Black Country Partnership for Learning Spring Conference at the Hawthorns Conference Centre, West Bromwich on Friday 25 May 2012

Huckfield would like to emphasise that this is not an ‘opinion posting’ but is offered as a comprehensive record of the Black Country Partnership for Learning Spring Conference on Friday 25 May 2012. It is based on notes taken throughout the Conference and on speakers’ presentations.

KEITH BATE, PRINCIPAL OF HALESOWEN COLLEGE

Introduction

In his Conference Introduction, Keith Bate, Principal of Halesowen College, welcomed colleagues to a further important Black Country Partnership for Learning Conference. He spoke of the previous Government target of 50% participation in Higher Education, which seemed to have disappeared. Nevertheless, he was sure that current Government’s Higher Education policy changes represented significant opportunities for Further Education Colleges.

PATRICK HIGHTON, EXECUTIVE DIRECTOR OF BCPL

Welcome

Patrick Highton, Executive Director of BCPL, welcomed colleagues to another high quality, low cost BCPL conference. He referred to the previous joint BCPL Further/Higher Education Conference in November 2011, with the outgoing Vice Chancellor of Wolverhampton University’s predicting reduced enrolment following higher student fees. In fact, Wolverhampton’s projected 2012 enrolment had increased by 5%. He hoped that this note of optimism would continue throughout the day.

Since this is offered as a comprehensive and detailed posting, the following links take you directly to the speakers concerned and their presentations.

GORDON MACKENZIE, DEPUTY DIRECTOR, HIGHER EDUCATION POLICY AT DEPARTMENT OF BUSINESS, INNOVATION AND SKILLS

Gordon spoke about student demand, progress so far in implementing the White Paper’s reforms and information for students and the institutional supply side.

NICK DAVY, HIGHER EDUCATION POLICY MANAGER, ASSOCIATION OF COLLEGES

Nick explained his historical perspective for education. This was a time for rethinking policy. We should be asking what kind of HE system we needed and get back to promoting applied and practical knowledge and skills.

JOHN DAVIES, HEAD OF PROGRAMME DEVELOPMENT, PEARSON

John explained Pearson’s plans for employer based degrees, some with employers paying fees. Pearson would soon launch degrees in Business and Enterprise and Engineering.

JOHN ELLISON, HEAD OF HIGHER EDUCATION, NEW COLLEGE DURHAM

John explained the process which was followed by New College Durham to gain Foundation Degree Awarding Powers. Despite the time taken, he thought that the process had strengthened the College.

PETER CRISP, CHIEF EXECUTIVE OF BPP LAW SCHOOL AND ADAM TEMPLE, MANAGING DIRECTOR OF BPP CENTRE, BIRMINGHAM

Peter and Adam gave examples of current private sector provision and explained the operational features of BPP, which were similar to those in the public sector. BPP already had Degree Awarding Powers.

PROFESSOR DAVID GREEN, VICE CHANCELLOR AND CHIEF EXECUTIVE, UNIVERSITY OF WORCESTER

David gave examples of the University of Worcester’s participation in the local economy, including a new Library which would serve both the University and the wider public.

PROFESSOR IAN OAKES, UNIVERSITY OF WOLVERHAMPTON AND BLACK COUNTRY LOCAL ENTERPRISE PARTNERSHIP

Ian outlined skills shortage problems in the Black Country. The new Jaguar LandRover Plant would create 750 jobs. The Black Country Local Enterprise Partnership had identified key outcomes and objectives.

LUKE MILLARD, BIRMINGHAM CITY UNIVERSITY, PAUL CHAPMAN, BCU STUDENTS’ UNION AND KIM HUGHES, DUDLEY COLLEGE STUDENTS’ UNION

Luke and colleagues explained how they had set up a “virtual Students’ Union” to provide an access point for students on various campuses. This also provided a means for FE and HE institutions to communicate with students.

PHILLIP HALLAM, CEO, RESOURCE DEVELOPMENT INTERNATIONAL

Philip explained how RDI, with its significant resources for marketing and investment, was able to work in partnership with universities to deliver online and distance learning.

MAIN NOTES ON CONFERENCE SPEAKERS’ PRESENTATIONS BEGIN HERE:

Links have already been provided above to speakers whose presentations now follow.

GORDON MACKENZIE, DEPUTY DIRECTOR, HIGHER EDUCATION POLICY AT DEPARTMENT OF BUSINESS, INNOVATION AND SKILLS

Gordon made a presentation on “The Changing Policy Framework: the HE White Paper and Beyond”.

Student Demand and Progress on White Paper

He said he would speak on what was known about student demand, what progress had been made in implementing the White Paper’s reforms and information for students and the institutional supply side. The actual impact of fees and other changes would depend on numbers applying, how institutions responded with their fees and the actions of Government. HEFCE now managed overall expenditure and it was hard to predict changes in the system which would unfold over several years.

On the demand side, after last year’s White Paper, there was a need to overcome financial and information barriers. All this was set against a background of the toughest funding review with £3bn to be saved by 2014-2015. A financial package was needed which would not deter lower income students.

High Demand

There was still high demand. In 2009-2010 demand exceeded supply by 50,000. Despite many more students, the wage premium for degrees remained stable. This suggested an increased demand for graduate skills. OECD had reported that the long term growth rate was influenced by higher skills.

Gordon referred to profound aspirational and attitudinal change taking place in society. David Willetts as Higher Education Minister frequently quoted the Millennium Survey of mothers, with 97% expecting their child going to university.

Despite White Paper changes, strong demand for Higher Education continued. March and April 2012 data showed HE applications holding up, with the overall proportion of English school leavers as applicants the second highest on record.

Though application rates from 18 year olds were only down 0.7%, we should not expect continuing increasing numbers with the size of the 18 cohort reducing. Disadvantaged applicants were only down 2% from January 2011, but there was a decline in older people’s applications – 11% for over 24s. Demand outstripped supply and we might still expect around 170,000 failing to secure a place. By September 2012 the Key Information Set on 14,000 undergraduate courses would be publicly available to applicants.

It had already been announced that the student grant package for 2013-2014 would be maintained. While he accepted that the 50% target had not been reached, the Robbins target – that University places should be available to all who qualified for them by attainment and ability – still remained.

Competition

The White Paper introduced competitive pressure through new providers. They were called ‘alternative providers’ since there were no ‘public universities’.  Though there were recent useful studies of the private sector, including from the Higher Education Policy Institute, there was still no comprehensive picture of private HE provision.

There were also information gaps for HE delivery in FE, including lack of knowledge on FE delivery costs and how FE courses were more geographically accessible than HE institutions.  AABs and ABBs had been freed up. In recent bidding, half of Core and Margin bid places were going to FE Colleges. But though under Core and Margin, FE Colleges received 10,354 places and HE received 9,643, this was still tiny compared with overall numbers.

Degree Awarding Powers were in the White Paper, responding to criticisms that those with these powers could guard against access to market.

Further Work

There was still the need for Government to respond to the White Paper and its Regulatory Framework Consultations. These responses would show the Government’s intentions on the Higher Education Bill. The Government needed to finish what had been started. It was not until 2014-2015 that the Student Loan System would reach maturity, covering all students on three year degree courses.

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NICK DAVY, HIGHER EDUCATION POLICY MANAGER, ASSOCIATION OF COLLEGES

Nick’s presentation was “A Perspective from the Association of Colleges”.

He said that while Gordon’s presentation was an excellent introduction, he also believed that institutions themselves could shape the system. It was not entirely done by BIS and people like Gordon. He wanted to ask a basic question on whether systems derived from medieval enlightenment were still appropriate for mass higher education.

Higher Education was not a market place since volume and to some extent entrance were controlled. Major institutions knew they would not be allowed to fall.

From Elite in Society to Mass Education

Nick explained his historical perspective for education. Plato had been an early wider participation advocate but was still an elitist – a ‘Philosopher King’. The educated were an elite in society.

Humboldt in early nineteenth century Prussia linked scholars and students. But none of this was about skills development. Teaching should be based on a search for truth. He commented that German universities had resisted the EU Bologna process to spread the complementarity of HE qualifications because they simply wanted to teach.

We had moved from elitism to mass education.  Robbins in 1963 wrote about cheaper mass higher education. Today we had reached about 36% participation in HE. There had been a success story around widening participation for those from lower socio economic backgrounds, but he wondered whether we were still putting the tools in place for society to grow. There were still problems with widening participation. The HEFCE site showed differences in backgrounds between newer and established universities. The Russell Group Club showed this problem. Though 7% went to private schools, 50% of them went to Russell Universities. This was a problem from allowing institutions to have too much autonomy. There were also problems with teaching and learning. Less than 9% attending Durham University come from Tyne and Wear.

Rethinking the System

He asked how many civil servants beginning to question costs of 3 year Bachelors’ Degrees.  It was time to rethink what kind of system we wanted and its purpose. It should be about developing higher level skills. Our Higher Education system should not aim to compete with workers in China but should serve a whole diversity of aims. This was an opportunity to rethink aims and processes.

The system needed continuing permeability. There were big gaps between Secondary, Further and Higher Education, each with different teaching systems. We needed to examine the transition from Secondary to Further and Higher. The big break between Secondary and Higher education was an elitist concept.

HEFCE in its “Opportunities and Challenges” publication was a request from the dying days of New Labour. But the new government still wanted it published. But HEFCE was a timid organisation. We should be asking what kind of HE system we needed and get back to promoting applied and practical knowledge and skills. There was not parity of esteem.

HEFCE’s and SFA’s not working together was a structural problem. He was beginning policy work with the Skills Funding Agency, National Apprenticeship Service and HEFCE, which did not talk to each other.

Should we be charging such high fees? More funding should be available for transition and widening participation. There should be more Credit and Transfer Frameworks. We needed many more APL schemes. Non Prescribed Higher Education should be promoted and funded.

He was not opposed to loans. Neither was Association of Colleges. But they were introduced too quickly. Prestigious universities should be pressed harder on widening participation. We needed a more diverse Higher Education system, probably supported by loans and with more achieved by colleges and universities working together.

PANEL QUESTIONS AND ANSWERS

In reply to a question about fees for part time courses, Gordon and Nick agreed that there was not yet much employer awareness about payment of fees for part time courses.

In answer to a question about FE Colleges and Core and Margin bidding, Nick said he was comfortable with a projected smaller increase of 5,000 places in 2013-2014 since some FE colleges would struggle hitting targets for Core and Margin. 5,000 was sensible. With more experience of hitting targets there should be larger increases from 2014.

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JOHN DAVIES, HEAD OF PROGRAMME DEVELOPMENT, PEARSON

John’s presentation was entitled “Validation and Accreditation Services for Higher Level Provision”.

Pearson Provision

He felt that Higher Education was at an interesting junction.  He felt strongly that much education debate following the Second War represented coming to terms with a mass education system. The promise in the White Paper was that the private sector would come in and reinvigorate the system. It sometimes seemed like warring factions with the private sector at the door.

But private providers were already there. Kaplan was already working with Liverpool and Essex to provide degrees. But there was little of a market in the system. Pearson as a FTSE 100 private provider sought to respond to changes in the landscape. 80% of Pearson publications were for HE. Pearson owned Edexcel. After Higher Nationals, Foundation Degrees had not really expanded numbers in ‘pre degree’ education.

There was ever higher demand from employers and a 25% churn rate among graduate recruits. Pearson would work with employers to provide a more flexible and responsive system.

Surveys showed that universities were not preparing students for the world of work. Universities were scratching at the surface with a growing sense of ‘instrumentalism’ – students’ going on a course to get a job. Pearson’s route would provide progression to jobs. Loans could be repaid as part of employment. An example was graduates leaving Deloitte with their fees paid.

Employer Base for Pearson Degrees

Pearson sought to develop degrees as employer-based, jointly with Royal Holloway College at the University of London. A Business and Enterprise degree would be launched in September 2012. Engineering would be launched in September 2013. Pearson was moving into unknown territory when moving off quota, since funding was uncertain. Pearson would deliver with partner colleges – a sort of enhanced Open University, with campuses in Manchester and London. Pearson needed experience of delivering degrees to gain its own DAP. Pearson could then franchise out provision. The old London External Examination Model, with sitting standard exams, would not work for Pearson. Successful courses involved hands on, face to face tutors in loco parentis. Courses with multiple delivery were not successful. Debt free graduates would be a matter for employers. Pearson would charge £6,500, pricing below traditional courses, and had already spoken with banks. Pearson wanted debt free students but could not compete with the Student Loan Company — which would cause the Government big problems.

For its Engineering Degree Pearson needed workshops, labs and a high level of management. This would build on current HNCs in Construction and Engineering. Mott MacDonald and Rolls Royce were interested. Pearson was interested in designing an engineering degree with case studies. (John’s detailed presentation gives more examples of this at Level 6). All this was a new and emerging market and not in competition with existing provision.

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JOHN ELLISON, HEAD OF HIGHER EDUCATION, NEW COLLEGE DURHAM

John’s presentation was entitled “Foundation Degree Awarding Powers for FE Colleges”

Background

John explained that New College Durham had around 2000 (1200 FTE) directly funded Higher Education students. It had one of 12 Schools of Podiatry in the UK and also offered a Social Work degree. There was a mixed national picture for degrees. Some parts of the county faced a big challenge getting young people to enter HE, with some only 23% – including East Durham, with wards like Easington and Seaham, the poorest wards. New College was ‘promiscuous’. It worked with a range of universities for validation – a restless organisation looking for universities with which it was comfortable. A university was a many-faceted institution, which sometimes gave you four different answers to a question.

Bill Rammell had promoted Foundation Degree Awarding Powers (FDAP) when Minister of State for Higher Education. These powers were available from 2008. Following its IQER pilot, New College Durham felt duty bound to pursue this in August 2008. The process showed similar issues for FDAP and TDAP.

He accepted that so far takeup was low. New College Durham and Newcastle College were granted FDAP in July 2011. Four more colleges were currently going through the process, including Blackburn and Grimsby. All this was a process within a dynamic and fluid environment. Though New College felt politically obliged to go through with this, FDAP gave public affirmation and confidence of status as a public education provider. The next step would be TDAP, though Newcastle was probably keener on this. DAP also provided a level of independence, though the College was still working with universities in Level 6 and other provision.

FDAP Process

The upfront cost was £52,000 from QAA and an annual subscription to QAA around £4,000 to £6,000, depending on numbers. It was difficult to work out the cost of whole process. With staff costs for external scrutiny, additional costs for external examiner fees, additional registry functions and all posts, this might even be between £125,000 and £250,000. Costs were probably more than would be expected. Newcastle College now had an Academic Registrar.

Benefits included no more paying validating charges to HE Institutions and more control over the College product. Experience showed that students were more interested in the student experience than in who was the awarding body. Though there was an opportunity to increase student numbers, the whole process was more was about strengthening experience rather than increasing volume. FDAP applicants need four years’ delivery of Level 5 or above and an endorsement from an existing validating body. This was QAA professionalism at its best. The College was looking for capacity and self criticality. FDAP had had now been granted for 6 years. But the College could not franchise.

College management structures needed to change. Though not a research institution, the College needed to show scholarly activity and that there was profit from this scholarly activity. The process had dominated the life of the College.

In answering the question “Was it worth it?”, he felt that the College was now much stronger as organisation. As an example, a recent approach from a Third Sector organisation had enabled a Foundation Degree to be assembled within a prescribed timetable – which would not have previously been possible.  New College’s own degrees will be delivered in September.

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PETER CRISP, CHIEF EXECUTIVE OF BPP LAW SCHOOL AND ADAM TEMPLE, MANAGING DIRECTOR OF BPP CENTRE, BIRMINGHAM

Peter and Adam’s presentation was entitled “The Private HE Provider”

Private Sector Provision

Peter explained his position as Dean of BPP’s Law School, which had eight centres. He wondered whether we should still be talking in this way about the private sector when it was growing faster than the public.  Private sector growth would overtake public by 2025.

Adam explained that the private sector was an established HE provider. Kaplan, with Degree Awarding Powers, was working with Liverpool John Moores and University of Essex. Laureate was working with University of Liverpool. The London School of Business and Finance was working with London Metropolitan University.  Private sector work ranged from accreditation and validating with the University of Wales to INTO and the Cambridge Education Group, providing pathways to Higher Education. There was also a University Partnerships programme, where BPP managed real estate and halls of residence.

The University of Buckingham was a private provider established by Royal Charter. New private providers with TDAP after 2004 included the IFS School of Finance and Ashridge Business School. Private For Profit providers included BPP University College and the College of Law – recently acquired by Montagu, a private equity group.

Pearson with Edexcel now planned to offer degrees. US companies now planning a UK entry strategy included Bridgepoint, De Vry and Capella, with a stake in RDI, which was itself seeking UK TDAP.  Private Equity also sought entry, including Warburg Pincus and Englefield Capital.

BPP was formed in 1976 by three members of the accountancy faculty and was floated in 1986 as BPP Holdings PLC. In 2007 it became the first proprietary company to receive UK Degree Awarding Powers. In 2010 BPP became the first private University College for 30 years. 140,000 students studied annually with BPP.  BPP Law School now delivered 25,000 students for to be employed by law firms. There was also BPP School of Health and BPP Business School. Adam also described the BPP Education Group’s companies in other countries.

Degree Awarding Powers

For those asking about DAP, Peter said that DAP represented building on success. Although QAA had first suggested that BPP programmes might be validated by existing universities, there were reputational risks in linking with the wrong third party. BPP wanted independence. The QAA process took 18 months.

Peter explained that DAP meant many new programmes, including Certificates, Diplomas and Undergraduate Degrees in business, law accounting and marketing.  BPP could also work with employers for tailored programmes. DAP offered innovation and control over BPP does. BPP Fees were the same as top up fees elsewhere in Higher Education.

DAP also meant challenges, including contributing to research like a publicly maintained university. BPP research and scholarship outputs were not pier reviewed.  But it was competing with a public sector which could not lose its powers, though it might have misbehaved, mismanaged its finances and under invested in teachers. QAA was re visiting BPP this Autumn, but the public sector held its degree powers in perpetuity.

BPP as Higher Education Provider

BPP had adopted a structure which was like public HE. Votes on its Academic Council were weighted in favour of independents. Other usual functions were like those of a University.

Adam explained that BPP faculties were the same as the public sector, with 95% of staff employed. There were 16 UK Centres, which saw students joining BPP as the first stage of their career. BPP Centres tried to reflect the workplace and offered a variety of different mechanisms. Students wanted more contact time so there were 12 to 18 class sizes. There were 3 standard start dates – January, May and September. The typical week was up to 16 hours maximum teaching for two semesters.

Adam explained that BPP provision was designed around the workplace. More traditional delivery represented education for the 5%. CPD Research in 2006 showed that “33% of students wish they had chosen a different course, such as a more scientific/technical course or a business-based course or a professional vocation”. BPP was trying to meet this demand for career led degrees.

Peter said that the CBI/UUK ‘Future Fit’ Survey 2009 showed that most important Key Skills were those for employability.  Employers wanted students with business and employment oriented skills and qualifications.

The 50% participation target mentioned was not as important as gaining higher level skills.

Adam explained that though BPP had a national focus, there was also a need to be near where students lived – residential proximity.  BPP fees were the same as the top up in the public sector. Fees for a three year degree were £5,000. There was no HEFCE funding at all in this. Maximum class sizes were up to 18. The CBI “Stronger Together” Report in 2009 welcomed more private participation in HE.  BPP was here to stay.

PANEL QUESTIONS AND ANSWERS

In reply to a question, Peter confirmed that BPP was already working with New College Swindon to deliver a BPP course using the College facilities. The BPP course was delivered by BPP staff. There was also general agreement that the QAA DAP process was taking too long.

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CONFERENCE LUNCH BREAK

PROFESSOR DAVID GREEN, VICE CHANCELLOR AND CHIEF EXECUTIVE, UNIVERSITY OF WORCESTER

In a wide ranging presentation entitled “Real Inclusion in Practice”, David explained that Worcester would soon have 10,000 students.  It used to have a few hundred. We should think in terms of Life Changes, starting off with pre natal and Early Years Education. The University wanted to reach out to develop partnerships. People mistook educational change for innovation. Partnership and intensity were important. The University should participate in the local economy, so that working with the Third Sector, Health and Care were important, as was involvement in music, sport and enlightenment.  This might sound like a Victorian environment but it represented a whole institution approach. Worcester’s new University and Public Library would be opened by HM The Queen. Getting children used to going to Library at University was important in enabling their access to Higher Education.

It was important to grow HE. There was an ongoing national argument between those who wanted to cut their way to prosperity and those who produce their way. Instead the real distinction should be between Profit and Not for Profit. There was a poor history of For Profit Education over time.

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PROFESSOR IAN OAKES, UNIVERSITY OF WOLVERHAMPTON AND BLACK COUNTRY LOCAL ENTERPRISE PARTNERSHIP

Ian’s presentation focused on the “Skills Challenge to the Black Country”.

Black Country Output Gap

He explained that the Black Country productivity challenge was a £5.9bn output gap for jobs, skills and business. Insufficient skills levels represented £1.4bn of this. His series of tables showed Black Country GCSE and NVQ attainment below the English average. Black Country working age qualifications were actually going down. Only attainment in Level 1 was above the national average.

The Black Country LEP had identified Key Transformational Sectors, including Advance Manufacturing, Building Technologies, Transport Technologies including Aerospace, Business Services and Environmental Technologies. Major developments included the Enterprise Zone, the Jaguar LandRover Engine Plant and Aerospace Sector. The Enterprise Zone would generate almost 4,000 new jobs by 2015 with relaxed planning regulations.  A £355mn investment in the JLR plant meant 750 jobs and a further 2,500 supply chain jobs. There had already been 20,000 applications for JLR jobs. But applicants needed not just qualifications but to be job ready.

Key Outcomes and Objectives

The Black Country LEP had identified key outcomes and smart objectives, with an 18% increase in employment – 8,900 jobs. Delivery of work experience, soft skills and the complex information landscape were LEP Key Themes. Education should be alongside workplace experience. Skills curricula should be revised in collaboration with Sector Skills Councils to match employer needs. There should be bite sized CPD opportunities for those in work and clearer accessible signposting for employers. Mapping the client journey against current provision could identify duplication and market failure.

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LUKE MILLARD, BIRMINGHAM CITY UNIVERSITY, PAUL CHAPMAN, BCU STUDENTS’ UNION AND KIM HUGHES, DUDLEY COLLEGE STUDENTS’ UNION

Patrick Highton explained that when he had been Director of the Birmingham, Black Country and Solihull Lifelong Learning Network, the LLN had successfully sponsored a Birmingham City University “Partnership working across Students’ Unions in FE Colleges – Birmingham and the Black Country” Project.

Virtual Student Union

Luke Millard explained that following the LLN initiative, this had been rolled out into the Black Country for development in partnership with the University of Wolverhampton and Black Country Colleges. This had become a “virtual Student Union” for students needing access and representation.

Paul Greatrix, Registrar at Nottingham University had emphasised in a recent Times Higher Education article that Student Unions were more important and relevant to universities and colleges than ever before. Meaningful student engagement was central to university and college life.

This “virtual Student Union” concept provided a student point of access not just for National Union of Student matters but for a wider range of university and college issues. It also provided an important communication tool for institutions with their students.

PHILLIP HALLAM, CEO, RESOURCE DEVELOPMENT INTERNATIONAL

Philip’s presentation was entitled “Flexible, Open and Distance Learning Approaches to HE Partnerships”.

About RDI

Philip explained that RDI was an international Higher Education organisation based in Coventry, founded 22 years ago, working in partnership with 8 UK universities to develop, market, deliver and support a wide range of online distance learning MBAs, Masters and Undergraduate Degrees to students in 150 countries. RDI also had a centre in Hong Kong and was currently under the scrutiny of QAA for TDAP.

Partnership Working

He continued that typically partnership working in the HE sector required a commitment of a minimum of 5 years and preferably 10 years. RDI’s longest partnership had been for 18 years. Building partnerships required significant investment and their continued success was highly dependent on the stability of people at HEIs. A change in people at an HEI was the most common factor in partnerships’ coming to an end and posed a significant risk to upfront investment made by RDI in any new partnership. This was one reason for RDI’s embarking on the TDAP process.

The investment risks in online provision were significant and took a minimum of 3 years to break even. Winding down online activities took a longer time since preserving the student experience was still the most important consideration. Unwinding a partnership was a costly process.

PANEL QUESTIONS AND ANSWERS

In reply to a question, Ian Oakes agreed that not enough was known about the Black Country LEP’s activity and targets.

In reply to a question on RDI future activity, Phillip Hallam explained that achieving TDAP would enable RDI to respond more effectively to market demands whilst strengthening its relationships with its university partners.

CONCLUSION

The Conference concluded at 1530. Patrick Highton thanked colleagues for attendance and stressed the importance of completing Evaluation Forms, since the Black Country Partnership for Learning sought information for further conferences and events.

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Criminal Justice Reforms – One Last Chance for Social Enterprise?

Huckfield apologises for the detailed length of this Briefing and offers a link below to take you straight to the two Current Ministry of Justice Consultation Documents in England, Punishment and Reform: Effective Probation Services and Punishment and Reform: Effective Community Sentences, which are its main topic.

To save time most important Huckfield comments are highlighted in this colour.

INTRODUCTION

This detailed Huckfield Briefing summarises developments arising from David Blunkett’s July 2003 Criminal Justice Act and Patrick Carter’s December 2003 Report “Managing Offenders, Reducing Crime“. Many of their themes have been continued into Kenneth’s Clarke’s December 2010 Green Paper “Breaking the Cycle: Effective Punishment, Rehabilitation and Sentencing of Offenders“.

These important milestones, together with others in BACKGROUND below, form the context for two important March 2012 Ministry of Justice Consultations – “Punishment and Reform: Effective Probation Services” and “Punishment and Reform: Effective Community Sentences “.

Though external providers are now tendering to deliver an increasing range of Prison Services, this has not yet happened with Probation Services. These Consultations, if implemented, provide the clearest and and most detailed projection yet of the intentions of National Offender Management Services for external local commissioning by Probation Trusts.

Huckfield advocates that the clear insight from these Consultation Documents of NOMS’ commissioning intentions, coupled with NOMS ESF Technical Assistance to improve partnership bidding capacity, offers a significant opportunity for Social Enterprise and the wider Third Sector to become involved.

To save time, this link

December 2003 Carter Report “Managing Offenders,Reducing Crime”

Patrick Carter’s seminal Report was a detailed examination of whether significant resource increases for Prison and Probation Services were focused or targeted effectively and recommended extending their delivery to a wider range of providers.

July 2007 Offender Management Act

 

Though this Act set up Probation Trusts with the intention of opening their services to a wider range of providers, this has not yet happened. Commissioning these services is the subject of the current Consultations.

AN OPPORTUNITY FOR SOCIAL ENTERPRISE

 

Huckfield believes that the combination of NOMS’ clear indication of its commissioning intentions in the current Consultation Documents and the availability of NOMS ESF Technical Assistance offer a significant opportunity for partnership bidding by Social Enterprises and the Third Sector which were not available under the Work Programme and others.

NOMS ESF Technical Assistance

 

This Section provides details of the way in which NOMS ESF Technical Assistance will operate and illustrates NOMS thinking on why this ESF capacity building support should be given to Social Enterprises and the Third Sector.

Current Consultations and NOMS ESF Technical Assistance

This Section shows how the two current Consultations are linked to the possible support from NOMS ESF Technical Assistance.

JUNE 2011 “COMPETITION STRATEGY FOR OFFENDER SERVICES”

While this Policy Document focuses on prisons and provision of Custodial Services, it sheds light on Ministry of Justice and NOMS thinking on new delivery models, savings to be achieved and payment by results. The current Consultation Documents represent similar projections for delivery of Probation Services through external commissioning.

Increasing Efficiency

Though mainly about prisons, this Section highlights Ministry of Justice and NOMS policies on quality and value for money, service reform and innovation and developing provider capacity and capability.

FEBRUARY 2012 NOMS COMMISSIONING INTENTIONS 2012-2013

 

The NOMS Commissioning Intentions 2012-2013 discussion document provides a framework for Prisons and Probation Trusts as they prepare for Service Level Agreements and contracts from April 2012 onwards. Prisons and Probation Trusts will be the prime providers in their localities and will use NOMS Commissioning Intentions as guidance on services to be sub-contracted to providers from all sectors through local commissioning.

Evidence-Based Commissioning

The document has a strong emphasis on evidence-based commissioning which is described in more detail in this Section.

Possible Delivery Models

This Section develops NOMS’ commissioning intentions and possible future delivery models, including Co-Commissioning.
Punishment and Reform: Effective Probation Services” and “Punishment and Reform: Effective Community Sentences“, were published on Tuesday 27 March 2012. If implemented, the proposals in these Consultations – the response deadline for which is Friday 22 June 2012 – represent the culmination of major reforms to the Criminal Justice System started by David Blunkett as Home Secretary in 2003. These Consultations take place against this background:

 

    • Reform of the Criminal Justice System. Kenneth Clarke’s Ministerial Foreward in “Effective Probation Services” says “Almost half of all adult offenders reoffend within a year of leaving custody. That figure rises to three quarters for those sentenced to youth custody”.

 

  • Introducing Additional Providers. Kenneth Clark’s Ministerial Foreward in “Effective Community Sentences ” mentions the 2007 Offender Management Act and “explores how best to ensure that probation can lever in the expertise of the voluntary and private sectors. This builds on existing policies to pay community sentence providers by results”

Together with “Commissioned Services” on page 64 of the Open Public Services Paper, updated in March 2012, these are current Government policies which are relevant to these Consultations.

November 2003 Criminal Justice Act

The Criminal Justice Act 2003 introduced three levels of community sentence, based on a risk assessment of offenders, within the framework of the ‘generic’ Community Order:

  • Level 1 – Community Punishment, involving the local community
  • Level 2 – Community Rehabilitation (more demanding programmes for medium risk offenders, tackling their assessed needs)
  • Level 3 – Intensive Supervision and Monitoring for persistent offenders, providing greater control and surveillance, combined with help to reduce re-offending – including greater use of electronic tagging (including satellite tracking of offenders)

Community Orders are further explained below in Structure of Community SentencesManaging Offenders, Reducing Crime” recommended setting up the National Offender Management Service.

On page 9, “Context of the Review” Carter noted:

Use of prison and probation has increased significantly
Far greater use is being made of prison and probation.

  • In 1996, 85,000 offenders were given a custodial sentence and 133,000 were given a community sentence. By 2001, both had increased by 25 per cent, with 107,000 offenders given a custodial sentence and 166,000 offenders receiving a community sentence

“There has been a similar growth in the number of offenders under super vision at any one time.

  • In 1996, an average of 55,000 offenders were in custody and a fur ther 127,000 offenders were under super vision in the community. By the end of 2001 this had increased to 66,000 in custody and 141,000 in the community
  • The latest figures show that these numbers have grown further. By late 2003 this had exceeded 74,000 offenders in prison

Despite these significant increases, Carter concludes that there is poor targeting, which fails to optimise the use of capital and current resources..

On ‘Probation’ on page 37 he recommended:

“Within NOMS there would be a clear separation of the supervision of offenders
(offender management) and the provision of punishments (community work) and interventions in the community (eg. basic skills training and drug treatment programmes).

“The Regional Offender Managers would manage the supervision of offenders.

  • Offender managers would work to the Regional Offender Managers to provide the end-to-end supervision of offenders (in custody or in the community). The offender managers would be the key part of the system – ensuring offenders meet the conditions of their sentence and receive the help they need to reduce
    re-offending.
  • Offender managers could be from a range of providers in the public, private or voluntary sector. Some may specialise in specific types of offenders (for example drug users) or in particular areas (for example urban or rural locations)
  • Regional Offender Managers would then monitor the performance of the offender managers. This could be measured by looking at re-conviction rates, for potentially two years after the end of the sentence
  • Initially, the majority of offender managers would be from the public sector. However, over time, new providers will emerge.

Though the National Offender Management Service was set up in 2004 and Probation Trusts were set up in 2007, for Probation Services little of these reforms has been implemented and form the subject of the two current Consultations.

Like many others working in Further Education, Huckfield had already submitted a Proposal for ESF Funding to Staffordshire Probation Services in August 1999 and had incorporated offender management and offending reduction elements in other projects, such as the Wolverhampton Next Steps Project in 2001 and 2002 and in West Midlands NHS Projects in 2002 and 2003. He later worked on Prison Education Projects alongside others at Tamworth College in 2003 and 2004. In 2011, Huckfield worked on a “Realising Ambition” Catch 22 Submission on Young Offenders.

Throughout this time, Huckfield had become aware that many convictions and sentences had become a revolving door. This is why Huckfield welcomed the Ministry of Justice December 2010 Green Paper “Breaking the Cycle: Effective Punishment, Rehabilitation and Sentencing of Offenders“, with its strong reform themes in the Ministerial forward by Ken Clarke as Justice Secretary.

July 2007 Offender Management Act

The Offender Management Act 2007 set up Probation Trusts as independent bodies directly commissioned by the Secretary of State. Though some of their services would be open to competition from other sectors, including from other Probation Trusts, there was no significant increase in delivery capacity provided by the Third Sector. In January 2008, the National Audit Office “National Probation Service: Supervision of Community Orders in England and Wales” was critical about the Probation Service’s poor information on unit delivery costs. Though an initial 10% outsourcing target was replaced by a “Best Value” approach, there was no “market testing” of Probation Services – as was happening with some Prison Services.

For the future local delivery of Probation Services, these two current Consultations therefore represent the culmination of reforms set in motion nearly 10 years ago. The intention of the 2007 Offender Management Act was that Probation services would be opened to a much wider range of providers. If proposals in these current Consultations are implemented, this should now happen.

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AN OPPORTUNITY FOR SOCIAL ENTERPRISE

NOMS ESF Technical Assistance

The Government’s preferred commissioning model – as shown in the Work Programme – is through prime contractors using payment by results. Neither of these are favourable to the business and delivery models of most Social Enterprises and the Third Sector. Huckfield has been sceptical of these developments in a detailed briefing Killing Social Enterprise Softly.

However in another briefing, A Ray of Hope for Social Enterprise, Huckfield acknowledges that National Offender Management Services has recognised the bidding problems of Social Enterprises, as illustrated on page 3 of the NOMS High‐Level Specification for Social Enterprise (SE) Consortia Building Programme, which invites Social Enterprise bids for ESF Technical Assistance to increase their capacity:

“There is also often a wider community benefit to the activities delivered by SE’s (beyond those experienced by the participants) and this is a factor that this procurement opportunity will seek to focus and build on.

“Many SE’s are relatively small in size ‐ the latest survey data1 suggests that 77% have a turnover of less than £1m and 36% turnover less than £0.1m. As such, most find it difficult to engage with government procurement opportunities that often have significantly higher thresholds. At sub contract level, there is also a limit to the number and range of organisations that a particular prime contract can support”

Current Consultations and NOMS ESF Technical Assistance

Huckfield attended a NOMS ESF Technical Assistance Briefing in Leeds on Wednesday 14 March 2012 and was impressed by the way in which the NOMS Team genuinely sought to involve Social Enterprises and the Third Sector. Huckfield wrote a briefing “A Ray of Hope for Social Enterprise“, in which NOMS intentions were described in more detail.

At the Leeds Briefing Huckfield asked what potential bidding and tendering opportunities might exist for those Social Enterprises and the Third Sector. The two current Consultation provide a detailed answer.

The two current Consultations on Punishment and Reform: “Effective Probation Services” and “Effective Community Sentences ” give strong indications of the way in which the National Offender Management Services proposes to develop further commissioning for Probation Services. These parallel Consultations are accompanied by a detailed Impact Statement which provides more interesting information shown below.

Partnership and capacity development which is supported under NOMS ESF Technical Assistance has already been covered in a previous Huckfield Briefing A Ray of Hope for Social Enterprise. Coupled with a detailed description of NOMS commissioning intentions in the two Consultation Documents Huckfield believes this offers a significant opportunity for Social Enterprise and Third Sector organisations to become delivers as part of the Criminal Justice system.

Back to TopEffective Probation Services” and “Effective Community Sentences “.

Kenneth Clark’s Reform Themes from the Green Paper include:

  • changing prison regimes to a more productive environment – “working prisons”
  • increasing curfews and tagging
  • increased reparation and restorative justice
  • Community Payback – the “flagship” of community sentencing
  • rehabilitation
  • Drug Treatment for Offenders
  • One Stop Shops for Women Offenders – from Jean Corston’s Report
  • increased employment prospects
  • payment by results
  • sentencing reform
  • reform of youth sentencing, including remanded young people recognised as “looked after” by local authorities
  • working with communities

These reform intentions are shown above in detail since most reflect a significant potential for the wider involvement of Social Enterprises and the Third Sector.

Reducing Reoffending

Kenneth Clarke’s Ministerial Forward on page 1 of the December 2010 Green Paper: Breaking the Cycle: Effective Punishment, Rehabilitation and Sentencing of Offenders is clear on intentions:

“This Green Paper addresses all three of these priorities, setting out how an intelligent sentencing framework, coupled with more effective rehabilitation, will enable us to break the cycle of crime and prison which creates new victims every day. Despite a 50% increase in the budget for prisons and managing offenders in the last ten years almost half of all adult offenders released from custody reoffend within a year. It is also not acceptable that 75% of offenders sentenced to youth custody reoffend within a year. If we do not prevent and tackle offending by young people then the young offenders of today will become the prolific career criminals of tomorrow”.

New Delivery Models

Page 47 of the Green Paper on “Reforming Services” heralds new delivery models heralds new delivery models:

“161. By April 2012 Probation Trusts will have slimmed down contracts focused on ensuring the effective delivery of sentences of the court and reducing reoffending. We will also develop proposals to allow Trusts more opportunities to use their own judgement in how they manage their businesses. The aim is to create a more level playing field to enable the public sector to be more directly compared with payment by results providers.

“162. We will explore the scope for new business models that can deliver better services, reduce costs, and enable partnership with the communities in which local agencies work. Some Probation Trusts are already making innovations of this type. We will consider giving public sector workers greater independence in managing the services they deliver, through the creation of social enterprises, co-operatives and mutualisation. This will support the transition of the public probation service towards a payment by results model.

Page 48 of the Green Paper is even more specific on models:

“164. To enable these changes while creating savings, the National Offender Management Service will be reformed and significantly slimmed down through replacing the existing regional structures with a leaner functional approach. This functional model will support commissioning of services; management of public sector prisons; management of contracts with Probation Trusts, private and voluntary and community sector providers; and delivery of national operational services. The new commissioning function will retain central oversight for commissioning in the short term, but this responsibility will increasingly be devolved to local commissioners to get the best responsiveness to local needs, to drive out cost and to enable smaller community-based organisations to participate fully. In the interim we could require main contractors to involve small, local organisations to ensure an integrated approach at local level. This model will be developed over the next two years”

Young Offenders

Page 71 on “Effective Sentencing for Young Offenders” has some interesting suggestions on young offenders:

“246. The current remand legislation for young people consists of a mixture of different frameworks for deciding where a young person is remanded and who pays, depending on the young person’s age and gender. This needs simplifying. To achieve this we propose to create a single youth remand order for 12–17 year olds. This would, gradually and with an associated transfer of funding, transfer the full costs of all remand to local authorities. Placements of remanded young people would still be commissioned and managed centrally and the local authority would be charged for this service”.

Payment by Results

Page 73 on “Youth Offending and Payment by Results” continues:

“257. We therefore propose to run a small number of pilots, each working in partnership with a consortia of volunteer local authorities. We will agree a target reduction in the use of custody with the consortia and provide a reinvestment grant, on top of the standard grant to Youth Offending Teams, to help them achieve this. The consortia will have flexibility in how they use the funding. At the end of the pilot period we will recoup some, or all, of the grant if the consortium has failed to meet the agreed target, based on the consortium’s use of custody. The pilots will enable us to explore how local areas can share in the financial savings and risks of custody.

On page 74 on Payment by Results, the Green Paper continues:

“259. We are exploring how we could apply a payment by results approach to Youth Offending Teams and custodial providers. This would link the funding we give them to the outcomes that they deliver. We would welcome views on how this might be achieved, as well as how we design future contracts with custodial providers with this in mind.

On page 81 under “Reforming the Courts to provide more Efficient and Effective Justice for Communities” the Green Paper seeks further Community Involvement:

“287. However, we also need to promote other opportunities for public involvement, through consultation about local concerns and action to address them and through volunteering. We want to test new, innovative ways of getting communities more involved in tackling low-level crime and anti-social behaviour. One approach which we are particularly interested in piloting is that of Neighbourhood Justice Panels. These provide a form of restorative justice in which local volunteers and criminal justice professionals are brought together to decide what action should be taken to deal with some types of low level crime and disorder. We will be bringing forward plans to test their effectiveness in the summer.

These intentions for further reform of the Criminal Justice system represent the Government policy which underpins the two current Consultation Documents. As above, these are shown in detail since they show potential for the involvement of Social Enterprises and the Third Sector.

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Competition Strategy for Offenders ” under “Improving Efficiency” says:

“The recent round of prison competitions generated around £22mn of savings in the Spending Review period and £216mn overall when compared to current cost. Competitive pressure led to savings at all of the establishments competed including HMP Buckley and HMP Doncaster, where contracts were retained by the existing providers.

“In addition to this a contract was let for HMP Featherstone II, a new 1605 place prison, which will provide places at the lowest operational unit cost in the estate at £11,000 per prisoner per year, against an average of £27,400 per prisoner per year. This low cost does not come with an impoverished regime – the specification for the prison requires standards as high as those in our existing prisons.

“Following the recompete of the Prisoner Escort and Custody Services we expect to release gross forecast cashable savings of around £30m (18%) in year one and £260m (20%) over the minimum seven year contract period.

Paragraph 114 on page 27 of the Ministry of Justice Impact Strategy for the March Consultation Papers on “Effective Community Sentences ” and “Punishment and Reform: Effective Probation Services” says:

“These savings are also shown as paragraph 113 on page 27 of the Impact Statement which accompanies the “Effective Community Services” and “Effective Probation Services” consultations which commenced on March 27 2012, with a concluding deadline of June 2012.

Paragraph 15 on page 8 of the Ministry of Justice “Competition Strategy for Offender Services ” continues:

“15. We will embed competition into our day-to-day business practices and expect our providers to respond accordingly. Previously, competition was targeted at particular establishments or services, often to correct poor performance. We will move to a model where, over time, every service will be competed unless there are compelling reasons why it should not be. We see this as a more empowering and stabilising strategy for our system that will drive improvement across a range of services”.

Paragraph 19 “Service Reform and Innovation” on page 9 of “Competition Strategy for Offender Services” repeats the formula for putting every service out to tender:

“19. We have committed by 2015 to applying the principles of payment by results across services which reduce re-offending. This includes piloting at least six new Payment by Results (PBR) projects. We will also consider the range of innovative proposals that have been presented to us in recent months and consider where best to pilot those ideas. The pilots will inform the development of this approach and help us identify effective models, which can be further rolled out in future competitions.”

Under “Developing Provider Capacity and Capability” in paragraphs 20 and 21 on page 11 of “Competition Strategy for Offender Services” sets out the basic aim of using a diverse range of providers;

“20. Developing a diverse market of potential providers of Offender services is vital to improving our outcomes. The market must be capable of attracting sustained investment and properly incentivising providers to drive efficiency and innovation. Government has a key role in promoting a functioning market which recognises the different strengths of different providers, whether they are from the public, private or voluntary and community sector.

“21.The most important element in ensuring a diverse market for Offender services is ensuring that all participants are confident that we will run fair and transparent processes. We will follow best commercial practice in our competitions, ensuring that all bidders understand what we require of them and how we will assess their bids. Wherever possible, we will commission services by outcome. Bids will be judged on quality, price and fit with our broader policy objectives”.

Though the June 2011 “Commissioning Strategy for Offender Services” mainly deals with provision of custodial services, this shows the extent of policy changes already happening in the Prison Service. These two current Consultations have the potential to set in motion similar developments for delivery throughout the Probation Service.

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FEBRUARY 2012 NOMS COMMISSIONING INTENTIONS 2012-2013

This Document NOMS Commissioning Intentions 2012-2013 represents Version 2 of the original Introduction to NOMS Offender Services Commissioning in November 2011. Version 2 represents a considerable revision and more focused version of the original November 2011 document.

Evidence-Based Commissioning

The NOMS Commissioning Intentions 2012-2013 document relies heavily on evidence-based commissioning. This Huckfield Briefing lists below detailed examples of NOMS “evidence-based commissioning, with extensive potential for Social Enterprise, Third Sector and wider community involvement.

