Skills Devolution

This website explains what is happening with the devolution of the adult education budget and explains some of the issues, listed below:

What is happening and where it is happening

The government plans to devolve control of the adult education budget to six combined authority areas and the Greater London authority in 2019. This will involve devolution of around £700 million (about 50% of the national AEB), an estimated £500 million of which is spent by FE colleges (about 8% of total FE college income). The seven areas (and their websites) are:

This spreadsheet shows which city, borough, unitiary or county council is in one of the 7 AEB devolved areas and which isn't. There are 66 higher tier council areas in 2019-20 AEB devolved areas (with a total population of around 20 million) and 86 which are not (with a total population of around 35 million). 

A short history of the policy

There have been discussions, think tank reports and campaigns on the devolution of the education and skills budget for many years. AoC commissioned a report from Professor Ewart Keep in 2016 which explained some of the background and issues.

The UK government gave the skills devolution policy a major boost in autumn 2014 when senior ministers agreed a deal with the ten Greater Manchester council leaders. That deal had three features:

  • it was signed by the council leaders and the Chancellor of the Exchequer (then George Osborne) along with other ministers and the police and crime commissioner
  • the council leaders made a commitment that the combined authority would have an elected mayor
  • ministers promised to transfer control over a number of budgets and services to the combined authority

There have been several updates to the Greater Manchester deal in the years since then and several other deals with other local government groups.  In the 2015 spending review, the Treasury invited local authorities and LEPs to make devolution proposals. The Treasury received more than 40 proposals. In the months that followed (between October 2015 and March 2016), the government reached and published several devolution deals which covered Adult Education Budget as part of a bigger package that involved the election of a Mayor and the transfer of a number of budgets and responsibilities. This government website contains all the devolution deals (plus information on the previous City deal process and a parallel Growth deal process involving Local Enterprise Partnerships).

It has taken some time for the adult education budget devolution policy to come to fruition. There are a number of reasons for this:

  • the original deals signed in 2015-16 anticipated a phased devolution process over three years starting in 2016 and ending with full devolution in 2018.
  • the planning work for devolution has proved more complicated than anticipated. The 2017 general election interrupted and delayed the process of presenting regulations to Parliament. In autumn 2017, officials wrote to combined authorities explaining that full AEB devolution would be delayed from 2018 to 2019
  • some of the devolution deals have been cancelled because of local disagreements (eg the North East, Lincolnshire and East Anglia deal). Another deal - in Sheffield City Region - was delayed first by legal action and then by local disagreements.
     

A national/local hybrid system 

Devolution will create a hybrid system for adult education in 2019 in which seven city and combined authorities have responsibility and financial control in their areas and in which the DfE’s education and skills funding agency organises the rest of the country.

The population of the seven areas is around 18.3 million, which is around 33% of the population of England (54.3million). Around 50% of the budget is being transferred to these areas.

Each of the seven devolution deals is different but there are some standard words covering 19+ skills which promise the staged transfer of the budget between 2016-17 and 2018-19 at which point the combined authorities are promised full responsibility for funding.

The government passed legislation in 2017 (clauses within the Technical and Further Education Act) to ensure that combined authorities continue with national data collection arrangements (eg the Individual Learner Record) and discussions have continued on the continuation of some national systems.
 

The transfer of legal responsibilities

There will be a transfer of statutory responsibility from DfE to the MCAs/GLA in order to give effect to skills devolution.

Ministers plan to present draft orders and proposals to Parliament in the second half of June. There will be a bundle of documents including:

  • A draft order using powers to transfer powers and duties from central government to the GLA and combined authorities.
  • Statutory guidance to combined authorities which they are expected to have regard to but which they will be able to ignore in some circumstances
  • A memorandum of understanding covering the central/local relationship

The legal transfer involves the government using powers in existing London and combined authority legislation (the Greater London Authority Act 1999 and the Local Democracy Economic Development and Construction Act 2009) to transfer duties and powers set out in existing adult education legislation (in the Apprenticeships Skills Children and Learning Act 2009)

Key duties relate to statutory entitlements that adults possess to access publicly funded education at certain levels without having to pay a fee. These are known as the statutory basic skills, first Level 2 and first Level 3 entitlements. These guarantee full funding for those taking courses in:

  • English and maths, up to and including level 2, for individuals aged 19 and over, who have not previously attained a GCSE grade A* -C or grade 4, or higher
  • first full qualification at level 2 for individuals aged 19 to 23
  • first full qualification at level 3 for individuals aged 19 to 23

The transfer of legal responsibility will exclude certain activities:

  • apprenticeships taken by adults and young people
  • offender learning
  • education and training for 16-to-18-year olds
  • higher education

The transfer is due to take effect at some point in early 2019 but ESFA’s existing adult education budget allocations cover the academic year from August 2018 to July 2019.

MCAs and GLA will take on legal responsibility for existing statutory entitlements to basic skills and level 2 qualifications for residents but not for workers or learners who travel into the area from outside. In some areas residents may only have access to education if the combined authority has a contract.

The planned regulations will leave DfE (via ESFA) responsible for the entitlements in the rest of England.

