The Department for Business, Innovation and Skills (BIS) has been accused of launching an FE “brain drain” through the planned closure of its Sheffield office that could lead to almost 250 people losing their jobs.

The Public and Commercial Services Union (PCS) told FE Week on Monday that 240 civil servants, with a vast combined knowledge of the FE and skills sector, had been warned by BIS that they stood to lose their jobs through plans announced by the department last week.

A 90-day consultation was launched with staff on January 28, a PCS spokesperson said, over the BIS plans to close the office in St Paul’s Place, Sheffield, and centralise policy making to London.

A BIS spokesperson said: “The move will create a combined central headquarters and policy centre in London”, with about six business centres also set to be established across the country with each one focusing on a key business activity.

A former senior employee at BIS told FE Week that the plan to lay off so many experienced staff based in Sheffield, where they produce most BIS data on FE and skills, was crazy.

“They all have a huge amount of FE expertise in Sheffield and it looks like everyone is going to lose their jobs,” the source said.

“It will mean a brain drain at a key time for the government and the sector as a whole, with post-16 area reviews and apprenticeship reforms all pushing forward.”

Lois Austin, the PCS full time official for BIS covering the Sheffield office, told FE Week: “BIS management told us on Wednesday that the loss of expertise that would come with closing Sheffield is a risk worth taking.

“They stand to lose a lot of FE specialist knowledge at a crucial time.

“Sheffield staff provide a crucial function, including building the IT model being used to work out how college restructuring funding can be used [through area reviews].

“The statistical first release and all other key FE-related statistics that inform the sector are also produced from Sheffield.”

She added: “The majority of people who work here tend to be a little bit older and have a lot more experience.

“They brief other civil servants and policy makers on how to improve policy, for example relating to apprenticeship reforms.”

Martin Donnelly, the BIS permanent secretary, said on January 28: “The decision to close Sheffield by 2018 has not been taken lightly.

“It is my top priority that all our staff are fully briefed and consulted on the process. We will provide comprehensive support to all those facing a potential change or loss of job.”

However, BIS declined to respond to FE Week requests for a comment on concern at what effect losing so many civil servants with FE expertise could have on the apprenticeship and skills reform programme.

It also declined to comment on whether it had started recruiting replacements for the Sheffield staff to work in London, which FE Week understands is already happening, or provide more details about how the new business centres will serve FE.

George Osborne has been challenged to reveal in Parliament whether a proposed apprenticeship fund created from Libor fines – promised by the Prime Minister in the run-up to last year’s election – has been scrapped.

David Cameron pledged last April that if he won the election, his government would fund 50,000 apprenticeships and traineeships for unemployed 22 to 24-year-olds using a £200m pot from fines paid by bankers in the wake of the Libor scandal.

Since then no further detail about the proposed fund has emerged, leading the Shadow Skills Minister Gordon Marsden to table a parliamentary question to ask for an update.

He lodged the question after repeated enquiries from FE Week on the fund were met with a wall of silence from government.

“What progress has been made by Treasury officials on incorporating the proceeds of the £227 million fine, imposed on Deutsche Bank in relation to their Libor activities, into a new three year fund to create 50,000 apprenticeships, as outlined by the Prime Minister in his April 2015 announcement? ” he asked the Chancellor on Friday.

The key election promise was widely reported at the time, with coverage from major news outlets including The Sun, the Financial Times and the BBC.

When asked by FE Week if the Government had scrapped plans for the fund, a Treasury spokesperson refused to confirm or deny it.

“Further announcements that support the Government’s commitment to delivering employment opportunities for young people will be announced in due course,” the spokesperson said.

A spokesperson for the Conservative party also refused to confirm whether the pledge had become government policy, adding that it was “something you need to talk to No 10 about”.

However, a spokesperson for No 10 then told FE Week that a response would be “better off” coming from the Treasury.

A spokesperson for the Department for Business, Innovation and Skills also directed our enquiry back to the Treasury, which declined to comment for a final time on Wednesday.

