Younger apprentices are being hit hardest by minimum wage non-compliance with nearly a quarter not getting the right pay levels last year, a government report has revealed.

The Apprenticeship Pay Survey 2014 indicates that 24 per cent of apprentices aged 16 to 18 and learning at levels two and three were paid less than the apprentice minimum wage, which was £2.68 an-hour at the time of the survey, but rose 5p from October.

The report says: “Younger apprentices were more likely to be earning less than the national minimum wage (NMW), with nearly a quarter (24 per cent) of level two and level three 16 to 18-year-olds having non-compliant pay levels, compared with 20 per cent of 19 to 20-year-olds, 17 per cent of those aged 21 to 24, and 8 per cent of those aged 25 or older.”

Overall, 14 per cent of apprentices of all ages and at all levels were paid less than the minimum wage, down from 29 per cent last year. It also showed that, while 94 per cent of apprentices had heard of the minimum wage and three fifths were aware there was a specific one for apprentices, just 26 per cent said they knew what the rate actually was.

The report also says: “Reducing non-compliance with the is a priority for the government. There are campaigns in place to increase awareness, for example in England the apprentices minister writes to all new apprentices informing them of their NMW entitlement.

“There are resources dedicated to dealing with cases of underpayment, notably the Pay and Work Rights Helpline. More information about the action being taking to reduce levels of non-compliance can be found on the gov.uk website.”

The report, based on 10,000 interviews with level two and three apprentices and 850 level four and five apprentices across England, Scotland and Wales, shows that earnings varied “widely” by framework, with the mean total weekly pay highest among level two and level three apprentices on the management framework (£393) and lowest (at £152) in the hairdressing framework.

It shows that 15 per cent of all level two and three apprentices were paid below the NMW. Non-compliant pay was more common among apprentices in hairdressing (42 per cent), children’s care (26 per cent) and construction (26 per cent).

It also showed that just 26 per cent knew or claimed to know the actual minimum wage rate for apprentices.

Of those surveyed, 36 per cent of 16 to 18-year-olds already worked for their employer before their apprenticeship, increasing to 42 per cent of 19-20 year olds, 64 per cent of 21 to 24 year olds and 93 per cent of those aged 25 or older.

It says 18 per cent of level two and three apprentices who worked overtime were not paid for any of their overtime hours, equivalent to 11 per cent of all those at level two, and the mean number of unpaid overtime hours was 4.6, up from 4.4 in 2012.

In a separate document, the Apprenticeships Evaluation: Learners report, it was also revealed that as many as 30,000 apprentices (4 per cent) had not  had not received any formal or informal on or off-the-job training during their contracted working hours.

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Live reaction

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Federation of Small Businesses (FSB)

National Chairman John Allan said: “We would like to see apprentices earning more, and we support increases to the apprentice minimum wage  to narrow the gap with the youth rate. However, we recognise that this change must happen gradually to minimise the impact on employers. Any sudden rise may leave small firms in particular unable to afford the rate and prevent them from hiring apprentices.

“Over a third of small businesses find the apprenticeship and minimum wage system confusing and the government should do more to improve their understanding. To support businesses and ensure compliance, we would like to see clearer and more accessible guidance that is promoted widely across the business community.”

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Confederation of British Industry (CBI)

Rob Wall, head of education and employment policy, said: “Apprenticeships are an important way to help young people build the knowledge and practical experience they need to be successful in work and life as well as delivering the skills business needs to be competitive.

“The rules setting out the National Minimum Wage apprentices are entitled to are clear. Where this is deliberately ignored businesses should feel the full force of the law.”

 

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Labour Party

Liam Byrne, shadow minister for skills, said: “These figures show the cold facts behind the government’s warm words on apprenticeships.

“Almost a quarter of young apprentices are paid less than the minimum wage.

“This Tory-led coalition lacks a proper plan to build real earn-while-you-learn routes that lead to to decent jobs.”

 

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National Hairdressers’ Federation (NHF)

Chief executive Hilary Hall said: “The NHF is dismayed by these findings and the poor light it throws onto hairdressing as an industry.

“We have worked very hard to raise awareness of the NMW rate for all ages, including apprentices, with members and throughout the industry as a whole.

“While the statistics are still unacceptably high, they have improved since the 2012 survey where non-compliance within hairdressing was a staggering 69 per cent.

“In our experience, if salon owners are not paying the NMW, it’s nearly always related to apprenticeships because of age differences.

“The problem for salon owners is that there are not only different rates for under 18s, 18 to 20-year-olds and 21 and over, but different rates again for apprentices which vary depending on whether the learner is under 19 or in their second year of an apprenticeship programme.

“It’s a ‘perfect storm’ for salon owners because they typically take on young people aged 16 or 17, and often they’re doing an apprenticeship as well.

“It means salon owners have to know when their workers have birthdays, especially the birthdays which trigger a change in their payment in rates, and keep track of when apprenticeships are completed.

“And as micro-businesses, salon owners don’t have HR and payroll support in the way that larger businesses do.

