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Skills & Employer Responsiveness Programme:
Challenges, Opportunities and Priorities
Clive Howarth
Head of Employer Services
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Purpose
• To update you on the changing skills ‘landscape’
• To outline skills priorities for this region
• To provide information on which the sector can make its own decisions and decide its
own actions in response
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Coalition Government:
• Policy commitments set out in ‘The Coalition: Our Programme for Government’ (May
2010)……..against a backdrop of reducing public spending: £17 billion reduction in BIS
spending by 2014-15
• BIS Secretary of State’s Grant Letter to the Skills Funding Agency (17 June 2010) set
out the Government’s key goals and ambitions:
– Supporting progression and strengthening supply of technician level skills,
particularly through Level 3 Apprenticeships
– Reducing the number of 18-24 year-olds who are NEET
– Opportunities for the unemployed to get the skills needed for work-readiness and
sustainable employment
– Inform and empower individuals and employers through independent careers
guidance and Lifelong Learning Accounts whilst giving colleges and training
organisations the flexibility to respond.
– Increased participation in adult and community learning
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Coalition Government (2)
• To coincide with the issuing of the Revised Grant Letter, John Hayes also announced a
range of freedoms and flexibilities:
– Removal of the Summary Statement of Activity for post-19 provision
– Single post 19 budgets
– Streamlined Performance Management
• These arrangements, alongside the refocusing of Train to Gain to support additional
Apprenticeships and FE capital investment, aimed to free up providers to deliver a
responsive and flexible offer to learners and employers
• Skills Funding Agency confirmed operational arrangements through Guidance Note 4
and 5 (all Guidance notes available on Agency website)
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Role of Skills Funding Agency
• The policies of the new Government changes both the role of the Agency and the
nature of the relationship:
– Focus on funding and regulation
– Limited intervention – only by exception- no ‘hand-holding’
– Aiming for ‘the right balance between consistency, equity and new freedoms and
flexibilities for the sector’
• Providers assume much greater responsibility and autonomy…. for planning,
prioritising, managing data queries, quality and responding to learner and employer
need
• Providers take on more active role in local communities – for example, Local
Enterprise Partnerships and Employment & Skills Boards
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The emerging landscape:
• Budget announced £17 billion reduction in departmental spending by 2014-15- an
average departmental real cut of 25%. Actual reduction known following outcome of
the Comprehensive Spending Review (CSR) on 20th October.
• Pressure on 16-19 funding rates will intensify with the reducing cohort plus post-19
scenarios and priorities
• HE funding also under pressure - it is part of the same overall BIS departmental
settlement from the CSR.
• Savings expected to be met as far as possible efficiencies, not frontline services.
Concern: the possible impact on the financial health of providers is immense with the
potential for many to move into inadequate financial health
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Budget impact on an ‘average’ college
7,000
6,000
£ (000s)
5,000
4,000
3,000
2,000
1,000
0
Scenario 1: 10% reduction Scenario 2: 15% reduction Scenario 3: 20% reduction Scenario 4: 25% reduction
over 4 years
over 4 years
over 4 years
over 4 years
2010/11
2011/12
2012/13
2013/14
2014/15
This is based on an ‘average’ FE College, with a 19+ income of £6.4m
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Impact of scenarios on College financial health
Scenario 4 (25% reduction)
Scenario 1 (10% reduction)
100%
100%
80%
80%
.
Outstanding
Outstanding
60%
Good
60%
Good
40%
Satisfactory
40%
Satisfactory
Inadequate
20%
Inadequate
20%
0%
0%
2009/10
2010/11
2011/12
2012/13
2013/14
2009/10
2010/11
2011/12
2012/13
2013/14
These graphs show forecast of the proportions of colleges by financial health categories based on
two scenarios and assuming that limited mitigating action has been taken by every college
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Future opportunities
• Increased opportunities for sub-contracting, collaboration and new organisational
models as the number of providers with direct contracts reduces as minimum
contract value is implemented from 2011/12.
• Greater scope/need to increase co-funding through increased engagement with
businesses and other partners
• Government ambitions on growth of Apprenticeships (only 25% of this funding
currently goes to Colleges)
• More flexibility to respond to the needs of employers, stakeholders and the
community
• Freedoms and flexibilities help providers manage within tighter budgets
• Challenges are still great…
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How providers are already responding
• There is already good practice across the sector where providers are taking decisive
action to cut costs and improve efficiency.