A number of banks were hit with fines for rigging the London interbank offered rate (Libor).

These include Business Secretary Sajid Javid’s former employer Deutsche Bank, which was fined $2.5bn (£1.7bn) in April 2015, of which the UK received £227m.

When he announced the fund last year, Mr Cameron said: “We’re going to take the fines from the banks who tried to rig markets – and we’re going to use it to train young people and get them off the dole and into work.

“This is about taking money off those who represent Labour’s failed past, and giving to those who through their hard work and endeavour can represent a brighter Conservative future.

“This is about offering hope, spreading opportunity, sharing prosperity – it’s about securing a better future for you, your family and for Britain, and from now until polling day I’m going to fight for that future with every ounce of energy in my body.”

The Chancellor has three working days to respond to Mr Marsden’s question.

The National Audit Office has said it will “look into” the issue of lead providers skimming outrageous management fees from subcontractors, FE Week has been told.

The Public Accounts Committee chair, Meg Hillier (pictured) had vowed last December to raise the issue with the NAO following FE Week’s ongoing investigation into topslicing, which found evidence of providers keeping 40 per cent of government funding before dishing out contracts.

Ms Hillier told FE Week on Wednesday that she had received a letter from the NAO, which said: “We propose to look into this issue further to determine the facts.

“We intend firstly to review the Skills Funding Agency (SFA)’s recent compliance work, which aimed to make providers more transparent about their management fees.

“Once we have a fuller picture I will take a view on whether a full investigation would be justified.”

Topslicing has been the focus of an FE Week campaign since its launch in 2011 (see right), and was the subject of “recent compliance work” by the SFA.

The practice involves lead providers retaining government funding – usually called management fees – before finding a subcontractor to do the training for the remaining sum.

In one case, as reported by FE Week in November, Learndirect retained more than a third of its total government funding in management fees, pocketing nearly £50m.

And this week, FE Week uncovered evidence that one college was grading its potential subcontractors by the size of management fee they were willing to accept – the higher the fee, the higher the score.

Cambridge Regional College issued a tender document on December 16 inviting subcontractors to bid for four lots – 16-18 apprenticeships, 19+ apprenticeships, 24+ learning loans and adult skills budget.

The criteria on which all bids would be judged, included in the document, gave the proposed management fee offered by the subcontractor a massive 35 per cent weighting.

It then outlined the scoring methodology that the college would use to grade bids.

“Management fees retained by the college are a pass/fail criteria and the fee passed on must be a minimum of 20 per cent, which will be scored as a 3,” it said.

Anything lower than 20 per cent “will be marked as a fail”, it said, while bids of 22 per cent “score 4” and 24 per cent “score 5”.

When asked about its methodology, Paul Skitt, assistant principal employer engagement at Cambridge Regional College, said its higher management fees were the result of stringent contract management controls required by the SFA.

“The weighting we give to management fees reflects the increasing costs of administration associated with sub-contracting – the closer involvement and the increased demand on resources – required by all colleges with sub-contracted provision.

“Our sub-contracting processes and procurement have been approved by the SFA,” he added.

The SFA declined to comment on the college’s tendering process.

“As independent corporations they are responsible for their own business models, modes of operation and financial health,” it said.

A spokesperson for the NAO confirmed it had sent a letter to Ms Hillier, but declined to comment further.

Independent training providers (ITPs) will have to compete for Skills Funding Agency (SFA) contracts following changes to European Union law.

The document, Adult Education Budget: Changing context and arrangements for 2016 to 2017, published on January 28, said that contract arrangements would stay the same for the next academic year.

But it warned: “In advance of 2017/18, changes to EU procurement regulations will require us to procure the adult budget provided to ITPs.

“This means that the AEB [adult education budget] will be subject to competition as part of a procurement process.

“We are working through the detail of this, including taking advice from our group of stakeholders and we will provide further information later in the year.”

The change is not expected to apply to apprenticeships, as the Government plans to introduce the levy on large employers from April 2017. However, it looks set to apply to the rest of the AEB.