“We will continue to warn our members and the wider industry that hairdressing businesses will be specifically targeted by BIS. Paying the NMW is a legal requirement and the consequences of breaking the law will be much tougher with big fines for non-compliance.”

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Association of Employment and Learning Providers (AELP)

Chief executive Stewart Segal said: “AELP has always condemned the payment of wages lower than the apprentice minimum wage but a lot of identified cases can have arisen due to the complexities of the minimum wage framework and issues surrounding the collecting of accurate data. All AELP members work closely with employers to try and ensure that businesses meet the legal requirements.

“We would welcome an increase in the minimum apprentice wage but we would understand if a small differential was maintained between the apprentice rate and the national minimum wage.

“The publication by BIS of this latest data is welcome following its encouraging research findings last week on the labour market returns from gaining an apprenticeship.

“Given that the average hourly wage paid to a level two or three apprentice is nearly £4 above the minimum apprentice rate in the first year and that the first year average is higher than the overall national minimum wage, these figures expose as a myth that apprentices are being exploited.

“It’s interesting to note too in the context of perceived low pay professions that apprentices at levels two and three in the hospitality and retail sectors are earning on average above £6.85 an hour which is higher than the NMW.

“And overall, the average pay for apprentices aged under 21 compares very reasonably with the national minimum wage rates for the younger age groups while apprentices are also benefiting from a high quality training programme that can significantly enhance their career prospects.

“Today’s data doesn’t show separate figures for levels two and two, but last week’s BIS research showed a 11.5 per cent employment premium return for level two apprentices and in our view, opinion-formers should think twice when they see both sets of findings before advocating that apprenticeships should be only at level three and above, especially when level two apprenticeships are providing sustainable employment for many young people.

“Opinion-formers should bear in mind as well that CBI is a backer of intermediate apprenticeships.”

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Trades Union Congress (TUC)

General secretary Frances O’Grady said: “The report exposes some shocking abuse, with many apprentices being paid less than the legal minimum. It’s particularly bad in sectors where more women work, such as hairdressing where more than a third of apprentices are underpaid, and childcare where a quarter are underpaid.

“Younger apprentices are the most likely to be treated badly, with nearly a quarter of them paid below the minimum wage.

“Some employers may be making genuine mistakes, but there are worrying signs that some apprentices are simply being exploited as cheap labour. Apprentices are a real asset to employers and deserve to be properly valued.

“The TUC strongly supports quality apprenticeships and is concerned that such widespread abuse of minimum wage rules might put young people off from fear of exploitation.

“The government must make apprenticeships a priority for minimum wage enforcement action and should withdraw training funding from employers caught cheating their apprentices out of pay.

“Enforcement would be made easier to achieve if the rules for apprenticeship minimum wages were simplified and increased to the same level as for other young workers.”

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Department for Business, Innovation and Skills (with Q&A)

A spokesperson said: “Apprenticeships offer people the chance to get the skills they need to make a success of their careers and participate productively in the country’s workforce. The government announced the two millionth apprenticeship start in this Parliament just last week.

“With the economy on the road to recovery, all workers – including apprentices – should be able to share in the proceeds of growth. The Business Secretary Vince Cable has written to the Low Pay Commission outlining proposals to simplify and boost the national minimum wage for apprentices. Based on the current national minimum wage rates for 16 to 17-year-olds, the proposal would give around 31,000 apprentices in the first year of their programme a pay rise of more than £1 an hour, rising from £2.73 to £3.79 per hour.

“The government is cracking down on employers who break the law by not paying the minimum wage. We are naming and shaming offenders and increasing penalties. Any apprentice who believes they are not getting the minimum wage that they are legally entitled to should contact the Pay and Work Rights Helpline on 0800 917 2368 to get free confidential advice.”

Q&A

Why does BIS not currently name and shame apprentice minimum wage non-compliers, and does it plan to change that policy?

“We have named employers who have failed to comply with the apprentice minimum wage – but we are not able to specify where that non-compliance relates to an apprentice.

“The Notice of Underpayment issued to an employer by HMRC following the identification of underpayments of the NMW does not differentiate between underpayments to workers and apprentices.

“It is therefore not possible to provide information on the number of employers who have faced a penalty for non-payment of the apprentice NMW since March 2014, as HMRC do not hold this information.”

How does BIS respond to the fact non-compliance is higher than average in hairdressing (42 per cent), and children’s care (26 per cent)?

“We have asked the Low Pay Commission to simplify the apprentice NMW rates, the current complexity is one of the key factors we believe causes non-compliance

“HMRC are about to begin a campaign solely focusing on hairdressing, which will include guidance and enforcement.

“We will be using the results of this survey to inform our sector-specific work at BIS– ensuring that we focus on those sectors where compliance is most problematic. This proactive work will range from awareness raising and promoting compliance, to targeted enforcement work.”

Can you respond on the fact younger apprentices were more likely to be earning less than the NMW?

“We know that there are a number of reasons for non-compliance with the NMW in relation to apprentices – including mistakes made by employers in relation to how the apprentice NMW rate applies and employers not paying the minimum wage for time the apprentice spends training.

