The Government want a demand-led system, where the customer has more power to choose. The key phrase for funded provision is ‘informed demand’. For funding purposes eligibility is centrally decided, and based on the learner and on the qualification taken; only certain learners taking certain qualifications can be funded.
This Funding Policy Watch outlines the key themes of the current LSC consultation on demand-led funding. The consultation outlines the strategic reform of the funding system and the accompanying technical changes.
- Key elements of the new funding system – the LSC/provider relationship, an ‘informed’ demand-led system, diversifying the market
- Qualification reform - SSCs and their Sector Qualification Strategies, turning off funding, qualifications and credit
- Funding models – the three markets – 14-19 provision, adult learner-responsive provision/learner accounts, employer-responsive provision/Train to Gain
- Technical Annex – the formula. guided learning hours, conversion of glh into SLNs, national funded rate.
- Key elements of the new funding system
No plan, ‘informed’ demand is the key, opening up new markets.
- The LSC/provider relationship
The LSC will develop a new relationship with colleges and providers. This will involve ‘light touch’ ‘strategic dialogue’. The LSC will no longer plan with providers, instead it will ‘stimulate competition, develop capacity and protect the interests of learners and employers’. It will agree the upper limits of funded activity, identify gaps in the market, and intervene to protect the interests of learners by removing funding from underperforming provision by 2008. The hope is that the FE system achieves self-regulation by 2012.
- ‘Informed’ demand-led system
The key phrase for funded provision is ‘informed demand’. For funding purposes eligibility is centrally decided, based on the learner and on the qualification taken; only certain learners taking certain qualifications will be funded. Not all customer choice will be funded; individuals and employers will be encouraged to contribute to the costs of their learning. Government priorities will continue to attract public funding. The ambition is for the overall learning market to grow; there will be a national campaign to promote learning, and SSCs will be responsible for driving up demand.
- Diversifying the market
The LSC want to open up the market to extend the range of existing, successful providers and bring in new providers. They are looking at whether the incentives in place are sufficient. They will review their criteria for new and expanding providers. They also want to encourage new collaborative arrangements that promote innovation and efficiency.
- Qualification reform
SQSs drive qualifications, funding supports the QCF, but supports qualifications more. Impact assessment of withdrawing funding not prioritised.
- SSCs and their Sector Qualification Strategies
SSCs will develop a qualification strategy for each sector. Public funding will be aligned to the priority qualifications identified in that strategy. The LSC consultation reiterates Leitch’s recommendation that colleges and other providers should be able to offer their own qualifications, subject to SSC approval and consistency with a national regulatory framework.
- Turning off funding
Eventuallypreferred qualifications within SQSs will drive funding. The transfer of funding into ‘preferred’ qualifications will start with an impact assessment. A timeframe for the overall transfer of funding will be set through guidance from SSCs and within the VQ Reform Programme. The transition plan will be linked to the agreed timescales for the QCF and the ‘running down’ of the National Qualification Framework (NQF).
- Qualifications and credit
Whilst supporting the flexibility of the QCF, the LSC do want the QCF to support the completion of qualifications not random units. They will introduce incentives to support the accumulation of credit leading to qualifications. Units taken randomly would not be supported. Fee contributions would be expected from learners or employers where the programme being pursued led to the award of credit that did not lead to a qualification.
- Funding models – the three markets
- 14-19 provision
A new rate methodology, no change in eligibility. For Diplomas a consultation with schools in Spring.
It is argued that young people are not yet in a position to be fully-informed customers so the ‘informed’ demand-led model will not be used so much here, rather an element of supply-side planning to deliver the entitlement. Local authorities and the LSC will work with providers through 14–19 partnerships to publish a 14–19 prospectus. The LSC and local authorities will work together to secure provision. Provision to address gaps, or significant new growth in capacity, will be commissioned through the LSC for 16–19 provision.
This model covers 16-18 FE and Sixth Form Colleges, mainstream School Sixth Forms, the 16-18 Foundation Learning Tier, and possibly Apprenticeships and the 14-19 Diploma. It does not cover Academies.
The 2 options - there is no change in eligibility for funding, but both options have a new funding methodology.
- Option 1 Strategic commissioning
Past performance would inform rather than determine allocations. The commissioning of growth for new and changed provision would take by negotiation with the LSC and, by competitive tendering. Significant new or changed provision would be offered by tendering.
- Option 2 Strategic commissioning with reconciliation
The second option has some similarities to the strategic commissioning model above, but would include in-year and year-end reconciliation (clawback). This option would introduce a stronger element of competition and an immediate funding incentive for higher participation.
Foundation Learning Tier (FLT)
It is proposed that there are two models – the 16–18 and the adult model. Two separate budgets would be used; there will not be a separate FLT funding stream. The LSC ask to calculate the SLN value for FLT provision. The choice is between funding by unit of learning/qualification, and funding by time - this is how the LSC currently fund E2E.
Apprenticeships
The plan is that every young person who wants an Apprenticeship and who meets the entry requirements should be entitled to a place. The LSC plan to either include 16–18 Apprenticeships in the 16–18 options outlined above, or to apply the funding arrangements developed for the Employer-responsive model.
