a proven track record of responding quickly to national priorities when these have been rolled out (Level 3 offer, Sector-based Work Academies Programmes) and mobilising all local providers – colleges, ITPs, and community providers – in a way which avoids duplication and meets local need. In light of the Levelling Up White Paper, we look forward to an expansion of devolved skills to more areas.

Q28. How can government improve the way it procures provision to ensure it complements existing areas of provision delivered by colleges and local authority providers and improves value for money?

See our response to Question 27.

Q29. How can we support colleges to improve how they commission and oversee provision by providers they will commission from?

• 92% of local authority adult and community learning providers and their subcontractors are already seen by Ofsted as good and outstanding and have robust quality assurance mechanisms in place for subcontracting work. This good practice should be shared, and build on.
• With MCAs in the lead for adult skills in devolved areas, outside of devolution areas, councils should have a new ‘Community Skills Lead’ role with strategic responsibility for adult education planning and work with the proposed employer representative bodies and the provider base to align provision and ensure progression routes. See also our response to Question 27.

Q30. How can we best support this arrangement for providers that are commissioned by colleges?

See our responses to Question 27 and 29.

Q31. How can we best support local areas to improve and expand their offer to better meet current and future skills needs?

As suggested in our response to Question 7, democratically elected local authorities, working in partnership with local and national partners should have the powers and funding to design a locally determined offer which would plan, commission and oversee a joined-up careers advice and guidance, employment, skills, apprenticeships and business support service for individuals and employers. It would be underpinned by multi-year local labour market and skills outcome agreements. The LGA has a framework for this to happen.

Now is the time to put Work Local into action. The Government should use it to back and fund pathfinders across rural, coastal and metropolitan areas and deepen existing devolution deals. For a medium-sized combined authority each year, our Work Local model could lead to an additional 8,500 people leaving benefits and 5,700 people increasing their qualification levels, with additional local fiscal benefits of £280 million per year and £420 million to the economy.

Q32. What measures are most suitable in showing how well colleges are delivering good outcomes? Which measure do you think best matches the purpose we have described in this section?

Grant funded organisations could be measured on good outcomes through:

• quality of provision / Ofsted
• financial health
• assessment of percentage of skills considered high demand by local business partners (to be determined through devolved partnerships)
• percentage of students from a harder to reach background or with a protected characteristic.
• community engagement.

If these were adopted, most providers would both focus on business demand, but also those furthest from the market, as well as the current focus on quality and financial health.

Q33. Of the outcome measures you have suggested above, how effective would they be at assessing college performance in a timely way?

N/A

Q34. Do you agree that underperforming on the skills measure (described in paragraph 120) should be taken into account for planning an Ofsted inspection?

While it is not clear if the skills measure will be based on Local Skills Improvement Plans (LSIPs), devolved areas’ skills strategies, or skills plans in non-devolved areas, we agreed that providers should be judged on their ability to meet demand, work within their communities and provide a quality local offer. Any assessment of this measure by Ofsted would need to clearly identify what measures are being assessed and be planned with local government commissioners / leaders. 

Q35. Do you agree that we should publish colleges’ financial health ratings in the Dashboard, as we do not currently publish these?

N/A

Q36. Do you agree with our proposal for new Accountability Agreements?

• Yes, they should be subject to enhanced assurance and oversight as they are predominantly public bodies. These should include oversight that they are delivering locally required skills and priorities.
• Moreover, providers should be far more accountable to the areas in which they serve. For instance, they should attend local and combined authority scrutiny committees or employment and skills boards. This could be an element of the final LSIP approach which should include local authorities as educational authority and, or, adult learning authorities.

Q37. Do you agree that Accountability Agreements should incorporate and replace Funding Agreements?

For non-devolved areas, it seems sensible that accountability agreements incorporate and replace funding agreements. Devolved areas should rightly make their own decisions.

Q38. Which of the options above, or combination of options, would have the biggest impact on shifting college behaviour towards meeting local skills needs?

Requiring providers to demonstrate that they have met the objectives and demands set out by the LSIP, with each area having a fully devolved LSIP partnership in place by 2023/24.

Q39. How do you think Ofsted can best make meeting local skills needs a more prominent feature within its inspection framework?

By having it as one of the factors appraised as part of the inspection regime, with a requirement that Ofsted consult with LSIPs and local government commissioners / leaders on achievement and performance.

Q40. Are there any other changes to Ofsted’s inspection approach that would support improvement in this aspect of college performance?

Yes:

• Adult participation is falling. More effective collaboration to develop pathways between colleges and ACL services could improve this. Ofsted could inspect these relationships and comment on local plans for provision below level 3.
• It could also inspect the level of delivery to those from a protected group or characteristic as part of their approach, with meaningful equality targets as part of the performance approach.

Q41. Do you agree that our accountability proposals should apply to all grant funded providers on a proportionate and relevant basis?

Yes

Q42: How might apprenticeships best feature in the new accountability system?

Apprenticeships should be considered and treated in the same way as other provision, providing a rounded picture of those providers who deliver apprenticeship as part of their overall offer.

Q43. Do you agree with our plan to give the FE Commissioner this role with a renewed focus on driving improvement and championing excellence?

Yes, this could cover all grant funded providers. The FE commissioner should work in conjunction with the new LSIP partnerships as lead local skills bodies and local government commissioners / leaders.

Q44. What lessons can we learn from our current approach to formal intervention to help us design this new approach?

The current focus on financial health and performance is welcome and includes an element of local consultation and discussion around the sector and occasionally wider partners. This could be reinforced with a wider focus on meeting demand and meeting the needs of communities / harder to reach individuals, placing an increased emphasis on providers to demonstrate their added value and reach.

Q45: Do you agree with our proposals to create a simpler and straightforward three stage approach to improve college performance?

Broadly. A clear timetable between the three stages would provide further clarity around the process and the rapidity of treatment in the event of an intervention. There should be a roadmap as with other public sector funded services if there is continued underperformance of a provider. All of this should be done in consultation with local government commissioners / leaders and LSIP partners to ensure fit with local need and demand.

Q46: What specific actions do you think we need to take to ensure that performance issues are dealt with quickly and effectively?

N/A

Q47. Do you agree with our high-level proposals to improve student data collection?

N/A

Q48. How do you think we should go about achieving our objective of keeping requirements to a minimum while maintaining confidence in the system?

N/A

Q49. Please provide any information that you consider we should take into account in assessing the equalities impact of these proposals for change. (For example, do you believe any groups with protected characteristics will be impacted by the changes and if so, how?)

A full equalities impact assessment of any outlined proposals should be considered by the Government, including the likely harm of rolling together community and other non-technical funds and the risks to community cohesion, mobility and development of doing so. It is highly likely that a shift towards a Level 3 dominated Single Skills Fund will have extremely difficult implications for those with a protected characteristic or other need.