“We are taking steps to improve compliance and will use the evidence provided in this report to build on our understanding.”

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National Union of Students (NUS)

An NUS spokesperson said: “These figures are unacceptable. We’ve long known that apprenticeships are fantastic for businesses, personal careers and creating opportunities for both employers and apprentices, but unfortunately the fact is that vocational study and apprenticeships still aren’t viewed with the same esteem as other routes of education.

“These figures also confirm what we have been saying all along about the gendering of poverty pay – traditionally male apprenticeships such as engineering have better wages, more classroom time, and more on the job training than traditionally female apprenticeships, such as hairdressing and childcare positions. The very best apprenticeships are doing what they can to combat this, but this kind of quality should be standard practice, not a luxury for the lucky ones.

“The low wages paid to apprentices stack up problems in other areas of their lives too. They have little disposable income and let’s not forget that many have to pay to travel to work or training. Apprentices pay an average of £24 on travel, with many paying significantly more. We’ve heard stories where apprentices are only paid for the four days they are in work but not for their off the job training. How can anyone expect to live a decent life on such a low income?

“We need more than just naming and shaming. We need a clampdown on those who are choosing to exploit hardworking young people trying to get their foot on the career ladder.”

 

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National Institute of Adult Continuing Education (Niace)

Chief executive David Hughes said: “These figures are a cause for concern, especially as the government is now putting more power into the hands of employers. It’s wrong that apprentices aren’t even being paid the minimum apprentice wage.

“While there is cross-party agreement that apprenticeships are the answer to youth unemployment, today’s figures clearly show that for many apprentices, the quality of the Apprenticeship is clearly not what it should be.

“This is why, in our manifesto, we have called for the introduction of an apprentice charter.

“This will be a clear commitment from employers that their apprentices are given the best possible experience, providing them with a solid foundation – not just for their current role – but for the rest of their career.”

 

 

 

 

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The Association of Colleges declined to comment.

The University and College Union (UCU) has ruled out further strikes over this year’s pay offer for FE, but claims industrial action remains “part of its armoury” for next year’s bargaining.

Delegates at a special FE sector conference on Saturday voted against further action over the offer of a 1 per cent pay rise.

It comes after a planned strike on October 14 was banned by the High Court and after the Association of Colleges (AoC) announced plans to proceed with its pay offer, which includes removal of the lowest pay grade, a 2 per cent rise to £7.65-an-hour for staff on the lowest remaining grade and a 1 per cent rise for all other grades, without the UCU’s consent.

In a letter to members, UCU national head of bargaining and negotiations Michael MacNeil, said: “Delegates discussed developments in the dispute over the 2014/15 pay offer and decided that ‘for tactical reasons’ we should not call industrial action on the 2014/15 claim but should instead focus on implementing an effective strategy for the 2015/16 bargaining round (due to start in February).

“Conference agreed that UCU must retain industrial action as part of its armoury to fight for better pay and improved terms and conditions for its members but the majority of those present questioned whether the current approach and ballot made tactical sense.

“Delegates voted for a new approach to support meaningful national bargaining in England. The outline of a targeted and strategic method had been presented to the FE committee and to branch officers at regional briefings held around the country in the last month.

“This approach includes submission of a joint trades union national cost of living claim together with a claim that addresses workload matters. This claim will be submitted to the AoC by the end of February.

“At the same time a template of the national claim will be made available to branches via their regional office for parallel local submission, with branches able to involve their members in the selection of local issues which are important to them which can be the subject of additional points to a local claim. As examples, a branch may choose to include issues such as lesson observations, zero-hours contracts or tackling the misuse of associate lecturers.

“To be clear — there will still be a national claim presented to the AoC with the other unions and national campaigning on pay will continue but there will also be a nationally co-ordinated approach to parallel local negotiations with an acceptance that these could provide a different way of providing members with overall financial benefit and/or an improvement on other conditions of employment.”

Martin Doel, chief executive of the AoC, said: “Strikes are very disruptive for colleges and more importantly for students, so we are pleased that UCU has decided against any further strike action. We look forward to productive discussions around the national pay offer next year.”

The government’s response to a House of Commons Business, Innovation and Skills Select Committee inquiry into adult literacy and numeracy has been welcomed as recognising the “urgency of the situation”.

David Hughes, chief executive of the National Institute of Adult Continuing Education (Niace), was among the first comment on the Department for Business, Innovation and Skills’s (BIS) report and video (below) response to the committee, which called for a “high-profile campaign to tackle the alarmingly low levels of adult literacy and numeracy in England,” among other things.

The committee, which issued its findings in September, also wanted to see greater co-operation across several government departments, a review of funding and a high profile national campaign. Further, its MP members rejected GCSEs as the only qualification by which attainment in numeracy and literacy should be judged.

The BIS response accepts many of the committee’s recommendations, and claims the government has responded to the skills gap in a number of ways. It refers to the establishment of the Behavioural Research Centre for Adult Skills and Knowledge (ASK) and to planned BIS-led research over the next two years, coupled with the establishment of the Vocational Skills Research Centre.

