GLA ploughs ahead with subcontracting fees cap - but DfE still dragging its heels

The Greater London Authority is one step closer to capping management fees when it takes control of the adult education budget next year, but the government is still yet to make a decision for the rest of the country.

In a draft rulebook for providers in London, published last month ahead of devolution of the adult education budget in September, the GLA confirmed that it is likely to introduce a 20 per cent cap on top-slices charged by prime providers to manage subcontractors.

“We will consider a retention of up to 20 per cent of funding to manage delivery subcontractors as a maximum cap and would not expect providers to retain more than this,” the draft rulebook reads.

“In exceptional cases, we will consider higher retention amounts and then only if there is a compelling rationale. This will be assessed on a case-by-case basis.”

It comes after FE Week revealed that London mayor Sadiq Khan first thought of introducing a cap on the controversial management fees in September.

Under the current system, the Education and Skills Funding Agency administers the AEB for the whole country, with no cap on top-slices.

But FE Week has reported extensively on examples where the management fees have risen to as much as 40 per cent.

The government was told that it needs to get a grip on the “outrageous and unjustifiable” subcontracting market which has become a “moneymaker” for training providers as a result of these high fees, by a panel of FE experts during an education select committee hearing in March last year.

The ESFA was meant to publish its first ever policy for top-slicing in subcontracting in August, but it kicked this decision into the long grass as it needed to conduct further investigations.

The agency was then supposed to provide an update on the guidance last month, but this has not been forthcoming.

An ESFA spokesperson told FE Week this week that its decision on management fees would be revealed in “due course”.

The Association of Employment and Learning Providers, which developed best-practice guidance on subcontracting including a 20 per cent cap on top-slicing with HOLEX and training provider group Collab last year, has welcomed the GLA’s lead on the approach and urged the government to hurry up.

“It’s great the GLA has set an important and much-needed precedent in adopting sector best practice and we’re encouraged that other combined authorities are now considering the same percentage as either a hard cap or good practice,” AELP chief executive Mark Dawe said.

“With funding so tight, the government should be backing up its own words on maximising the amount that reaches frontline delivery as soon as possible and this is why it’s so disappointing that it has missed its deadline for publishing new expectations in respect of apprenticeships.”

In early 2018, the GLA revealed that it planned to move away from paying providers to deliver qualifications, to paying for wider outcomes such as progression into work.

But the move to an outcomes-based funding system will not happen straight away and has not been included in the GLA’s new draft funding rules.

It will only be introduced once “there is confidence that there is sufficient data to allow robust payment models to be developed”.

FE Week also revealed earlier this year that the GLA is having to recruit a huge team of new bureaucrats to hand out the budget to London’s training providers from 2019, with most of their wages paid every year by top-slicing £3 million from the AEB.

Under the devolved system, seven combined authorities will take control of £600 million of the AEB to administer within their area.

The devolution of the budget is a hot topic at the moment, with FE Week organising a debate in parliament for Monday hosted by the shadow skills minister Gordon Marsden, where FE Week editor Nick Linford and Dr Susan Pember OBE of Holex will argue against and in favour of the policy, respectively.