ITPs squeezed out by pre-devolution pilot

National adult skills contracts will shrink from September as a portion of funding is handed to 20 local authorities for the second year of a pre-devolution trial.

The government’s “pathway to devolution pilot”, launched this academic year, is testing an “alternative approach” to formal devolution and helping councils prepare for full local control of Adult Skills Fund (ASF) cash by boosting their grant allocations.

Independent training providers holding national ASF delivery contracts have been told the pilot means their allocations will be reduced and they can no longer deliver in the 20 areas.

Officials said the funding reductions to national contracts, currently held by 45 ITPs, are needed to “avoid duplication” of delivery in the regions covered by the pilot, and to ensure value for money for taxpayers.

The national contract has halved from £77 million when it was first procured to 57 providers in 2023-24, to £37 million this academic year.

So far, 11 local authorities have been handed uplifts averaging 27 per cent, or £931,000, to their usual ASF allocations. Most of those areas are covered by combined authorities that will have devolved adult skills budgets from August this year.

ITP bosses told FE Week that while they supported giving local areas more control over adult education spending, handing additional funding to small authorities that lack skills commissioning expertise could result in a “waste of resource”.

Procuring adult skills contracts has caused headaches for both local and national government, often leading to legal disputes.

Future not clear

There is uncertainty over the future of central government commissioning of adult education.

ITPs holding a national contract are understood to have received indicative allocations for the 2026-27 academic year.

But the national delivery contract, launched in 2023 and thrice extended by one year, stipulates that its final possible extension is summer 2027.

It is unclear whether the government will try to use procurement rules to extend it again.

Last year, the Department for Education said ministers were contemplating re-procurement or taking an “alternative commissioning approach”. But its estimated March deadline for publishing a potential new tender passed by without an announcement.

The number of providers delivering a national contract has dropped from 57 in 2023-24 to 45 this year, with allocations of up to £2.5 million available per provider.

FE Week understands that ITPs still holding a contract have seen their allocations decrease by up to 90 per cent since the first year.

Luke Muscat, CEO of Leep Group, said some local authorities involved in the pilot may lack skills expertise for handing the extra funding.

He added: “It’s a couple of hundred thousand pounds given to an area and they’re asked to do something with this. I don’t think they are all equipped to manage it very well.

“In principle, I agree with the concept, but when it gets to a certain scale there is a question over whether it’s efficient for an individual entity or area to procure.

“How small or low should those allocations be allowed to get before it becomes a waste of resource?”

‘Business-as-usual’

Limited information has been published about the pathway to devolution pilot policy, as officials said they are allocating the funding through “business-as-usual processes”.

But a spokesperson for the Department for Work and Pensions, which now controls adult education policy, told FE Week the 20 councils in next year’s wave of the pilot were selected based on either their “proximity” to full devolution or their experience of procured adult skills delivery.

Local authorities involved will have the same autonomy to spend funding as with their current grant allocations, which usually involves direct delivery, partnerships or subcontracting arrangements.

The councils will not be required to meet the same detailed “readiness” criteria as newly devolved areas and will not have legal powers such as altering the government’s standard ASF rules, regulations and legal entitlements.

Analysis suggests that 15 of the councils involved in the pilot’s second year have joined, or plan to join, five new combined authorities over the next two years.

But five of the local authorities are yet to agree combined authority plans – with councils such as Milton Keynes, Luton, and North Northamptonshire still locked in a debate over which will “buddy up” to form a combined authority.

Leicester City Council is set to receive a 39 per cent budget increase to £5.8 million through the pilot.

According to figures set out in cabinet papers this month, West Sussex County Council has been offered an indicative increase of 39 per cent to £4.2 million, although a spokesperson claimed this figure was no longer accurate.

Most of the 11 local authorities involved this academic year told FE Week they were able to launch new delivery contracts by the start of the academic year in September.

They praised the pilot for helping them build a local supplier network, diversify the curriculum offer, and said it “strengthened alignment” with local labour market priorities.

All but two – Norfolk County Council and Suffolk County Council – have finalised adult skills devolution deals in place.

The government wants England to have a “complete national layer” of strategic authorities across England, which should include local control over adult skills.

Under confirmed devolution plans, 20 areas will control about 77 per cent of England’s £1.4 billion adult skills fund budget by the next academic year.