Further Education and Skills Radical Reform Story

1. Further Educationand Skills Radical Reform Story November 2010

2. Further Education and the gaining of new skills is central to delivering the Governments goals of balanced and sustainable growth and creating the Big Society The FE and skills system supports social mobility and well being by providing opportunities for those who need additional help in order to progress, such as: Skills is one of the factors that drives productivity and employment both of which support growth. • - young people with limited employability; • - disengaged with education and the labour market; • people with disabilities or severe mental • health problems, offenders, • people with limited English. Innovation Skills Competition Enterprise Investment Productivity Employment • The FE Sector delivers training from basic skills to higher education – contributing to increased employment and productivity. • It also delivers for groups at risk of social exclusion • Can support “Big Society” agenda- give communities more powers and encourage people to take an active role in their community Sustainable GROWTH

3. PROBLEM • 1) Capability • OCED statistics show that despite recent progress, the UK remains a middle • ranking country in terms country in terms of qualifications, compared to • other OECD member states:- • 17th out of 30 in terms of the proportion qualified to upper secondary level and above (level 2) • 12th out of 31 in the proportion qualified to degree level and above • Poor Choice • Student choice is hampered by lack of information on the value of qualifications including what salary and benefits qualifications brings • 3) Complicated and misunderstood skills system • Qualifications not valued or understood • Funding System over regulated and bureaucratic

4. 1993 No quals 2008 1993 2008 Other quals 1993 GCSE 2008 1993 A Level or Eq. 2008 1993 HE 2008 1993 Degree or Eq. 2008 0% 20% 40% 60% 80% 100% Employment Unemployment Inactivity Human Side of this Problem Those with poor skills are [1]:- • More likely to be in prison • More likely to be in debt • More likely to be unemployed • More likely to be unwell and have mental health problems • More likely to have a child who can’t read at 9 • More likely to be involved with or have to be supported by the State • Are less likely to vote • Are less likely to own their own homes • Are less likely to take up a community role such as school governor • Are less likely to hear their child read • Will never normally earn more £14,000 Those with no qualifications are on average 37ppt less likely to be in employment than those with HE [1] Centre for Research on the Wider Benefits of Learning, Research Brief, October 2006

5. Fairness, Shared Responsibility and Freedom Reform programme: 1 Confirm, restate and communicate the need for a skilled nation Work with employers over the need to train and where appropriate introduce levies and licences to practice 2 3 Empower the prospective student by providing a career service that gives impartial advice Provide a prestigious suite of qualifications that are well regarded by employers and portable 4 Through the development of Life Long Learning Accounts financially support the most vulnerable in society by fully subsidising programmes. For those with poor basic skills, Young adults (19 up to 24) who didn’t complete their secondary education (level 2 qualification)‏ and who could progress and gain level 3. 5 Rebalance Government investment by introducing co-funding and loans for full time adults (24 and over) programmes leading to a recognised Level 3 and 4 QCF qualification. 6 Deregulating the sector, simplifying the funding system and reducing the number of organisations involved in the skills delivery landscape 7

6. Confirm, restate and communicate the need for a skilled nation 1 RATIONALE • The UKCES report ‘Ambition 2020’ suggests we may fall further behind in the proportion with Level 2 or above, perhaps slipping from 18th to 23rd in the proportion with Level 2 or above. • Most OECD countries are experiencing faster growth of high-skilled jobs than the UK. This poses an important challenge to employers in the UK and to business policy.

7. Work with employers over the need to trainand where appropriate introduce levies and licence to practice 2 RATIONALE POLICY DIRECTION • statutory industry levies currently exist in three sectors: construction, engineering construction and the film industry. We will consider options for other industries and introduce a statutory levy scheme if employers want this • introduce a new framework to support employers in developing a productive and committed workforce • continued support for Unionlearn to encourage the take up of learning • encourage a small number of targeted sectors and occupational areas to adopt collective professional standards for the skills and capabilities expected of people working in that sector or occupation. • Skills Pledge promoted to employers as a public commitment to training. Currently involves substantial monitoring • A productive workforce is key to economic growth and to closing the productivity gap with other leading nations. • Dearden et al (2005) show from a robust study based on 17 years worth of data that an increase in the amount of training in an industry leads to an increase in productivity in the sector that is about double the wage gain of the individuals who are trained [1] • Around a third of employers do not provide any training at all for their staff with another 12% only providing training for Health and Safety purposes, this suggests a relatively low level of demand for skills from employers [2] [1] Dearden, Reed and Van Reenen (2005) “The Impact of Training on Productivity and Wages: Evidence from British Panel Data”, CEP discussion paper no.674. [2] CBI (2007) Understanding modern manufacturing; CBI (2008) Taking stock: CBI education and skills survey

8. Empower the prospective student by providing a career service that gives impartial advice 3 RATIONALE POLICY DIRECTION • High quality information will empower employers and learners to access the best training for them. • Individuals can access information, advice and guidance through the Nextstep Careers service (the new All Age Careers Service in England will be fully operational by April 2012). • Life Long Learning Accounts are also being developed as a source of information on funding for learning based on individual circumstances • Clear and comparable information will also be made available on the quality of colleges and training providers, to help learners and employers choose where and what to learn. The Framework for Excellence will publish college and provider level performance results for the first time this December as a platform for a wider range of public information through the development of a quality labelling system in 2011 • Survey evidence suggests that information problems are a major barrier to investment in skills, both in terms of information on the benefits of skills, and information on the training opportunities available.

