NATIONAL AUDIT OFFICE

Report by the Comptroller and Auditor General

c Department of Employment and Manpower Services Commission: Vocational Education and Training for Young People

Ordered by the House of Commons to be prin ted 10 July 1985

LONDON HER MAJESTY’S STATIONERY OFFICE E3.30 net

497

This report is presented to the Houseof Commons in accordance with Section 9 of the National Audit Act, 1983.

Gordon Downey Comptroller and Auditor General National Audit Office

9 July 1985

Contents

Department of Employment and Manpower Services Commission: Vocational Education and Training for Young People

Summary

Report Part 1: Background Part 2: Outline of the Youth Training Scheme Part 3: Provision and Take-up of YTS Places Part 4: Standards of Training Provided Part 5: Financial Control Part 6: Other Educational and Youth Training Initiatives

Glossary of abbreviations

Pages l-4

5 6-l

8-11 12-13 14-16

17

18

Department of Employment and Manpower Services Commission: Vocational Education and Training for Young People

Summary

1. This Report results from an investigation by the National Audit Office (NAO) of the Manpower Services Commission’s (MSC’s) involvement in arrangements for providing vocational education and training for young people. It is concerned mainly with the Youth Training Scheme (YTS), costing some f758 million in 1984-85. The NAO investigation found that YTS was introduced in 1983 after considerable thought had been given to the problems of unem- ployment among young people and their training needs; that it had attracted a good response from employers in providing training places, although a lower proportion of eligible young people than MSC had forecast had taken up places; and that MSC had established a framework for monitoring the quality and effec- tiveness of the scheme. The main points of concern raised by the report are:

- whether MSC can improve their matching of supply and demand for places to avoid abortive expenditure on over-provision;

- whether the distribution of training places reflects industry’s need for skills; - whether MSC are dealing successfully with criticisms of YTS pro- gramme quality which emerged from monitoring in 1984, and with the problem of early leavers; - whether MSC are taking sufficient steps to inform themselves of YTS providers’ costs, in order to keep the right balance between incentive and control of subsidy;

- whether there is a danger of duplication between YTS and other initiat- ives in work-related youth training and education.

Outline of the Youth Training Scheme

2. YTS was introduced in 1983 as a result of a change in the emphasis of GOV- ernment support from a series of special employment measures to vocational education and training. Its purpose is to equip young people with basic, trans- ferable skills whilst introducing them to more specific skills in the occupational groups in which they work (paragraphs 1.1- 1.7 and 2.1).

3. The scheme covers all 16 year olds who have left full-time education, unem- ployed 17 year olds and older disabled leavers up to the age of 21. It operates in three separate modes, each comprising one year courses combining work experi- ence with a minimum of 13 weeks off-the-job training. Mode A schemes are run by managing agents (public and private sector employers) who arrange both work experience and off-the-job training courses; Mode Bl schemes are operated by sponsors (local authorities and voluntary organisations) who provide work

1

experience on special projects; and Mode B2 schemes are run mainly by local education authorities and local authorities on the lines of Mode A schemes (para- graphs 2.2-2.6).

4. From September 1984 Mode A managing agents have been paid a block grant of fl,950per filled trainee place. This has financed a trainee’s allowance of f26.25 per week and provides a contribution towards the cost of supervision and train- ing. For the project-based Mode Bl schemes the sponsors are paid the actual costs of running the schemes, including the trainee’s allowance, at an average cost in 1984-85 of f3,840 per place. The authorities managing Mode B2 schemes are reimbursed the trainee’s allowances paid and the actual costs, up to f960 per place, of off-the-job training. In addition Mode A and Mode B2 managing agents receive an administration fee off 100 for each contracted place whether or not it is filled (paragraphs 2.8-2.10).

5. MSC has established a Youth Training Board to provide oversight of YTS on behalf of the Commission and an Advisory Group on Contents and Standards to provide professional advice on YTS. The administrative structure for YTS con- sists of MSC’s 55 Training Division Area Offices, each advised by an Area Man- power Board, and the MSC’s Large Companies Unit advised by a sub-group of the Youth Training Board. These are responsible for identifying, negotiating and recommending schemes, mainly with employers, to meet local youth training needs. Ah programmes are monitored and assessed by the network of Area Offices. MSC also funds a network of 55 Accredited Training Centres to train providers’ staff (paragraphs 2.11-2.13).

