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Chapter 13: Funding13.1 The National Strategy proposed in this Report envisages activities at many levels, national, regional and local. Public and private bodies are involved, and for everyone some spending may be required. What precisely will be needed depends entirely on the scale and timing of implementation. Present costs 13.2 The starting point must be present costs. In fact it is difficult to get precise information about current expenditure on all activities concerned with provision for adults. This is largely because most funding does not separate basic skills from other education and training. For example, though information about FEFC funding of Programme Area 10 is available, it covers more than literacy and numeracy provision. Similarly, while information is available about additional support for students in colleges, often this is wider than support for basic skills. 13.3 The Local Government Association is not able to identify the amount spent by LEAs on basic skills provision for adults, which are another important source of funding. There are similar problems in disaggregating relevant funding from other sources, such as TECs, the Single Regeneration Budget, the Lottery, Trusts and Foundations and the European Union. So any estimate of current expenditure is approximate. 13.4 The absence of detailed information about funding emphasises the case we make for consistency and coherence. These are essential for the funding arrangements in the new National Strategy and for Local Action Plans. To ensure consistency and coherence, we propose that there should be a single funding mechanism in the future. 13.5 We turn to the additional funding necessary to achieve the targets in the National Strategy. Our estimates are bound to be approximate, largely because of uncertainty about total current expenditure. Also, depending on which of our key recommendations are implemented, there should be greater efficiency in future arrangements. So the figures below are somewhat speculative, and will need to be refined by the proposed Technical Implementation Group. This is vital, not just because our estimates are approximate, but also because many of the recommendations raise policy issues dependent more on principles than on costs. Once they are approved in principle, timing and costs can be realistically assessed. 13.6 At present (1997/8) some £280 million a year is spent in England on basic skills for people over 19, of which £180 million is spent by the Further Education Funding Council (FEFC). Table 13.1 sets out the details. The FEFC funds approximately 250,000 learners at a cost of £750 per learner. Each learner is studying on average for about 1.6 qualifications - for example one in literacy and one in numeracy. The present success rate is low, with about one third of learners achieving their learning goal. Table 13.1: Expenditure on basic skills programmes by source of funding 1997/98
Source: DfEE Future learner numbers and costs 13.7 Against this background, a rough estimate of future costs can be made. 13.8 The Government has committed itself to a large expansion in basic skills provision between 1997/98 and 2001/02. The target is to double the number of learners from 250,000 per year to 500,000, and it is a fair expectation that FEFC expenditure may also double from £180 million to over £350 million by 2001/02. 13.9 To achieve the targets for improving literacy and numeracy proposed here will require further expansion thereafter. The aim is to reduce the numbers with inadequate literacy by 3,500,000 by the year 2010, with a similar target for numeracy. This means that on average each year some 450,000 people will have to achieve functional literacy and a similar number functional numeracy. The aim for 2005 must be that 450,000 people are achieving this. 13.10 This is a formidable challenge. At present the comparable flow of successful learners is under 70,000 per annum. The flow of successful learners has therefore to increase by more than sixfold. At the present rate of success and cost, the total cost of achieving the targets would also have to be six times as high as at present - over £1,100 million. 13.11 This would be an unrealistic aim financially, and we propose a more radical approach. Our proposals are focused on a much more efficient system, in which the failure rate among learners on programmes is drastically cut (from its present level of two-thirds) and some learners are able to raise their standards largely by independent learning, often through the University for Industry. We believe that our targets can be achieved by a well-organised system in which the number of funded learners rises from 500,000 in 2001/02 to 750,000 in 2005/06, remaining level thereafter. 13.12 How much would this cost? Clearly we are envisaging a much higher average quality of provision per learner than at present. On the other hand, a larger and better organised system offers significant economies of scale. To assess the balance of these effects should be an early task for the Implementation Group. The factors to take into account include the following:
ii) on the other hand, for certain types of course, especially those relying on the University for Industry, the cost per learner hour can be reduced substantially. 13.13 Our provisional calculations suggest that there will have to be some increase in the expenditure per funded learner if our targets for outcomes are to be achieved. At the very least we envisage that, whilst at present the average learner is taking 1.6 qualifications, in future equal numbers would be tackling literacy and numeracy. If we allow only for that, the calculation for the year 2005/06 is simple. Starting from £180 million in 1997/98, we would treble it for the increase in student numbers and add another 25% for the increased number of qualifications studied for. This leads to around £680 million. On this basis the cost would rise steadily by £60-£65 million a year, from £180 million in 1997/8 to £350 million in 2000/01 and £680 million in 2005/06, remaining constant thereafter. It is a very preliminary estimate and the Implementation Group will need to refine it. 13.14 A broad picture emerges as follows. At present, the main cost from FEFC funding is £180 million per annum. It is a fair assumption that, to achieve the expansion in numbers which is already official policy, the figure for 2000/01 will be of the order of £350 million. The full implementation of the National Strategy proposed here would raise this to some £680 million by 2005/06, five years later. Other costs 13.15 There is no doubt that by far the largest cost implication of the proposed National Strategy is that discussed above, i.e. the effect of increasing student numbers. Some of the other recommendations are cost-neutral, and for yet others - for example, promotion campaigns by broadcasters and the media - the costs will not directly involve public expenditure. For quite a few items, re-focusing of an institution's existing funding would be the required course. 13.16 Amongst the other recommendations which will clearly have additional public expenditure implications, we would single out:
13.18 There are some interim measures to consider. Deciding on the allocation of resources and changing funding mechanisms inevitably takes time, and it is important to make progress with the broad thrust of the National Strategy meanwhile. An urgent task is for the Further Education Funding Council, TECs and other major funding bodies to modify their funding mechanisms so as to provide an incentive for providers to increase the scale of what they offer. In addition, the FEFC should increase the entry units for basic skills to encourage the outreach work that is essential if more learners are to be brought into programmes. 13.19 We also propose that the FEFC, TEC and other funding bodies should give priority to funding more intensive courses of at least 10 hours a week. RECOMMENDATION 21 - Funding
(ii) The FEFC, TECs and other major funding bodies should modify their funding mechanisms to provide incentives for providers to increase the scale of adult basic skills provision. (iii) The FEFC should increase the entry units for basic skills to encourage outreach work, and to account for the requirement of institutions to assess all appropriate students.
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