How have the deals enabled local partners to respond to local demand?
This section looks at how the deals have enabled local stakeholders to begin to develop more effective demand-led employment and skills systems within the framework introduced in the last section.
Towards a more demand-led system
While many cities do not yet have conclusive outcome data for the programmes agreed as part of the City Deals or Growth Deals, the experience of most cities across the country provides early insights into how the deals process has enabled local partners to develop a more demand-led system. Overall, it is clear from the interviews conducted that existing ways of working are varied, and that City Deals and Growth Deals have enabled partners to respond to local demand to varying extents. It can also be difficult to isolate the effects that the City Deals and Growth Deals may have on creating more demand-led employment and skills systems from the broader context of reform. This includes the implementation of austerity measures, changes to adult skills funding, the move towards public service transformation and the general increase in the influence of LEPs.
The remainder of this section analyses the feedback from respondents in cities and LEPs through the lens of the six key elements set out as part of the framework for establishing more effective demand-led local systems for employment and skills.
- Partnership arrangements
- Employer engagement
- High quality LMI
- Shared objectives
- Alignment between delivery agencies
- Performance management and evaluation.
1. Partnership arrangements
As set out in Section 2, partnership arrangements and employer engagement are crucial elements of a demand-led approach to delivering skills and training. Coordination between employers on the one hand, and colleges, training providers, HE Institutions, JCP, Work Programme providers and other supply-side partners on the other, should help reduce skills mismatches in the system by improving feedback loops. Overall, feedback from respondents suggests that the process of negotiating deals has had a positive and catalytic effect on improving partnership working and employer engagement.
Deals as catalysts for strategic partnership working
While most cities had some form of regular meetings or collaborative arrangements to bring local partners together in place prior to the deals, the majority of respondents felt that the City Deals and Growth Deals processes have acted as a catalyst to improve cross-boundary working and engagement with employers and providers.
The deals have catalysed more strategic partnership working as priorities were reviewed as part of negotiation process. The need to determine and set priorities for employment and skills provision at city region or LEP level required local partners to develop strategies between sectors and delivery partners. In Stoke, for example, partners reported that the City Deal and Local Growth Deal have increased the influence of the LEP in the area, which coupled with the formalisation of private-public and cross-authority working and local priorities in a Strategic Economic Plan, has led to a more positive and constructive relationship between providers, the council, employers and central government agencies. In addition, both employers and the SFA engage more constructively and effectively with the council – for example, while discussions about the Skills Funding Incentive pilot scheme that was agreed with BIS were independent of the Stoke City Deal, respondents felt the deal negotiation sped up the process and gave these discussions more focus.
The offer of greater control over local skills delivery and funding allocations provided a strong enough incentive to bring together partners. This included training providers, employers and local authority partners who previously had little incentive to work together. In Sheffield, respondents reported that the City Deal, Growth Deal and Devolution Deal processes enabled a scaling up of partnership activities that prompted the reformation of the Sheffield City Council Employment and Skills Board. The opportunity to shape the skills system with additional funding available made it more attractive and worthwhile for local partners – including representatives from strategic sectors such as manufacturing and engineering, large employers in hospitality, the SFA and Sheffield College – to work together at city level.
This is echoed by respondents in other cities and local areas who stated that relationships with FE colleges in particular, had become more collaborative and productive as a result of the deals process. Respondents in Birmingham reported that the City Deal had improved relationships with FE providers in particular. As part of the Skills Compact, nine colleges have agreed to work closely with employers, schools and other training providers to align careers advice, learning and preparation for work. This is regarded by respondents as a step change in partnership working. As stated by one respondent, “colleges are keen to get behind the consortium – they can now see the potential impact of the LEP”.33 Echoing this, respondents in Stoke reported that FE colleges in the city now share their data with the council, and have also begun to use the ‘red-amber-green’ skills framework established by the council to set their priorities in relation to local demand.
City Deal Wave One stands out
The degree to which different deals, or waves of deals, improved partnership working is considered mixed. Overall, it was felt that the first wave of City Deals were the most collaborative in nature. Respondents indicated this was due to the longer negotiation timelines,34 the wider scope of the deals and the existing level and quality of partnerships across local authority boundaries within cities and with central government prior to the deals taking place. In Manchester, for example, local authorities had a history of working together as the Association of Greater Manchester Authorities (AGMA) and GMCA, as did FE providers at the Manchester Association of Colleges. In addition, the Chambers of Commerce and LEP all map over the same functional economic area. With existing good relationships in place, Greater Manchester was able to use the deal process to build on existing provision and significantly increase local partners’ freedoms and flexibilities.
