Edexcel Funding Network
The Edexcel Funding Network is a group of interested colleagues from centres, Edexcel staff, and other organisations which meet about twice a year to hear from expert speakers on a range of current funding issues. Centres have the chance to hear from expert speakers and to talk to colleagues from other centres concerned with funding issues. Centres that become members are invited to every event, are emailed slides when they cannot attend, and sometimes are involved in conversations about funding issues we pick up on and need a centre perspective on. Everyone is welcome.
April's event focussed on the credit crunch and its effects on education. Every one is feeling it, but what effect is the credit crunch having on education and training? As the crunch continues to bite what will be the impact of the recession on 16-18 participation, and adult skills?
Welcome and introduction, Steve Besley
The theme of the day's event was the credit crunch, and the Policy Team brought together three top speakers to give the Network an outline of the big picture in the first session, and some more specific detail in the second. Steve Besley set the scene; Mark Corney and Mick Fletcher focussed on how the finances are looking and the effect they may have on education policy. The second session had a narrower focus, and we heard from a college about the opportunities the response to the crunch may bring.
Session 1 - Setting the scene, Steve Besley, Head of Policy, Edexcel
The theme of the budget was 'Building Britain's Future'. The Budget was, of course, the centre piece of activity, but a series of related papers were also released. Lord 'A new industry strategy - new industry, new jobs' was launched by Peter Mandelson, and a new strategy around the current in-word 'efficiency', was also released. The efficiency report came as a result of the operational efficiency programme which was set up under Budget 2008 to look at efficiencies across government. So there are a whole range of strategies that come together around the budget. Everyone will be familiar with the context; a sense of belts-tightening for the next few years, 2010/11 seen as critical because that is when the spending review should happen. There was a fair amount of support to ensure public services such as education can continue, but we may see difficult times ahead. Steve gave us a reminder of the key messages:
Confirmation of two years of funding growth for schools
But, we are not sure what growth can be expected in the future. Having Ed Balls at the department is useful because of his relationship with the Treasury and the Prime Minister. A different education secretary might not be able to secure the same sense of growth, although much of it was signalled a few years before he arrived.
Commitments to honour the growth for 16-19
Which was a worry for a lot of schools and colleges.
Continuing emphasis about the importance of science and technology
Britain's future, innovation, prosperity, all hangs on science, technology, engineering, maths subjects, so the budget on that seems to be ring-fenced.
Honouring the mass of promises that the Prime Minster and others have made throughout this year
On job training schemes, support for Train to Gain and so on.
There's been a lot of debate in the media about when things might improve, the CBI suggests it is going to take another five, six, seven years. The Chancellor is hoping things will start to improve at the beginning of next year; so fingers are crossed for the future.
Session 2 - Education and skills policy in recession, Mark Corney Director, MC Consultancy
Conservative education and skills policy
Mark began by making two main points. The first is that schools policy will do the pushing. In other words, once you make a decision on schools, there will be second order effects will have a domino effect on everything else. The second issue, and for Mark the real issue in the first 12 months of a Cameron government, would be have they got bigger fish to fry rather than messing around with another change to the Machinery of Government?
The next budget
It is Mark's view is that the pre-budget report this November, and this will be an important budget report. The reason for that is there is so much volatility in the fiscal stance. We just don't know whether the numbers will be worse come November, so Mark would not rule out looking at the pre-budget report because the Chancellor's estimates will have to change completely. We have already had a flash-finding for GDP for this quarter which is lower that what informed the current budget.
What the budget says
The budget is all about one figure. £5 billion. We get a fiscal easing this year of £5 billion. In two years we will see a fiscal tightening, and it will be the same £5 billion. £5 billion worth of savings were announced this year, in 2009/10, and of course that is the game that our politicians play. We therefore have to ease by £5 billion.
The other key message from the budget is; when is an efficiency additional public spending? Actually, there is no new money for 16-19 provision. The test is from Alistair Darling to Ed Balls; from the Treasury to the DCSF. If it's shown in the budget table it's new money from Ali to Ed. But actually that additional money of £200 million this year, and £400 million next year, is efficiency savings in DCSF. The original efficiency saving over this spending period was £4.6 billion. This budget assumes another £500 million of efficiency savings. Partly through a 3% efficiency saving on quangos, partly a 1% efficiency savings on schools and FE providers. That means we have got to do a lot more for a lot less. That's across 16-17 year-olds. It's quite important to make that point. Partly it's the demographics, because the cohort for each year is just starting to fall. And one of the helpful aspects of education and skills policy certainly for young people, for any government, will be the cohort as it declines. That has an impact on HE policy as well. Counter-acted of course by health because we are all living longer, so that puts extra spending pressure on health. So, for the DCSF there is no new money.