6. MSC have identified a number of key questions relating to the effectiveness of individual schemes and have embarked on a programme of surveys, reviews and data collection to provide information on them (paragraphs 2.14-2.15).

Provishn and take-up of YTS places

7. For 1983-84, the first year of YTS, MSC were anxious to ensure that there were places for all eligible young people, and they found sufficient response from employers to justify increasing the originally planned proportion of Mode A places, which are MSC’s preferred method of training. But although MSC almost attained their target of providing 450,000 places, only 370,000 were taken up; the cost of providing the unoccupied places probably amounted to about f55 million (about two-thirds of which was for Mode Bl). MSC consider that some over-provision is desirable to cater for choice and peaks in occupancy (para- graphs 3.2-3.9).

8. For 1984-85 MSC have planned to provide 405,000 places, and their latest estimate is that 385,000 will be taken up (paragraph 3.10).

9. MSC’s analysis of how the total of YTS places in 1983-84 was divided among occupational groupings did not show any clear imbalance. However,’ MSC had no reliable information as to the distribution of YTS places among different industries, and were thus unaware whether there was any significant imbalance in relation to normal job distribution (paragraphs 3.1 l-3.12).

10. Because employers may use YTS trainees (including normal intake occupy- ing YTS places) without giving them employment contracts, the scheme may initially have assisted the continuing decline in permanent, employed training places in industry; and MSC monitoring is not designed to show how far the creation of training places for 16 year olds has been at the expense of less employ-

2

ment for those aged 17 and above. But MSC expect that ultimately the emergence from YTS of young people with basic and adaptable skills should encourage employers to offer more jobs involving specialist training (paragraphs 3.13-3.14).

Standards of training provided

11. To ensure that YTS schemes are of a satisfactory standard, MSC have established criteria covering the design and structure of what they should pro- vide, for example to ensure that there is provision for induction, off-the-job training and work experience and for training in basic skills; and Area Officers carry out monitoring visits to report whether or not schemes meet the criteria and to assess their general effectiveness. MSC’s monitoring is supplemented by HM Inspectorate of Schools’ inspections at Colleges of Further Education, and by sample checks by special Quality Advisers (paragraphs 4.1-4.8).

12. However, in the scheme’s first year MSC accepted that some programmes needed time to satisfy the scheme requirements. MSC keep central records which indicate how many programmes have been assessed but not the number of indi- vidual monitoring visits, although this information is available at each of the Area Offices. MSC believe from the evidence available that most schemes and their component programmes have been assessed more than once and that the great majority have attained required standards (paragraphs 4.9-4.10).

13. By November 1983, monitoring assessments reported to MSC Headquar- ters indicated that improvement in standards was needed for 35 per cent of YTS places examined; and by January 1985 this proportion had fallen only to 32 per cent. Other quality reviews during 1984 concluded that, while quality was improving, there was still a lack of understanding of quality requirements among some managing agents, a lack of co-ordination between work experience and off-the-job training and a need for broader-based training in educational estab- lishments (paragraphs 4.11-4.14).

Control of costs

14. It is too early in the life of YTS to expect to find conclusive evidence of its effectiveness in equipping young people for employment. One factor of import- ance is the proportion of trainees who leave more than four weeks before the end of their courses (early leavers). It is not possible from MSC records to deduce what proportion of each intake has left early; but early leavers constituted 55 per cent of all YTS leavers between April 1984 and March 1985. MSC is undertaking a programme of surveys to discover how far YTS trainees find permanent employment within three months of ending their training. Early results have shown that between 49 and 62 per cent of leavers in the months from June to October 1984 found employment within 3 months, and between 27 and 38 per cent were unemployed after 3 months (paragraphs 4.15 to 4.16).