Stewart Segal, chief executive of the Association of Employment and Learning Providers, said he was aware of the planned change.

He said: “This will mean that the SFA will probably have to run an open tender process some time in 2016.

“Grant funded organisations can have a ‘roll-over’ contract without external tendering, but our view is that all providers should be treated in the same way.

“We also believe that the rules may also allow some budget for each ITP to be ‘rolled over’ without tendering.

“If this was the case, the majority of providers would retain their current contracts.”

He added that the SFA would be discussing how the procurement process should work in practice with AELP in the “next few months”.

An SFA spokesperson said: “We are developing our approach to the competitive procurement of AEB-funded activity in line with EU public procurement regulations, including taking advice from our group of stakeholders. We will provide further information later in the year.”

When asked if the changes would apply to apprenticeships, she added: “We are reviewing the impact of the Public Contracts Regulations 2015 on how apprenticeships are delivered, following the introduction of the levy in 2017.

“We will confirm any procurement plans arising from this later in the year.”

An EU spokesperson declined to comment when asked why it was changing the procurement regulations.

The Government is propping up colleges to the tune of £100m, the Association of Employment and Learning Providers’ (AELP) has revealed.

AELP chief executive, Stewart Segal, said he was looking forward to college finances improving significantly through the Government’s post-16 area reviews.

He added that he hoped “we can save much of that £100m going into the sector to make sure it can continue” because of this.

FE Week asked the SFA about the £100m after hearing this.

An agency spokesperson did not deny that the Government had told sector stakeholders, including AELP, about the bailout figure before Christmas.

It did, however, say that the figure was “out of date”, but declined to provide a new one.

Mr Segal also said during the same webinar on January 26 that “various reports suggest up to 90 colleges may fall into the [serious financial difficulties] category” (see right).

This would represent a big increase on the 50 that FE Week reported in February last year could be in serious financial difficulty, due to a “perfect storm” of capital debt and 16 to 19 funding cuts.

Dr Lynne Sedgmore, then-executive director of the 157 Group, said at the time that the figure was a “sector rumour”.

Part of the problem, she added, was that SFA predecessor body the Learning and Skills Council had “encouraged” colleges to “take on ambitious capital redevelopment programmes”.

“Since colleges have to finance a major part of their capital development themselves, many have high borrowings and now face a ‘perfect storm’ as funding rates have been repeatedly cut for 16 to 19-year-olds in recent years and funding numbers slashed for adult provision,” said Dr Sedgmore.

When asked about the £100m figure mentioned by Mr Segal, an SFA spokesperson told FE Week: “These are out of date forecasting figures. We will reassess the position when we have financial plans later in the year.”

“We will soon be publishing a list of colleges under notice of concern and providers under a breach notice,” she added.

“The SFA considers FE college exceptional financial support on a case-by-case basis, depending on the type of exceptional financial support requested.”

Notices of concern are issued in response to SFA concerns over a college’s financial health and trigger interventions from the FE Commissioner. The agency issues breach notices if providers fail to meet terms of its contracts.

Training providers have branded “ridiculous” the overdue news that many of their 16 to 18 apprenticeship and traineeship growth requests have not been funded in full by the Skills Funding Agency (SFA).

The SFA announced today that it had awarded an additional £25m to colleges and training providers to deliver 16 to 18 apprenticeships – but there was no extra cash for 16 to 18 traineeships.

The announcement, which should have been made on January 8, is in response to growth requests submitted by providers to help fund apprenticeships and traineeships in 2015/16.

It comes just a week after FE Week exclusively revealed that the delay in confirming the growth requests was due to an overspend by the Department for Education.

Stewart Segal, chief executive of the Association of Employment and Learning Providers, said he was “very disappointed” at today’s announcement.

“This will also mean many young people will not be able to take up their apprenticeship opportunities. When we are looking to engage more employers to deliver the target of 3m apprenticeship starts, this decision not to fund growth will put out a negative signal,” he said.

“Providers have made a significant investment in generating this additional interest and can ill afford this stop-start approach to developing the programme,” he added.