But it rejected national awareness-raising campaign. “We do not consider that these, on their own, were of sufficient value to warrant what would be a very significant Government investment,” the response report said.

It added: “At this time any commitment of Government funding in communications and marketing activity over £100,000 would still be subject to agreement by the Cabinet Office.”

It also said the government would “consider” a cross-government strategy for raising adult literacy and numeracy levels.

David Hughes, chief executive of the National Institute of Adult Continuing Education, said: “I’m pleased the government shares the committee’s appreciation of the urgency of the situation.”

He added: “We have been saying for some time that there needs to be a more concerted cross-government (and cross-party) approach to address the longstanding and persistent literacy and numeracy skills of the nation.

“It is therefore very encouraging to see the acknowledgement for developing a cross-government strategy for raising adult literacy and numeracy levels. I would like to see a new strategy led by BIS and supported by the departments for education, work and pensions, communities and local government, and health.”

The response report focuses in part on improvements and reforms to qualifications such as GCSEs and Functional Skills, and to a review by the Education and Training Foundation (ETF) commissioned by the government last month. It also agrees with the committee’s view that “no learner should be let down by poor quality provision”, and claims to be combating this with “significant reforms”.

Association of Employment and Learning Providers chief executive Stewart Segal said: “It is encouraging that the government now accepts that the goal is to ensure that we ‘create a culture of aspiration and expectation that achievement of English and maths at level two is the norm’.

“The response also recognises the need to retain flexibility of delivery and we pleased that the inclusion of English and maths is an important part of the apprenticeship and traineeship programmes using functional skills qualifications.”

Association of Colleges chief executive Martin Doel said: “We are pleased that adult numeracy and literacy continue to be high on the Government’s agenda and that they are supportive of local-level campaigns to ensure that more people know how to seek out training.

“Colleges already have close links in their local communities and are well-placed to support as many adults and unemployed people as possible in improving their maths and English skills.

“The government is right to point out that GCSE level and style of study is not always appropriate for everyone. That’s why our manifesto calls for new English and maths qualifications to be developed to allow 16 to 19-year-olds and adults to gain the skills that businesses need.”

Responding to the committee’s concerns about numeracy being seen as a “poor relation” to numeracy, the government report draws attention to the introduction of the new national curriculum in schools from 2014 which “sets expectations matching those in the highest-performing education jurisdictions in the world”.

But it rejected a recommendation that the government reverse its decision to cut £2.5m from the Unionlearn budget, claiming the savings are “appropriate”, and another which called for prison libraries to be open at weekends.

The report concludes: “Support for English and maths continues to be a high priority for the government. We will continue to invest in this area and to work with the FE sector and others to identify how our investment can make the greatest difference for the individuals it is designed to serve.”

Dr Lynne Sedgmore, executive director of the 157 Group, said: “The government response emphasises yet again the importance placed on literacy and numeracy skills, and it is especially pleasing to see the ASK team from the Behavioural Insights Unit turning to the excellent practice in Colleges, among them 157 Group members Stoke and Leicester, to find out what really works. This is a truly practice-led approach to policy formulation and we hope to see much more of it in the future.”

Committee chair Adrian Bailey said: “We are pleased that many of our recommendations have been accepted by the government, and that there is a genuine move towards improving adult literacy numeracy levels.

“While we are disappointed that some of our recommendations have not been accepted, such as ensuring that prison libraries are open over the weekends, we are pleased with the general positive response, and look forward to overseeing the government’s work on improving adult literacy and numeracy, over the coming months.”

The past year was a dramatic one for FE Week which saw a change of editor and a major re-design with publication of our 100th edition. Reporter Paul Offord looks back at the highlights of 2014, the 16 FE Week supplements and 35 newspapers published.

Click here to view the spread

Job Centre Plus (JCP) staff have been set a “target” of 10,000 traineeship referrals amid concerns the youth unemployment programme had not been promoted to benefit claimants because it extended their time out of work, FE Week can reveal.

The figure, to be achieved within 12 months from August this year, was disclosed in documents released following a Freedom of Information request.

It is split into “planning assumptions” [see below] for England’s 28 JCP districts, but a Department for Work and Pensions (DWP) spokesperson said they did not represent targets despite, according to the documents, telling JCP staff to “ensure steps in place to achieve allocations.

There had been concerns that JCP staff were not putting benefit claimants on the programme because it affected their search for paid employment in the meantime.

Association of Employment and Learning Providers chief executive Stewart Segal said: “We have heard of many examples of where JCPs have not referred clients because they are concerned that traineeships are too long and will delay people getting off benefits.

“Providers are creating flexible programmes that ensure young people get the skills they need to sustain employment in the long term and JCP must support this process. It is good that JCP will set targets for referrals, but this should not become a numbers game.”

The Statistical First Release published on November 26 showed there had been 10,400 traineeship starts during 2013/14 — the programme’s first year.

Dr Fiona Aldridge, assistant director for development and research at the National Institute of Adult Continuing Education, said: “We have found that referrals to traineeships, by JCP staff, have been relatively low.”