On page 9, NOMS indicates “the kinds of services and interventions that have the best evidence base for reducing reoffending:

  • structured cognitive-behavioural programmes such as accredited programmes. Accredited programmes by definition are interventions that have been independently judged to meet evidence-based standards
  • basic education (where needed)
  • employment-focused programmes in which offenders can secure real jobs
  • structured therapeutic communities particularly for substance misusing offenders
  • therapeutic approaches for juvenile offenders that involve the family
  • substitution prescribing, in conjunction with psychosocial support, for opiate dependent offenders”

Page 9 continues: “Evidence indicates that the following are promising approaches in terms of reducing reoffending”:

  • Circles of Support and Accountability for sexual offenders
  • Medical treatment for some types of sexual offenders
  • Mentoring
  • Structured group counselling
  • Peer fellowship/support for substance misusers /li>
  • Structured approaches to supervision (e.g. the Citizenship programme created by Durham Tees Valley Probation Trust)
  • Intensive supervision involving treatment programmes
  • Cognitive behavioural domestic violence interventions
  • Motivational Interviewing”

On page 10, NOMS indicates further “intermediate outcomes likely to be important and worth consideration”:

  • improving reintegration into (non criminal) social and family groups. This includes strengthening family ties, improving family and intimate relationships, improving parenting behaviours, and increasing acceptance into communities and social networks
  • changes in anti-social attitudes and improvements in thinking skills
  • finding suitable accommodation and increasing skills to retain accommodation
  • finding long term employment and increasing employment skills
  • ending debt and other finance-related problems
  • achieving sobriety

Large elements of proposed externally commissioned delivery of these services might be provided by Social Enterprises, Third Sector and Community Organisations.

Possible Delivery Models

Page 28 of the NOMS Commissioning Intentions 2012-2013 document shows NOMS further commissioning aims which include these services:

  • Providers developing their capacity to offer restorative justice conferencing in custody and the community
  • Establishment of effective models of Integrated Offender Management by close working between providers and local community partners; • Development of credible alternatives to custody and custodial remand for the courts
  • Delivery of the specification for Approved Premises to enable offenders to progress to less intensive support while offering protection to the community
  • Developing the use of interventions suitable for delivery as Specified Action Requirements in order to address offending behaviours which are currently poorly provided for
  • Increasing the level of meaningful work for prisoners and developing ‘working prisons’ using the expertise of the private, voluntary and community sectors
  • Developing systems which will enable the greater engagement of volunteers within the provision of offender services in custody and in the community

Page 23 of NOMS Commissioning Intentions 2012-2013 also shows NOMS intentions for Co-Commissioning, including:

  • Continue to align resources with mainstream providers of primary and secondary healthcare (including mental health services) and ensure that emerging structures as part of the Health Reforms in England are able to access NOMS funded resources to support effective joint planning and delivery
  • Improve access to mainstream Adult Social Care assessment and support for offenders in custody
  • Align services with Offender Learning and Skills Service (OLASS 4) providers in prisons in England following re-competition of the service and support initiatives to make prisons places of work
  • Facilitate the introduction, and ongoing operation, of mandating day one entry of prison leavers onto the DWP Work Programme
  • Strengthen relationships with NOMS CFO Employment Service Providers to maximise the services available to offenders both in prison and in the community
  • Ensure that offender’s families are highlighted as a priority group within the DfE Families with Multiple Problems initiative and that they are able to access appropriate specialist services
  • Ensure appropriate access, and where necessary support, for offenders to enable them to resolve their housing related problems
  • Ensure that all offenders have access to services that assist them to manage their finances

This Section has highlighted in detail NOMS Commissioning Intentions for 2012-2013 since the wide range of their ambition indicates a broad diversity of delivery in which Social Enterprises, Third Sector and Community Organisations might become involved.

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Effective Community Sentences Consultation Document ” Consultation under “Intensive Community Punishment” in paragraph 24, one of the main proposals is to change Community Orders to make them more credible to sentencers and to the public, centring on an Intensive Community Punishment which could combine:

  • Community Payback
  • Significant restrictions of liberty through an electronically monitored curfew, exclusion, and a foreign travel ban
  • A driving ban
  • A fine

Sentencers would also have the option to add some rehabilitative requirements, and measures to deliver compensation or reparation to victims. It is proposed that the length of Intensive Community Punishment would be restricted to 12 months.

Structure of Community Sentences

As shown below, the structure of large numbers of Community Orders means that these could be carried out by organisations working alongside Probation Trusts. Though Figure 1 “Volume of Community Order Starts by Requirement on page 6 of the Impact Statement shows that between 2006 and 2010 Community Orders varied between 212,000 and 231,000, paragraphs 7 and 8 continue:

“Around half of offenders sentenced to a community order are subject to only one requirement:

“7. In 2010, 118,700 adults started a community order – around half of these had one requirement; 35% two; 12% three and 3% four or more. Unpaid work alone was the most common combination of requirements (given to 33% of adults starting a community order in 2010).

“In 2010, 37% of those offenders who started community orders were tier 1 offenders

“8. In the same period, 61% of offenders were supervised by an unqualified Probation Service Officer (PSO) (tiers 1 & 2) and 38% were supervised by qualified Probation Officers (POs) (tiers 3 & 4). More than 80% of standalone unpaid work cases were in tier 1. The combinations of accredited programmes and supervision, and drug treatment and supervision were represented most in the higher supervision tiers. Around two thirds of the community orders terminating in 2010 ran their full course or were terminated early for good progress.

Figure 3 “Requirements by Tier” on page 7 of the Impact Statement shows that Unpaid Work at 90% was the most commonly used requirement for Tier One Offender.

All this is described in detail since it shows the potential for Community Orders and similar provision to be delivered by Social Enterprises and Third Sector organisations, based in the local community.

Flexible Delivery

The “Introduction” of “Punishment and Reform: Effective Community Sentences” in paragraph 18 on page 7 emphasises that the Consultation would like to receive more flexible delivery approaches:

“18. We are bringing forward these reforms at a challenging time in terms of public finances. Given the wider landscape of financial constraint and consolidation, these proposals must be considered in the context of affordability. Our reforms must enable us to do better with less. Through this consultation we seek views from sentencers and local areas in particular to develop our understanding of the choices around how these proposals could be introduced. The related impact assessment sets out our estimates of the impacts of these reforms; but we will be undertaking further work as part of the consultation exercise to assess the costs and trade-offs of doing so. The value for money of any investment required will be paramount when considering implementation.”

This represents an open invitation for responses which propose Flexible Delivery solutions is described in THE CHALLENGE OF GEOGRAPHY below.

Payment by Results

Paragraphs 151 to 154 on pages 37 and 38 of “Punishment and Reform: Effective Community Sentences” are specific on Payment by Results:

“151.We aim to apply the principles of payment by results to all providers of offender services by 2015. We are testing the approach through a series of initial pilots. Pilots have already started in two private prisons, with two more, in public sector prisons, to follow in 2012. We are contributing to eight drug and alcohol recovery pilots run by the Department of Health and are testing through two pilots with the Department for Work and Pensions how we can further incentivise Work Programme1 providers to reduce reoffending. Two further pilots focus on offenders in the community, under the management of the Wales, and Staffordshire and West Midlands Probation Trusts, and are being developed in line with our wider proposals for reforming probation services.

“152.For each of the two community pilots, a proportion of the participating Trust’s funding will be placed ‘at risk’, with payment dependent on the successful rehabilitation of offenders. If the pilot meets its target, measured through a reduction in reconvictions, then the ‘at risk’ payment will be made. Over-achievement will bring the potential for additional success payments, but failure to meet the reconvictions target will mean that no payment is made.

“153.As this approach requires the transfer of financial risk from the Government to the provider, the two public sector Probation Trusts cannot directly engage in their current form. The pilots will seek to test how novel commercial and contractual arrangements between Probation Trusts and partners from outside the public sector can enable probation services to be delivered on a payment by results basis. The pilot providers will be granted new freedoms and flexibilities, to allow them to develop and introduce innovative service delivery models,

“154. The pilots will begin in 2013, and run for up to four years. The final scope is still to be agreed, but it is likely that a significant portion of each Trust’s community sentence caseload will be included, so that we can have confidence in the results that we observe. Each of the two pilots will be the subject of an independent evaluation, and the lessons learned will inform our strategy for applying payment by results principles more widely to offender services.”

This Section has highlighted the range of provision for which Probation Trusts may in future commission local external delivery of services and its broad diversity in which Social Enterprises, Third Sector and Community Organisations might become involved.

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THE CHALLENGE OF GEOGRAPHY

 

These Consultation Documents and their forerunners make it clear that the number of Probation Trusts and their separate areas will be reduced. There is also a strong emphasis of the closer involvement of local councils, especially since the December 2010 Breaking the Cycle Green Paper envisages that these will fund remand elements of Young Offender Services.

On page 19 in paragraph 41, the Effective Probation Services Consultation Document makes it clear that Probation Trusts will largely become responsible for commissioning in their areas:

“Probation services are currently commissioned by NOMS. In order to achieve our objectives we want to see a stronger role for public sector Probation Trusts as commissioners. As part of their enhanced commissioning role we envisage that Trusts would:

  • receive and manage budgets for the delivery of the entire range of community based offender management services, including Electronic Monitoring
  • compete specified probation services such as the offender management and supervision of lower risk offenders and specified activities
  • act as joint commissioners with local partners of other services for offenders”

All this suggests a wide range of services to be commissioned locally by Probation Trusts.

Localised Solutions?

However, some smaller Trusts will be be absorbed into larger Probation Services regions. Since NOMS has private sector prime contractors for delivery of other services, it is uncertain how these will feature in future Probation Trust commissioning.

The December 2010 Breaking the Cycle Green Paper recommended a more central role for local authorities in funding young offenders on remand. Paragraph 246 on page 71 says:

“The current remand legislation for young people consists of a mixture of different frameworks for deciding where a young person is remanded and who pays, depending on the young person’s age and gender. This needs simplifying. To achieve this we propose to create a single youth remand order for 12–17 year olds. This would, gradually and with an associated transfer of funding, transfer the full costs of all remand to local authorities. Placements of remanded young people would still be commissioned and managed centrally and the local authority would be charged for this service.”

Since a stronger role is envisaged for local authorities, Huckfield wonders whether this might offer the possibility of a Probation Trust, Local Council and Third Sector Organisations forming a “wholly devolved administration” for their area within a larger regional boundary? This might offer a solution in some smaller areas with less resources, to form a basis for comprehensive localised commissioning.

In “Strengthening Local Delivery” in paragraph 71 on page 27, the Effective Probation Services Consultation says:

“The Open Public Services White Paper March 2012 highlights the Government’s belief that “power should be decentralised to the lowest appropriate level”. If we are successfully to strengthen the local delivery of services to meet local priorities, while potentially reducing Probation Trust numbers, Trusts will need to put the right structures in place to maintain these important relationships with partners. We will also need to consider the probation leadership and skills base required at a more local level”.

Finally, Huckfield is really grateful for your reading through all of this and welcomes any comments below.

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Black Country Partnership for Learning Further and Higher Education Conference Friday 25 May 2012

THIS CONFERENCE IS A VERY TIMELY EVENT

This piece represents a strong Huckfield recommendation. At only £95, this Conference represents exceedingly good value. A similar London Conference would be at last £300 plus fares.

This is the Black Country Partnership for Learning Online Booking Form.

Black Country Partnership for Learning

Black Country Partnership for Learning (BCPL) includes the University of Wolverhampton and seven Further Education Colleges:

  • Dudley
  • Halesowen
  • King Edwards
  • Sandwell
  • Stourbridge
  • Walsall
  • Wolverhampton

BCPL held a highly successful 14-19 Years Post Wolf Conference on Friday 25 November 2011, with 100 attending from the West Midlands and beyond.

Friday May 25th 2012 at the Hawthorns Conference Centre, West Bromwich Albion Football Ground

This timely Conference which includes speakers and a programme which covers a very wide range of Further/Higher Education topics, especially if you read David Kernohan’s Wonke piece on Thursday 29 March 2012 about HEFCE’s projected grants for 2013, and all the uncertainties for the future arising from this.

From well-published delays in the Government’s Higher Education Bill, some colleagues may have thought things were settling down. But several other pieces recently including Andrew Fisher on Student Number Control, have highlighted continuing uncertainties for Higher Education, including Higher Education delivered in Further Education Colleges – not just for 2013 but in years to follow, especially since HE Margin bidding will continue.

Huckfield knows Further and Higher Education colleagues who, though they have developed strategies for 2013 enrolment, are still much perplexed about the years to come. This Conference is a good chance to get some answers.

Conference speakers range from the Minister for Higher Education and Science, Rt Hon David Willetts MP, through Higher Education in Further Education Specialists, including those from the private sector, including online provision to more local speakers with their local interpretations.

Conference Aims and Purpose

  • To receive progress relating to the changing policy framework and institutional impact for Further and Higher Education Institutions
  • To reflect on the new landscape emerging at the Further and Higher Education interface following the HE White Paper 2011
  • To discuss practical responses, local partnerships and developments for 2012/2013 activity in colleges, universities and with private providers

Conference Programme and Speakers

09:45: Background and Context to the Conference

  • BCPL Chair & Director

10:00: The Changing HE Policy Framework

  • Rt. Hon David Willetts MP, Minister for Higher Education and Science, Department for Business, Innovation and Skills
  • A Perspective from the Association of Colleges – Nick Davy, HE Policy Manager

11:00: The New Landscape

  • Validation and Accreditation Services for Higher Level Provision – John Davies, Head of Programme Development, Higher Education Awards, Pearson
  • Foundation Degree Awarding Powers for FE Colleges – John Ellison, Head of Higher Education, New College Durham
  • FE/HE and Private Sector Relationships in Higher Education – Peter Crisp, Chief Executive of BPP Law School and Adam Temple, Managing Director of BPP Centre, Birmingham

12:00: Panel Session/Questions and Answers from Floor

12:30: Lunch

13:30: Practical Responses and Local Partnerships

  • Participation, Progression and Partnerships: Real Inclusion in Practice – Professor David Green, Vice Chancellor & Chief Executive, University of Worcester
  • Local Enterprise Partnerships and Employer/Demand-Side Perspectives – Professor Ian Oakes, Pro-Vice Chancellor, Research and Enterprise, University of Wolverhampton and Black Country Local Enterprise Partnership Board

Panel Session/Questions and Answers from Floor

14:30: Practical and Local Developments

  • Partnership working across Students’ Unions and College based Student Support functions across Birmingham and the Black Country – Luke Millard, Birmingham City University and Paul Chapman, BCU Students’ Union and Kim Hughes, Students’ Union, Dudley College
  • Flexible, Open and Distance Learning Approaches to HE Partnerships – Dr Philip Hallam, CEO, Resource Development International Ltd (RDI)

Panel Session/Questions and Answers from Floor

15:30: Plenary Session– Key issues for participants, reactions to inputs, impact and implementation timelines 2012/2013 and beyond

Close

AND, FINALLY

Huckfield attends many conferences and seminars. There is much uncertainty facing Further and Higher Education in the years to come. With this range of speakers and issues covered you won’t do much better anywhere else.

As above, this is the Black Country Partnership for Learning Online Booking Form.

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FE Professionalism – You couldn’t make it up if you tried!

TEN WASTED YEARS

OFSTED 2003 Report and the 2007 Regulations.

Huckfield has an active background around Further Education (FE) and has always raised concerns about limited external understanding of the FE Sector.

This Huckfield briefing laments 10 wasted years of trying to improve professional standards in Further Education in England.

Even OFSTED, whose Initial Training of Further Education Teachers Report in November 2003 prefaced the 2007 Further Education Teachers’ Qualifications Regulations, as shown later in OFSTED Damning Evidence, bluntly says that the Regulations have achieved nothing.

Lord Lingfield’s Interim Report on Professionalism in Further Education , published on Tuesday 27 March 2012, now recommends that the whole lot should be scrapped and that any required FE Professionalism qualifications should be decided by employers.

FE Professionalism – Petals, Kettles and Dettols

Getting qualified to teach in FE has always been a bit unique, as Lord Lingfield’s Interim Report on Professionalism in Further Education has shown.

FE Professionalism has baffled many with its petals, kettles and Dettols. To give them their proper titles:

  • Preparation for Teaching in the Lifelong Learning Sector
  • Certificate for Teaching in the Lifelong Learning Sector
  • Diploma for Teaching in the Lifelong Learning Sector

Having achieved the Diploma ( the top level) under the 2007 Further Education Teachers’ Qualifications Regulations FE lecturers have then been required to pay £68 to the Institute for Learning to achieve Qualified Teacher Learning and Skills (QTLS) status. This should give them parity of esteem with schools’ teachers’ Qualified Teacher Status and, following Professor Alison’s Wolf’s Review of Vocational Education Report in March 2011, enables those with QTLS to teach in schools.

OFSTED was the main begetter of all this when it produced its Initial Training of Further Education Teachers Report in November 2003, with sharp criticism of the previous system. The Report’s Summary on page 2 showed:

“The current system of FE teacher training does not provide a satisfactory foundation of professional development for FE teachers at the start of their careers.While the tuition that trainees receive on the taught elements of their courses is generally good, few opportunities are provided for trainees to learn how to teach their specialist subjects, and there is a lack of systematic mentoring and support in the workplace.The needs of this diverse group of trainees are not adequately assessed at the start of the courses, and training programmes are insufficiently differentiated. As a consequence, many trainees make insufficient progress”.

As a response to OFSTED’s findings, in 2004, the Standards Unit of the Department for Education and Skills produced its policy proposals, Equipping our Teachers for the Future: Reforming Initial Teacher Training for the Learning and Skills Sector. These proposals gave a series of tasks to the Institute for Learning (IfL), a voluntary membership body established in 2002. But by 2006 the Institute had only obtained 4,000 lecturer members from a projected workforce of 188,000 in 2009/2010.

2007 Further Education Teachers’ Qualifications Regulations

This dramatic lack of progress under “Equipping our Teachers for the Future: Reforming Initial Teacher Training for the Learning and Skills Sector” published in 2004 led to a Reforming Initial Teacher Training package in 2007, centring on the The Further Education Teachers’ Continuing Professional Development and Registration, England, Regulations, No. 2116 and The Further Education Teachers’ Qualifications, England, Regulations, No. 2264). The 2007 Regulations made registration with the Institute for Learning compulsory to achieve Qualified Teacher Learning and Skills status.

Summarising the new 2007 Regulations, in paragraph 2.6 on page 12, Lord Lingfield’s Interim Report on Professionalism in Further Education says:

“These regulations required that FE lecturers should comply with the following:

  • Annual registration with the Institute for Learning (IfL)
  • Achievement of teaching qualifications comprising an initial award (PTLLS),’fully-qualified’ status consisting of Qualified Teacher Learning and Skills (QTLS) or Associate Teacher Learning and Skills (ATLS) based on a Diploma (DTLLS) or a Certificate (CTLLS), plus a period of reflective practice, termed ‘professional formation’, monitored by the IfL
  • An annual requirement for at least 30 hours of CPD (or between six and 30 hours for part-time staff, according to the extent of their teaching contract) which FE lecturers should report to the IfL in order to maintain their ‘qualified’ status: in effect an annually-renewable licence to practise

Paragraph 2.6 on page 12 of the Report continues:

“These regulations applied to colleges under statute and to other providers in the FE sector under contract with the public funding bodies. They affected FE lecturers who joined the sector after 1 September 2001, requiring them to be ‘fully qualified’ within five years of 1 September 2007; that is by September 2012 or five years after the date of joining for those who entered the service after 2007”.

Despite this requirement from 2007 onwards of compulsory registration with the Institute for Learning, Lord Lingfield’s Interim Report describes the situation as “Working towards QTLS becomes a Permanent State”

Few Takers and Union Boycott

The trouble with this required compulsory registration with the Institute for Learning under the 2007 Regulations, according to paragraph 2.11 on page 13 of Lord Lingfield’s Interim Report is that very few in FE have taken much notice of these requirements:

“By August 2011, only some 2,900 lecturing staff had achieved ‘fully qualified’ status (source GHK), for which the IfL was the conferring body; a figure that had risen to 6,000 by February 2012 (source IfL)”.

Compared with overall numbers of FE staff, this is tiny, as paragraph 2.9 on page 13 of the Lord Lingfield’s Report explains:

“As a voluntary body it (IfL) attained a membership of some 4,000 lecturers (source: IfL) by 2006. This should be compared with a sector estimated in 2009-2010 as comprising over 2,000 employers and 188,000 members of the teaching workforce. When registration with the IfL became mandatory under the 2007 Regulations, the number of those associated with the professional body rose to over 200,000 (including a number of teaching support staff), before falling back in stages to around 85,000 in 2011-2012 (source: IfL). The highest figures of IfL registration were achieved through government paying the whole of the registration fee”

Paragraph 2.11 on page 14 of Lord Lingfield’s Report thus concludes:

“According to research conducted for the government by GHK Consulting, only about 15% of lecturers have attained ‘fully qualified’ status or have committed themselves to the programme of post-qualification study and supervised practice required to achieve it. QTLS/ATLS has not become a universal full licence to practise and a driver of teaching excellence”.

Paragraph 2.11 on page 13 of the Report says:

“In February 2011, the Institute made clear its intention to charge a registration fee to individual members of £68 for an initial eighteen-month period, which was later extended to a two-year term with an annual rate of £38. This brought to a head underlying concerns expressed variously by employers’ and employees’ representative bodies, and by many individual lecturers, about the value added by the IfL; the juxtaposition of compulsion for FE lecturers to register with the Institute and the obligation to pay a fee, without which they would be disbarred from employment; and the fact that the duty to be ‘qualified’ and regularly updated to teach effectively lay with employees rather than being shared with their employers. Discontent found a focus in a boycott of IfL registration among many of the 40,000 or so FE members of the University and College Union (UCU) and the threat of legal action”.

Institute for Learning Upsets Everbody

As shown in paragraph 2 on page 4 of its Summary in Lord Lingfield’s Interim Report , the Institute for Learning seems to have upset everybody in FE:

“With the benefit of nearly five years of State funding and regulatory backing, the IfL has not won the confidence of those organisations which should be its partners”.

Paragraph 3.1.2 on page 15 of Lord Lingfield’s Report further comments:

“The wider FE community understands that IfL’s preferred outcome to the review would be a return to some form of government funding and enforcement of the 2007 Regulations. It is regrettable that this stance by the IfL appears to have alienated employee and employer representative bodies alike”

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VOLUNTARISM REPLACES REGULATION

“Working towards QTLS becomes a Permanent State”

Though the 2007 Further Education Teachers’ Qualifications Regulations made registration with the Institute for Learning compulsory – with a grace period for obtaining Qualified Teacher Learning and Skills status – Lord Lingfield’s Report comments in paragraph 3.5 on page 20:

“The implication was that, as has occurred in some previous impositions on the sector, that ‘working towards’ would, for many, be a permanent state”.

Since this was a situation which obviously could not continue, Lord Lingfield’s Interim Report recommends that the Institute for Learning should revert to its status as a voluntary membership body and in paragraph 4.3 on page 23 believes that some membership fees should be refunded:

“We suggest that the IfL should be obliged to refund part of the second-year subscription paid by some of those who are registered with it, when the Regulations are revoked from 1 September 2012. We recommend that the final instalment of the transitional public funding granted to the IfL be used for this purpose, before any restitution of accrued reserves is required by the Secretary of State”

Withdrawal of 2007 Further Education Teachers’ Qualifications Regulations

Paragraph 4.2 on page 22 the Report also recommends withdrawal of the Regulations:

“The 2007 Regulations are no longer fit-for-purpose, nor are they so well-founded that amendment will deal adequately with their shortcomings. We recommend that they should be revoked with effect from 1 September 2012. We recommend in their stead a largely voluntary regime of in-service advanced practitioner training and CPD for lecturers, based on advice to employers drawn up through consultation conducted urgently by LSIS and encapsulated where appropriate in contracts issued by the funding bodies.”

The Report’s basic view on leaving things to employers is stated in paragraph 5 on page 6 of its summary:

“In all these matters we emphasise our core belief that staff training, professional updating, competency and behaviour are essentially matters between employer and employee”.

Paragraph 5.1 on page 25 of the Report passes the baton for upholding standards to OFSTED:

“In all these matters we emphasise our core belief that staff training, professional updating, competency and behaviour are essentially matters between employer and employee. There are sufficient statutory arrangements in place through, for example employment legislation and the requirements for staff performance management and learner safeguarding set out in Ofsted’s Common Inspection Framework, to ensure at least a threshold level of professional competence. Most providers will want to do very much better than that and to stand or fall according to the service they offer and the public accreditation they earn for the high quality of that service from Ofsted and others”.

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OFSTED AGREES

OFSTED Damning Evidence

Lord Lingfield’s Report in paragraph 5.4 on page 26 refers to OFSTED as the only remaining regulating body:

“The purpose of this discussion will be to help ensure that the single regulator remaining in FE monitors outcomes in a way which informs learner choice and assists employers both to further enhance their service and to support the professionalism of their staff”.

But OFSTED doesn’t sound too confident about its new role. Paragraph 2.12 on page 14 of Lord Lingfield’s Report says about OFSTED:

“This disappointing outcome appears to be compounded by the findings of researchers and of OFSTED, to the effect that decade-long reforms have had very little impact on the same faults in delivering teacher training in FE that were identified by the inspectorate in 2003. Initial teacher training programmes appear to be largely generic and theoretical, rather than being related to the professional and occupational expertise of college lecturers; mentoring continues to be weak; the system of qualifications and credits is very inconsistent among teacher training providers; and the commitment of FE employers to support their staff to attain excellence in pedagogy appears distinctly uneven”.

Paragraph 3.2.2 of Lord Lingfield’s Report on page 15 confirms OFSTED’s view:

“OFSTED has confirmed to the panel that no sound, causal, link can be made between regulatory enforcement of teaching qualification and CPD in the sector, and improvements in practice”.

GOVERNMENT AGREES TOO

Minister – “Colleges and Providers Freedom to Decide”

The Minister for Further Education, Skills and Lifelong Learning John Hayes said on Tuesday 27 March 2012:

“Moving away from an approach that enforces professionalism through regulation, to one that gives colleges and providers the freedom to decide how best to achieve high standards of teaching and learning is consistent with our policy of giving colleges freedom and power.

“It is also important that we empower staff to take responsibility for their own professional development – supported where they choose by voluntary professional body membership.”

As reported in Student Cashpoint Funding News on Tuesday 27 March 2012, John Hayes went further:

“I want to thank Lord Lingfield and the panel for their insightful report, which sets out a compelling vision for elevating the status of the further education workforce”.

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LSIS TAKES OVER

LSIS – a Ragbag of FE Functions

Though all this will be voluntary, paragraph 4.4 on page 23 of the Report gives the responsibility for piloting a new Level 5 Certificate of Education to replace DTLLS and a Level 7 Diploma in Further Education to the Learning and Skills Improvement Service (LSIS):

“The panel is convinced that in bringing together voluntarily the concerns of employers and employees, LSIS will be reflecting the essential conjunction of interests in which professionalism thrives. The review panel suggests that both government and LSIS, might consider whether there are elements of the approach of the HEA in higher education which would be suited to FE, bearing in mind the close parallels which exist between the two sectors in relation to the ‘dual professionalism’ of lecturers (occupational specialist and teacher) and the growing provision for HE in FE providers”.

The trouble is that LSIS itself now accommodates a ragbag of FE functions, having taken over from Lifelong Learning UK as the FE Sector Skills Council. It struggles within a reduced budget. Comparisons with the Higher Education Academy are hardly appropriate since the HEA operates in a more specific way.

FE Big Disappointment

All this obviously comes as a bitter disappointment to those many FE College Principals and others, who over the years have encouraged their staff to acquire more professional qualifications to raise standards.

Another problem is that any equivalence between Qualified Teacher Status and Qualified Teaching and Learning Skills status is clearly on the back burner – and with it further FE lecturers’ aspirations to teach in schools.

For what it’s worth, as Further Education policy gradually moves towards Employer Ownership of Skills, Huckfield hopes that the Association of Colleges and University and College Union will take the lead working on an acceptable induction procedure. This could start with an initial competence requirement, perhaps using some earlier City and Guilds 7300 Teacher Training qualifications – nowadays called Legacy Qualifications.

Too Big a Risk for Young People

The latest ONS unemployment statistics (October—December 2011), presented to the House of Commons Work and Pensions Select Committee on Tuesday 28 February 2012, showed 731,000 young people aged 16–24 years looking for work, excluding students. The unemployment figure including students was 1.04 million — up 22,000 on the 3 months to September 2011. The unemployment rate for 16–24 year olds, including students, is 22.2%.

Huckfield believes that leaving things to the market is far too big a risk for this key cohort when life chances are at stake.

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Social Enterprise Exchange – the Future is “Structured Investment Products”

AN ENGLISH AGENDA IN SCOTLAND

Scots Ask Questions about Short Term Survival

This is a brief reflection on the the Social Enterprise Exchange in Glasgow on Tuesday 27 March which Huckfield attended.

During the question times, especially for Alex Salmond, Scotland’s First Minister, most of the Scots asked practical questions about how their organisation might survive from this year to the next. For many English questioners the answer seemed to be more private investment.

“Structured Investment Products”

So now we all know. The future of Social Enterprise means “Structured Investment Products”.

Huckfield attended the Afternoon Masterclass Session: “Capital Advice: the risks, realities and rewards of social investment“. Anyone attending could hardly have have missed its English flavour.

Caroline Mason from Big Society Capital still saw a future for grant funding, but emphasised its role in funding technical assistance for becoming ready for Big Society Bank’s forthcoming loans. One or two near me muttered something about “surely most local banks would offer advice on getting ready for outside investment?”.

At the end of this session, contributors were asked about the next five years. Geoff Burnand from Investing for Good and Social Investment Business made several references the Scope Charity Bond, in which he had been involved. The Scope Charity Bond is a carefully structured investment product:

“The Scope Bond Programme will be listed on the Euro MTF market in Luxembourg, a recognised stock exchange which has a strong presence in capital markets and a proven record for supporting social investment. The programme will be subject to the same regulation and protection offered to corporate bond investors and a prospectus will be available on request from the programme arranger, Investing for Good.

“Alongside Investing for Good, the Scope Bond Programme has been developed through close collaboration with several other City partners including BNY Mellon, acting as fiscal agent and registrar, Capita acting as nominee holder, and with legal expertise provided by Linklaters and Weil, Gotshal and Manges, who have all offered pro bono support to the charity.”

At the end of this Afternoon Masterclass Session, contributors were asked to sum up. Caroline Mason couldn’t wait to begin lending to Social Enterprises, presumably those made “investment ready” through grant funding. Geoff Burnand saw the future in a proliferation of more “structured investment products”. As they left this session, few Scots seemed in much doubt. This was an English agenda.

Launch of the Voluntary Code for Social Enterprise

Perhaps all these investment banker contributions from South of the Border represented one of the reasons for a full house for the launch of Senscot’s Voluntary Code for Social Enterprise. The basis of the Code is that investment for personal gain is not the way to take Social Enterprise forward.

Aidan Pia, Senscot’s Executive Director, read out Laurence Demarco’s intended speech, especially its conclusion:

“The prevailing view, we believe, is that (in Mohamed Yunus`s words):

“The real power of SE can only be unlocked by the total delinking of personal gain from the social mission”.

“If we`ve got the vibe wrong – the Code will simply disappear. But if we`ve got it right, the Code will spread – and could help consolidate Scotland as a world leader in Social Enterprise”

This fitted easily alongside Scotland’s First Minister’s offer of financial assistance for Social Enterprise organisations in setting up their international headquarters in Scotland.

Conclusion

It is the Senscot Code rather than “structured investment products” which Huckfield and many Scots will take away from the Glasgow event.

Social Impact Bonds – Victorian Values with a Vengeance?

BACKGROUND

The recent Huckfield Killing Social Enterprise Softly briefing was pessimistic about the openings available for Social Enterprise and Third Sector organisations in their bidding to deliver public services.

This briefing is more pessimistic about the damage to the wider image of the Third Sector and Social Enterprises by the introduction by stealth of Social Impact Bonds.

JP Morgan “Impact Investments” Report, November 2010 and Big Society Bank Outline Proposal, May 2011

The JP Morgan Global Research Report described below advocates a new asset class of “Impact Investments” – investment and profits from supplying clean drinking water, maternity care and primary education to the world’s poorest people. Various themes from the Report are carried forward in the Outline Proposal submitted to the Cabinet Office for the Big Society Bank.

Though setting up the Big Society Bank has been delayed, as shown below, local councils are now piloting proposals for Social Impact Bonds for Children’s Services.

This Huckfield briefing seeks to develop the case that, despite current economic problems, these services should be delivered through local council, Social Enterprise or Third Sector structures and not become dependent on individual charitable donations, dormant bank accounts and investments driven by tax relief.

SOCIAL INVESTMENT TASK FORCE

This Section traces the Social Investment Task Force from its inception in February 2000, its Reports in 2003 and 2005, to its advocacy of Social Impact Bonds in April 2010.

First Social Investment Task Force Reports

This Section covers the Task Force’s Reports from 2000 to 2005.

Social Impact Bonds

This Section deals with the Task Force’s Final Report in April 2010 and its advocacy of Social Impact Bonds.

CABINET OFFICE SCALING UP

This shows how the Social Investment Task Force Report April 2010 was incorporated into the Cabinet Office Report February 2011 on “Growing the Social Investment Market“. This projects a significant shift of individual charitable donations and investments into Third Sector structures for the delivery of public services.

VICTORIAN VALUES

This Section shows that the thoughts of some Victorian Philanthropists were not dissimilar from some advocating Social Impact Bonds.

Victorian Philanthropists

Despite the expansion of philanthropy, faced by demands which could not be be met, early Victorian Philanthropists were overtaken by demands for Government-led welfare systems.

Council of the Society for Organising Charitable Relief and Repressing Mendicity

Working with the Poor Law Guardians, this well known Victorian Charity actually began campaign against further public funding and intervention.

History of National Society for Prevention of Cruelty to Children

NSPCC’s history and the gradual replacement of its services and functions by local council delivered services are described in detail. These form a background against which some local councils are currently piloting projects for some children’s services to be funded by Social Impact Bonds.

STANDING HISTORY ON ITS HEAD

Following the history of the NSPCC, this Section shows how developments in Manchester, Essex and elsewhere, through piloting projects for funding mainstream services through Social Impact Bonds, may be about to stand history on its head.

“IMPACT INVESTMENTS”:THE NEW ASSET CLASS

This Section deals with the JP Morgan Global Research Report on “Impact Investments” November 2010, its promotion of a new asset class based on profits from the world’s poorest people, and how its findings were incorporated into Outline Proposals for the Big Society Bank.

JP Morgan “Impact Investments” November 2010

This describes sections of the significant JP Morgan “Impact Investments” Report and its proposals for profitable investments through supplying clean drinking water, maternity care and primary education to the world’s poorest people.

Big Society Bank Outline Proposal May 2011

This shows how themes from findings of the JP Morgan Global Research “Impact Investments” Report were translated into Outline Proposals for the Big Society Bank.

AND, FINALLY

This Huckfield briefing expresses concern and questions the wisdom of more mainstream public services funded through Social Impact Bonds dependent on individual charitable donations and investments.

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MAIN HUCKFIELD BRIEFING BEGINS HERE:

Links have already been provided above to those sections which now follow.

SOCIAL INVESTMENT TASK FORCE

This Section covers Reports from the Social Investment Task Force from October 2000 till April 2010.

First Social Investment Task Force Reports

Like many Coalition Government ideas – Student Tuition Fees, the Work Programme, more commissioning of public service delivery to the private sector – Social Investment comes from a previous Government.

Gordon Brown as Chancellor announced this in a Speech at the NCVO Annual Conference in London on February 09 2000:

“To encourage the social enterprise sector in Britain, which can play a vital role in the economic regeneration of deprived communities the Chancellor also announced the setting up of a Social Investment Taskforce.

“The Chancellor made clear he wanted to see “more investment in the UK in social enterprises – projects which have social objectives, and are not simply profit orientated.

“…It will report by autumn 2000”.

The Social Investment Task Force described its remit on the opening page of its First Report on October 18 2000:

“To set out how entrepreneurial practices can be applied to obtain higher social and financial returns from social investment, to harness new talents and skills to address economic regeneration and to unleash new sources of private and institutional investment. In addition, the Task Force should explore innovative roles that the voluntary sector, businesses and Government could play as partners in this area.”

Among the Recommendations of the Social Investment Task Force in October 2000 were (as set out in the Chair, Ronald Cohen’s letter to the Chancellor):

  • A Community Investment Tax Credit to encourage private investment in community development
  • Community Development Venture Funds. We suggest a matched funding partnership between Government on the one hand and the venture capital industry, entrepreneurs, institutional investors and banks on the other. Initially, we suggest that £100 million be made available by the Government on attractive terms in matching funding over the programme’s duration
  • Disclosure of individual bank lending activities in under-invested communities
  • Greater latitude and encouragement for charitable trusts and foundations to invest in community development initiatives, even where these include a significant for-profit element
  • Support for Community Development Financial Institutions, including Community Development Banks, Community Loan Funds
  • Micro-loan Funds and Community Development Venture Funds

Arising from these original recommendations, the Task Force produced two further progress reports -“Enterprising Communities: Wealth Beyond Welfare” in July 2003 and “Enterprising Communities: Wealth beyond Welfare” in July 2005.

In the Social Investment Task Force 2005 Report, Sir Ronald Cohen was able to report in hits Foreword on page 1:

“The community finance development sector is now worth £400,000,000. It has financed over 9,000 businesses, created 10,000 jobs and sustained 85,000 more. This finance, which is delivered by community development finance institutions (CDFIs), has levered £160,000,000 funds from other sources into the UK’s most disadvantaged communities.”

Bridges Community Ventures released a Social Fund Report, including equity capital for social ventures. This followed Bridges’ introduction of Social Impact Reporting in August 2004.

Social Impact Bonds

Five years later, in the Final Report of the Social Investment Task Force April 2010, this had developed into advocacy of Social Impact Bonds

Chapter 3.2 “Social Impact Bonds” on page 18 of the Social Investment Task Force Report- “Social Investment – Ten Years On” in April 2010 says:

“Of £92bn health expenditure in England, only 3.7% is spent on preventative interventions. As a consequence, the root causes of social problems are seldom addressed. If more money were allocated to preventative action, there could be a significant reduction in the demand for expensive acute services in the future. However, the Government has hitherto been unable to fund preventative services as well as acute services, and consequently funds only the latter.”

The Report continues on page 18:

How the Social Impact Bond Works
The SiB focuses on specific deep-rooted social problems that are a significant cost to the taxpayer (for example: re-offending by short-sentence offenders; acute hospital admissions for elderly patients; at-risk children placed into local authority care)”.

CABINET OFFICE SCALING UP

The Final Report of the Social Investment Task Force in April 2010 “Social Investment – Ten Years On” on page 16 under “A Vision for the Future” outlines the scale of future possible investment:

“The scale of this opportunity is significant. If just 5% of the £65.6bn of capital in UK philanthropic foundations, and, over time, 0.5% of institutionally managed assets in the UK, were devoted to social investment, this would unlock over £5.5bn of financing for social projects.

“This sum would supplement the £4.4bn of grant funding that is currently made each year. If 5% of the £86.1bn estimated to be invested in ISAs (Individual Savings Accounts) were also directed to social investment, this would generate a flow of an additional £4.3bn.

“Taken together, these four sources – philanthropic foundations, institutionally managed assets, grant funding and individual savings accounts – could generate £14.2bnfor social investment”

As reported in Killing Social Enterprise Softly, the Cabinet Office paper “Growing the Social Investment Market: A Vision and Strategy” in February 2011 speaks in very similar terms. On page 26, its projections are stated clearly:

“3.9 Recent years have seen great progress. But there are many symptoms of dysfunction in what remains an embryonic and ineicient market, including:

  • Small market size. Social investment in 2010 amounted to around £190 million, compared with £3.6 billion philanthropic grant funding, £13.1 billion individual giving and £55.3 billion of wider bank lending. Individual deals tend to be very small indeed, with recent research suggesting that only 15% are over £15,000. And only a small proportion of social venture start-ups are successful in obtaining early-stage finance from a social investor”

All this shows how the work of the Social Investment Task Force was taken up eagerly by the Coalition Government. It now appears to be Government policy for significant funding increases for the Third Sector and Social Enterprise to become dependent on managed institutional and individual investments and donations.

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VICTORIAN VALUES

This Section shows how, in their advocacy of philanthropy working alongside statutory services, the thoughts and aspirations of some Victorian Philanthropists were not dissimilar from some advocating Social Impact Bonds.

Victorian Philanthropists

During the time of Florence Nightingale (1820-1910), George Cadbury (1839-1922) and Joseph Rowntree (1836-1925), the Charitable Organisation Society was one of the leading philanthropic bodies during the lifetime of Charles Dickens.

The Metropolitan Association for Improving the Dwellings of the Industrious Classes began in 1841 to build new homes for the poor. This was known as ‘5% philanthropy’, where donors could invest their money for a good cause while receiving a respectable but below-market rate of return.

It soon became apparent that none of these efforts could match the scale of the challenge. Encouraged by Electoral Reform Acts in 1867, 1884 and 1885, by the end of the 19th Century, trade unions and political movements channelled much of these energies into Government until the 1906 Liberal Government, which began to create a new Government-led welfare system.

Council of the Society for Organising Charitable Relief and Repressing Mendicity

The Fifteenth Annual Report of The Council of the Society for Organising Charitable Relief and Repressing Mendicity at a Meeting held at Willis’ Rooms, King Street, St James, London on May 23 1884, on page 27:

What Money Can Do for the Poor in Connection with the Charitable Organisation Society
“It helps to provide the means of learning the cause of distress in applications for assistance, of searching out the best kind of help, of detecting imposture: in a word, or discriminating. It is also a means of introducing better methods of relief; of introducing reforms in charitable administration; or propagating and testing principles and methods of relief and having them discussed. It makes a confederation or organisation of charity possible”.

Similar cooperation was evident between Charitable and Statutory Organisations. On page 50, the Report continues:

“Of increasing cooperation with the Poor Law Guardians there is much evidence in the Reports of the District Committees. While the feeling in favour of a reduction of out relief becomes stronger, there is rising up a new appreciation of the possibilities which the Poor Law afford for effectual charity.”

These Charitable Organisation Society reports on working with the Poor Law Guardians and Boards seem echoed by Social Investment Task Force Report references to working alongside statutory provision.

History of National Society for the Prevention of Cruelty to Children

The history of NSPCC is especially relevant since it is Children’s Services which are now being encouraged to considered Social Impact Bonds for their funding.

In July 1884 the London Society for the Prevention of Cruelty to Children was established. This soon became the National Society in 1889. since then there has been:

  • 1889 Prevention of Cruelty to Children Act
  • 1916 War Charities Act – after which the NSPCC began using street collectors to raise money
  • 1932 Children and Young Person’s Act, and the further Act of 1933. Improvements to child protection, bringing together all existing child protection legislation into one Act
  • 1948 Children Act. Establishment of local authority Children’s Committees and Children’s Officers
  • 1963 Children and Young Persons Act. Local authorities given responsibility for providing support to families at home to reduce the number of children being taken into care. In 1963 the NSPCC had a child protection staff of 325, who helped 121,565 children during that year alone.
  • During the 1970s that NSPCC staff stopped wearing their Inspectors’ Uniforms
  • 1989 Children Act brought about a further review of the services provided by the NSPCC

This Huckfield briefing wonders whether Social Impact Bonds initiated for some Children’s Services in Essex and Manchester are about to stand history on its head.

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STANDING HISTORY ON ITS HEAD

Huckfield wonders whether the Boston Consulting and Young Foundation’s “Lighting the Touchpaper – Growing the Market for Social Investment in England“, published in November 2011, has missed the point. In “Conclusion” on page 27, the Report says:

“Our survey shows that while the foundations for this revolution are solid, based on many years of nurturing from government funds and social banks, the more entrepreneurial spirit of social investment as a driver of radical innovation and social impact remains the exception rather than the rule within the market”

While this may have been the case during the currency of the Report until its publication in November 2011, the Report surely misses these developments elsewhere?

Social Finance Technical Guidance November 2011

Social Finance in November 2011 published more technical guidance on Social Impact Bonds. The “Technical Guide to Commissioning Social Impact Bonds” November 2011 in Chapter 8 from page 18 onwards gives wide reaching examples of:

  • “local authorities introducing Social Impact Bonds to fund foster with payments made on the basis of improved well-being for children and young people and reductions in the need for expensive residential care
  • DWP Innovation Fund introducing a Social Impact Bond to present young people’s becoming NEET
  • “Long term health condition management. There is considerable scope for Social Impact Bonds to support new approaches to better managing long term health conditions, such as diabetes or asthma. Any additional services funded by the Social Impact Bond, such as supporting greater self-care by patients, would need to be closely integrated with other services, such as the local GPs and/or local hospital Foundation Trusts”

In other words, detailed guidelines were now available for local councils and others seeking to introduce Social Impact Bonds.

Local Examples

On March 06 2012, Essex County Council won Government support for a new Social Impact Bond to “finance intensive family and community based work with young people on the edge of care and custody”. The Council’s statement continued:

“Social Impact Bonds will be used in Essex to fund high level programmes that support vulnerable children and help keep families together, particularly when there is a risk that a child may come into local authority care. The approach is an innovative way of attracting investment to the public sector by deploying socially motivated private investment to pay towards tackling public service issues where a dual return of social benefit and savings to the public purse can be achieved. Investors receive a payment only if a programme hits its target, thereby reducing the risk to the public sector”.

Manchester City Council on March 15 2012 reported that it would “pilot a new scheme to improve outcomes for looked after children and young people:

“Manchester City Council’s Executive today agreed to pilot a brand new scheme to improve outcomes for looked after children and young people whilst saving the Council up to £4.7m over eight years.

