"Fuzzy maths" underpins national rates

Members of the ALP have been amazed by calls from local LSC staff asking about ways around the LSC formula funding. Why? Because they recognise – as everyone except the national LSC and DfES has – that many work based learning providers cannot survive on the LSC’s national rates. Many local LSCs want to find ways of enhancing their local providers’ capability and cannot find a way within the rigid pricing structure imposed upon them.

For provider representative organisations, this has a rich irony to it. After many years of argument, the Government agreed to standardise the wild variations in prices struck by different TECs. In fact the Government identified that the relentless downwards pressure on prices had diminished the quality of training on offer – especially for providers in the non-profit sector that specialised in hard-to-help population groups.

Unfortunately, the national price for some training – particularly in service occupations – has been standardised at a level that is simply too low. Providers always knew that shifting from TEC prices to the national rates would involve a downward price adjustment for some providers. That is why we welcomed the "cushioning" arrangements designed to minimise the impact of the more abrupt changes.

Now, we discover from a DfES paper considered by the Interim National Rates Advisory Group in July, that the 2001-02 rates were formulated using an alarmingly simplistic and inconsistently applied methodology. (1) It also reveals for the first time that "a full bottom up costing of all the elements of different WBL programmes has not yet been carried out to inform the national rates."

In the DfES paper, a table shows the underlying methodology used for determining length of stay on Advanced Modern Apprenticeships. This is based on the median duration of leavers successfully completing between April 1999 and March 2000.

However, the Government's methodology is flawed. Firstly, successful completion is defined as achieving a VQ3 qualification and not the MA framework. Secondly, the sample consists of only 13,100 leavers aged 16-18 and 10,600 leavers aged 19-24. This represents only a quarter of the volume of starts that the LSC is planning for the current year – and suggests that the assumptions are based on an unrepresentative sample of leavers. In one industry (transport), the conclusions are reached on the basis of just 8 leavers.

The Government is now handing over the rates determining process to the LSC. This is precisely the time to recognise how significantly the national prices have to be revised. Sadly, the parting shots of Government officials have been extremely unhelpful. Commenting on a very partial survey of providers’ experience, officals conclude that "the current national rates are not causing provider difficulty, except in a few individual cases". The July meeting of the Interim Rates Advisory Group rejected officials’ recommendations and decided to wait until their September meeting when the period 4 reconciliation data is available. Information emerging from the LSC suggests that this will show at least a 20% under-spend in the youth work-based learning budget – and strongly indicating that some seriously fuzzy maths underpinned the whole rates setting process for 2001-02.

As it assumes control of the rates for 2002-03, the LSC needs to:

Most of all the LSC needs to embark on a fundamental assessment of the real costs of training. It is over a year since the ALP first made this argument – and with the LSDA has produced an initial set of illustrative costings. Without a proper understanding of what training really costs and how much employers actually contribute, then the next year will be yet another period of exhausting attrition between bureaucrats and providers.

(1) The DfES paper - and further background - is on our website at www.post16.org.uk – click on "LSC Key Information", then select "Rates Advisory (Interim) Group" and finally choose the option "July 2001".