Employer Ownership of Skills Pilot

Employer Ownership of Skills Pilot

Briefing Paper

July 2012

• Introduction
• Rationale for the pilot?
• Implementation of the pilot
• Long-term implications of the pilot?
• Social partnership
• Conclusion

Introduction

The government is currently piloting major changes to the skills funding regime in England. At present the vast majority of the government subsidy for workforce training (including apprenticeships) is distributed by the Skills Funding Agency and National Apprenticeship Service to colleges and training providers rather than direct to employers.

The current pilot is testing out the impact of changing the routing of skills funding by offering employers in England the opportunity to bid for direct access to up to £250 million of public investment over the next two years to design and deliver their own training solutions. The pilot is jointly overseen by the UK Commission for Employment and Skills (UKCES), the Department for Business, Innovation and Skills (BIS) and the Department for Education. More detail about the pilots is available on the UKCES website at: www.ukces.org.uk/ourwork/employer-ownership.

Rationale for the pilot?

The rationale for the pilots was set out in a 'vision document' published in December 2011 by the UKCES. In the foreword to this document the Chair of UKCES (Charlie Mayfield) makes the following argument:

'We have two markets for skills development; a publicly funded market built around qualifications, and a privately funded training market addressing business needs. These two markets do not align sufficiently, which perpetuates the debate about a skills system that fails to meet employer needs and supply-side initiatives lacking employer investment. Instead, we need to create the conditions for employers to own the agenda, to develop the skills they need to compete and to make it easier for them to do so.'

The vision document sets out five design principles that outline how 'employer ownership is different and has the potential to transform skills', as follows:

Employers should have the space to own the skills agenda

There should be a single market for skills development

Skill solutions should be designed by employer-led partnerships to reach more people and businesses

Public contributions for vocational training should move to employer incentives and investments

Transactions should be transparent.

The vision paper also argues that over the longer term 'there needs to be two radical shifts in the leadership and ownership of skills' for both young people and adults, as follows

• 'Invite employers to step up to the challenge of bringing more young people (16-24) into the productive workforce by funding employers directly for Apprenticeships, for example through the tax system (e.g. via National Insurance rebates)'; and
• 'Incentivise greater investment in adult workforce development (up-skilling for those aged 24 and above) by employers and employees, by moving from qualification-based provider funding to employer-based investments and loans to leverage additional outcomes'.

Part of the rationale for the pilot is also based on the premise that employers and employees will be willing to invest more in skills development if they are given more leverage over the use of government subsidy. The foreword by the UKCES Chair says that 'greater employer ownership means greater responsibility. We need a single market for skills development into which employers and employees are prepared to make a greater contribution for higher quality training.'

Implementation of the pilot

The pilot is currently operating over two years and the first round of applications for funding closed on 26th April. Up to £50m is available for the 2012/13 academic year, starting in August 2012. Subject to the success of the first round of the pilot, up to £200m will be available for the second round and second year. Once the evaluation of the first round bids is complete the dates for the opening of the second round will be announced. All bids must be led by a named employer(s) although other partners can be signed up to a bid, including trade unions.

The pilot is looking to trigger 'significant and scalable proposals for skills investment' and on this basis a minimum financial investment from government has been established, involving £250,000 for collaborative proposals involving SMEs and £1 million for individual or consortia bids involving large employers (defined as employing 250 employees or above). There is no defined level of investment required of employers but the UKCES guidance says the following: 'We would expect good bids to have clear and substantial financial commitments from employers. Levels of employer investment will be taken into account in the investment criteria used to assess bids.'

Funding under the pilot can be used for a wide range of training and skills development activity and it is up to employers, working with partners, to define the activity they want to pursue and set out the rationale for why public investment is needed. The UKCES guidance provides a lot of detail about this and says that the funding can be provided for 'apprenticeships and wider employee skills development and training opportunities, skills development to help people into work and innovative approaches to the design and delivery of skills development and training'.

Long-term implications of the pilot?

There are clearly major long-term implications if the pilot is ultimately judged to be a success and the government decides that a much greater proportion of its workforce skills budget is distributed in this kind of way. Clearly, it would not be feasible to continue to distribute funding on a much larger scale via the form of bidding process that is currently being used for the pilots. It therefore seems likely that there would need to be some form of intermediary (other than a national body like the UKCES) to cope with a large-scale funding arrangement along these lines.

Unionlearn is represented on an advisory stakeholder group convened by the government and the UKCES regarding the planning and implementation of the pilot. There are a range of issues that unionlearn has highlighted through its representation on the advisory group and also through the input that it gave to the UKCES during the drafting of the vision document. These concerns are relevant to the existing pilot and also any moves to extend these reforms to a larger part of the government's skills budget. Some of the key concerns that unionlearn has highlighted are:

• the importance of giving unions and employees a proper voice in any reformed funding system
• ensuring that employers maintain high standards of quality and equality of access in any training that they are providing using direct government subsidy
• preventing 'deadweight' (i.e. ensuring that employers do not receive government subsidy for training that they would have delivered anyway in the absence of any funding contribution)
• ensuring that the direct funding route is delivered in a way that requires employers to increase their levels of investment in training compared with the provider-led funding system
• ensuring that the college and training provider network is not destabilised by the major changes to the routing of funding.

Social partnership

Unionlearn has also made a strong case for the need to look to the social partnership systems governing skills funding in other European countries to address many of these challenges. For example, unionlearn pressed the UKCES to incorporate some of these lessons in the vision document published last December. As a result of this lobbying the vision document did include some references to social partnership, including a direct quote from the TUC General Secretary, as follows: 'A social partnership approach must take centre stage to meet the skills needs of employers and the workforce'.

The vision document also acknowledged that 'there are no doubt lessons to learn from the experience of social partnership arrangements in other countries' when undertaking reform of the skills system that is being tested out by the pilot. The vision document also argues that social partnership arrangements can play a key role in maintaining high quality training. For example, in relation to apprenticeships it states: 'Quality and transferability for the individual apprentice would of course need to be assured, ideally through partnerships between industry and employee bodies as is often achieved via social partnership at the sector level in other countries'.

Conclusion

Unionlearn will be making information available about the progress of the pilot on a regular basis and will continue to lobby the government and the UKCES to address the concerns highlighted in this briefing. In addition, unionlearn will continue to emphasise the importance of giving unions and employees a proper voice in the pilot and any long-term changes to the skills funding system, especially through the development of social partnership arrangements like those found in other European countries.

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Employer Ownership of Skills: securing a sustainable partnership for the long-term, UKCES, 2011