The ESFA may regret rejecting the IfA’s levy budget concerns

As revealed by FE Week, the IfA has warned that there could be a £500m overspend on the £2bn apprenticeship budget this year.

 This, their analysis shows, rises to a £1.5 billion overspend for 2020/21 when the entire £2bn budget would be used paying for apprentices that started in previous years, leaving nothing for new starts.

Readers may find these predictions a surprise, even bizarre, in the context of a fall in starts and employers on average only using a small fraction of their levy pot.

And in an interview with FE Week, the top civil servant responsible for apprentices said he was not forecasting the budget to be exceeded – not this year anyway.

But in truth, the way employers pay monthly for apprenticeships, it is more than possible that a slow start will rapidly grow out of control.

 Consider a levy paying employer starting one £5,000 apprentice per month for 12 months from the start of 2018/19 (total value of £60,000) with the minimum duration for a standard of 13 months (372 days).

 In August, the employer levy spend would be £333 for one start, rising to £666 in September when there are two starts and by the July (once there are 12 starts) the payment for a single month would be £3,667 (more than ten times the cost of August).

And that is before any of the 20 per cent completion payments are paid, in this case worth £1,000 of the £5,000 per apprentice.

So in this example, after a year the monthly cost has risen from £333 to £3,667 and costing a total of £23,333 in 2018/19 with a further £36,667 ‘carry-over’ to be paid in 2019/20 (excluding the cost of any starts in 2019/20).

This exponential growth in both in-year and carry-over monthly payments can quickly get out of control and makes the Institute for Apprenticeships forecast plausible.

And analysis published by FE Week this week suggests the average cost of standards is far greater than the ESFA would have expected.

We’ve taken latest starts data for every standard and compared it to the funding rate band cap when introduced in May 2017. Even taking account of drop-outs, it seems reasonable to suggest average funding is more than £8,000 per apprentice. This peaks in September, when many of the most expensive courses begin – such as the two year £18,000 MBA.

This is likely to be more than double the average framework costs before May 2017 (around £3,000 for 500,000 starts at £1.5bn per year) and far higher than the ESFA was expecting given the budget in England has only risen by £500 million, around a third higher.

The IfA programme of rate reductions will reduce the average cost, typically by around a third.

 So as it stands their £4.2 billion prediction in 2020/21 with no funding for new starts could not only be right but – dare I say it – even conservative.

AoC fears college apprenticeships market share will shrink further

The Association of Colleges has warned that colleges’ share of the apprenticeship market will continue to shrink, after FE Week analysis revealed they have been hit hardest by the move to levy funding.

New statistics from the Department for Education, which included the number of starts per provider for the first time, show that colleges’ share of the market dropped from 31 to 26 per cent from 2016/17 to 2017/18, while their starts plummeted 35 per cent.

Teresa Frith, senior policy manager at the AoC, said that colleges had been particularly badly hit by changes in the apprenticeships market – and warned that the situation was likely to get worse.

“Apprenticeship reforms have shifted funding towards large employers and higher level standards while restricting the money paid for younger apprentices and small companies,” she said.

“This change in the market has made it harder for colleges.”

Referring to FE Week’s exclusive revelation last week that the apprenticeships budget is forecast to be overspent by £500 million this year, she warned that “as the budget becomes more over-committed in 2019, there will be more and more colleges turning small employers and young apprentices down because they can’t afford to offer training for free”.

Ms Frith said it was “right to highlight shifts in the supply side of the apprenticeship market” but urged the DfE to publish information on which employers are spending their levy funds.

“Without this data, we’ll only have a partial picture of what is going on.”

The new data showed that colleges were responsible for 99,220 starts last year, down by 35 per cent – or 52,740 – on the previous year’s total of 151,960.

That’s an 11 percentage-point bigger fall than the sector-wide drop of 24 per cent, revealed in last week’s final year figures.

Some of this fall in starts will have been the result of changes to rules around subcontracting which hit colleges that had previously subcontracted much of their provision.

West Nottinghamshire College, which previously subcontracted the overwhelming majority of its provision, had just 1,440 starts last year – down by a massive 79 per cent on the previous year’s total of 6,830.