One responsibility that will not transfer will be that relating to financial oversight. Combined authorities will not bear the exceptional costs of any insolvency measure instituted in case of financial failure in an FE college. The college insolvency regime comes into effect in 2019 and is only planned to be used in exceptional cases.
 

The transfer of adult education budgets in 2019

ESFA plan to confim budgets to combined authorities in autumn 2018 based on an analysis of 2017-18 student and funding data derived from the Individual Learner Record.

The original plan for a new national formula to distribute AEB on a geographic basis was suspended in March 2017. ESFA officials found it hard to find a basis for distribution that did not result in significant shifts in funds. AEB spending per head of population or per student varies widely for historical reasons and because need varies across the country. School achievement is lower in some of the cities and towns located in the devolved areas which means that ther are higher adult basic skills neds. Officials looked at formulae that weighted funds according to statutory entitlements, adult skills deprivation, unemployment and area costs but are now taking a simpler approach which calculates the combined authority share of the existing AEB.

The 6 MCAs plus GLA account for around 33% of the population of England but the share of AEB to be devolved may amount of 50% of the budget. Table 2 presents the indicative share of 2015-16 adult education budget spending. The actual figures to be devolved will differ from this once more up to date date is used

MCA / GLA share of 2015-16 AEB spending £ millions
Greater London Authority 310
West Midlands Combined Authority 105
Greater Manchester Combined Authority 81
West of England Combined Authority 62
Liverpool City Region Combined Authority 55
Tees Valley Combined Authority 24
Cambridgeshire and Peterborough Combined Authority 14

ESFA officials are currently working on calculations for the 2019-20 budget that will transfer to MCAs. In a recent allocation letter, ESFA confirmed that they will use full year 2017-8 funding data to calculate the relative devolved/non-devolved share of the adult education budget. The key field is "learner postcode prior to enrolment". ESFA will make estimates for parts of the budget that are not linked to ILR data (ie learner support and non-formula funded community learning). Some colleges may interpret this as providing them with an incentive to shift the balance of their current AEB delivery to residents outside devolved areas to maximise their entitlement to the national AEB. However DfE/ESFA plans for the national AEB are unclear so this may not be a safe harbor. The best advice for colleges is generally to take a long-term approach in which their publicly consulted, agreed and published strategies determine financial decisions.
 

Funding conditions and rules

The standard way in which central government funds local and city governments is using powers under section 31 of the Local Government Act 2003. This would leave MCAs with some freedom over how they use AEB, so long as they are fulfilling the statutory entitlements. What they do with these freedoms depends on their strategies. DfE may set out what can and what can’t be done in its statutory guidance.

ESFA’s Adult Education budget funding rules run to 51 pages and set out a number of constraints on how money can be used. Key points include:

  • There are restrictions related to the residence and immigration status of learners.
  • Full funding is available for those covered by the statutory qualification entitlements but also for those who are unemployed and, from 2018-19, on low wages (below £15,736 income)
  • Funding is mainly available for courses leading to approved qualifications with some exceptions for non-regulated learning. Larning in the workplace is only available in certain circumstances

National officials have developed the funding rule book along with the funding formula, funding agreements, qualification classifications, data collection systesms and audit arrangements over a period of twenty years. ESFA’s management of the system is carried out cheaply, as an adjunct to its other systems (16-18 funding, oversight of colleges via ILRs). The has been a strong emphasis on eliminating problems and minimising risks. Although the systems are long established, they now do not work that well because lots of the funding rates are low, the qualification list is too restrictive and the rule book is too complicated. The reductions and the restrictions are the way in which a relatively small team of (mainly national) officials has managed the budget. Devolution may be an opportunity to reduce the number of funded providers while simultaneously relaxing some of the rules (eg allowing a wider choice of courses). However if MCAs are careless about removing controls, they may find there are unexpected consequences. Dialogue with colleges will help problems in advance.


Strategies, plans and commissioning

Mayors were elected in 2017 for a three year term running until May 2020 (at which point they will move to a 4 year cycle). Individual mayors have plans for the funds they will take over. As part of the preparation process, MCAs were required to share plans with DfE in autumn 2017 which will be developed during 2018.

MCAs have wider economic strategies and will wish to align their adult education budget funding towards meeting these. The Mayor of London’s Skills for Londoner’s strategy sets out a broad set of ambitions and also a plan to combined AEB with the European Social Funding that GLA controls. The Greater Manchester plan also involves the aim to develop an integrated skill and employment approach. If they are able to, some MCAs will want to use AEB funds to support courses which cannot are not eligible for funding in the current rules.

There is growing use of public procurement to allocate funding for education and training, for example in ESFA’s decision to do this to allocate apprenticeship contracts and part of the adult education budget and in decisions by levy paying employers to do the same when selecting training providers they will work with.