“Funding for the pilot scheme will be provided through a new form of public investment known as the Social Impact Bond. The Council will enter into a partnership with an ethical investor who will be contracted by the Council to both underwrite the scheme and provide the carefully vetted service itself on behalf of the Council. This third party investment, together with savings that arise as a direct result of the intervention will pay for the roll out of the scheme in the future”

Department of Work and Pensions in Perth, Scotland. On March 15 2011 the Herald reported:

“Scotland’s first social impact bond (SIB) has attracted a group of individuals and small businesses to invest in funding a Scottish charity’s work with young people.

“The SIB will enable the Perth-based YMCA to benefit from the new funding model, trialled in England last year, which will target the corporate social responsibility budgets of bigger companies as well as philanthropic investors and charitable trusts.

“SIBs aim to ease the burden on public sector funding by offering investors returns linked to measurable social outcomes in infrastructure projects. The Perth project is one of six across the UK about to be announced by sponsoring agency the Department of Work and Pensions, a conference in Glasgow heard yesterday.

“Jill McGraith, acting chief executive at YMCA, said: “We thought there would be a couple of big investors but what happened was small individuals and businesses came forward.”

One Huckfield conclusion from this is that the introduction of Social Impact Bonds for funding Children’s and Young People’s Services may risk increasing their vulnerability through lack of willing investors and difficulties in measuring performance.

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“IMPACT INVESTMENTS”:THE NEW ASSET CLASS

This Section shows how a Report from JP Morgan Global Research, the Rockefeller Foundation and Global Impact Investing Network formed the basis of the Outline Proposal for the Big Society Capital Bank.

JP Morgan “Impact Investments” November 2010

One of the most important rent publications forming a theoretical underpinning for much of this is “Impact Investment” in November 2010 from JP Morgan Global Research, the Rockefeller Foundation and Global Impact Investing Network

This collaborative research explores how so called “impact investments” offer a new alternative for channelling large-scale private capital for social benefit. The report also includes the first large-scale data analysis of return expectations and, when available, realised returns for impact investments.

“Exploiting Poor People”

Page 12 of the JP Morgan Global Research Report on “Current Market Landscape” is candid about the risk of poor perceptions of “impact investments:

“Managing impact investments
The risks for impact investments are similar to those for venture capital or high yield debt investments, with heightened reputational and legal risks, particularly in emerging markets where regulatory infrastructure can be onerous and the rule of law is less well defined. Further, critics may argue that impact investments exploit poor people for the sake of profits. Indeed, exploitation and mission drift are risks that are amplified when poor populations are concerned, but we believe the potential of impact investing to create a pathway out of poverty, combined with the emergence of systems to track and manage social performance, outweigh these risks. Investors need to be vigilant to ensure that the social impact and outcomes are delivered by monitoring social performance.”

“Social Impact Bonds”

Under “Investment Structures”, the JP Morgan Global Research Report on page 20 describes Social Impact Bonds:

“Some more innovative investment structures have also been devised, including bonds that employ equity-like features that allow the investor to benefit from financial profits or even, in the case of the UK’s Social Impact Bonds, from successful social impact. The Social Impact Bonds, structured by the UK-based investment organization Social Finance, employ government commitments to use a portion of the savings that result from improved social outcomes to reward non-government investors that fund the intervention activities. The existence of such innovative structures allows investors with different (social and/or financial) return and risk appetites to invest via the vehicles that best align with their goals”

“Base of the Pyramid”

Throughout the JP Morgan Global Research Report its pages are candid about making profits from supplying services to some of the world’s poorest people. Typically, as shown on page 8, “In this report, we focus primarily on investments that target the ‘base of the pyramid’ defined by the World Resources Institute as people earning less than $3000 a year”

Clean Water for Rural Areas

On page 52 the JP Morgan Global Research Report describes the profit to be made through supplying “Clean Water for Rural Areas”

“Revenues, margins, capital and profit
As noted in Table 12, reaching 273 million households over the next ten years results in potential revenues of $29–$71bn. Applying an operating margin of 10% suggests profit potential of $2.9–$7bn and applying our one-to-one assumption of invested capital to year 10 revenues suggests required capital of $5–$13bn”

Maternal Care in Urban Areas

The JP Morgan Global Research Report on page 53 on Health: Maternal Care in Urban Areas

“The price ranges from INR 2,000 (about $40) for a normal delivery in a general ward to INR 14,000 (about $300) for a Caesarian delivery in a private room. Multiplying these prices by the number of deliveries over the 10 year period gives us an estimated revenue opportunity of $2–$14bn. Factoring in a profit margin between 5% and 10% we calculate a potential profit opportunity of $0.1–$1.4bn. Based on revenues in year 10, we conclude that potentially $0.4–$2.5bn of impact investment capital could be allocated to fund hospitals that deliver maternal health care over the next 10 years.

Primary Education

In Education, on “Revenues, Margins, Capital and Profits for Primary School Age Children” the JP Morgan Global Research Report says on page 59:

“Making a more conservative assumption (particularly given we are comparing fees charged by schools that are different from the ones for whom we consider the operating cost), we will assume profit margins between 10% and 20%, which gives us an estimate of the potential profit opportunity of $2.6–$11bn. In our analysis, year 10 revenues provide the estimate for required funding of $5–$10bn.”

Alongside many readers of this briefing, as expressed on page 12 of the JP Morgan Global Research Report , Huckfield shares concerns about a new asset class arising from profits through supplying clean drinking water, basic maternity services and primary education to some of the world’s poorest people.

Big Society Bank Outline Proposal May 2011

These Huckfield concerns are greater since the lead author of the JP Morgan Report is now the Chief Executive of Big Society Capital – the Big Society Bank.

All this gives the at least an appearance of making a short conceptual leap from profits out of clean water, maternity care and primary schools in India and Africa to providing services in more deprived areas in England.

The Big Society Bank Outline Proposal submitted to the Government in May 2011 includes on page 2: Section 1: Mission, Objectives and Operating Principles:

  • Achieving better attendance at schools
  • Supporting disabled people and other disadvantaged groups into the workplace
  • Reducing homelessness and boosting affordable housing
  • Reducing re-offending and promoting better alternatives to custody, particularly for younger people
  • Delivering better outcomes for vulnerable children
  • Delivering better prospects for chaotic families
  • Providing better access to drug and alcohol rehabilitation programmes
  • Improving healthcare in the community and reducing the need for hospital admissions
  • Boosting preventative action in order to reduce the strain on the health system from chronic diseases
  • Improving access to and control over finance for individuals excluded from mainstream banking
  • Achieving effective mixed use of community assets, thereby enhancing community cohesion
  • Encouraging entrepreneurship to stimulate employment in under-invested areas

On page 2, Big Society Bank’s Objectives will be to help:

  • Develop intermediaries to operate effectively between sources of capital and those in need, be they social ventures or individuals, and so to augment the flow of investment and skills to the social sector
  • Connect social entrepreneurs to the capital markets so that they can access growth capital
  • Support financial innovation so that social organisations can be rewarded for their performance in delivering valued social outcomes
  • Develop the investor market through the creation of social investment vehicles that support high growth ventures, as well as smaller local organisations
  • Support the development of community-led, social enterprise initiatives to improve opportunities for young people

To Promote Best Practice, on page 7, specifically the Big Society Bank will:

  • Promote transparency of intermediaries in the utilisation of funds provided by the BSB
  • Publish in its Annual Report details of the social and financial performance of its investments
  • Promote innovative products such as Social Impact Bonds that link investment returns to social outcomes
  • Promote initiatives that help communities to raise local capital for local provision of services

All this surely represents an amalgamation of the Social Investment Task Force on Social Impact Bonds April 2010, the JP Morgan Global Research Report, November 2010 and the Cabinet Office paper “Growing Social Investment: A Vision and Strategy” of February 2011?

AND, FINALLY

Huckfield and many others still believe that many of these services should still form the basis of delivery by Central and Local Government and appropriately funded Third Sector and Social Enterprise organisations, rather than their becoming dependent on individual charitable donations, dormant bank accounts or the Big Lottery.

All of this is taking place against a background where, following the Chancellor’s Budget of Wednesday 21 March 2012 the Chartered Institute for Personnel and Development and Office for Budget Responsibility are predicting that one in seven public sector jobs will now be lost. They projected that 880,000 public sector jobs will be lost by 2017.

As more of these services become funded through Social Impact Bonds, how long will it take before we see NSPCC uniformed Inspectors back on the streets?

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A Ray of Hope for Social Enterprise

BACKGROUND

The Huckfield Killing Social Enterprise Softly briefing last week was pessimistic about the openings available for Social Enterprise and Third Sector organisations in their bidding to deliver public services.

The Work Programme is the Government’s preferred delivery model. With a few large contracts and major providers taking the risk it’s easy to administer. Social Enterprises and the Third Sector are very junior partners. Killing Social Enterprise Softly also mentioned the way in which HM Prisons and the National Offender Management Service are now contracting out more HM Prison and offender management services, again using the prime contractor model.

With many others, Huckfield on Friday 24 February attended a briefing by SERCO, Catch 22 and Turning Point at Durham University, with SERCO as lead partner in The Local Alliance. Another partnership of HM Prisons, Working Well, Shaw Trust and Mitie is also doing the rounds. No wonder that some Durham questioners wondered whether they should submit Expressions of Interest to more than one prime!

Well Done, NOMS

National Offender Management Service is now offering a ray of hope for Social Enterprises and the Third Sector in England. The NOMS briefing Huckfield attended on Wednesday 14 March in Leeds was much more cheering since the presenters clearly wanted to support Social Enterprises to take part.

Congratulations are due to the NOMS management team who are delivering this ESF Technical Assistance programme, especially for taking the trouble to hold this series of seminars at an appropriate level. This is the closest that many of us have come to the “ESF Good Old Days” before CoFinancing, under which organisations had more bidding flexibility. Perhaps there might be more Huckfield thoughts on ESF CoFinancing another day?

To Save Yourself Time

Since this is a detailed Huckfield briefing, to save time, use this link to go straight to HOW TO BID below. This enables you to skip background details and takes you directly to details of the NOMS ESF Technical Assistance current bidding process for Social Enterprises in England.

THE NOMS EXAMPLE

This Section below describes other ESF CoFinancing Organisations which may have access to Technical Assistance support for Social Enterprises and the Third Sector. ESF Technical Assistance is not delivery funding but funding to enhance delivery capabilities.

Other ESF CoFinancing Organisations Please Copy

This Section below suggests lessons for others from the way in which NOMS is operating its ESF CoFinanced Programme. This Section also mentions Wise Group – a Social Enterprise from Scotland – which is delivering the DWP’s Troubled Families “Family Wise” ESF programme in the North East.

TECHNICAL ASSISTANCE

This Section below describes ESF Technical Assistance and how NOMS will operate its Programme to support Social Enterprises and the Third Sector.

ESF Technical Assistance

This Section below shows how the European Social Fund defines Technical Assistance.

NOMS Technical Assistance

This Section below describes how NOMS will operate ESF Technical Assistance to support Social Enterprise and the Third Sector.

NOMS Rationale for Technical Assistance

This Section below shows NOMS’ reasoning behind using Technical Assistance in this way.

HOW TO BID

This Section below describes in detail the way in which the bidding process will operate.

Main Aim of this Bidding Opportunity

This Section below describes some key features of the bidding process.

Approach to Bidding

This Section below describes what NOMS seeks to achieve through inviting Social Enterprises to bid for Technical Assistance support.

Timescales and Funding

This Section below describes the timescale and funding ‘lots’ for which Social Enterprises can bid. There are 15 bidding ‘lots’ across England.

Key Bidding Requirements

This Section below describes the most important issues to keep in mind while initiating a bid. Once bidders register their interest, there is time between April and June 2012 to work up a full proposal.

Projected Outcomes

This Section below shows what NOMS would like to achieve from the Technical Assistance bidding process.

NEXT STEPS

This Section below gives further details of forthcoming Huckfield briefings, which will focus on encouraging other ESF CoFinancing Organisations to follow the NOMS example of making Technical Assistance available to Social Enterprises and the Third Sector.

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MAIN HUCKFIELD BRIEFING BEGINS HERE:

Links have already been provided above to those sections which now follow.

THE NOMS EXAMPLE

This Section provides further background on NOMS Technical Assistance bidding.

Other ESF CoFinancing Organisations Please Copy

Though the Work Programme has an Innovation Fund available to assist organisations, this is not processed in the same way.

This Huckfield briefing hopes that other ESF CoFinancing Organisations, including the Department of Work and Pensions and Skills Funding Agency – which have bigger ESF allocations than NOMS – will please copy the NOMS example. Their ESF CoFinanced programmes include Technical Assistance. Following further discussion, some of this might be used in the same way.

DWP uses ESF to support a range of delivery programmes, including supporting troubled families. Many DWP and other programmes seek to reach those hardest to help. This is not ideal territory for big prime contractors, which need the services of smaller Social Enterprises and Third Sector organisations to achieve their outputs. At least one of the DWP’s ESF CoFinanced Troubled Families prime contractors – the Wise Group in the North East – is a strong Social Enterprise.

Though this Huckfield briefing recognises that the current 2007-2013 EU Structural Funds Programme is nearing a conclusion, previous EU Programme experience shows it will take until 2015 to wind up the Programme. Huckfield briefings will continue to press for other ESF CoFinancing Organisations to use any Technical Assistance in ways similar to NOMS and also for some ESF in the new 2014-2020 EU Structural Funds Programme, when this is agreed, to be used in the same way.

The NOMS High-level specification for Social Enterprise (SE) Consortia Building programme (Technical Assistance funded) also refers to page 5 of the EU Sustainable Development Strategy 10917/06 from 2006:

“INVOLVEMENT OF BUSINESSES AND SOCIAL PARTNERS
Enhance the social dialogue, corporate social responsibility and private-public partnerships to foster cooperation and common responsibilities to achieve sustainable consumption and production”.

A further Huckfield briefing will feature Community Benefit in Sustainable Procurement, which also supports Social Enterprise and Third Sector delivery and fits within the EU Sustainable Development Strategy.

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TECHNICAL ASSISTANCE

This Section describes how NOMS will use ESF Technical Assistance to help Social Enterprises and the Third Sector.

ESF Technical Assistance

This Technical Assistance is not a bidding opportunity to deliver services but rather to help Social Enterprises to form consortia or new structures to deliver. The European Social Fund England site explains Technical Assistance:

“Technical Assistance (TA) funds finance the preparatory, management, monitoring, evaluation, information and control activities of the Operational Programme, together with activities to reinforce the administrative capacity for implementing the funds, at national and regional levels. These funds are predominantly used to support CoFinancing Organisations (CFOs) in delivering ESF as they are responsible for 95% of programme activity”.

NOMS Technical Assistance

On page 3 of the High Level Specification for Social Enterprise (SE) Consortia Building programme , NOMS has defined its use of Technical Assistance more specifically. Through using ESF Technical Assistance NOMS seeks:

“to develop the Social Enterprise market place to better enable such organisations to participate in the current and future Cofinance programmes. This procurement opportunity has the expressed aim of enabling consortia building within the social enterprise sector, with a particular focus on SMEs in the market. This opportunity is designed to enable the sector to organise into entities or structures that can, through working with NOMS CFO and others help to deliver policy objectives.

“This opportunity is therefore designed to test how enterprises and other organisations can work together to create a ‘value’ or ’supply chain’ that can offer offenders the opportunity to gain skills and employment (supported by other multi-pathway interventions). These value or supply chains should also create environmental and social benefit beyond that experienced by the participants themselves and which is offered through a single contract to the Authority or one of its prime providers.”

It is important to note that though this is a bidding opportunity for NOMS ESF Technical Assistance, the successful Social Enterprises do not necessarily have to use their new structures for NOMS delivery. However, since NOMS has regional prime contractors across England, it is advisable to discuss any bids with them first. Contact details are provided below in HOW TO BID below.

Rationale for NOMS Technical Assistance

The High Level Specification for Social Enterprise (SE) Consortia Building programme in Background on page 1 shows that:

“NOMS Co-Financing (CFO) Programme will provide support to approximately 110,000 offenders by December 2014. The Co-Financing Programme is supported by money from the European Social Fund (ESF) and then matched with complimentary delivery through NOMS contracted out provision. Estimated total programme value is in excess of £275m. Delivery is via a prime or consortia contractor model, with specialist delivery provided by sub-contractors or partners.

“As part of the delivery requirement, each prime provider must have a Social Enterprise element and there should be a strong link between the main programme and the additional work commissioned via Technical Assistance”.

NOMS deserves credit here for insisting that prime contractors must include Social Enterprise elements – which this Technical Assistance programme is designed to support.

Page 1 of the High Level Specification for Social Enterprise (SE) Consortia Building programme continues with an explanation of why NOMS is doing this:

“The government is committed to removing pre-qualification processes for contracts under £100,000 but this is unlikely to impact on CFO procurement as the lots have been and will probably remain substantially above that level. The only opportunities therefore for SME Social Enterprises to participate would be either as part of a substantive consortium able to meet the prime provider thresholds or more likely as a sub contractor.

“The current CFO phase 2 contracts (worth in total £89m) have 419 subcontractors /partners, of which only 36 (8.5%) are currently identified as Social Enterprises. This relatively low level of representation, together with the anecdotal evidence collected at NOMS CFO Programme regional events and more informal consultation indicates that some structural intervention is necessary in order to achieve programme objectives”.

NOMS thus clearly recognises that there is inadequate participation from Social Enterprises and the Technical Assistance programme seeks to do something about it.

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HOW TO BID

This Section highlights some of the main points to keep in mind during the bidding process.

Main Aim of this Bidding Opportunity

Page 3 of the High Level Specification explains:

“NOMS CFO has secured additional Technical Assistance funding from ESF to develop a number of elements to increase the effectiveness of the Co-financing Programme, which will deliver services to offenders to increase access to mainstream opportunities up to 2014. One of these elements includes a programme of work designed to develop the social enterprise market place to better enable such organisations to participate in the current and future Co-finance programmes”

On page 4 of the High Level Spefication, NOMS explains:

“The primary objective is to award grants for the creation of new SE consortia models that will be able to better participate in current and future tendering opportunities. The Authority will also be providing Technical Support to underpin this procurement, with a separate procurement opportunity to be launched during the coming months for defined Technical Support.”

“Potential consortia models will need to demonstrate how multiple partners (or elements of the chain) offer specialist services or capacity or trading environments; each will also need to demonstrate as part of contract compliance, the additional value they are creating within the community or area in which they are/will be operating. The focus of this procurement is the development of the SE market place and the ability of small and medium sized enterprises to participate in wider CFO and other programmes.”

Approach to Bidding

The High Level Specification continues on page 4:

“Potential consortia models will need to demonstrate how they are supporting this development and incorporating partners from the sector. Potential consortia models will also need to evidence the strength of the SE offer in their proposal and the number of organisations involved”.

Though earlier information about this bidding opportunity indicated a deadline of Friday 23 March 2012 for Expressions of Interest, NOMs has made it clear that it will be acceptable for Social Enterprises to express an interest until the beginning of April. Since there is not yet an Official Expression of Interest Form, it is best to e mail Simon Ambrose at NOMS. His contact details are: Simon Ambrose, initial NOMS contact.

  • Simon’s phone is: 0300 047 5902
  • Simon’s address is: 2nd Floor, 2.15 Clive House, 70 Petty France, London, SW1H 9EX

It is only necessary at this stage for a bidder or lead bidder to express an interest, perhaps with a brief summary of what is intended. Though no official Expression of Interest forms are yet available, contact with NOMS ensures that they register your details and ensure that interested Social Enterprises receive all relevant information.

There will be a period from April until June to submit a full application. This April till June period should afford good time to enable new partnerships and consortia to develop their offering. They will have from November 2012 until 2014 to deliver their project.

At the Leeds Seminar on Wednesday 14 March, detailed advice was on offer about the kind of Third Sector organisations which might be suitable for delivery of services, whether a new legal body, lead body or external organisations. Once formed or strengthened, these new structures might proceed to deliver a wider range of services – not necessarily for NOMS prime contractors.

While at this stage only £1.25mn is on offer for ESF Technical Assistance to help Social Enterprises to form consortia and develop their capacity, all this is targeted directly at and biased in favour of Third Sector organisations.

There was also guidance at the Seminar on the constitutional structures which Third Sector bidders might ultimately assume – ranging from Unincorporated Organisations and Charitable Incorporated Organisations through Industrial and Provident Societies and Community Benefit Societies to Community Interest Companies.

The Leeds Seminar also strongly recommended making contact with the NOMS prime contractors for the areas concerned, since they obviously have an interest in the further development of their delivery capacity.

The NOMS Prime Contractor in the North East is Pertemps, where the contact is Mark Harrison. Contact details are: Mark Harrison – initial Pertemps contact

  • Mark’s phone is: 01642 495 460 and 077 396 77225
  • Mark’s address is: Pertemps People Development Group, 7-9 Queen Street, Redcar TS10 1DY

The NOMS Prime Contractor in the North West is Merseyside Probation Trust, where the contact is Tracey Hill. Contact details are: Tracey Hill – initial Merseyside Probation Trust contact

  • Tracey’s phone is: 01928 713 555
  • Tracey’s address is: Runcorn Probation Office, Norton House, Crowngate, Runcorn WA7 2UR

Once again, potential bidders are strongly advised to engage in an informal pre bidding dialogue with the relevant NOMS prime contractor to ensure that they are aware what you seek to do and may be able to help. If successful, Social Enterprises which receive Technical Assistance will be in a good position to assist with prime contractor delivery.

The NOMS CoFinanced ESF consists of £1.25mn with bids open for 15 lots:

England (excluding South West):

  • Lot 1: 1 x £250,000 This is for proposals that have national coverage
  • Lot 2: 2 x £150,000 These are for proposals that are at a regional level
  • Lot 3: 8 x £50,000 These are for ‘local’ proposals

South West (including Cornwall):

  • Lot 4: 2 x £100,000
  • Lot 5: 2 x £50,000

Once projects are up and running, the Technical Assistance grant at 100% will run from from November 2012 until October 2014. Additional technical support and advice will be made available to consortia lead organisations at different stages of the procurement process to enable them to strengthen and clarify their offer. The support will be universally available to all successful bidders at the respective stages within the same value lot.

Key Bidding Requirements

Page 6 of the High Level Specification shows that potential bidders should be able to demonstrate:

  • The viability of creating a value or supply chain that will result in a legally constituted consortium established as a Social Enterprise. Potential bidders must also ensure that they can evidence the ability to incorporate Social Enterprise partners in their proposed consortia models as well as evidence of engagement and commitment from identified partners.
  • That they have utilised the access to technical support (for example legal, governance, financial, HR) that will be provided by the Authority to assist in the development of their consortia, or utilised their own alternate support to evidence the viability of their proposals
  • That they have developed and can offer referral routes that will deliver skills, employment and where included other support (across the reducing re-offending pathways) for offenders and which can also demonstrate a wider impact within the communities or societies within which they are operating or delivering. Such impact may be financial, social, economic, re-generational, environmental or other impact that, for example fits with the EU’s definition of sustainable development
  • The effectiveness of their model through accepting referrals from CFO providers, probation trusts or prisons in sufficient numbers relevant to the scale of the offer outlined in the bid and through subsequent outcomes related to skills and employment.
  • The ability to participate in and contribute to the shared learning around evidencing social value in a way that will help test the approach envisaged by the Public Services (Social Value) Bill
  • That the potential consortia models are capable of funding their defined model through trading activity, social finance, contracts with CFO prime providers or funding obtained through other potential stakeholders (for example local or health authorities or housing associations) as a consequence of or in relation to the wider social impact that can be achieved

All this means that a wide range of technical support, additional posts, structures, systems and other changes might be funded – provided that NOMS can see that the Technical Assistance really is making a difference. NOMS will carry out usual required ESF monitoring duties.

Projected Outcomes

Page 6 of the High Level Specification shows that among NOMS’ anticipated outcomes will be:

  • 15 legally constituted consortiums with which the Authority or its providers can contract (through a single contract with each consortium) to support the delivery of objectives and outcomes outlined in their bids.
  • 15 cohesive (but potentially multi-faceted) referral routes that will deliver skills, employment and where included other support (across the reducing re-offending pathways) for offenders and which can also demonstrate a wider impact within the communities or societies within which they are operating or delivering. Such impact may be financial, social, economic, regenerational, environmental or other impact that, for example fits with the EUs definition of sustainable development.
  • Consortia to demonstrate the effectiveness of their model through accepting referrals from CFO providers, probation trusts or prisons in sufficient numbers relevant to the scale of the offer outlined in the bid and through subsequent outcomes related to skills and employment.
  • 15 consortia capable of funding their defined model through trading activity, social finance, contracts with CFO prime providers or funding obtained through other potential stakeholders (for example local or health authorities or housing associations) as a consequence of or in relation to the wider social impact that can be achieved.

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NEXT STEPS

Huckfield is a keen supporter of Social Enterprises. Further Huckfield briefings will feature:

  • discussions with possible Social Enterprise bidding organisations in the North East and North West with support and guidance
  • pressing for other ESF CoFinancing Organisations to use ESF Technical Assistance in similar ways to NOMS to support Social Enterprise and Third Sector Organisations
  • encouraging the Scottish Government in discussion with DWP and others to use CoFinanced ESF in Scotland in similar ways, including support for the Work Programme. Further Huckfield briefings will cover the Innovation Fund for the Work Programme, since initial bidding for Round 2 has just closed
  • encouraging and lobbying UK and Scottish Governments and ESF Cofinancing Organisations to make available ESF bidding opportunities for Social Enterprise and Third Sector Organisations, not just for Technical Assistance, but to fund their delivery too.

Finally, further Huckfield briefings will provide information as it becomes available.

So why not Subscribe to Updates in the right hand panel? It’s complete free.

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Killing Social Enterprise Softly

BACKGROUND

This is a long and detailed Huckfield briefing about what is happening in Social Enterprise and the Third Sector. It might even be called ‘the Strange Death of Social Enterprise’. In summary, it shows that national London-based Third Sector Organisations are gradually undermining the basis of Social Enterprise.

This briefing – with apologies for its length and detail – shows that the dividing line between Social Enterprise, the wider Third Sector and private sector is already blurred, with the result that many looking on now find difficulty telling what is a Social Enterprise.

Many endeavours of Third Sector national organisations to extend the influence and heighten the status of Social Enterprise and Third Sector organisations in public service delivery are commendable.

But their downside is that many in the media and wider public no longer truly understand or recognise a Social Enterprise or Third Sector structure. “Social Enterprise” now stretches all the way from private companies and multinationals with a progressive Corporate Social Responsibility to local community structures whose main purpose is changing lifestyles and communities

There are some interesting recent examples of this:

BBC Newsnight Programme

One occurred during a BBC “Newsnight” Programme on Tuesday 21 February 2012 in its coverage of a report “Social Enterprise Schools – a Potential Profit Sharing Model for the State Funded School System” by the Policy Exchange, a right leaning Think Tank. The Report described schools run by for profit companies as Social Enterprises. Despite a rebuttal by Social Enterprise UK, many people must now be wondering what constitutes a Social Enterprise.

Cabinet Office “Growing the Social Investment Market”

Before this, there was the Cabinet Office document “Growing the Social Investment Market: A Vision and Strategy” February 2011. This clearly saw the potential of the Social Enterprise contribution of 1.5% of GDP to “help unlock a slice of the £95 billion of UK charitable income and endowment assets for social investment”.

This Cabinet Office document sought to use the size of the Third Sector as an indicator of the size of private investment which it might attract. The SIZE OF SOCIAL ENTERPRISE SECTOR is discussed later.

“Teach Yourself Lansley”

Though completely unconnected with anything above, one of the best recent examples was in the Guardian’s signposting on Thursday 02 March 2012 to John Lister’s “Teach Yourself Lansley“. This defined Social Enterprise as follows:

“Social enterprise: (oxymoronic noun) interim nonprofit private provider paving the way for proper private takeover”

Senscot’s Social Enterprise Code of Practice

Against this background of increasing confusion, Senscot (the Social Entrepreneurs Network Scotland), of which Huckfield is a Board Member, at the Social Enterprise Exchange at SECC on Tuesday 27 March 2012 will launch its own Code of Practice. This includes:

  • a more precise definition of Social Enterprise and its operating environment
  • no dividends for private external investors
  • an “asset lock” to prevent the sale of assets.

To Save Yourself Time

Since this is a long and detailed Huckfield briefing, to save time, use this link to go straight to CURRENT SITUATION below. This enables you to skip background details and takes you directly to more recent developments.

HISTORY

This Section below provides links and gives a brief summary of developments in the Department of Work and Pensions/Job Centre Plus and the Department of Health, leading to David Freud’s important paper in March 2007 “Reducing Dependency, Increasing Opportunity: Options for the Future of Welfare to Work: An Independent Report to the Department for Work and Pensions“, which sets out policies for the “prime contractor” mechanism which now forms the basis for the Work Programme across the UK and National Offender Management Services in England. Freud’s “prime contractor” mechanism will probably extend to future contracting for NHS services under the Coalition’s Health and Social Care Bill 2011 – the biggest shakeup of the NHS since its inception.

Employment Zones April 2000

The introduction of the policy for Employment Zones began significant contracting out of DWP/JCP services to independent providers. This was one of the corner stones for much current delivery.

Public and Commercial Services Union (PCS) Paper June 2006 and ACEVO Response

In a timely and prescient paper, the PCS Union warned that the dividing line between the private sector and Third Sector was already being blurred.

Developments in NHS Commissioning and Procurement

From 2005 to 2008, strong policies were emerging from the Department of Health, including a Social Enterprise Unit, which favoured the development of Social Enterprises as NHS service providers.

PREPARING THE GROUND

This Section provides links and describes how the previous Government prepared the ground for the incoming Coalition Government to introduce the Work Programme model as a basis for future Government commissioning.

David Freud’s “Welfare to Work” Report March 2007

Though only parts of David Freud’s Report were introduced by Gordon Brown’s Government, it laid the foundations for the Coalition’s Work Programme and its policy of using “prime contractors”.

James Purnell’s White Paper “Reforming Welfare for the Future” December 2008

This White Paper in December 2008, with its endorsement of the DWP Commissioning Strategy, began further to develop the basis for the Coalition’s commissioning policy. Its commissioning for Flexible New Deal delivery paved the way for the Work Programme.

ACEVO Third Sector Task Force February 2009

The ACEVO Task Force, despite good intentions, signalled its conditional acceptance of the Government’s proposed reforms, including significant prime private sector contractors.

CURRENT SITUATION

This Section provides links and summarises events leading to current policies.

Modernising Commissioning Green Paper December 2010

This Green Paper sets out the Coalition’s intention to widen public sector commissioning procedures.

“Growing the Social Investment Market” February 2011

This Cabinet Office paper made clear that an expansion of Third Sector public service delivery would need a range of policies, including tax incentives, to stimulate more direct private investment in the Third Sector.

Open Public Services White Paper July 2011

The White Paper is specific about opening public service delivery to wider tendering and commissioning.

Tax Incentives for Private Investment 2012

This Section describes NCVO and Social Enterprise UK proposals for tax incentives to stimulate private investment in the Third Sector.

SOME LATEST DEVELOPMENTS

This Section provides links and describes some latest developments which may have contributed to a blurring of boundaries between Social Enterprise, the Third Sector and private involvement.

ACEVO and NHS Competition

ACEVO policy supports more competition in NHS delivery – a different line to most organisations seeking to oppose Andrew Lansley’s Health and Social Care Bill.

ACEVO’s Structure

Despite ACEVO’s good intentions through using its structures to broaden the operational base of the Third Sector, some of these risk causing confusion externally between private and Third Sectors.

Social Enterprise UK, BBC Newsnight and the Policy Exchange

BBC Newsnight’s recent coverage of the Policy Exchange Report on “Social Enterprise Schools” and the response of Social Enterprise UK has done little to clear wider public misunderstanding of what constitutes a Social Enterprise.

National Audit Office and “The Introduction of the Work Programme”

Extracts from the first National Audit Office Report on the Work Programme in January 2012 show that Third Sector subcontractors are not treated well.

SIZE OF SOCIAL ENTERPRISE SECTOR

This Section highlights significant differences between Social Enterprise UK and others on the size of the Social Enterprise sector in the UK. These differences in definition also contribute to wider public misunderstanding. A more precise definition is needed on what constitutes a Social Enterprise – which is what the Senscot Code of Conduct seeks to do.

SHORT NOTE ON POLICY IN SCOTLAND

Through dedicated programmes, this short section explains how the Scottish Government’s more direct support for Social Enterprise represents a different policy approach. Future Huckfield briefings will provide more details on policies in Scotland.

CONCLUSION

Drawing together themes from above, this Section offers conclusions and pointers to the future.

National Offender Management Service and Prisons in England

Bidding for delivery of National Offender Management and HM Prison Services represents the “second wave” of prime contractor commissioning, involving different kinds of partnerships. Huckfield has attended a briefing for these.

Unions and The Third Sector

Unions are showing increasing interest and involvement in communities, the Third Sector and not for profit structures. As their membership from these sectors increases, they will resist further private sector investment.

And, Finally

Some pointers for the future. Despite the policies of their national organisations, through increasing private sector involvement and payment by results, many Social Enterprises and Third Sector organisations will draw their own dividing lines to distinguish themselves from the private sector.

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MAIN HUCKFIELD BRIEFING BEGINS HERE:

Links have already been provided above to those sections which follow.

HISTORY

This section offers a brief history of some of the main background events leading to the publication of David Freud’s “Welfare to Work” paper in March 2007. It is not exhaustive but seeks to highlight important developments leading to the current situation.

Employment Zones April 2000

The first foundations of the current Coalition Government’s Work Programme were laid with external provision of Department of Work and Pensions and JobCentre Plus services 12 years ago under New Labour.

Following trials in pilot areas, contracting out of the Department of Work and Pensions/Job Centre Plus services began with Employment Zones in April 2000. As described in November 2003 Report “The Wider Labour Market Impact of Employment Zones” by the Warwick Institute for Employment Research:

“Employment Zones (EZs) were introduced in April 2000 as a means of tackling the relatively high levels of long-term unemployment that persisted in some localities despite the general fall in the number of claimant unemployed in Great Britain. A total of 15 areas were designated as EZs and within these areas the main programme for long-term unemployed adults – New Deal 25plus – was replaced by the EZ programme. EZs represented a radical approach to tackling the problem of long-term unemployment. The new approach was characterised by a ‘client centred’ approach (emphasising personal choice and client responsibility), flexible delivery of services funded through a Personal Job Account and a focus on progression into sustainable employment (reinforced by a regime of output related payments to zone contractors)”.

The Warwick Institute of Employment Research Report concluded on page 77:

“The key finding of both studies is that the EZ programme had a small, positive impact on the programme target group, relative to their situation when supported by mainstream Jobcentre Plus services and provision for adult long-term unemployed (ND25plus). The findings were remarkably consistent. Both studies found that there was a measurable and significant reductions in the stock of adult long-term unemployed in the EZs areas. The time series analysis of unemployment outflows found an increase of around one percentage point in the aggregate outflow rate of the adult long-term unemployed in EZs. The analysis of individual data found that this impact was greatest for those who became newly eligible for the programme rather than the stock of those already eligible at the start of the programme”

In 2003 the Employment Zone approach was extended to include 18-24 year olds who had previously participated in New Deal for Young People (NDYP) and to allow those who were significantly disadvantaged in obtaining employment to join the programme at an early stage. Prior to April 2004 one contractor in each area operated the EZ but in April 2004 the six largest EZs were converted to multiple provider zones.

In his Independent Report to the Department of Work and Pensions on March 05 2007, “Reducing Dependency, Increasing Opportunity: Options for the Future of Welfare to Work” David Freud on Employment Zones on page 54 wrote:

“Since 2000 the Department has experimented with contracting out complete programmes in 13 areas, called Employment Zones. In these the long-term unemployed (and in some cases lone parents) are referred to private providers for a period of 30 weeks, with largely outcome related payments based on job entry and retention for 13 weeks.

“There is now a wide body of research on these pilots, which suggests that the greater flexibility in Employment Zones also leads to improved outcomes – but at a higher price. As Table 4 shows, job starts in Employment Zones are six percentage points higher, at 40%, than their comparators. For sustainability the gap is even larger with Employment Zones achieving 34% – up 9 percentage points. The evidence suggests that single provider zones do rather better than multiple providers – certainly in terms of starts and more marginally in terms of sustainability”.

This shows that from 2000 onwards, contracting out of significant DWP and JobCentre Plus provision and delivery was gradually becoming a permanent feature.

Public and Commercial Services Union (PCS) Paper June 2006 and ACEVO Response

Against this background, the Public and Commercial Services Union showed increasing concern about contracting out of services delivery.

In June 2006 a paper “Third Sector Provision of Employment-Related Services“, by Steve Davies from Cardiff University and published by the PCS Union, highlighted growing difficulties caused by this wider array of Third Society organisations.

In his Forward to the paper, PCS General Secretary Mark Serwotka highlighted these difficulties:

“Even the term “Third Sector” itself seems to be a questionable one. The leading organisation lobbying for contracting out employment services – the Employment Related Services Association (ERSA) – is composed of profit-seeking businesses, long-established charities, hybrid government/charity organisations and non-profit making organisations who aim to increase their “market share” of public contracts.

“Some seem to have maintained a local focus and close relationships with users, but this is far from being the rule. Only a few of the voluntary sector organisations were found in the report to have clear structures for involving users of the services, while private companies are, naturally, structured around delivering profits.

“In some cases, the founders of these companies derive very substantial benefits. For example, the report identifies the highest paid director of WTCS Ltd (formerly Westcountry Training and Consultancy Service) as receiving over £580,000, while the sole shareholder Dr Sarah Burnett also received £100,000 in dividends. Emma Harrison of a4e (formerly Action for Employment) collected over £1.1 million in dividends alone in 2005”

All this now sounds remarkably prescient in view of a4e recent events. On the Employment Related Services Association (ERSA), the PCS Paper continues:

“ERSA, the main lobbyist for the extension of the contracting out of employment services is dominated by private companies that make millions of pounds of profit from job brokering and training, and large charities that are increasingly dependent on contract funding from government. Through their trustees, some of these charities have very close links with the business lobby with their own interests in opening up public sector markets”.

ACEVO (the Association of Chief Executives in Voluntary Organisations) in “Speaking Truth to Power: Third Sector’s Relationship with Government” October 2006, in response to the PCS report’s concern that “third sector involvement in public services will lead to “privatisation” said:

“Greater third sector involvement in public services is likely to occur through formal commissioning processes, in which bids from a variety of organisations are sought and assessed by public sector commissioners. Thus, through contractual arrangements and regulation, the public sector will retain the ultimate control and ownership of those services. This model only involves “privatisation” as defined by PCS, viz. some form of independent involvement in public service delivery. It does not imply any privatisation in the more widely understood sense”.

In response to the PCS concern that the Third Sector includes private companies, ACEVO responded:

“The private companies within ERSA membership are not, and are not considered by anyone to be, part of the third sector. ERSA membership is open to any organisations that “provide services delivered as part of publicly funded programmes designed to assist with employability or the creation or sustaining of employment” . ERSA membership therefore includes organisations from both the private sector and the third sector”.

As a paid up UNITE member, concerned about developing trade union opposition to Social Enterprise, Huckfield submitted comments to the ACEVO response. These comments were strongly influenced by openings which were then expanding for Social Enterprise and the Third Sector under policies from the Department of Health as described below.

In 2006, UNISON also published a Report on “Social Enterprises and the NHS: Changing Patterns of Ownership and Accountability“. In his Forward on Page 2, Dave Prentice, UNISON General Secretary, writes:

“As the report makes clear there are concerns that the traditional appeal of social enterprise – a focus on innovation, sustainability and community empowerment – may be undermined by a greater emphasis on a business ethos and creating a diversity of providers.

“Furthermore, it is possible that some social enterprises may smooth the way for the involvement of the private sector in primary care – whether intentionally or otherwise.

“There is little doubt that social enterprises are an issue of growing importance for the NHS and those who work in it, and this report signals the need to keep rapid developments under close and constant scrutiny”.

As this Huckfield briefing later shows, the PCS Report and Mark Sewotka’s Forward and the UNISON Report on Social Enterprise and the NHS, both in 2006, were timely and prescient in their warnings about private sector involvement. Though at that time the Department of Health and others offered strong support for Social Enterprises in NHS delivery, this initial support described below has been overtaken by policies which encourage a higher level of private involvement. The blurring of private and Third Sector boundaries is now a serious issue.

Developments in NHS Commissioning and Procurement

The NHS Purchasing and Supply Agency Procurement Guide: Alternative Provider Medical Services (APMS) published in August 2005, was a detailed guide to the wider range of conditions and circumstances which should be taken into account to accommodate Social Enterprises. Page 4 of APMS says:

“APMS is a relatively new contracting route for PCTs. Although services may be provided by non-NHS providers, NHS patients treated under APMS arrangements will remain NHS patients. In procuring for services, PCTs will wish to ensure that a range of prospective providers can apply.”

Page 7 of this Guide continues:

“APMS is a flexible contracting tool, which gives PCTs powers to contract for services from a range of providers and for a range of primary medical services. APMS cannot be used to contract for primary care pharmacy, dentistry or optometry services, which generally have to be commissioned by the PCT under the separate arrangements set out in the National Health Service Act 1977 (although, in some cases – eg. dispensing – these services can be included in GMS/PMS/PCTMS and APMS contracts). Under APMS, Primary Care Trusts have powers to contract with:

  • Commercial providers
  • Voluntary sector providers
  • Mutual sector providers
  • Public service bodies
  • GMS/PMS practices, through a separate APMS contract
  • NHS PCTs and NHS Foundation Trusts

All this signposted significant opportunities for Social Enterprise and Third Sector delivery in the NHS.

In January 2006 the White Paper Our Health, Our Care, Our Say was published by Patricia Hewitt as Health Secretary. Page 10 of the White Paper said:

Allowing different providers to compete for services
In some deprived areas of the country there are fewer doctors per head of the population than in others. We will increase the quantity and quality of primary care in these areas through nationally supported procurement of new capacity with contracts awarded by local PCTs. To assist this process, we will remove barriers to entry for the ‘third sector’ as service providers for primary care”.

Page 175 of the White Paper included:

Supporting the development of the third sector and social enterprise
One way of introducing high quality provision will be to promote better use of health and social care ‘third-sector’ providers. They include organisations from the voluntary and community sector, as well as other forms of values-driven organisations such as co-operatives”

The January 2006 White Paper was followed by further more detailed developments.

In February 2006, the Social Enterprise Coalition and the NHS Purchasing Agency published More for your Money: A Guide to Procuring from Social Enterprises for the NHS. The Guide explained on page 4:

“Social enterprises are also characterised by their ownership structures. Unlike most private enterprises, whose ownership is often determined by shareholder investment in the business, social enterprises can be owned by their users or customers, their employees, the wider community, trustees, public bodies, or a combination of different stakeholder groups”.

In February 2006, the Royal College of Nursing’s published its Policy Briefing Nurse Led Social Enterprise. In “Social Enterprises: Their Place in the Re Provision of Health and Social Care” on page 6, the paper said:

“Given the support for SEs within the White Paper Our Health, Our Care, Our Say with the incentive of set-up funding for aspiring CICs, it seems likely that they will become an increasingly attractive option for commissioners of primary care and community care services. The White Paper insists that, as businesses, they will provide a more flexible service and that they can respond quickly and dynamically to changing need and consumer preference. No matter whether that view is valid or not, SEs will still need to demonstrate excellence as employers if they are to retain a suitably qualified and skilled workforce.”

All this showed serious encouragement to develop Social Enterprise and Third Sector delivery in various parts of the NHS.

Department of Health Social Enterprise Unit October 2006

As promised in Our Health, Our Care, Our Say, a Social Enterprise Unit was established in the Department of Health. In October 2006, Sue White, as Head of the Department of Health’s new Social Enterprise Unit wrote seeking potential Social Enterprise NHS Pathfinders:

“The Social Enterprise Unit is seeking to identify social enterprises that are interested in taking part in its pathfinder programme and leading the way in delivering innovative services”.

In February 2007, an updated List of Social Enterprise Pathfinder Applicants was published, which included many well-known Social Enterprises, including Healthy Living Centres genuinely rooted in their local communities. Many Pathfinders received funding from the Department of Health.

In many ways, these developments from Department of Health and National Health Service represented a high water mark of Social Enterprises’ potential to become mainstream suppliers of NHS Services. Social Enterprise Pathfinder funding was followed by the Social Enterprise Investment Fund and the “Right to Request” for setting up a Social Enterprise, which Primary Care Trusts were obliged to consider. The Social Investment Fund is now managed for the Department of Health by the Social Investment Business. To save time and space here, these developments will be covered in a future Huckfield briefing.

Huckfield spoke at an ACEVO Conference on Third Sector Opportunities in the NHS in London on Thursday 15 March 2007. At the conference many active commissioners in the NHS favoured contracting with Third Sector organisations. But all this has been overtaken by further developments described below. The rules of the game have changed!

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PREPARING THE GROUND

This Section summarises more recent developments leading to the Coalition Government’s current policies, which have overtaken this initial support.

David Freud’s Welfare to Work Report March 2007

In December 2006, David Freud, former journalist, banker and Chief Executive of the Portland Trust was asked to:

“To review progress on the Welfare to Work programme since 1997, taking account of evidence from the UK and international experience, and make policy recommendations on how the Government can build on its success in using policies such as the New Deal to continue to reduce inactivity and inwork poverty, and meet the Government’s 80% employment aspiration.”