The college blamed the rule changes, which meant it could no longer subcontract entire apprenticeship programmes, for having to make £2.7 million savings and cut 100 jobs earlier this year – before it spiralled into a financial crisis that led former principal Dame Asha Khemka to resign.

And Eastleigh College, which previously told FE Week it subcontracted around 80 per cent of its provision, saw its start numbers drop by 75 per cent – from 6,720 in 2016/17 to 1,630 in 2017/18.

While colleges’ share of the market declined last year, “other public funded” providers – which includes universities and employers – saw their share go up from eight per cent to 12 per cent as starts jumped 17 per cent.

They were responsible for 45,540 starts last year – an increase of 17 per cent on the previous year’s figure of 38,910.

Much of this growth was at providers new to the apprenticeship market, including universities delivering degree-level apprenticeships for the first time.

Independent providers’ share of the market remained at 61 per cent over the two years, while starts fell by 24 per cent – the same as the sector average.

They delivered 228,090 starts in 2017/18, down from 300,170 the year before.

That’s a drop of 24 per cent, the same proportion by which starts fell across the board last year, according to final full year figures published last week.

A freedom of information request last year by the Association of Employment and Learning Providers revealed that 74 per cent of all apprenticeship starts in 2015/16 were with independent providers, while colleges were responsible for just 21 per cent.

Last month the skills minister Anne Milton told the Association of Colleges conference that she wanted collaboration between colleges and private providers in delivering apprenticeships.

Her words were a change to what was written in her speech, which urged colleges to be “real competition” for private providers.

MBA apprenticeships defended by their biggest provider

As management degree apprenticeships continue to hit the headlines, with sector leaders voicing growing concern about their rising costs, FE Week spoke to the biggest apprenticeship MBA provider to hear the other side of the story.

 Last year 550 people started an apprenticeship MBA, according to official statistics, and the Cranfield University School of Management in Bedfordshire currently has 388 on the programme, valued at over £7 million.

And the university is preparing expand further from its focus on middle managers and higher, to introduce a new apprenticeship MBA in management and leadership for early career managers. Beginning in March, Cranfield hopes to have a cohort of 120 in its September intake.

Another management degree in logistics and supply chain will begin in February, but is expected to remain small at around 30 learners.

Melvyn Peters, director of education for the School of Management, said he believes higher-level apprenticeships are allowing a greater diversity of learners to access postgraduate courses without the fear of getting into debt.

“The ability to access a high-level postgraduate degree, without cost to yourself, is generating a lot of interest and enabling people to access it for the first time,” he said.

“Learners are more varied. I think it’s breaking down the old boys’ network. I think there was an element of that before. It’s allowing a much greater diversity and I think that has to be a good thing.”

 Ofsted chief Amanda Spielman used her annual report earlier this month to warn graduate schemes are being “rebadged” as apprenticeships and urged the government to give “greater thought” to how levy money is spent, while skills minister Anne Milton has previously warned of a “middle-class grab” on degree apprenticeships.

 But Mr Peters said that the “apprehension” about levy money being spent on high-level apprenticeships was a “misunderstanding”.

“The levy scheme was supposed to upskill across the economy, not just additional vocational apprenticeships,” he added.

 “If there is a reorientation back to lower-level apprenticeships then we’ll basically have a salary tax which is being used to cross subsidise other industries. I can’t see where Barclays or Zurich or companies of that ilk would have that lower-level apprenticeship need. For them it would be pure salary tax.”

Most of Cranfield’s degree apprenticeship programmes cost the maximum allowable under the levy, with the new management and leadership and logistic and supply chain degrees, as well as an existing degree in business and strategic leadership, all coming in at £18,000.

 However, the popular Executive MBA costs £27,000, with employers having to pay the extra out of their own pockets.

 Mr Peters said the non-apprenticeship version of the degrees had also been slimmed down so that the provision and cost is equal on both.

“We’ve been quite careful about how we adapt the programme to deliver. It wasn’t just a cost-cutting exercise, it was value identification.

 “What do these people absolutely have to have? How do we deliver that in a more cost-effective way?