The big winners in this budget are the DWP. And the JCP. In the pre-budget report 2008 there was £1.3 million additional spending to improve the job centre network. On top of that in this budget there is about £1.2 billion. In the pre-budget report there was an additional £500 million on programmes specifically for 18-24 year-olds who might be out of work up to twelve months, in this budget there's another £1.7 billion. This is probably one of the consensus points that's emerged since the Conservatives have been out of office. Whereas a decade ago we would just write-off a generation, this time we have not.
Mark has been trying to work out if there's any additional money for DIUS. About 10% of the £1.2 billion for new programmes will be for training those unemployed 18-24 year-olds. So if they choose an option that requires skills, that money flows over to DIUS because they are responsible for adult-responsive and employer-responsive skills funding. So there is an additional £120-odd million for skills for long-term unemployed 18-24 year-olds. And that is new new money, from the Treasury to DWP. Mark's also been looking at whether there is any skills money, new new money and not efficiency gains, in relation to the Industrial Activism strategy. It's worth £750 million. £400 million this year, and £350 million next year. And it's there to support a while range of projects. Carbon technology is one, exports is another. The question is, how much of that £750 million will be spent on skills provision.
The recession and education and skills
Whoever wins the next general election will inherit an increase in real terms in current public spending of 0.7%. and that is predicated on growth bouncing back to 3.5% in two years time. Once that goes out of the window all the other numbers fall apart. A 0.7% real terms increase is lower than the last spending review when it was at 2%, and it was lower than the spending review before that, when it was at 5%. Given the recession, 0.7% real terms increase isn't bad, but the Institute of Fiscal Studies have said there's a £41 billion per year interest debt payment. And in recession you also have benefit payments. When you strip out those two, you don't get any real-terms increase. Even on the government's plans, by the middle of the next decade the Conservatives would inherit a debt to GDP ratio of 80%. On these projections it will be 2017, 2018 before we get to 40% of debt to GDP. That will mean a number of things.
Pressure on 16-18 places
Recession will drive up demand for full-time education, and that's why we've seen the expansion of the budget to cater for the extra 54,000 places. However, will full-time education meet the needs of all young people? It is unlikely. We must note also the private school issue. For the first time in a decade, absolute numbers are falling for sixth forms. Alongside this parents will be hit with redundancies, and won't be able to afford fees, so next year you might find extra demand from would-be private sixth formers having to come back into state education. That will put pressure on 16-18 YPLA budgets. And which organisation will have to deliver the efficiency gains from 2010/11? Not the LSC, but Local Authorities.
Pressure on higher education
We have a very lop-sided higher education system. The bulk of the money goes to full-time 17-20 year-olds. That makes up about 70% of all cash spending on HE. But when the economy is heading south you find you have an increase in applications for full-time education. The highest demand is not from 18-20 year-olds, it's from 18-24 year-olds, those people who as a result of the recession now want to come back into education. There is a cap on HE numbers at the moment.
Adult fundingWe are already detecting a shift in adult funding. Where there is a spare pound, it won't be going to Train to Gain or Adult Apprenticeships, which are employer-driven, but towards the shift to funding traditional adult FE. Why? Because many individuals are now unemployed, and they haven't an employer. In the pre-budget report 2008 the additional funding from DWP of £83 million didn't go to Train to Gain; it went to adult FE. The £122 million from the new 18-24 year-old jobs package which will flow over to DIUS, will probably go to adult FE. The recession moves you back to a traditional approach to adult skills; using adult FE instead of Train to Gain. It will mean more individually-driven adult provision, rather than employer-driven provision. That said, there are so many flexibilities in Train to Gain, they are close to spending their budget now, and have still got a year to go, so there are major issues there.
Some very tough choices on public spending will have to be made because of the recession. Adult skills has always been the Cinderella of the system. It will be the pauper, in Mark's view in about 5 or 6 years' time. The recession creates the conditions whereby politicians can review reforms, which they may not do when the economy is doing well. Mark expects there to be a long hard look at the payment of universal child benefit, and big question marks over the future of funding of higher education.
