The Education and Skills Funding Agency has signalled that it intends to crack down on subcontracting management charges.

The agency said it wants to increase the amount of funding that reaches the front line, as well as increase transparency around fees and charges “top-sliced” by subcontractors.

The ESFA intends to “work with the sector to develop and publish expectations around subcontracting fees and charges in the coming months”. However, it has stopped short of committing to a cap on management fees.

Calls for 20 per cent cap

The ESFA will publish its final expectations by the end of the year, and any changes will come into force in 2019.

In March, the Association of Employment and Learning Providers, the Collab Group of colleges and adult education body Holex issued guidance to their respective members to recommend a cap of 20 per cent cap on management fees.

Two months later, apprenticeships and skills minister Anne Milton told MPs that subcontracting fees were “wasted money” and she would like to see less top-slicing - but had no plans to take action over the practice at the time.

In 2016, Tes analysis showed that the 26 biggest FE providers collectively retained £66 million in the 2014-15 academic year in management fees - more than a fifth of the funding that they were allocated by the then Skills Funding Agency. The biggest provider, Learndirect, top-sliced more than a third of the funding it received for its subcontracted provision.