Tuesday, 7 May 2013

Leading on LEPs and Adult FE

by Mark Corney

Both the Department for Business, Innovation and Skills, and the Department for Communities and Local Government have joint responsibility for network of 39 Local Enterprise Partnerships (LEPs).

The ‘Business, Innovation and Skills’ select committee of the House of Commons has recently proposed that BIS should be the lead department for LEPs. In addition, the select committee supports the idea of a single-pot devolved to LEPs and core cities and expects the Government to set out its scope and size in the formal response to the report.*

Assigning to BIS lead-department status for LEPs would be an intriguing move. The same department is also responsible for the £1.8bn adult further education budget.

Ultimately, the single-pot is about cash transfers from central government departments to local bodies. BIS will face pressure from its own local agencies, LEPs, to pass the cash over.

In terms of BIS, we know that the science and higher education budgets are not in scope. Even Lord Heseltine, the champion of localism par excellence could not take on the Vice Chancellors.

But Heseltine also lost to Richard.

A national funding system will continue to operate with respect to apprenticeships. The £640m grant budget and the £130m fee-loan budget for adult apprenticeships will not be devolved to the single-pot and to LEPs.

Instead, BIS is working-up models which place purchasing power over the public contribution for adult apprenticeships into the hands of each employer.

Options include distributing the public contribution through the NI/PAYE system or using a national funding agency to contract directly with each employer.

And so what is left is the £1.8bn adult FE budget.

Some £0.25bn, however, is earmarked for 24+ fee loans for level 3/4 courses. This funding is distributed via the Student Loans Company. Loan funding clearly cannot be devolved to LEPs.

The battle over adult FE funding, therefore, boils down to about £1.5bn of grant funding to providers.

But even this could be an overestimate.

If BIS remains a non-protected department in the Spending Review, another round of turning grants into loans can be expected. Grant funding can be turned into loans so long as the cost to the Treasury over the lifetime of the loan is no greater than 70%. The only remaining candidate likely to meet this rule in the adult FE sector is the potential £500m level 3/4 budget for 19-24 year olds.

Clearly, this pot of gold could be far smaller than LEPs might imagine.

Mark Corney is policy adviser to CfL and writes in a personal capacity.

*Local Enterprise Partnerships, 9th Report 2012/13 Session, Business, Innovation and Skills Select Committee, House of Commons, April 2013

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