1 Introduction

1.1 In 1995/96 the Department for Education and Employment (DfEE) decided that it would no longer provide central funding to TECs to support adult guidance services. Instead, TECs were granted the flexibility to vire a proportion of their Training for Work (TfW) budgets to help to pay for the services, on the condition that they matched spending vired from TfW with an equivalent amount from their own resources. This report is the result of an assessment of the early impact of the new funding system.

1.2 The assessment was carried out by PA Cambridge Economic Consultants (PACEC) in collaboration with Bullivant Associates, and its aims were fourfold:

1. To ascertain the level of TEC commitment to the use of TfW funding flexibility.

2. To compare and assess the consequences of the new funding system for TECs which did and did not take up the flexibility.

3. To compare and assess the consequences of the new funding system for Skill Choice and non-Skill Choice TECs.

4. To examine the effectiveness of TEC use of the TfW funding flexibility, and the additionality achieved during the first six months of 1995/96.

Prior participation or not in Skill Choice was introduced as a factor in the assessment because it was recognised that the ending of this initiative could have a major bearing on guidance service provision, over and above any influence that the new funding system might have.

2 Methodology

2.1 The assessment was based on a case study approach, involving 12 TECs drawn from four categories:

1. Type 1: Skill Choice TECs using the flexibility

2. Type 2: Skill Choice TECs not using the flexibility

3. Type 3: Non-Skill Choice TECs using the flexibility

4. Type 4: Non-Skill Choice TECs not using the flexibility

2.2 The assessment was conducted in two phases (before and after TECs signed contracts with their Government Offices to take advantage of the flexibility) and it involved information gathering (using quantitative questionnaires and structured interviews) from TEC managers responsible for guidance services, contract managers in the various Government Offices and a selection of guidance providers.

3 The Principal Findings

3.1 The salient findings of the assessment are as follows:

1. TfW flexible funding has influenced planned changes in guidance expenditure in a modest, but positive way (ie TECs using the flexibility will reduce expenditure less/increase it more than TECs not using the flexibility). The scheme has had a less obvious impact on the number of clients being served. TECs using the flexibility plan to reduce or increase overall client numbers to the same extent as TECs not using the flexibility. However, TECs using the flexibility provide evidence that they are maintaining higher order services to clients to a greater extent than TECs not using the flexibility.

2. Guidance provision supported by TfW flexible funding is associated with genuine additionality (ie in the absence of the scheme guidance expenditure and client numbers would have been lower).

3. Prior participation in Skill Choice, or not, appears to have been much more of an influence, than the use of TfW funding flexibility, on planned changes in guidance provision.

4. It appears likely that guidance volumes (ie expenditure and client numbers) will change more between 1994/95 and 1995/96 than guidance quality (eg quality assurance, standards of service, networking etc).

5. The picture is complex, but TfW funding flexibility does not appear to be a major factor explaining differences between planned activity and actual activity to date.

6. It is too early to say how outcomes from guidance may have been influenced by TfW funding flexibility.

7. Interviews with guidance providers confirmed the information obtained from TECs about changes in client numbers.

8. The market for guidance not supported by TEC funds appears to be expanding, but it also appears that TEC-funded activities may be displacing some non-TEC activities which are sometimes (albeit mistakenly) referred to as guidance.

9. Government Offices did not play a significant role in influencing TEC decisions about participating in TFW flexible funding.

10. Because TECs are not yet advanced in their business planning for 1996/97, many are uncertain about their future level of commitment to guidance and about whether or not they will use TfW funding flexibility next year.

11. Guidance providers are similarly uncertain about the future, but many are, evidently, hoping to reduce their dependence on TEC funding.

12. A variety of barriers to TEC participation in the scheme have been identified.

4 Issues Arising

4.1 Issues arising from the assessment chiefly concern the barriers to be circumvented, if there is to be wider take-up of TfW funding flexibility in future. The following factors which appear to have militated against TEC participation in the scheme in 1995/96, and many of which seem likely to inhibit participation in 1996/97, should be noted. They are presented in broad order of priority, as judged by PACEC.

2. TEC reluctance to vire expenditure from TfW budgets that have generally been reduced significantly.

3. TEC reluctance to vire expenditure from TfW budgets at a time when a shift towards output related funding means that TEC income from TfW is more uncertain.

4. TEC objections to what they perceive to be the imposition of conditions on how they spend their reserves.

5. TEC concerns about the administrative burden that participation in the scheme might impose.

6. A possible lack of faith on the part of some TECs that, rather than jeopardising the achievement of TfW performance targets, participation in TfW flexible funding might provide a means of helping the achievement of targets.

7. The perception, on the part of some TECs and GOs, of shortcomings in centrally issued guidance and information on the scheme.

8. The ability of some TECs to fund guidance services by other means.

4.2 In addition, several other issues are to be noted, although they are not directly relevant to the assessment. First, it is believed by some TECs that the market for guidance is being depressed by the fact that the Employment Service has no performance-related incentive to refer its clients to guidance providers (although the number of referrals has actually increased of late). Secondly, there is some evidence to suggest that guidance might be depressing the demand for TfW. Because of the shift towards output related funding in TfW some training providers are now using guidance to direct some, mainly less able, TfW-eligible clients away from the scheme. The Board of at least one of the case study TECs regards guidance as a threat, largely for this reason. An alternative view was that, regardless of what guidance might do to the demand for TfW, it is important in supporting the momentum towards a culture of lifelong learning.

4.3 Finally, PACEC is conscious that a number of the findings of the assessment were inconclusive because Departmental planning timescales necessitated the second phase being carried out earlier than would have been ideal. In addition, substantial changes in the TEC funding environment tended to limit the ability of some interviewees to predict the future. For these reasons it is recommended that aspects of the assessment should be revisited at some point in due course.

The Department for Education and Employment undertakes research to help achieve its aim of supporting economic growth by promoting a competitive, efficient and flexible labour market.
Research Briefs summarise key findings from reports that are published in the Department's Research Series.

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Assessment of the Early Impact
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