Functional skills ‘commercially unviable’, research suggests

Average delivery costs still leave training providers making a loss on functional skills, even with funding increase

Average delivery costs still leave training providers making a loss on functional skills, even with funding increase

29 Jan 2024, 14:50

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Training providers are still making a loss on functional skills qualifications even after this month’s funding boost, according to a new report. 

The Association of Employment and Learning Providers (AELP) said historic underfunding of functional skills qualifications (FSQs) has led to larger class sizes, increased online delivery and higher entry requirements for apprenticeships.

FSQs have got “harder to pass,” are “no longer in line with their vocational intent,” and “have now become unviable,” today’s report asserts.

Funding for functional skills in apprenticeships was increased significantly for new learners this month.

A 54 per cent increase from £471 to £724 was announced by the government last year for eligible learners. The increased funding rate for apprentices now matches funding for non-apprentice functional skills through the adult education budget. 

But even that increased funding rate falls below the average cost of delivery of the qualifications. 

AELP’s report, ‘Spelling it out, making it count’, used financial data from 11 training providers and found that the average cost of delivering functional skills to apprentices was £911 per learner for English and £893 per learner for maths. 

Some providers were found to be spending over £1,000 per apprentice per qualification. 

Functional skills qualifications are alternatives for GCSEs. Learners without grades 4-9 in GCSE English and/or maths have to continue to study those subjects until they achieve a pass. This is a mandatory requirement to achieve an apprenticeship. 

Using average costs of delivery for non-apprenticeship FSQs, which were already funded at the higher £724 funding rate, providers on average lost £20 per learner for English and £39 per learner for maths. 

This is before any resit costs, which affect up to a third of learners, that are unfunded. One resit, adding £35 worth of costs, would increase the per-learner loss to around £69, the report said. 

“It is clear that apprenticeship providers have been incurring significant losses on mandated FSQ deliver for many years, which may go a significant way to explaining the current parlous state of many apprenticeship provider’s finances,” the report stated.

Those losses are likely to be higher though as it costs more to deliver FSQs to apprentices than to non-apprentices. Those extra costs include more one-to-one teaching, travel and additional retakes.

Before this month’s funding uplift, providers were losing on average £440 per FSQ English apprentice and £422 per FSQ maths apprentice.

Ben Rowland

The Department for Education was approached for comment. 

Ben Rowland, chief executive of AELP, said: “It is clear that the rate of losses incurred in delivering qualifications that bear increasingly little relevance to workplace scenarios is unsustainable. Urgent change is needed, and it is needed now.”

‘Commercially unviable’

The report claims that reforms to FSQs in recent years have made the qualifications “more academic in nature” with less vocational context to the main subjects learners are studying, with more content and assessment coming from GCSEs. 

Providers reported varying first-time pass rates for functional skills learners.

For apprentices, 65 per cent of apprentices pass FSQ English at their first attempt. For maths that was just 45 per cent. For some providers though, first time pass rates were as low as 19 per cent and 7 per cent respectively.  

Training providers with higher proportions of SEND apprentices and those with more open entry requirements were more likely to report making losses on FSQ delivery. 

Researchers reported more providers and employers now require English and maths entry requirements for apprenticeships to get around the requirements to deliver functional skills. This, they said, “diminished learner choice and adversely impacted on social mobility.”

One of the report’s case studies, an apprenticeship training provider, stated: “We are not in a position to progress candidates who do not currently have level 2 English and maths. This is for two main reasons: it is not commercially viable to re-train apprentices in exams which they have recently taken. Secondly, there is a higher risk they will not pass their assessment, leading to non-completions.”

AELP has called for an immediate 10 per cent uplift to FSQ funding rates, to £796, though this would still fall short of the reported average costs of delivery for apprentices. Had the rate kept up with inflation, it would now stand at £875, AELP said. 

The research was carried out with the University of Warwick’s Institute for Employment Research, with support from the Edge Foundation and Gatsby Charitable Foundation. 

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  1. Albert Wright

    Apprenticeships were designed so that young people who lacked the skills and attitudes required to study in an academic way, could excel by doing qualifications related to activities they wanted to do because they already had an interest in them and the aptitude to perform well.

    However, something has gone wrong and the requirement that they need to achieve a basic level pass in English and maths to continue to study their apprenticeship has become a barrier. This group of young people are in danger of becoming workless for life and being seen to be worthless. There is a danger that they may become criminals by being recruited into gangs dealing drugs.

    I am not clear about the number of people in this position but if it is more than 1% of the age group at age 16, we need to ensure schools and colleges are adequately resourced to ensure this does not happen.

    • It will be way over 1% Albert.

      At age 16, those leaving school with English and maths is lower than 70% and that is running higher than normal because of teacher and centre assessed grades during and after Covid.

      If you split it by deprivation quartile, then around 80% for the least deprived 25% and 55% for the most deprived. In the most deprived areas, the English and maths pass rate at age 16 is 40%.

      Sadly the debate on improving those numbers tends to break down as underfunding and over-politicisation in the sector tends toward finger pointing.

  2. I have taught FSQ’s since they started and I have seen a very big change in results for maths particularly. Learners straight from school, can have very basic maths skills which consequently require too much of a jump in order to attain. It is demoralising for teachers and learners when the fail rate is so high. English works well and has a very high success rate but maths needs looking at.

  3. Undervalued

    If you are a teacher, you could regard this research as a wolf in sheeps clothing.

    It looks back at costs and funding rates, but it totally ignores the fact that teaching pay and conditions have worsened significantly over that time. Merely looking at the costs ‘today’ and building an argument around that will structurally entrench the eroded pay and conditions of staff. In essence, setting a new low baseline.

    If this research has any impact and the funding rate is increased to cover costs, that money will not be used to increase teacher pay (as that would increase costs above what the research found). It will have no effect on the years of below inflation pay increases. But it will ‘normalise’ the current low salaries in the minds or leaders and funders.

    Lets not forget that one in five staff in the FE workforce are on zero or variable hours contracts. There has already been plenty of research done on how far ‘real’ pay has dropped in the last 10-15 years.

    If you search for the words ‘pay, salary, wage, tutor, teacher’ in the report, you will not find them. The actual people delivering FSQ are nothing more than a commodity in this piece, a bunch of numbers in a spreadsheet.

    I view this as a classic example of the difference between cost and value. Good luck improving quality and retaining good staff with that approach.

  4. Jim Maguire

    One of the main reasons for low functional skills’ pass rates, especially for Level 2 functional maths, is that the government, in its ‘wisdom’, deemed that anyone with a level 2 in maths could deliver level 2 maths in an FE setting. The inevitable result is that vocational tutors are asked to deliver a difficult subject that they’re just not qualified, or experienced to deliver, usually to the detriment of their learners and their own sanity.