Though Social Enterprise was making genuine progress in the Department of Health, the publication of David Freud’s Report Reducing Dependency, Increasing Opportunity: Options for the Future of Welfare to Work: An Independent Report to the Department for Work and Pensions, should have prompted wider questioning among London Social Enterprises and Third Sector national organisations.

On page 6 Freud recommended, under “Contracting Support for the Hardest to Help”:

“And while there is no conclusive evidence that the private sector outperforms the public sector on current programmes, there are clear potential gains from contesting services, bringing in innovation with a different skill set, and from the potential to engage with groups who are often beyond the reach of the welfare state. Therefore this report recommends that once claimants have been supported by Jobcentre Plus for a period of time, back-to-work support should be delivered through outcome-based, contracted support”.

This foreshadowed payment by results – a payment mechanism which causes real problems to many Social Enterprises and the Third Sector.

On “The contracting system” on page 61, the Freud Report continued:

“The private and voluntary sector would, then, compete for long-term contracts to provide support to disadvantaged people, with payments based on successful individual outcomes over an extended period. Correctly contracted on output based criteria, providers will be incentivised to experiment and innovate to find effective solutions”

On page 62, he continued:

“However, more likely is a bidding process in which private sector prime contractors take the lead in building consortia, given the level of financial commitment and risk required. Within this model it would be an option to contract two or more prime contractors in a region, at least on a trial basis, although in practice it is likely that the complexity of operating in this arena will lead to significant efficiencies for sole consortia.”

On “Scale of contracts” on page 63 the Freud Report continued:

“This paper recommends that in principle the Department lets out prime contracts in each of the 9 regions and 2 countries in Great Britain. This should allow an adequate number of prime contractors for a competitive market to develop. It also offers the scale appropriate to attract major players from around the world”.

All this began laying foundations for the development and operation of the Work Programme.

James Purnell’s White Paper “Reforming Welfare for the Future” December 2008

Gordon Brown’s Government was reluctant to introduce the restructuring of JobCentre Plus delivery as envisaged by Freud. Only Freud’s recommendations requiring single parents to find work earlier were adopted. But then came James Purnell’s wider reaching White Paper “Raising Expectations and Increasing Support: Reforming Welfare for the Future” in December 2008.

On page 12, its Executive Summary said:

“So, we are confirming that we want to move to the ‘Invest to Save’ approach recommended by David Freud, also known as AME-DEL.(Annually Managed Expenditure: Departmental Expenditure Limits). This involves private and voluntary providers investing up front in getting more people back in to work, and being paid out of the resulting benefit savings”.

“This period of innovation will be further enhanced by the proposals we have already announced for a ‘Right to Bid’, where we will turn the traditional tendering process on its head by inviting organisations to approach us with suggestions about how they can enhance our services”.

In “Devolving to Providers” on page 46, James Purnell’s White Paper continued:

“In February 2008, the Department for Work and Pensions published its Commissioning Strategy, which set out our vision for modernising and strengthening the welfare-to-work market. It opens the way for larger, longer contracts with providers rewarded for their success in helping more people into sustained work; where customers receive a more personalised and flexible service; and where delivery of employment support is integrated into local services. These principles are already shaping the commissioning for Phase 1 of the Flexible New Deal, which starts in October 2009”.

In preparation for the commissioning of Flexible New Deal, alongside Social Enterprise and Third Sector representatives, Huckfield attended attended a DWP Briefing on Flexible New Deal at Parkhead, the Celtic Football ground, on Wednesday 25 February 2009 on behalf of a potential bidder.

Part of the Huckfield Client report included:

“The Head of Supplier Management, explained that DWP was seeking to build relationships with top 30 suppliers, but this could be up to 50.

“There would be longer programmes of 5 to 7 years, building a strategic relationship with providers. There would be a shared understanding of objectives, with increased flexibility through open specifications in return for improved performance. This could include a “Black Box” approach, with providers telling DWP the best way to do things. This could result in Increased job outcomes and reduced cost per outcome. DWP still wanted smaller suppliers as subcontractors.

“DWP was seeking a single provider or Special Purpose Vehicle to deliver and manage across a range of services. There could be a range of organisations under an SPV as a legal entity. This could offer choice with more than one provider in particular area – so that competition could be offered between local providers”.

There was widespread recognition from Social Enterprise and Third Sector organisations attending on that occasion that the door was opening wide to large private sector providers. Even larger public sector operators would have difficulties in making bids on this scale and size.

Huckfield discussion while at the DWP briefing at the Celtic ground with other Social Enterprise and Third Sector providers in attendance confirmed their early recognition that their likely role would be as secondary or tertiary subcontractors. So by the beginning of 2009, many recognised that the rules of the game had already changed.

ACEVO Third Sector Task Force February 2009

In July 2008 in advance of the White Paper, ACEVO (the Association of Chief Executives of Voluntary Organisations) set up a Third Sector Task Force. The “Third Sector Taskforce” on “Welfare to Work Reform: Third Sector’s Role” reported in February 2009. On page 5 “Reform of Public Service Delivery” the Task Force recognised that the private sector would play a dominant role.

“DWP has introduced a new commissioning strategy that firmly establishes the need for contractors to achieve high, measurable, standards of delivery, both in terms of quantity and quality. This follows publication of the Freud report, the outcome of which is a new prime contractor model, in which each successful prime will operate in a large geographical area with a big population. It is already clear that most of these prime contractors will come from the private sector and that they in turn will be looking for sub-contractors with a strong, effective and consistent delivery capability”.

But on page 6 the ACEVO Task Force Report pinned its hopes on assistance from the proposed Social Investment Bank:

“For Third Sector organisations to take part in the DEL:AME (Departmental Expenditure Limits: Annually Managed Expenditure), due to commence in March 2011, it will be essential that the later recommendation in this report re the Social Investment Bank is implemented quickly, as few Third Sector organisations will be able to afford the substantial cash outlay needed to take part in programmes which only produce income 12–18 months later. With the likelihood that, if successful, the DEL:AME principle will be extended to all major contracts for Welfare to Work programmes and probably more widely still, it is vital that access to up-front funding (possibly £1bn will be needed) is available to potential third sector contractors, so that they can compete on a level playing field with the private sector companies that will be attracted by the longer-term funding of these programmes”.

One the Role of the Third Sector in Welfare to Work Delivery on page 6, the ACEVO Task Force Report continued:

“The scale of the new contracts and the “reward” mechanism for providers will create a greater opportunity than ever before for the third sector to support prime contractors in the delivery of public services. If that opportunity isn’t exploited, it may lead to the unwanted effect of freezing out third sector providers, so it is essential that arrangements are in place to encourage the strongest possible involvement by the Third Sector”

Tony Hawkhead, the ACEVO Task Force Chair, wrote on page 2:

“The recommendations range from the strategic to the technical, but all would make a difference. In particular, the recommendation for a Social Investment Bank, a new form of investment in the third sector, could transform the sector’s ability to get involved, not only in Welfare to Work programmes, but in a whole range of public service delivery activity”.

The ACEVO Task Force Recommendations on page 13 said:

  • “A Social Investment Bank should be set up, building to a minimum of £250 million start-up capital. This could be provided by a mix of unclaimed assets funds and matching funding from the Exchequer. As this is going to take considerable time to create, a smaller interim SIB should be set up to support the sector as soon as possible.
  • Capacitybuilders should work with organisations such as REACH to create a “clearing house” where TSOs can identify and recruit trustees with the skills and experience to support public service delivery.
  • Up to £5 million of DWP pump priming should be provided to support existing work by primes in strengthening the capacity of potential TSO partners. This needs support from third sector representative bodies and, possibly, Train to Gain. DWP and third sector representative bodies should work quickly to set up a transparent mechanism for deciding on the fund’s fair allocation and use.
  • DWP contracts should be structured to reward the gathering and sharing of good practice by all contracting organisations”.

Despite its advocacy in the ACEVO Task Force Report, the Social Investment Bank or Big Society Bank has been a long time in the making and is still not properly funded nor fully operational as originally envisaged. The difficulty with the Task Force’s recommendations, is that even when fully operational, it is doubtful whether the Bank’s main purpose will enable resourcing of Social Enterprises or the Third Sector to compete with or become prime contractors.

Further ACEVO Task Force recommendations included:

  • “A central service of technical contracting expertise should be set up, funded by DWP, to smooth the contract process between TSOs and prime contractors. The service should be transparent and neutral.
  • DWP and its providers (third and private sector) should establish a set of contracting “norms”, consistent with the Compact.
  • Performance by prime contractors against DWP’s Code of Conduct should be assessed objectively, and should directly affect the contractor’s star ratings. The assessment should concentrate on whether clients have had a positive and beneficial experience.The assessment should concentrate on whether clients have had a positive and beneficial experience.
  • There should be a more transparent process for resolving disputes arising from the Code of Conduct, in order to avoid unnecessary, time-consuming and expensive litigation, and to encourage faster, more informal, resolution of disputes”.

These Task Force conclusions and their broad support for proceeding with the prime contractor model were reached despite considerable evidence presented about Third Sector difficulties, as shown on page 11 of the Task Force Report:

Expansion of third sector skills and knowledge
There is strong evidence that TSOs need new skills and knowledge if they are to participate effectively in public service delivery, and realise their potential to deliver welfare to work schemes. Such skills would include knowing how to bid successfully, negotiating with primes and managing contracts that are paid on results. According to the ACEVO survey, just 13% of respondent TSOs have a dedicated contracting team, but 51% believe they would benefit from having one. There is also strong evidence that this is a difficult challenge for the third sector. There is little funding available for such capacity-building. TSOs rarely have the knowledge and resources needed to invest in the necessary training and development”

Despite the ACEVO Task Force Report’s acknowledgement of Third Sector difficulties, though its support for the Social Investment Bank and other pre conditions have not been met, commissioning with private prime contractors is developing rapidly, as shown below.

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CURRENT SITUATION

This Section summarises events leading to the Coalition’s current policies.

Modernising Commissioning Green Paper December 2010

On December 07 2010 the Coalition Government’s Office for Civil Society published a “Modernising Commissioning Green Paper“.

On page 9 the Green Paper referred to key elements:

“In the Spending Review 2010, the Government committed to increase the diversity of provision in public services by increasing competition and consumer choice. This will involve consideration of three key elements:

  • Introducing payment by results across public services
  • Setting proportions of specific services that should be delivered by independent providers, including civil society organisations
  • Introducing new rights for communities to run services, own assets and for public service workers to form mutuals”

On page 16 the Green Paper referred to financing from the Big Society Bank:

“Big Society Bank to help civil society organisations access more resources and play a bigger role in delivering public services. The Big Society Bank will work, over the medium term, with new and existing social finance intermediaries to support the growth of a bigger, well functioning and sustainable social investment market”.

This is the same Bank advocated by the ACEVO Third Sector Task Force Report, which is still not operational.

The Social Enterprise Coalition “Response to Modernising Commissioning: Increasing the Role of Charities, Social Enterprises, Mutuals and Cooperatives in Public Service Delivery” January 2011, was hesitant on payment by results. The SEC Response said on page 4:

“Finally payment by results can mean that organisations with the strongest balance sheet and greatest ability to raise working capital are given an advantage above those that can deliver the best outcomes. This can severely limit market entry and have the unintended consequence of limiting choice and innovation.

“The Social Enterprise Coalition therefore believes that payment by results as a principle requires an approach where risk is shared between the public sector and civil society organisations. We would support mechanisms where parts of payments are dependent on the outcomes delivered but not the entire payment. We know of examples of contracts where 20%-30% of payment is dependent on outcomes and results delivered. We feel that such schemes provide the benefit of a greater results based incentive, while not creating a barrier for civil society organisations, limiting market entry, or disincentivising innovation.”

Under Big Society Bank on page 10, though supporting the principal of a Big Society Bank, the SEC Coalition Response continues:

“The Big Society Bank needs to be independent, flexible, risk taking and capable of being a market shaper”.

But this response then then surely compromises its position by supporting Social Investment, with its need for payment by results to attract private funding:

“Social investment is a market which requires support in order to develop. The Big Society Bank should aim to develop both the supply of and demand for investment within civil society, particularly to Social Enterprises. It should make investments, whether equity or equity-like, use its balance sheet as a guarantee to leverage further private finance, help existing intermediaries raise further finance for investment and help develop new forms of financial products. It should also help with investment readiness and tackle the lack of investment knowledge.”

Once again, this is a conditional response which depends on a Bank which has yet to become fully funded or operational. Much of the SEC Response accepts a need for the attraction of private capital through social investment. But private investors will seek not only a return but dividends, based on a payment by results system, with which Third Sector organisations have difficulties.

In December 2010, the National Council for Voluntary Organisations NCVO made its submission on the Green Paper “Modernising Commissioning: Increasing the role of Charities, Social Enterprises, Mutuals and Cooperatives in Public Service Delivery“.

The NCVO response to the Green Paper is a little confusing. Section 1.5 of the Executive Summary on page 2 says:

“It is likely that a shift toward a payment by results model would exacerbate these problems if decisive action is not taken. The Big Society Bank is a part of the solution to that problem”.

But Sections 2.9 and 210 on page 4 seem to undermine this, especially if “NCVO shares the Government’s desire for a greater focus on outcomes in public services”:

  • “2.9 NCVO shares the Government’s desire for a greater focus on outcomes in public services. Too often, services have been geared towards delivering narrow outputs and in meeting short term performance targets. A genuine shift towards outcomes would allow the necessary flexibility to reform services.
  • “2.10 There are, however, significant challenges associated with a shift towards outcomes. First, the ways in which outcomes are measured (and agreed between partners) is complex and will also take time. There needs to be an acceptance of a fair share of risk on both sides in both toward outcomes”.

All this means that while ACEVO, the Social Enterprise Coalition and NCVO all recognise that problems will be caused for Social Enterprises and Third Sector Organisations through systems based on payment by results, they have not been fundamentally opposed to their introduction. This paves the way for the scale of private investment foreshadowed in the Cabinet Office paper “Growing the Social Investment Market” described below.

“Growing the Social Investment Market” February 2011

Though it heralds a significant increase in direct private sector investment and involvement, this Cabinet Office Paper of February 2011 has not received the focus and attention it deserves. Section 2.3 on page 17 made the Government’s vision clear:

“2.3 We do not underestimate the degree of challenge, or the timescale required to realise our vision. But the opportunity is large. UK charitable investment and endowment assets alone account for nearly £95bn. If just 5% of these assets, 0.5% of institutionally managed assets and 5% of retail investments in UK ISAs were attracted to social investment, that would unlock around £10bn of new finance capacity.”

The contribution of Social Enterprise and the Third Sector is used as a yardstick for the level of private investment to be attracted. Section 2.7 on page 17 the Cabinet Office paper recognised the dilemma thus posed for Third Sector organisations:

“2.7 For other voluntary, community and social enterprise (VCSE) organisations, our vision ofers opportunity. Our intention is neither to privatise the social sector nor to bring it into the public sector. Social investment is not a panacea. We recognise that some VCSE organisations may prefer not to seek financing of this type. However, we believe that many VCSE organisations will want to consider social investment as a potentially useful tool to help them increase the scope, reach and longer-term sustainability of their activities.”

Section 2.12 on page 18 continued:

“2.12 For other financial services firms and intermediaries, such as traditional investment managers, advisers and pension funds, our vision will see them being prepared to invest a greater proportion of their assets and their clients’ assets in social investments, while building the resources and expertise necessary to research and evaluate the opportunities presented by this new class of assets. We envisage them developing a range of new products which will open up the social investment opportunity to a broader and better informed investor community”.

The effect of this Cabinet Office paper was to shift attention and debate from Social Enterprise and the Third Sector to Social Investment, including Social Impact Bonds. There will be more on these in a future Huckfield briefing.

Open Public Services White Paper July 2011

The Open Public Services White Paper in July 2011 introduced a strong presumption in favour of Commissioning on page 29, Section 5.2:

“In the services amenable to commissioning, the principles of open public services will switch the default from one where the state provides the service itself to one where the state commissions the service from a range of diverse providers”.

On page 30 in Section 5.8 the White Paper continued:

“The Government will consult with local authorities and the wider public sector about how to go further in opening up locally commissioned services in:

  • customer contact
  • planning
  • property and facilities management
  • back-office transactional services
  • family support
  • support for looked-after children
  • trading standards and environmental services
  • housing management

On page 39 in Section 6.4 the White Paper continued:

“We now want to embed across our public services the idea of diverse and innovative providers competing to raise standards. This includes freeing up those already working in the public sector so that they can find new and better ways to deliver services. There is now a rich pattern of autonomous providers within the public sector, including local health trusts, Academies, public corporations, leisure trusts, trading funds, further education corporations and arm’s-length management organisations. These organisations are increasingly competing for their income and with each other – all within the public sector.”

On page 40, Section 6.9 the White Paper continued:

“As well as increasing the diversity of service providers, there is an opportunity and need for more innovation in the financing of public service providers. The Government’s policies challenge the traditional approach to finance in each of the public, private, and voluntary, community and social enterprise (VCSE) sectors. For example, payment by results requires capital investment to cover both cash flow before payments are made and the risk that the anticipated results will not be achieved”

On page 43 in section 6.17 the White Paper mentions a range of Employee Ownership options, including the Right to Provide, Mutual Pathfinders, the Mutuals Task Force, the Mutuals Support Programme, the Enterprise Incubator Unit and Post Office Mutualisation.

There is no doubt that the combination of the “Modernising Commissioning” Green Paper and Open Public Services White Paper represented a major policy shift in the delivery of public services. ACEVO, the Social Enterprise Coalition and NCVO made separate submissions in response to the White Paper. Surely these might have carried more weight if a joint submission had been made which outlined the serious concerns of Social Enterprises and the Third Sector?

ACEVO’s Response to the Open Public Services White Paper on October 10 2011 encouraged more competition in public service delivery:

“In both cases we believe there is a case for Government to promote a health provider market, ensuring that the shape of the provider market is determined primarily by what is in the interests of taxpayers and service users, not what is in the interests of particular providers”.

” We recently surveyed all third sector subcontractors involved in the Work Programme (with 148 responding, ie. just under a third of all third sector subcontractors) and found that 42% thought DWP’s differential pricing would not be adequate to ensure the Work Programme helps harder-to-reach client groups, with 47% unsure and only 9% responding that it would be adequate. At the very least this suggests that there is a need to ensure that the success of the Work Programme in supporting the hardest to help is monitored, and remedial action taken if it is found not to be wanting”

Though the ACEVO response advocates a “Right to Redress” and adherence to the Merlin Standard, the trouble is that comes too late when bad practice has been carried out.

In response to the Government’s July 2011 Open Public Services White Paper, Social Enterprise UK and Co-operatives UK published a joint “Response to the Cabinet Office’s Open Public Services White Paper October 2011

In reply to “How can we stimulate more openness and innovation in public services through new types of provision?” the response said:

“Managing risk and outcomes-based commissioning
…”We therefore welcome the government’s desire to focus commissioning on outcomes rather than outputs and encourage government to help build trust between commissioners and providers to facilitate this. However, we do not believe that results based payments should account for the full or even majority value of the contract. Given the relatively low margins in public services – particularly when it comes to the delivery by socially motivated organisations –retaining smaller proportions of funding back for results would create the same incentive for outcomes, but balance the cash flow requirements of the sector.

On behalf of the National Council for Voluntary Organisations (NCVO), on July 11 2011, Stuart Etherington made an initial response to the Open Public Services White Paper, which included the following on funding and payment by results:

“Access to finance and cash flow is another major barrier denying voluntary organisations from taking on a greater role in service delivery. The Big Society Bank is a positive step towards remedying this, but will not be able to provide finance to the whole sector. There is an ongoing need for a range of grants, loans and contracts to make services accessible and sustainable.

“We are pleased that the Government has acknowledged that whilst Payment By Results and competition have potential, that neither of those are ends in themselves when considering public services. In the case of payments by results, we agree with the principle of rewards for high quality performance. However, some NCVO members have expressed concern about its implementation”.

The July 2011 NCVO Policy Analysis on page 7 under “Finance and Payment by Results” said:

“As PBR is likely to be extended under these proposals, there will be implications for all providers. Whilst PBR has some potential, and as a general principle it is right that high quality work and the right outcomes are rewarded, there remain some concerns:

  • PBR will potentially exclude organisations which cannot bear the financial risk, or have enough working capital to ‘wait’ for payment
  • There remain considerable complexities around how outcomes will be defined
  • Weighting payment amongst various providers will be complex – and this is likely to be necessary when dealing with individuals and communities with complex needs where there are multiple public service interventions

All this shows that ACEVO, the Social Enterprise Coalition and NCVO have all rightly recognised difficulties caused for Social Enterprises and Third Sector Organisations by more payment by results systems in the Open Public Services White Paper. Surely their further analysis might have formed the basis of a more effective joint submission on these difficulties?

Tax Incentives for Private Investment 2012

The National Council for Voluntary Organisations (NCVO) set up a Working Group which produced the NCVO Commission on Tax Incentives for Social Investment: Analysis and Recommendations in January 2012, which included Social Enterprise UK. Basically the Report seeks to extend direct private investment in Third Sector Operations. On page 22 “Recommendations”, the Report says:

“Second, the Government should consider how equity or equity-like investment made directly into enterprises established for community or social benefit should be eligible for CITR, along the following lines:

“The meaning of “CITR” would be extended to read: “entitlement to tax reductions in respect of amounts invested by [individuals or companies] in community development finance institutions or through equity or equity-like investment into enterprises established for community or social benefit”.

“The eligible bodies capable of receiving CITR investment would be extended to include:

  • bodies accredited as CDFIs under ITA 2007
  • registered charities
  • Community Interest Companies registered with the CIC regulator
  • Community Benefit Societies registered with the Financial Services Authority (or its successor)
  • other company forms such as Companies limited by shares and Limited Liability Partnerships (LLPs) majority owned by the above registered charities, CICs or ‘BenCom’ societies.

“Direct investment of this type would entitle the investor to the same reliefs as those available for investment into a CDFI and would be subject to the same restrictions where applicable.”

Other parts of this Report seek to make it easier for tax relief available under the Enterprise Investment Scheme and Venture Capital Trust to be available to those investing in the Third Sector.

In further support of incentives for private sector investment, on January 27 2012 Social Enterprise UK in a “Letter to respond to the Department for Business, Innovation and Skills: Improving Access to Non-Bank Debt – Call for Evidence” sought relaxation of regulations to permit more direct private investment:

“Other initiatives that we believe the government should explore include:

  • Reform of tax incentives – We would like to see the government seriously consider the recently submitted policy recommendations from the Commission on Tax Incentives for Social Investment, of which Social Enterprise UK are members
  • Regulatory framework reform – In particular, we would like to see the government review the current financial promotions rules with a view to providing exemptions for community and social finance offers. Underpinning any exploration into reforming the regulatory framework, we would also like to see how individual socially motivated investors could be benefitted and supported. In the same vein, to look at collective investment models/products designed around actively courting retail investment – e.g. retail social impact bonds, crowd funding – which could perhaps work in a similar way to ISAs with protections against exploitation such as caps”

These NCVO and Social Enterprise UK approaches encourage further Social Investment by private investors in Third Sector and Charitable activities. All of this represents a significant policy shift which supports the Cabinet Office Paper “Growing the Social Investment Market:A Vision and Strategy” February 2011, the main purpose of which is to encourage more private investment in the Third Sector. This surely represents a national policy shift not widely understood or recognised among many Social Enterprises or wider Third Sector Organisations?

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SOME LATEST DEVELOPMENTS

This Section describes some latest developments which may unfortunately continue to blur dividing lines between private and Third Sector organisations .

ACEVO and NHS Competition

ACEVO’s Chief Executive chaired the “Choice and Competition : Delivering Real Choice” Panel for the NHS Future Forum as part of the Prime Minister’s “pause” in consideration of the Health and Care Bill 2011. Part of the Future Forum’s recommendations made on June 13 2011 included:

“competition should be used to secure greater choice and better value for patients – it should be used not as an end in itself, but to improve quality, promote integration and increase citizens’ rights”

This recommendations are not supported by the professional organisations and others which have moved amendments in the House of Lords which to restrict competition in the NHS.

ACEVO’s Chief Executive has consistently advocated more competition in the NHS, as at the ACEVO North Conference September 29 2011:

“This means taking the principles set out in the White Paper – the principles of diversity, of choice, of transparency, of free competition – and translating them into concrete actions. We’ve heard a lot of promises from the government over the past year, about levelling the playing field for all providers, and creating the conditions for fair and open competition across the public service environment. Now we need them to deliver on those promises.

“Delivering on the promise of reform also means sending the right messages to commissioners about making use of the third sector. So I expect the Government to stand firm on competition-related issues as the health bill passes through the Lords”.

All this shows ACEVO policy at variance with Opposition amendments against the Government’s Health and Social Care Bill in the Commons and Lords. The main thrust of these amendments seeks to reduce or confine NHS competition.

ACEVO’s Structure

Though understandably ACEVO seeks to extend and widen the influence of the Third Sector, some of its own structures may unfortunately cause a blurring of divisions between private and Third Sectors.

ACEVO offers “Corporate Partnership“:

“For corporate organisations, there are two primary reasons to join ACEVO: to access the market of third sector chief executives, and to build a profile around sustainable business and CSR.”

Corporate Partnership offers access to Our Members, shown as “34% with income of £1mn to £3mn, 15% of income of £5mn to £20mn and 4% greater than £20mn”

Under “Relationships“, ACEVO offers:

“If we get this right from the start, we will be able to work together and meet your objectives. Activating your brand, generating business and bringing you closer to the third sector are easier for us when we know you and how you operate”.

ACEVO’s “Sustainable Business-Cross Sector Partnership Creation” seems determined to blur distinction between Third and private sector even more:

“It has become clear that the narrative around corporate responsibility is shifting. We are seeing a move away from the language of CSR, towards sustainability. Traditional methods of corporate philanthropy have been exposed as somewhat Victorian and there is a movement, which is gaining significant momentum, pushing for sustainable methods of engagement. ACEVO has a unique position to drive this debate: we have access to the brightest thinkers in the third sector, and are reaching out to business to join this movement.

“Our steering group has been tasked with exploring the key building blocks – those crucial elements of a partnership that we need to replicate for new partnerships to work effectively and with maximum impact”.

ACEVO deserves credit for its efforts to widen the acceptance of Third Sector organisations to participate in public service delivery. But in pursuing these objectives, some of its own structures may unfortunately heighten confusion in the public mind about the private sector, Social Enterprise and the Third Sector.

Social Enterprise UK, BBC Newsnight and the Policy Exchange

Social Enterprise UK, responding to BBC Newsnight’s coverage on Tuesday 21 February 2012 of the Policy Exchange’s proposals for Social Enterprise Schools, said:

“The story blurred the lines between the private sector and social enterprise, which is an important concern for our sector. Private companies exist to make a profit for their owners and shareholders, whereas social enterprises exist and make a profit in order to tackle social issues. The social purpose is enshrined in a social enterprise’s governing documents and takes precedence. A private company simply reinvesting 50% of its profits back into the business does not make it a Social Enterprise”.

The Policy Exchange “Social Enterprise Schools” publication on page 44 suggests the following model:

  • Social enterprise with a flexible asset lock
  • 50% of any surplus to be distributed as dividend to shareholders
  • Remaining 50% of any surplus would have to be reinvested in the service

“Due to the substantial initial external investment that will be required, it should be permissible for 50% of any school’s surplus to be extracted as a reasonable return on that initial investment. As we will explore below, it would be desirable to encourage teacher ownership, and be able to offer staff a personal financial stake in the school they work in (or in the broader provider company).

The Policy Exchange Report on page 46 recommends a Monitor (in line with the NHS Monitor favoured by ACEVO):

“Such a regulator would have the ability to monitor anti-competitive behaviour and would also guard against any one provider becoming too dominant and allow the risk of failure to be spread more widely.

“In addition, in the event that for-profit provision went beyond the social enterprise model at some future stage, the regulator could also have responsibility for an insurance scheme whereby a levy was raised from for-profit providers, contributing towards a risk pool to guard against failure”

“A rule where operators of a social enterprise secondary school would receive no share of any surplus unless a certain percentage of all students achieve expected levels of progress might be a sensible starting point”.

For many onlookers, once we get into arguments over territory like this, most of those outside a narrow circle of Social Enterprise cognoscenti will not be able to understand these differences.

Before this, the Chief Executive of Social Enterprise UK posted his Blog of September 06 2011:

“At Social Enterprise UK HQ we’re seeing an upsurge in interest – potential start-ups looking for advice, social enterprises realising that they’re part of a movement (it still amazes me how many organisations there are out there that don’t realise they’re actually a Social Enterprise), but perhaps most interestingly, big corporates are knocking on our door wanting to know how they can get into the world of social enterprise”.

This description of those organisations which “don’t realise that they’re actually a Social Enterprise” should surely give cause for concern? If they don’t know themselves whether they are a Social Enterprise, how will those looking on understand the difference?

National Audit Office and “The Introduction of the Work Programme”

On Tuesday 24 January 2012, the National Audit Office produced a Report on “The Introduction of the Work Programme

The Report recommends on page 11:

“Early indications show that subcontractors are dissatisfied with the approach taken by some prime contractors. The Department should carry out spot checks to make sure that its own standards for prime contractor management of subcontractors are implemented and should consider conducting a survey of subcontractors to be assured that the standards have been applied”.

The Report says on page 31 Section 2.9:

“Successful bidders offered performance levels greater than those achieved under previous welfare to work schemes as well as those assumed by the Department in developing the Programme. Based on the discounts offered by the successful prime contractors the Department estimates that prime contractors offered discounts of £250 million if they secure the performance promised in their bids.”

This National Audit Office Report is surely recognition of the secondary role to which which Social Enterprises and others are now relegated in a bidding process dominated by private sector prime contractors?

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SIZE OF SOCIAL ENTERPRISE SECTOR

Some of these difficulties, differences and blurring of divisions arise from Social Enterprise UK’s wider definition for the Social Enterprise Sector. In “Growing the Social Investment Market:A Vision and Strategy” February 2011, on page 13, the Cabinet Office believes that Social Enterprises now produce 1.5% of UK GDP:

“1.7 Social ventures are also making a big contribution to economic growth in what remains a challenging economic and fiscal environment, and can play an important role in helping to re-balance the economy. Already their economic impact includes:

  • a £24 billion annual contribution to the economy – equivalent to 1.5% of GDP – based on the formal definition of social enterprise used in the Small Business Survey by the Department for Business, Innovation and Skills (BIS)
  • making a positive contribution to employment. Social enterprises alone employ at least 800,000 people, and support the labour market by operating in disadvantaged areas and offering employment opportunities to traditionally excluded groups”.

This estimate of the size of the Social Enterprise Sector comes from the Annual Small Business Survey 2007/08 which is used in the Social Enterprise Coalition’s Report on “The State of Social Enterprise 2009“, which reports on page 8:

“According to data from the Annual Survey of Small Business UK (aggregated data 2005–07), there are approximately 62,000 social enterprises in the UK with small and medium social enterprises contributing £24 billion GVA (Gross Value Added) to the UK economy”.

The SEC Report shows a wide range of organisations and structures in the survey, many of which Senscot would find it difficult to recognise as social enterprise:

“Whilst some social enterprises are very large, with turnovers in excess of £100 million, the majority operate at small-business scales, with a median turnover of £175,000”.

But the SEC Report does not discuss basic eligibility characteristics for a Social Enterprise.

In contrast, in “Approaches to Measuring the Scale of the Social Enterprise Sector in the UK” September 2010, the Third Sector Research Organisation at Birmingham University showed that according to one measurement on page 11 only around a quarter of these might be Social Enterprises.

On page 5 ‘Results’, the Report said:

“The survey focused on organisations registered as Companies Limited by Guarantee (CLGs) or Industrial and Provident Societies (IPS) only and was used to provide an estimate of around 15,000 social enterprises or 1.2% of all enterprises in the UK. It was estimated that they contributed £18 billion to GDP, and employed 475,000 paid staff, of whom two-thirds were full time. Of these 15,000 social enterprises, 88% were CLG and 12% were IPS. Two thirds reported having charitable status, of whom 93% were CLG and 7 per cent IPS.”

The difference between the size of the Social Enterprise sector as measured by the Cabinet Office and Social Enterprise UK’s State of Social Enterprise 2011, compared to that evidenced by the Third Sector Research Organisation, provides further evidence of a blurring of boundaries and definitions of what constitutes a Social Enterprise.

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SHORT NOTE ON POLICY IN SCOTLAND

Since the Amendment by Green MSP Mark Ballard to the Scottish Government’s Voluntary and Social Economy Motion in the Scottish Parliament on Thursday 19 May 2005, in Scotland a distinct policy of support for Social Enterprise has emerged. His amendment:

“recognises the breadth of the social economy in Scotland; further recognises the distinctive contribution that co-operatives and social enterprises make to the social economy; recommends the development of a differentiated strategy to meet the specific needs of the social enterprise sector of the social economy, and further recommends that such a strategy be developed in partnership with social enterprises and their networks beyond the voluntary sector, be aligned with the development of the Co-operative Development Agency and be aligned with the Department of Trade and Industry’s strategy to support social enterprise across the rest of the United Kingdom.”

In response to this and following a detailed consultation, Rhona Brankin MSP as Communities Minister introduced “Better Business: A Strategy and Action Plan for Social Enterprise in Scotland” in March 2007, with £1.5mn support for Social Enterprises. This was a comprehensive strategy with three aims:

  • Aim 1 Raising the profile and proving the value of Social Enterprise
  • Aim 2 Opening up markets to Social Enterprise
  • Aim 3 Increasing the range of finance available to develop Social Enterprise

This was followed by the Enterprising Third Sector Action Plan 2008-2011, with the following objectives:

  • Objective 1: Opening markets to an enterprising third sector
  • Objective 2: Investing more intelligently
  • Objective 3: Promoting social entrepreneurship
  • Objective 4: Investing in skills, learning and leadership across the third sector
  • Objective 5: Providing support for business growth
  • Objective 6: Raising the profile of enterprise in the third sector
  • Objective 7: Developing the evidence base

This Action Plan was initially funded through £8.75mn of £93mn identified for development and support of the Third sector in the Scottish Government Budget in November 2007. £30mn was allocated to the Scottish Investment Fund and £12mn for direct investment through the Third Sector Enterprise Fund. £1mn was allocated to the Social Entrepreneurs’ Fund, launched in November 2008 for individuals to set up a business with a social or environmental purpose. An additional £500,000 was made available until March 2012.

On July 27 2010 a detailed Progress Report on the Action Plan was published.

This was followed by an Evaluation of Third Sector Investment and Support by Scottish Government Social Research in September 2010. Its Conclusions and Recommendations in Section 7.1 on page 49 said:

“It is clear from the study findings that the package of funding and support has been very well received by third sector organisations, stakeholders and other funders. The evidence indicates that the overall approach that has been taken is the right one and has a significant contribution to make to developing an enterprising third sector. There are some gaps and areas for improvement but the key message is that the package should not be significantly altered, rather it should be fine tuned to maximise its impact.”

During the 2007 to 2011 Scottish Parliament, basic Scottish Government funding for Social Enterprise has been provided through:

Where appropriate, these programmes are now extended. An example of Scottish Government funding for the future is in the £1.5mn Ready for Business Programme. The December 2011 Programme Announcement showed that Ready for Business will seek to:

  • improve the profile of Third Sector suppliers with the public sector buying community and thereby open markets
  • strengthen understanding and application of Community Benefits in Procurement
  • encourage routine use of co-production in the design of public services and development of Public-Social Partnerships

The hallmark of all these Scottish Government programmes of funding support is that they are detailed and specific and do not seek private sector involvement. Despite ongoing general funding difficulties, there is still £25.9mn in the Scottish Government’s Budget of Tuesday 31 January 2012 for the Third Sector.

Future Huckfield briefings will cover the Scottish Government’s policy in more detail.

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CONCLUSION

Following the Coalition Government’s Modernising Commissioning Green Paper in December 2010, the Cabinet Office paper Growing the Social Investment Market in February 2011 – with its advocacy of private investors’ ‘social investment’ – and the Open Public Services White Paper in July 2011, the future shape of public service delivery is becoming more clear. The responses of ACEVO, Social Enterprise UK and NCVO, while raising some difficulties, have supported the thrust of these policies.

National Offender Management Service and Prisons in England

Events in England for commissioning in the National Offender Management Service and Prisons represent the “second wave of the primes” – with private sector primes forming partnerships with larger Third Sector organisations.

On Friday 24 February 2012, Huckfield attended a briefing in Durham from The Local Alliance – SERCO, Turning Point and Catch 22. Many colleagues from smaller organisations were pondering how they might fit into a bidding partnership obviously dominated by SERCO.

Expressions of Interest rightly ask smaller organisations about their capacity and delivery volumes they anticipate. The Local Alliance Durham briefing also stressed that this should not be the only contractual services delivered by those expressing interest.

Another consortium is the ‘HMPS Partnership’ – HM Prison Service, MITIE, the Shaw Trust and Working Links. There will be others.

All this leaves many Social Enterprises and Third Sector Organisations at the end of the chain, with fears that they will be beaten down in price for services where they have a proven track record of delivery. They know that this system of “primes” and payment by results is becoming the norm.

Unions and The Third Sector

Trade unions are taking a new interest in Communities and the Third Sector. A Campaign for Learning event in London on Monday 12 March 2012 brings together unions, communities and the Third Sector nationally for the first time. UNITE now has a Community, Youth Workers and Not for Profit sector, a new Unite for Our Society site and is piloting new new Community Branches. All this shows an increasing trade union interest and presence in Third Sector activity.

The Unite Community, Youth Workers and Not for Profit Sector proclaims:

“UNITE is the lead union for the not for profit sector, setting out a progressive agenda to support all who work for charities, professional bodies, housing associations and many other workplaces, from the very large to those that employ only one or two people”.

There is no doubt that this influx of new membership into UNITE and other trade unions will resist greater private sector involvement in Social Enterprise and the Third Sector.

And, Finally

The prime contractor model and payment by results are spreading widely throughout Department of Work and Pensions, JobCentre Plus, the Ministry of Justice, National Offender Management Service and Prisons. When Andrew Lansley’s Health and Social Care Bill finally reaches the Statute Book, there will be more.

Where these are areas of policy devolved to the Scottish Government, many of these changes will not happen. The Scottish Government has resisted contracting out, commissioning and tendering for NHS, Prisons and the services which it controls. But tax incentives for private investment encouraged by Social Enterprise UK and NCVO do affect Scotland as part of the UK taxation and welfare systems.

Meanwhile, rather than influencing public services delivery, surely these national organisations representing the Third Sector will find themselves restricted to a role in negotiating with private sector primes to secure better terms and conditions for subcontractors?

All this represents a brave new world of private sector direct investment, Social Investment, including Social Impact Bonds, payment by results and the emerging threat of privatisation of the Third Sector.

This Huckfield briefing suggests that many smaller Social Enterprise and Third Sector organisations may be driven to draw their own line in the sand.

But this line will be in a different place from that drawn by their national representatives.

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Filling the Infrastructure Funding Gap

BACKGROUND

With ongoing reductions in public expenditure for infrastructure funding, this Huckfield briefing gives a summary of funding available in Scotland for further development of infrastructure projects. It does not seek to be exhaustive but to shed light on some sources with which all readers may not be familiar.

The following headings take you straight to sections concerned:

SCOTTISH INNOVATION

This Section offers a brief description which shows that there is more funding innovation in Scotland than is sometimes recognised or appreciated.

Glasgow Eastern Area Regeneration (GEAR)

This important partnership brought public and private sectors together with benefits for deprived communities in Glasgow.

Highland Housing Association Land Bank Fund

This important Highland Council/Highland Housing Association Land Bank Fund initiative deserves more detailed study.

Fife and East Kilbride

In Fife and East Kilbride there have been important research projects which are sometimes overlooked. Further Huckfield briefings will provide more details on these.

LOCAL COUNCIL BORROWING AND LOANS

The following represent general powers for local council borrowing which do not need special purpose vehicles:

Prudential Borrowing

A brief summary of the Prudential Borrowing Code and its implications for local councils.

Municipal Bonds

Faced by higher interest rates from the Public Works Loan Board, following the example of the Greater London Council and some Housing Associations, more local authorities are exploring issuing their own bonds.

SPECIAL PURPOSE VEHICLES

Rather than general powers, these mechanisms need specific assembly and formation:

Non Profit Distributing Organisations

NPDOs are sometimes called “PFI-lite”. Through the Scottish Futures Trust NPDOs represent the Scottish Government’s chosen vehicle for funding significant public infrastructure developments. Scottish Futures’ “hub” policy is still being developed across Scotland.

National Housing Trust

Through the Scottish Futures Trust, these involve partnerships between local councils and developers to build more affordable homes.

EUROPEAN FUNDING

Under some Priorities of the 2007 to 2013 Structural Funds Programmes, local councils and others may continue to make funding applications.

JESSICA

Funding under JESSICA (Joint European Support for Sustainable Investment in City Areas) represents an important programme funded by the European Commission, European Investment Bank and Scottish Government.

LEVIES AND TAXATION

This Section deals with Planning Agreements, Community Infrastructure Levy and Tax Increment Funding.

Planning Agreements

Planning Gain through Planning Agreements has been more widely used in England than Scotland.

Community Infrastructure Levy

In England, CIL is beginning to replace Planning Agreements under Section 106 of the Town and Country Planning Act 1990.

Tax Increment Funding

With the Scottish Futures Trust, the Scottish Government and local councils are setting the pace for the rest of the UK in this important new financing mechanism.

LOCAL COUNCILS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

With more Councils defining and developing Community Benefit policies from renewable energy, especially wind farms, this is an expanding area of potential infrastructure funding.

Dumfries and Galloway

Following a detailed review in 2011, Dumfries and Galloway are developing a detailed Community Benefit policy.

South Lanarkshire

Especially with its well known Whitelee Wind Farm, South Lanarkshire has been a Scottish and UK pace-setter in defining community benefit from wind farms.

Scottish Borders

Scottish Borders is developing its Community Benefit policy. Its area includes the 10-turbine Brunta Hill Windfarm.

Highland Council

Highland Council announced its detailed Community Benefit policy, including funding for infrastructure, on Friday 24 February 2012. Highland is also the first council in Scotland to begin a detailed community benefit policy for offshore wind.

OTHER COMMUNITY BENEFIT FROM RENEWABLE ENERGY

Scottish and Southern Energy (Scottish Hydro) and the Forestry Commission are beginning to develop their Community Benefit policies across Scotland. While these are at a preparatory stage, their size they may have important implications for infrastructure.

Scottish and Southern Energy (Scottish Hydro)

Scottish Hydro policy across Scotland is beginning to emerge.

Forestry Commission

The Forestry Commission has pursued a tendering process for wind farm developments on its land. The £5000 per installed Megawatt tariff which has emerged has now set the benchmark for Scotland.

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SCOTTISH INNOVATION

The following show examples of innovation in Scotland which deserve more study and will be covered in more detail in further Huckfield briefings.

Glasgow Eastern Area Regeneration (GEAR)

GEAR activity from 1976 to 1987 is summarised in “Remaking Planning: The Politics of Urban Chance” in 1996 by Tim Brindley, Yvonne Rydin and Gerry Stoker:

“Private builders have been attracted to GEAR sites that have been reclaimed and attractively landscaped by the public sector. Initially, land was sold cheaply by the former public sector owners and in some cases, subsidised with public sector grants and underwritten by public sector guarantees to buy any properties not sold”.

Highland Housing Association Land Bank Fund

“Paying the Piper:Funding and Financing Infrastructure Issues for Housing in Scotland” March 2011 by Newhaven Research for the Chartered Institute of Housing, describes the Highland Council/Highland Housing Association Landbank initiative on page 45:

“In March 2005, Highland Council transferred the land to Highland Housing Association (HHA) for the open market value. Purchase of the land by HHA was funded by means of an interest free loan provided from the Land Bank Fund . HHA issued a development brief in July 2005, and commissioned a feasibility study and indicative masterplan for the site, which confirmed potential for 32 affordable and 88 private units, or 120 in all; revised outline planning consent was applied for and granted.”

Fife and East Kilbride

There are also cases innovative ways forward in Fife’s research into a possible “roof tax” and research for East Kilbride on the “Infrastructure Deficit” for the Northern Distributor Road.

Further Huckfield briefings will provide more details on these.

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LOCAL COUNCIL BORROWING AND LOANS

Prudential Borrowing is well established as a local council funding source for infrastructure. With increased Public Works Loan Board rates, more councils are now investigating the possible issuance of their own bonds.

Prudential Borrowing

Prudential Borrowing is the administrative framework applying to local councils that allows them to borrow in accordance with the Prudential Borrowing Code.  The objective of the Code is to help ensure for individual authorities that:

  • Capital expenditure plans are affordable
  • All external borrowing and other long term liabilities are within prudent and sustainable levels
  • Treasury management decisions are taken in accordance with professional good practice

Prudential Borrowing has often been a loan from the Public Works Loan Board at rates of interest marginally above those at which the Government itself can borrow from the gilts market. Other forms of borrowing, including commercial bank loans and bond issues, are also permitted.

