DWE0020

Written evidence submitted by The Association of Colleges,

The Association of Colleges

Summary

Government policy to give employers more control of decisions on skills at a time when total public and private spending will continue its decline because of inflation will have a negative impact on efforts on productivity growth, the energy transition and the economy.

National Audit Office findings

The National Audit Office confirm that there are some major problems in the UK economy, in the skills system and in government policy. NAO make the following points

• Workforce productivity growth has been lower in the UK since 2012 than in comparable countries in the OECD.
• The skills need is growing as a result of immigration changes which followed Brexit, the net zero transition and the demographic change.
• Employer spending on workforce training per employee has fallen.
• Adult participation in government-funded further education has fallen significantly.
• Overall Department for Education skills policy aims to give employers more control both of the content of programmes and the use of funding. DfE applied these approaches to apprenticeships and is now extending them to the whole of technical education.
• An employer-led approach relies on employers having the capacity and interest to become involved in developing local plans, in designing content and in ensuring their employees participate. DfE has limited evidence these conditions exist which puts current reforms at risk.

Colleges, the skills system and UK productivity

English colleges educate over 1.7 million students every year and employ approximately 106,000 full-time equivalent staff. Further education colleges are an essential part of England’s education system offering top-class technical education, basic skills and lifelong learning to people of all ages and backgrounds to make the most of their talents and ambitions. The Association of Colleges (AoC) represents more than 90 per cent of the 234 colleges in England incorporated under the Further and Higher Education Act 1992. We have some additional points to make to the committee:

1. Skills challenges in high value sectors

NAO identify and analyse significant problems across the economy but these can be acute in particular sectors. Various reports have identified construction along with health and digital as key sectors in terms of job growth and contribution to national aims but there are acute skills issues in all three. Colleges train 60% of construction apprentices and have decades of experience in supporting the sector but have never had such big challenges meeting demand which is currently rising. Recent research carried out by the Construction Leadership Council found good demand for construction programmes in colleges (with 56% of programmes seeing an increase in demand compared to pre-pandemic levels) but also a large number of staff vacancies. The overall teaching staff vacancy rate is 14% with civil engineering, electrotechnical and bricklaying most affected. Colleges struggle to compete with pay levels in industry and, while some are experimenting with different methods to attract and retain staff (including flexible working), there are real challenges ahead. Colleges are keen to upskill their staff to meet demands relating to the energy transition and modern methods of construction but fear that they will lose trained staff back to industry.

2. Apprenticeships

There are some specific problems with the design and operation of the apprenticeship programme which mean that it is not fulfilling its potential to train the workforce of the future and has become forgotten as an area of public policy. The Levelling Up white paper contained more references to lessons from the Medici banking system than to apprenticeships. There are a number of issues worth attention:

• The levy. The levy puts the responsibility for paying for apprenticeships onto employers who are the main beneficiary of the programme. The levy has protected the overall apprenticeship budget of £2.5 billion a year from government spending cuts but the decision to give individual employers full spending power has resulted in a shift in funding towards higher level apprentices and mid-career training working in larger organizations while reducing money available for young people and those at the start of their career.

• Absence of information and planning. As a result of recent reforms, mployers design the standards which define programmes, pay a levy to cover training costs and decide where funds are spent via a digital account. Colleges compete for business with other training providers in a market that has shifted apprenticeship spending towards those who can navigate its complexities best There are signs that this has moved money towards training in London and big cities and towards sectors which employ more graduates.

• Quality issues: Apprenticeship completion rates are too low. This reflects badly on some training providers and employers and damages the long-term reputation of the programme. DfE’s new accountability framework introduced in 2022 is a sensible way to tackle bad practice and we are working on details but it focuses only on provider performance and not on employer practices.
   
• Administration: Giving employers control of spending means they have the responsibility for administering public funds. Concerns remain regarding the level of bureaucracy involved in apprenticeship delivery and the level of input expected from (particularly) smaller employers.

3. Government priorties

The English college sector is experiencing a recruitment crisis because salaries are uncompetitive compared to those available in other sectors of education and industry. Without the right, qualified college staff to teach and train young people and adults, the UK will fail to meet the skills gap in its own economy.

Colleges have faced ongoing challenges in staff recruitment for years. In some teaching areas, such as construction and engineering (accounting for around 17.5% of the teaching workforce in FE colleges), this is a longstanding problem, due to the widening gap between college and industry pay as funding cuts hit colleges throughout the 2010s. AoC’s college staffing challenges report which we published in February 2022 estimated a sector average vacancy rate of 5.5% (6,000 in all), resulting in increased pressure on remaining staff and course closures even in areas of economic priority. A follow-up survey in August 2022 of a smaller sample of colleges identified the fact that 80% of colleges are restricting their delivery in key skills shortage areas, particularly construction, engineering and health and social care. This will heighten the skills shortages in those areas and hamper economic growth.

Recent government policy has recognised the importance of technical education and skills, for example in the 2021 spending review - but these efforts risk being undone by a burgeoning economic crisis which is overwhelming students and staff, and significantly impacting on college finances.

The 2021 spending review settlement provided extra funds for 16-18 education, for capital investment and for adult skills via the new National Skills Fund but was agreed as time when inflation was less than 3% and leaves colleges with fixed budgets at a time when pay pressures have increased and when energy prices continue to rise. The recent government support scheme for businesses only lasts six months. Financial pressures colleges are hampering the expansion of technical education, the preparation of young people for working life and their work to support employers in filling skills gaps. Meanwhile the society-wide issues for households in covering higher prices are hitting participation.

There are very serious risks to college solvency and this, in turn, will harm UK skills development if nothing is done.
 

October 2022