“Without the burden of debt, this is enabling a lot more people to access higher-level qualifications for the first time,” he added. “That has to be a good thing.”

The Cranfield apprenticeships MBA teaching is delivered in “partnership” with Grant Thornton, although not, according to Cranfield, under a subcontracting arrangement.

Bailout cash will still be available under new insolvency regime

Colleges will still be able to access some bailout funding once the insolvency regime comes into effect next year – even though the government has previously said the tap will be switched off.

This was revealed in a letter from Peter Mucklow, FE director at the Education and Skills Funding Agency, published on Wednesday, which detailed post-16 funding arrangements for next year.

It said the agency’s “new approach to intervention, including the arrangements for the insolvency regime, will become operational in April 2019, once the restructuring facility has finally closed and longterm (over 12 months) exceptional financial support is no longer available”.

However, it did not mention either short- or medium-term EFS – indicating they will still be available.

A Department for Education spokesperson said it was “still looking into the details of the exceptional financial support. More information will be available in due course.”

Mr Mucklow’s letter said the incoming insolvency regime was a “significant” change for colleges, and would require “ever more effective monitoring and management of financial resources by colleges and those of us that have a responsibility for the best use of public funds”.

“We would strongly encourage you to audit your internal financial monitoring and management arrangements to satisfy yourselves that you can and will meet this challenge,” he wrote.

He urged colleges to address any financial issues “as early as possible”, as “the risk of deferring or taking an overly optimistic view of resolution now carries a significant risk”.

As part of a request from ministers to be “more proactive in anticipating financial concerns”, colleges “that are evidently deteriorating or at risk financially” should expect challenges from the agency.

The insolvency regime, which will allow colleges to go bust for the first time, was due to have been introduced this year but will now come into force on January 31, the DfE confirmed last month.

It has previously made it clear that once the insolvency regime comes into effect, the exceptional financial support tap will be switched off.

Cash from the restructuring facility, which was intended to support colleges to implement post-area review changes but has increasingly been used to prop up failing colleges, must also be spent by the end of March next year.

A spokesperson told FE Week in June that new arrangements would be put into place which would be “centred round the new insolvency regime”.

In an interview last month, the FE commissioner Richard Atkins (pictured above) said there was likely to be “some money to support colleges that have become insolvent to get back on their feet in some way”, but it was likely to be a “much smaller amount of money” than is available at the moment.

“I don’t think it will be given in the form of handouts to existing governors and management to carry on as you were,” he told FE Week.

Instead, he expected it would be focused on “ensuring that the provision in this area continues” where a college has “either become or is about to become insolvent”.

The costs of EFS are understood to have increased significantly in recent years.

FE Week reported in January that 12 cash-strapped colleges received bailouts totalling more than £11 million in December last year, after the DfE accidentally published the figures.

These included Bradford College, which received two payments each worth £1.5 million in the space of a month, and Stoke on Trent College, which received £500,000 while it awaited the outcome of a £21.9 million application to the restructuring facility.

EFS is cash for colleges that are “encountering financial, or cashflow, difficulties that put the continuation of provision at risk”, and is available as short-, medium- or long-term support.

Both short-term and medium-term re-profiling EFS would be paid back within 12 months, and may result in the college being issued a financial notice to improve.

Longer-term EFS is for cases where “it is clear that full repayment could not be made within 12 months”, and will automatically result in an ‘inadequate’ financial health rating for the college and intervention from the FE commissioner.

IfA consulting on content for five new T-level pathways

The Institute for Apprenticeships is seeking input from providers, awarding organisations and employers on the draft content for five more T-level pathways.

The new consultation is for courses in building services engineering, digital business services, health, healthcare science, and science, which are expected to be taught from September 2021 in wave two of the T-levels rollout.

It was launched today and runs for a month until January 17.

Sir Gerry Berragan, chief executive of the IfA, said: “It is so important that we have a world class technical education teaching offer.

“We know that as a nation we are being held back by a shortage of skills and T-levels will have a key part to play in changing that.”

Addressing employers, he added: “Your involvement as leaders in helping to develop the content is invaluable and I hope you will be able to stay engaged for a long time to come.”

This is the third batch of draft content to have gone out for consultation.