Prudential Borrowing is sometimes described to as an alternative means of procurement to PFI/PPP. But Prudential Borrowing represents a means of finance rather than a procurement route. But Prudential Borrowing can be used in conjunction with conventional, PPP or PFI procurement mechanisms.

In “An Exploratory Study of the Utilisation of the UK’s Prudential Borrowing Framework” by Stephen Bailey and others in Public Policy and Administration November 2010, on page 352:

“The Prudential Indicators are intended to clarify the consequences of proposed investment policies, enhancing transparency and accountability. Using the Indicators, each local authority sets a limit on the amount of borrowing it can undertake. Estimates for ‘capital expenditure un-financed’ (defined as that capital expenditure which is not financed by capital receipts, grants or revenue contributions) results in local authorities setting their own limits on the total amount of debt they can take on. This is intended to ensure that all external borrowing is within prudent and sustainable limits, that capital expenditure plans are affordable and that treasury management decisions correspond with certain accounting standards. This marks a significant shift from direct prescriptive statute-based control towards increased local self-regulation, financial autonomy and reliance on professional codes of practice for the monitoring of this autonomy”

Municipal Bonds

Municipal bonds may be issued by central and local government to finance capital projects like schools, roads or other public infrastructure or even to fund ongoing required expenditure.  Investors who buy municipal bonds are in effect lending money to the bond issuer in exchange for a promise of regular interest payments and the return of the original investment or principal. These bond investors are usually attracted by the steady stream of income payments. They may be more risk-averse and more focused on preserving rather than accumulating wealth.

Following London’s £600mn bond issue to fund Crossrail in July 2011, according to the Sunday Telegraph of Sunday 4 December 2011 some English local councils, including Wandsworth, Birmingham and Guildford now have secured external credit ratings as a preparation to become potential bond issues as their sources of finance are cut or become more expensive.

Though around 50% of UK capital expenditure is channelled through local government. But local councils face increasing difficulties with  spending cuts and increases in the cost of borrowing from the central Public Works Loan Board. Grants for local government capital spending will be reduced from £11.1bn in 2010-11 to £6bn in 2014-15 in real terms.

The New Local Government Network believes that increased Public Works Loan Board interest rates will force more city councils to the bond markets. In “Capital Futures:Local Capital Finance Options in an age of recovery”, the New Local Government Network said:

“Nearly two-thirds of the councils surveyed for new research say the PWLB rate rise will change the way they borrow, suggesting that bond issuances will come back onto the local agenda for the first time in 17 years.”

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SPECIAL PURPOSE VEHICLES

This Section describes special mechanisms which may be set up through Scottish Futures Trust to assist local council borrowing.

Non Profit Distributing Organisations

These are sometimes called “PFI lite”. The Scottish Government has abandoned PPP/PFI in favour of the Scottish Futures Trust(SFT). SFT has embarked on a range of procurement options, such as Non-Profit Distributing Organisations (NDPOs). The essential difference between NPDOs and mainstream PPP/PFI is that returns to private investors are capped.

The Eighth Report on December 16 2008 of the Scottish Parliament Finance Committee Inquiry into Methods of Funding Capital Investment Projects in paragraph 129 concludes:

“The Committee believes that a broad range of options for funding and procurement of capital projects should be in place. The Committee notes the Scottish Government’s decision to make NPDO models the default form of private finance, and the statement in the Value for Money Guidance that, where NPDO is not suitable, other private finance models will be assessed. The Committee recommends that public bodies should select the method of financing which delivers best value to the taxpayer. The Committee, therefore, agrees by division that all methods of finance should be considered equally on their merits. A minority of the Committee endorses the Scottish Government’s position that the NPDO model should be the default option.”

The Scottish Government’s Response from Cabinet Secretary John Swinney on February 16 2009:

“The Scottish Government very much agrees that value for money should determine the procurement model used. That is why it is not in favour of the use of the standard PFI model of procurement because it considers that the uncapped equity returns inherent in the financing structure do not represent best value for money for the taxpayer and give rise to excessive profits. Where it is shown that the use of private finance will secure better value for money, the Government believes that the NP~ model, which eliminates uncapped returns and directs surpluses for community benefit, offers a better deal for taxpayers”.

In “Non-Profit Distribution: The Scottish Approach to Private Finance in Public Services” in the Cambridge University Press “Social Policy and Society” 2009, Mark Hellowell and Alyson Pollock on page 406:

“The key difference between PFI and NPD is that, whereas in the former, the SPV capital includes a small element of private equity, in the latter its members invest only loans. In consequence, while SPV shareholders receive returns on their capital in NPD, the level of these returns is to a large extent ‘capped’ at the point at which contracts are signed, and any surpluses remaining at the end of the contract are passed to a designated charity. This is distinct from the PFI model, in which surpluses are passed to SPV members as dividends”.

The Scottish Futures Trust is forming a series of NPDO “Hubs” across Scotland involving private and public sector partners. On Monday 23 January 2012, Barry White, SFT Chief Executive announced:

“This is a momentous achievement for SFT and the hub team. In the past 18 months we have announced the appointment of the preferred partners for the South East, North, East Central and West hubs with the last preferred partner for South West hub to be announced in August 2012. When all hubs are operational they will deliver in excess of £1.4bn of infrastructure projects across Scotland by 2020″

National Housing Trust

This is an initiative by the Scottish Government in 2011 to enable developers and local authorities jointly to fund homes by forming Limited Liability Partnerships, with loans underwritten by the Scottish Government. Typically a local council may meet 65% of construction costs for the homes, in a partnership with private developer.

The Scottish Government described in October 2011 how the National Housing Trust works.

“New build homes are procured from developers, and when a bid from a developer is accepted onto the initiative the developer will complete the homes on their site to agreed standards and timescales. Limited Liability Partnerships (LLPs) are being set up to oversee progress on each developer’s site within a Council area – these are companies which won’t have any staff, but have a board of management involving the relevant developer and Council and a representative of the SFT. Once the homes are completed, the LLP will buy them by paying between 65% and 70% of an agreed purchase price to the developer upfront.

“This contribution is funded by participating Councils who will provide loans to the LLPs in their area – Councils are likely to fund this by borrowing from the Public Works Loan Board. The remaining 30% to 35% is contributed by the developer as a mixture of loan funding and equity investment”

“The homes are expected to be available to tenants for affordable intermediate rent for five to 10 years and the developer will oversee an agent(s) who will manage the homes and carry out maintenance and repairs to agreed customer service standards. The managing agents will allocate homes to tenants based on criteria agreed with the Council.

“Each LLP’s income from tenants’ rents will be used to pay interest to the Council so it can finance its own borrowing for the initiative and will also pay interest on the loan from the developer and pay for agents responsible for managing and maintaining the homes. The Scottish Government will provide a guarantee to participating Councils that it will step in if there is a problem and the LLP is unable to pay what it owes to the Council”

This is an example of Procurement Tendering on the Tenders Electronic Daily site.

The Second Phase of the NHT initiative shows details of 15 Councils procuring homes through the current phase of the NHT initiative and the approximate number of homes being sought in each area.

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EUROPEAN FUNDING

Under current 2007 to 2013 EU Structural Funds Programmes, the Scottish Government, Local Councils and others may continue to apply for European Regional Development Fund, provided they can find the required match funding contribution. EU funding will be covered in detail in a later Huckfield posting.

Councils and others can also apply under a wide range of Transnational Programmes including Eighth Framework. Applications may be made under most of these, irrespective of council designation.

JESSICA

The most recent development in Scotland is under the JESSICA (Joint European Support for Sustainable Investment in City Areas).

Scottish Ministers signed a Funding Agreement with the European Investment Bank (EIB) in June 2010 to establish a £50m JESSICA Holding Fund in Scotland. The fund was capitalised with £24m from ERDF Priority 3, matched by £26m from the Scottish Government.

The £50 million investment fund will support a range of regeneration projects offering loans and equity investment to revenue generating projects in 13 local authority areas in Scotland. These areas being an eligibility criteria of ERDF Priority 3.

The announcement at the Scottish Government JESSICA launch event said:

“The £50 million SPRUCE (Scottish Partnership for Regeneration in Urban Centres) Fund is open for business. The Fund is a new source of capital aimed at financing regeneration projects in Scotland, with funding that has been repaid from successful projects being used to fund further regeneration projects. Administered by Amber Fund Management Limited SPRUCE, Scotland’s JESSICA Fund (Joint European Support for Sustainable Investment in City Areas) will provide funding support to revenue-generating projects within 13 eligible areas. The intention is that the fund will be recycled up to three times within 10 years, providing significant resource to support successful regeneration in these key areas”.

This is explained in more detail on the site of AMBER, the fund’s managing agent:

“The SPRUCE Fund supports a wide range of urban regeneration activity within well defined, integrated, sustainable urban development plans.

“Eligible and investible projects include the development of office and commercial space, key transport projects and investment in energy efficient projects. This latter activity includes support for innovative approaches to energy efficiency retrofit measures.

“The SPRUCE Fund can lend to public, private or joint venture entities delivering regeneration or energy efficiency benefits within the designated local authority areas. The SPRUCE Fund lending rates are highly competitive”.

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LEVIES AND TAXATION

This Section describes Planning Agreements, Community Infrastructure Levy and Tax Increment Funding. The latter are emerging instruments which deserve special focus in view of their potential.

Planning Agreements

Previously, a main source of funding for infrastructure in Scotland and especially in England has been from Planning Gain and Planning Agreements.

In 2004/05 most Scottish planning agreements were under Section 75 of the Town and Country Planning (Scotland) Act 1997. By 2006/07 the majority were under Section 69 of the Local Government (Scotland) Act 1973. In England the main legal basis for planning obligations is set out at section 106 of the Town & Country Planning Act 1990.

The Scottish Government’s “Assessment of the Value of Planning Agreements in Scotland” by McMaster and others in 2008 on page 37, Table 4.11 showed that during the three years from 2004/05 to 2006/07, the total value of all planning obligation contributions throughout Scotland was £159mn.

The same Report on Planning Agreements shows that during the period 2004/05 to 2006/07 only 16% of all planning permissions in Scotland were linked with a Planning Agreement. Edinburgh, Scottish Borders, Aberdeenshire, Glasgow and Midlothian accounted for 61% of all contributions. Page 1 on Use of Agreements shows:

“The increase in the use of agreements for major housing developments, however, was especially significant. In 2003/04, 9% of all such permissions were linked with an agreement and the proportion rose to 16% in 2006/07.

For England, the equivalent Department of Communities and Local Government Report in 2006 showed that this three year Scottish total compared with an English total ten times as large in 2003/04 – for a single year.

In Valuing Planning Obligations in England Update Study for 2005-06, published by DCLG Final in August 2008,  Table 4.2 “Regional Estimate of the total value of planning obligations agreed in 2005-06 (excluding land contributions and county councils)” on page 50 shows that total Affordable Housing contributions were £1.9bn and other obligations £935.7mn, giving a total of £2.8bn

On page 52 this is further summarised:

“The total value of obligations that will be delivered from agreements signed in 2005-06 is estimated at around £2.8bn (an estimated loss or non-delivery of approximately £1bn or 30%)”.

Allowing for population differences – with England’s population ten times that of Scotland – this shows that the English total in developer contributions for one year was three times the level of contributions in Scotland.

The Town and Country Planning Association in “Planning Community Needs – a Guide to Effective Section 106 agreements and Statements of Community Involvement” in July 2008 gives a London Borough of Camden example where the total Section 106 Planning Gain was valued at £90mn from a scheme with a total value of £3bn. Inside the M25 orbit, London Boroughs and Central Government investment in London have seen levels of planning gain which are not achievable in Scotland, the North or Midlands.

After lobbying from developers about planning obligations’ being too onerous, Scottish Government Circular 1/2010 was designed to ease pressure on residential and commercial developers, through “Relationship to Proposed Development” and “Reasonableness” Tests.

Further developments now make it easier for some negotiations between planning authorities and developers to enable relief from some Planning Agreements in order to allow developments to proceed. While all of this eases pressure on some developers, it does not make it easier to fund infrastructure.

Further Huckfield briefings will include more up to date information on Planning Agreements in Scotland and England.

Community Infrastructure Levy

The main advantage for infrastructure funding is that procedures in a Community Infrastructure Levy in England determine the levy in advance, without subsequent uncertainties on payments and implementation. In many London Boroughs there will soon be two Community Infrastructure Levies – one levied by the Mayor to fund Crossrail and the other by Boroughs to fund their infrastructure needs.

One of the forerunners of the Community Infrastructure Levy was the Milton Keynes “Roof Tax”, as reported in the Guardian of Wednesday 27 July 2005:

“Society Guardian has learned that a Milton Keynes partnership committee, a new body with powers to fast-track planning, which includes EP and councillors, will tell key Whitehall departments that the infrastructure price tag for the proposed eastern and western extensions of the new town will reach between £1.2bn and £1.5bn by 2011.

As an interim measure to fund facilities, the Milton Keynes partnership committee has gained agreement from 20 large landowners, as well as builders, for the country’s first infrastructure tariff, labelled a “roof tax”. They will pay a levy of £18,000 for each house completed. This could raise around £270m”.

There is potential in exploring models of development charges based upon work already undertaken by Scottish Government.  This should build on recent research and examples of good practice including the Future Infrastructure Requirements for Services model adopted in Aberdeenshire.  Other models might be based upon the concept of allowing developers to ‘pay as you sell’ rather than ‘pay in advance’. This relies on infrastructure planning to identify where benefits can be accrued.

Under the Community Infrastructure Levy procedure in England Local Planning Authorities publish a list of infrastructure projects to be funded and the levy rate to contribute to identified funding gaps. An Independent Examiner from the Planning Inspectorate then judges whether the infrastructure list and proposed levy are reasonable.

Community Infrastructure Levy powers were introduced for England in April 2011. DCLG has consulted on amendments following the Localism Act 2011, to require local authorities to pass some receipts to neighbourhoods where development is taking place and to clarify how receipts fund ongoing costs of providing infrastructure. All this gives more local choice over how to implement the CIL charge.

As the DCLG March 2011 Presentation shows, Community Infrastructure Levy may be spent on infrastructure which legally includes (the list in the Act is not exhaustive):

  • flood defence
  • open space
  • recreation and sport
  • roads and transport facilities
  • education and health facilities
  • affordable housing

Authorities are advised to keep their infrastructure evidence simple and should demonstrate that there is an Infrastructure Funding Gap against existing funding streams. Authorities seeking to raise funds through CIL have to strike a careful balance between:

  • Meeting all or part of the infrastructure funding gap
  • The potential impact of CIL upon the economic viability of development across its area

The Newark and Sherwood CIL came into force in December 2011. Redbridge and Shropshire followed on New Year’s Day 2012. Portsmouth and London are at Examination Stage. Broadland, Croydon, Huntingdonshire, Norwich, Poole, South Norfolk and Wandsworth are undergoing Examination.

Since the first 12 CIL Charging Schedules show significant differences, it is difficult to predict average yields from CIL. But they will be significant.

Bristol predicts £14mn over five years. In its detailed Levy Rationale Background Paper – March 2011 Shropshire identified an overall Infrastructure Funding Gap of £385,459,000 for 2010 till 2026 for Road Transport Facilities, Flood Defences, Education, Medical Facilities, Open Space, Sports and Recreation, Police and Electricity Supply – based on estimates and existing developer contributions. This equated to £17,800 per projected dwelling.

In a succinct but methodical Examiner’s Report to Shropshire Council September 2011 the Examiner Sue Turner concluded:

“Since the Core Strategy was adopted, work on infrastructure planning has continued. The Shropshire LDF Implementation Plan 2011-2012 provides an up to date picture of the infrastructure projects to which CIL is expected to contribute.  It identifies a funding gap of £212,815,912 and an indicative CIL requirement of £180,148,912.   All of the figures above show that there is a significant infrastructure funding gap and demonstrates the need to levy CIL”.

Shropshire’s prediction of £180mn over 15 years shows that CIL can be a significant source of future income. In accordance with the DCLG Code of Practice, 10% of net CIL monies will be directed to strategic infrastructure schemes, and 90% of net CIL monies will be spent on local infrastructure.

As CIL Charging Schemes proceed, their Examiners may need to revise some CIL estimates on account of the following:

  • Ageing population and changing implications for a range of social infrastructure facilities
  • Changing household patterns. Many current planning ratios are based on historical household demands. More single person households are changing the pattern of education demands. Primary and Second School contributions may gradually need changing
  • Digital Media and changing models of learning, particularly in the FE/HE sector
  • Externally commissioned service delivery and new models of delivering social infrastructure in partnership with retail and leisure establishments

It will take time before most local authorities have a CIL scheme in place. Only 35% have Adopted Local Plans. So there may be a need to look at other methods in the mean time.

Tax Increment Funding

In “Paying the Piper – Funding and Financing Infrastructure Issues in Scotland” by  Newhaven Research for the Chartered Institute of Housing on March 07 2011 on page 27:

“Tax increment finance (TIF) allows local authorities to fund the improvement of an area through the property tax revenue subsequently generated by that improvement ….

“Used in this way, TIF is intended to create the necessary conditions for attracting subsequent commercial and residential investment, but it has also been used directly by local housing authorities to secure additional market and affordable housing”

“In brief, the approach involves clearly designating a specific area, calculating the existing tax revenue generated in that area at some base date, specifying and costing a programme of improvement work, estimating the increase in tax revenue that will arise as a consequence of doing this work and then hypothecating that increase in tax revenue for a specific period to pay for the work to be done.”

In May 2011, the Scottish Government on set out its basic position on Tax Increment Funding:

“Any proposal for a TIF project must demonstrate to Scottish Ministers that:

  • the enabling infrastructure will unlock regeneration and sustainable economic growth
  • it will generate additional (or incremental) public sector revenues (net of a displacement effect)
  • it is capable of repaying, over an agreed timescale, the financing requirements of the enabling infrastructure from the incremental revenues”.

The Scottish Government set out the latest position in an announcement “Plans for funding building projects” on Tuesday 01 November 2011:

“Three local authorities have been given approval by the Scottish Government to develop proposals under the Tax Incremental Financing (TIF) model.

The successful councils plan to fund infrastructure projects by borrowing against the future business rate income that should be generated by the resulting development.

The following local authorities will now work with the Scottish Futures Trust (SFT) to develop full TIF business cases:

  • Falkirk Council – £52 million direct investment to key strategic road improvement, the Grangemouth flood defences and site enabling works. It is forecast to attract £365m of private sector funding and creating over 5,000 full-time equivalent (FTE) additional jobs at national level
  • Fife Council – £17 million for improved vehicle and marine access to Energy Park Fife, site remediation and enhanced delivery of a Levenmouth Low Carbon Investment Park. It is estimated that 1,000 new jobs will be created
  • Argyll and Bute – £20 million proposal to extend Oban’s North Pier and to construct a development road at Dunbeg/Dunstaffnage. 1,000 FTE jobs expected

Ministers have so far approved two TIF business cases:

  • City of Edinburgh Council – £84 million Leith Waterfront project has the potential to unlock £660 million of private investment generating 4,900 FTE jobs
  • North Lanarkshire Council – £73 million Ravenscraig Phase two scheme is expected to unlock £425 million of private investment and over 4,500 FTE jobs

In addition to those already agreed, work on developing further TIF business cases remains underway.

  • Glasgow City Council is in the process of developing a business case for a £80 million TIF project, Buchanan Quarter, which is expected to be submitted shortly
  • Aberdeen City Council’s plan to use TIF for Union Terrace Gardens project will be progressed if public support for the project can be demonstrated

Cabinet Secretary for Infrastructure and Capital Investment Alex Neil said on Tuesday 01 November 2011:

“Depending on progress with TIF pilots, we will bring forward primary legislation before the end of this Parliamentary session to roll out TIF more widely across Scotland. There may also be further opportunities to progress those bids not announced as successful, to ensure good geographical spread, before then.”

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LOCAL COUNCILS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

With more onshore windfarms gaining planning consents and becoming operational, several local authorities are beginning to develop and formalise their policies and guidelines for Community Benefit, including funding for larger infrastructure programmes.

Dumfries and Galloway

Dumfries and Galloway conducted a Windfarm Community Benefit Framework Review in April 2011. “Windfarm Community Benefits. Revised Approach 2011 Information for Communities”  Section 7 refers to a Minimum Developer Contribution:

“The standard minimum rate of contribution is £5,000 per megawatt per annum based on the  installed/consented capacity of the windfarm. For example for a windfarm development with installed capacity of 25 megawatts, the community benefit fund would be £125,000 per annum. This rate will be index linked from 1st January 2011 based on the Retail Price Index”.

Windfarm Community Benefits Revised Approach 2011 Information for Developers” in Section 6 refers the establishment of a Regional Socio Economic Fund:

50% of the funding will be ring-fenced for a Regional Socio-Economic fund. The purpose of this fund is to invest in social, economic and environmental projects that support a sustainable low carbon economy. Projects will seek to deliver in one or more of the following areas:

  • Business and skills
  • Environment and community
  • Cultural and tourism
  • Affordable housing
  • Community transport
  • Improved broadband connectivity

The region-wide fund will take applications from constituted community groups, communities, organisations including the public sector from across Dumfries and Galloway.

South Lanarkshire

With Whitelee and the other windfarms, practice in South Lanarkshire is now established with its Renewable Energy Fund

The Fund’s basic options are:

  • Main renewable energy fund – grants over £10,000 up to 50% of total ‘eligible’ costs
  • Local grant scheme – grants of less than £5,000 and up to 100% of total ‘eligible’ costs for smaller community-based projects

Applications for financial assistance are eligible for projects within a 10km radius of participating renewable energy developments. These are accepted from:

  • public organisations and agencies
  • partnerships, trusts, co-operatives and other non-government organisations
  • community groups, associations or organisations
  • any business, co-operative or other trading enterprise located, or offering a service benefiting communities, within a 10km radius of participating developments

Applications will be considered from outside the 10km radius if it can be demonstrated that the people who will benefit those who live inside the eligible area. Any grants awarded would be proportional to the percentage of residents who would benefit from the project.

Scottish Borders

Scottish Borders’ Council has issued a comprehensive toolkit “Achieving Community Benefit from Commercial Windfarms” on page 10 says:

“There are no hard and fast rules about the level of community benefit which can be achieved, but some real examples include: – Highland Council aims to achieve £4,000 to £5,000 per installed MW per year”

Highland Council

Highland Council launched its renewable energy Community Benefit Policy in Inverness on Friday 24 February 2011. The policy is in line with examples above:

“The  Council’s policy applies to all onshore renewable energy developments.  It seeks a minimum payment to community benefit funds equivalent to £5,000 per Megawatt of installed capacity per year. The Council will seek to negotiate concordats with developers, which will ensure that developers operate within the Council’s policy and that developers negotiate directly with the Council on behalf of communities to secure the greatest level of benefit possible.

“The Council’s policy is a 3-tier system of benefit with all of the first £100,000 per year of benefit going to local communities and managed within a Local Fund.  Of the community benefit that remains:

  • 55% will also go to local communities through their Local Fund
  • 30% will go to one of ten local Area Funds covering Caithness; Sutherland; Dingwall and Black Isle; Easter Ross; West and Mid Ross; Lochaber; Inverness; Skye; Nairn and Ardersier; Badenoch and Strathspey
  • the remaining 15 % will go to the Highland Trust Fund”

The Council’s Community Benefit policy makes it clear that infrastructure may be funded:

“It is intended that all three funds would receive bids from communities, groups and other appropriate organisations for the following project types:

  • Financial and other support for business and community projects including provision of infrastructure
  • Alternative and renewable energy research
  • Energy generation and efficiency schemes (including community ownership or stakes in renewable energy developments
  • Community ownership or control of assets
  • Projects which address issues of fuel poverty
  • Other community interest projects based within the community
  • Skills development and apprenticeships”

Highland Council’s policy is one of the first in Scotland to explore in more detail a proposed allocation of Community Benefit from offshore wind developments.

OTHER ORGANISATIONS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

As more windfarms receive planning consent, are being constructed and become operational, in addition to local authorities, other organisations are now formalising their approaches to community benefit associated with these developments. The following provides some Scottish national examples:

Scottish and Southern Energy (Scottish Hydro)

In November 2011 SSE announced details of a new Scotland Sustainable Energy Fund that could be worth more than £90 million over 25 years:

“The fund will be available for organisations promoting skills development, community energy schemes and improving the built and natural environment. The fund is in addition to the £150 million SSE has already committed to support community projects in Scotland over the 25-year projected lifetime of the company’s existing and planned wind farms”.

SSE’s commitment is based on a tariff of:

“£5,000 per megawatt for all new onshore wind farms constructed in Scotland from 1 January 2012. This will comprise £2,500 for local community initiatives and £2,500 per megawatt for the new Scotland Sustainable Energy fund”.

While all this is at an early stage, it means that in future there may be substantial community benefit funding available for larger projects. As progress is made, there will be further Huckfield briefings.

Forestry Commission

Forestry Commission Scotland is working with developers for wind and hydro projects on national forest land. FCS has published a helpful guide to its thinking in “Opportunities for Community Involvement In Hydro or Wind Renewable Energy Development on the National Forest Estate“.

Forestry Commission Scotland deserve credit for setting the “benchmark tariff” of £5000 per installed megawatt since this is becoming the standard tariff for wind farm community benefit across Scotland.

The Opportunities for Community Benefit document shows selected developers for Hydro and Wind Generation Lots across Scotland. The developers will engage with local communities about processing Community Benefit. All this is still at an early stage of development.

But further Huckfield briefing will be posted on this site as soon as it becomes available, especially if some developers follow precedents above of splitting benefits available into local community and more strategic projects.

CONCLUSION

All of this represents a rapidly unfolding scene in which the Scottish Government and some local authorities are emerging as UK pace-setters. Future Huckfield briefings will publish further details as these unfold.

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Griggs’ Governance Report Deserves a Context

BACKGROUND

Professor Russel Griggs’ “Report of the Review of Further Education Governance in Scotland” submitted to Scottish Ministers on Friday 20 January 2012 contains some pretty strong stuff.

Professor Griggs’ team has delivered a comprehensive report on governance, in which structures for new regional further education boards are laid out in immaculate detail. But they lack a wider context in which they might operate.

Supplementary Guidance on page 60 to Professor Griggs from the Cabinet Secretary for Education shows that the Report’s terms of reference were amended by the “Putting Learners at the Centre”  pre legislative consultation in September 2011.  Further developments, including the issuing of the Scottish Funding Council’s “Putting Learners at the Centre Implementing Paper” in November 2011 and the adoption of the Scottish Government’s Budget on Wednesday 08 February  2012 shows that the Report’s background and context have moved even further. This Huckfield briefing offers suggestions for the context in which the Griggs’ recommendations might operate.

CONCLUSIONS OF REPORT

The “Report of the Review of Further Education Governance in Scotland” represents a comprehensive and detailed report and its main conclusions are considered below. These are links to its main findings below:

Colleges after the 1992 Act 

A brief summary of changes for colleges since the Scotland version of the 1992 Higher and Further Education Act.

Scotland’s Colleges Do Well 

Setting achievements by Scotland’s Colleges in a context. These achievements were also summarised in a recent Huckfield briefing on “Funding for Scotland’s Colleges”.

Griggs’ Regions and Other Regions 

Griggs’ regions don’t necessarily match existing regional boundaries.

Communities and Third Sector 

Though pages 18, 26 and others mention community involvement, community and Third Sector representation needs to be accommodated to ensure successful regional delivery by the new structures.

Regional Board Management and Central Structure 

Outlines for the conduct of new regional Boards are set out, with not much left for the Scottish Funding Council.

Running a Regional Board

There needs to be more detail on the running and objectives of Regional Boards.

Capital Projects 

If, as the Report recommends, the Scottish Government is to provide capital funding, like the NHS in Scotland, detailed guidance will be needed on regional board provision for maintenance and depreciation of assets.

But these conclusions and recommendations above deserve a wider context, on which this Huckfield briefing makes suggestions, including the following: (Please click on links below for these following sections)

ENGAGING EMPLOYERS 

Strong themes on the need for greater employer involvement have appeared in several reports before the Griggs Report. Many concluded that employers and colleges need to connect better to ensure that qualifications and outcomes are relevant for local labour markets.

DISAPPEARING YOUTH LABOUR MARKET 

There is an increasing number of young unemployed in a young people’s labour market which is rapidly disappearing. Economic and social conditions have changed so that going from school to work becomes much more difficult. New routes and pathways to work are needed.

COMMUNITY INVOLVEMENT

Through direct funding for the Third Sector, including Third Sector Interfaces, and through various local authority structures for neighbourhood participation and community involvement, there are a large number of local community and Third Sector structures. Their involvement in regional further education is essential for its effective delivery.

YOUTH EMPLOYMENT STRATEGY 

Any regional college governance structure should take adequate account of a range of initiatives in the Scottish Government’s comprehensive Youth Employment Strategy published on Tuesday 31 January 2012, especially those for procurement and community benefit.

Below this Huckfield briefing highlights issues which should form a background for further consideration of the Griggs Report’s recommendations. These are summarised below.

CONCLUSIONS OF REPORT

The following represent some of the main topics on which the Report produced conclusions:

Colleges after the 1992 Act

The Report on page 2 describes the purpose of the 1992 Further and Higher Education Act:

“The current structure and governance of the FE Sector in Scotland was set up as a straight Scottish parallel to the Further and Higher Education Act in 1992 in England and Wales. Basically it backed Colleges out of the Local Authorities they were part of, made them independent entities with charitable status, gave them some governance requirements by statute, and then told them to be free, independent and create their own future.”

On the ground the ‘liberation’ of further education went further than that. Further Education Colleges were given a licence to trade, without catchment areas or boundaries. Some Colleges developed outposts in Siberia and China. Others began accrediting activities which nobody previously had thought of accrediting.  Many College Principals resigned because they felt this didn’t represent their view of the further education world. Many that remained soon styled themselves as ‘Chief Executive’.

There is one important step which the Report doesn’t highlight – the Further and Higher Education (Scotland) Act 2005 which set up the Scottish Further and Higher Education Funding Council.

About the current organisation of Scotland’s Colleges’ Griggs on page 2 writes:

“Currently we have 37 Boards of Management of incorporated Colleges with a further four Colleges which are not incorporated in statute but are publicly funded.

“While the sector undoubtedly did produce the innovation which was hoped for post 1992, in recent years it has also given rise to many inequalities. We highlight over 20 in this report, the majority of which we do not believe add value to the learner across Scotland or provide a consistent national approach in areas where perhaps that is desirable. Focus has remained, for the Colleges, on their own geography without any real focus on what is best for the learners across Scotland.

“There also has been no real national direction or policy from Government for many years which can provide the overall guidance and principles that the sector needs, and with 41 different College Boards it has been difficult to establish any real cohesive engagement between Government and the sector as a whole.

“The funding mechanism that the sector currently uses also does not help either governance or cohesion.

“This, along with other issues surrounding the status of Colleges, has diminished the value that the sector should contribute to the Scottish economy”.

All this represents a pretty bleak view of the world. This is really saying that left to themselves, Scotland’s Colleges probably won’t get things right.

Scotland’s Colleges Do Well

But surely Scotland’s Colleges don’t do that badly? The Scottish Government’s “High Level Summary of Statistic s Trend Last Update”, November 2011 showed that:

  • There were 347,336 students undertaking courses in the 43 SFC-funded colleges in Scotland in 2009-10, accounting for a total of 438,522 enrolments, individuals can enrol on more than one course.
  • In 2009-10, the number of FE students decreased by 33,915 from 301,692 students in 2008-09 to 267,777. However, the number of full-time students increased by 9% between 2008-09 and 2009-10, which resulted in a 1.5% increase in FE activity at colleges (as measured by SUMs). At FE level, in 2009-10, there were 47,630 full-time and 267,777 part-time students.
  • The main reason for the high number of part time students at FE level is that many students are also in full time jobs or have other domestic responsibilities. The majority of these types of students are frequently enrolled on programmes with a vocational orientation.
  • 95% of all the activity programmes in Scotland’s colleges led to a recognised qualification. The latest figures for 2009-10 indicate that 23,221 HE qualifications were achieved and 95,178 FE qualifications were achieved by students studying at colleges. Furthermore, 38% of enrolments by working age students in Scotland’s colleges, had a direct involvement in industry and commerce in 2009-10.
  • In 2008-09, the most recent year for which SFC data is available, 41,243 FE students received support from bursary funds. This amounted to £67.4mn  of support, which in real terms meant an increase of 8.6% compared to academic year 2007-08 (£60.4mn).

These achievements were also listed in a recent Huckfield briefing on “Funding for Scotland’s Colleges”. All of this surely suggests a high level of participation in Scotland’s Colleges?

Griggs’ Regions and Other Regions 

New regional further education structures are Griggs’ main recommendation. But he leaves it to the new Regional Groups to work out how things will play out on the ground. On page 3 he says:

“The Chairs and the Principals/ CEOs and the Student Representatives of all the Colleges, the UHI centre, the Local Authorities, Trade Unions plus any other body that has a key current or potential interest in UHI be given the task, by June 2012, of producing a solution for their area which uses the regional structure and governance proposals from this review as its base”

On page 4 the proposed Regional Boards will be allocated outputs to deliver:

“To achieve that change we believe means moving to a new place in terms of the way Boards operate, and we recommend that Boards should be given outcomes which they have to achieve and then be judged through a new auditing system to ensure they have achieved them. This will mean that the Boards will be clear of ‘the what’ in terms of what is being asked of them through the individual outcomes, but will encourage different solutions, and we hope innovation, in ‘the how’ of those outcomes being achieved”.

Different approaches for different areas is fine. But there will be problems fitting all this alongside existing local government, Community Planning Partnership, NHS and other boundaries. Within the Scottish Government’s Concordat 2007 many Community Planning Partnerships have spent much time in constructing admirably detailed Single Outcome Agreements.

Many other strategies currently feed into and derive from these SOAs. How many SOA outputs might be fed into those for Regional Further Education?

Communities and Third Sector

On page 18, Professor Griggs’ Report writes on local communities:

“Community reputation where the links of Colleges to their local communities can vary in nature and in strength. For example some Colleges place significant weight on access courses and are seen as a key community resource, while others deliver more provision of national significance and may have weaker community links. In defence of some Colleges, not every Local Authority, or indeed community, appears to value their Colleges to the same extent, which is also part of the challenge”.

Some of this surely overlooks ongoing Scottish Government funding for Third Sector Interfaces to ensure Third Sector input into Community Planning Partnerships? Third Sector organisations include local community groups. They have debated long and hard across Scotland about how these Interfaces and their local representation on CPPs might be constructed. Local community representation on the new Regional Boards is surely essential to achieve many of these outputs?

Might there even be some elected places on Regional FE Boards, following the precedent of elections to NHS Boards under the Health Board (Membership and Elections) Scotland Act 2009?  Larger cities in Scotland all have their variants of local community participation including Aberdeen’s Neighbourhood Community Action PlansEdinburgh’s Neighbourhood Partnerships and Glasgow’s Local Community Planning Partnerships

To achieve many of these outputs, some community participation and input is surely essential?

Regional Board Management and Central Structure

On page 29 Griggs writes strong words on the conduct of Chairs and Boards:

“Each Regional Chair and Board will be audited annually or at an appropriate time to ensure that they are fulfilling their agreed outcomes. If they are not doing so a programme of action will be put into place to rectify areas of concern or failure. This could ultimately lead to the removal of the Chair and/ or Board if they do not fulfil the required outcomes”

On page 6, at the heart of all of this will be a new central structure:

“A central team is formed to manage the process of change across the sector and work with the new Chairs and Boards, once recruited, to deliver their initial outcomes. The ‘FE Change Team’ would report to the Cabinet Secretary and his senior officials in terms of its work. It would also control the transition funding that will be needed to achieve these changes. It would be disbanded when the new structure is in place”.

Together with Professor Griggs’ recommendation on page 41 of a new FE Strategic Forum, one wonders whether there will be much FE work left for the Scottish Funding Council.

Running a Regional Board 

Griggs on ‘Financial Strategies’ in Section 6 on page 30:

“The strategy for the region should set out how the Board will manage financially the organisation in an effective and sustainable way over time as well as on an annual basis. We do not think that this should necessarily mean that each new entity has to make a surplus all the time…….. we would wish the new Regional Boards to demonstrate an ability to take account of the longer term and provide a sustainable financial future for the region. This could include spending to save in the knowledge that this may not give a surplus every year”.

This needs further strategic direction. Similarly, the surplus target of not exceeding 10% of annual revenue also needs further explanation on pages 36 and 37:

“The limit of 10% is what we believe should apply, which is based on what we know today. However like much else that we recommend it could and indeed should evolve. Therefore one of the tasks for the new FE Strategic Forum should be to relook at the percentage and review if a different or better formula should be used. We would not wish the basic premise of a cap to be removed but there could be other ways of establishing what it should be.

“The latter distribution of funding should be done by a new body consisting of the Chairs of all the regions plus others, which we set out later in this review”

Again, one wonders whether this is sufficient guidance for running regional structures, which have yet to decipher ways of delivering outcomes, which are not yet decided.

Capital Projects

Page 45 on Capital Funding also seems to raise more questions than it answers:

“This would mean that Government would allocate no real capital funding to individual Colleges beyond what they need to keep existing LAPs, physical or electronic, maintained to a standard that is fit for purpose for the learner yet allows movement with technological advancements”

When Griggs concludes on page 46 that “A central resource is established within Scottish Government that works with Colleges to deliver major capital projects for the FE sector”, this surely raises more questions than it answers? Colleges now have detailed funding and policies for maintenance and depreciation. Who will provide for this?  Other organisations, including NHS Scotland, have comprehensive guidelines for all of this.

ENGAGING EMPLOYERS

It is rather surprising that Employer Engagement on page 49 of Professor Griggs’ Report Professor Griggs’ Report is relegated to the category of “Other Issues”:

“Much is always made of the need for the FE Sector to provide people for industry, and indeed one of the new focuses in the recent consultation Paper is on Colleges’ prioritising learning opportunities which lead to jobs. On the other hand there is much evidence that industry is actually not very good at forecasting what it needs any distance into the future, in terms of how it should respond rapidly to changes in the economy. We suggest that the need for Colleges to promote dynamic change is likely to get greater not less over the coming years as the world adjusts to a new economy and its implications.

“We do not believe therefore that there is a single national solution to this interface. That is why we have suggested that a key outcome for each region should be, in terms of its strategy, to stipulate and be judged against how they will interface with and react to local industrial and employer needs. While we accept that the national Industry Advisory Groups (IAG) may well help frame some of that thinking for the future, the only real way to manage that interface on a day to day basis is geographically. It also has to be accepted that in some areas local industry may not want to play a part in that interface as it does not see it as a priority”.

All this seems a rather gentle conclusion. It will surely be difficult for regional college structures to meet employability targets without greater employer involvement?  The Committee for the Report didn’t have direct employer representation and the Report does not list much evidence taken from groups of employers. A series of major reports during 2011 pointed to the need for more employer involvement.

Many of the following reports were also mentioned in a recent Huckfield briefing on “Funding for Scotland’s Colleges”.

Alison Wolf’s Benchmark

Although designed for an English audience. Alison Wolf’s ‘Review  of Vocational Education” March 2011 has become a benchmark for more employer involvement. On page 77:

“Finally, as we have seen, employers value ‘work history’ and experience – that is, having held a proper, paid job in a real workplace, as opposed to ‘work-related’ experience in an educational institution or government training scheme…. However, it is becoming ever harder for young people to obtain ordinary employment and too little is being done to assist them in obtaining genuine workplace experience and employment-based skills”.

UK Commission on Employment and Skills

In July 2011 the United Kingdom Commission for Employment and Skills published a report on Scotland. On page 25 under “Customer Focus: What is the Challenge?” the UKCES Review of Employment and Skills in Scotland continued:

“Although there is evidence of customer involvement in design and delivery of provision in the skills system, and employer involvement in co-design of services for large-scale recruitment, this is not a regular and consistent feature across the whole range of employment and skills services. …..”

“.. There is limited customer consultation in design and delivery of programmes, offering very few opportunities for customers to influence or develop and take control of their own innovative and positive employment solutions”.

Recommendation 2 on page 29 says:

  • Extend the opportunity for direct involvement in the design of provision. This could include services replicating in-house training schemes as part of pre-employment.
  • Identify opportunities to involve employers directly in the delivery of services, for example deliver training directly at employers’ premises.

Willie Roe’s Report

To ensure more employment engagement and involvement, WIllie Roe’s “Review of Post 16 Education and Vocational Training in Scotland” in August 2011.  On page 49 he ways that the UKCES Report represents a “call to action” for:

“Employers to engage more effectively with local partners that deliver employment and skills services, clearly signalling their needs and becoming involved in the design and delivery of provision”

This represents an echo of Alison Wolf’s “Review of Vocational Education” published in March 2011. Prof Wolf on page 143 writes:

“Indeed our third major objective should be to recreate and strengthen genuine links between vocational education and the labour market; and especially, in the case of young people, the local labour market. 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” .

On page 71 Willy Roe’s Report recommends the creation of Business Education Networks at local level:

“At the level of each local authority (or combination of local authorities) there should be established a Business-Education Network to co-ordinate and extend the wide range of connections that exist (or will be created in the coming years) between businesses, schools, colleges, and training providers. Some places in Scotland already have a vehicle of this kind. The Networks should be co-funded from the private and public sectors”.

HM Inspectors for Scottish Funding Council

Preparing Learners in Scotland’s Colleges for Employment or Further Study”  26 August 2011 – An aspect report on provision in Scotland’s colleges by HM Inspectors on behalf of the Scottish Funding Council says on page 17:

“However, in many subject areas in many colleges, advisory groups are not effective in bringing employers and programme teams together for the benefit of the college, employers and learners”.

“Putting Learners at the Centre”

Following this, the Scottish Government’s “Putting Learners at the Centre: Delivering our Ambitions for Post-16 Education published in September 2011 on page 32 said:

“The system of National Occupational Standards is designed to ensure that the relevance of the qualification system to the workplace is constantly maintained. Both OPITO (the industry led body for the oil and gas sector), and Constructionskills are outstanding examples of bodies which speak to the system on behalf of employers and ensure that the people going into their sectors are well prepared.  However in other sectors the Sectors Skills Council model is not strong. We will improve this situation, where necessary looking at radically alternative models which put employers in the driving seat”

Following these references above to the need for more employer involvement, various structures, including Skills Investment Plans and Industry Advisory Bodies, are currently being explored by Skills Development Scotland and others to secure more employer participation in vocational training and skills delivery. But none of these approaches has yet produced a formula for adequate employer representation on new regional further education structures to secure greater employer involvement in skills design and delivery.

DISAPPEARING YOUTH MARKET

Although designed for an English audience. Alison Wolf’s ‘Review  of Vocational Education” March 2011 on page 26 highlights the significance of the disappearing youth labour market:

“The rapid change in young people’s typical activity and experiences can be summarised using three of the big longitudinal studies for the UK which look at people born in 1958, 1970 and 1991 respectively. Table 1 below summarises their activity at age 18 and highlights both the steep decline in employment – from three quarters to 40% – and the increase in the proportion ‘out of the workforce.’ While the latter figure is partly cyclical, because of the 2009 recession, it also reflects another change in the English labour market. Young people have always suffered first and most in recessions, but England is now also increasingly like other European countries in having very high structural youth unemployment rates, up to and including 25 year olds.”

Professor Wolf’s ‘Review  of Vocational Education” continues on page 39:

“For young people with poor qualifications, the collapse of youth employment is a double problem. The qualifications they are offered are often not valued in the labour market. And while in the past, it was relatively easy to offset a lack of ’valuable’ qualifications through labour market experience, this is no longer true. Improving opportunities for this substantial group of young people must be seen as a national priority”.

Further Huckfield Reports will provide more analysis of the disappearing youth market in Scotland. As a starting point, there is enough evidence that previous approaches of young people attaining qualifications in the expectation that these will always lead to employment is no longer an effective approach.

COMMUNITY INVOLVEMENT

This following section provides further analysis of the need for greater community involvement in regional college structures:

Communities and Third Sector

As also shown above, the Scottish Government makes available direct funding to the wider Third Sector and also funds Third Sector Interfaces to ensure Third Sector input into Community Planning Partnerships. Many Third Sector Interface structures include local community groups.

On page 26 Professor Griggs’ Report writes:

“However this does not mean is that each current College within the region would lose its own identity, or deny its community’s ability to make demands of it. Branding and community involvement will be a specific responsibility of the new regional Board and we could see in many cases why the new Regional Boards would wish to keep some of the current identities of individual Colleges the same as they now”

Surely some way must be found to ensure that the detailed preparation undertaken by the Third Sector is carried forward to the new regional college boards?

YOUTH EMPLOYMENT STRATEGY

Economic and social changes since the late 1970s have made it harder to move straight from school into work. With youth unemployment at a record high, the need to provide routes into employment for school leavers is ever more pressing.

In the recent Institute of Public Policy Research  “Rethinking Apprenticeships” on Tuesday 15 November 2011, a number of contributors seemed to suggest that more higher quality apprenticeships could contribute to reducing high youth unemployment, as typified in its Introduction on page 6:

“Apprenticeships play a key role in supporting young people’s transition into work and responsible adulthood in many northern European countries and in some other Anglo-Saxon countries, notably Australia. Rates of youth unemployment in these countries are much lower than in the UK.”

Though the Scottish Government Youth Employment Strategy published on Tuesday 31 January 2012 includes more apprenticeships, its approach is more comprehensive and includes other initiatives. This is one of the most comprehensive Youth Employment Strategies yet produced and regional further education has a critical role to play throughout.

Community Benefit

Page 9 of Employment Strategy – Procurement – supply side skills. The Scottish Government has developed a comprehensive strategy for “Community Benefits in Public Procurement” following the publication of an initial strategy in 2008.

Most public sector contracts in which community benefit will be involved will not easily coincide with regional college boundaries. But to make this important strategy work, there needs to be regional college involvement on the supply and demand sides.

There is an extended role for further education both in training and supporting SMEs bidding for tenders associated with public procurement and in helping contractors to deliver. There are now a series of mechanisms through which colleges can support both the supply and demand sides of public procurement.

Procurement 

On page 9 the policy document states: “The Government’s recently published Infrastructure Investment Plan makes it clear that we will use our £9 billion public procurement spending to maximum effect to promote economic growth and jobs, including:

  • Asking every company in receipt of a significant Government contract to produce a training and apprenticeship plan. This particularly targets our young people
  • Continuing to use community benefit clauses to support employability and targeted recruitment and training through public sector contracts. Moving forward we will increasingly focus this on supporting young people.
  • We will introduce a Sustainable Procurement Bill which legislates for a systematic use of community benefit clauses within public procurement. Youth employment will feature centrally within this part of the Bill”.

Throughout the Youth Employment Strategy, there is strong focus on the role of public bodies, as typified on page 11:

“Government agencies and NDPBs are well placed to take innovative steps to support the youth employment agenda. In most cases there will be opportunities to provide employment, apprenticeships and work experience opportunities for young people. Moving beyond direct employment and work experience, many Government bodies are in a position to take an imaginative approach to deriving youth employment benefits as they discharge their core activities”.

Government bodies mentioned for offering apprenticeships include the NHS, Historic Scotland, National Records of Scotland and Creative Scotland. New approaches are also projected for the Royal Conservatoire and links with Commonwealth Games, Ryder Cup and Commonwealth Games Legacy Fund.

The Scottish Government Youth Employment Strategy represents one of the most comprehensive policies for community benefit and public procurement in the UK. Community benefit in procurement is not as comprehensively defined in policy for England, especially for apprenticeships. Much more of this will not be classical “day release” but delivered at the placete of work. Since many public procurement bodies have a regional rather than local presence, regional further education boards need to take account of their skills, training and apprenticeship needs.

Employer Involvement – Again!

On page 16, the Employment Strategy again refers to the need to involve employers:

“Employers have told us that they often find the range of employment and training support available from different public agencies difficult to understand. We are committed to making it easier for all employers, including small and medium sized enterprises, to make better use of public resources to help young people find work.

“As part of a wider programme of work to better align employability services in Scotland, we will develop a clear and simple national offer of support to employers which combines services from SDS, Jobcentre Plus, Scottish Enterprise and other relevant national bodies”

CONCLUSION

Finally, this Huckfield briefing suggests that Professor Griggs’ detailed and comprehensive report would be even more effective in a wider context which takes account of other important current issues.

Professor Grigg’s concept of further education learning and skills being developed on a regional basis represents an innovative way forward. It stands in direct contradiction to the English policy model, which essentially leaves much of the restructuring of further and higher education to the market, especially through the expansion of student loans for both sectors.

In England, the Student Loans Company will assume its place as the largest funding agency. In Scotland, the largest funding agency will continue to be the Scottish Government, with a watching brief for the Scottish Funding Council.

     

Employer Ownership of Skills

The UK Commission for Employment and Skills launched its bidding Prospectus for Employer Ownership of Skills on Tuesday 07 February 2012.

Previous Huckfield briefings on Employer Ownership Pilots have appeared here since Wednesday 07 December 2011.

The Bidding Timetable and details of Briefing Sessions are shown below.

Though Employer Ownership Pilots apply only in England, the Scottish Government will follow developments after recent references in policy documents to a lack of employer involvement.

The Scottish Government’s Further Education Consultation in September 2011 Putting Learners and the Centre: Delivering our Ambitions for Post 16 Education, on page 32 said:

“We will improve this situation, where necessary looking at radically alternative models which put employers in the driving seat”.

Background for Prospectus

As reported in previous Huckfield briefings, on Thursday 17 November 2011, the Prime Minister and Business Secretary Vince Cable announced the Employer Ownership Pilots initiative for England. Under the proposed £250mn programme, employers will be given the power to design, develop and purchase the vocational training they need. 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”

Employer Ownership of Skills, a policy paper published by UKCES on Tuesday 13 December 2011 provided more details. Section 6 of the policy document says:

“Public investment will be provided directly to businesses, sitting alongside businesses’ own private investment, rather than following the mainstream public funding model.

“It will be open to proposals from businesses of  all sizes and from all sectors of the economy.  As part of the pilot, employers will be asked  to demonstrate how public investment would  be used to leverage business investment and  commitment to raising skills levels in their sector,  supply chain or local area and how they will support Apprenticeships”.

The Coalition Government Agenda

Employer Ownership Pilots represent the start of a gradual shift of public funding for employer led training and a new environment where through the Department of Business, Innovation and Skills, UKCES and the Skills Funding Agency, public funding acts as market maker. Rather than the Government’s keeping control or directly funding the training agenda for employers, increasingly, it wants employers to take the lead. Innovative suggestions include a public funding role in employer training as underwriting, as guarantor or for reducing risk.

The UK Government’s wider rationale is that 60% of employers already use private training providers. So employers been have subsidised to join Government incentives. But with unsustainable levels of public spending, the Government will now encourage employers to take ownership of their training agenda. This means moving from direct provider funding, 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.

In other words, public funding will go directly to employers who will exercise their choice of provider.

Contents of The Prospectus

The Employer Ownership of Skills Prospectus February 2012  on page 6 “The Invitation” says that the full investment criteria, application forms and guidance will be available towards the end of February 2012.

Details of the Bidding Timetable and details of Briefing Sessions are shown below.

The Prospectus on page 6 continues:

“The Prospectus invites employers to develop proposals for improving skills, covering a wide range  of activities including:

  • Apprenticeships and wider employee training opportunities
  • Training and skills development to help people into work
  • Innovative approaches to the design and delivery of training and workforce development”

The Prospectus on page 6 continues:

“Proposals should set out:

  • The outcomes to be achieved
  • The rationale behind the proposition and why it cannot be done as successfully through existing funding routes/delivery channels
  • The mechanisms by which it will be delivered
  • The level of private investment
  • The public investment needed to make it happen”

Apprenticeships

The Prospectus continues on page 7:

“For example, successful apprentices will be expected to have:

  • Acquired one or more significant qualification(s) recognised to be important to the sector
  • Become competent in their current role
  • Been supported towards achieving English and Maths to the level of a GCSE A* – C where they do not already possess this
  • Good progression opportunities once they have completed, either in work or into further/higher education”

This is very much the Coalition Government’s agenda for vocational training and apprenticeships, beginning with Alison Wolf’s “Report on Vocational Education” in March 2011 and the Department of Business, Innovation and Skills’ FE Reform Series “New Challenges. New Chances”, the latest of which appeared on Thursday 01 December 2011.

Employers in Control

The Prospectus shows on page 8 that employers will be expected to be in control:

“Employer leadership and commitment: We want to explore through the pilot how we can improve the way that employers and individuals get the skills they need. We want to test new employer designed and delivered training and employment programmes. For example, proposals could include:

  • A clear articulation of the skills needs within an industry and why public funds are required to complement private investment
  • An employer definition for what quality is for a sector in skills and learning programmes
  • A package of employer designed training and assessment that meets both industry and employee needs
  • More sustainable models of funding training that encourage greater private investment alongside public investment
  • New methods of training delivery that closely align employer and employees’ needs
  • An employer-designed payment and monitoring system that safeguards public funds, demonstrates value for money and is simple for the business to operate”

These criteria show clearly that increased contributions will be sought from employers towards “more sustainable models of funding training that encourage greater private investment”. The need for “an employer-designed payment and monitoring system” favours larger companies. Many larger employers already have transaction and payment systems on to which Employer Ownership might be bolted. Though employers of all sizes from all sectors can bid, this part of The Prospectus favours large employers.

Collaboration

 The Prospectus shows on page 9:

“Collaboration can be demonstrated in two principal ways: employers working with:

  • their employees, trade unions and providers to ensure that any skills offer responds to employer and employee need
  • employers coming together to work in partnership”

The Prospectus continues on page 9:

“The types of collaboration between employers could, for example, include:

  • Large primes and small businesses in a supply chain developing a mutually beneficial programme of learning
  • Leading employers investing in a sector by providing up-front funding to support learning
  • opportunities in smaller businesses
  • Employers working together, with the support of their employee representative bodies, to secure greater apprenticeship and sustainable job opportunities
  • National Skills Academies working for a set of employers to secure appropriate training opportunities
  • Groups of employers, who individually may find it difficult to meet their skills or training requirements, coming together through bodies such as Group Training Associations and developing a collective proposal that meets all of their needs and offers more opportunities
  • Employers within a locality developing a strategic skills offer through the most appropriate geographical infrastructure (for example partners in a city region) and with support of colleges and providers”

Difficulties for Collaboration on the Ground

The Government’s main problem with encouraging greater employer ownership of training is the lack of appropriate employer development and implementation mechanisms configured for employer-led bids. Sector Skills Councils are themselves in a competitive bidding agenda and some may not survive. The CBI, Institute of Directors, Engineering Employers’ Federation and others are not appropriately configured to articulate local employers’ skills and training needs. Group Training Associations are reduced in number and some have become training providers.

In short, there are not enough obvious local employer structures to articulate skills needs or submit bidding applications for Employer Ownership Pilots.

Employer bidding routes have been suggested, including bids from larger employers on behalf of supply chains, by clusters of companies and by businesses working together to de-risk training. Some of these were available when funded by Regional Development Agencies. Where they still exist, they will be dominated by larger employers. So there is a risk that some bids might seek simply add deadweight or reduce existing funding costs.

Larger employers with strong relationship with large providers, including colleges, have an advantage, especially where they have current programmes which are substantially employer funded. Larger employers are also more likely to have resources for bid submission.

Transparency

The UKCES “Employer Ownership of Skills” policy document of Tuesday 13 December 2011 included references to the need for market transparency. Page 5 ‘Transactions should be transparent’ included:

“Public contributions should be transparent, simple and less bureaucratic. Public contributions should be designed to facilitate employer/employee choice, empowering them as customers to drive quality, innovation and value for money”

This sounds like code language for driving down provider costs.

Initial Bidding Criteria

The Prospectus shows under “Investment Criteria” on page 13:

  • “Economic benefit and value for money – proposals should demonstrate their potential for increasing the impact of work readiness, workforce development and Apprenticeship activity and for this to have a tangible impact on employer performance and growth. Only economic benefits which are deemed to be additional to what would happen without Government support will be counted
  • Innovative approaches to skills and workforce development – proposals should demonstrate how they address strategic skills needs and demonstrate how this solution is new or an improvement on existing options
  • Feasibility – proposals should demonstrate strong employer leadership and set out levels of employer investment alongside public investment. ……… The proposal should show that a strong team with a positive delivery track record will lead the project and that strong and appropriate partnerships have been forged to deliver the solution
  • Quality – proposals should demonstrate how a high quality experience for the employer and learner will be delivered and how the breadth and depth of learning will be provided”.

In bidding jargon, this means that proposals must demonstrate additionality, innovation, a track record and quality assurance.

Size of Bids

None of this should be a surprise. Frequently Asked Questions on the UKCES site says:

“10. Are there minimum and maximum amounts we can bid for?

“We want to see significant and scalable proposals for skills investment and therefore the minimum cash investment from Government will be £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). We will continue to assess the appropriateness of the eligibility criteria throughout the Pilot”

13. Over what timescale is the money available?

“Up to £50m is available for the 2012/13 academic year, starting in August 2012. Subject to success of the first round of the pilot, up to £200m will be available for the second round”.

This shows that though the first round of Employer Ownership Pilots will be for a total £50mn, a much bigger second round will be available when there is more bidding experience.

Bidding Timetable

The Prospectus for Employer Ownership of Skills on page 11 shows the bidding timetable:

  • Webinar taking place throughout March and April 2012
  • Full application form and guidance published towards the end of February 2012
  • Deadline for employer registration – 13 April 2012
  • Deadline for submission of full applications 26 – April 2012
  • Decisions and applicant feedback – June/July 2012
  • Delivery to commence August 2012 onwards

Briefing Sessions

The Prospectus for Employer Ownership of Skills on page 11 shows the timetable for Briefing Sessions. Potential Bidders can register online to attend Employer Ownership Briefing Sessions, which are from 0800 till 1000 as follows:

  • Manchester – Tuesday 06 March 2012
  • London – Wednesday 07 March 2012
  • Birmingham – Wednesday 14 March 2012
  • Leeds – Thursday 15 March 2012
  • Sheffield – Wednesday 21 March 2012
  • Bristol – Tuesday 27 March 2012
  • Newcastle – Wednesday 28 March 2012
  • Nottingham – Tuesday 03 April 2012
  • Liverpool – Wednesday 04 April 2012

And, finally. Further Developments

Further developments as they occur will be posted in future Huckfield briefings.

Funding for Scotland’s Colleges


Sincere apologies for the length of this Huckfield briefing.

The following detailed sections seek to provide information for Scotland’s Further Education Colleges and others along similar lines to that previously provided in Huckfield briefings for Further Education and Higher Education in England.

Many of Scotland’s Colleges will be familiar with funding initiatives listed. No claim is made that this briefing is infallible or that it contains all that Colleges need to know about funding!

Since the Scottish Government’s Budget, proposed College regionalisation and reduced funding are not yet concluded, this briefing seeks to be policy-neutral. Further Huckfield briefings will report on latest developments.

Though information provided here is taken directly from source and attribution is made where appropriate, please feel free to add comments and suggest amendments below.

Because this is a long briefing, please click on the following headers to go straight to these sections:

OVERALL SUMMARY

This section provides an overall summary of the funding reductions now presented to Colleges and also includes the Cabinet Secretary’s response in the Scottish Parliament debate on Further Education on Thursday 02 February 2012.

SCOTLAND’S COLLEGES ARE IMPORTANT

This section presents a summary of achievements by Scotland’s Further Education Colleges.

COLLEGES AND PUBLIC SPENDING REDUCTIONS

This section summarises proposed overall funding reductions for Scotland’s Further Education Colleges.

SCOTTISH GOVERNMENT CONSULTATION ON POLICY

This section highlights important points in the Scottish Government’s Pre Legislative Consultation. In September 2011, the Scottish Government published its Pre Legislative Consultation Paper “Putting Learners at the Centre:  Delivering our Ambitions for Post-16 Education“.  In November 2011, Scotland’s Colleges published a “”Response to the Pre Legislative Consultation Paper: Putting Learners at the Centre”

SCOTTISH FUNDING COUNCIL CONSULTATION ON IMPLEMENTATION

This section highlights important points from the Scottish Funding Council’s proposals for implementation of “College Rationalisation: Proposals for Implementing Learners at the Centre“, together with the response and comments from Scotland’s Colleges in “Response to Proposals for Implementing Putting Learners at the Centre”

FUNDING FOR COLLEGE STUDENTS

This section provides a brief summary of Education Maintenance Allowances and Colleges’ bursaries for students.

SKILLS DEVELOPMENT SCOTLAND INITIATIVES

This section provides a summary of various Skills Development Scotland initiatives, including Individual Learning Accounts, Get Ready for Work, Training for Work, Modern Apprenticeships, with all of which Colleges will already be familiar.

A note is provided on Apprenticeship Training Agencies, based on the Australian model, which are expanding in England. Further SDS Initiatives including Flexible Training Opportunities, Employer Recruitment Initiative, Adopt an Apprentice and the Low Carbon Skills Fund, are summarised. There is also a note on additional support.

LOCAL FUNDS

This section highlights some available local funds for skills development and apprenticeships. The Commonwealth Jobs Fund (Glasgow), Commonwealth Apprentice Initiative (Glasgow) and West Dunbartonshire New Employment Wage Subsidy are summarised. This is not an exhaustive list and information on other local initiatives will be posted in future Huckfield briefings.

COLLEGE INITIATIVES

This section includes examples from Adam Smith, Carnegie, Dundee, Edinburgh Telford and Inverness Colleges in a brief and not exhaustive summary of Colleges’ involvement in renewable energy development. Further College developments for onshore and offshore renewables and other funding which may be available will be reported in a future Huckfield briefing.

LOCAL COUNCILS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

This section shows how several local authorities are now developing and formalising their policies and guidelines for Community Benefit. Though most Community Benefit policies provide specific allocations for local communities, some Councils are now developing Community Benefit policies to fund larger regional infrastructure, including skills development, on which this section focuses.

OTHER ORGANISATIONS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

This section shows how organisations which operate nationally in Scotland are also developing Community Benefit policies. Scottish and Southern Energy (Scottish Hydro), Scottish Power and the Forestry Commission are examples of those with significant Community Benefit policies for renewable energy developments. Apart from applications from local communities, these policies will also focus on larger projects, including local skills development.

HIGHER EDUCATION ACADEMY

This section describes how Scotland’s Further Education Colleges may participate in and benefit from Higher Education Academy programmes below, if they are subscribers. The Higher Education Academy has recently started offering subscriptions to FE collages with HE provision. This was mentioned in the HEA’s recent HE in FE briefing

HEA supports various networks and provides resources, events and workshops relating to learning and teaching in Higher Education. HEA has an office in Edinburgh. HEA works with individual academic staff, subject discipline groups and senior managers to identify and share effective teaching practices in order to provide the best possible learning experience for all students.

HEA contact details are provided in this Section.

EUROPEAN STRUCTURAL FUNDS

This section briefly covers proposals emerging from the European Commission about its 2014-20 Structural Funds, which are at an early stage of development. Scotland’s previous Objective One and Cohesion Fund Highlands and Islands Area may become a Transitional Area, thus retaining higher rates of intervention. Further developments will be highlighted in a future Huckfield briefing

KNOWLEDGE TRANSFER

This section covers a recent report published by Scotland’s Colleges. Frontline Consultants’ “Review of the Developing Employer Engagement Programme and Knowledge Transfer Grant” shows that Scotland’s Colleges have been highly successful with limited funding available for DEEP and Knowledge Transfer Grants.

EMPLOYER OWNERSHIP POLICY DEVELOPMENT

In July 2011 the United Kingdom Commission for Employment and Skills published its “Review of Employment and Skills” in Scotland. Other reports, including the Scottish Government’s and Scottish Funding Council’s “Putting Learners at the Centre” consultations, emphasise a need for more employer involvement in the design and delivery of skills training. Various structures, including Skills Investment Plans, are currently being explored in Scotland to secure more employer participation and involvement. In England, Employer Ownership Pilots launched this week will project a new environment in which public funding acts as market maker rather than direct funder. Employers will be directly funded by purchase training from providers of their choice.

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MAIN BRIEFING STARTS HERE:

OVERALL SUMMARY

Details of next year’s College spending were published in the Scottish Funding Council’s Circular “Indicative college sector financial decisions for academic year 2012-13” of Thursday 02 February 2012, including the following:

  • Colleges will see teaching budgets cuts by up to 8.5% under funding arrangements for next academic year.
  • The overall budget will be £499.6mn, reduced from £544.7mn.
  • No college will see its individual teaching budget cut by more than 8.5%, with student numbers being maintained.
  • Student support will be maintained at the 2011-12 baseline level, with £84.2mn allocated using the same formula.
  • A £15m Transition Fund has been set up to support mergers and federations.

Winding up the Scottish Parliament debate on Further Education on Thursday 02 February 2012, the Cabinet Secretary for Education said that:

  • from 2007 to the end of the current Spending Review, the Scottish Government will have invested £4.7bn in colleges – 40% more in cash terms than previously
  • NPD investment in colleges represents additional capital investment of £300mn
  • student numbers and college student support are being maintained
  • college student support has been increased by 25% since 2006-07, from £67.3mn to £84.2mn
  • unlike England, the Education Maintenance Allowance is protected
  • every 16 to 19-year-old will have a place in learning, with College places prioritised for 20 to 24-year-olds.
  • recent figures show that 88.9% of school leavers go to positive destinations

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SCOTLAND’S COLLEGES ARE IMPORTANT

Scotland’s Colleges are important. The Scottish Government’s “High Level Summary of Statistics Trend Last Update”, November 2011 showed that:

  • There were 347,336 students undertaking courses in the 43 SFC-funded colleges in Scotland in 2009-10, accounting for a total of 438,522 enrolments. Individuals may enrol on more than one course
  • In 2009-10, the number of FE students decreased by 33,915 from 301,692 students in 2008-09 to 267,777. However, the number of full-time students increased by 9% between 2008-09 and 2009-10, which resulted in a 1.5% increase in FE activity at Colleges. At FE level, in 2009-10, there were 47,630 full-time and 267,777 part-time students
  • The main reason for the high number of part time students at FE level is that many students are also in full time jobs or have other domestic responsibilities. The majority of these types of students are frequently enrolled on programmes with a vocational orientation
  • 95% of all the activity programmes in Scotland’s Colleges led to a recognised qualification. The latest figures for 2009-10 indicate that 23,221 HE qualifications and 95,178 FE qualifications were achieved by students studying at Colleges. Furthermore, 38% of enrolments by working age students in Scotland’s Colleges, had a direct involvement in industry and commerce in 2009-10.
  • In 2008-09, the most recent year for which SFC data is available, 41,243 FE students received support from bursary funds. This amounted to £67.4mn  of support, which in real terms meant an increase of 8.6% compared to academic year 2007-08 (£60.4mn).

This suggests that that around 8% of Scotland’s population is engaged with FE Colleges – a significant achievement.

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COLLEGES AND PUBLIC SPENDING REDUCTIONS

Commenting on Thursday 12 January 2012 following the announcement from the Scottish Government that funding losses to colleges would be capped at 8.5%, spokesperson John Spencer, Convener of Scotland’s Colleges’ Principals’ Convention said:

“The Scottish Government’s announced move to cap the level of cuts in the first year of the reform process at 8.5% is a helpful development.

“It is, however, important to restate that this will still be an 8.5% cut coming after a 10.4% cut in the current year. Colleges want to protect places, and committed to retain activity at the same level with the 10.4% cut this year, but we remain to be convinced as to how this may be achieved again”.

Published in September 2011, the Scottish Government’s Spending Review and Draft Budget 2012/12 at Table 9.06 on page 112 shows that the Scottish Funding Council’s Further Education Programme will be:

  • 2011/12 – £544.7mn
  • 2012/13 – £506.9mn
  • 2013/14 – £494.7mn
  • 2014/15 – £470.7mn

Though these figures may vary slightly, this represents a significant reduction in Scotland’s Colleges’ revenue budgets. The following page says “In 2012-13 we will embark on an ambitious programme of reform of post 16 education.”

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SCOTTISH GOVERNMENT CONSULTATION ON POLICY

College Regionalisation

The Scottish Government intends far reaching changes in the organisation and funding of Colleges.

One of the key recommendations of the Scottish Government’s pre legislative policy document “Putting Learners at the Centre:  Delivering our Ambitions for Post-16 Education” is at Section 133 on page 45:

“The financial pressures we face mean we can no longer afford a system of individual institutions (with all the managerial and academic overheads that entails) serving overlapping areas. Nor is it sensible to allow incoherent and unplanned provision to emerge, as sometimes happens through unilateral decision-making. Moreover …we need to strengthen the alignment between post-16 learning and jobs and growth.  We therefore need colleges,  in particular,  to come together collaboratively to achieve these benefits through federations, mergers or other innovative means”.

The pre legislative policy paper continues in Section 134 on page 45:

“A shift to regionalisation would still support local delivery and responsiveness to local need within the frameworks established at national and regional levels.  In developing such an approach, we will give specific consideration to mechanisms for protecting access-level provision locally”.

College Funding

Putting Learners at the Centre:  Delivering our Ambitions for Post-16 Education” in Section 41 on page 18 says:

“We expect our training programmes to be of a high standard and to help individuals to progress towards sustainable employment or further learning. So it is important we continually review the performance of training providers, placing our trust in those with the strongest record of success. In that regard we need to encourage colleges to do more to provide flexible training and undertake long term provision alongside private providers. It is also important that, where appropriate, a significant proportion of funding is linked to outcomes that demonstrably help participants move towards sustainable employment. We will review current funding models and consider how we can use funding to improve performance”.

On page 54, Section 171 says on reforming funding:

“Given our wish to shift towards regionalisation of college provision, SFC funding for colleges should in future be based on the needs of a region, taking into account  the demographics and economy of the region in question.   The  SFC should also separately consider if there is specialist provision that should be funded nationally.  Regional funding of college provision should be bolstered by new requirements to make sure the needs of individual localities and communities within the region are properly taken into account.  There should be a simple, visible and public connection between the funding allocated and the outcomes that should be delivered in return”.

Scotland’s Colleges’ “Response to the Pre Legislative Consultation Paper: Putting Learners at the Centre” on November 29 2011  on pages 5 and 6 asks for regionalisation and funding changes to be introduced more slowly:

“Allocation of Funds to Regions: as a potential solution in ensuring provision for adult learners, we would propose amending the suggested criteria for regional funding allocations. The indicators proposed in the paper do not account for those aged over 24. We believe the criteria for funding should also include key indicators for older learners to ensure their needs are considered in funding and planning provision. However, it is important that a full equalities impact assessment is carried out before implementing any new formula”.

“Simplification of Funding Methodology: colleges support a simpler funding measure based on full-time equivalents (FTEs). However, changes in how student numbers are counted should not lead to a reduction in funding for delivering education to those students.”

“Outcome Agreements: Scotland’s colleges support the development of outcome agreements and, in broad terms, agree with the proposals for their negotiation and assessing performance. However, we believe that the target to have agreements in place for the next academic year by April 2012 is extremely challenging. The sector would also be agreeing to outcomes that were not known or planned for when decisions on provision were being made. With so many unresolved change proposals, any agreement should focus solely on plans for developing regional structures”.

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SCOTTISH FUNDING COUNCIL CONSULTATION ON IMPLEMENTATION

College Regionalisation

Section 2 on page 1 of the Scottish Funding Council’s Consultation Paper “College Rationalisation: Proposals for Implementing Learners at the Centre” in November 2011:

“Until now, funding from the SFC has been provided to individual colleges on a largely historical basis. In future, we think investment in the sector should be focused on the needs of a region – with those needs defined by the region’s socio-economic characteristics. We will expect colleges in a region to work together rather than independently to meet that need. We will make clear our expectations in an outcome agreement to be negotiated with the colleges in a region, with this agreement acting as the key mechanism for accountability. This approach represents a fundamental shift: from historically-based to needs based funding; from individual colleges to regional groupings; and from activity to outcomes”.

The Consultation defines regions in Section 10.The Consultation closed on Friday 23 December 2011.

Calculations for Regionalisation

Most interesting is the “College Regionalisation: Proposals for Implementing Putting Learners at the Centre” November 2011 which in its Sections 17, 18, 19 and 20 on ‘Estimating Regional Need’ explains how funding allocations will be based on regional socio economic data and population characteristics:

  • the number of the S3-S6 age group in school education. This reflects the Scottish Government’s commitment to the senior phase of the Curriculum for Excellence, including school-college activity
  • the numbers of 16-19 year olds not in school or university education and not participating in a national training programme;
  • the numbers of 20-24 year olds who are unemployed
  • the numbers of people of all ages with low qualifications in a region
  • travel to study/travel to work data – though this is relevant more for some regions than for others”

Scotland’s Colleges’ “Response to Proposals for Implementing Putting Learners at the Centre” says on page 8:

“If Putting Learners at the Centre is implemented as outlined in the consultation paper, there will be risks as funding is redirected and refocused away from skills and the economy to concentrate on 16-19 year olds not in education, training or employment. As Colleges, we have worked hard to provide the skills and training needed for the growth of the economy to all comers, of all ages, providing the skills and education our learners need to get a job, keep a job, or get a better job”.

Scotland’s Colleges’ Response continues on page 10:

“The indicators proposed in the consultation paper will impact on those aged over 25 including those attending on a part-time basis and those in employment. We would recommend that a full equalities impact assessment is carried out before reaching any conclusion”.

Section 19 of the SFC Consultation Paper “College Regionalisation : Proposals for Implementing Putting Learners at the Centre” says:

“We propose to include travel to study/travel to work data to take account of the fact that significant numbers of learners will wish to study outwith their region because of transport links, to reach specialist courses, work or lifestyle or learning choices. We expect local learning opportunities at access or lower SCQF levels to be available nearer to home, but that people may have to travel for higher level courses or more specialist provision”

Section 19 continues:

“Outcome agreements for such regions would require them to demonstrate they are not duplicating provision better provided in neighbouring regions, that they are co-operating with those regions to ensure coherent provision for students and that, where appropriate, they continue to provide nationally important specialist provision.”

“Though broadly supportive of the switch to regional outcome agreements, Scotland’s Colleges’ “Response to Proposals for Implementing Putting Learners at the Centre” on November 29 2011 on page 18 recognises difficulties in changing to a funding methodology based on regional Outcome Agreements:

“To help develop these agreements, Colleges will engage with other stakeholders (e.g. local authorities, SDS, enterprise networks and other community planning partners) to discuss joint planning to meet regional skills needs including the contribution of regional outcomes. However, there needs to be a more clearly defined strategic role for Colleges both within a region and nationally, and particularly in terms of their membership of Community Planning Partnerships.

“It is appropriate that SFC indicate key national priorities to include in each region’s outcome agreement, however, these should not be seen as the only targets driving funding as this would constrain a college’s ability to work flexibly to meet regional needs.

“We concur that agreements should be assessed against outputs and broader outcomes and would wish to ensure that this does not lead to an increase in the already costly, complex and administratively burdensome systems needed to currently monitor activities”.

Issues will arise around Outcome Agreements based on progression and employment and inclusion of those who will not find either of these easy.

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FUNDING FOR COLLEGE STUDENTS

Education Maintenance Allowance Scotland

Scotland’s Further Education students and others are still able to benefit from an Allowance which no longer exists in England. There are serious effects from EMA withdrawal and its replacement by a narrower bursary system in England. EMAs in Scotland:

  • are available to eligible 16-19 year olds – currently those born between March 01 1992 and February 28 1996.
  • are available after reaching school leaving age
  • will stop on reaching a 20th birthday
  • can be paid for up to 3 years and up to 4 years for students with additional support needs

Depending on dependent children in a household, these are payable at £30 weekly for incomes up to £20,051 and £22,403.  To be eligible, students must have signed a Learning Agreement.

College Bursaries

Paid in addition to EMAs, individual College Bursaries may vary. The Aberdeen College Bursaries Advice  and Dundee College Money Matters are fairly typical.

Since some of these may face reductions, the National Union of Students Scotland is campaigning to ensure that their level should be preserved.

SKILLS DEVELOPMENT SCOTLAND INITIATIVES

Individual Learning Accounts

Individual Learning Accounts represent a Scottish Government scheme offering up to £200 annually per annum towards the cost of a learning programme. The offer is available to all residents in Scotland who are over 16 years and have an income up to £22,000 a year.

  • Individual Learning Accounts ILA 200: £200 for courses such as SVQs and IT skills
  • Individual Learning Accounts ILA 500: £500 for part time qualifications at Scottish Credit and Qualifications Framework (SCQF) levels 7,8,9,10 and 11. These include a part-time higher education or professional qualification course such as a Higher National Certificate.  This is delivered through the Student Awards Agency for Scotland

This scheme can be utilised to assist individuals to gain additional skills and qualifications to gain and sustain employment.

Get Ready for Work

Get Ready for Work (GRfW) is a National Programme to upskill, develop and support young people who may not be ready or able to access a Modern Apprenticeship or further education and want to access sustainable employment or further education. This is delivered by a range of Colleges, local authorities and providers across Scotland.

The programme is available to 16-18 year olds and lasts for six months. Trainees receive a weekly training allowance and expenses

GRfW comprises training and work placements with employer partners. During work placement trainees will receive “on the job” training and development to further enhance employment prospects and gain sustainable employment. Typical College providers include Forth Valley College, Kilmarnock College and Motherwell College.

Training for Work 

Training for Work offers vocational training to anyone over the age of 18 who has been continuously unemployed for 13 weeks. Some are able to enter the programme immediately.

Following referral from JobCentre Plus, Training for Work provides skills in response to an industry’s specific needs. Training can be tailored to meet the needs of local employers, which offers a better chance of getting a job. City of Edinburgh Council is a typical provider.

Modern Apprenticeships

Modern  Apprenticeships offer anyone between the age of 16 – 19 paid employment combined with an opportunity to train for jobs at craft, technician and management levels.  This offers a way to gain skills and qualifications to start a career without having to study full time across a wide range of industries. MAs offer:

  • The occupational SVQ for the sector
  • Core Skills – skills to become a more flexible employee, able to adapt to constantly changing work Situations.  These skills are known as Core Skills and are:
  1. Communication
  2. Working With Others
  3. Numeracy
  4. Information Technology
  5. Problem Solving.

Modern Apprenticeships and their Frameworks are managed by the Modern Apprenticeships Group at Skills Development Scotland. Funding depends on age, SVQ Level and sector and may vary from just over £1000 to over £6000.  These payments assume provision of a contribution for the Apprenticeship Framework and Awarding Organisation.  There is a range of College examples from Ayr to Oatridge.

Apprenticeship Training Agencies

The Learning and Skills Improvement Service in England offers the “Guide to Setting Up an Apprenticeship Training Agency” . ATAs are apprentice recruitment agencies which then ‘hire out’ apprentices to employers – who then become “host employers”. This is based on the Australian model, where Group Apprenticeship Schemes are the largest employers of apprentices, with over 40, 000 apprentices, around 10% of the national total.

The ATA has the responsibilities of an employer and ensures the apprentice gets paid and receives appropriate on-the-job training. Formal training and assessment is delivered by a training provider with an existing apprenticeship contract.

For employers, ATAs offer an advantage since they conduct recruitment and matching apprentices for host employers, especially during current economic difficulties with uncertain order books and workloads. They also offer ongoing mentoring, especially to younger apprentices. If relationships with the host employer don’t work well, the ATA usually finds another apprentice or another training provider. For these services, the host employer pays the ATA the apprentice’s wages and an ATA management fee. The ATA deals with payroll, support and supervision of the apprentice and remains the legal employer. This has advantages, especially for SMEs, since the ATA and host employer work together to provide a good hosting match for the apprentice.

For Colleges, there may be some reluctance to pursue this since if the College as an ATA becomes an employer, the apprentice becomes a member of the College staff, with staff conditions attached. There may still be merit in further exploration of Colleges and other providers to become ATAs.

Flexible Training Opportunities

Employers up to a maximum of 150 employees can make applications for up to £5000 towards employee training costs with Flexible Training Opportunities. The Flexible Training Opportunities scheme offers up to a 50% contribution towards training costs (excluding training required by legislation or statute, including Health and Safety or inhouse delivery)

The employer can apply for funding up to 10 claims per annum, up to a maximum of £500 per claim. For example, this means that for training costs of £1,200, there will be a grant of £500. Eligibility conditions are:

  • Employers with up to 150 employees
  • Must have registered by Sunday 21 March 2012
  • Must have completed training by 30th June 2012
  • An employer can apply for funding for up to 10 claims.

The following two schemes are aimed at maintaining an employed status for apprentices,

Employer Recruitment Incentive

The Employer Recruitment Incentive offers businesses an incentive of up to £2000 when recruiting a Modern Apprentice or employee.

  • 16 to 19 year old who is recruited or has progressed to a Modern Apprenticeship from Wednesday 21 December 2011
  • Individuals aged 20 and more than 3 months unemployed starting a Modern Apprenticeship from Wednesday 21 December 2011
  • Also available for 16-19 year olds within 26b weeks of having completed Get Ready for Work and  TPA and for those leaving Training for Work entering employment.

Adopt an Apprentice

Adopt an Apprentice Modern Apprentices continue with their training in a new workplace. The scheme gives a financial incentive to employers who take on an apprentice who has been made redundant.

“The preferred option is to secure employment with an alternative employer to allow the apprentice to complete their training. Once a Training Provider has been made aware (either from the apprentice or the relevant employer) that an apprentice is being, or has been, made redundant because of the economic downturn, the Training Provider should take all steps to secure alternative employment either through their own contacts or by working with the relevant Sector Skills Council”.

Low Carbon Skills Fund

Energy businesses working to support a low carbon economy can access the Low Carbon Skills Fund for training to increase expertise in this growth area. This is available to businesses focused on developing skills in carbon reduction, installing and using renewable energy resources, and increasing energy efficiency which have no more than 250 employees.

The Low Carbon Skills Fund gives Scottish businesses with up to 250 employees the opportunity to apply for up to £12,500 towards employee training costs. It

  • provides funding for up to 25 episodes of training
  • provides 50% of training costs, up to a maximum of £500 per episode

A list of the types and levels of training that are eligible for support, including:

  • renewable energy, low carbon technologies and microgeneration
  • energy efficiency, environmental and clean technologies
  • waste management and reuse
  • reducing carbon in supply and energy management

Additional Support

SDS will also help parents/carers and young people to access advice and information on welfare benefits. Nevertheless, it is always advisable to seek expert advice from agencies which specialise in these areas. There is also the official UK Government Website or a local Jobcentre Plus advisor for the most up to date information.

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LOCAL FUNDS

There are also various funds available to local residents and businesses:

The Commonwealth Jobs Fund (Glasgow) offers a  50% wage subsidy for 12 months up to a maximum of £6,507 for 35 hours a  week. Eligibility is for:

  • Glasgow residents only
  • SMEs with less than 250 employee
  • Additional jobs, not displacement
  • Permanent  jobs (minimum 18 month contract) 25-40 hrs per week
  • Glasgow living wage £7.15 per hr
  • 18-24 yrs unemployed 26 week (pre employment programmes accepted) available until 31st March 2013

The Commonwealth  Apprentice Initiative (Glasgow) offers a 50% wage subsidy for 12 months up to a maximum of £6,507 for 35 hours a  week. This means up to £8000 per employer for an apprentice. This is paid to employers in addition to contributions from Skills Development Scotland.

The West  Dunbartonshire New Employment Wage Subsidy offers a wage subsidy of up to pay of £140 per week for up to 13 weeks and offers a maximum of 50%  of gross pay. Eligibility is for:

  • West Dunbartonshire businesses & residents only
  • SMEs with less than 250 employees
  • 16-40 hrs per  week
  • Minimum wage & not exceed £7 per hr
  • Unemployed minimum 3 months over 3 year period
  • 16-19yrs  NEET (Not in Employment, Education or Training
  • Additional employment opportunities not displacement

Other local funding which may be available will be reported in a future Huckfield briefing.

Local Additional Support Needs

There are also local support programmes for those with Additional Support Needs. A list of additional local support is provided through this link.

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COLLEGE INITIATIVES

More renewable energy developments are supported by Colleges and may provide further funding sources. These College examples do not represent an exhaustive summary of various Colleges’ involvement in renewable energy development. Further college developments for onshore and offshore renewables and other available funding will be reported in a future Huckfield briefing.

Adam Smith and the Hydrogen Office

There is a new partnership between Adam Smith College and The Hydrogen Office, established to provide expertise and innovation for energy education. Adam Smith and The Hydrogen Office have recently run school road shows in Fife for pupils aged 12 to 15 years, highlighting new energy sources and careers.

The Partnership will provide wider access to equipment and technological advances in the energy sector, with in-depth insight into new practices being used by companies.  Students studying renewables, construction and engineering courses may also get chance to work on special projects with The Hydrogen Office.

The College is also currently developing a Degree in Renewable Energy Technology with Abertay University.

Carnegie College and West Coast Energy

Carnegie College has close relationships with the renewables industry including with West Coat Energy for Renewable Energy Scholarships.

Up to six scholarships will be available to local young people to provide financial support for students studying Engineering and Renewables at the College, as well as providing mentoring aid supported by West Coast Energy. The company’s community benefit package of £3,500 per megawatt was revised following local consultation. The College has a campus at the Fife Energy Park, Methil, providing training for wind turbine technicians.

Dundee College

Dundee College has joined the Universities of Abertay and Dundee, Angus and Perth Colleges to form Energy Training East with Dundee Renewables, to harness expertise from Dundee City Council, Scottish Enterprise and Forth Ports, Skills Development Scotland and JobCentre Plus to pilot a training regime.

Edinburgh Telford College

Based at its new Granton campus, the College has a partnership with PPL Training for its Renewable Energies Training Centre.

Inverness College

Inverness College has its SEAM (Sustainable Energy And Micro-renewables) training centre for training and research in renewable energy and sustainable construction technologies, with support from the Scottish Government CARES programme, Community Energy Scotland, Highlands and Islands Enterprise and an EU Northern Periphery Partnership project called SMALLEST.

Scotland’s Colleges are represented on the Forum for Renewable Energy Development in Scotland (FREDS) Skills Group. 

Further examples of Colleges’ involvement in Renewable Energy Projects, developments and funding will feature in future Huckfield  briefings.

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LOCAL COUNCILS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

With more onshore windfarms gaining planning consents and becoming operational, several local authorities are now developing and formalising their policies and guidelines for Community Benefit. Some examples are provided below. This is not an exhaustive list and further examples will follow in later Huckfield  briefings.

Since many local communities are affected by development of windfarms, this section recognises that most Renewable Energy Community Benefit funds rightly prioritise applications from local communities. Examples below show Community Benefit policies which are being developed for larger regional infrastructure funding, including skills development. Most of these are at an early stage and updates will be provided in further postings.

Dumfries and Galloway Council

Dumfries and Galloway conducted a Windfarm Community Benefit Framework Review in April 2011. “Windfarm Community Benefits. Revised Approach 2011 Information for Communities”  Section 7 refers to a Minimum Developer Contribution:

“The standard minimum rate of contribution is £5,000 per megawatt per annum based on the  installed/consented capacity of the windfarm. For example for a windfarm development with installed capacity of 25 megawatts, the community benefit fund would be £125,000 per annum. This rate will be index linked from 1st January 2011 based on the Retail Price Index”.

Windfarm Community Benefits Revised Approach 2011 Information for Developers” in Section 6 refers the establishment of a Regional Socio Economic Fund:

“50% of the funding will be ring-fenced for a Regional Socio-Economic fund. The purpose of this fund is to invest in social, economic and environmental projects that support a sustainable low carbon economy. Projects will seek to deliver in one or more of the following areas:

  • Business and skills
  • Environment and community
  • Cultural and tourism
  • Affordable housing
  • Community transport
  • Improved broadband connectivity

The region-wide fund will take applications from constituted community groups, communities, organisations including the public sector from across Dumfries and Galloway. Further information about the operation of this policy can be obtained from Dumfries and Galloway Council, Economic Development Service, Business and Enterprise Team on 01387 260078.

South Lanarkshire Council

South Lanarkshire was one of the first local authorities to set up a Renewable Energy Fund. With Whitelee and the other windfarms, Community Benefit practice in South Lanarkshire is now well established.

Renewable Energy Fund

The two options are:

  • Main renewable energy fund – grants over £10,000 up to 50% of total ‘eligible’ costs.
  • Local grant scheme – grants of less than £5,000 and up to 100% of total ‘eligible’ costs for smaller community-based projects

Application for financial assistance for projects within a 10km radius of participating renewable energy developments will be accepted from:

  • public organisations and agencies
  • partnerships, trusts, co-operatives and other non-government organisations
  • community groups, associations or organisations
  • any business, co-operative or other trading enterprise located, or offering a service benefiting communities, within a 10km radius of participating developments.

Applications will be considered from outside the 10km radius if it can be demonstrated that the people who will benefit live inside the eligible area. Any grants awarded would be proportional to the percentage of residents who would benefit from the project.

Argyll and Bute Council

Argyll and Bute Council has had a policy on Community Benefit since 2004, when it was decided by Councillors that the initial tariff would be £2000 per megawatt installed, with an additional £1000 per mW depending on annual output. The latest list of Argyll and Bute Community Windfarm Benefits gives an indication of distribution of these benefits.

Scottish Borders Council

Scottish Borders’ Council has issued a comprehensive toolkit “Achieving Community Benefit from Commercial Windfarms” on page 10 says:

“There are no hard and fast rules about the level of community benefit which can be achieved, but some real examples include: – Highland Council aims to achieve £4,000 to £5,000 per installed megawatt per year”

Highlands Council

On Highlands Council has also made clear its intention to maximise community benefit from windfarms, a policy to be launched on Friday 24 February 2012:

“Members also gave the go ahead for a new concordat to be established which will set out the terms of a new relationship between the Council and developers.  As part of this agreement it will be the Council’s responsibility to provide the framework and infrastructure for receiving and then disbursing Community Benefit and through which developers will agree to provide not less than £5,000 per installed megawatt annually that will appreciate each year in line with the UK Retail Price Index”

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OTHER ORGANISATIONS AND COMMUNITY BENEFIT FROM RENEWABLE ENERGY

As more windfarms receive planning consent, are being constructed and become operational, in addition to local authorities, other organisations are now formalising their approaches to Community Benefit associated with these developments. The following provides some Scottish national examples:

Scottish and Southern Energy (Scottish Hydro)

In November 2011 SSE announced details of a new Scotland Sustainable Energy Fund that could be worth more than £90 million over 25 years:

“The fund will be available for organisations promoting skills development, community energy schemes and improving the built and natural environment. The fund is in addition to the £150 million SSE has already committed to support community projects in Scotland over the 25-year projected lifetime of the company’s existing and planned wind farms”.