The second wave of City Deals were negotiated with smaller cities where some respondents reported having less experience of cross-boundary working at city region level. As a result, developing and improving local partnerships and collaboration in some cities has been more challenging. There was also variation in the extent to which it was felt that the Growth Deal process enabled more effective partnership working. This in part relates to the extent to which priorities between the city and the wider LEP area align. The Growth Deal process was also conducted on a shorter time-frame and a number of partners reported a lack of resource available at city and LEP level to both negotiate the Growth Deal and ensure continuity or alignment with the City Deal before it. This may have also been affected by the focus on capital rather than revenue in the Growth Deal design.
2. Employer engagement
Reflecting the consensus from the literature and government policy that the emphasis should be placed on creating a more demand-led local employment and skills system, almost all respondents identified improved employer engagement as a high priority. This ranged from building engagement with employers as strategic partners in identifying and setting priorities, to engagement of employers in the co-design of programmes in the deals process. In most cases, respondents reported improved and more productive relationships with employers, and between employers and other partners at local level as a result.
The majority of deals established stronger incentives or mechanisms for employer engagement. Many respondents felt they now had greater incentive to engage, as they had more opportunity to influence skills programmes to their benefit. The feedback on the impact of the Growth Deal process on partnership working neatly summarises how the deals process overall provided an incentive to work together: “people have had to come to the table with something… Employers can see a local vehicle for dialogue about their skills needs”.35
Models of employer engagement vary between cities, with more or less formal structures in place, and relationships formed both directly with employers and indirectly through membership organisations. Differences between cities and LEPs to some extent reflect pre-existing mechanisms for employer engagement. Where cities had already established more formal mechanisms for employer engagement, the deals provided a catalyst for expanding activity. In other areas, mechanisms for more formal employer engagement were created.
Several cities are working with employer representative organisations to ensure strategies reflect the needs of their wider business base rather than a select number of larger employers. Wider engagement with employers, and SMEs in particular, emerged as a priority in Southampton early on in the deal negotiation process. The council is now working more closely with the Chamber of Commerce, Future Southampton, and Business South to expand employer engagement and involve them in setting local employment and skills priorities.
Other cities have developed mechanisms to engage directly with employers. In the West of England, for example, there is a cross-cutting group designed to improve engagement with SMEs and address their particular needs and barriers to greater engagement with the skills system – SMEs are also present on sector-specific groups.
Several cities have established brokerage models to respond directly to the needs of individual businesses or have involved employers in programme design. The Five Three One campaign in the Leeds City Region, for example, brokers skills support for companies of any size or sector and is estimated to add £7 million to the economy.33 In several cities, employers are also involved in the lead- or co-design of training programmes as a result of the deals (Box 5).
Case study 1: Employer involvement in the design training programmes in Greater Manchester and Sheffield City Region
In Greater Manchester, the deals have been used by authorities at city region level to involve employers in the design of courses and qualifications. The City Deal created a Greater Manchester Employment and Skills Board, a voluntary partnership to bring the LEP together with providers and government agencies and create greater ownership of skills by employers. Respondents reported that this has encouraged high levels of employer engagement in the skills system more generally. Employers from relevant sectors are involved in designing apprenticeship frameworks for the legal sector, catering, hospitality and digital games programming, for example. And as part of the programme, partners in Greater Manchester will continue to consult with employers to ensure these apprenticeships are delivering the correct skills.
Sheffield City Region also negotiated a brokerage model through its City Deal, which will involve reaching out to SMEs in particular and determining their needs before seeking applications from providers to deliver apprenticeships frameworks that match these needs (including from local colleges and partnerships of colleges). To date, 15 new apprenticeship frameworks have been created that respondents feel meet local business and sector needs more effectively than the national apprenticeship frameworks.
The deals process has improved collaboration and coordination, with colleges and employers now also more likely to co-invest in skills provision in some areas. In Stoke, relationships between employers and colleges are reported to have improved through strategic partnership working to secure funding to develop the first phase of an Advanced Manufacturing Hub through the City Deal (later stages will be funded through the Growth Deal). This has resulted in the flagship success story of Bentley refurbishing an existing auto-training space in a college in Stoke, with benefits to both Bentley as an employer and the college, which can capitalise on this investment.
