The National Audit Office has today published its report into the circumstances surrounding the monitoring, inspection and funding of Learndirect.

The nation’s biggest FE provider was given an ‘inadequate’ rating by Ofsted in a report published in August, and the government offered it special treatment by allowing it to retain its contracts for almost a year – much more than the usual three-month termination period.

FE Week has the report’s main findings:

1. Plans were aborted for full Ofsted inspections in 2015 and 2016

Ofsted identified “risks” with Learndirect’s delivery of apprenticeships and classroom-based teaching in 2015 but only gave it an “amber” rating at the time, which did not trigger an inspection.

In March 2016, Ofsted changed this risk rating to red, and in July that year made an internal decision to schedule a full inspection for the following November.

Learndirect however asked to “defer” this inspection while it was negotiating the sale of its apprenticeships business to another party (a sale which never actually went through), to which Ofsted agreed.

On March 16 this year, Ofsted notified Learndirect that it intended to conduct an inspection between March 20 and 23, but the provider immediately asked to defer  again because of the transfer of apprenticeships activity to Learndirect Apprenticeships Ltd.

Ofsted rejected the request and went in for a full inspection.

Meg Hillier, the chair of the public accounts committee, was “concerned” that it took Ofsted so long to investigate.

“It knew Learndirect was a risk from as early as spring 2015, but the inspection took two years to arrive,” she said.

An Ofsted spokesperson said the inspectorate has “no concerns” about the management of the inspection of Learndirect, including the timing of the inspection and the follow-up monitoring visit.

“We stood firm in the face of legal challenge in order that our findings could be made public at the earliest opportunity,” they said.

2. Learndirect’s financial health rating has been ‘inadequate’ since 2015

In late 2015, the ESFA downgraded its financial health rating for Learndirect from ‘satisfactory’ to ‘inadequate’. The agency noted that the company’s 2014/15 accounts showed “high borrowing and low profitability relative to turnover”. The company then extended its accounting period, and did not file financial statements for the year-end 31 July 2016.

The NAO said the company has explained that it took this decision because of uncertainties caused by the March 2017 Ofsted inspection. In the absence of formal financial statements, ESFA received management accounts which confirmed that the ‘inadequate’ rating was still “appropriate”.

The ESFA “kept the issue under scrutiny”, and in January this year wrote to Learndirect requiring the company to show that it was still able to meet its contractual obligations. Learndirect’s most recent set of accounts, covering the 18-month period from August 2015 to January 2017, were published in November and shared with ESFA. They revealed the scale of the provider’s debt and uncertain future.

3. Learndirect has £95 million from the ESFA for 2017/18, £14 million for apprenticeships

The ESFA will hand Learndirect just shy of £95 million this year – £45 million from the Adult Education Budget, £31 million for European Social Fund projects, £14 million to complete the training of existing apprentices, and £4 million from Advanced Learner Loans.

This is the first time the provider’s apprenticeship allocation has been revealed, after the DfE repeatedly refused to release the figure. Its allocation for delivery of these courses was £38 million in 2016/17.

Learndirect’s published ESFA achievement rates for apprenticeships stood at 74 per cent in 2011/12, but fell to 58 per cent in 2015/16 – four percentage points lower than the government’s minimum threshold.

4. It made a tactical withdrawal from the AEB tender to secure funds

Learndirect originally bid for £85 million in this year’s AEB tender. But in mid-July, after the provider’s grade four, the ESFA asked Learndirect to “generate some 2017/18 AEB funding scenarios and their consequences”.

On July 25, Learndirect contacted the ESFA to withdraw its bid from the tender, believing that this course of action “offered the best prospect for receiving some AEB funding in 2017/18”.

It was aware that it would receive no funding at all if Ofsted were to publish its ‘inadequate’ rating.

On September 6, the ESFA wrote to all providers which either did not participate in the procurement or were unsuccessful, including Learndirect, to confirm a rule change that meant they would receive 75 per cent of the value of their previous contract to use in 2017/18.

5. The DfE’s communications team hid Learndirect’s notice of serious breach

In early April, the ESFA was preparing to publish the latest list of providers that had received a notice of serious breach, which should have included Learndirect as its apprenticeship achievement rate had fallen below the 62-per-cent threshold.

The Department for Education was aware that Ofsted planned to rate Learndirect’s overall effectiveness as ‘inadequate’ in its latest inspection, but that the formal report was delayed while Learndirect pursued a complaint about the inspection.

