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Spring budget - Technical education,T-levels and Institutes of Technology

19 June 2019

Over the weekend, the Chancellor of the Exchequer, Philip Hammond, announced that the Government will increase spending on technical education by £500 million a year in coming years to support a major overhaul of the system. The plans for these reforms were set out last year in Lord Sainsbury's review and the Government's post-16 Skills Plan published in July 2016. Government plans will also involve a new £40 million fund to test out new approaches to lifelong learning and extending maintenance loans to part-time higher education and higher level technical education. This news comes a few weeks after the Industrial Strategy promised £170 million in capital funding for Institutes of Technology. There will be more information on these plans in the Spring Budget published on Wednesday, but it may take time for the implications to be clear. The Government is pledging funds for new courses which have not yet been developed and which will not be available for some time yet, though it is interesting that they are now described as T-levels. Nevertheless, the plans are a clear signal of intent from Government to introduce a new approach and a vote of confidence in colleges who are ready to work with employers to co-design the new routes, deliver the 900 hours per year and help more young people make a smooth and successful transition to work and to higher level learning. The rest of this note summarises what we know and can estimate: Technical education funding The Treasury is allocating £500 million a year for the new programme but these will not be in place until 2021-22 so the full funding is not due until then. Three pilots are scheduled for 2019-20 and £100 million has been earmarked for that year. The Department for Education (DfE) has asked the new Institute for Apprenticeships and Technical Education to convene panels of professionals to oversee the design of new qualifications for each of the 15 technical education routes designated by the Sainsbury review. The idea is that these will involve two year courses, a substantial work placement and considerably more teaching time than existing courses. The announcement over the weekend describes the funding as supporting an increase in annual study hours from the current level of 600 hours to 900 hours. DfE spends around £6.8 billion a year on 16 to 18 education and training. This is almost £1 billion less than total spending in 2010. This includes £800 million in spending on 16 to 18 apprenticeships but from April 2017, apprenticeship training will be funded by the levy on larger employers. DfE spending on 16 to 18 education (around £5.9 billion) supports 1.2 million young people and is routed via a national funding formula. This formula assumes annual 600 study hours and assigns £4,000 as the national base rate. There are further weightings to support high cost students or higher cost courses. For example, there is a 30% weighting for engineering. An increase in assumed study hours from 600 to 900 implies a minimum of £2,000 in extra funding but more for some students. A fair assumption is that the total amount of new money could support about 200,000 young people across the two years of study, i.e. 100,000 a year. This is approximately 20% of the age group in education. According to official statistics, there were 69,000 young people in Year 13 studying for technical qualifications, 125,000 for applied general and 323,000 taking A Levels. There are large numbers of young people taking mixed programmes (for example A Levels plus an applied general BTEC or OCR qualification). The introduction of the new technical education routes is likely to involve a switch from academic to technical routes. It is not really possible to predict take-up for the new technical education courses, but if they are well designed and supported both by employers and Government they may be popular. There is talk of setting quality standards before institutions can offer technical courses. It would be odd to set these standards in technical education and not do something similar for the 2,000 school sixth forms and 150 colleges offering A-levels. Current policy requires more than 200,000 young people each year to take post-16 maths or English courses as part of the policy that those who did not achieve a grade C in their GCSE must resit. There are also more than 100,000 young people taking courses at Level 2 or below, partly because they did not achieve higher levels at GCSE or because qualifications at this level are sufficient to help them secure work. The Sainsbury review set out plans for transition year programmes and the expectation that these will be followed by two year courses. The current system involves a 17.5% funding reduction when students reach the age of 18. The additional funding from the Treasury is welcome but does not deal with existing financial pressures in the education system. The £4,000 funding rates for 16 and 17 year olds was last changed in 2013 (when there was a 2.5% increase). It is due to be fixed at £4,000 until 2019 - despite annual inflation of 2% and staff cost pressures caused by increases in employer contributions to national insurance and teacher pensions. There is still just time to review the funding formula for 16 to 18 education to incorporate the new elements. Work would need to be completed by summer 2018 to allow EFA and institutions to prepare properly for changes in 2019-20. If this is the intention, it would also make sense to properly cost the 16 to 18 curriculum to see if the expectations that young people rightly have are affordable within existing resources. There are obvious areas of inefficiency (for example small sixth forms, drop-out from A Level courses after one year) but there is also a build up of financial pressure. Institutes of Technology The Industrial Strategy promises £170 million in capital funding for new Institutes of Technology (IoTs). Officials expect that there will be 10-15 IoTs and that they will develop out of existing provision, preferably from FE colleges. There will be an invitation to apply in spring 2017 with the intention that decisions are made later in 2017 so that the first IoTs can be ready in 2018. The capital funding is the total amount available over a 3 year period (from 2017-18 to 2019-20). Previous allocations of capital funding for skills have involved an assumption that private funds can be generated to match fund government's contribution, but this has become more difficult because colleges are under pressure to conserve cash and because there are few loan funds available. The two banks with the largest loan books in the college sector are actively reducing their exposure. IoT status will be awarded by Government to applicants and work is underway to work out what this will mean. Sensibly, there is no longer a requirement that IoTs must be totally new institutions. Previous initiatives involving skills academies, university technical colleges and national colleges have proved that it is difficult to create a viable institution from scratch. There are no current plans for dedicated revenue funds to support IoTs. The expectation is that income can be earnt from the apprenticeship levy and fees paid via student loans.