05Conclusions

This report has reflected on the key policy developments and deals agreed over the last five years during a period in which government trialled various approaches to devolution. Based on the lessons learned, this final section presents a series of recommendations and points for discussion on how effective, demand-led systems might be supported further at the local level. Given publication coincides with the formation of a new government, these final observations are presented to promote a discussion on the place of employment and skills policies within the localism agenda.

Several initiatives designed to give local partners more power and resources were introduced by the 2010-2015 government – and employment and skills were a central feature throughout. City Deals waves one and two were negotiated between localities (including local government and LEPs) and central government and included the devolution of certain aspects of employment and skills programme design, delivery and funding. Growth Deals were negotiated between LEPs and central government and focused primarily on capital funding for local skills infrastructure programmes. Recent Devolution Agreements with Greater Manchester, Leeds City Region, Sheffield City Region and London agreed to devolve more significant powers and flexibilities over employment and skills to the city regions than elsewhere.

To varying degrees the deals have allowed partners to flex national policy, to fill gaps in provision and to experiment with new ways of working. Given the early stage of many of these deals, the report does not attempt to assess the impact of these policies on employment and skills outputs in local areas. However, the feedback from respondents interviewed in cities and LEPs in late 2014 and early 2015 provides an early indication of some positive effects.

Many cities and LEPs interviewed felt that the deals enabled them to take positive steps towards establishing more demand-led employment and skills systems. In particular the deals appear to have impacted most widely on partnership and employer engagement as they acted as a catalyst for partners to come together. Interviewees reported that relationships with FE colleges in particular had become more collaborative and productive as a result of the deals process.

However, the deals were tailored to specific areas and varied significantly in scale, nature and approach, making it difficult to draw comprehensive conclusions. Respondents did report a number of remaining barriers to delivering demand-led local employment and skills systems and many respondents were keen to gain further freedoms and flexibilities to address them. In particular they hoped to address the barriers that would enable greater coordination of services at the point of delivery, greater ownership of programmes, for example through devolved funding, or delivery partners being held to account against the priorities of cities and LEPs through outcome agreements.

Recommendations

The research provides several lessons for partners at the local and national level for establishing more demand-led systems. These are presented to stimulate a discussion between local and national partners.

Local level

• Ensuring strong governance models are in place. Good governance at the scale of the functional economy is vital to the effectiveness of local demand-led employment and skills systems. This requires effective relationships to be in place across sectors, bringing together local and national government, employers, third sector, education and training providers and FE partners to work together to set and deliver local priorities. This may mean constituting an employment and skills partnership that brings combined authorities (where they are already established) and LEPs, together with employment and skills providers, and key government agencies, as Greater Manchester has done, for example. The exact nature of partnerships will vary in different parts of the country as existing institutional infrastructure varies and localities should seek to build on existing partnerships rather than ‘reinventing the wheel’.
• Continuing to explore effective ways to engage with local employers and directly involve them in provision. Cities have used multiple mechanisms to engage with the local business base, from consultation to formal partnerships. Engaging with employers that represent the full range of sectors present in a local economy and with smaller businesses was reported to be particularly challenging. Localities should take a tailored approach to engaging with particular sectors and SMEs. There are a few examples in Manchester, Sheffield and the West of England LEP where localities directly involved local businesses in the co-design and delivery of programmes.
• Developing local analytical capacity and capability to make use of LMI to its full extent. Building on strong governance and effective partnerships, robust LMI should underpin local priorities and strategies. Localities need both the analytical expertise and the capability to design appropriate policy and delivery that builds on their analysis and reflects the needs of the local labour market. Those working with LMI need to be able pull out the key messages and trends for the local area, ensuring skills policy is focused on significant and growing local industries. The direction of travel towards increased influence for local partners in employment and skills will create greater demand for data at the local level. Improving local capacity to make best use of available LMI, as well as developing innovative methods for gathering new data and information, would benefit localities in delivering a more demand-led system.
• Ensuring robust evaluation plans are in place where funding has been secured to deliver pilot programmes. Gaining an understanding of exactly what types of interventions work and will deliver better outcomes can be challenging. Localities need to build up their evidence base in order to review what works and to demonstrate their capacity and capability in delivering employment and skills helping to gain greater policy design and funding flexibilities from national level. This should include being able to show how and why a locally-led, designed or funded scheme has performed better than the national equivalent, with information gained through robust evaluation. It may be appropriate for cities or LEPs to collaborate with other areas that have introduced similar schemes to run evaluations in a more cost effective way.
• Continuing to make the case for how and why a more effective demand-led employment skills system can best be designed and delivered by local partners, in order to obtain greater freedoms and flexibilities through devolution in the future based on robust evaluation evidence where possible. To capitalise on the government’s renewed commitment to devolve more power and resource to cities and other local areas, localities will need to continue to work together, engage with employers and make a robust case for why they are best placed to deliver a demand-led employment and skills system.