The DfE’s communications team subsequently asked for Learndirect to be omitted from the list, because it “did not want any information suggesting that the company was not meeting expectations to be in the public domain until Ofsted had made its final rating public”.

FE Week reported this at the time, but the DfE refused to give a reason for why it was omitted; that mystery has now been solved.

6. Learndirect will lose its Home Office and STA contracts

Learndirect is likely to lose its other government contracts, including those currently held with the Home Office and Standards and Testing Agency, to deliver the Life in the UK test and professional skills tests respectively.

Both contracts, which will bring a combined income of £10.8 million to Learndirect this year, will be put out for tender next year. The Home Office contract was already due to run out in June, but the STA agreement was meant to run until 2019.

The NAO’s report said the re-procurements of these contracts will be in an “open competitive tender”. As such, Learndirect “will be eligible to bid for the contracts”.

Statement from Learndirect:

“Learndirect ltd welcomes the publication of the NAO report today.

“Having invited the NAO into Learndirect and undertaken a number of meetings with the team leading this piece of work, we believe that the report gives a balanced view of the decisions that have been made by Ofsted and the ESFA concerning the monitoring, inspection and funding of Learndirect.

“The report recognises that Learndirect has been operating in a challenging funding environment over the last few years and has had to make significant changes to its business to reflect reduced funding in the adult skills arena. 

“Since the inspection, Learndirect has worked closely with the ESFA and Ofsted to ensure that the provision being offered to learners and apprentices continues to improve. “Significant improvements have been recognised in the recent monitoring inspection undertaken any Ofsted in November 2017.

“This has been a particularly difficult time for the company and especially the many hundreds of Learndirect staff who are wholly committed to ensuring the best possible experience for their learners and apprentices.”

Learndirect’s multimillion-pound contract to deliver the Home Office’s Life in the UK test is to be put out to tender for a “new” provider, FE Week can reveal.

The nation’s biggest FE provider has since November 2014 held the contract to operate the tests, which are a crucial component for obtaining British citizenship, on behalf of the UK Border Agency.

It also had a contract for an older version of the service for an unknown number of years before 2014, and had the agreement extended at least once.

But it appears that the nation’s largest provider, which has endured a chaotic end to 2017, what with its grade four from Ofsted, the subsequent losses of government funding and a National Audit Office investigation – the outcome of which is due tomorrow, will not continue with the tests when its current Home Office contract ends in June next year.

A “prior information notice” was released by the Home Office on November 30, spelling out the department’s intention to put the £21 million contract out to tender and recruit a new provider.

“In preparation for the current contract coming to an end, it is the Home Office’s intention to launch a competition in early 2018, in order to find a new provider or providers to deliver the service throughout the UK,” the document, brought to the attention of FE Week by Tussell, a database of UK government tenders and contracts, said.

Learndirect’s previous contract was extended in 2013, when it issued a press release suggesting it had worked with the Home Office on the service since its launch in 2005.

“We’re very proud of the work we’ve done with the UK Border Agency to deliver Life in the UK tests since they were launched in November 2005,” said Suzana Lopes, its senior vice-president of sales at the time.

The Home Office told FE Week that announcing its intention to tender the test was part of its usual procurement procedures, and confirmed it began working with Learndirect on the “new” Life in the UK Test service on November 1, 2014.

The department would not, however, tell FE Week how many years it had worked with Learndirect on the older version of the service.

Learndirect also declined to comment.

Life in the UK tests are carried out on computers around the UK, with separate arrangements for those carried out abroad.

The Home Office’s tender page says bids for the contract, which will initially run from July 1, 2018 to July 31, 2021, will be “welcomed from single organisations or consortia, although it is the intention that a single contract will be awarded for provision of the service UK-wide.

“Indicative timescales are of competition launch towards the end of January 2018, with a final bid submission date at the end of March 2018 and a service commencement date in July 2018. These dates are indicative only, and may be subject to change.”

There will be a “supplier event” after the launch to “engage with potential bidders and provide further information, and to afford prospective bidders an opportunity to ask questions”.

The public accounts committee has scheduled a hearing to review the Learndirect saga on January 15 in the New Year, FE Week understands.

The meeting will dissect the findings of tomorrow’s National Audit Office report, which was called for by the PAC’s chair, Meg Hillier (pictured above), and looks into the circumstances surrounding the monitoring, inspection and funding of the nation’s biggest FE provider.