Session 3 - Learning and skills in a cold climate, Mick Fletcher, Education Consultant
Causes for concern
Mick's view is that there is a perfect storm brewing! The recession operates through its impact upon individuals, on private finances, and on public finances. We are also moving into a period where, in the post-14 sector, there are pressures on costs to increase. We've then got, in the public finance arena, an assumption that there will be efficiency savings. There's an awful lot smoke and mirrors around efficiency savings and we need to ask ourselves, 'are these efficiency savings real?', and if so, 'what might they be?'. On top of all this we are building up significant evidence that some of the headline policies, to which the opposition has quietly bought into, are not working. It's very difficult for a Government to change course, but it's a window of opportunity for a new Government to say 'Let's cut our losses and blame the previous bunch.' And that is a 'silver lining'. Although there's lots of things about a Cameron Government that we may not be enthusiastic about, the chance for any new Government to admit failing policies and try something new is a very important feature of our democratic system.
The recession and the impact on private finances
The impact of the recession on individuals is asymmetrical. Some of the people who are suffering are the people losing their jobs, and it may be that one of the consequences of that unemployment is that people pull their children out of private education and put them back into the state system or instead of going for a job young people stay on in full-time education. We can overplay the extent to which there is a body of young people wildly antipathetic to full-time education. There are clearly some, but there are quite a number that are just pragmatic about it. They'd like a job, but if they can't get one they perhaps may think they are 'stuck' in college, but they will go. Clearly there is going to be pressure on Apprenticeship places. What a time to guarantee an entitlement to an Apprenticeship! Unless you dilate the Apprenticeship brand out of all recognition, you are not going to be able to fulfil that guarantee. We'll see resistance to fees from individuals. Some individuals will be well capable of paying increased fees both for themselves and for their children in higher education, but they'll make just as much noise as those who can't afford to pay. We'll see resistance to fees from employers certainly. That isn't to say we should abandon that idea, there is still significant opportunity for the sector to arrange things so that it brings in more individual private finance. There will also be greater demand for learning support - more people will qualify for EMAs. And there will be problems on the capital front as well, as all those institutions that were looking to sell assets to finance their building programme are going to run into difficulties.
The recession and the impact on public finances
There will be a big squeeze from 2010 onwards on public finances. Schools and the NHS will be prioritised which leaves less for others. That won't change. The aging society means a pension mess is brewing, or is well-brewed! So there will be pressure from other Government departments. The learning and skills sector won't be a growth area in terms of public finance for some time to come. There will be competing demands from DWP. And there will be pressure to reduce unit costs. This budget, more than any other, is peppered with references to efficiency gains.
If we carry on with increasing the participation rate, and in the short term we are bound into that, it is going to get more and more expensive. Those who are currently not in learning are going to be more expensive to attract than those who are currently in the system. Mick calculated for LSN last year, that provision for NEETs and those in jobs without training would cost at least 20% more on average. As you move up that curve towards 100% the intervention costs would become more and more expensive. So increase in participation doesn't involve doing more of the same. It involves doing something different so it undermines your capacity to achieve economies of scale. The role out of the Diplomas is going to be costly. Mick predicts that this is one ambition that we might have to roll back from later on. The Government initially envisaged that schools would make savings as a result of releasing 14-16 year-olds for part of the time. Mick can't see schools ever coming up with savings. If we shrink institutions as the cohort decreases overheads will have to be carried on a lower turnover. There is also increasing expenditure on students with special learning needs. The budget is out of control and will be an issue for us in the longer term. The cohort is decreasing, 2009 is the peak year. So if you are say, a six form doing traditional A levels your options are, to shrink; not a very popular option for any educational institution. Or they can compete harder for the same students from elsewhere, which only sifts the problem. Or you can diversify. Diplomas may be an example of how institutions might diversify but it's not going to be easy, particularly for smaller institutions. The rate of increase of units costs fell and is going up again. (Not the rate of unit costs fell and is going up again!) There is real worry in the department and in the LSC about unit cost pressures in the 16-18 budget.
The plan for efficiency gains
Which leads us to efficiency. Some of the efficiency savings are simply smoke and mirrors. Others are more substantial. The 'economies of scale' efficiency for example, could be quite real and it's worth exploring. Economies of scale are certainly possible. According to research by Mick some years back the place where economies of scale are most likely to be realised is in A level provision. It's probably politically the place where it's least likely to be realised. What the mathematics showed was that if you have the same subject offering then it costs roughly twice as much to deliver it to 100 pupils as it does to 500. It's all about class size. The economics of education is all about maximising class size. Which is why Train to Gain will always be a nonsense if it is delivered on a one-to-one basis in the workplace. So there are certain economies of scale there, but what actually happens? As the cohort size grows institutions offer more and more subjects until they eventually wipe the economies of scale out. You can take a number of views on this. You can say that it's excellent that economies of scale allow us to offer a wider range of provision so that people can do say, A level Greek, Chinese and Russian, in every area, supported by large classes of people taking chemistry and English literature. Or you could take the view that actually we are in such a desperate state that we need to claw out of the system some of those inefficiencies, and the way you claw it out of the system, is that you reduce the funding. It is unlikely they will do this; what we will be left with in terms of efficiency savings is rather more rhetoric than reality.
