Wednesday 19th April 2017

Funding Non-Levy Payers – Just A Few Ideas That Might Work

So, my last post on LinkedIn ‘wake up and smell the coffee or eat chocolate’ has just gone past 20,000 views in the past 96 hours and I’m assured it is not my son clicking for 19,500 of them. Someone must be listening or interested in what I have to say – read more here

Whilst the ‘pause’ in the funding for non-levy payers has brought about a mixed bag of reaction, and calls for immediate changes in the proposals for sub-contracting and co funding, I would be surprised if there was any immediate change – indeed I cannot see why the proposed new sub-contracting arrangements cannot work for existing arrangements and for those new providers entering the market for the first time. I might be thick but a prime doing more of the delivery resulting in a greater management fee simply results in the sub-contractor doing less and having less costs. In my book, it all even’s out – the risk I can see is the prime now has a relationship with the employer (and so they should) which could cause confusion and issues for sub-contractors – but that’s a risk you take.

I’m more interested in creating a debate and reaction to what the new non-levy funding world will look like. I am sure AELP and others will have their views and provide a valuable input but providers themselves should be and must be at the heart of the debate – after all, we are the ones that pick up the pieces when providers fail and when the policy has been poorly thought though. Unfortunately, this is happening quite often now but I hope recent events will get officials to listen and learn.

So here is my starter for 10 on what the world of non-levy funding could look like – whether that’s 1 January 2018, 1 August 2018 or even later….

Commencement of new contracting

My first proposal would be to not introduce any new contracting until 1/8/18 at the earliest, by which time the digital voucher will have been operational for 15 months and all the teething problems with its implementation will have been ironed out and running smoothly.

It will provide sufficient time to consult (now after the election and summer recess), come up with a workable solution and enable providers, new or old to prepare for implementation.

Move all Employers onto the Digital Voucher

My second proposal would be to move all employers to the Digital voucher from 1/8/18, not make them levy payers but the mechanism for management of Apprenticeships becomes standardised at that time.

Whilst we would all like the digital voucher to signal the end of contracting and a truly demand led environment, control of public finances in my opinion will prevent that from happening, coupled with the consternation that prevails when SME’s are burdened with more taxes – remember the last budget anyone?

So in my view there has to be some control over the take up of Apprenticeships for non-levy payers because an explosion in demand will consume many hundreds of £m’s of public funding – and no underspend in levy pots will mitigate this – especially after year 2 when I predict the levy pot will be well gone and the Government facing the funding of 90% of all additional spend – for those long enough in the tooth, remember the demand led element in the mid-90s’ – I predict a repeat of that come mid 2019 or early 2020. 

A new Approach – Discuss over a glass of red

I cannot see an alternative to new contracts for providers, unless the Government control take up from non-levy payers through flexing the co funding % dependent upon what the Government want to buy to support the industrial strategy or simply restrict the number of Apprentices an SME can employ each year – two very blunt instruments but simple and potentially very effective. For providers, you have an open market you have been asking for and for the Government a cost-effective mechanism of the overall control of public finance.

We all want to grow our provision – some quicker than others. Remember we have a merged EFA and SFA now – so what about introducing lagged funding for growth – it will control growth, will get providers to think longer term and invest and in my opinion will remove some of those in the market simply wanting to make a quick buck – if I were the new CEO of ESFA, I would be voting for that one as an option going forward!

So, there is a stark choice of controlling activity levels and public finance through contract or through something much simpler – for me, I would remain with contracts – it is not perfect but with a properly thought out procurement process, with expectations of new providers made very clear including their need to get ready before they have a contract award, strong performance management points and mechanisms, the system can and does work.

But you know I am radical so I would combine contracts with lagged funding and flexing co funding to determine what the Government want to buy – STEM subjects with no co-funding and Hairdressing with 50% co-funding – just because I don’t have any hair left. Those mechanisms will control overall expenditure, will get providers thinking longer term and deliver greater investment into the market.

And for sub-contracting – we have controls in place that were never imposed – suggested 15% management fees as the maximum, primes being in control of the provision – it all goes back to circular 96/06 – yes 1996 – because I wrote it! Sub-contracting in my view will always continue to have a valuable role to play but sub-contractors need to realise the risk Primes run with their OFSTED – that is why we don’t subcontract at all! – and good primes work with sub-contractors very effectively in developing capacity – a win win scenario – but it should be limited as a % of contract size and should be kept local and in complementary provision. Finally, performance management is not an excuse for last minute sub-contracting to help the books balance at the end of the year when your ‘other college income’ has fallen short of expectations.

But what about Quality I hear you cry? – well that is one for another article because with over 1/3 of existing primes not having a Matrix accreditation which is a condition of contract and nearly ½ of those on RoATP with no OFSTED grading, we need to think long and hard about what Quality measures look like in the medium to long term. Quite simply, OFSTED have a lot to get around with new providers in the levy market!

I’m looking forward to the debate and hopefully will be able to make a positive contribution.

Peter Marples

Peter Marples is Joint Owner of 3aaa Apprenticeships, the only independent training provider to achieve Ofsted Grade 1 Outstanding in all areas on first inspection.

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