• Need the sector to share this best practice and learn from each other to deliver
greater efficiencies.
• Examples of actions governing bodies are either taking or considering include
improved efficiency of delivery:
– Reduce staffing costs through redundancies, reducing use of variable hours staff,
staff pay.
– Improved floor space utilisation
– Upgraded facilities
– More effective procurement – such as joint procurement, including for example
exam fees
– Other delivery models and options
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How providers are already responding
• Developing organisational models with other providers
– Taking on new sub-contractors
– Federations
– Shared services
– Mergers/acquisitions
• Repositioning their offer
– Grow provision in areas of growth (e.g. Apprenticeships)
– Increase market share on any or all programmes (and decrease in others?)
– Review curriculum offer in light of market competition
– Review curriculum in light of emerging sectors and skills priorities
– Robust management of sub-contracting to remove poor provision and develop
more ‘expert’ offer.
• Securing increased investment from employers and learners
• Benchmarking and peer review with others to improve efficiency.
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Regional Priorities
Regional Skills Priority Statement
• Produced by each RDA following consultation across their region. Process led by
Agency staff seconded to RDA.
• Identifies key challenges and issues in region’s economy
• Articulates priority skills for the region, not the only skills for the region
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Regional Skills Priority Statement
Key points:
• Good progress over past 10 years in improving adult skills and raising young
people’s educational achievement
• Still too many with no or low skills and too few with higher level skills
• One challenge is to give those in work the skills to keep them there and to enable
them to progress
• Another challenge is to get people into the jobs market with skills and attitude to
learning that will keep them there
• Spatial imbalance of skills across the region and danger of communities being ‘left
behind’
• We lack clear ladder of progression and opportunity as an incentive to achievement
of higher level skills
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Regional Skills Priority Statement
• Need to re-balance the economy by supporting private sector recovery and address
impact of public sector cuts
• Region wants to see:
- investment directed to the right skill areas
- intervention where the market fails
- raising of business and individual aspirations for skills development
- deployment of people’s skills effectively
- strengthened case for sectoral targeting of skills investment
- responses to geographical and local variations in skills demands through utilising
supply side interventions aimed at improving productivity: outcome not output
- commitment from the supply side to respond to demand side information and
intelligence
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Sectors driving the demand for skills
Group 1 – Rising employment at level 4 and 5 but declining employment at lower levels
Group 2 – Rising demand for intermediate skills (levels 2 and 3)
Group 3 – Rising demand at intermediate and higher level
Group 4 – Rising demand at level 2 and level 4
Group 1
Group 2
Banking and Insurance. Other Financial and
Education
Business Services. Other (mainly Public)
Health
Group 3
Retail
Group 4
Food, Drink and Tobacco. Other Manufacturing.
Construction.
Services. Electrical and Optical Equipment.
Communications. Transport. Hotels and Catering.
Chemicals Oil and Gas Extraction.
Machinery & Equipment. Metals. Other Mining.
Agriculture, Forestry and Fishing.
Textiles and Clothing. Rubber and Plastics.
Wood and Wood products.
Wholesaling. Business Services.
Paper, Printing and Publishing.
Public Admin and Defence.
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Sectors of Economic Significance
Volume Employment Sectors
Key support sectors and those of New Technology ‘Driver’ Sectors
sub-regional importance
Business Services
Financial and Business Services
Health & Social Care
Tourism
Retailing
Distribution & Logistics
Advanced Manufacturing
Composites
Low Carbon: Carbon Capture &
Construction
Storage
Wholesaling
Low Carbon: Civil Nuclear
Low Carbon: Offshore Wind
Technologies
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Final key messages
• Days of on-going budget growth are over for foreseeable future, if not forever!
• Government expects to see an even bigger economic return on public investment
and increasing shared investment between state: employer: individual
• Budget pressures will change the structure of the sector within the life of this
Parliament
but:
• significant numbers of adults in our region still lack the skills they need to find and
keep work and progress within work. The need is at least as great as ever.
• the region needs to increase in prosperity and skills is seen as a major solution. The
demand is still there and new markets are emerging.
• freedoms and flexibilities offer a real opportunity for providers able to adapt and
adopt new ways of working.
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