The ESFA should hire risk managers to root out problems in training providers

12 Jul 2021, 6:00

Making providers get insurance will solve neither incompetence nor fraud, writes John Hyde

“Taking a sledgehammer to crack a nut” was how Lord Aberdare, speaking at the second reading of the Skills Bill, described the decision to require independent training providers to buy insurance and pay to join a new register.  

He warned such moves could destabilise ITPs at a time when the economy desperately needs more skilled staff as we move out of lockdown and as the effects of Brexit on the labour market are felt.   

ITPs deliver three-quarters of all apprenticeship, traineeship and adult education budget programmes. 

How many ITPs have failed in the last decade, to warrant introducing these draconian conditions? 

‘More cost effective solutions?’

Why has the Department for Education and ESFA decided insurance cover and new registration conditions will solve this problem? 

Exactly what must be insured has yet to be defined by ESFA. Most ITPs already hold public liability insurance as a requirement to contract for NHS apprenticeships. 

But it appears DfE also wants insurance against failure. Of course, insurance underwriters will insure any risk, but at a price  ̶  as DfE officials will soon discover. 

As this insurance cover will be mandatory, it will become a cost of delivery and so will ultimately paid by the taxpayer.

Debating the Skills Bill, politicians will have to decide if this is an effective use of taxpayers’ money or whether more cost-effective solutions exist. 

‘More frequent inspections’

Are there systemic failures in the DfE and ESFA control systems that need resolving, for instance?  

There are just two reasons for ITPs’ failures: incompetence and fraud.  

Incompetence ranges from misunderstanding the detail and nuances of the programmes delivered, poor or insufficient allocation of resources, inept management, untrained delivery staff and insufficient financial resources.  

For new entrants, these problems should be identified at the register of apprenticeship training providers (RoATP), and afterwards, at the initial Ofsted inspection visit.    

More frequent inspections would identify problems before greater numbers of learners are affected. Serious breaches result in providers having to cease trading. 

For grant-funded organisations, intervention by the FE Commissioner precedes the institution being closed or merged.   

‘Commissioner for ITPs?’

To provide “a single unified system of protection for learners” as described by Baroness Wolf, should a Commissioner for ITPs be introduced?   

The commissioner could have powers to suggest or demand mergers between ITPs or between ITPs and grant-funded FE colleges; and, on a cost-effective basis, could have access to funds to finance these mergers. 

Now on to fraud. With ITPs this includes claiming funding for “ghost” or ineligible learners, deliberate cheating in examinations and assessments, bribery of employers and inappropriate use of government funding. 

The ESFA has live data of all provider and learner activity. Simple algorithms would show up anomalies of some providers against the norm to highlight potential fraud. 

Could the ESFA follow the Ministry of Defence’s example where on larger defence contracts, a civil servant is seconded to sit on the board of the company awarded the contract? 

Similar arrangements could be introduced for ITPs receiving ESFA funds in excess of £10 million. This would give government line of sight of the provider’s financial position, policy decisions, implementation of delivery and overall competence. 

It would also give the civil service, collectively, a much clearer understanding of the day-to-day running, decision-making and interpretation of ESFA rules. 

‘Risk of destablisation’

Dealing with provider failure needs rethinking, but insurance claims are unlikely to solve it.  

Incompetent provider failure might be insurable for a substantial fee, but fraud would invalidate any insurance premium. Funds would need to be available to support learners transferring from a failed provider. 

I fail to see how enhanced liability insurance and more stringent entry registrations will have any impact on provider failures, or add more protection to learners. Meanwhile, it risks destabilising the entire ITP sector.

The ESFA should try employing risk management professionals to discover the real issues within ITPs and implement processes to mitigate these.      


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  1. Lester

    I agree entirely with this. There are already many checks and balances made against ITPs and this additional level will only add to costs and not add an real value. They could also use effective technology to track AI and have early warning signs of provider failure, this would be more effective and in line with the way we now approach the ability to identify patterns and trends. Insurance is simply a sticking plaster to move mitigation.

  2. Benjamin Feighery

    I think this hits the nail on the head, the vast majority of risk i see in providers is through misunderstanding of the rules, and who can really hold them to blame for that given the hugely complicated sets of rules that change every year and sometimes change retrospectively. It they want ITP’s to tow the line then give them a simple line to follow not a gordian knot.

  3. Dead right John. The reasons for (funded) providers failing are:
    1. Financial Management
    2. Lack of OFSTED knowledge or preparation
    3. Lack of ESFA Audit/Compliance rules and processes
    4. Hiring the right people at senior level.

    Insurance doesn’t cover any of that.

  4. Darren Hands

    They should go back slightly to how things ran in the LSC days with proper contract managers undertaking proper quarterly review visits, and compliance review visits done on a more frequent basis – roughly back in those days there would be a three year cycle at most for such a visit to take place – for those rated Good. Those judged to be a higher risk could be seen every year. They have gone to far down the light touch route.