“The position on traineeships is even more disappointing as the programme is still in its early stages and needs continued support to establish the credibility of the programme,” Mr Segal said.

FE Week understands that many providers have been left short-changed by today’s announcement, with some providers receiving significant less than what they asked for.

@FEWeek @NickLinford Just rec’d 16-18 Growth reqst feedback, we’ve only got 50% of P1-8 & 0 for P9-12-I’m furious!19+ apprvd but not 16-18!?

— Corrina Hembury (@CorrinaHembury) February 5, 2016

Corrina Hembury, managing director at Access Training, based in Nottingham, said they had received just over half of their 16 to 18 apprenticeships growth request for the period from August to March, and zero of what they’d requested for the period from April to July.

She had been told by her SFA adviser that “I’ve actually done quite well compared to a lot of other providers that he looks after”, she said.

“It is ridiculous that we’re in a state where the government have set a target of 3m apprenticeships and there is a commitment to train more people and help move them into employment and they are now putting that at risk and not funding things,” Ms Hembury said.

Today’s announcement “means we have no capacity for any new 16 to 18 apprentices” until around April, she said.

“We’ll continue to support all the learners we currently have on programme now, and obviously we don’t want to not engage any new ones.

“We need to look at balancing that risk of disengaging learners and employers from apprentices altogether with us having to start working with and potentially not being able to draw down funding for them. Which is a tough decision,” Ms Hembury said.

One provider also took to Twitter to vent her anger. @Bmcleish01 said: “we have sig volumes of learners now without funding! 3m apps target is a joke without funds”.

Another training provider has told FE Week their 16-18 apprenticeship growth request was over £1m and they have been awarded less than 10 per cent of that figure.

Teresa Frith, senior skills policy manager at the Association of Colleges, said: “It is very disappointing that the funding they are providing to colleges for isn’t large enough or flexible enough to cope with demand.

“A priority for the Skills Funding Agency must be to learn from this in developing the new system which comes into effect with the introduction of the levy in 2017.”

In a statement, the SFA said: “We assess all provider growth cases to ensure they secure high quality opportunities for young people. Where we are able to support increases in funding we allocate this equitably to providers. The process for doing this is set out in our Operational Performance Management Rules.

“We have made it clear, that the funding we have been able to allocate, will enable all apprentices who had started their apprenticeship (at the time providers submitted their growth requests) to be funded.”

The Skills Funding Agency (SFA) has published a list of live notices of concern and serious breach of contract for the first time.

The information contained in a table unveiled today on the agency’s website features 62 providers in total.

That number includes 47 general FE colleges, nine local authorities, five independent learning providers and a single specialist designated institution (download full list from here).

An SFA spokesperson told FE Week: “It is the first time a list has been published. We will be publishing updated data on the first working day of every month from now on.”

A note on the table added: “When a notice is lifted, or a schedule of a notice is lifted, it will not be included in the next published list.”

It comes after Association of Employment and Learning Providers chief executive, Stewart Segal, said in a webinar on January 26 that “various reports suggest up to 90 colleges may fall into the [serious financial difficulties] category”.

He added that he hoped “we can save much of that £100m going into the sector to make sure it can continue” through the Government’s post-16 area reviews.

FE Week asked the SFA about the 90 colleges and £100m fund on the same day.

It took them two days to send over the following response that did not deny the Government had told sector stakeholders, including AELP, about the 100m figure before Christmas: “These are out of date forecasting figures. We will reassess the position when we have financial plans later in the year.”

It neglected to respond over the 90 colleges that Mr Segal said were in financial difficulties.

We asked repeatedly for further information over the following week, which led to an SFA spokesperson adding the following before FE Week went to press last night: “We will soon be publishing a list of colleges under notice of concern and providers under a breach notice.”

“The SFA considers FE college exceptional financial support on a case by case bases depending on the type of exceptional financial support requested, as detailed in the government’s FE College: Exceptional Financial Support document,” she added.

Here’s a summary of the type of institutions the notices were issued to: