As featured before in Important Grant News, Prime Minister David Cameron and Vince Cable first mentioned the Employer Ownership Pilots initiative on Thursday 17 November 2011.

Vince Cable said then:

“We have to fundamentally alter the relationship between employers and the state – giving employers the space and opportunity for greater ownership of the vocational skills agenda, including the chance to bid for direct control of public funds. This will encourage greater competition in the market as we strive for sustainable growth.”

Under the £250mn Employer Ownership programme, businesses will be given the power to design, develop and purchase vocational training programme they need. The announcement of the Employer Ownership Pilots programme is a major step towards the Government’s policy aim of greater employer ownership of vocational training.

UKCES Policy Paper Launched on Tuesday 13 December 2011

Supported by Vince Cable, Business Secretary, and Danny Alexander, Chief Secretary to the Treasury, the United Kingdom Commission on Employment and Skills (UKCES) will launch its Policy Document Employer Ownership of Skills: Securing a Sustainable Partnership for the Long Term” on Tuesday 13 December 2011.

UKCES Prospectus for Employer Ownership Pilots in January 2012

UKCES will issue a Prospectus for Employer Ownership Pilots in January 2012. Though the UKCES Growth and Innovation Fund has been available for bidding by Sector Skills Councils, Awarding Organisations and partners, including providers, this new Prospectus will invite groups of employers to bid directly for funding for their purchase of training. So employers will be able to bid for funding directly to purchase their training from providers.

Background – Unemployment and the Wolf Report

With unsustainable levels of public spending, the Chancellor announced on Tuesday 29 November 2011 that there would be £30bn additional expenditure cuts. The Government will find it difficult to reduce funding for unemployed young people. With 1.16mn 16 to 24 year olds not in employment, education or training, the £1bn (£940m) Youth Contract programme over 3 years aims to provide work placements, apprenticeships and advice and guidance for 18-24 yr olds and particular support for 16-17 yr old NEETs.

So Employer Ownership Pilots represent the start of a phased gradual withdrawal of public funding for employer led training.

Professor Alison Wolf’s third conclusion in her Review of Vocational Training in March 2011 has received little mention. Alison Wolf is determined that employer involvement in skills and qualifications should be increased:

“….. Employers are the only really reliable source of quality assurance in vocational areas, and, in spite of lip service, have been progressively frozen out of the way vocational education operates”

The Government seeks a new environment where through UKCES and the Skills Funding Agency, the public expenditure contribution becomes more a market maker and less a direct funder. The Government and UKCES rationale is that employers have been subsidised to join Government incentives. So the Government seeks to reduce public funding on employer-led provision by encouraging employers to take ownership of their own training agenda.

This means a move from funding training providers, based on qualifications, to employer-based structured investments and loans to leverage additional outcomes and work experience and moving from provider led to employer owned workforce development.

This is also the Government’s way of driving down provider costs. Basically, as much as possible the Government seeks to stop directly funding training for employers and transfer ownership to them – hence Employer Ownership Pilots to find best practice and lower costs to achieve this.

Mechanisms for Employer Pilots

The Government’s main problem with its policy objective of greater employer ownership of training is the lack of appropriate local development and implementation mechanisms across the country configured for employer-led bids. There are not enough obvious local structures to articulate skills needs or submit bidding applications for Employer Ownership Pilots.

It has been suggested that larger employers might submit bids on behalf of supply chains or for regional clusters. But even where this might be possible, these will be dominated by larger employers. This carries the risk that some UKCES pilots may simply add deadweight or reduce existing funding costs. In other words, there is a risk that some pilots might actually reduce overall employer contributions.

So there is a need for innovative mechanisms and solutions for providers to build relationships with employers to leverage in private investment.

Larger employers are more likely to have resources for bid submissions. Though funding applications may be written by larger employers, there will be funding advantages for employer bids to be supported by providers.  Bidding for Employer Ownership Pilots will probably involve an Expression of Interest and later full bidding stage.  Employer Ownership represents the future direction of employer led funding. There is bidding experience to be gained for all sizes of providers through their involvement in these employer bids.

Summary

Though employer ownership of the vocational training agenda will not happen overnight, few employers or providers can afford to be bystanders in this major policy shift.