The reliance on match funding from EU sources and intensity of deal-making activity has in some areas led to delays in programmes being implemented, however, with respondents raising concerns about the potential knock-on effects for partnerships. The introduction of the Growth Deals meant that in some areas the implementation of City Deal programmes was delayed due to lack of resource. In a number of areas, delays in the European Social Fund allocations had stalled the implementation of programmes agreed as part of the Deal. This was felt by some to negatively affect existing relationships and ongoing employer engagement.
Respondents were also conscious of the need to inform learner choice by establishing more effective and in-depth careers guidance on different professional pathways. To a large extent, the ability for an individual to make informed career choices rests on having the information about different pathways and opportunities at their disposal, which in turn requires high quality local and national LMI.
3. High-quality labour market intelligence
The development of a shared understanding of the economic priorities in a functional economic area based on LMI is crucial within a demand-led skills system. LMI can be used to underpin the establishment of shared goals, which may be formalised through joint strategic plans at LEP and/or city region level.
Cities and LEPs reported having developed a stronger economic rationale for skills policy and that policies are more evidence-based. The availability of robust LMI to inform these priorities is integral to the ability for localities to set clear priorities. Of particular importance is the availability of common and consistent LMI, allowing cities and LEPs to benchmark against other localities. It is difficult to say whether or not the City Deal or Growth Deals process has radically altered the capacity of cities and LEPs to conduct labour market analysis – many had established methods of labour market analysis prior to the deals process. But in the same way that the City Deals and Growth Deals provided a catalyst for partnership working and helped to set local priorities, they seem to have provided an incentive for some partners to gather the intelligence needed to inform priorities set out within deals. Overall, however, there are high levels of variation in the extent to which LMI is formalised into working processes and continues to inform skills policy.
Cities and LEPs have taken a variety of approaches to gathering and using LMI to inform the design and delivery of programmes. Schools, FE and HE providers, councils and employers in Stoke-on-Trent and Staffordshire have come together to form the Education Trust, which is responsible for ensuring that LMI is up-to-date and aligned with key growth sectors. The Trust reviews both existing growth sectors and new industries that are moving into the region and uses a ‘red-amber-green’ framework to rank which skills are in highest demand. In Nottingham, while there are no formal agreements or procedures through which the city gathers data from the FE sector, the city receives an overview of current activities from up to 50 training providers who have signed up to a Provider Charter. Some cities have commissioned specific pieces of research. In Cambridge, for example, the city worked with a researcher from Cambridge University to provide updated analysis, with a focus on the take-up of apprenticeships in business sectors in Greater Cambridge.
Overall, most respondents felt that access to and use of LMI, on both local supply and demand, could be improved and was regarded as a barrier to delivering more demand-led systems by most cities. Progress has been made in providing local-level LMI and there are a range of nationally available data and tools available on, for example, employer skill needs37 and learner destination data.38 Nevertheless several respondents reported that they don’t have sufficient data at LEP level or the capacity to fully analyse it which suggests there are challenges around awareness and local capacity. As one respondent stated, “It is an all voluntary board and we have a slim team of people… It needs to act as a starting point but we’re not given the data that may be available.”33 New Economy Manchester (funded by local partners prior to the City Deals), which as part of its remit provides economic intelligence and analysis, was regarded by a number of respondents as a useful model to learn lessons from and potentially replicate in other areas (Box 6).
4. Shared objectives
The deals required local areas to set out strategic priorities, formalised through Strategic Economic Plans, as part of the Growth Deals. Feedback from respondents across cities suggests that the extent to which these objectives are shared and aligned across partners at the functional economic area varies across cities.
Gaining information from employers and providers
A number of cities and LEPs complemented the analysis of publicly available LMI data with direct input from local employers in order to identify strategic priorities. Mechanisms for gaining intelligence from employers included large-scale local surveys and events. Leicester, for example, combined a survey of over 1,000 employers with several consultation events and an employer event attended by over 130 employers where skills was a central theme.
Yet, gaining more qualitative LMI to underpin policy making can be challenging. For example, the Newcastle City Skills Fund is designed to meet employer demand through strategic skills assessments but is highly reliant on the willingness of employers to engage with the process. It is unclear what the city can do to support this further. Many employers, SMEs in particular, also find it difficult to think strategically about future skills needs or gaps.
Most respondents felt they had a clear understanding of local employment and skills priorities, with many reporting that they had a more focused set of priorities than those set at the height of the recession, where goals were broad and aimed to increase employment across the board. This is primarily due to improved economic conditions in most cities and LEP areas since the recession, with priorities shifting to harder to help groups that remain outside of the labour market.