SSE’s commitment is based on a tariff of:

“£5,000 per megawatt for all new onshore wind farms constructed in Scotland from 1 January 2012. This will comprise £2,500 for local community initiatives and £2,500 per megawatt for the new Scotland Sustainable Energy fund”.

While all this is at an early stage, in future there may be substantial community benefit funding available for larger projects including skills development. As progress is made, there will be further Huckfield briefings.

Scottish Power

Scottish Power operates the Green Energy Trust, providing grants up to £25,000 for renewable energy with community benefit, including a wider educational element.

Forestry Commission Scotland

Forestry Commission Scotland is working with developers to build wind and hydro projects on national forest land. FCS has published a helpful guide to its thinking in “Opportunities for Community Involvement In Hydro or Wind Renewable Energy Development On the National Forest Estate“.

Forestry Commission Scotland deserve credit for setting the “benchmark tariff” of £5000 per installed   megawatt since this is becoming the standard tariff for wind farm community benefit across Scotland.

The Opportunities for Community Benefit document shows selected developers for Hydro and Wind Generation Lots across Scotland. The developers will engage with local communities about processing Community Benefit. All this is still at an early stage of development. But further information will be posted in future Huckfield briefings as soon as it becomes available, especially where developers follow precedents above of allocating benefits available into local community and strategic projects.

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HIGHER EDUCATION ACADEMY

Further Education Colleges may participate in and benefit from Higher Education Academy programmes below, if they or individual staff are subscribers or HEA recognised professionals (see below).

The Higher Education Academy has only recently started offering subscriptions to FE Collages with HE provision. This was mentioned in the HEA’s recent HE in FE briefing

All HEA programmes are open to Scottish institutions – with the one exception of the National Teaching Fellowship Scheme, which is currently only open to institutions in England, Wales and Northern Ireland.

For further information about subscription rates, Colleges should e mail Dr Andy Jackson, HEA’s Head of Business Development for further information.

The Higher Education Academy is a national and independent organisation, funded by the four UK HE funding bodies and by subscriptions and grants. The HEA Strategic Plan 2012-2016  shows expertise and resources to support Higher Education to enhance the quality and impact of learning and teaching. HEA supports various networks and provides resources, events and workshops relating to learning and teaching in Higher Education for 28 different disciplines. HEA has an office in Edinburgh.

HEA works with individual academic staff, curriculum discipline groups and senior managers to identify and share effective teaching practices in order to provide the best possible learning experience for all students.

HEA’s work is focused in three main areas – Academic Practice Development; Teacher Excellence; and Institutional Strategy and Change. “Support and Services to Higher Education: 2011 and Beyond” provides an overall summary of HEA activities.

Funding and Programmes

Though not all programmes are currently open for bidding the following represent examples of possible funding from HEA:

Professional Recognition

The Professional Recognition Scheme contributes towards the professionalisation of teaching by conferring the status of Associate Fellow, Fellow, Senior Fellow or Principal Fellow.

Teaching Development Grants 

For Teaching Development Grants over the next year there will be a total of £1.5 million of funding available for individual grants, departmental grants and collaborative grants on the themes of internationalisation or employability. Development Grant funding exists to stimulate evidence-based research and encourage innovations in learning and teaching that have the potential for sector-wide impact.

The closing date for an Individual TDG Application Form is Sunday 19 February 2012.

The Collaborative Grant themes are internationalisation or employability. A total of £570,000 will be available with a maximum of £60,000 per project. Project duration will be 18 months. Collaboration may be cross institution and/or interdisciplinary. The project lead must be a Fellow of the Academy.

The application process for TDG Collaborative Grants opens on Monday 27 February 2012 and closes on Sunday 22 April 2012.

Change Academy 

Submissions are now open for Change Academy 2012. The HEA, in partnership with the Leadership Foundation for Higher Education, seeks submissions from HE institutions across the UK interested in taking part in the year-long Change Academy programme. Change Academy is a flagship programme designed to support institutions as they implement complex change projects to enhance the student learning experience. There is a Change Academy Guidance and Proposal Form. The closing date for submission is Friday 02 March 2012.

Internationalisation 

Connections: Pilot Projects Supporting Internationalisation The Higher Education Academy, in partnership with the UK Council for International Student Affairs (UKCISA), invites institutions to submit applications for funding to support projects which will:

  • enhance the teaching and learning experiences both for international students studying in the UK and home students in the context of internationalisation
  • promote intercultural understanding to prepare students for employment in a global context.

Bidding for the last deadline closed on Monday 30 January 2012.

There is a handy summary of all HEA Funding Opportunities, including links to the following:

As mentioned previously, the Higher Education Academy has a specific Higher Education in Further Education section and directory.

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EUROPEAN STRUCTURAL FUNDS

 2014-20 Funding Proposals

Though at an early stage of development, the European Commission’s proposals for regional, employment and social policy is beginning to take shape. The Commission’s main points of interest concerning future funding are based on a Common Strategic Framework. 

European Regional Development Fund, the European Social Fund the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund will be brought together under a Common Strategic Framework.

Europe 2020

The objectives of the programme will be aligned to objectives of Europe 2020 which are:

  • 75% of the 20-64 year-olds to be employed
  • 3% of EU’s GDP to be invested in Research, Development and Innovation
  • Greenhouse gas emissions 20% lower than in 1990
  • 20% of energy from renewable sources
  • 20% increase in energy efficiency
  •  Localism: Emphasis has been placed on encouraging the development and delivery of programmes at a more local level. This is demonstrated by:
  • Joint Action Plans: The development and delivery of a group of projects with a minimum public contribution of €10 million, to defined targets and outputs carried out under the responsibility of the beneficiary. A Member State, managing authority or any designated public body can submit a proposal for a Joint Action Plan.
  • Integrated Territorial Investment: Where an urban development strategy or other territorial strategy requires an integrated approach involving investments under more than one priority axis of one or more operational programmes; essentially combining ESF, EAFRD and ERDF money.
  • Community Led Local Development: led by local action groups composed of representatives of public and private representatives, with no single interest group of public sector organisation having more than 49% of the voting rights.

ERDF Priorities

  • 20% on Energy efficiency & renewables
  • 60% on research & innovation and competitiveness of SMEs
  • Improving access to and quality of information and communication technologies
  • Climate change and moves towards a low-carbon economy
  • Services of general economic interest
  • Telecommunication, energy, and transport infrastructures
  • Enhancing institutional capacity and effective public administration
  • Health, education, and social infrastructures
  • 5% on Sustainable urban development

ESF Priorities

  • Employment promotion
  • Investment in skills, education and life-long learning
  • 20% on Social inclusion and the fight against poverty
  • Enhancing institutional capacity and efficient public administration

Progress so far  

On Monday 19 December 2011 there was a “Future Scottish EU Programmes Roundtable” in Glasgow, to share preliminary thoughts on a possible 2014-20 EU Programme:

“Discussion took place on the targeting proposed by the European Commission and the expected reduction of funds to approximately two‐thirds of current levels.  The Commission is proposing that 52% of funds should be targeted on ESF.   Currently only 42% of the LUPS Programme is targeted on ESF for example, meaning in the future Programme ERDF will proportionally take the larger share of cuts”.

“The proposed prescriptive allocations for 80% of possible activity to be spent on RTD & Innovation; SME Competitiveness; and Low Carbon activities alongside, a target of 15% to be spent on financial instruments and 5% for integrated urban development, means we need to be clever about  integrating these percentages across/within the themes.    It was noted that the prescriptive allocations would be something a number of Member States would challenge during the negotiations, so could be subject to change.

“There was general agreement that the three pre‐selected ERDF themes are largely those we ought to be looking at, but need to build in maximum flexibility to fund things across the themes within one operational programme and to enable future unknown priorities to be accommodated”.

The note from the meeting also says that:

“Consideration should be given to removing restrictions on the retention of revenue funds, making staff and overhead costs eligible expenditure, aligning known national funds and making it easier to use private sector funds as means to improve match funding”

With 60% of ERDF funds prioritised for research, innovation and competitiveness of SMEs, 20% for Energy Efficiency and Renewables and 5% for Sustainable Urban Development, this leaves 15% for ERDF other services and access. This means that Higher Education and Business Support organisations may feature as applicants, assuming that State Aids implications can be clarified.

Transitional Areas

The EU’s Cohesion Policy 2014-2020 proposes that 11.6%  or €38.9bn of Structural Funds should be spent on Transition Areas. These will be NUTS 2 regions whose GDP per capita is between 75% and 90% of the average GDP of the EU 27 Countries.

There will obviously be much discussion about the EU’s proposed Transition Regions – those in between less developed (Convergence) and more developed (Cohesion) Regions in the present programme.  In Scotland this includes the area in the current Highlands and Islands Programme.

More developed areas (the current Cohesion Areas, including Scotland’s LUPS Programme area) should receive 15.8% or €53.1bn.

Though there is much still to be discussed, all this means that Scotland’s previous Objective One Programme area might continue to receive higher levels of EU funding. Further developments will be reported in future Huckfield briefings.

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KNOWLEDGE TRANSFER

In November 2011, Frontline Consultants completed a Review of the Developing Employer Engagement Programme and Knowledge Transfer Grant, which has recently been published by Scotland’s Colleges. This Review shows that Scotland’s Colleges have been highly successful with limited amounts of DEEP and Knowledge Transfer Grant funding. On page 18:

“We have excluded the lower impact data from our aggregation to avoid double counting:

  • In 2008, net employment impact was estimated at 253, 120 and 103 jobs respectively for the year 1, 2 and 3 surveys.  This suggests that net employment attributable to the programmes in that year could have reached 476 net jobs.
  • Net GVA impact can be aggregated across the three surveys to cover the five year period 2006-10.  We discounted all the impacts back to 2006 using the HM Treasury discount rate of 3.5%.
  • This suggests that over the five year period 2006-10, £23.65m (PV) of net GVA impact could be attributable to the college employer engagement programmes (Table 5.5).  This is an average of £4.73m net GVA (PV) per year.

All this shows that comparatively small amounts of targeted funding for Scotland’s Colleges produces very good results.

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EMPLOYER OWNERSHIP POLICY DEVELOPMENT

A series of reports in Scotland and England have called for greater involvement of employers in the design and delivery of skills. Under Employer Ownership Pilots in England, employers will directly receive public funding to purchase training and skills from providers.  These new pilots may provide relevant experience for Scotland.

UK Commission for Employment and Skills “Review of Employment and Skills”

In July 2011 the United Kingdom Commission for Employment and Skills published its “Review of Employment and Skills” in Scotland.

On page 25 under “Customer Focus: What is the Challenge”,  the Report said:

“…………… Although there is evidence of customer involvement in design and delivery of provision in the skills system, and employer involvement in co-design of services for large-scale recruitment, this is not a regular and consistent feature across the whole range of employment and skills services. ………There is limited customer consultation in design and delivery of programmes, offering very few opportunities for customers to influence or develop and take control of their own innovative and positive employment solutions”.

Review of Post-16 Education and Vocational Training in Scotland

To ensure more employment engagement and involvement, Willie Roe’s detailed “Review of Post 16 Education and Vocational Training in Scotland” in August 2011.  On page 49 he said that the UKCES Report represents a “call to action for:

“Employers to engage more effectively with local partners that deliver employment and skills services, clearly signalling their needs and becoming involved in the design and delivery of provision”

Review of Vocational Education – The Wolf Report

Though this Report covers provision in England, this section is relevant to Scotland. Alison Wolf’s “Review of Vocational Education” was published in March 2011. Prof Wolf on page 143 writes:

“Indeed our third major objective should be to recreate and strengthen genuine links between vocational education and the labour market; and especially, in the case of young people, the local labour market. 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”.

“Review of Post-16 Education and Vocational Training in Scotland”

In August 2011, on page 71 Willy Roe’s Report recommends the creation of Business Education Networks at local level:

“At the level of each local authority (or combination of local authorities) there should be established a Business-Education Network to co-ordinate and extend the wide range of connections that exist (or will be created in the coming years) between businesses, schools, colleges, and training providers. Some places in Scotland already have a vehicle of this kind. The Networks should be co-funded from the private and public sectors”.

“Preparing Learners in Scotland’s Colleges for Employment or Further Study”  

Preparing Learners in Scotland’s Colleges for Employment or Further Study” August 2011 is an aspect report on provision in Scotland’s Colleges by HM Inspectors on behalf of the Scottish Funding Council. The Report says on page 17:

“However, in many subject areas in many colleges, advisory groups are not effective in bringing employers and programme teams together for the benefit of the college, employers and learners”.

In recommendations on page 25:

“Scotland’s Colleges should:

  • consider how best they can collaborate in meeting the need for workforce development, given that only 23% of employers in the SESS used a college for workforce training.

“Putting Learners at the Centre: Delivering our Ambitions for Post-16 Education” 

Following this, the Scottish Government’s “Putting Learners at the Centre: Delivering our Ambitions for Post-16 Education published in September 2011 on page 31 said:

“Employers consider  their needs are  not sufficiently well articulated; that institutions are insufficiently responsive and flexible in terms of where, how and what is delivered; and, therefore, we are not well placed to anticipate and respond to current and future labour market demand.”

On page 32 the Scottish Government’s pre legislative paper continued:

“We will improve this situation, where necessary looking at radically alternative models which put employers in the driving seat”

Following these references above to the need for more employer involvement, various structures, including Skills Investment Plans, are currently being explored and developed in Scotland to secure more employer participation in vocational training and skills delivery.

Employer Ownership Pilots 

These following paragraphs on proposed Employer Ownership Pilots in England are included since they may have relevance for future Scottish Government policy.

On Thursday 17 November 2011, the UK Business Secretary Vince Cable announced their Employer Ownership Pilots initiative for England. Under the proposed £250mn programme, employers will be given the power to design, develop and purchase the vocational training they need.  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”

“Employer Ownership of Skills” 

Part of the Scottish Government’s intentions may be guided by the UK Commission on Employment and Skills publication of “Employer Ownership of Skills” published on Tuesday 13 December 2011.

Employer Ownership Pilots represent the start of a phased gradual withdrawal of public funding for employer led training and a new environment where through UKCES and the Skills Funding Agency, public funding acts as market maker. Innovative suggestions include a public funding role in employer training as underwriting, as guarantor or for reducing risk.

The Coalition Government’s wider rationale is that 60% of employers use private training providers. For provision in England the Government will now encourage employers to take ownership of their training agenda. This means moving from provider funding, 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.

Section 6 of the UKCES “Employer Ownership of Skills” policy document says:

“Public investment will be provided directly to businesses, sitting alongside businesses’ own private investment, rather than following the mainstream public funding model.

“As part of the pilot, employers will be asked to demonstrate how public investment would be used to leverage business investment and  commitment to raising skills levels in their sector, supply chain or local area and how they will support Apprenticeships”.

None of the above seeks to project that similar policies will follow in Scotland, or that this could be one of the “radically alternative models which put employers in the driving seat”, to which “Putting Learners and the Centre” on page 32 refers. However, whichever direction is followed, what is happening in England is surely relevant?

AND FINALLY

Finally, many grateful thanks are owed if you’ve persisted and read through all this and think it’s the end. In reality, it’s probably only just the beginning.

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What’s Happening to School Funding?

Because this is a long piece, please click on the following headers to go straight to these sections:

INTRODUCTION

Introduction, context and background to this posting. School funding reform takes place against a background of spending cuts and policies to spread Academies and Free Schools.

EDUCATION SPENDING – CUTS IN REAL TERMS

An analysis, including evidence from the Institute of Fiscal Studies, showing how inflation has overtaken projected school spending increases to become a real terms cut.

SCHOOL FUNDING – A BRIEF RECENT HISTORY

Brief history from Charles Clarke in 2003 and Jacqui Smith in 2005, through various changes in School Finance (England) Regulations to Michael Gove’s Written Ministerial Statement on Tuesday 13 December 2011.

THREE LATEST CONSULTATIONS FROM 2010 TO THE PRESENT  

Ed Balls’ “Consultation on the Future Distribution of School Funding” in March 2010, Coalition Government first “Consultation on School Funding Reform – Rationale and Principles” in April 2011 and Coalition Government second “Consultation on School Funding Reform: Proposals for a Fairer System” in July 2011. Includes context and comments on these Consultations.

MAIN ISSUES IN SECOND COALITION CONSULTATION AND RESPONSES

Details of respondents to this Consultation and summary of school funding factors in these responses. Throughout these responses there is general support for the Consultation Document.

CONCLUSIONS

Though there will be even bigger disparities if reform does not proceed, there will be big winners and losers as a consequence of any reform. A solution may be a longer transitional period to a new national formula.

MAIN BRIEFING STARTS HERE:

INTRODUCTION

Michael Gove’s Written Ministerial Statement of Tuesday 13 December 2011 said that all responses from the Department for Education’s recent Consultation on School Funding were still being considered and that the Government’s own response was still being prepared:

“However, the responses also reflect a variety of views over some of the key aspects of the system. We are now working on developing further proposals in light of the responses”.

This latest round of Government attempts to reform funding for schools has been going on since 2003.  Though this history gets overshadowed by other arguments about Academies and Free School funding, it surely makes good sense to make progress with a system of school funding which all can understand and through which inputs and outputs are more transparent. At the moment, apart from growing numbers of Academies and Free Schools, there are so many local school funding variants that it’s difficult to measure what’s happening.

Background of Spending Cuts, Academies and Free Schools 

The big difference for this round of school funding reform is that it takes place against a background of big Government spending cuts and a strong Government policy to extend Academies and Free Schools.

This piece examines the need for school funding reform irrespective of current policy contexts. Indeed, a combination of austerity measures, Academies and Free Schools all reinforce the urgent need for reform and greater transparency in schools’ revenue funding. The trouble is that, as with any reform, as shown by the Institute of Fiscal Studies report below, there will be winners and losers.

EDUCATION SPENDING – CUTS IN REAL TERMS

Education Cuts in October 2010 Spending Review 

The Coalition Government’s attempt to reform school funding takes place against a background of large cuts to education spending planned for the period covered by the Chancellors’ Wednesday 20 October 2010 Spending Review. By 2014/2015 overall education spending will fall to its lowest level since the mid-1990s.

Planned Department for Education (DfE) cuts are in line with those across the average planned across government spending as a whole. The resource budget for schools is a little better protected since the biggest cuts are in higher education and schools capital spending, followed by planned cuts to 16–19 education spending, Early Years and youth services spending.

The previous Labour and present Coalition Governments have both shifted spending away from higher education and towards schools. But though school capital spending grew fast under Labour, it is due to receive the largest cut under the Coalition Government.

Nick Gibb, the Schools Minister in a Commons Written Answer on Monday 19 July 2010, gave the Coalition Government’s first detailed response on school funding.

“Revenue funding for maintained schools currently goes through local authorities. We have inherited a needlessly complex system of funding which it is our intention to simplify.

“The core element of maintained school revenue funding is the Dedicated Schools Grant (DSG), which the Department distributes to local authorities, who then allocate it to schools in consultation with their Schools Forum. The total Dedicated Schools Grant allocation for financial year 2010/2011 is £30.6 billion (this is post the removal of an estimate of academy recoupment)”

Alongside the Chancellor’s Statement The Department for Education Spending Review of Wednesday 20 October 2010 explained that over the four year Spending Review period, £1bn would be freed up by ‘procurement and back office savings’ while the public pay sector freeze will save schools an additional £1.1bn. As part of the Spending Review, the Department for Education explained said that total funding for the schools budget would be increased by 0.1% in real terms until 2015.

October 2010 Spending Review Overtaken by Inflation 

But since then, HM Treasury projections of higher inflation have changed this real terms calculation, with a resulting real terms cut over the whole period of around 1% and a small real increase in only one year. In addition, pupil numbers are expected to increase.

Michael Gove’s Written Statement on Tuesday 13 December 2011 says that for 2012/2013 the DSG will remain at the same cash per pupil as 2011/2012  – which itself was the same as 2010/2011. No authority can lose more than 2% in cash terms. The Minimum Funding Guarantee for individual schools limits overall reductions in grant to 1.5% per pupil (the same as 2011/2012).

If the Pupil Premium is added to the 2011/2012 DSG figures, the cash increase should be 2.1% more than the equivalent 2010/2011 – 1.7% extra per pupil. But these cash increases are still below the level of inflation, however this is measured. As shown by DfE site, in 2012/2013 the amount available for the Pupil Premium will double from £625m in 2011/2012 to £1.25bn. It will further rise to £2.5bn by 2014/2015. But as shown below by the Institute of Fiscal Studies below, because of inflation only schools in most deprived areas will benefit from this.

No indicative allocations for 2013/14 or 2014/15 have yet been published pending the outcome of the ongoing consultation process on changes to the schools funding system – the subject of this piece.

The Institute of Fiscal Studies Press Release of Tuesday 25 October 2011 said:

“We estimate that public spending on education in the UK will fall by 3.5% per year in real terms between 2010/2011 and 2014/2015 (or 13.4% in total). This would represent the largest cut in education spending over any four-year period since at least the 1950s, and would return education spending as a share of national income back to 4.6% by 20142015.”

“….All areas of public education spending are expected to see real-terms cuts between 2010/2011 and 2014/2015, but the severity of cuts will differ. Current spending on schools will see the smallest real-terms cut (about 1% in total). The areas seeing the largest real-terms cuts will be current spending on higher education (40% in total) and capital spending (more than halved)”.

The Institute of Fiscal Studies “Trends in Education and Schools Spending” October 2011 in its Conclusion on page 23, explained this in more detail:

“Whether one considers economy-wide inflation or an estimate of schools-specific cost inflation, the majority of primary and secondary schools are expected to see real-terms cuts in 2011/2012.

“Looking further ahead, the Pupil Premium will grow as the budget increases to £2.5bn by 2014/2015  However, given the continuation of the cash-terms freeze in other per-pupil funding, it is again the case that only the most deprived schools would be better off financially than in 2010/2011. Under both economy-wide inflation and an estimate of schools specific cost inflation, the majority of primary and secondary schools are expected to have lower real-terms funding per pupil in 2014/2015 than they had in 2010/2011”.

All this shows is that school funding projections which looked more optimistic in the the Chancellor’s Comprehensive Spending Review in October 2010 has now been overtaken by inflation.

SCHOOL FUNDING – A BRIEF RECENT HISTORY

Current attempts to reform school funding began nine years ago.

Charles Clarke in 2003 and Jacqui Smith in 2005 

On Thursday 17 July 2003, as Secretary of State for Education, Charles Clarke in a Ministerial Statement to the House of Commons said that there were real difficulties with schools budget allocations since not enough funding was ending up in schools.  These difficulties were further explained in July 2004 in the Government’s “Five Year Strategy for Children and Learners“, which said:

“…the bulk of school funding does not come to local authorities as hard cash. It comes as a theoretical planning total based on a range of factors, and there is no guarantee that it will be spent on education”.

Page 46 described this arrangement as:

“..long-standing confused responsibility between central and local government for setting the level of school funding”.3

Page 45 said: that:

“..unpredictable and short-term budgets” also made “it harder for schools to plan ahead and take full independent responsibility for their future development”

In other words, not enough Department of Education funding was going directly to Schools.

In a Commons Written Statement on Thursday 21 July 2005 Jacqui Smith MP as Minister for Schools stated that a ring fenced Dedicated Schools Grant was “an essential precursor to three years budgets for schools”.  The Dedicated Schools Grant was introduced in 2006/2007. This was based on a “spend plus formula” which has been maintained.  So the Schools Budget became the Dedicated Schools Grant.

The Institute for Fiscal Studies “School Funding Reform: an Empirical Analysis of Options for a National Funding Formula” November 2011 explains “spend plus” on its page 5:

“Each year, local authorities receive an allocation from the Dedicated Schools Grant. Over recent years, this has been calculated based on the so-called “spend-plus” methodology. Under this method, local authority grants have been determined as a flat-rate increase on what schools or local authorities received in the previous year, plus an extra increase determined on the basis of a formula. The retrospective aspect of this methodology limits the ability of the school funding system to redistribute money between local authorities on the basis of changing need. Although the Dedicated Schools Grant was introduced in 2006, the ‘spend-plus’ methodology was brought in following the school funding ‘crisis’ of 2003–04, when a number of schools complained that they were due to receive cuts in funding”

Though these three year budgets did not commence until 2008/2009, they continued on the 2006/2007 “spend plus” basis. This same formula still continues today. Underneath it still lie many of the contradictions and differing allocations which were the cause of Charles Clarke’s concern in 2003.

School Finance Regulations

Before 2006, schools were funded through the Schools Funding Spending Share (General Formula Grant to Local Authorities). The School Finance (England) Regulations 2006 implemented the new approach and set out the financial arrangements for local education authorities’ funding of schools over the financial years 2006/2007 and 2007/2008.

Moving the new School Finance (England) Regulations 2006 in the House of Lords on Thursday 16 February 2006, the Parliamentary Under-Secretary of State for Education and Skills, Lord Adonis, noted:

“The new arrangements set out in these regulations will provide for three important changes: first, a ring-fenced dedicated schools grant so that the funding intended for education is ring-fenced for that purpose alone within local authority budgets; secondly, multi-year budgets for schools so that they get the full benefit of the multi-year pre-announcement of funding that we made in December; and thirdly, a rationalisation of standards-related grants so that there is less central prescription on how standards funding is spent at school level.”

In response, Baroness Buscombe, until recently Chair of the Press Complaints Commission, but then Opposition Spokesperson for Education and Skills in the House of Lords, welcomed these principles but added:

“despite the simplification, however, school funding is still incredibly complicated”

The 2 year settlement 2006/2007 and 2007/2008 was based on “spend plus” pending a review of distribution. In 2008/2009 a three year settlement was introduced but continued “spend plus”. For the three-year period, 2008/2011, the School Finance (England) Regulations 2008 (SI 2008/228) were introduced although the Explanatory Memorandum said that “to a large degree, they re-enact provisions in the previous regulations”.

The School Finance (England) Regulations 2011 (SI 2011/371) of 15 March 2011 were intended to relate to the 2011/2012 financial year. The Government noted that the 2011 regulations “to a large degree … re-enact provisions in the School Finance (England) Regulations 2008”, although there are “some significant changes, relating particularly to … the incorporation of a number of grants within the Dedicated Schools Grant, which were previously paid as separate grants”

On the 2011/2012 calculation of DSG, the DfE explained on page 3 of  “A Consultation on School Funding Reform”, introduced on Wednesday 13 April 2011:

“This method – called ‘spend plus’ – was started in 2006/2007 and represented a reform from the previous method of school funding. When the DSG was created, in 2006/2007, its initial level for pupils in each local authority was based on what each authority planned to spend on schools in 2005/2006 – the last year before the introduction of the DSG and “spend plus”. Therefore, because we still base funding from the DSG on the previous year, current levels of school funding are, in fact, based largely on those in 2005/2006.”

The same Consultation Document  explained on page 2 that “the amount of DSG per pupil for each authority is calculated based on what the local authority received the previous year. Local authorities then fund schools using a local funding formula”. Until recently, the DfE website explained this in more detail:

“Since 2006/2007, LAs have received their schools funding through the Dedicated Schools Grant (DSG) rather than as part of the local government settlement.

“The DSG is a ring-fenced grant paid by the Department. The DSG is paid to LAs, who must use it for the purposes of their schools budget. It is for each LA to distribute funding – in consultation with its schools forum – to the schools it maintains using its locally agreed formula (drawn up in line with schools finance regulations). It is for the schools’ governing body to decide how to spend their available resources”.

Though there is an ongoing wider review of the school funding system for 2013/2014 onwards, which will determine individual allocations, the Government has said that for the time being it will carry the current formula forward.  The Secretary for Education, Michael Gove MP, in Written Ministerial Statement on Tuesday 13 December 2011, said “we will continue with the current methodology for funding schools in 2012/2013 through the Dedicated Schools Grant (DSG). The underlying school budget will be kept at flat cash per pupil for 2012/2013”.

All this shows that from Charles Clarke’s Ministerial Statement delivered to the House of Commons on Thursday 17 July 2003 until Michael Gove’s Written Statement on Tuesday 13 December 2011, the Government has been trying to reform the school funding system.  Despite the introduction of the Dedicated Schools Grant, little else has changed.

THREE LATEST CONSULTATIONS FROM 2010 TO THE PRESENT  

Ed Balls in March 2010

As Secretary of State for Children, Schools and Families, Ed Balls announced on Monday 15 March 2010  – before the last Election- the publication of “Consultation on the Future Distribution of School Funding”. Page 8 said that the DSG “Spend Plus” methodology:

“has required the setting of a base year to which future increases are applied, in this case 2005/2006, and so does not allow for changes in relative needs between local authorities since that time to be reflected. There is a strong case, therefore, for returning to a system where funding allocations better reflect current need”

Though the Coalition Government published the Consultation Responses to Labour’s Consultation, it decided to introduce its own White Paper “The Importance of Teaching” on Wednesday 24 November 2010, which assessed the current school funding arrangements as:

“…opaque, anomalous and unfair school funding system which reflects the historic circumstances of local authorities rather than the specific needs of individual schools and pupils:

“At present, as demonstrated by the graph below, inequalities in the funding system lead to huge variation in the money similar schools receive. We compared 72 secondary schools outside London, with similar size and intakes and found a variation in funding per pupil from just below £4,000 to well over £5,500.

“At the same time, only around 70% of the money that is intended for the most deprived pupils is actually allocated to schools on that basis. And the funding system has become increasingly opaque and unresponsive, with the money that schools receive depending more on what they received in the past than the characteristics and needs of pupils in the school now. Post-16 funding, although distributed on a more transparent basis, is also inherently unfair, with school sixth forms being funded on average £280 more per student than general FE colleges and sixth form colleges”.

The Financial Times on Friday 12 November 2010 reported that drafts of the White Paper proposed that “state schools in England will be directly funded from Whitehall for the first time” through a “single ‘national funding formula’”, a move which, the FT said, would “sideline local authorities from managing education spending”, with a “transition to a new funding system to begin in 2012, with a new independent Education Funding Agency taking over finance for “all schools and sixth form provision” from 2013”.  But the Financial Times on Sunday 21 November 2010 reported that these plans had been dropped.

The Government’s White Paper of Wednesday 24 November 2010, “The Importance of Teaching”, said on page 82:

“While the majority of schools are local authority maintained schools, funding will continue to pass to them through the local authority. But as more schools become Academies, with funding being given directly rather than through the local authority, so the requirement for a greater degree of transparency and consistency in allocating school funding becomes more pressing”

“Because we plan, over time, to make Academy status the norm and wish to ensure more resources go direct to the frontline in a fairer way, our long term aspiration is to move to a national funding formula to ensure that resources going to schools are transparent, logical and equitable”.

Coalition Government First School Funding Consultation – Rationale and Principles  – April 2011 

On Wednesday 13 April 2011 the Department for Education launched the first of two further consultations on school funding, “A Consultation on School Funding Reform: Rationale and Principles“, in which on page 3 it provided a more detailed critique of the current DSG funding system:

“the amount of DSG per pupil for each authority is calculated based on what the local authority received the previous year”, adding:

“3.2. This method – called ‘spend plus’ – was started in 2006-07 and represented a reform from the previous method of school funding. When the DSG was created, in 2006-07, its initial level for pupils in each local authority was based on what each authority planned to spend on schools in 2005-06 – the last year before the introduction of the DSG and ‘spend plus’. Therefore, because we still base funding from the DSG on the previous year, current levels of school funding are, in fact, based largely on those in 2005-06.

“3.3. The amount spent in 2005-06 was determined by two things:

  • an assessment of what the local authorities’ needs were at that time (often using data that was already becoming out of date); and
  • the amount local authorities each chose to spend on schools (itself a result partially of decisions made several years previously).

“3.4. So, current levels of school funding are based on an assessment of needs which is out of date, and on historic decisions about levels of funding which may or may not reflect precisely what schools needed then. It is inevitable that over time needs have changed and historic local decisions may no longer reflect local or national priorities”.

Coalition Government Second School Funding Consultation – Proposals for a Fairer System – July 2011

Following its basic statement of policy in “Consultation on School Funding Reform: Rationale and Principles”  on Wednesday 13 April 2011 – which set out the Government basic premises, on Tuesday 19 July 2011, the Government published “Consultation on  School Funding Reform: Proposals for a Fairer System”, which described these in more detail:

From the outset the July 2011 Consultation Document on page 3 Government’s outline national funding formula is made clear:

“The new national formula will include:

  • A basic amount per pupil
  • Additional per pupil funding for deprivation
  • Additional funding to protect small schools
  • An adjustment for areas with higher labour costs”

Page 6 of the Consultation makes it clear that there will be three blocks of funding:

  • Schools
  • High Needs Pupils
  • Early Years

Institute of Fiscal Studies’ Analysis  

Reform Dilemma

The Institute for Fiscal Studies in “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 described all this on its page 1:

“School funding exhibits wide variation. Last year, most primary schools received between £3,000 and £6,000 per pupil, while most secondary schools received between £4,000 and £7,000. This variation arises largely because schools differ in their characteristics, but funding levels also vary across schools with similar characteristics”.

On page 3, the IFS analysis poses the Government’s basic dilemma, to which the Consultation seeks to provide some answers:

“The crucial question for the government is whether the advantages of a national formula – simplicity, transparency and responsiveness of funding – exceed the costs that the adjustment process would entail. However, maintaining the status quo is unlikely to be desirable either. Without reform, school funding may become less transparent and less related to educational needs over  time. The fact that there will be winners and losers per se is not necessarily an argument against reform. If one believes that a national funding formula represents the most desirable system, then the numbers of winners and losers merely show how far the status quo is from an ideal scenario. Moreover, failing to implement substantial reforms to school funding would lead to a further drift away from the desirable system and a greater cost of implementing reform towards it in future”.

Basic Workings of School Funding 

As the November 2011 Institute of Fiscal Studies Report on School Funding Reform explains on page 6 about the basic workings of school funding:      

“Local authorities’ allocations from the Dedicated Schools Grant are ‘ringfenced’, meaning that they must be spent on pupil provision in support of a local authority’s schools budget. Local authorities are free to add to this money using other sources, such as other grants that are not ring-fenced, council tax revenues and local charges for some council services. However, only 10% of local authorities actually do so.

“Some of this schools budget is spent on central services provided by the local authority, such as high-cost special educational needs and school admissions.  This  amount  varies  by  local  authority.  On  average,  local authorities retain about 13% of their schools budget for central services, while 10% of local authorities retain less than 9% and 10% retain more than 17% of their schools budget.”

The Institute of Fiscal Studies Report provides a good background to the current Consultation on its page 6:

“Each local authority then has its own ‘fair-funding’ formula for allocating the remainder of its schools budget to schools. This is intended to ensure that schools within a local authority that have similar characteristics (in terms of the pupils they serve) receive the same level of per-pupil funding. The formulae vary by local authority, but the most important element of them is clearly pupil numbers. Overall, the most common aspects of these fair-funding formulae are:

  •  the number of pupils at each Key Stage
  • indicators of social deprivation, such  as  the  number  of  pupils  eligible for free school meals (FSM)
  • Individually Assigned Resources for pupils with a Statement of Special Educational Needs (SEN)
  • number of pupils with SEN without a statement
  • number of pupils with English as an additional language (EAL)
  • site and school factors (the school’s business rates bill, an amount per square metre of the school’s site, and many other factors)”.

Minimum Funding Guarantee and “Spend Plus”

The Institute of Fiscal Studies Report on page 7  explains that all this is further complicated by the Minimum Funding Guarantee and “spend plus” in the Dedicated Schools Grant. IFS believes that “spend plus” and MFG have further weakened relationship between financial provision and educational needs. There are also specific schools grants over which LAs have no control, including School Standards Grant, School Development Grant and other standards funds.

As Michael Gove explained in his Written Statement on Tuesday 13 December 2011:

“To protect schools from significant budget reductions, we will continue with a Minimum Funding Guarantee that ensures no school sees more than a 1.5 per cent per pupil reduction in 2012-13 budgets (excluding sixth form funding) compared to 2011-12 and before the Pupil Premium is added”.

Funding for Academies

For academies, all this is further complicated by the Department for Education’s and Young People’s Learning Agency’s  not knowing how local authorities distribute funding between schools, as shown in Department for Education’s August 2011 “Academies’ Pre-16 Funding: Options for the2012/13 Academic Year”.  This has led to some recent press reports, including the Financial Times of Wednesday 07 December 2011, about Academies’ receiving incorrect funding.

MAIN ISSUES IN SECOND COALITION CONSULTATION AND RESPONSES

Latest Statement  
This Consultation closed on Tuesday 11 October 2011. On Tuesday 13 December 2011, in a Written Ministerial Statement, Michael Gove said:

“I am publishing today a report on the consultation responses: there was a good deal of consensus around some proposals, such as the factors to include in both any national and local formulae, and the need for careful transitional arrangements. However, the responses also reflect a variety of views over some of the key aspects of the system. We are now working on developing further proposals in light of the responses”.

Who Responded? 

The DfE published its “Analysis of Responses to the Consultation Document” on Wednesday 14 December 2011. Most interesting is the analysis of respondents, including:

  • 562 Parents/Carers
  • 211 Academies
  • 168 Maintained Schools
  • 114 Individual Local Authorities

On Sunday 01 January 2012 the Department for Education said that there were 1529 Academies open in England, including 1194 new Academies. Applications had been received from 1775 schools and 1576 had been approved. There is some overlap in these figures since Academies in a Federation may submit a single application for that Federation, which will include more than one school.

At this pace, it looks as though the spread and results from the Summary of Consultation Responses above will soon be out of date, since Academies will easily outnumber maintained schools.

The Consultation Reponses Overview says:

“Just over half of those responding to the first question felt that using a notional budget for every school was the best option as this would be fair and transparent and would be a move towards what was described as a long-awaited national baseline for school funding.  There was some concern that an option based on the pupils in each local authority (LA) area simply provided a funding formula for LAs and that it would leave the current system unchanged”

The following sections proceed in the order of the July 2011 Consultation: 

Chapter One – The National Funding System

On page 7 of the Tuesday 19 July 2011 Consultation Document, the Government gave options of two ways for calculating the schools block:

  • A formula based on the schools within the area and the pupils within those schools (“school-level”);
  • A formula based solely on the pupils within the area (“local authority-level”).

The Consultation Response Summary shows:

“Just over half of all of those responding to this question preferred option (a) which proposed a formula based on the schools within the area and the pupils within those schools, for calculating the schools block, rather than the option (b) proposal for a formula based solely on the pupils within the area. There was some concern that instead of a national funding formula for schools, what was being proposed was a national funding formula for LAs.

Chapter 2 – The Schools Block

For local flexibility in the Schools Block, page 10 of the Consultation Document proposes to reduce the number of local formula factors:

  • Basic entitlement per pupil (currently Age-Weighted Pupil Units)
  • Funding for additional educational needs (AEN) (e.g. deprivation, SEN)
  • Rates
  • Exceptional site factors (e.g. split site, PFI and rent)
  • Lump sums for schools

Local Decisions

The Consultation Response Summary shows:

“Just under half (45%) of all respondents who answered this question supported the retention of all of the listed factors at a local level and a further 41% supported some of them.  Respondents considered it beneficial to streamline additional factors which could be taken into account and welcomed the reduction from the current 38 factors to a more manageable number. It was suggested, however, that there needed to be a sufficient amount of local flexibility to ensure that the local formula remained needs-led, transparent and equitable. It was suggested that if only five factors were permitted they should be sufficiently flexible to cover the majority of local circumstances”

“(8%) respondents, the majority of which were from Academies, did not support the retention of any local level factors to maximise decision making powers at school level.  It was commented that all schools and Academies needed to know that their funding allocation would be fair and transparent and would not vary depending on which LA they were in.”

Additional Factors at Local Level 

On additional factors to be decided at local level (Question 3 on page 10 of the Consultation Document), there was a very wide range of responses, with the highest percentage (23%) concerned about pupil mobility.

Ratio for Primary and Secondary Schools

The largest percentage, just under 50% of respondents, thought that setting a range of allowable primary/secondary ratios around the national average was the right approach.

The Institute for Fiscal Studies Report on pages 22 and  23 demonstrates the current variations in ratios between different aged pupils. This is based on the Average Weighted Pupil Unit, which is allocated to pupils of different Key Stages or ages. Though Key Stage 2 in every local authority counts as 1, ratios for other Key Stages vary with each local authority.

“On average, schools receive 50% more funding for pupils aged 14–16 than for pupils aged 7–11. At the extreme end of the scale, some schools receive 70% more funding for such pupils”.

The Consultation Document proposes a ratio of 1.27 for primary/secondary funding allocations. In its analysis, the Institute of Fiscal Studies Report on page 37 says:

“It is clear that implementing a ratio of 1.27 for basic per-pupil funding at secondary schools relative to primary schools leads to significant redistribution from secondary to primary schools, if combined with the consultation’s proposed £95,000 lump sum for primary schools.  The consultation did not explicitly make the case for redistribution from secondary to primary schools and it thus seems likely that the government would want to adjust basic per-pupil funding ratios to prevent this. Such redistribution can be limited by using a higher secondary to primary funding ratio, such as the 1.45 employed here.”

Calculation of Schools’ Budgets

47% of consultation responses supported LAs’ calculating budgets for all schools in the area. Nearly 40%, however, supported the option that the EFA could make the calculation.

26% respondents considered the first option, the LA based option, to be less bureaucratic and easier to administer.  It was suggested that a system where the LA calculated budgets for all schools in its area would be open and transparent and would support accountability.  It was also suggested that this option could deliver budgets more quickly and accurately as it would remove the potential for inaccuracies in future Education Funding Agency (EFA) calculations. During this year, the EFA will replace the Young People’s Learning Agency and gradually administer more DfE funding.

12% respondents said that Academies wanted independent control of how their budgets were allocated and that the LA should not be involved in the process.  There was concern that if LAs were allowed to determine Academy budgets there was the possibility that they could favour some schools at the expense of others. Respondents commented that it would undermine the principle of autonomy for Academies if LAs were to have control of Academy budgets.

Schools’ Fora

Pages 12 and 13 of the Consultation Document paragraphs 2.23 to 2.26 proposed options to improve the working of Schools Fora –  whether main groups on the Forum should all separately have to approve a proposed formula and whether the Forum should have more decision making powers. In response:

“Just under half of all respondents to this question did not believe the options listed would help achieve greater representation and stronger accountability at a local level”

Monitoring School Fora

Though there was no clear view on whether the new Education Funding Agency should be involved in monitoring compliance, the biggest block – 16% – felt there was no need for checking compliance, since School Fora should be able to check compliance. Others thought that having the EFA checking compliance or acting as a review body potentially duplicated any scrutiny or audit process that currently existed.

All this suggests though there is a preference for Local Authority School Budget allocation, with more Academies this view will change to favouring the EFA.

On these questions above, the Institute for Fiscal Studies in “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 on page 3 says:

“In this Briefing Note, we describe the options for a national funding formula for schools and examine how different options would affect the finances of different schools or areas of the country. Our analysis is based on data held by the Department for Education (DfE). Curiously, such analysis was not present in DfE’s second, more detailed, consultation on school funding reform. The lack of such analysis makes serious public debate difficult”

However, to be fair, had DfE published this analysis, responses to these questions would have been largely pre determined.

Chapter 3 – The Schools Block – Formula Content

Page 15 of the Consultation Document sets out in paragraphs 3.3 to 3.6 the proposed Schools Block formula content and proposes that the new formula could consist of:

  • A basic per-pupil entitlement
  • Additional funding for deprived pupils
  • Protection for small schools
  • An Area Cost Adjustment (ACA)
  • English as an Additional Language (EAL)

Formula Composition

The Summary of Consultation Responses shows that 50% of respondents thought that these factors were appropriate for a fair funding formula and 43% believe that some of them were.

Deprivation

The Consultation Document asked whether Free School Meals Ever 3 or 6 ( DfE shorthand for having received Free Schools Meals at any point during the past three or six years) should be used to allocate deprivation funding in the national formula.  Alternatives included the Index of Multiple Deprivation, benefits data or the Income Deprivation Affecting Children Index. Although opinion was divided on the best method for allocating deprivation funding in a national formula, Ever 6 was the most popular with 36%.

On page 10 in its Figure 2.2, the Institute of Fiscal Studies “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 makes a significant points that:

“these  implicit FSM premiums have grown substantially since 2005–06, from £1,100 to £2,000 in primary schools and from £1,600 to £3,400 in secondary schools (all in 2010–11 prices), doubling  in  real  terms  in  just  five  years.  This is  far  in  excess  of  overall growth in funding per pupil over this period; school funding has certainly become more targeted at more deprived schools over recent years.

“In previous analysis, we  have  shown  that  local authorities’ funding formulae are less targeted at deprivation than the allocations they receive from the Dedicated Schools Grant. In other words, local authorities seem to spread or ‘flatten’ the funding they receive for deprived pupils, distributing it across all the pupils in the area”.