She added: “We are in the process of capturing the good practice that exists between JCP and traineeship providers and will use this to develop support materials to help work coaches identify suitable participants. This will be invaluable in improving levels of awareness and understanding among JCP staff. It will improve partnership working between local JCPs and providers.”

Teresa Frith, senior skills policy manager for the Association of Colleges (AoC), said: “We are discussing with DWP how colleges can support JCPs in achieving these targets.

“We’re pleased to see the Department for Business, Innovation and Skills [BIS] and DWP working more closely as this allows for a more holistic approach in supporting people who are unemployed.”

A DWP spokesperson said: “There are no targets, but we want to help as many young people as possible to improve their skills and move into work. Traineeships are key to this, so as the programme grows we will be referring more young claimants to it.”

He declined to comment on claims about JCPs not referring clients to traineeships. A BIS spokesperson declined to comment.

Editor’s comment

A job for now or job skills for life?

 

Just under a year ago FE Week reported how Job Centre Plus (JCP) staff were turning 18 and 19-year-olds away from traineeships because enrolment would put their benefits at risk.

So it’s an odd situation to now hear of JCP staff having apparently turned potential enrolments away from the programme because it might actually extend their time claiming benefits.

This would have presumably taken place because chasing a job, any job, might appear more attractive to JCP staff than claimants developing lifelong employability skills while remaining in receipt of benefits.

But, in the week Ofsted revealed its view of traineeships as being one in which “the numbers involved are extremely low,” we learn the Department for Work and Pensions (DWP) now appears on board to push the programme.

Its target (let’s not kid ourselves it’s anything else) of 10,000 referrals will come as welcome news to the providers putting their time and effort into a programme that should always have had the full backing of those in charge of JCP staff.

These are the very staff who regularly deal with those for whom the traineeship programme was developed — young people with little or no job experience and employability skills.

It’s wrong to deny these people the chance to develop the essential skills to win and hold down a job.

Chris Henwood

chris.henwood@feweek.co.uk

Hopes of an ex-FE and skills learner claiming glory in the Sports Personality of Year awards last night were dashed as Formula 1 champion Lewis Hamilton took the BBC crown.

Former Exeter College learner Jo Pavey, who won the 10,000m title at the European Championships Zurich in August 10 days after winning bronze in the 5,000m at the Commonwealth Games, had been in contention but ended third behind golfer Rory McIlroy.

The 41-year-old, who did her A-levels at the Devon college between 1990 and 1992, got 99,913 (16 per cent) of the 620,932 votes cast, while 25-year-old Mr McIlroy received 123,745 votes (20 per cent) and 29-year-old Mr Hamilton registered 209,920 votes (34 per cent).

Exeter College principal Richard Atkins told FE Week: “Jo studied with us before progressing to university.

“She has kept in touch with us and has, from time to time, come in and spoken to our sports therapy students.We see quite a lot of Jo locally, at community sports awards, chamber of commerce dinner etc and she remembers her time at college fondly in part because she and her (now) husband and coach, Gavin, spent a lot of time in the college refectory.”

He added: “As principal of Exeter College I am immensely proud of Jo’s achievements. She is a brilliant role model for our female students, and an exceptional example of how perseverance can triumph.

“She is very modest and it was amazing to see her standing alongside Lewis Hamilton and Rory McIlroy last night.

“As chair of AoC Sport, our sector’s sports organisation, I realise that we need role models such as Jo to help us to encourage more females to participate regularly in physical exercise and sport.”

Earlier today, Ms Pavey tweeted: “Thanks so much to everyone who voted for me. I feel very overwhelmed. I really can’t believe I made top 3. Thank you #BBCSPOTY.”

But there was BBC Sports personality disappointment for FE & skills among Commonwealth Games medallists who had been in the running for the Young Sports Personality of the Year award.

Loughborough College learner and sprinter Sophie Thorhill, Notre Dame Catholic Sixth Form College learner and diver Alicia Blagg, and former Prior Pursglove College learner and wheelchair athlete Jade Jones, all 18, were all shortlisted, but missed out to gymnast Claudia Fragapane. The 17-year-old became the first British woman in more than 80 years to win four gold medals at one Commonwealth Games.

New Skills Funding Agency (SFA) chief executive Peter Lauener (pictured) has told of his concern for the future of a “growing number of colleges” running into financial difficulties, in an exclusive interview with FE Week editor Chris Henwood.

Mr Lauener, appointed around the start of last month, outlined how “financial strategies” were key in the face of ongoing austerity measures.

In a wide-ranging interview, the first he has given since adding the SFA post to his existing chief executive role at the Education Funding Agency (EFA), he reflected on the scale of college inspections carried out by FE Commissioner Dr David Collins with concerns over bank balances.

He said: “All providers are certainly facing challenges, and we do have concerns about a number of colleges, and the growing number of colleges, and equally I could say in the schools sector there are a number of schools facing financial challenges, and some do have problems, but it is equally the case, coming back to the college sector, there are a number in strong financial health.