There's a huge body of evidence that shows that lower level NVQs do not produce any sort of wage return to individuals, and they do not help individuals significantly to get into employment. Short basic skills courses delivered in the workplace also produce negligible benefits. Train to Gain is a problem in that there is a lot of deadweight. The take-up of the Diploma is disappointing. It was 40,000 scaled down to 20,000, and finally just 12,000. There are very few pockets of collaborative work out there. Nothing is going out that will produce any economies of scale. There are big deadweight issues with EMAs. It produced an increase in participation by perhaps 5%. To get that 5% increase you had to pay the EMA out to 35%. Even things like activity agreements, or learning agreements, for NEETS, and for those in jobs without training, had a fairly successful penetration rate, but were still only taken up by 20% of the target group. If on there is all this evidence to say that Labour policy isn't working it gives the opposition an opportunity to bring an end to the policies. And with our tax-payers hat on we might see that as a positive message, or the silver lining.
It's just possible that the Tories will axe Train to Gain. Reform, a think-tank, which they might well listen to has said axe it. It didn't say take the money and give it back to traditional FE classes, it said save the £1.9 billion. So that is possible. It's possible that it's in the Government's mind to rationalise 16-18 provision through a more aggressive approach to commissioning. It is possible that they could use this commissioning process to drive the economies of scale. But it will have to be seen to be believed. It's more likely that we will see three things. A drive to efficiency through controls on eligibility for funding. They will try and limit the vocational offer. That is a much more likely scenario than the aggressive commissioning. There is also likely to be an attack on enrichment. There will a pressure to cut the funding cap as a way a trying to increase efficiency. They might also abandon EMAs. This is probably more likely than doing anything about child allowance, which is a bit iconic. Another think thank, Policy Exchange, has said we would be better off not having EMAs and giving the money to institutions a premium for disadvantaged students. This isn't Conservative Party policy as of yet. But it's a huge half billion that could be picked up. We will see continuing pressure to increase fees, and almost overtly fees being used to ration adult provision. Safeguarded funding will also come under threat. We are probably going to see more competition between providers on the basis of price and not just on quality. And the link will be strengthened between funding and outcomes. There is a serious chance that the Conservatives will abandon the Raising of the Participation Age. It's unlikely they will say they are not going to do it but they will increase new freedoms and flexibilities. There is also a chance they will abandon the Diploma, but to abandon the Diploma all you would have to do is remove the death sentence hanging over other vocational qualifications.
And we may still see further structural change in the system. Will the Skills Funding Agency lean towards Job Centre Plus, or will it be merged into HEFCE? If a decision like that comes up and is taken, then it will set the character of adult further education for a generation or more.
Session 4 - Responding to recession through new flexibilities, Nick Linford, Director of Planning and Performance, Lewisham College
Nick took us on a whistle-stop tour of some of the exciting things that have happened in the last 6 months which have presented new opportunities for Lewisham College and may present new opportunities for Edexcel. There are new funding routes to support both the employed and the unemployed. There are two things going on here. Flexibilities have been built into the current funding, and there are also new routes to funding.
Flexibilities built into current funding
- Train to Gain was flexed up in December last year. The flexibilities came about to offload the money in the Train to Gain budget a bit faster because there was a significant under-spend. It is also a great time to be having these flexibilities because of what is happening with the economy.
- Certain thin QCF qualifications, or units of QCF qualifications can also now be funded under Train to Gain, which is another new flexibility.
- Funding can also now be drawn down under Leaner-Responsive funding, for units that are part of the adult unit trials. These are qualifications that are primarily delivered on-site for adults, they could be employed, they could be unemployed, but it doesn't involve an employer.
New routes to funding
- Skills for Jobs is new to Lewisham but some providers will have been drawing this down for a year.
- Another is called the Six Month Training Offer. This is very new and was only announced in January, and colleges are only finding out about it now.
- Response to redundancy. Another completely separate funding system with its own rules, regulations and rates and so on.