National level

• Greater coordination of policy and resources at the national level to support innovation and experimentation. While some functions and resources have been devolved to localities, central government departments and agencies remain important elements of the employment and skills policy design and funding system. Many respondents felt that there could be better coordination between different national agencies and departments to negotiate the integrated services, bringing together education and training with employment support programmes, for example, would improve outcomes. Central government can support a more demand-led local system by ensuring that decision-making, policy design and funding streams, dealt with by different departments at national level, work together to support innovation and experimentation at local level.
• Ensuring availability of LMI data on programme outcomes. The government and national partners such as UKCES have an important role to play in continuing to make data available, improving the quality of the data, being a supportive champion of localities who seek to gain additional information from providers and by encouraging better use of LMI in employment and skills policy.
• Setting frameworks for performance management and evaluation. The government has a role to play in supporting localities evaluate and share best practice. They can develop frameworks for performance management that enable meaningful comparisons between local and national schemes in the context of the tailored approach to devolving employment and skills. The government can support localities by working with them to develop evaluation methods and support localities to collaborate on evaluation where appropriate.
• Ensuring that local programmes are not duplicated by equivalent centrally led programmes. In the context of continued austerity and a gradual and tailored approach to devolving employment and skills policy, it is important that programmes delivered by local partners, and schemes that are delivered by central departments and agencies, are coordinated and aligned. High levels of duplication and competition between similar programmes creates a confusing landscape for employers and individuals alike, and risks undermining the local relationships and synergy that should underpin a more demand-led local system.

Progress has been made in enabling local partners to establish employment and skills systems that are more responsive to the needs of local economies. There is scope, however, to support cities and their surrounding areas through the devolution agenda to continue to build effective partnerships and widen their employer engagement, and enable partners to establish shared objectives and align delivery.

Broader lessons about the process of devolution also emerged from the research, and although these do not apply exclusively to skills, they could be helpful in informing the future devolution of skills policy and funding to local level.

One of the key lessons that emerged was the importance of allowing sufficient time for the negotiation process. Respondents from the first round of City Deals, which were felt to be negotiated over a longer time period,⁴² reported more positive effects than respondents from the second round of City Deals.

A second lesson to emerge from the research was the significant advantage of having dedicated resource within government to aid the negotiation process. Many cities, primarily those in the first round of deals, felt that they had benefitted hugely from the dedicated role of the Cabinet Office and the Cities Team as single points of contact within the government and champions for local plans.

Finally, clarity and certainty about the terms of negotiation and devolution policy are important. Many of the respondents interviewed felt they would have benefitted from more explicit guidance in the deals process, including what programmes were eligible and the provenance of some future funding streams. Allowing sufficient time for different places to build local collaboration, providing dedicated staff at the national level and ensuring greater clarity about the terms of negotiation, could support more effective devolution of skills policy in the future.

• The report raises a number of questions – many of which local and national stakeholders are currently grappling with. For example:
• How can local partners continue to strengthen employer engagement in ways that help to raise the demand for skills and encourage co-investment from employers?
• How do both local and national government ensure that there are strong enough incentives for different stakeholders to align their resources and approach to local labour market needs?
• How can partners design and resource the performance management and evaluation of locally led employment and skills initiatives in ways that enable sharing of best practice?
• How can local capacity to effectively use LMI to inform strategy be improved?

This report suggests that the approach exemplified by the City Deals and Devolution Agreements offers an opportunity to address these issues. Continued austerity measures present significant challenges to local partners working to deliver employment and skills initiatives and programmes but makes coordination and integration all the more important.