Investing for quality

What is the LSC Standards Fund for - and how should it be distributed? According to the Association of Colleges, it should supplement the mainstream funding lines for FE colleges. And it should certainly not be shared with "private" work based learning providers. In an assiduously briefed Guardian article at the end of January ('Hands off our cash!’) the AoC claimed that a Standards Fund worth £170m in 2002/03 "was originally pledged to them."

In fact, the 2002-03 Standards Fund is worth £185m - a 9% increase on its originally announced value - and it is explicitly designed to boost quality across the post 16 sector. It is not frivolously called the "unified" Fund. It is the result of a consistent application of policy by the Government that started in February 2000. Then, David Blunkett announced that he was "considering setting up a work-based learning standards fund to ensure that standards are developed in this route in the same way as in further education."

This heralded moves to extend the standards fund to providers other than FE colleges - although this aspiration was only turned into a costed pledge in June 2001. In 2001-02, the work-based sector received £10 million out of a total fund worth £115m across the 2 years 2000-02. It was noted at the Standards Fund Advisory Group's first meeting, that this allocation was specifically to bridge the gap between support from TEC discretionary budgets and the unified fund available from April 2002.

In 2000, David Blunkett pledged that the standards fund would increase to £170m in 2002-03 and (subsequently increased to £185m). Seemingly the AoC believes that £170m has been ‘promised’ to colleges. But the LSC’s Grant letter published in December 2001, emphasised Government policy that the fund will be unified. The letter stresses that the fund "will not be constrained by internal ring-fencing for different funding streams or different sectors". So, the actual proportion of the £185m that will be allocated to colleges and what will go to the remainder of the post-16 sector depends entirely upon new criteria for how the fund is distributed.

This unseemly fuss by the colleges' association is also losing sight of the bigger picture. The Standards Fund inherited from the FEFC was worth less than £60m per year. In 2002-03 it will have tripled in value.

What's more, the Fund is part of an LSC "standards and infrastructure" budget block that will have grown from £435m in the LSC's first operational year to £734m in 2003-04. That's a rise of almost 70%.

The shape of the new Standards Fund also represents a serious triumph for providers large and small. Following an extensive consultation process, the LSC has agreed to substantially reduce the Fund's bureaucratic application and monitoring processes and to streamline the fund from 17 separate categories to just 3 broad strands:

The AoC also criticises money going to "private" providers. Whilst this is a bit sneaky it also raises a valid question. The majority of providers receiving Standards Fund money are in the not-for-profit voluntary and community sector. Many of these are decent sized and extremely well managed, but they have very weak balance sheets and rely on programme funding that is usually priced on a marginal-cost basis. Either the LSC raises it prices (and the provider earmarks its "surplus" to re-invest) or the LSC disperses specific funds to build providers' capability and quality. The DfES has plainly chosen the latter option.

Providers that are in the fully-fledged private sector are possibly in a different category. There has been much consolidation in the LSC funded sector recently. Large companies - particularly in education and HR services - have been building up their group holdings by acquiring training subsidiaries. These investors are not stupid. They see the potential profitability in this sector and are prepared to make investments to improve the quality. This is all for the good - and a Government committed to private/public sector collaboration should encourage this. But they have to be very clear on what basis public investment resources are given over to private sector providers.

So how should the Fund be distributed? Most of will be handled by local LSCs. Two anxieties have emerged. Colleges fear that "ex TEC" staff will lack the sensitivity to understand FE requirements. Others are alarmed that allocations will not be decided through a bidding process. Instead, decisions will be taken on the basis of the Development Plans drafted by providers. Non FE providers in particular will need to recognise the new significance that is consequently vested in Development Plans submitted to ALI or the LSC.

The "local fund" should be allocated flexibly amongst providers who need the support and can demonstrate quality improvements in areas that meet the LSC's Quality Improvement Strategy. In particular, these should include retention, achievement and measures for the hardest-to-help. The "investment fund" needs to implement weaknesses found in the post area inspection plans and develop flagship initiatives like Centres of Vocational Excellence. But the LSC will face a dilemma in using this funding to address "extremely significant weaknesses in providers". Until now, the practice has been to bail out failing colleges but to close down weak non-FE providers. The LSC is moving towards a "unified funding approach" in 2003-04 and the Standards Fund is a form of early implementation. It will have to achieve convergence in the way it handles this.