The definition of success for these last three is about getting people back into work. It is not a qualification-based success criteria.
Train to Gain
Fund at full rates some non-first full level 2 - the LSC will now fund, through Train to Gain, learners who already have a level 2. These learners cannot contribute to the Government's PSA targets but they can now be funded to do another. They are fully-funded and free to the employer. This have proven to be an expensive policy decision as we are moving from an under-spend on Train to Gain, to a very serious concern about over-spend.
Fund at co-funded rates some non-first full level 3 - these will be funded at lower rates at providers will be expected to charge a fee. So the expectation is that we are looking at big growth within Train to Gain. This will be very helpful for learners who are in work and who need training.
Skills for life at any level - previously it was only allowed at level 1 and level 2. The LSC will now fund Entry 1, Entry 2 and Entry 3 through Train to Gain.
Funding for QCF units/thin qualifications (list of 138) - Nick hasn't yet come across a provider delivering any of these as the rates are set as if they are being delivered within a classroom, and providers aren't used to delivering within a classroom, and not used to marketing or selling a classroom based model, or having enough learners to be able to deliver on a classroom-based model. So it's not sure how successful this is. But it is exactly what everyone is asking for - to be able to deliver shorter qualifications. But the question is whether providers can make it viable with the short list of qualifications that are eligible.
Increasing and simplifying the rates further for 09/10 - and the rates are going up 4.5%.
The LSC have realised that they have perhaps opened the floodgates. Train to Gain may be too successful. Colleges are being warned that funding is already being stretched. And the problem that colleges will have is that they are talking about 9 month plus programmes on Train to Gain, assessments often take place over many many months. So for many studying this year much of the funding will be paid next year. So the significant number of starts this year are going to be very expensive next year, even before we begin to count the new starts this year. So there is deep concern that providers are going to be told to stop recruiting this year, and there is worry about what they can afford to continue into next year.
Because of this the LSC are already withdrawing some flexibilities, such as concurrent unit and non-unit delivery. We are probably going to see some more of the flexibilities pulled back. Clearly it is critical for a provider not to be too over-reliant on Train to Gain.
Adult unit trials
This is to test whether units can incentivise a learner to complete a full qualification. The difficultly of course is whether the learner should be on a long programme under the learner-responsive funding, whether the college should be holding onto them that long, or whether they should be sent out into the workplace, and be funded under a different funding model.
Edexcel are one of the awarding bodies that are involved in this trial. Although it is called a trial, actually any provider can get involved as long as it's within their existing budget and doesn't effect their existing budgets.
Skills for Jobs
This is a new pre-employability programme funded by the LSC. Up to £1,500 per learner is available. There is no extra money for completing a qualification, or for even getting to the end of the course. The incentive funding is paid out when people get a job, and if they stay in that job. Well established links with JCP are critical as are relationships with employers. If you don't have the relationships with the employer before you recruit the learner you don't have much chance of succeeding with this model. They are looking at being more flexible however. You often find that it's bespoke training tailored to the employer that is the most successful in this model.
Six month offer
This is completely new and was announced by the Prime Minister in January 2009. It is restricted to colleges and only eligible to learners who have been unemployed for at least 6 months. The funding is set at about £1,500 per learner, you can do qualifications or not, and the college will receive extra funding not just if they get the learner into work, but if they get the learner into work and further training, which is partly why it has been restrictive to college who already have both an employer-responsive and a learner-responsive contract. The theory is that they progress from this onto another funding model with a qualification bearing outcome such as Train to Gain.
Response to Redundancy (R2R)
A very similar programme, but this involves European Social Fund money. It is funded very much like the six month offer, but this one is focussed on those that aren't yet unemployed but are at risk of being made redundant. You can however use it to fund those who have been made redundant.
JCP of course have billions to support training for those coming off Job Seekers Allowance, so there's a big question about whether JCP will direct people through their own, more well-established programmes, such as what's called the Day One provision.
What does it mean for colleges?
Access to an increasing number of programmes to support employed and unemployed. There's more money on the table which is good.
Unfortunately, it's in lots of different pots with lots of different regulations, and different ways of submitting the data. So how joined up it all is, is a question.
The biggest challenge is getting people into work. Another challenge is working out which programme the learner should be on and the progression route they should take.
Opportunities for Edexcel
- Qualifications that are tailored to the eligibility requirements.
- Thinking about what curriculum would be useful for the providers and learners.
- Work with providers and employers to see how Edexcel can support the offer to the unemployed and the potentially unemployed.