The first batch covered the first three pathways to be introduced for teaching from 2020: design, surveying and planning, in the constructions route; digital production, design and development, in the digital route; and education and childcare.

The second lot covered courses in onsite construction, building services engineering and digital support and services, which are expected to be rolled out from 2021 onwards.

T-levels were first announced in 2016, following the Sainsbury review of technical education.

They’re intended to set a new “gold standard” in training, and be on a par with A-levels.

According to the Department for Education’s response to its T-level consultation, published in May this year, it intends to introduce 13 courses in 2021 and a further nine in 2022 – with full delivery delayed until 2023.

ESFA insists the apprenticeship budget is not under pressure

The top apprenticeship civil servant has sought to reassure the sector after fears were raised of a budget overspend this year, as part of a wide-ranging interview with FE Week.

Keith Smith, director of apprenticeships at the ESFA, said he was “not expecting any pressures” on the £2 billion budget this year, in response to a question about a recent presentation by the Institute for Apprenticeships’ chief operating officer, Robert Nitsch.

The IfA forecast (see below) shows the apprenticeships budget could be overspent by £500 million in 2018/19, rising to a £1.5 billion overspend in 2021/22.

The figures were exclusively reported by FE Week last week, and prompted demands for an “open debate” on how the levy operates, and for the IfA to share the full presentation.

“I think what they were trying to set out was one scenario or a potential, particular illustration of what the budget might do and might happen, depending on some assumptions about demand, take up and those sorts of things,” Mr Smith said.

However, he added that from the agency’s “current point of view we’re working within the context that the apprenticeship levy does and can continue to cover the costs of the programme”.

“For us going forward, very much what we’re trying to do from the budget that we’ve got, that we use that to support all of the high-quality apprenticeships that we want to continue to support.”

Mr Smith said it was “really important to say” that the IfA had “looked at the medium to longer term against various different scenarios and assumptions”.

He said the agency was “working hard to make sure” that “levy-paying employers have confidence to be able to make really high-quality business decisions to invest in their workforce”, to “continue to operate a system for small employers” and “that we can continue to fund as many of those high-quality apprenticeships as we’re able to”.

“And there’s no sense from us in the short term that that potentially is at risk.”

Mr Smith said the agency’s immediate focus was on “delivering on the government’s commitment for three million apprentices” and “creating a more diverse and ethnically diverse apprenticeship programme”.

“We’re completely focused on delivering that for the 2020 commitment,” he said.

Meanwhile, pressure is mounting on the IfA to reveal the full presentation, which was delivered as part of an employer engagement event at Exeter College on November 30.

It has so far refused to share the slides, on the basis that they were produced specifically for the event and “were not intended to be shared beyond this”.

Shadow skills minister Gordon Marsden wrote to the IfA boss Sir Gerry Berragan asking him to publish the presentation, after having told FE Week of his intention to do so.

He said the figures cited from the presentation had “raised some concern across the education sector” as they had “not been previously indicated”.

Publishing the presentation would be “useful”, Mr Marsden wrote, “otherwise it undermines what I imagine was the purpose of the exercise, which was to reassure stakeholders and employers”.

“With an apprenticeship programme still adapting to the introduction of the apprenticeship levy, and fluctuating starts across levels and standards, I believe maximum transparency as to where the apprenticeship budget is being spent is essential for the health of the sector,” he said.

Robert Halfon, chair of the education select committee, has also tabled a parliamentary question about the presentation – although at the time of going to press it had yet to be published on the parliament website.

3aaa police enquiries continue as DfE ‘has not yet completed its work’

The police will only decide whether to launch a criminal investigation into disgraced apprenticeship firm Aspire Achieve Advance after the Department for Education “has completed its work”.

Derbyshire Constabulary started making enquiries into the defunct company, better known as 3aaa, on October 11, following a referral from Action Fraud.

The case was passed on by the DfE following its own second investigation into the training provider, which got underway in June.

But a police spokesperson told FE Week this week that they still haven’t been able to decide whether a criminal investigation needs to be opened.

The spokesperson said this was because the police need to wait for the DfE to conclude its own investigation, which has been going on for seven months.