Protection of Smaller Schools

For the protection of smaller schools, the Consultation Document asked whether there was agreement that £95,000 is an appropriate amount for a primary school lump sum. Opinion was divided on this. This lump sum is advantageous to some Academies and Free Schools when starting.

Area Costs Adjustments

Other Consultation Document issues included allocation of premium for sparsity of provision how the Area Costs Adjustment should be calculated. Teachers have a national pay structure, but the General Labour Market, Specific Costs and Combined Costs approaches affect different areas differently. There is also an issue of whether teachers are paid enough in areas where they are difficult to retain. The majority of respondents favoured a combined approach, including Specific Costs for teachers’ salaries and a General Labour Market approach for other staff.

Chapter 4 – Central Services and Defining Responsibilities

On pages 23 and 24 of the Consultation Document, paragraphs 4.1 to 4.7 discuss the development of a funding model, having first defined the respective responsibilities of maintained schools, Academies and local authorities. The model would clarify what elements of funding would be delegated to schools or centrally retained for maintained schools, if there is local discretion.

Retaining Local Authority Central Services

On retention of local authority a majority supported retraining central services if there was local agreement.  Although it was agreed that funding should generally go directly to schools, there was support for the pooling of resources across the LA in certain cases.  By agreement schools could delegate this funding to the Schools Forum for determination and allocation.  Respondents said that as the rationale for Schools Fora was to provide the local knowledge not available at national level, they should be trusted to act in the best interests of pupils.

Funding Blocks

A majority also thought that the split of functions between the proposed funding blocks – Schools, High Needs Pupils, Early Years, Central Services and Formula Grant (based on DCLG/LACSEG – Department of Communities and Local Government/Local Authority Central Spend Equivalent Grant) – was broadly acceptable.

Local Authority Central Spend Equivalent Grant (LACSEG)

There was a majority in favour of moving LACSEG calculations to a national formula since current disparities in LACSEG represented a major cause of disparities between schools. A majority also supported LACSEG funding arrangements’ more accurately reflecting the actual pattern of where Academies were located.

On page 31, the Institute of Fiscal Studies “School Funding Reform: An Empirical Analysis of Options for a National Funding Formula”  November 2011 says:

“Going forwards, the government has not explicitly stated how funding for these central services will be distributed across local authorities once the reforms are implemented, merely stating that the total funding will reflect the total resources available and that transitional measures will take account of baseline levels”

Chapter 6 – Children and Young People requiring High Levels of Support

Parents and Schools 

Running throughout the Consultation is difference over Higher Needs Pupils between parents and schools. There was support in Consultation Responses for some basic principles for funding high needs children and young people, including funding to age 25, the role of commissioning and involvement of individual budget holding. Just under 50% thought that it would be appropriate to provide a basic £10,000 with an individual top-up and just under 50% wondered whether this was enough. Just over 16% thought that a post 16 base rate was helpful and that the local authority should be responsible for higher level costs over £10,000 for post 16s. A majority favoured a system for High Needs Children and Young People based on numbers, since this had provided stability.

Consultation Response opinion was evenly divided about funding for Special and Alternative Education Provision Academies directly from the commissioner or through the EFA with a top up from the commissioner.  There was no clear opinion on an approach based on proxy variables, with just under 50% preferring that deprivation should be linked more to Alternative Provision rather than SEN needs.

CONCLUSIONS

For those still reading this, the following arise as important issues for any future formula:

Even Bigger Disparities if No Reform

The most powerful argument for change, as this piece has tried to show, is that the longer these reforms are left undone, then the more the disparities will increase. This piece has tried to show that though successive Secretaries of State have tried to reform funding since 2003, the basic formula used has not changed since the announcement of the Dedicated Schools Grant by Jacqui Smith in July 2005.

Formula

Great care is needed in devising a new national formula for all schools, especially for the distribution of funding across Key Stages. Appropriate weighting is needed to ensure no unintended funding redistribution from secondary to primary schools. Though deprivation funding, based on Free School Meals, is currently geared towards secondary schools, it may still be necessary to adjust the ratio of primary/secondary funding to a higher ratio. The £95,000 lump sum small school premium is also relevant here.

Big Gains and Losses

Because of the wide variety of different local authority funding formulae and practices, the effects of funding changes will be concentrated in some local authorities which could experience big gains or losses of 10% or more.  There will be cases where primary and secondary funding changes will offset each other and others where these will reinforce each other.

Winners and Losers

The inescapable consequence of reform of a current funding system based on dozens of local historical factors is that whichever funding formula is chosen, there will be winners and losers. Some of this will happen in dramatic fashion, with anticipated media hyperbole. A solution for many may be a longer transitional period to a new national formula.

AND, FINALLY

If all of this works out, school funding should become more transparent so that everyone, especially parents, may see what funding each school receives. Since schools will need to provide more information about courses and results, it should become easier to judge what additional value each school makes to pupils’ lives.

Since many more, and soon most, schools will be academies, there will be increasing demands all round to know the value added to funding inputs to produce pupil outputs. Since this information may no longer be in Local Authority Department of Education papers, there will be a demand for publishing all of this.

Above all, remember. It’s never over till it’s over

 

 

 

The Government’s Regional Policy is called Localism

This piece is not about the politics. It’s about funding.  It’s main message is that Localism is the new Regionalism.

Especially, this piece – with apologies for its unenviable length – seeks to summarise the deluge of  Local Government funding initiatives and consultations which appeared immediately prior to Christmas.

Regional Policy by Eland House and Victoria Street

Instead of making tracks to Priestley Wharf to see Advantage West Midlands, West Midlands Councils and LEPs must look to funding available and allocated at national level and, just as important, to increasing their own powers. From management of EU Structural Funds to devolving Community Budgets, the Departments of Communities and Local Government and Business Innovation and Skills have replaced the Regional Development Agency.

1)      Core Cities with their LEPs will fare best. They might do even better with an Elected Mayor – though this shouldn’t become a celebrity sideshow contest.

2)      Non Core Cities with a LEP will become more dependent on their LEP. Though Wolverhampton can benefit from the Black Country LEP and Coventry from the Coventry and Warwickshire LEP,  perhaps they should think of leading a new national Non Core Cities Group? They might establish links with Nick Clegg’s Core Cities Unit and invite them to meetings.

3)      District Councils and second tier authorities need seriously to think about reinventing themselves. Through funding and governance changes, in future, there will not be a “mainstream” or typical District Council.

A) LOCALISM FUNDING – THE NATIONAL PICTURE

Before examining different funding routes for the three groups of councils above, this Section details DCLG and other funding now available or allocated at national level.

 i) The Economic Background

For all authorities, irrespective of their size or grouping or whether or not the Eurozone stays intact, the economic background is not good.

While in his Autumn Statement the Chancellor spoke of two more austerity years stretching into the next Parliament and taking £30bn more out of the economy, there has been little mention of further spending reductions he required during the present Parliament until 2015. In the Local Government Chronicle on Thursday 15 December 2011, Tony Travers, Director of the Greater London Group at the London School of Economics in a piece called “Bad Times are Here to Stay” wrote:

“In the light of the Chancellor’s announcement that there will be a public sector pay cap for a further two years, adjustments have been made to spending levels for the years up to 2014-2015. The Department for Communities and Local Government’s ‘local government’ spending line has been cut by £240mn in 2013/2014 and £497mn in 2014/2015”.

He continues:

“Health service spending will rise by 3.8% in cash terms this year, while local authority revenue spending fell by more than 3%. DCLG capital programmes have been chopped by 46%, compared with an 11% public sector average”.

“Council expenditure at the end of the current decade will probably be at the level, in real terms, it was 20 years previously”.

“Public sector austerity will last until at least 2017/2018 – unless the Eurozone implodes, when cuts might have to continue until beyond 2020. This may be a bleak midwinter message, but it is an entirely realistic one. Bad times are here to stay”.

And though local councils may extend their territory though setting up Health and Wellbeing Boards, forthcoming changes in Education Capital and Revenue Expenditure could mean that much future education funding completely bypasses them.

The relative position of the West Midlands is shown in the Price Waterhouse Cooper UK Economic Outlook Chapter Four “Regional Household Exposure to Finance Stress

“The West Midlands stands out as a potential area of concern here, with both low earnings growth and high increases in unemployment, perhaps reflecting the particularly severe impact of the recession  on relatively cyclical manufacturing industries in that region”

“The North East and Wales are the regions that have suffered the highest levels  of household financial stress since the  recession began, followed by the West Midlands. A mixture of high increases in  unemployment and economic inactivity rates; marked falls in house prices and increases in personal insolvencies have all contributed to these findings”.

“Closing the North-South divide is therefore more difficult than ever for government, particularly at a time when money is tight and so the scope for significant transfers to more highly stressed regions is limited, particularly within England!”

ii) European Funding

EU funding will be covered in a later posting on this site. Under current 2007 to 2013 EU Structural Funds Programmes, Local Councils and LEPs may continue to apply for European Regional Development Fund, provided they can find the required match funding contribution. Applications may be made for ERDF, irrespective of size or council designation.

The West Midlands has more limited access to European Social Fund than some other regions, where some local councils have opted themselves to become ESF CoFinancing Organisations.

Councils can also apply under a wide range of Transnational Programmes including Eighth Framework. Applications may be made under most of these, irrespective of council designation.

And, despite previous difficulties, there’s always possible future development of JESSICA (Joint European Support for Sustainable Investment in City Areas)  and JEREMIE (Joint European Resources for Micro to Medium Enterprises) – about which more at an appropriate time.

iii) Regional Growth Fund

A detailed analysis of the regional breakdown of receipts from the first two rounds of Regional Growth Fund bids shows that almost 70% of the projects successful in the first round (April 2011) were located in the North of England. Second Round Winners show 55% in the North.  So far this shows that the West Midlands is not a major beneficiary region from Regional Growth Fund.

However, the formulae for the Growing Places Fund and New Homes Bonus are more favourable to the West Midlands.

iv) Growing Places Fund

On Monday 07 November 2011, the Growing Places Fund Prospectus launched  a £450m invitation for local partnerships to bid for infrastructure funding that will promote economic growth and the delivery of jobs and homes. The fund has been distributed indicatively by formula to LEP areas. The formula includes a 50% weighting given to resident population, and 50% given to “employed earnings”. These distribution criteria benefit more populous areas with higher rates of employment and higher average wages, mostly in London and the Greater South East.

So far the North has only received a collective total of 10%. The South East has received 20% whilst the broadly-defined ‘London mega-region’ as a whole has received around 40%. LEPs in the North East have received less than 5% of the GPF allocation, the North West under 15% and Yorkshire and the Humber just over 10%.

The Black Country has received £9.6mn.  Greater Birmingham and Solihull £14.9mn . Coventry and Warwickshire received £8.5mn.  Much will depend on structures involving local councils to use this revolving loan fund. 

v) Community Infrastructure Levy 

Though trailed by the previous Government, amended Community Infrastructure Levy Regulations were introduced on Wednesday 06 April 2011. DCLG is currently consulting on amendments following the Localism Act 2011, to require local authorities to pass some receipts to neighbourhoods where development is taking place and to clarify how receipts fund ongoing costs of providing infrastructure. All this gives more local choice over how to implement and utilise the CIL charge.

With DCLG’s capital programmes cut by nearly 50%, funding for new or replacement infrastructure funding might come from:

  • Central Government Formula Grant
  • Council Tax
  • Disposals from Property Portfolio
  • Prudential Borrowing
  • Government Ring Fenced Grant
  • Partner Investment (Network Rail or Energy Supply Company)
  • Other Grants including Lottery
  • Community Infrastructure Levy.

The National Infrastructure Plan published on Tuesday 29 November 2011 alongside the Chancellor’s Autumn Statement mentioned 500 projects and programmes worth more than £250bn. The Chancellor announced a number of initiatives, including borrowing against future Community Infrastructure Levy receipts.  In addition, the Chancellor announced £1bn for the road network and £1.4bn for rail infrastructure and commuter links.

As the DCLG March 2011 Presentation shows, Community Infrastructure Levy may be spent on infrastructure which legally includes (the list in the Act is not exhaustive):

  • Flood defence
  • Open space
  • Recreation and sport
  • Roads and transport facilities
  • Education and health facilities
  • Affordable housing

Authorities are advised to keep their infrastructure evidence simple and should demonstrate that there is an Infrastructure Funding Gap against existing funding streams. Authorities seeking to raise funds through CIL have to strike a careful balance between:

–        Meeting all or part of the infrastructure funding gap; and

–        The potential impact of CIL on the economic viability of development across its area.

One of the more solid works of reference on CIL is from the Planning Officers Society in October 2011. In addition, the Planning Advisory Service has been recently recruiting pilot authorities. So help is available for those authorities seeking to move forwards on CIL.

Shropshire is one of the DCLG’s Phase One Front Runners for the  introduction of CIL and has embarked on an admirably detailed local consultation at parish level about local projects using CIL and other funding. There are no West Midlands authorities in Phase Two of the DCLG queue. Because CIL is an important source of revenue, there is surely a need for more West Midlands authorities to become involved.

The Newark and Sherwood CIL came into force in December 2011. Redbridge and Shropshire followed on New Year’s Day 2012. Portsmouth and London (with its importance for Crossrail) are at Examination Stage. Broadland, Croydon, Huntingdonshire, Norwich, Poole, South Norfolk and Wandsworth await Examination.

Though six more authorities are consulting on their charging schedule, after Shropshire, there are no West Midlands authorities in any of these lists.

Since the first twelve CIL Charging Schedules show significant differences, it is difficult to predict average yields from CIL. But they will be significant.

Bristol predicts £14mn over five years. In its detailed Levy Rationale Background Paper in March 2011  Shropshire identified an overall Infrastructure Funding Gap of £385,459,000 for 2010 till 2026 for Road Transport Facilities, Flood Defences, Education, Medical Facilities, Open Space, Sports and Recreation, Police and Electricity Supply – based on estimates and existing developer contributions. This initially equlated to £17,800 per projected dwelling.

In her succinct but methodical Examiners’ Report to Shropshire Council on Friday 02 September 2011, Sue Turner concluded:

“Since the Core Strategy was adopted, work on infrastructure planning has continued.  The LDF Implementation Plan 2011/12 provides an up to date picture of the infrastructure projects to which CIL is expected to contribute.  It identifies a funding gap of £212,815,912 and an indicative CIL requirement of £180,148,912.   All of the figures above show that there is a significant infrastructure funding gap and demonstrates the need to levy CIL”.

Shropshire’s prediction of £180mn over 15 years shows that CIL can be a significant source of future income. In accordance with the DCLG Code of Practice, 10% of net CIL monies will be directed to strategic infrastructure schemes, and 90% of net CIL monies will be spent on local infrastructure.

Shropshire’s Community Infrastructure Levy documentation is all online and represents a first class online or distance learning tutorial in building a Charging Schedule and introducing the Levy.

As CIL Charging Schemes proceed, their Examiners may need to revise some CIL estimates on account of the following:

  • Ageing population and changing implications for a range of social infrastructure facilities
  • Changing household patterns. Many current planning ratios are based on historical household demands. More single person households are changing the pattern of education demands. Primary and Second School contributions are changing.
  • Digital Media and changing models of learning, particularly in the FE/HE sector
  • Externally commissioned service delivery and new models of delivering social infrastructure in partnership with retail and leisure establishments.

There are still outstanding issues about Councils’ ability to borrow against future CIL receipts, though Sections 1 to 7 of the Localism Act 2011 probably give more powers than some local councils may currently recognise. The easiest way to begin progress is through the Planning Advisory Service or Planning Portal sites on Community Infrastructure Levy.

CIL is not the only way in which local authorities can pre fund infrastructure since they can use income, loans and bonds, especially from 2013 onwards. But the Levy represents a step forward through its removal of the uncertainties and arguments surrounding the Section 106 process.

It will take time before most local authorities have a CIL scheme in place. Currently, only 35% have Adopted Local Plans and there is some interesting debate on what constitutes a “local plan”.  All this means that the remaining 65% may not be able to afford to wait for CIL and should get moving.

vi) New Homes Bonus

There was an extended piece on New Homes Bonus in Who Speaks for the West Midlands?

There is a useful DCLG New Homes Bonus Calculator on the DCLG site. From this Wolverhampton provisional total receipts for Year One and Year Two are £1.2mn and for Coventry are £2.8mn. For Birmingham these are £7.4mn. The ongoing issue to be decided is the extent to which New Homes Bonus is fully funded or siphoned off the Formula Grant.  

vii) General Power of Competence

The Localism Act 2011  provides local government with substantial new powers, greater freedom and flexibilities through a General Power of Competence, which will enable them to act in the interest of their communities and in their own financial interest. Local Government will be able to generate efficiencies and raise money by charging and trading in line with existing powers. Local authorities now have the opportunity to own assets, develop property and generate revenue. A growing number of councils are also examining a Local Authority Mortgage Scheme, with support for first time buyers through underwriting so much of their deposit.

viii) Communities

The Coalition is inching its way towards devolved powers, including Total Budgets at Community Level.

On Community Budgets, the Government announced on Wednesday 21 December that in Birmingham, Balshall Heath, Shard End, Castle Vale will become a pilot for more pooled budgets focused on prevention. Balsall Heath Forum and Shard End will be a community led approach. Castle Vale Community Partnership will led by a Housing Association. This process should mean moving power away from central government and allow communities and councils to assume greater control of, for example, skills, transport and employment. Community budgets should lead to more pooling of public service budgets.

Alongside Community Budgeting, Councils should not ignore the size of funding available for community projects in which they may become partners or for which they may provide match funding. Community groups have access to funding programmes to which local councils don’t. In September 2011 Big Lottery’s “Reaching Communities Programme” offers up to £500,000 for revenue and capital projects for most deprived LSOAs.

The Community Builders Fund, the latest round of which which closed on Friday 09 December 2011, has offered up to £750,000 loans and investments to support ‘community anchor’ organisations.

Various Social Investment and Social Impact Bond proposals offer similar sums from which their private investors seek a return. It’s worth keeping up to date with the Social Investment Business website.

There is more detail about funding for Community Projects elsewhere on this site. 

ix) Retention of Business Rates

Under new proposals in its Consultation Response to Proposals for Business Rate Retention, on Monday 19 December 2011,  DCLG proposes that councils will be able to retain a greater percentage from the business rates that they generate. It is hoped that the proposals will create incentives for councils to promote local economic growth as they will directly benefit from any increase in rates. Against this, there is increasing concern that the progressive redistribution which operates through the current centralisation of business rates will disappear.

Arising from previous concerns, in its Consultation Response, DCLG now proposes an initial rebalancing of resources using tariffs and top ups, based on previous average income, depending on whether an authority has received more or less in business rates than others. Despite this, there are still concerns about the potential of some areas to raise much more in business rates than others.

Local authorities will be able to come together to form a pool, with scope to generate additional growth through collaborative effort and to smooth the impact of volatility across a wider economic area.

B) GROUPS OF LOCAL AUTHORITIES

1) Core Cities

Throughout these difficult times, the Government’s designated eight Core Cities of Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield will have more direct access to funding.

Unlocking Growth in Cities” – launched by Nick Clegg in Leeds on Thursday 08 December 2011 – heralded a series of ‘tailored deals’ between Core Cities and Central Government. There was no talk of a “second wave” for the rest. And some are predicting that only Core Cities will be able to bid for Tax Increment Financing in the new Local Government Finance Bill, published on Tuesday 20 December 2011.

Perhaps most depressing for Core Cities are the document’s current comparisons of GDP per capita and patent applications between English and comparable non capital cities in Germany, France and Italy. Only in education to tertiary level of 25 to 64 year olds are English non capital cities comparable.

For Core Cities, these proposed “tailored deals” represent a tempting menu:

  • Giving cities one consolidated capital pot for investment
  • Giving cities powers to create Business Improvement Partnerships
  • Access to new infrastructure funding through Tax Increment Financing
  • Devolving major local transport funding and the power to commission local, or even regional, rail services, including managing franchises
  • Giving cities the power to consolidate local public sector property assets into a single local property company
  • Creating ‘City Skills Funds’ and ‘City Apprenticeship Hubs’

Six out of the eight Core Cities have a Passenger Transport Executive, with precept powers –  so they have a regional reach. The Core Eight have their own structure and organisation, based in Manchester. Manchester, the most ‘core’ of all, benefits from the Greater Manchester Combined Authority as a forerunner for further devolved powers. In April 2011, the new Authority replaced a range of single-purpose joint boards and quangos to become a formal administrative authority for all Greater Manchester for the first time since abolition of the Greater Manchester County Council in 1986.

Though the Authority is still progressing initial procedural matters, ultimately, instead of GMCA’s bidding on a project by project basis, more funding could be devolved so that decisions on funding and expenditure could be taken in Manchester.

Bob Neil MP as DCLG Under Secretary told the Commons’ Delegated Legislation Committee on Monday 14 March 2011:

“The measure involves the authorities having competence concurrently with the joint authority, so the Government are satisfied that this is not a regionalising and centralising model, but that it is something of genuine collaboration”

But, despite this reasoning,  this is in reality Regional Government under another name. It’s also interesting that the Greater Manchester Combined Authority was set up under the Labour Government’s Local Democracy, Economic Development and Construction Act of 2009 not the Coalition’s Localism Act of 2011.

2) Non Core Cities 

It is the larger Metropolitan Authorities and Cities, especially in the West Midlands, which are left out of all this. Apart from Coventry and Wolverhampton, there is a long national list including Carlisle, Plymouth, and Preston. Each has a significant subregional hinterland. They might seriously think about becoming a new National Network and build relationships with Nick Clegg’s Core Cities Unit.

Coventry and Warwickshire LEP has other projects for a Growing Places allocation of £8.5mn apart from Coventry City. Coventry will vote on an Elected Major in May 2012. The Black Country LEP has £9.6mn to spend across four Black Country Boroughs. Preston will have to argue that the £13mn for Lancashire LEP under the Growing Places Fund should be spent in Preston. While some of this will happen, it would be better still if Non Core Cities might develop more direct access to their own funding.

Elected Mayors

What follows is not written in support of having directly-Elected Mayors, but to illustrate the Government’s consistency of approach in their favour.

There are currently 13 Elected Mayors. Though the Secretary of State has power to direct authorities to hold referenda – as he has done already – a petition by 5% of the total electorate can do so. This has already happened in Salford. Outside the Core Cities, under the Localism Act there will be referenda in May 2012 in Bradford, Coventry and Wakefield for Elected Mayors.

Overall policy on Elected Mayors appeared in the “Open Public Services” White Paper in July 2011, under Section 5.10 “Democratic Decentralisation: the key policies we are already implementing”:

“- giving cities the power to elect mayors …We will also consider making it easier for other cities to take up the option of city mayors. Decisions on whether a city should adopt the mayoral model should ultimately be for local people”

Directly elected Mayors hold office for four years. They decide on the size of the cabinet, appoint cabinet members and decide on the delegation of  executive functions. These executive powers may also be held by Council Leaders. Mayors set the Council Budget and formulate significant policy framework plans but amendment or rejection of proposals requires a two thirds majority in Council. Based on their mandate, Elected Mayors also have a range of “informal powers which enable them to influence, persuade and co-ordinate on a wider scale.”

Much of the argument for Elected Mayors made by the previous Labour and current Coalition Government is based on low turnouts at Local Council Elections. Though many local and regional debates show no strong preference for elected Mayors, the Chancellor of the Exchequer announced in his Autumn Statement on Tuesday 29 November 2011 that:

“As part of its commitment enable Tax Increment Financing, the Government will also consider allowing city mayors to borrow against future CIL [community infrastructure levy] receipts where this can make a significant contribution to national infrastructure.”

“Funding and Financing Infrastructure Investment” on page 7 of the National Infrastructure Plan, published alongside the Chancellor’s Statement, makes the same point:

“As part of its commitment to enable Tax Increment Financing, the Government will also consider allowing city mayors to borrow against future CIL receipts where this can make a significant contribution to national infrastructure”

The November 2011 DCLG Consultation “What can a Mayor do for your City?” makes the position clear in Section 21 on page 10:

“The Localism Bill, if enacted, will provide the Secretary of State with a power to transfer by Order, subject to Parliamentary approval, local public functions to any local authority outside London. Local public functions are functions currently the responsibility of government or other public authority, which are carried out in relation to the people who live, work, or carry on activities in the authority’s area”.

Unlocking Growth in Cities” also emphasises that “tailored city deals” with transfer of powers for economic growth, infrastructure development, housing and planning, skills and employment may be available, but also that they represent a “two-way transaction”. Page 10, Section 1.18 “The Government’s Asks” says:

– “leadership and accountability: where cities want to take on significant new powers and funding streams, they will need to demonstrate strong, accountable leadership, an ambitious agenda for the economic future of their area, effective decision-making structures, and private sector involvement and leadership (cities with a directly elected mayor will meet this requirement)”.

All these policy documents above are not offered as evidence to support elected mayors but to underline the coherence of the Government’s preferences. They show how strongly the Government keeps pressing the case.

One of the strongest arguments against all this was mounted by Sir Howard Bernstein’s comment “An Elected Mayor is Not for Us” in Manchester Confidential on Tuesday 13 December 2011:

“In Greater Manchester, we have demonstrated that for reform to be successful, it requires a genuine bottom up approach rather than one that is driven top down from central government. Imposition of a mayor for the City of Manchester cuts across this approach”.

The Greater Manchester Local Enterprise Partnership (GM LEP) has also said that plans for directly elected mayors would bring no advantages to the city region.

Their argument is stronger because Greater Manchester now has a Combined Authority, which gives constitutional form to more than twenty years of the Association of Greater Manchester Authorities. All this shows that if Non Core but regionally significant Cities don’t favour Elected Mayors, they may need to strengthen their arguments for local accountability.

The risk with the Government’s strong preference for Elected Mayors in all these proposals is that some areas may get sidetracked with local celebrity contests from some of the real debates and arguments. Apart from accountability, DCLG seeks to devolve powers to bodies operating at the appropriate geography.  Though “Unlocking Growth” has much comment about cross boundary working. “Local economic area” is defined as the “functional economic area as defined by LEP.”

3) District Councils

Describing its “Future Councils: Life After the Spending Cuts“, published in September  2011, the New Local Government Network said that lack of funding and new rights for citizens to control service delivery “could, by 2020, leave local authorities in the same kind of position as the state government of California: struggling to provide services in the face of high demands, low income and increased direct democracy”.

Its author, Simon Parker, describes a gradual series of significant changes driven by budget cuts and rising demand for public services, so that by 2020 few Councils will be recognisable. He continues that beyond initial “traditional” cost cutting, some authorities will seek to slim down their core. Beyond this, some councils may become largely commissioning bodies. This brings back memories of Nicholas Ridley, MP for Tewkesbury. Throughout the 1970s and early 1980s from the Conservative Front Bench, he advocated that Councils should meet once a year to agree contracts with the private sector.

Liam Scott-Smith in the New Local Government Network’s ” Delivering Distinctiveness“: The Future for District Councils, amplified this further.  He offers four basic models:

–        Residual Councils are authorities who outplace a large proportion of  their services to outside providers. They may retain a pool of funding which can be targeted at specific projects or services for the poorest  communities.

–        Clustered Councils are authorities who through sharing so many services become de facto federations. Councils may cluster in major city-regions as each authority recognises the need to pool sovereignty to encourage greater economic growth.

–        Commercial Councils are very entrepreneurial councils. They will set up trading arms and be heavily involved in selling services to other local authorities. These councils could also begin to trade with business and the community.

–        Lifestyle Councils will focus primarily on promoting an areas brand and way of life. Such authorities will focus on capturing a niche focus through which to promote a distinctive local existence, both economically and socially associated with their areas.

These are significant options for District Councils and second tier authorities in times when local government is changing. They need working through for individual authorities. For example, why shouldn’t a Further Education College be a central feature in town centres rather than Tesco?  Hinckley and Bosworth offers the examples of strategies based on North Warwickshire and Hinckley College, a Business Improvement District and MIRA. There are many more.

District Councils will not have the same access as Core  Cities and Non Core Metropolitan Authorities to the bigger funding programmes. So the Government’s proposed funding reforms not only give second tier districts a chance to build local level partnerships but ultimately may force them into new relationships. Assembling funding packages from Community Infrastructure Levy, New Homes Bonus, retained Business Rates, including NHS, Further Education, Academies, LEP and Community Project contributions, will become more frequent.

So all this presents an opportunity for District Councils and second tier authorities to develop a distinctive role. The danger for many is not that their structures are unsustainable, but that they may not recognise opportunities in these changing times for increasing their influence and leadership. District Councils need more ownership of this inevitable process of change. If they don’t, they may become its victim.

And, Finally

My reason for such a lengthy post is that the flurry of Government documents published just before Christmas was plentiful and significant:

All this means that things are beginning to move. There is a general theme running through all of this – that local councils should act now before they are forced to act.

Above all, remember. It’s never over till it’s over.

Who Speaks for the West Midlands?

This post makes three main points:

  • Compared with the North and other regions no one is putting the Case for the West Midlands
  • In a brand new policy environment, there is “no going back” to previous structures and policies. The West Midlands needs to adapt to new funding structures
  • The West Midlands needs a coherent policy approach without costly new structures but through more effective and efficient use of existing resources.

Putting the West Midlands Case

The steady flow of policy documents and projections from the West Midlands Regional Observatory ceased in November 2010.   Despite excellent subregional examples such as the “Black Country Education and Skills Barometer” in October 2011 and leading online policy analysis down to LSOA level by the Coventry Partnership, Marketing Birmingham and others are not yet resourced to fill this gap.

No one is putting “The Case for the West Midlands”.

A good starting point might be the wider acceptance of Birmingham as the regional capital or Core City and more recognition that the advocacy of many local projects is more effective when set against a West Midlands regional background.

But, as Michael Caine might say, “Not a lot of people know this”.

Things are different elsewhere. Across the North West, North East and Yorkshire and Humberside, they have succeeded in blurring their often significant differences to put “The Case for the North”.

The Northern Way

In the 1980s traditional rivalries between Manchester and Liverpool were so fierce that there was a Government Office in both. Today, through the Association of Greater Manchester Authorities, Manchester is viewed benevolently by central Government as a powerful City Region.

Across the Pennines the North East has long enjoyed a blend of solidarity and cooperation second only to Scotland. That was why John Prescott’s first elected Regional Assembly was trialled in the North East.

Despite local and regional rivalries, especially since 2004 through the Northern Way, cities as far apart as Manchester, Liverpool, Newcastle, Leeds and Sheffield recognised that the North West, North East, and Yorkshire Humberside would earn more respect if they spoke with one voice.

Without RDA funding the Northern Way ceased on March 31 2011. But the Case for the North continues to be made – through the Northern Regeneration Summit, North of England Education  Conference and Northern Housing Consortium. Many individual organisations, such as the Chartered Institute for Public Relations, though headquartered in London, hold a Northern Conference or have a Northern Office.

To fill the gap left by Northern Way, the Institute for Public Policy Research North is now collecting evidence for its Northern Economic Futures Commission.

The effectiveness of the Northern Way was endorsed in a thoughtful and not uncritical “Evaluation of The Northern Way 2008-2011” in April 2011 by SQW. In Capabilities, ‘Strengths and Weakness’, SQW says on p152:

“Fundamental and cutting across all of these strengths, a major factor in the success of the initiative in the 2008-2011 period was that it became more focused on a smaller set of issues that were genuinely pan regional. This meant that it was filling a genuine strategic gap on behalf of northern partners. In doing this, it also clarified its role to be on more fundamentally about setting and influencing the agenda rather than ‘doing delivery'”.

Michael Ward in the Smith Institute’s “Rebalancing the Economy: Prospects for the North” in March 2011 in its Executive Summary on page 6 now advocates that Northern local authorities and others should now go further:

  • The report recommends that the three Northern regions should take the initiative with business, universities, and the community and voluntary sector in establishing a new, strategic advocacy body for the North – ‘a Council of the North’ – to argue the North’s case in Westminster and Brussels….
  • Local planning authorities in the three Northern regions should work together, initially on a non statutory basis, to develop a strategic plan for the North, covering key housing and employment developments, infrastructure and skills (similar to the London Plan).

The Joseph Rowntree Foundation’s “Rebalancing Local Economies” October 2010 – funded by the Northern Way – compares very different areas, ranging from Leeds through Liverpool Speke and Croxteth to the Tees Valley. One of its main conclusions is that while economic growth plays a crucial role in tackling neighbourhood deprivation, these benefits do not automatically trickle down to all neighbourhoods.

Following the establishment of the Institute for Public Policy Research office in Newcastle, the most important feature in all these reports is that they continue to reflect IPPR North, Joseph Rowntree, the Smith Institute and others demonstrating an ongoing convergence of public authorities to proclaim a united message for the North.

The Contrast of the West Midlands

In contrast, the West Midlands Leaders’ Board Statement of Intent and “Local Economic Assessments in the West Midlands” by Rocket Science in February 2010, despite their contemporary relevance, today sound like wistful longing for a bygone era. Though West Midlands Councils continues, as an umbrella body this is not resourced for an overall strategic or regionally representative role.  The closest approximation to a regional strategy body is the Local Management  SubCommittee for EU Funds.

The West Midlands struggles to find a collective voice.  It hasn’t even been possible to produce a harmonious let alone unanimous West Midlands response to High Speed 2.  Now that an astute new Transport Minister Justine Greening seeks ways for HS2 to become more politically acceptable, perhaps the West Midlands should too?

Michael Ward’s “Rebalancing the Economy: Prospects for the North ” in March 2011 on page 32 provides an effective summary of changes in Government’s policy following the Department of Business, Innovation and Skills October 2010 White Paper: “Local Growth: Realising Every Place’s Potential”: 

  • changing the spatial level at which activity takes place, from the region to the functional economic market area
  • withdrawing most of the money;
  • institutional change – abolishing the RDAs and setting up the LEPs; and
  • stopping some things and centralising others.

The Localism Act. Regional Growth Fund, Growing Places Fund, New Homes Bonus, Local Enterprise Partnerships and Core Cities all represent the Government’s chosen policy instruments and initiatives with which the collective North is more effectively coming to terms.

Resilience to Policy Changes

Regional economic resilience matters. But resilience in responding to fundamental Government shifts in policy matters even more.

Previous funding levels for regeneration will never be restored.  The House of Commons Communities and Local Government Select Committee Report on Regeneration  shows that this Government takes a radically different approach.

In its Report on Wednesday 19 October 2011 on “Resources” the Committee on page 12 said:

“In December 2010, DCLG published an economics paper commissioned by the previous Government, “Valuing the Benefits of Regeneration” in December 2010.  That paper estimated spending on “core” regeneration programmes by DCLG, the Homes and Communities Agency and Regional Development Agencies to be £11.189bn in 2009/2010. At our request, DCLG provided us with further financial data which showed that this spending fell to £7.926bn in 2010/2011 (revised from £9.1bn after taking account of in-year adjustments) and is estimated to fall to £3.872bn in 2011/12.

This means a 65% reduction in regeneration spending. But it’s worse than that. The 2011/12 figure includes £2.9bn on existing programmes and only £1bn on “additional programmes – the Regional Growth Fund, the New Homes Bonus and the FirstBuy scheme”.

None of these are primarily intended as regeneration initiatives. As Lord Heseltine, Chair of the Regional Growth Fund Panel, told the Committee:

“The fact is that Regional Growth Fund is not about regeneration. We have never been told to go and regenerate any community or anything like that”.

The Government does not believe that big spending regional agencies are effective. Enterprise Minister Mark Prisk told the Northern Summit in October 2010 Enterprise Minister Mark Prisk at the Northern Summit in October 2010 :

  • “Between 1990 and 1999 – the year the RDAs were set up – Gross Value Added growth averaged 2.5% a year in the Greater South-East, and 1.9% in the remaining English regions – a gap of 0.6 percentage points,” Prisk said.
  • “Between 1999 and 2008, under the RDAs, annual GVA averaged 2.1% cent in the Greater South-East, and 1.5% in the rest of the country – also a gap of 0.6 percentage points.”

Michael Ward also recognises the limitations of RDAs on page 25 of his “Rebalancing the Economy: Prospects for the North” under “Towards a Balance Sheet for the RDA Area”, where he says.

“But the real engine of job growth in the North in the New Labour years, it has been argued, was straightforward government spending on public services – mostly health and education. The RDAs accounted for only about 1% of total public spending in their regions”.

IPPR North’s October 2011 paper “Learning from the Past” on page 3 “The Recent Economic Story of the North”, basically agrees with this:

“Despite a determined programme of work and investments made by RDAs and their part­ners, a gradual evolution of the institutional framework towards more decentralised arrange­ments, and a benign economic environment, the headline figures remained stubbornly fixed. Between 2000 and 2008, while the annual rate of growth in GVA in the northern regions was a healthy 4.6 per cent, it was still below the England and UK averages of 5.2 per cent.”

So instead of big spending regional agencies, the Government has turned to more localised initiatives, some of which are described below.

Where the New Money is Going

Regional Growth Fund

In its “Regional Growth Fund Updated Briefing” in October 2011 Northern Housing Consortium shows on page 5 how abolition of Regional Development Agencies has disproportionately affected the North:

“Spending out turn figures for 2009-2010 show that the North’s comparative disadvantage means that the Northern RDAs accounted for 43% of total English RDA spending, despite the fact that the Northern Region comprises only 29% of England’s population.

Because of this, the Northern Housing Consortium recognises the significance of Regional Growth Fund on page 2:

“We were pleased to note that almost 70% of the projects which were successful in obtaining funding in the first round (April 2011) were located in the North of England, including two bids for housing renewal and growth in Wakefield and Hull.

“Results of the second round were announced on 31st October, 2011. 119 successful bids were announced, 49 of which affected the North East, 34 the North West, and 23 affecting Yorkshire and Humber.

The Consortium RGF Briefing in October 2011 continues on page 2:

“…there is a strong case for the vast majority of the RGF to be allocated to the North, which has been disproportionately affected by the abolition of Regional Development Agencies (RDAs), the cessation of Housing Market Renewal (HMR) funding, and the higher percentage of public sector employment in the North. Over the course of this CSR period, the RGF represents the main opportunity for the North to obtain finance to address these challenges through a transition to sustainable growth”.

Though Michael Heseltine as Chair of the Regional Growth Fund Panel doesn’t see the Fund as an agent of regeneration, many in the North still see the Regional Growth Fund as their best hope.

New Homes Bonus

The Northern Housing Consortium is rightly more concerned about New Homes Bonus. In its Report on “The New Homes Bonus: Risks and Opportunities for the North” in September 2011 the Consortium says on page 2:

“We found no relationship between New Homes Bonus payments and levels of deprivation. However, in the longer-term we are very concerned about the large net losses in funding many local authorities in the North will suffer from, once the majority of the Bonus is funded through top-slicing Formula Grant allocations. That is why the Consortium is calling for the Bonus to be fully-funded in future Comprehensive Spending Review rounds.”

In February 2011 £194mn New Homes Bonus was projected for 2011/2012 with £1.2bn over the next four years.  More than half of the first allocation went to Councils in London, the South East and East of England with £100mn.  Councils in the North East, North West and Yorkshire and Humberside received 20% of the total.

But depending on net additions to housing stock, in 2014/2015 NHB could be more than £1bn – almost the originally projected total for the whole scheme. Much will depend on how much represents a transfer from Funding Formula Grants and how much is fully funded.

New Homes Bonus is not large enough to provide regional rebalancing. But, matched with other funding, it might form an element of a West Midlands strategy.

The Centre for Cities “Room for Improvement: Creating the Financial Incentives Needed for Economic Growth” July 2011) analysing the First Round of New Homes Bonus 2011/2012 shows the significant position of the West Midlands. The Report on page 39 says:

“Our modelling suggests that the strongest supply response will be in London (a 21% increase over the baseline). This can be attributed to the relatively steep spending cuts experienced by London Boroughs and that, with a high affordability ratio across the capital, most authorities are not constrained by a lack of demand. The second strongest supply response is in the West Midlands (10%).

So despite Birmingham’s overall loss, collective use of New Homes Bonus may be able to contribute to a West Midlands strategy.

Growing Places Fund

The Growing Places Fund Prospectus in November launched a £450m invitation for LEPs to bid for infrastructure funding for promote economic growth, jobs and homes. The fund is distributed indicatively by formula to LEP areas, based on a 50% weighting given to resident population, and 50% given to ‘Employed Earnings’ – criteria benefit which benefit London and the Greater South East.

The North in total has only received 30%. The South East has received 20%. The ‘London mega-region’ has received 40%.

The Black Country received £9.6mn, Greater Birmingham and Solihull £14.9mn and Coventry and Warwickshire £8.5mn. The North East received £16.7mn . Greater Manchester received £24.7mn

But Growing Places success as a revolving fund will depend on LEPs’ ability to lever additional private and other resources.

Possibilities with the New Money

While Regional Growth Fund, New Homes Bonus, Growing Places Fund and future announcements on Retention of Business Rates and Core City Deals may form ingredients of a regional strategy, none of these heralds a return to a previous scale of regional development spending.

But they do show a need for strategic thinking, collective initiative and a return to a more informal collective approach which has benefited the region in the past.

Strategic Added Value for the West Midlands

The West Midlands lacks the Strategic Added Value and strategic thinking of Advantage West Midlands.

In “Towards a Resilient Region: Policy Activism and Peripheral Region Development” by the Spatial Economics Research in September 2010, economists at the University of Newcastle make a relevant point on page 9:

“Whilst much attention has focused on the role of political leadership at the time of crisis, resilience thinking also looks to the role of intelligent institutional leadership in framing and articulating the nature of the event, crisis or slow-burn process and constructing a discursive narrative of strategic adaptation or adaptability able to enrol local and regional actors”

This research shows how One NorthEast identified Renewable Energy as an emerging technology, with the creation of the New and Renewable Energy Centre. Based on development of internationally recognised research and development, testing and commercialisation infrastructures, this offered the prospect of 3000 jobs in the supply chain. One NorthEast ploughed significant resources into NaREC.

But Advantage West Midlands has already overseen similar investment in the West Midlands. There is no doubt that regionally strategic projects, such as the Premium Automotive Research and Development Programme at Warwick University and the strategic regeneration of Longbridge, could be developed to play the same role.

The March 2009 PWC Evaluation of Regional Development Agencies “Impact of RDA Spending” published by BIS under “Performance against Objectives” referring to additional GVA, makes a similar point on page ix of the Executive Summary:

“….Moreover, such an assessment overlooks the wider economic impacts of RDAs’ activities which are not captured in the estimated impact on GVA. These include the social and environmental impacts and effects of RDAs’ strategic role and wider influence other regional and national stakeholders (SAV), neither of which has been valued as part of this analysis”

It’s not regionally significant resources but regionally strategic thinking which matters.

A start has already been made in some local areas. Look at the presentation from Shropshire Council on Monday 21 November 2011 on “Delivering Local Priorities Through Partnership Working” using Community Infrastructure Levy and Section 106.

Though all this is less than regional, it’s a good example of the new thinking needed. Based on this a West Midlands LEP might use Community Infrastructure Levy, New Homes Bonus or even TIF to fund the Growing Places Fund.

The Heart of the West Midlands Case

At the heart of any West Midlands’ case is the region’s more than 50% dependency on lower value added private sector activities such as some business services, wholesale and retail, hotels and catering and cultural, recreational activities.

There is severe under representation in higher value added business and professional services, environmental technologies, digital media and medical technologies is the key to improving economic performance and generating more highly skilled jobs.

The West Midlands case might be based on upskilling and diversification strategies identified for the regional by Cambridge Econometrics for Advantage West Midlands and others in 2009 and 2010. These included:

  • The need for higher skills
  • The need to strengthen our industrial structure
  • The need to improve regional gross value added

In  the Regional Observatory’s “The West Midlands Economy Post Recession: Key Issues and Challenges” June 2010, on page 24 under Cambridge Econometrics ‘diversification’ scenario there would be an increase of more than 200,000 in regional employment.  High value added business & professional services could create than 100,000 net new jobs. ICT could create 30,000 net new jobs.

Surely HS2, Regional Growth Fund, New Homes Bonus, Growing Places Fund, the Deal for Core Cities and other proposed regional improvements fit somewhere into all of this?

Though the numbers may have changed since the Cambridge Econometrics Report, the basic strength of the case hasn’t.

Informal Collaboration 

This is not a call for statutory or semi statutory structures.

One of the most effective examples of West Midlands regional cooperation is sometimes overlooked. The Post 1999 Group, convened informally by Jon Bloomfield at Birmingham City Council, effectively cut across sub regional boundaries and defined the parameters of 2000 to 2006 European Programmes – with substantial Objective 2 rural coverage in Herefordshire, Shropshire and Worcestershire.

The Group’s true legacy is that with Advantage West Midlands match funding, many of today’s regionally significant projects were devised and delivered.

A move in this direction began on Monday 05 December, when West Midlands European Office convened a meeting to decipher how the region might lever further European funding under proposed 2014 to 2020 Structural Funds. West Midlands Universities were invited to draw up a list of possible projects.

Despite the cuts, the West Midlands still has some excellent local authority economic development departments and an enviable diversity of further and higher education projects. But no one is bringing them together, even on an informal basis like the Post 1999 Group.

A start might be made based on Jaguar LandRover’s newfound investment from Tata. JLR is now a £10bn turnover company, which employs more than 21,000, mostly in the West Midlands. If the West Midlands can’t turn that into one element of a regional strategy, it hardly deserves to be called a region.