Thousands of apprenticeship places have been scrapped as a result of changes to how basic skills qualifications are funded, leaving independent learning providers millions of pounds out of pocket.
The Association of Employment and Learning Providers (AELP) has warned that its members could be forced to make staff redundant in order to stay in business as a result of the unintended consequences of funding rates being increased.
Having long complained about the low rate of funding for functional skills courses in English and maths, providers welcomed the announcement in November by FE minister Matthew Hancock that the amount paid for the qualifications was to be more than doubled (see below).
But the move appears to have backfired. While the funding increase per qualification was backdated to last August, the values of contracts between providers and the Skills Funding Agency (SFA) - set months previously - are unchanged. This means that providers are getting paid more but reaching their SFA allocation months sooner than expected.
With little additional funding being made available, many are being forced to abandon apprenticeships and other courses that they had been planning to start in the first half of this year.
Out of more than 100 members who responded to an AELP survey, three- quarters said they had been adversely affected by the increase in funding rates.
The manager of one independent provider in Northamptonshire told TES it had been forced to axe 250 apprenticeships that had been due to start between January and March, thereby missing out on pound;500,000 in funding.
"It's having a big impact: we have been unable to start any new apprenticeships because we have gone over our funding allocation," he said. "We had one project lined up with a local employer to get unemployed people into training and apprenticeships, and we have had to cancel that. The functional skills increase has taken us over our capacity."
Matt Garvey, managing director of West Berkshire Training Consortium, said the firm will probably have to cancel more than 100 planned apprenticeships at a cost of pound;200,000-pound;300,000. It has also had to scrap programmes for the unemployed and "gift" its learners to less successful providers.
"When they retrospectively changed the funding rate, it meant we went over our allocation by tens of thousands of pounds," he said. "We are paying the price for being successful."
AELP chief executive Graham Hoyle has written to Mr Hancock to express his concerns. "The number of providers being pushed to the limit is in three figures. They are right down to the wire on their unemployment and apprenticeship programmes," he said. "If they don't get any relief next month, they are going to have to lay off staff. It's nonsense.
"It's the biggest problem for the most successful (providers) which now don't have any money left. They have got to cut back."
Independent providers have annual contracts with the SFA for their FE provision, with quarterly reviews. Colleges, meanwhile, receive an annual grant to pay for their provision. Last month it emerged that in 2011-12 colleges received pound;78 million to teach students that they did not enrol.
As a result, a number of colleges have not used up their budgets and are offering to take on independent providers as subcontractors to make use of the leftover cash. However, around 25 per cent of the funding would be swallowed up in "management fees" rather than being spent directly on provision.
Mr Hoyle said this situation is causing a "real risk to quality", and argued that providers and colleges should be funded under the same system to "maximise every penny in the SFA budget".
"Some colleges are touting cash around; it rubs salt into the wound (for independent providers). We need to have a level playing field. We can't have two different funding systems. It's silly that the money is just sat there when there's room (for it to be used) elsewhere," he added.
An SFA spokeswoman confirmed that the agency is "in discussions with each college or training organisation where there are funds against which it has not delivered. These adjustments will be reflected in 2012-13 and 2013-14 allocations".
She said that data were not yet available on the number of apprenticeships funded since Christmas. "The agency continues to ensure that funding is used for the direct benefit of learners and employers," she added.
Sting in the tail
Increase in funding rates:
Stand-alone functional skills in English and maths:
Functional skills in English and maths within 16-18 apprenticeships:
Functional skills in English and maths within 19-24 apprenticeships:
Functional skills in English and maths within 25-plus apprenticeships:
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