“A criminal investigation has not begun as the Department for Education has not yet completed its work at 3aaa,” he told FE Week.

“The department is carrying out the necessary work with the agreement of Derbyshire Constabulary and, once it has completed its work, officers will look into this allegation.”

Despite admitting that the police are waiting for the DfE to pass over more information, the spokesperson added: “The Department for Education is not delaying an investigation into 3aaa.”

The DfE would not say when it expects to wrap up its own investigation.

“We do not comment on the details of any investigations, ongoing or otherwise,” a spokesperson said.

Once the police force has all of the information from the DfE and whistleblowers it will decide if the allegations break any laws. If this threshold is passed then a criminal investigation will open.

FE Week exposed the truth behind the government and police investigations into 3aaa last month.

The company, which had 4,500 learners and 500 staff before it went bust in October when the ESFA pulled its £16.5 million skills contract, allegedly manipulated Individualised Learner Records to artificially inflate achievement rates by a huge amount and misused employer-incentive grants.

3aaa received nearly all of its income from government skills funding.

It was co-founded by Peter Marples and Di McEvoy-Robinson in 2008, but the pair stepped down in September as the ESFA came knocking.

Their latest accounts show that they took out huge directors’ loans totalling more than £4 million between them.

At the end of 2015, both owners purchased multi-million pound properties.

3aaa splashed its public cash on £1.6 million of sports-club sponsorships, an Elton John concert and Tesla supercars among other luxuries.

And as revealed by FE Week last month, the company also paid for its former managing director’s child’s school fees as part of a “generous bonus”.

The first ESFA investigation into 3aaa, carried out by auditing firm KPMG in 2016, found dozens of success rate “overclaims”.

The finding is understood to have resulted in the company paying back a substantial six-figure sum.

But it didn’t stop the agency from giving the provider a £7 million apprenticeships contract increase in the same year.

After launching a second investigation into 3aaa in June, the DfE called in an independent auditor to investigate the ESFA over its contract management of the former apprenticeships giant.

Technical training must match the best academic options

The new year will include the introduction of T-levels – which makes this an ideal time to celebrate the best that vocational education can offer, says Anne Milton

One of the great privileges of my job is the opportunity to meet apprentices, their employers and brilliant training providers.

Whether it’s visiting Leeds Teaching Hospital – where I saw how our high-quality nursing apprenticeships are helping to make sure the NHS can continue to get the skilled staff they need – or seeing the amazing work by engineering apprentices at Airbus, there is always one common theme: how apprenticeships can transform lives; the impact they make on people’s futures; and the positive energy they bring to employers.

That’s why I was thrilled to attend the National Apprenticeship Awards last month, to celebrate the brilliant achievements of all the winners and nominees.

The ceremony not only showcased the fantastic apprentices, but also celebrated the employers and the training providers.

I wish more people could see what I saw that evening. The incredible energy and passion in the room was palpable and the event was a strong reminder of how an unrelenting focus on quality pays off. Quality has always been and remains at the heart of our reforms, and is at the heart of what providers deliver.

That’s why we recently announced updated and strengthened guidance detailing our new, more robust, approach for providers looking to apply and secure a place on our register of apprenticeship training providers. This will make sure any provider is of consistently high quality.

The ‘snobby’ attitude towards technical education needs to change

Our new tougher approach builds on checks that were already in place, but provides greater assurance that public money is being used effectively. I would like to thank all those who took the time to respond to our review. Your feedback has been invaluable and has helped us to shape this new process.

Last week the Damian Hinds, the education secretary, set out his long-term ambition for technical and vocational education. I was really pleased that in his speech he underlined the need for Britain as a nation to change its “snobby” attitude toward technical education. Our academic system should rightly be celebrated, but we also want technical and vocational routes to be equally celebrated. It is more important than ever that we all make sure we offer the next generation the widest choice of high-quality technical training options that match the best academic options.

I know many of you share this view. The education secretary set out a number of new measures, which include national standards for higher technical qualifications and a new destination measure to recognise those schools and colleges whose pupils not only go on to study degrees, but also higher technical apprenticeships or higher technical qualifications.