Yet the extent to which these objectives are shared and aligned across partners at the functional economic area varies across cities. Some respondents stated that priorities set at city region or LEP level for employment and skills were fully aligned with more local or city objectives. In some places, this is due to continuity of staff working on both the development of City Deal and LEP Strategic Economic Plan, as in Cambridge. In other localities, the priorities set at LEP level were felt to be relatively distinct and separate from more local or city objectives.
5. Alignment with delivery partners
A number of respondents recognised the need to reform and integrate services, such as employment support and training, at the point of delivery. Overall, the feedback from respondents suggests the extent to which City Deals and Growth Deals resulted in greater integration at the point of delivery is mixed.
Alignment with training providers
Despite the improved relationships with local training providers and employers, many respondents expressed frustration with the structure of adult skills funding, in particular the lack of incentives for colleges to deliver according to business needs. Some respondents felt there had been greater alignment among FE colleges as a result of cross-sector partnership working at the local level. Some of this effect could also be attributed to the result of funding cuts to the Adult Skills Budget, which have compelled colleges to be more efficient and align supply more closely to local demand through coordination with other local providers. The negotiations made as part of the deals mark a shift in FE delivery in some places but they were not designed to significantly reform the national FE funding system, which many respondents would welcome.
The devolution deals with Greater Manchester and Sheffield City Region stand out from the City Deals and Growth Deals because they do include devolved responsibilities for adult skills funding and provision. The Sheffield City Region deal, for example, includes plans for the establishment of a joint venture partnership between the city region and BIS, SFA and DWP. It will devolve responsibilities for the majority of the Adult Skills Budget, AGE, and the restructure of FE provision with the city region, potentially enabling greater alignment between delivery partners and local priorities.
Outcome agreements, where the skills priorities of a local area and the solutions to address them are collectively agreed, are potentially a way of aligning incentives and ensuring providers are held to account against locally defined priorities. There was limited focus on outcome agreements with training providers within the City Deals and Local Growth Deals. There is scope to explore this kind of model further, including the role it can play in holding local partners to account.
Alignment with employment support providers
There are several examples of cities and LEPs agreeing to coordinate provision with DWP, JCP and Work Programme providers. In Nottingham, for example, the Integrated Employer Hub negotiated as part of the City Deal will build on an existing council run service to deliver a co-ordinated, bespoke training and recruitment service. It will bring together local and national partners to improve employer engagement through brokerage, reporting to a board made up of representatives from local agencies, as well as national government departments such as DWP. In Stoke-on-Trent and Staffordshire, to ensure the Skills Plan is effectively delivered, the LEP is working closely with the National Careers Service, DWP and JCP. While these relationships may have developed without formal deal relationships, they have been formalised and given a clear direction through this process. In Sheffield, for example, partners reported improved consultation with JCP on employment and skills issues.
Many respondents highlighted the scope for improvement in relation to coordination with employment support providers at the local level. Respondents in one city, for example, felt that the deals process had done little to improve relationships with the national Work Programme provider. There was appetite among respondents for greater flexibility within delivery of national employment policies to enable local areas to respond more effectively to locally defined priorities.
Similarly, many cities expressed a desire to have more influence over employment and skills policy for the hardest to help in their area, specifically those who have not succeeded in finding employment through the Work Programme and are in receipt of ESA. The Manchester Working Well pilot (Box 7) and London Working Capital pilots are the two most significant employment support initiatives introduced as part of the Deal process. Respondents generally felt that work in this area would be significantly aided by greater coordination of national funding streams and national policy across departments, including DWP, JCP, BIS, SFA and Work Programme providers.40
Box 7: The Manchester Working Well pilot
The Manchester Working Well pilot, implemented in May 2014, is built around a payment-by-results mechanism which rewards service providers for employment-related outcomes achieved. The programme provides tailored support for up to two years, with up to one year of in-work support, to individuals who have left the Work Programme to help them find sustainable employment. The programme builds on the Troubled Families initiative and integrates health, skills, education and housing providers with two service providers (The Big Life and Ingeus).
The payment-by-results system and in-built cost-benefit analysis has enabled greater coordination. DWP, Treasury and DCLG co-invest in the scheme and costs are shared in line with anticipated benefits, based on the proportions of fiscal benefits that fall to each department.