It is understood that witnesses to be called to the hearing will include Ofsted chief inspector Amanda Spielman, Learndirect boss Andy Palmer, former ESFA chief Peter Lauener, and the Department for Education’s permanent secretary, Jonathan Slater.

Learndirect was offered special treatment after the government allowed it to retain its contracts for almost a year – much more than the usual three-month termination period – even though the provider was given an ‘inadequate’ rating by Ofsted in a report published in August.

The special treatment afforded to Learndirect after its infamous grade four from Ofsted was actually a ministerial decision, even though the ESFA’s former boss attempted to take “personal responsibility” for it, the National Audit Office has revealed.

The country’s public spending watchdog has this morning published its much-anticipated report into the circumstances surrounding the monitoring, inspection and funding at the nation’s biggest FE provider.

It has for the first time shown that the decision to continue funding Learndirect until July 31 next year was ultimately made by a Department for Education minister, even though Peter Lauener publicly claimed it had been his decision.

The NAO’s report states that between 2015 and August 2017, Ofsted awarded an ‘inadequate’ rating to 26 providers aside from Learndirect. In 23 cases, the ESFA terminated their contracts with a notice period of three months or fewer. The other three cases involved four- or six-month notice periods.

In May this year, around six weeks after Ofsted’s visit to Learndirect, the ESFA concluded that continuing to fund the provider for 2017/18 would “best meet the interests of learners”, allowing the company to wind down and let learners “complete their courses with minimal disruption”.

This was because the agency believed that the provider’s size of made it an “unusual case, to which special considerations should apply”.

The agency however “recognised” that such a decision would “require ministerial review”, which “would not be possible until after the general election”. Accordingly, “ESFA put a formal submission to the minister on July 2017 4”, the report says.

This was the only time ministers have reviewed and approved an ESFA decision to continue funding a provider with a grade four, the NAO found.

The DfE declined to comment directly on which minister took the final decision or when it was made.

During a Public Accounts Committee meeting in October, Mr Lauener said it had been his decision to continue funding Learndirect until next July, after Meg Hillier, the committee’s chair, asked him if the provider “was too big to fail”.

ESFA believed that the size of Learndirect Ltd made it an unusual case, to which special considerations should apply

At the same meeting, Jonathan Slater, the DfE’s permanent secretary, denied that the Learndirect had been given special treatment.

But as the NAO has today confirmed, no other ‘inadequate’ training provider has ever been given a full year to run down its contracts.

After reading the report, Ms Hillier said the government had “backed itself into a corner by letting itself become dependent on Learndirect”.

“At a time when many further education providers are struggling with funding restraint, it is disgraceful that the department should be continuing to spend millions of pounds of taxpayers’ money on an inadequate provider,” she said.

“Our priority throughout has been the protection of learners and ensuring that they do not lose out – a point that has been acknowledged by the NAO,” said a DfE spokesperson.

“We set the contract wind-down period to July 2018, which will give learners the opportunity to complete their courses, and will continue to monitor performance on a monthly basis to ensure learners and other service users are not affected.

“This process has demonstrated that where providers do not meet the standards we expect, we will not hesitate to take action.”

FE Week has pulled out the other main findings of the NAO’s report, which you can read here, along with a statement from Learndirect.

FE and skills will have a major role to play in a new social mobility action plan being launched by the education secretary this morning.

The plan, which will be unveiled by Justine Greening at the Reform social mobility conference in London today, outlines four social mobility “ambitions” – two of which focus on post-16 education and training.

It promises to offer “real choice at post-16” and “rewarding careers for all” as part of its overarching aim to focus on the areas of the country that have been left behind.

“Today I’m launching a plan which puts improving social mobility at the heart of all our education policy,” Ms Greening is expected to say.

“The reality is that in modern Britain, where you start too often decides where you finish.

“This is a defining challenge for us as a nation. We have talent spread evenly across this great country – the problem is that opportunity is not.

“And for some people it’s a whole lifespan of missed opportunities.”

The new plan, she is expected to say, will “provide a structure and an architecture to enable us to work in a more coordinated way” to tackle the social mobility challenge.

Her four ambitions will encompass important stages in people’s education.

The first two, “closing the word gap” and “closing the attainment gap”, will focus on early years and schools.

“Real choice at post-16”, the third, will involve “creating world-class technical education, backed by half a billion pounds in investment, and increasing the options for all young people regardless of their background”.

The fourth, “rewarding careers for all”, promises to boost “skills and confidence to make the leap from education to work” and raise “career aspirations”.

