This view is strengthened by the recent publication of Vince Cable's and John Hayes' Skills Strategy and Skills Investment Strategy. They signal very clearly the direction of travel. I would implement them tomorrow if I could, because the risks and opportunities that they are designed to respond to, are already upon us. But it will take time to embed the fundamental changes they set out thoughtfully and carefully.

The best colleges and providers already operate in the way the new funding system will encourage. However, I urge everyone not to wait for the new system. Instead, consider right now how to engage more closely with customers and partners to innovate, respond and flourish. Failure to consider and act on these opportunities means we risk failing learners who, rather than benefiting from better provision at less cost, will simply suffer funding cuts.

Part and parcel of these deliberations must be collaboration with others to reduce costs and enhance revenue. This will allow greater investment in curriculum and estate, strengthened financial and human balance sheets and greater influence. Excellence in FE teaching and business acumen have already created the most cost effective education sector in the country. Now is the time to exploit that position to create more innovative, efficient and enterprising offers within the sector, but also across the education landscape in England and abroad.

For our part, the Agency will become cheaper and more effective, confining ourselves to funding and enabling, while keeping a watchful eye on risks. The new funding system will be crucial to the way we do that. It must be simple and it must embed accountabilities and incentives so that, without interference, it delivers the outcomes learners and businesses need in a given market place. This will allow all of us to trust that the system will work. Nevertheless, we must also optimise its success by gathering and sharing intelligence and information, advice and guidance to help customers make good decisions, provide transparency and identify risks and opportunities.

And if some of those risks and opportunities materialise, we must encourage the sector to help out. Where that does not provide a solution, we will intervene, swiftly and decisively, to coordinate responses to opportunity, or to deal with risk. Where the risk is institutional failure and sector led solutions are not viable, we will respond by changing governance and management so that improvements can be made and learning continues. In a market based system, a controlled failure mechanism is necessary, but of course, there must also be rewards for excellence.

I am encouraged that an increasing number of organisations tell me they welcome greater freedom in the system and the flexibility it offers to respond to customers' needs. But the freedom to decide what is delivered must be informed by what customers and stakeholders want, so a significant proportion of adult funding will be conditional on achieving outcomes. These will be the obvious suspects: employment or self-employment; progression while employed; qualification and Apprenticeship completions; and progression to higher education or higher level further education. But writing about outcomes is easier than delivering them. We will need to work closely with the sector to agree clear definitions of the publicly funded outcomes that they can sell to their markets and also agree how to measure and report them to stakeholders.

The other difficult exam questions are: how will colleges and providers engage with customers and partners in their market place to plan the right outcomes? And: how to reconcile those outcomes with what learners want? These will always be vexed and unsolvable equations that will never have a neat solution, but the debates are best managed by direct conversation between the sector and its markets – with Whitehall not in the room.

In summary, the sector has been set free to discover and deliver what their customers want, but is in the uncomfortable position of quite often knowing what they really need. This conundrum has to be managed while money is significantly tighter, yet failure to do so risks a smaller sector providing less to fewer. I recognise that these are difficult challenges, but the Agency shares these aspirations and we are fully committed to supporting the sector to achieve them.

For true success ask yourself these four questions: Why? Why not? Why not me? Why not now?

Geoff Russell is chief executive of the Skills Funding Agency, part of the Business, Innovation and Skills Department


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