“Colleges need to look hard at their financial strategy; they need to look hard at their curriculum resourcing plan and make sure they’ve got a plan that they can afford, and they need to look hard as well at their governance and make sure that the corporation of an FE college, or a sixth form college for that matter, are getting the right regular reports about financial difficulties.”

The vast majority of Dr Collins’ 13 inspections, for which official reports have been published, were triggered by SFA financial concerns and where an Ofsted inspection result triggered his visit, finances were also later identified by the FE Commissioner as an issue.

“It’s not surprising that there would be more colleges in financial difficulty, given the reduction in budgets, in adult skills budgets, given the fact that the 16 to 19 budget has not been protected in the way that the pre-16 budget has been protected, so it has been, very clearly, a challenging financial position,” said Mr Lauener.

He added: “Our analysis indicates a worsening position for colleges in the FE sector and sixth form colleges, and that’s not surprising, given what we’ve talked about, and the workload of the FE Commissioner as a result is significant, as indeed is the workload of the Sixth Form College Commissioner [Peter Mucklow], who is one of my staff in the EFA.

“So there is definitely going to be an important agenda here over the next few years. In fact, I don’t see this being a ‘we’ll work hard and sort it over the next year’ situation — this needs to be a long-term issue.

“But the prime responsibility rests at corporation level, and I would much rather that these problems were sorted at corporation level. In my view, when there is intervention from the funding agencies, that’s because all the checks and balances in the system have not worked.”

And with further FE and skills cuts widely expected, Mr Lauener had words of budgetary caution. He said: “It would be foolish of any of us to expect that there will be a sudden loosening of the financial belt after the election — I would take quite the opposite from the broad statements made by the Chancellor [George Osborne] and the Chief Secretary [Danny Alexander] with the Autumn Statement.

“There is a public sector budget deficit that needs to be cut, and politicians from all parties are making it clear that they expect to cut that, to reduce that and eliminate that public sector financial deficit, and it will be very surprising if the post-16 sector was immune from that — I’m certainly not expecting that and I don’t think colleges should plan on that optimistic scenario.”

Peter Lauener in the FE Week spotlight

Chris Henwood: You’ve been at the SFA for around six weeks now. How are you finding the workload with your existing role at the EFA?

Peter Lauener: I’m certainly finding time is under a lot of pressure. Having said that, I’ve got two teams of very strong directors, and I wouldn’t have been able to take on this role without very strong people working for me, so that allows me to focus my time on what I think is most important.

What are your thoughts on the recent National Audit Office report that spoke of streamlining education and training funding systems?

If I look at the SFA and the EFA, they have done similar things in the territory of improving the IT systems, the platform on which we operate, so we both developed online account systems for the organisations that we fund. One question is could we bring these together? I think putting it a little bit more widely, and not just about the IT systems but about the systems that we use to fund. I think one of the questions I would certainly want to look at is whether there is cope for simplification in the SFA systems.

We’ve done quite a lot in recent years, partly because of the Alison Wolf agenda, to simplify some of the post-16 education funding agency systems, they’re massively simpler than they used to be, and that’s allowed us to streamline the data requirements of the sector from the EFA. I would certainly like to have a look at the scope for doing that in the SFA as well.

You mentioned IT systems, but this will send shivers down the spine of MIS officers up and down the country based on their experiences with Fis, Lars and the Hub. How can you assure them that they’re not in for more problems?

Things definitely went wrong in the last year. I’ve just had, in the last few days, a report on RO4 this year, because I asked to be kept up to date with my SFA and EFA hat on, and the reports are pretty encouraging, that the returns have worked to a good quality and consistent standard. So I think those problems are behind us, but I will certainly continue to look with my colleagues very closely at that, and there’s been a lot of work over the last year on the systems implementation, and I think we’re in a good position, a much better position than a year ago. But this will remain high on my radar for two reasons. One is a basic credibility thing — people expect a funding agency to be able to manage its data well. And people expect a funding agency to get the money out, but these are basic core licence to practice things. So before we do anything fancy we need to make sure we’re doing the basics now.

Are there any plans for a single funding system?

This is not about a merger of the organisations. I’ve not taken the job because of that, nor is there a plan to merge the organisations. Many of the organisations that the EFA and the SFA fund are the same; colleges, charitable and commercial providers, many of the partners and stakeholders are the same, so there is definitely scope for doing things simpler, better, better together, more effectively in the future, and I am obviously very keen to explore that.

We recently reported how providers were not complying with SFA rules on declaring subcontractor arrangements and, where they had, fees of up to 40 per cent were being charged. What are your thoughts on this?

I can’t say what we were doing in any particular case, but I do believe in transparency on these matters. Actually, there are many cases where you get a prime contractor/sub-contractor relationship which is entirely beneficial and allows organisations to play a part who haven’t got the capacity, or indeed the capability, and possibly not even the inclination to put in place all the QA arrangements and management information returns, they just want to do a particular thing.

A prime contractor can agree a wider range of functions with sub-contractors, and I don’t believe we should be laying down a very precise template and charging regime. Having said that, it would find it quite hard to see a set of arrangements that would justify a 40 per cent management fee, because it’s kind of obvious that what is taken as a management fee is not going to frontline education or training.

