A major training provider claiming to have £130m of apprenticeship levy business has had its contract with the ESFA terminated, after an FE Week investigation found that one of its employees had been offering banned inducement payments to an employer.

Talent Training, based in South Tyneside, was caught offering cash amounting to as much as 20 per cent of government funding per apprenticeship directly to a firm considering whether to engage their services for training.

The money it claimed from the Education and Skills Funding Agency was meant solely for the purposes of training and assessing apprentices, but it was offering through an intermediary to hand as much as £200 in every £1,000 back the employer in question as a kickback.

The provider, which has now launched an internal investigation into the matter, appeared to try to circumvent strict government rules put in place explicitly to ban the practice.

FE Week was contacted by a whistleblowing employer, and secretly sat in on and recorded a phone call with a Talent employee during which the offer of an inducement was made.

We subsequently sent the information to Keith Smith, the director of funding and programmes at the ESFA.

The ESFA investigated, and a spokesperson told FE Week that “it is unacceptable for any training provider to abuse the system by offering employers cash incentives from the apprenticeship levy”.

He continued: “The ESFA has reviewed the information and taken action to protect the interests of learners and employers, by serving notice to terminate the levy agreement for Talent Training.

The ESFA has reviewed the information and taken action, by serving notice to terminate the levy agreement

“The ESFA is taking immediate steps to contact levy employers that have made a commitment with this provider.”

However, any non-levy apprenticeship contracts with Talent “have not been terminated”, he confirmed, adding: “As we have now served notice to terminate, we are unable to comment further on this specific matter during this time.”

This tough line has been backed by Association of Employment and Learning Providers’ boss Mark Dawe, who said: “The ESFA has been very clear that funding and taxpayers’ money should never be handed back to the employer in any form of unauthorised rebate or kickback, outside of the approved government incentive payments.

“Ultimately, anyone who is found to have broken or manipulated the rules should be held to account and dealt with appropriately by the ESFA.

“This appears to be the case in this instance, and it should send out a strong message to all providers and employers that abusing the system will not be tolerated.”

FE Week launched its investigation into Talent, which has insisted that no inducement payments have actually been paid to any employers, after we were approached by a concerned employer that asked not to be identified.

We were shown an email (below) sent in March from Barry Waller, then national business development manager for Talent Training.

It said: “Just to make you aware, we offer a financial incentive to employers of around 20 per cent of their levy spends, if partnered with Talent Training. Based on your levy bill, this could be a good financial draw down if chose to work with TT?”

Another email was sent to the employer a day later, offering to “go further into the rebates and revenue generation aspects of our models in further detail”.

Intrigued, FE Week arranged to listen in – and secretly record – a telephone conversation between the employer and the Talent employee.

During this conversation, the employer was told that when using levy-funding, it would be paid 15 per cent of the price in cash, and that with some firms, Talent went as high as 20 per cent. When the levy pot was empty, Talent would switch to the co-investment model, and the employer would pay 10 per cent, though it would then be given this back in full.

Our anonymous employer then asked whether a co-investment employer would get both the 15 per cent back on top of the 10-per-cent co-investment refund.

It should send out a strong message that abusing the system will not be tolerated

The Talent executive replied: “Yes, exactly that”.

They continued: “There’s no reason why you can’t have a project which potentially could be worth £1 million, which is your levy.

“But you could have a £4 million apprenticeship campaign or apprenticeship programme, and you would get 15 per cent on the £4 million, but your levy is only £1 million, and you wouldn’t pay your 10 per cent on the additional £3 million, because we would reimburse that.”

The employer later emailed Talent to ask whether revised ESFA funding rules – published after the telephone conversation – would alter the arrangement.

The same Talent employee replied, with a senior employee copied in, that this was “nothing that would change our model or process”.

The ESFA revised its funding rules in March, specifically to ban inducements like this, which were increasingly rife across the sector.

“We have been made aware of some emerging delivery models that are contrary to the policy intent,” it said on March 1. “For example, some providers are offering incentives for employers by paying or refunding them for certain aspects.”

Two weeks later, the agency made the following announcement: “We have strengthened the rules to prohibit the payment of incentives, inducements by providers or refunds of co-investment of any kind.”

Then on March 20, provider funding rules were updated.

“You must not pay incentives or inducements or any other payment not authorised by us to the employer, in relation to any part of the apprenticeship programme,” they said.

Talent initially denied that it had done anything wrong, but after being presented with FE Week’s findings, a spokesperson conceded it had been “greatly concerned by these claims and conducted urgent enquiries”.

It indicated that any rule-breaking appeared to have been done by a single “rogue, junior employee”– who had now been suspended.

FE Week pointed out that a senior employee of the firm had been copied into relevant emails that outlined inducements. Talent’s spokesperson insisted that said this person “did not necessarily take note” of these emails.

The spokesperson added: “No contracts have been entered into with any employer based on the employee’s alleged activities and no inducement payments have been, nor will be, paid by Talent to any employer as claimed.”

David Harper, chairman of Talent Training, which has over 200 staff, then admitted he was “shocked to hear that alleged offers may have been made in order to win business”.

Mr Waller said this when speaking to the potential customer:

“The xxxxxxxxxx project is four times the amount of their levy, because the money that they’re going to generate is, you know, very substantial.

“There’s no reason why you can’t have a project which potentially could be worth £1m, which is your levy, but you could have a £4m apprenticeship campaign or apprenticeship programme, and you would get 15% on the £4m, but your levy is only £1m, and you wouldn’t pay your 10% on the additional £3m because we would reimburse that.

“We’ve got a lot of recruitment companies where… and we’re doing stuff to really help them… I mean, they’re not going to be in our main portfolio of clients… but in terms of local support, you’ve got a lot of recruitment companies who potentially have got a relatively small levy, but they’re kind of going full hog in terms of the development, in terms of upskilling their staff in whether it be recruitment or sales or customer service, or customer experience qualifications, because they’re not paying for them. They are generating a commercial return on each of the qualifications on a monthly basis. It’s great cash flow!”

The statement: Talent Training in its own words

After being presented with FE Week’s investigation findings, David Harper, chairman of Talent Training, said: “I was shocked to hear that alleged offers may have been made in order to win business.

“We are investigating but can confirm these incentives would be against all our business principles and would not make it through our governance processes.

David Harper LinkedIN page

“We are taking all steps necessary to safeguard the interests of our clients, the good name of the levy funded apprentice programme, the regulatory authorities and our third party delivery partners.”

He added: “We are confident that no inducement payments have been paid to any employers.

“We are also sure our new levy -funded apprentice business model, Talent’s first class reputation, and most importantly the integrity of our team, will be vindicated when our enquiry is completed.

“Talent also wishes to thank our many clients who have urgently contacted us to express their continued support.”

Barry Waller emails

Nick Linford editorial: This will send a strong message

The ESFA should be applauded for taking swift and tough action against Talent Training.

I expect this story and the associated concerns will be a hot topic at the upcoming AELP conference, but to be clear there can be no grey areas over how levy money should be spent.

It must all be used for training and assessment of the apprentice it’s linked to, and any attempts to hive off cash through employer inducements has to be cracked down on.

The National Audit Office has already warned it is worried the reformed apprenticeship system is wide open to abuse.

Our investigation, which I’m extremely proud of, exposed one such attempt at foul play – involving a major independent provider that previously had a good relationship with the government.

Let’s hope that lessons are learned through the internal investigation Talent is now carrying out.

The government and the sector as a whole must be on our guard. The new apprenticeships system, which has benefitted from a huge amount of welcome publicity and support from ministers, will be fatally undermined if the NAO finds widespread malpractice in the coming months.

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