14-19 Diplomas
It is proposed that the 16–18 funding model should be used to fund partnership provision. Its interaction with funding provided through the Dedicated Schools Grant at local authority/school level is being considered. Any proposals will feed into a consultation on school funding in early 2007. It is recognised that the 16-18 model relates only to the institutional costs of the post-16 setting. The LSC are also concerned that the model would limit local commissioning and brokering, and suggest that a more flexible mechanism to assess costs may provide local solutions. They put forward suggestions that they hope would form the basis of discussion in the 14–19 partnership about the transfer of funding for 14-19 Diplomas between schools and partnership providers.
- Adult learner-responsive provision/learner accounts
Funding far less generous, balance to shift towards employers over time. All funding through Learner Accounts by 2010.
The LSC see the new funding model as successfully devolving purchasing power to adults, through Learner Accounts. It is expected that eventually all adults will access learning through these accounts. Those not eligible for entitlement funding will have access to a wide range of choice at affordable prices. The LSC expects providers to continue to respond to the demands of their local communities. Funding will be focussed on employability outcomes.
Learner Accounts are being trialled for Level 3 provision in 2007/08. Learner Accounts will be expanded so that all adult vocational provision is funded through Learner Accounts or Train to Gain by 2010.
Colleges and providers will receive indicative allocations as an indication of the funds that the LSC will make available. But this allocation will not be a commitment. Funding will be determined by learner choices and actual delivery. The initial allocation will be calculated using the new funding formula. The LSC will assess the impact on providers to consider the need for transitional protection.
Learner Accounts trials
From Autumn 2007 the LSC will trial a new type of Learner Account in a small number of areas. Learner Accounts are designed to give learners ownership of their own learning and it is planned that the account will be used over time, rather than just for one qualification or learning programme.
- Employer provision/Train to Gain model
Eligibility increasingly restricted, indicative allocations, but no guarantee, 80% commissioned, 20% regional responsive fund, competitions for new provsion.
Under the new funding model, which builds on the Train to Gain model, employers will be able to choose their provider. There will no longer be any call for a plan, providers will tender to become approved providers; tenders will be awarded for up to three years subject to satisfactory performance and employer demand. Maximum contractual volumes will be varied in-year in response to employer choice and provider performance.
The Employer-responsive model covers provision that is focused on meeting the workforce development needs of employers and will build on Train to Gain. It is suggested that the model could cover Apprenticeships for 16–18 year olds, so that all Apprenticeships for the 16–25 age group are funded under the same system.
Regional statements will identify the skills and sectoral priorities for a region, but it is proposed to use a similar approach to the existing Train to Gain model where 80 per cent of the overall fund is commissioned and 20 per cent is retained in a regional response fund. Provision will be open to competition through planned expansion and tendering.
- Technical Annex
The LSC have developed a formula over the past two years, but there are still several areas where further advice is being sought. The same funding formula will be used separately for the 16–18 and Adult Learner-responsive approaches. It will use different values for some elements of the formula, such as national funding rates and the provider factor. The Employer-responsive Model will include some, but not all, of the elements of the formula.
The formula
Funding = SLNs x national funding rate x provider factor + additional learning support
Guided learning hours
The size of learners’ programmes will be determined by guided learning hours (glh). For the majority of provision there will be ‘nominal’ glh for each learning aim being studied, which is similar to the ‘listed’ rates currently used. The consultation explores which glh figure will be used.
Conversion of glh into SLNs
SLN = annual guided learning hours/450
The maximum size of any learner’s programme that is funded will be limited to no more than 1.75 SLNs in any year. This is equivalent to 4.25 AS/A2 qualifications plus the 16–18 entitlement. For small programmes, a modifier will apply to recognise the proportionately higher costs of recruitment and administration for these courses. There will continue to be an entitlement for full-time 16–18 year-old learners on programmes of at least 450 guided learning hours.
National funded rate
The LSC will fund provision using national funding rates. There will be different funding rates for youth and adult provision. For adult learners, there will also be a fully funded rate and a co-funded rate. The fully funded rate will apply to provision that attracts fee remission such as that for learners on means-tested benefits or those on first full Level 2 courses.
A factor will be calculated annually in advance for each provider that reflects the relative funding levels that each provider will receive. It is largely based on historical data and will simplify the calculation of each provider’s funding allocation. The provider factor will include the following elements, which are multiplied together to give the factor: average programme weighting, disadvantage, area costs, short programme modifier, success factor.
Edexcel Funding Policy Watches are intended to help colleagues keep up to date with national developments. Information is correct at the time of writing and is offered in good faith. No liability is accepted for decisions made on the basis of information given.
Centres can access the LSC’s Learning Aims Database which allows them to search for aims and view aim details at: . The last word on funding lies with the LSC. Centres should be in contact with their LSC in relation to the planning and funding of their provision.
Funding Policy Watch 2007 1 Funding in 2008/09
Created by Sian Owen – Authorised by Steve Besley – February 2007 – Page 1 of 5