Exclusive feweek.co.uk additional Q&A content

Where the FE Commissioner has intervened, a vast majority have been because of financial problems, not Ofsted grades. Was that a surprise for you?

No, it wasn’t a surprise, and I don’t think it should have been a surprise in the sector. These financial problems have been brewing for the last couple of years, and Dr Collins’ letters to the sector have been very punchy and to the point.

I think it’s great having him in that role; every principal knows he’s been there, done that, got the t-shirt, in fact got one or two t-shirts, so his assessment is frank, it’s credible, but it only generally provides the basis for the next stages. It’s not the case that Dr Collins goes in, does a report, and the issue is sorted — it’s then often back to how do we now put these in place, what funding support might be needed, what is the action plan to bring this college back into a satisfactory financial state?

And that has to be led at the corporation level. Sometimes, there have obviously been cases, and no doubt there will be one or two, where it goes beyond the capacity of an individual corporation to do that, we will then need to look at the scope for mergers, if that’s a sensible way forward, and we can’t, we wouldn’t, rule anything out in that situation.

What we have to do is have confidence that the plans that emerge will provide a satisfactory way forward. There’s no point going from the frying pan into the fire and creating a situation that there is no confidence that it would be viable in the long-term. So that will need a long, sustained focus from corporations, and from the funding agency/agencies.

What kind of projections has the SFA got for the number of colleges we can expect to see being visited by Dr Collins?

I’m not going to give numbers of colleges, because this is not an area where you can turn the handle on a model and you get out a specific number.

This is something that we need to keep under very intensive review, and every time we get a new point of information, recalibrate and say, have we got concerns about that college, are things getting better or worse. So the important thing I would say here is that we’re very clear about the way we use data. And this is certainly one area that I am keen to look at the relative experience of the EFA and the SFA.

In the EFA, we’ve got quite a lot of experience of manipulating large amounts of financial data, because we’re funding now 4,500 academies. So 4,500 academies is a long way past the position where you can have a deep personal knowledge about what happens in each institution, so what we rely more and more on is data — putting data to an analytical model.

I was asked about this at the last public accounts committee I went to with my EFA hat on, and it’s a kind of data analytics approach that any organisation working in the financial sector will now use. So we’ve developed in the education funding a risk assessment tool, I know there have been similar approaches in the SFA, but I’d like to say, well, can we pool our experience on this? And are there different ways of using the data that will get us to a sharper understanding of the risk that is being run here? The second thing that I think is very important is absolute transparency. So one of the things that bothers me when I hear corporations that say, “Well, we didn’t know about this…” No, that’s obviously a set of arrangements that are not working well, and in many cases there are outstanding corporations with outstanding leadership teams, and there’s everything you would want to see. But I do think that funding agencies have got a role in making as much data transparent. So making data about the sector as transparent as possible, and I think there’s scope to go further with financial data on that, certainly making it transparent to corporations.

What was the thinking behind the change to a new system of loans from BIS [covered by FE Week in edition 121] as opposed to the former system of SFA advances?

That is just a matter of departmental accounting practice. This is not a matter of policy, but it is a matter of accounting practice, and the delegations, and where authority to make loans, as opposed to advances, is held. There’s nothing complex about that. As the chief executive of the SFA, I have authority to make advances of funding, but not authorities to make loans — and it’s as simple as that.

The final decision is a matter for ministers in cases of loans, but the recommendations and assessment are made by the SFA in a similar way as previously, so I don’t regard this as a big change in practice, or something odd or unusual, or something limiting the SFA.

Does this change to loans have any benefit?

Well, I’m not convinced it either has benefits or disbenefits. Again, we’re also in ‘last resort’ territory, because I never start from the proposition when a college is in financial problems that we should step in and bail it out, and I don’t think any college starts from that expectation. The first thing is, can the college reschedule its affairs? Can it make savings, can it realise assets, can it change what it does that will earn a surplus? And of course colleges are able to secure loans from the banking sector, and most colleges have got loans of one sort or another, or overdraft facilities, and that will resort to be the first point. I would always regard it as a sign that something was wrong if any college came in, and obviously a number do, seeking financial support in the form of an advance or a loan.

What are your thoughts on the future of the SFA in light of the movement towards city devolution and devolution of the skills budget?

It was already there with local enterprise partnerships (Leps) and skills pilots and all these things, and I think the wider question is, “What isn’t right to specify nationally?” or, “What isn’t right to specify locally?” or, “What isn’t right that employers should dictate?”

I view the devolution issue as part of that. And sometimes, there’s a mistaken belief that in the SFA we specify from on high what colleges should be doing — well, we don’t at all. That has always been a matter decided locally. The question comes from the localism/devolution debate is what the sum of colleges are providing in a particular area? Does it add up to what the local community needs or to employers’ needs? And some local partners are saying no.