Colleges have been funded on a grant-in-aid basis for the adult education budget and its predecessors. Several MCAs seem to be coming round to the view that they should do this for their home colleges (possibly for all colleges, universities and local authorities) on a “lift and shift” basis for existing AEB grants but some may choose to go down a procurement route. Legal advice obtained in the past by BIS officials stated that “A local authority may (as BIS does now) decide to fund a college or ACL provider under a grant arrangement to enable them to deliver their statutory function (i.e. the delivery of education and training to their local community). If so, they are not delivering a service under the terms of Public Contract Regulations 2015, removing the need to go out to competitive tendering”

All MCAs are likely to want to reduce the number of organisations they contract with. GMCA estimate that 75% of funding goes to colleges and provider with a long tail of more than 100 organisations accounting for the rest. GLA has data suggesting there are more than 400 organisations providing AEB funded learning to London resident learners and plans to implement a minimum contract value of £100,000. There are some risks associated with this planned rationalization:

  • It has not been that important in the recent past (particularly since people can now be easily contacted via mobiie phones) to collect accurate postcode data.
  • There is a risk that a bureaucracy develops to manage small transactions. Some colleges have trade union education centres that run short courses for people who travel quite long distances to attend. Will these colleges need to claim funding from MCAs for one or two learners?
  • If a restrictive approach is taken to contracting and data sharing, it is possible that providers will turn people away because they come from the wrong postcode.

Some MCAs may try different commissioning approaches. For a long time, GMCA has wanted to link the adult education budget more closely to strategies to reduce unemployment and worklessness. The GLA skills strategy raises the possibility of outcome-based commissioning though implementing this will depend on access to data.

MCAs have a close relationship with the city/borough/unitary councils in their areas, some of which run substantial local authority education services. DfE officials are planning to include requirements for a policy and disclosure of conflicts of interest to be included in MCA decision-making.
 

Data and oversight

Responsibililty for and access to data is a major issue where there is still some disagreement.

The Technical and Further Education Act 2017 gives powers for DfE to require MCAs to use the Individual Learner Record to ensure that there is comprehensive national data on education and training. This national data Is used in official statistics, in national performance tables, by Ofsted and to manage funding.

There is also work underway to give MCAs access to ILR data. There are several areas of difficulty:

  • ILR data is returned by colleges and providers to ESFA every month but some fields are updated less regularly. The timetable for sharing data may not fit MCA plans.
  • MCAs are not currently due to get access to some of the systems used by ESFA to manage funding.
  • Some MCAs plan to introduce new funding rules and amounts. This may require changes to the ILR which currently only happen on an annual timetable with a signficiant lead time.The detail of this data transfer and the MCA desire for additional fields to support new funding plans, plus earlier information on activity,

Colleges will continue to obtain the largest share of their public funding from national sources (eg 16-18 grants, apprenticeship payments, HE and FE student loans) and will continue to be both regulated by ESFA and inspected by Ofsted. Most colleges have HE provision and will be applying to join the OfS register. The skills devolution plans do not affect these responsibilities but introduce MCAs as new partners and funders for colleges while also creating a risk that MCA decisions to shift or reduce funds could result in destabilization. At a more routine level, the way that MCAs will audit use of funds or make use of national Ofsted processes or DFE performance data is unclear.

Nationally funded programmes and institutions

A large number of DfE programmes and services will continue to be nationally regulated and funded including:

  • apprenticeships taken by adults and young people
  • offender learning
  • education and training for 16-to-18-year olds
  • higher education

DfE will also continue to organise and fund traineeships nationally and also several residential adult education colleges

Traineeships

Traineeships for 19-24 year olds – these will remain a nationally funded and contracted programme with funds provided by ESFA, regardless of where trainees reside.

Providers with wider recruitment areas

ESFA has announced that the small number of residential adult education colleges (Ruskin, Northern, Fircroft and Hillcroft) will be funded nationally for all their learners even where they are located within MCA areas. This arrangement is described as transitional. Other colleges and providers with wider recruitment areas who have asked for this sort of arrangement – for example the WEA, the other adult education colleges, land based colleges – will be funded in the same way as other colleges and providers.

AoC's localism research (2016)

Localism is an evolving concept and this project evaluates how this is being devised against a backdrop of further education funding cuts. Through an in-depth research report and a series of events the project identified approaches for college leaders to ensure localism works for colleges, students and the local and national community.

Further education is currently facing a ‘perfect storm’. It faces reductions in funding and number of reforms and proposals from Government and other stakeholders. This project identifies the leadership approaches and organisational strategies that can best help colleges and their stakeholders to make localism work to the benefit of all.

We worked with Ewart Keep, Director of SKOPE, Professor of Education, Training and Skills at the Department of Education at the University of Oxford on this project, which was funded by independent think tank Further Education Trust for Leadership (FETL).

The final report was published, following a launch seminar in September 2016. Please see below for the final report, as well as interim reports, research papers and more information.

News release - launch of final report

AoC Blog - Devolution and localism: what will happen to colleges? by David Corke, Director of Education and Skills Policy, AoC

AoC Blog - Will devolution create skills ghettos? written by David Corke, Director of Education and Skills Policy, AoC

Webinar - Localism is what YOU make it, presented by David Corke, Director of Education and Skills Policy, AoC and Professor Ewart Keep, Director, SKOPE.

New research project to investigate impact of 'localism'

Latest Grants in the Leadership of Thinking