Ms Greening will say she wants to build a “new type of partnership with businesses to improve advice, information and experiences for young people”.

The Social Mobility Commission’s annual state of the nation report, published last month, raised concerns that the apprenticeship levy would adversely affect social mobility.

It warned that the levy could “lead to disproportionate levels of apprenticeship spend in cities, where many big businesses are located” which may “widen the disparity in available opportunities between urban and rural areas”.

It recommended the government target “any unused apprenticeship levy funds at regions with fewer high-level apprenticeships”.

The Skills Commission, an influential group of MPs and education and business leaders, launched a major inquiry in August into the impact of the government’s apprenticeship reforms on disadvantaged young people.

Update at 9.30am: 

The action plan has now been published, including the following announcements that will be of interest to the sector:

• Employers to take part in regional skills advisory panels, which will help ensure that the local provision of skills, and the delivery of skills policy in local areas, responds to local employer needs
• Introduction of an entitlement to full funding for basic digital courses. The government has said it will do this several times before, so we have asked the DfE if it can now confirm when this will be introduced from
• Employers to be incentivised to “provide quality apprenticeships through the apprenticeship levy” – though its not clear how this would be done, for example by raising the levy or lowering the £3m threshold. FE Week is enquiring about this
• T-level transition year to be piloted to “test different offers to make sure we are providing the best possible options to all young people” – but no details yet. FE Week has requested further information

The report made the following admission about long-term under-investment in FE:

“Historically we have not done enough to invest in FE, which is the sector responsible for delivering training from basic skills to postgraduate degrees, including the bulk of technical education.

“The hard work and dedication of teachers and college leaders has not been matched by successive governments who have overlooked further education.

“This is a major problem given that the sector disproportionately serves students from disadvantaged backgrounds and challenging areas.”

The AELP wants the education secretary to review the “controversial” outcome of the non-levy tender before ‘good’ and ‘outstanding’ providers are “wiped out”.

Results of this much-delayed procurement were released last week, and many Ofsted grade one and two providers were denied an ESFA contract to continue delivering apprenticeships for smaller employers until April 2019.

As a result, many of them could now go into administration or be forced to cut experienced staff, the AELP wrote in a letter to Justine Greening.

Today’s Ofsted annual report found that four out of five independent training providers are currently rated ‘good’ or ‘outstanding’, a feat which AELP believes is a “significant achievement” given the weight of reform that has affected delivery over the past 12 months.

“Today we should be celebrating the chief inspector’s confirmation that so many training providers and colleges are delivering high-quality learning to employers and individuals,” said AELP’s boss Mark Dawe.

She needs to act fast before lasting damage is done

“Instead we are angry that a significant proportion of them may not be trading in a few months’ time because of an arbitrary decision to cull the market when employers will soon have the opportunity to decide for themselves which providers should benefit from the apprenticeship reforms.

“Justine Greening’s own social mobility agenda will be seriously undermined if she disregards the Ofsted ratings in favour of the ESFA’s procurement decisions, leaving parts of the country without specialist apprenticeship provision in key sectors. She needs to act fast before lasting damage is done and the government’s three-million apprenticeships target becomes an embarrassment.”

One ‘good’ provider that has been training learners for over 33 years has threatened the ESFA with legal action after it was declined a non-levy contract.

Yorkshire College of Beauty, which claims it is the country’s largest beauty therapy apprenticeship provider, failed in its request for a £1.1 million allocation because it achieved 1,225 marks in the ESFA’s scoring criteria instead of the 1,275 minimum.

The provider hit out at the government’s “shambolic” procurement process which it says is a “paper-based exercise” with “no consideration” to the standard of training, Ofsted grades, awarding body reports or achievement rates.

My whole team have found the whole process to be shambolic and unfair

“I am challenging the marking and have instructed lawyers,” said Christine Tilley, the college’s owner.

Ms Tilley said she has the “support of local councillors and businesses” and has already written to her local MP, Stuart Andrew, to fight her battle in Parliament.

“We have approximately 150 apprentices on contract to train in what is a specialist area being the beauty therapy sector,” she said.

“It takes a certain kind of learner to be able to be placed in a levy-based business and this makes up less than five per cent of the learners we historically recruit.”

Ms Tilley added that because the college didn’t win a non-levy contract, she has 75 apprentices currently undertaking a level two qualification who are being prevented from progressing onto level three and continuing their training.

“My whole team have found the whole process to be shambolic and also unfair,” she protested.