Private training providers were overpaid around £20m last year by the Education Funding Agency (EFA),
FE Week can exclusively reveal.

Around 10 per cent of the EFA’s 2011/12 budget for private sector provision for 16 to 18-year-olds was not returned, even though it wasn’t delivered.

A further 15 per cent — around £25m — was handed back.

An EFA spokesperson said it allowed providers to keep a certain amount of funding for which no provision had been delivered.

But, she said, it was not true that it had paid £20m to independent training providers “for nothing”.

“In 2010/11 and 11/12 we applied a 10 per cent margin for some independent providers where they under-delivered to reflect changes to the funding system in those years. This has been reduced to 5 per cent in 2012/13,” she said.

However, Shadow junior education minister Tristram Hunt called on Education Secretary Michael Gove to account for the £20m overpayment.

It comes just weeks after FE Week reported how the Department for Education (DfE) had cut its projected budget for 16 to 18 apprenticeships by £166m, in part because of “competition” from older applicants — who are funded by the Department for Business, Innovation and Skills (BIS) rather than DfE.

“This is another worrying sign of incompetence at the DfE. In a tough economic environment we simply cannot afford to be losing money like this,” said Mr Hunt.

“Every wasted pound is a pound that could have been spent on improving educational attainment for our young people. Instead, we have £20m that appears to be sitting in the bank accounts of private providers.

“Meanwhile, the government has a £166m under-spend on the young apprenticeships we need to boost our competitiveness, rebalance the economy and provide a high quality vocational pathway for the forgotten 50 per cent.

“Michael Gove needs to explain where this £20m has gone and get a grip on the chaos overwhelming his department’s finances.”

Paul Warner, Association of Employment and Learning Providers director of employment and skills, said: “The period in question relates to a time when the DfE was making changes to Foundation Learning that had some acknowledged issues at the onset.

“Therefore, we were seeing in effect some transition funding to protect the provider infrastructure from a serious shock which might have left provision short for young people in some geographical areas. The margin has now been reduced.”

The overpayment figures are not in the public domain, but have been seen by FE Week.

They provide a stark contrast to private training provider funding for older learners, paid for by the Skills Funding Agency (SFA) and BIS.

The SFA makes the details of its overpayments public, but it pays private training providers strictly on delivery. Its overpayment of £91m last year therefore ended up largely in the coffers of colleges and local authorities, for example.

Kim Thorneywork, the SFA’s chief executive, said the overpayment — revealed in December — meant some providers’ allocations for 2012/13 would be reduced, and she expected “to deliver a balanced budget for the 2012/13 financial year”.

It is not known the extent to which the EFA overpaid non-private training providers, such as colleges and local authorities, for 16 to 18 provision.

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Editorial: Money for nothing?

The EFA did not need to pay private companies £20m more than the value of their 16 to 18 delivery

They refer to ‘changes to the funding system’ as the rationale.

Presumably this relates to ending the ‘entry to employment’ scheme of short employability courses, and replacing them with the larger and longer ‘foundation learning’ programmes that Ofsted recently criticised.

So private providers delivering part-time courses were given an allocation boost in advance of running longer and more expensive courses.

Should the fact that many of these more expensive courses never materialized justify overpayments?

To put it another way: how much of the £20m has left the sector in dividend payments to grateful company bosses?

As reported in FE Week the National Audit Office is conducting a review of the EFA, so the question should be asked.

Before then, the Public Accounts Committee and Education Select Committee might like to question Michael Gove.

Nick Linford, editor

The government has announced it will be extending the traineeship programme to cover 19 to 24-year-olds as part of today’s spending review.

Traineeships, which combine work experience placements with maths, English and employability training, are set begin in August for 16 to 19-year-olds.

A government spokesperson has told FE Week the extension to 24-year-olds will also apply from August, although further detail was not included in the spending review as laid out in Parliament by Chancellor George Osborne.

However, it was also announced that within the adult skills budget, the funding for apprenticeships would be” maintained in real terms” for adults over 19.

Skills Minister Matthew Hancock said: “In tough times this is a positive outcome for skills, with funding for apprenticeships protected and the extension of traineeships to those between 19 and 24.”

But the review further said savings would be made on adult skills spending as 19 to 24-year-olds were proportionally overrepresented amongst the people who benefit from the adult skills budget.

Funding for 16 to 19 education and apprenticeships will also be reformed to “improve value for money” and the review warned “the sector will be expected to make efficiencies”.

There will also be a consultation this summer into options for major reform of apprenticeships funding to give employers more power.

It will consider options such as making payments to employers, reforming the Department for Business, Innovation and Skills’ delivery systems and use of Her Majesty’s Revenue & Customs’ Pay As You Earn system.

The spending review said this “confirms the government’s commitment to implement the key reforms set out in the Richard Review, which will put employers at the centre of the apprenticeships system and raise standards.”

In the FE sector at least £260m in savings will also be made through prioritising higher value qualifications, and reducing non-participation spending.

Mr Hancock added: “We are reforming the skills system to remove lower quality qualifications, and make it more responsive to business and have also established a permanent fund so that employers can design their own training programmes to address specific skills shortages, and help Britain compete.”

Commenting on the spending review, Business Secretary Vince Cable said: “I made it clear that I would fight for a deal that ensured the government had a credible growth story.

“The settlement we’ve achieved for this spending round does exactly that by prioritising and protecting activities that are key to growth.

“We have secured a robust funding package for science and innovation, skills and apprenticeships and more money for the regional growth fund, creating jobs outside of London, and the Green Investment Bank.

“We are also unique in having a two year capital funding guarantee, with a three year guarantee for science funding, giving business the certainty it needs to invest alongside government commitments.”

The government plans to revise health and safety red tape to make it easier for employers to take on work experience students.

In an open letter to employers, Ministers Mark Hoban, Vince Cable, Matthew Hancock, Oliver Letwin and Michael Fallon committed to ending bureaucracy that might have put employers off offering experience to young people.

Employment Minister Mark Hoban said: “We know that work experience gives young people vital insights into the world of work, encourages them to aspire to great things, and helps them to prepare for their future.

“Too often in the past, the crazy cornucopia of confusing rules discouraged employers from taking young people on.

“That’s why we have been working across government to make sure the rules are clear and easy to understand.”

The letter sought to make it clear to employers that they will not have to do special risk assessments for young people, or have to repeat the same assessment for every work experience placement, where the circumstances are exactly the same.

The health and safety executive also issued revised guidance today to employers to reflect this and Ofsted and the Department for Education have worked together to publish guidance on how Ofsted will inspect health and safety.

“The new guidance radically reduces the burdens placed on schools and local businesses,” said Skills Minister Matthew Hancock.

“‘Sensible questions’ will replace the mountains of paperwork which has resulted in many businesses refusing to offer work experience to young people.”

He added: “It makes clear that it is not the responsibility of schools to check health and safety on work placements, and that companies need do no more than they would do for one of their own employees.”

Judith Hackitt, chair of the Health and Safety Executive, said there was no need for “lots of paperwork or an over-cautious approach”.

“Employers who are already managing the risks in their business effectively for employees are unlikely to need to do anything in addition for work experience,” she said.

“Schools and colleges just need to ask a few questions to ascertain that appropriate measures are in place.”

The Association of British Insurers also issued a statement reassuring employers that they did not have to take out special insurance policies to cover students on work experience.

Mr Hancock said: “I am sure employers as well as schools and colleges will welcome these changes.

“They are badly needed and will create much needed opportunities for young people and employers.”