The Public Accounts Committee has today published its report into the monitoring, inspection and funding of Learndirect.

Members of the committee grilled the organisations who’ve been closest to the saga involving the nation’s biggest FE provider during a hearing in January.

Learndirect 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.

The PAC’S final report dissects the evidence from this long running debacle and gives five recommendations for the government and Ofsted to act upon. 


1. Develop a new framework for identifying providers who are too big to fail

Having awarded Learndirect several vital contracts for a variety of public services, the PAC said the government was later restricted in its ability to take “decisive action” when the provider’s apprenticeships provision began to fail.

The DfE and other government bodies should now “develop a framework for identifying any risk that a commercial provider becomes so large and essential to the delivery of public services that it cannot be allowed to fail, or requires special treatment if it begins to do so”.

The PAC wants the Cabinet Office to report back on this progress by December, and the DfE to do so separately by the start of the next academic year.

The DfE told FE Week it would respond “in detail” to the PAC’s recommendation in “due course”.

The Cabinet Office did not respond to requests for comment.


2. The ESFA should publish its expectations on management fees

Learndirect has charged “unusually high” management fees of 40 per cent to its subcontractors for years, which means a “large amount of funding is not available to be spent on teaching and learning”.

Even though the ESFA requires all providers who subcontract their provision to be transparent about management fee rates, it provides no guidance on the levels of support that “might be merited by different levels” of top-slices.

The PAC said that the ESFA should therefore “formally publish”, in time for the next academic year, its “expectations about the services that should be offered to subcontractors, and the associated management fees that are reasonable”.


3. Ofsted must urgently review its plans for assessing risks of private provider failures

In assessing when to reinspect Learndirect, the PAC said Ofsted did not “take full account of the company’s size and the consequences for learners of its declining performance”.

It pointed out that a full inspection of Learndirect requires Ofsted to commit around 15 per cent of its total inspection capacity for the FE sector.

It wants the watchdog to “urgently revisit how it prioritises its use of resources and the different type of risk attached to a private sector failure, in a way that takes account of risks to high numbers of learners and the changing provider-base in FE”.

Ofsted said it keeps its inspection processes “under regular review, particularly as the skills landscape changes and new risks emerge, and will study the PAC’s recommendation”.


4. A new inspection deferral policy is needed for commercial providers

Ofsted’s policy for deferring an inspection “risks putting providers’ business interests ahead of learners’ interests”, the PAC said.

The watchdog originally planned to reinspect Learndirect at the start of November 2016, but agreed to defer its inspection when the provider claimed it was negotiating the sale of its apprenticeships business.

This sale never actually went through but delayed inspection for four months.

To prevent a situation like this from happening again, the PAC says that by June 2018, Ofsted should develop a “specific deferral policy for commercial providers, to ensure that learners’ interests always take priority over the pursuit of profit”.

Ofsted said it will “always put the interests of learners before any commercial considerations, which is precisely what we did in this case”.


5. The government needs not to hand so much power to private giants

The PAC concluded that Learndirect had received hundreds of millions of pounds of public money while “neglecting its learners in pursuit of profit and frustrating the Ofsted inspection regime with delaying tactics and spurious legal action”.

It pointed out that the ESFA gave Learndirect almost £500 million in the academic years from 2013/14 to 2016/17, during which time the quality of apprenticeships provision was in decline and the provider failed to achieve the ESFA’s minimum standard. Yet, despite this downward trend, the company waited until September 2016 to develop an improvement plan.

The PAC believes the government should “learn the lessons” from the failure of Learndirect, in particular “concerning the need to understand how many government contracts a company holds at a given time and how well it is performing against each of those contracts”.

The Cabinet Office did not respond to requests for comment.


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  1. freer spreckely

    In the world of neoliberal economy (deregulation, privatisation and low tax regime) ownership is the only real cast iron law of responsibility. Lloyds Banking Group owns Learndirect and shares in the 40% management fee received from taxpayers, but we hear nothing from the Bank about its failure to manage Learndirect, why not?