If I was a college principal in that situation, I would be wanting to work very closely with other colleges, or in a college where you’ve got a large college covering a city, like Sheffield College, where I come from, I would take a particular responsibility for saying, “What evidence have I got that I am meeting community needs, young people’s needs, adult needs and employer needs?” And I would want to be on the front foot in that debate with local government, with the Lep, and I would be. I would see them as important stakeholders to satisfy. I don’t think that debate is going to go away, and I think it’s very important that the sector responds with national leadership and local leadership.

It’s our job at the SFA to make those arrangements work, however they emerge from the ministerial discussions and decisions — it’s not our job to say it should be this or it should be that. It’s our job to make the system work in the best possible way, the most efficient way, the most effective way, the way that consumes least resource from the system so everyone else can get on, provide the skills, provide the opportunities, get employers working more effectively.

So you don’t see the role of the SFA as being challenged by city devolution?

Not necessarily, and indeed we’re doing a lot of work to support Leps in their role. Now, clearly you could construct scenarios that said that the funding should be done, managed in a completely different way, and I’m neutral on that question, because the SFA doesn’t have a policy of responsibility or a planning responsibility. Our job is to make the system work as effectively as possible to meet the objectives set by ministers, and to advise on the best way. Is there a policy idea, say, to advise on the feasibility of implementation? Now, if there was a decision to manage some budgets in completely different ways, that’s probably a decision for ministers, and if that affects some of the rules that we do, then that’s something we will need to adjust.

But at the moment, ministers have asked us to work very closely supporting both Leps and supporting the new deals that are emerging for cities, and we will be doing that. I was talking with one of my senior team about discussions in Manchester, about the Manchester deal, and I’m sure we’ll play an important part in both providing data about what’s happening, and in developing the possible ways that local aspirations can be met.

Apprenticeships among the 16 to 18 age group are on the up again, but now the issue is for the 19+ age group and 25+. We have even heard that growth requests are being turned down for 25+. How can you increase 25+ apprentice numbers? Do you want to?

We want to meet whatever targets the government give us — as we speak on the day that the two millionth apprentice was announced. The adult apprenticeships budget is a single unringfenced budget so there are no separate limits for 19 to 24s and 25+ but of course we pay different amounts. We’re certainly targeting growth in 16-19 and 19 to 24.

Association of Employment and Learning Providers chief executive Stuart Segal recently said there needed to be greater flexibility when it comes to funding apprenticeships. What are your thoughts around that?

Providers always call for greater flexibility. I’ve already said I think there is a case to look at for other areas where we can simplify the funding system, but I have two absolute requisites in any systems we are operating. Number one, I have to manage the budget. A funding agency that busts the budget will not be long for this world, and we can probably all think of one or two examples where that has happened. I don’t think Stuart was saying this, so if providers are saying: “We need a fast-track way to increase our budget,” then that is only possible up to a point because we have to operate within a national budget, and that will never change — and nor should it change. We have to manage within the national budgets.

Then the second thing that’s a requisite for me in that kind of situation is all part of the national targets, and if there is a priority to a particular target, then to achieve that target you will have to maintain funding on that line and not move it into another line.

So I’m kind of sympathetic, subject to my two requisites and from managing the budget to meeting our targets. We are keen to expand higher apprenticeships, and I think that’s really important for the future of the whole programme, so we need to prioritise that. This may relate back to your 25+ point, but government is all about priorities, and if you decide to spend the money here rather than there, then that knocks back into the funding system. What we need to do in the SFA is not to erect our own rigidities that were never intended by ministers in setting the policy objectives and the targets for the organisation of the system.

Apprenticeship funding reforms have been in the pipeline for a while now. Do you have any concerns about making employers pay a third?

Well, we need to wait, clearly, to see what funding policy proposals emerge, so it’s our job to make a system work once a policy is decided. At the heart of it, it’s not a debate about funding — that’s a mechanism for making the policy happen. At the heart of it is getting employers engaged in the delivery of apprenticeships.

Why? Because that’s good, it’s right for the apprentice, it’s good for the employer and it’s good for UK Plc — and that’s at the core of it.

What have you learnt about the SFA since you have been at its chief executive?

It’s not exactly something I learned, but I’ve had a very warm welcome. So I’ve made a point of visiting all the SFAs major sites, so there are six major sites and I’ve visited all six in the last few weeks, and conducted staff meetings on those sites. I’ve also visited a seventh, as it happens, one of the smaller sites, and I’ve enjoyed talking to staff about the organisations they have previously worked in. So there is a lot of experience, a wealth of knowledge in the SFA, and that’s great — and that’s something I’ve had confirmed rather than something I have learned. The second thing I would say is that I’ve been looking at areas where there might be scope for the EFA and the SFA to work jointly and more effectively in the future together in a way that might enable us both to do a better job and to make savings, and there are a few areas that I’ve developed where I would want to look further at that in months to come.

What words of advice can you give to college principals in terms of the austerity ahead and the difficulties we are facing?

I would say there are some great colleges who are delivering for employers, delivering for their communities and delivering for their students, whether they are young people or adults, and they are running their organisation, getting excellent inspection results from Ofsted and with strong finances. So there are great examples in the sector for others to learn from. So make sure you made your own assessments of your college, and are aware of where there are colleges that are maybe doing things that you should learn from.