The 2014 Manchester Devolution Agreement aims to build on the pilot, if successful, through staged expansion. Fully rolled out, the programme will cover 50,000 individuals with a £100 million budget comprising investments of £36 million from Greater Manchester, £32 million from ESF and up to £32 million from central government via payment-by-results.
Duplication of employment and skills programmes between local and national partners was also raised as a challenge by many respondents. The Sheffield City Region deal agreed a new ‘Skills Made Easy’ programme – which included a brokerage service for employers in exchange for an employer contribution. The introduction of a similar SFA funded scheme (that did not require employer contributions) in the same area provided competition and duplication of services, which was felt to be unhelpful.
Overall, respondents felt adult employment and skills funding streams remain too fragmented and project-specific to allow cities to integrate policy and delivery across sectors and between partners. A number of barriers to further local integration of employment and skills delivery remain. There was a perception among respondents that this is in part due to the nature of the deals, which primarily provided funding for programmes and specific projects rather than creating more flexible, non-ringfenced funding sources. While there may have been more aligned thinking and an ambition for more integrated delivery among partners in cities, the majority of respondents felt that there is some way to go to achieve this.
6. Performance management and evaluation
Monitoring, evaluation and performance management were a feature of all the deals, to the extent that dedicated City Deal boards in most cities would monitor progress on delivering the outcomes set out in specific deals. Similarly, EU-funded projects included in the deals will be evaluated and monitored.
Several cities have introduced or are piloting payment-by-results methods of performance management. Examples include Skills Funding Incentive Pilots that were introduced through the Growth Deals and agreed with three LEP areas: West of England (Bristol), Stoke and Staffordshire and the North East (as detailed previously in Box 4), and the Sheffield Payment-by-Results model for apprenticeships.
Sheffield City Region is an example where a payment-by-results model was included in the City Deal. This was included to stimulate the delivery of a wider range of apprenticeships to meet local labour market and employer demands. Providers who agree to deliver an apprenticeship framework that meets employer priorities and needs receive £1,000 per learner – a service brokered by the city region. Respondents reported that in the early stages of the programme, the financial incentive had not appeared to be sufficient to encourage providers to come forward to engage. Through more active outreach on behalf of the brokers, the system has now bedded in and 15 new apprenticeship frameworks have been created that are viewed locally as meeting local business and sector needs more effectively than existing national frameworks.33
Cities and LEPs have developed different systems for monitoring and evaluation as a result of the varied nature of the programmes and projects agreed as part of the deals. Monitoring and evaluation of Sheffield City Region’s devolved skills budget is managed by Sheffield Council, for example. Because the existing city region processes and structures were not suitable for the devolved skills budget that was negotiated, Sheffield City Council bears the responsibility for financial risk and quality across the region. However, this means that existing SFA tracking and records monitoring are already in place – with the advantage that Sheffield statistics and results are verified by SFA data. The City Council publishes a monthly compendium of results. In contrast, other localities have been required to develop new systems. Swindon, for example, will monitor progress of their scheme to build on personal learning credits available through the Army and support army leavers to build on their transferable skills for up to two years before they are due to leave. BIS is in the process of developing a monitoring framework to evaluate this.
Evaluations planned as part of the Manchester Working Well and London Working Capital pilots are two of the most significant of their kind. The evaluations are currently being designed by local partners working together with DWP. While the details of the evaluations associated with both employment pilots are still to be developed, the scale of the pilots and robust nature of the evaluations accompanying them offer the potential to significantly improve the evidence base around what works in getting the harder to help back into employment.
Several respondents highlighted the need for better access to data to allow them to monitor and evaluate programmes. This in part requires more data sharing among delivery partners and central government departments. As one respondent put it, they wanted “better data, better recording and a better idea of how providers influence outcomes” to enable them to monitor how programmes were delivering.
Many cities and LEPs interviewed felt that the policies implemented to date had enabled them to take positive steps towards establishing more demand-led employment and skills systems. Taken together, the City Deals and Growth Deals have acted as a catalyst for partners to come together and would appear to have enabled partnership working and employer engagement at the local level.
In terms of the elements that would support a more demand-led local skills system, respondents suggest there is room for improvement, reflecting both the nature and design of the policies as well as the differences at local level between the cities and LEPs that took part. Overall, the feedback from respondents suggests there is scope to:
- Build local capacity and capability to better access and use LMI
- Establish shared objectives across functional economic areas
- Better align provision at the point of delivery
- Join up and standardise performance management and evaluation processes.
The final section summarises the main findings from this report, before setting out a series of recommendations for partners and policy makers at local and national level.