Skills Funding Agency announces transition factors hitting provider funding rates by 25 per cent or more.

Colleges and training providers have been told their Skills Funding Agency earnings rate could fall by a quarter or more, with just two months before the new academic year.

The agency is introducing protection measures for colleges and training providers, to “smooth” the impact of its new funding system.

The measures are intended to stop providers’ earnings rocketing or nosediving.

Jerry White, director of planning and performance at City College Norwich, said: “It is going to be vexing curriculum planners up and down the country to be told, with only around 30 working days to go until the beginning of the new contract year, that funding values need adjustment resulting in the need to change delivery and resource plans.”

The agency said decisions on next year’s funding were still open to review.

Each provider has been given a number — a ‘transition factor’ — that indicates how much of the budget under the new system it can keep.

A provider transition factor of 0.9 would mean its national rates are reduced by 10 per cent, so it would need to do more work for the same money.

Allocations, finalised at the end of March, remain unaffected by the ‘transition factor’.

Worries about providers learning how they would be affected by the protection measures were aired in a Joint Information Systems Committee online forum for college finance directors, where one provider revealed its rates under the new system would be cut by 25 per cent.

“I can’t imagine that colleges are going to take this lying down,” said one forum member.

FE Week has also learned that at least one independent training provider has been given a transition factor below 0.7.

Meanwhile, a number of colleges have already approached the Association of Colleges with concerns about their situations.

Julian Gravatt, the association’s assistant chief executive, told FE Week: “In principle, it’s right for the agency to smooth the introduction of the new formula, but it’s unacceptable that some colleges have only just received this information at a time when they are setting their 2013-14 budgets.

“We are busy taking up college queries with agency staff.”

An agency spokesperson said: “We have worked with the sector over the past 18 months to develop and implement a more streamlined funding system.

“We are helping providers move to the more streamlined system including using a transition factor which will ensure that their total cash earnings remain within three per cent of the current system.

“The transition factor is derived from the latest full year data from 2011/12 to generate an adjustment which maybe positive or negative to earnings of a provider. It has not been designed to be applied at the level of each qualification for planning provision.

“In circumstances where provision has changed dramatically from 2011/12 to 2013/14 we will review each provider’s transition factor to ensure that high quality provision to learners and employers can continue.”

———————————————————————————————-

Editorial : The transition factor

The Skills Funding Agency has been helping providers understand its funding reforms since first publishing plans in October 2011.

It has also designed the reforms in partnership with an advisory group made up of provider representatives.

But, as with all funding reforms that have come before, there will be winners and losers.

At the end of March the agency said it would “smooth” out the winning and losing with transitional protection.

Now we learn the extent of smoothing required for some providers — and it’s huge.

Imagine signing off your curriculum plans and then learning a 0.7 transition factor will be applied.

Effectively, this means to earn a £10m allocation you would have to plan £13m-worth of provision, and at a rate of 70p in the pound.

It will also be interesting to see how subcontractors react.

Presumably they will be seeking out prime providers with a transition factors above one, as they will now be earning more than the national rate.

All avoidable of course, had the funding system reform been resisted.

Nick Linford, editor of FE Week

The 16 to 18 apprenticeships budget has been cut by £166m as would-be apprentices were squeezed out of places by “competition” from older applicants, a senior Department for Education (DfE) civil servant has revealed.

Simon Judge, the DfE’s finance and commercial director, wrote to the Education Select Committee after its expected funding of 16 to 18 apprenticeships in the current financial year fell nearly 20 per cent to £684.3m.

He said the removal of poor quality provision explained some of the underspend, but increased competition from applicants aged 19-plus, funded by the Department for Business, Innovation and Skills, was also a factor.

“The removal of poor quality [apprenticeship] provision is only one element of the overall underspend,” wrote Mr Judge in a letter dated May 8 to committee clerk Lynn Gardner.

He said changes in the apprenticeship mix by sector, and the wider economic conditions facing businesses in some regions and sectors, also explained the fall.

The financial revision was disclosed in the DfE’s supplementary 2012-13 estimate.

In the most recent Statistical First Release, published in March, the number of under 19 apprenticeships started in the first half of this year was provisionally 69,600 — a 12 per cent drop on last year’s provisional figure of  79,100.

By contrast, the 19-24 apprenticeship starts over the same period grew 6.5 per cent.

This comes just two months after the government revealed under 19 apprenticeship starts had fallen for the first time in three years — from 131,700 in 2010/11 to 129,900 last year.

Tristram Hunt, Junior Shadow Education Minister, claimed the underspend revealed incompetence. “The number of apprenticeship starts for young people has already fallen by nearly 2,000 in the past year. And now we discover that the government is so incompetent that it’s not even spending all the money in the apprenticeships budget. With nearly one million young people unemployed that is simply unacceptable,” he told FE Week.

A joint statement from the two departments said: “There are a number of reasons behind this underspend. This includes changes in the cost of courses that were taken up, economic challenges facing some sectors and an increase in 19 to 24-year-olds choosing to become an apprentice. We have also rooted out poor quality provision that was not meeting the needs of today’s employers.”

A senior economist at the Institute for Public Policy Research, Tony Dolphin, who wrote  the report Rethinking Apprenticeships, added that apprenticeships should be reserved only for those aged 16 to 24.

“They should not be just another form of on-the-job training; they should specifically support the transition of young people from education into work through a mix of on-the-job targeted training and more general off-the-job learning,” he said.

Booming application numbers plus an increasing list of vacancies show apprenticeships are growing as a career alternative to university, according to Skills Minister Matthew Hancock.

The National Apprenticeship Service (NAS) has revealed there were 90,420 more online applications between February and April this year than the same period last year, when 278,410 were submitted.

The 32 per cent rise sits alongside a 15 per cent increase over the same period in the number of apprenticeship vacancies advertised online — up to 32,600.

It means that an average of 11 applicants were fighting it out for each apprenticeship.

“With more vacancies than ever before, apprenticeships are fast becoming the norm for young people who want to achieve their career goals through an alternative route to university,” said Mr Hancock.

“We want more employers to take advantage of the advice and support available from NAS and consider how hiring an apprentice could benefit their business.”

The most popular day for submitting was Monday, March 18 — just after National Apprenticeship Week — when 6,730 applications were made in 24 hours.

Meanwhile, Friday, April 26, saw the highest number of live vacancies ever recorded with 17,700 available online.

The five most popular apprenticeship were in business and administration, with 101,510 applications; childcare, with 29,020; customer services, with 26,200; IT, software web and telecoms, with 20,550; and vehicle maintenance and repair, with 19,710.

The five most common vacancies were in business and administration at 7,702; customer services at 2,700; childcare at 1,991; manufacture craft and technician at 1,771; and hospitality and catering at 1,720.

And the toughest competition for an apprenticeship was in arts, media and publishing and information communication technology where there was an average of 17 applicants for each vacancy.

The figures were released as two new guides to hiring an apprentice for small and medium-sized enterprises (SMEs), and large firms were developed — and are available here and here, respectively — in response to Jason Holt’s Review of Apprenticeships.

“It is vital that we do more to demonstrate how all employers can grow their own workforce through apprenticeships,” said Mr Holt.

“For smaller businesses, this is even more crucial as apprentices help improve productivity while reducing costs.”

David Way, NAS executive director, said: “We aim to make it really easy for employers to hire an apprentice.

“The launch of these new online employer tools will further enhance the service we already offer employers — whatever their size and whatever their needs.

“For SMEs there is also the added incentive of £1500 to assist them in the recruitment of apprentices.”