9. Provide a prestigious suite of qualifications that are well regarded by employers and portable 4 RATIONALE POLICY DIRECTION • Develop qualification titles that mean something to individuals and employers and which are a marker of quality • develop a qualifications framework that promotes the take-up of credible, high value qualifications by employers and learners • prioritise rigorously on the training and qualifications that add greatest value for learners and employers • Promote Vocational qualifications and the crafts through new Craft Awards • Qualifications are a good proxy for skills, are measurable, improve the labour market and motivate individuals by rewarding their effort. • 89% of employers agree that VQs lead to an increase of skills and knowledge [1] • 83% of employers agree that VQs increase and develop new skills.[1] • 71% of employers believe that VQs increase overall business performance [1] [1] Skills for the Workplace: Employer Perspectives, UKCES Evidence Report, November 2008

10. Financially support the most vulnerable in society by fully subsidising programmes 5 RATIONALE POLICY DIRECTION • retain a funding entitlement for literacy and numeracy qualifications at functional levels, and a first full qualification at Level 2 and Level 3 for 19 up to 24 year olds. • reform Learner Support to provide financial support for learners on low-incomes to access learning. • Evidence shows that information failure and credit constraints are most likely to affect those with low skills. • The National Adult Learning Survey reports up to 23% as citing finance as a barrier to learning • Social benefits are also more likely to outweigh private benefits at lower levels giving individuals little incentive to invest even if they were able to overcome the information and credit failures. • Being outside of employment, education or training during early adulthood makes it less likely that someone will be employed later in life

11. Rebalance Government investment by introducing co-funding and loans for full time adults (24 and over) and programmes leading to a recognised Level 3 and 4 QCF qualification 6 RATIONALE POLICY DIRECTION • co-fund tuition for people aged 24 and over taking a first, full level 2 qualification • replacing grant subsidy from Government with income-contingent loans for this group. As this group currently receive co-funding or full-funding for their training at Level 3 and 4, this policy change would represent a significant culture change for this group. • Published the underpinning principles for loans in further education in Investing in Skills for Sustainable Growth. Over the next few months we will engage with colleges, training organisations and others on implementation. • To feed in your views now email FEloans@bis.gsi.gov.uk by 31 March 2011. In a constrained fiscal environment, we need to re-balance investment in skills by Government, individuals and employers to reflect the benefit each receives. This means that individuals should meet the costs of investment where they capture the returns through increased wages. • Although people with Level 3 and above can still be adversely affected by information failure and credit constraints, they tend to have greater earnings potential and the private returns often outweigh the social benefits.

12. Reducing number of intermediary bodies, simplifying systems such as the funding process and removing regulation 7 RATIONALE POLICY DIRECTION • To move to a more demand-led system, we need to free up the system to be more responsive to what individuals and employers want. • Within this system the relationship between further education and its direct customers (individuals and employers) takes primacy and is the key to securing high quality and relevant training. • Reducing the number of bodies in the FE and skills landscape and streamlining the remainder – this is being achieved through the abolition of some bodies, the merger of others and the streamlining of all public bodies in receipt of public funds • Simplifying systems and processes – simplifying the funding system; aligning pre and post 19 systems where possible; extending peer review; reviewing data requirements; and encouraging collaboration and shared services across the sector • Removing regulation and introducing new freedoms and flexibilities for the sector – first set announced in June 2010 and further freedoms to be announced shortly. These include a number requiring legislative change being introduced in the next session “…providers need to be responsive to ongoing developments in the labour market ....this raises questions about the forces driving the system, whether it is too complex and sufficiently empowers customers,the pattern of future demand, its performance and scope for quality improvement [1] [1] UKCES, Ambition 2020, July 2010

13. (£000s)‏ SR baseline 2010-11 Budget 2011-12 Indicative Budget 2012-13 Adult Skills Budget 2,835 2,795 2,685 of which Apprenticeships 360 605 648 OLASS 134 133 131 Adult Safeguarded Learning 210 210 210, Learner Support 144 151 163 Information Advice and Guidance 82 81 84 Skills Infrastructure (including LSIS)‏ 137 56 51 Capital Grants 305 278 Total Skills Funding Agency 3,734 3,607 Funding not routed through the Skills Funding Agency 337 179 172 Funding and Investment

14. Skills Funding Agency Learners 2010/11 to 2012/13 (AY) Illustrative forecast learner numbers • Illustrative in the context of increased freedoms and flexibilities for FE colleges and training organisations to meet the needs of employers, learners and communities. • The Skills Funding Agency will continue to update these illustrative forecasts based on actual delivery data. • Illustrative forecast reduction in training places is mainly as a result of redeploying funding previously allocated to Train to Gain to support more Apprenticeship places which provide longer and more comprehensive programmes with higher economic returns. • Going forward, loans will support the capacity to sustain learner participation. Illustrative participation (learners) 2010/11 2011/12 2012/13 Adult Skills 2,347,616 2,114,670 2,659,402 …….of which Apprenticeships total 388,490 • 437,068 497,044 Adult Safeguarded Learning 780,000 787,800 795,678 Total learners 3,439,402 3,135,416 2,910,348

15. In Summary by 2014:- • Better choice for prospective learners through an all age career service • Lifelong learning accounts for all • New set of licences to practice • New simplified funding system that provides full subsidies for basic skills and 19-24 • Co funds post 24 level 2 and apprenticeships • New funding route via student loans for level 3 post 24 • Reviewed and reformed Basic skills • Adult learning underpinning the growth and the Big Society agenda. • New freedoms for colleges to determine their own portfolio of provision