Providers to get transitional funding protection from new system

Providers are to be protected from potentially huge drops in funding when a new payments regime is introduced from August.

The Skills Funding Agency exclusively told FE Week that “transitional protection” would be in place for the new adult funding system after research showed the value of many qualification would fall by more than 20 per cent.

However, the agency’s protection measure could also be used to limit the amount it pays out with the research having shown that the value of some qualifications could rocket. One such qualification, uncovered by FE Week, will soar 271 per cent.

This change in the value of qualifications, between the current ‘demand-led funding formula’ and the new ‘streamlined funding system for adults,’ is called turbulence.

The agency said it was acting to limit the effect of turbulence on providers — and the qualifications watchdog Ofqual said it was “alert” to the possibility that some qualifications could become more attractive to providers.

An agency spokesperson said: “We accept that the simplified funding system will shift rates of individual qualifications, but our initial assessments suggest that turbulence at provider level will be low in most cases.

“Transitional protection will be put in place to limit this turbulence even further.”

An Ofqual spokesperson said: “The way qualifications are funded can have an impact on the market, and create particular incentives. As a regulator, we are alert to this.”

When the current funding system was introduced in 2008/09, transitional protection was also put in place for the same reason and on that occasion funding variations in both directions were limited to a maximum of 2.1 per cent.

We welcome the provision of pragmatic and sensible transitional support as a means of managing change most effectively.”

However, no further details were available from the agency on the new “transitional protection”.

Nevertheless, its announcement was welcomed within the sector.

“It is undoubtedly a period of persistent transition in the sector and curriculum planners are facing constantly shifting priorities as they respond to policy changes and prepare for new initiatives such as the Study Programme and Traineeships,” said David Grailey, chief executive of the awarding body NCFE.

“At a time of such turbulence, the latest funding developments are an added pressure for colleges and training providers.

“We welcome transitional protection for providers, and hope it adequately addresses the issue of turbulence,” he said.

And Association of Colleges chief executive Martin Doel said: “We have appreciated the consultative approach that has been taken to simplifying the agency funding regime and think this collaboration will have resulted in a more effective funding methodology.

“But the introduction of any new system has the potential to generate unforeseen consequences and a degree of unwanted instability.

“We therefore welcome the provision of pragmatic and sensible transitional support as a means of managing change most effectively.”

A spokesperson for the Association of Employment and Learning Providers added: “With apprenticeship rates being held, this is less of a big issue than it might have been, but we support the principle of not causing too much short-term disruption.”

The agency spokesperson said it was still accepting feedback on the proposed new funding system.

“As we stated when we published the Funding Rules 2013/2014, we continue to welcome feedback on specific funding rules that are not clear or any area where a rule is missing,” she said.

“We will address these clarifications and update the document, with a final version of the document to be published by the end of March 2013.

“Between now and March rates are being reviewed as part of this process.”

Email FundingSystemsTeam@skillsfundingagency.bis.gov.uk to give the agency feedback on its new funding system proposals by Friday, March 15.

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Editorial: Protect or postpone?

The promise of transitional protection from the Skills Funding Agency has unsurprisingly been welcomed within the sector.

After all, it should smooth out the turbulent times ahead as qualification rate variations between the old and new funding systems hit double, sometimes triple digit percentage points.

The way the system puts qualifications of hugely varying credit values into cumbersome bands is the problem and could lead to further issues.

There will naturally be temptation for providers to favour the delivery of more cost-effective qualifications that are nearer the lower credit end of each funding band.

So given this, and that transitional protection can only be temporary, I would question whether the funding system change is a wise move at all?

Despite developing the system for more than two years, too much at this late stage remains unclear.

And is our current system so bad? Even if it is, can’t it be tweaked rather than thrown out with the bathwater?

The agency has already delayed introduction of the new regime in 2012/13, and they should do so again for 2013/14.

I would favour a permanent delay.

Nick Linford, editor of FE Week