To coincide with his speech we published our second T-level action plan that shows the progress we have made this year. The plan details the next seven T-levels that will be taught from 2021, including one in healthcare science and onsite construction and how providers can apply to teach them. Do take a look and apply! Also, if you haven’t already, do take the time to respond to our T-level funding consultation. It is a chance to have your say and help us to shape this system. Your views are vital so that we can make sure T-levels give young people the technical skills they need and our economy the workforce it needs.

It is an exciting time for the sector and I’m really looking forward to building on this work in the new year. And now I’d like thank all the readers who’ve taken the time to read this and all my previous columns. This is my last FE Week column for this year, and so I want to thank FE Week for its journalism over the past year and wish all readers a very merry Christmas and a happy new year. See you in 2019!

More new qualifications? Hold on – T-levels aren’t off the ground yet

T-levels are more than another alphabet soup qualification, says Gordon Marsden. But it’s the government’s job to make sure HE and FE providers – and learners – know how much more there is on the menu

Damian Hinds’s speech last week at Battersea Power Station laid out the government’s vision for a “new generation” of higher technical qualifications at levels 4 and 5 for T-level students to progress on to.

There were certainly warm words, but details were lacking. It’s not even clear whether these will be an entirely new suite of qualifications or a rebadging of existing ones. The education secretary would also seem to be jumping the gun, given all the problems dogging the development of the level 3 T-levels.

Talking about vocational failure and the need to act on it could have been said at any time in the past 30 years. Since 2010 the Labour Party and I have said repeatedly that we have to put vocational and technical education on an equal footing with academic routes to get the high-skilled workforce we need to improve productivity and compete internationally. That imperative – given Brexit – has accelerated.

The Sainsbury Review was a crucial step forward, but the government’s handling of T-levels has fallen far short of its vision to create a much broader eco-system fit for 21st-century Britain.

The review said that “short, flexible bridging provisions should be developed”. But there’s no detail on this – how learners could cross over to T-levels from academic subjects and vice versa ¬– than when I first raised it with Nick Boles, the skills minister.

There were certainly warm words, but details were lacking

I’m concerned that presenting T-levels simply as a competitor to A-levels could damage their take-up and viability. But the Department for Education has left the education secretary to plough on about UCAS A-level and points equivalence for universities. Exhortation alone won’t do that. The government must first convince HE and FE providers, with the learners and families, that T-levels are not just another alphabet soup qualification, but are the vanguard of new high-quality pathways into the world of work.

Presenting them antagonistically as the new kid on the block against the entrenched brands of A-levels and BTECs will not do the business.

Many believe the pre-16 curriculum remains too narrowly academic to allow many students, to take on T-levels. Simply aiming at those whose preparation has been largely geared towards taking A-levels, and assuming that will be an adequate proxy for taking T-levels, is a risky strategy. Far more resources going into the promised transition year will be needed.

There is a particular challenge to get SEND students involved. We know that a number of SEND learners, particularly many on the autism spectrum, can be very successful in progressing not just in digital skills, but also in creative, art and design pathways. That talent must not be wasted.

There are looming capacity issues if T-levels do start to take root and take off. What capacity will colleges have to be involved since the Chancellor closed his purse to new funding, despite unprecedented lobbying by the sector?

Who will teach T-levels? Existing FE, school, college or training staff, recent graduates doing crash courses in T-level teachings or a new cadre? Whatever the answers are will require a big infusion of money beyond the existing £500 million by 2022. And a whole new approach to funding continuing professional development for FE staff, which this government has consistently ignored, will be needed.

A review of higher technical qualifications at levels 4 and 5 for T-level students to progress towards is welcome, but given existing take-up problems with advanced learner loans there is no guarantee it will be a game-changer.

We also need to look at how we expand and deliver technical skills at level 6 or 7. This occupies crossover territory between FE and HE, which, frankly, Labour’s new National Education Service will be better equipped to handle than current DfE structures locked into dated silos.

Getting transient headlines for T-levels and talking up the importance of technical education is only a start. Unless ministers and officials do urgent due diligence on delivery and detail, T-levels, like other previous reforms, risk being fatally compromised.