Investigation into the circumstances surrounding the monitoring, inspection and funding of Learndirect Ltd

The National Audit Office has published an investigation examining the monitoring, inspection and funding of Learndirect Ltd. This follows an Ofsted inspection of Learndirect Ltd in March 2017, which rated its overall effectiveness as ‘inadequate’.

Learndirect Ltd is the UK’s largest commercial further education provider, engaging with around 75,000 learners annually. In 2016/17, the company received £121 million from all of its central government contracts.

Robert Halfon, Chair of the Committee, said:

“The conclusions of the report raise big questions about subcontracting and the quality of apprenticeship training.

I’m unconvinced and uncomfortable about the practice of giving a large sum of money to just one organisation. Particularly when the recipient subcontracts much of that training, taking a hefty cut and delivering little of value for the Government funding it receives.

High quality apprenticeships and skills training plays a key part in helping people climb the ladder of opportunity and we should look at changing this funding model and sharing the money between a larger number of smaller organisations.”

A Learndirect Spokesperson said:

learndirect Limited welcomes the publication of the National Audit Office report.

Having invited the NAO into learndirect Limited and undertaken a number of meetings with the team leading this piece of work, we believe that the report gives a balanced view of the decisions that have been made by Ofsted and the ESFA concerning the monitoring, inspection and funding of learndirect Limited

The report recognises that learndirect Limited has been operating in a challenging funding environment over the last few years and has had to make significant changes to its business to reflect reduced funding in the Adult Skills arena. 

The report also recognises that the Board became aware of a reduction in quality in the provision for Apprentices working in SMEs and took steps to address that under performance.  The new management team had taken steps that were having an impact, as noted by the ESFA in May 2017, but unfortunately these had not had enough impact by the time that Ofsted inspected.

Since the inspection learndirect Limited has worked closely with ESFA and Ofsted to ensure that the provision being offered to learners and Apprentices continues to improve.  Significant improvements have been recognised in the recent Monitoring Inspection undertaken any Ofsted in November 2017.

This has been a particularly difficult time for the company and especially the many hundreds of learndirect Limited staff who are wholly committed to ensuring the best possible experience for their learners and Apprentices.

The key findings of the NAO investigation are:

• Ofsted inspected Learndirect Ltd in March 2013, and rated its overall effectiveness as ‘good’.
• In 2015, Ofsted rated Learndirect Ltd’s risk profile as amber, because of concerns about apprenticeships and other elements of provision that Ofsted regarded as relatively small. In March 2016, it changed the rating to red, because of increased concerns over apprenticeships and other aspects of provision.
• Ofsted planned a full inspection for early November 2016. In September 2016, Learndirect Ltd informed the Skills Funding Agency (SFA) that it was negotiating the sale of its apprenticeships business (a sale that did not ultimately conclude). Ofsted therefore decided to postpone the inspection to early 2017.
• Learndirect Ltd’s achievement rates (the proportion of learners who gain their qualification each year) for non-apprenticeships training were reasonably stable over time, but achievement rates for apprenticeships declined from 2012/13 onwards.
• On 14 March 2017, SFA issued Learndirect Ltd with a Notice of Serious Breach in relation to the standard of its apprenticeships provision.
• In late 2015, SFA downgraded its financial health rating for Learndirect Ltd from ‘satisfactory’ to ‘inadequate’.
• On 16 March 2017, Ofsted informed Learndirect Ltd that it intended to carry out an inspection on 20 to 23 March. The company asked for the inspection to be deferred, because it was about to transfer its apprenticeships activity to Learndirect Apprenticeships Ltd, another company in the group. Ofsted rejected the deferral request, and carried out the inspection as planned.
• On completion of its inspection, Ofsted rated Learndirect Ltd’s overall effectiveness as ‘inadequate’. The company made a complaint about this judgement before Ofsted’s report was published, and on 2 June, Learndirect Ltd began legal proceedings against Ofsted, challenging the conduct of the inspection and publication of the inspection report. Learndirect Ltd’s legal challenge was ultimately unsuccessful, and the inspection report was published on 17 August.
• In late October 2017, Ofsted carried out a re-inspection monitoring visit. It found that Learndirect Ltd had started to take action in response to the areas of weaknesses identified at the March 2017 inspection.
• Learndirect Ltd and Ofsted have identified similar reasons for the company’s declining performance. Ofsted identified poor management of subcontractors’ performance, weak oversight of learners’ progress and insufficient focus on apprenticeship training relating to small and medium-sized employers as factors contributing to its rating of Learndirect Ltd as ‘inadequate’.
• In most cases where Ofsted rates a commercial training provider’s overall effectiveness as ‘inadequate’, the Education and Skills Funding Agency (ESFA) withdraws funding within three months. In this case, ESFA decided that funding Learndirect Ltd for the 2017/18 academic year, after it was rated ‘inadequate’, was in the best interests of learners and the other public services that the company delivers.
• In 2017/18, Learndirect Ltd is expecting to generate income of around £105 million from its main government contracts, most of which will cease by July 2018.
• The £45 million of Adult Education Budget (AEB) funding awarded to Learndirect Ltd for 2017/18 was based directly on a proportion of its 2016/17 funding rather than a specific bid made by Learndirect Ltd itself.
• Learndirect Ltd has withdrawn from any new apprenticeships business. Learndirect Apprenticeships Ltd will continue to build up its apprenticeships activity with large employers.
• The Home Office and the Standards and Testing Agency plan to re-procure the service currently being provided to them by Learndirect Ltd.