15. The original proposals for YTS suggested that the costs of youth training should be shared between employers, trainees and the community; that the Exchequer contribution should provide an incentive to employers to participate; and that there should be a minimum of bureaucracy in the operation of the scheme. These aims have been reflected in the financial regimes for YTS, particu- larly the block grant arrangements for Mode A managing agents, which do not involve comprehensive checking of the agents’ actual costs. Closer financial con- trol is exercised over Mode Bl and B2 schemes, for which payments are made against verifiable claims for costs @aragraphs 5.1-5.12).

16. A consultants’ report in October 1984, commissioned by MSC, made several recommendations aimed at more expert and purposeful MSC financial

3

monitoring of YTS courses, although suggesting that, as an incentive, grants might allow providers a margin of profit above their costs (paragraphs 5.13-5.14).

17. MSC have not sought to test the reasonableness of Mode A block grants by examining managing agents’ cost records, as they are entitled to do. Instead they have obtained information from a survey of 900 agents and sponsors under all three Modes, which has suggested that Mode A agents’ costs exceed their benefits by f470 per place. NAO noted that the reliability of this information was open to considerable doubt, but MSC stated that they did not believe that checking man- aging agents’ financial records would in itself provide a dependable check of the reasonableness of the grant, since important elements such as work experience supervision costs and the offsetting contribution to output by trainees were unlikely to be reflected in scheme financial records. However, MSC would be considering this issue further (paragraphs 5.15-5.17).

Other educational and youth training initiatives

18. The most important of the other central Government initiatives towards improved provision for young people are the Technical and Vocational Educa- tion Initiative (TVEI) - a four year course of full-time technical and vocational education, including work experience, which is in the pilot project stage; a range of one-year pre-vocational courses in schools and Colleges of Further Education leading to a new Certificate of Pre-Vocational Education (CPVE) -to be intro- duced in September 1985; and the transfer of resources to MSC control to bring the total MSC expenditure on work-related Non-Advanced Further Education up to one quarter of the total: this is to begin in September 1985 and is intended to enable MSC to see that the money is used to support provision, for young people and adults, that is geared closely to the local labour market needs. TVEI and CPVE need careful co-ordination with YTS to avoid duplication of provision. This applies particularly to CPVE, and MSC are reviewing the inter-relationship with DES and other interested parties in this area (paragraphs 6.1-6.8).

4

Vocational Education and Training for Young People

Report

Part 1: Background

1.1 In accordance with a change in the emphasis of Gov- ernment support relating to young people from a series of special employment measures towards the development of skills for the job market, total expenditure on non-advanced vocational education and training rose from some f770 mil- lion in 1979 to about fl.7 billion in 1983-84. Some fl billion of this was local authorities’ expenditure financed partly though the Rate Support Grant, and f700 million was direct expenditure by Central Government on Youth Train- ing, of which the main element is now the Youth Training Scheme (YTS), administered by the Manpower Services Commission (MSC).

Role of MSC 1.2 MSC were established to administer public employ- ment and training services. The Commission are a body corporate but are accountable for their operations to the Secretaries of State for Employment, Scotland and Wales. They are financed by a grant in aid from the Department of Employment (DE) who are responsible for overseeing their administration and agreeing their budget. MSC have responsibility for advising Ministers on employment and training matters. There is close liaison between DE and MSC, and DE often participate in MSC’s major reviews. In this way Ministers are kept informed of MSC’s activities and proposals.

1.3 The Department of Education and Science (DES), the Scottish Education Department and the Welsh Office are responsible, in conjunction with local authorities, for edu- cation services in Great Britain. Beyond the provision of a wide, basic education these services include vocationally rel- evant courses in schools and colleges of further education. The departments’ responsibilities involve developing means of achieving the Government’s educational objectives, including the provision of appropriate arrangements for the transition from full-time education to work. The depart- ments maintain liaison with DE, MSC and others to co- ordinate the instruments of vocational education and training.

Review of national training 1.4 In the 1970s the United Kingdom invested about 2.5 per cent of its Gross Domestic Product in vocational educa- tion and training, industry providing roughly half and local authorities most of the balance. The Government became

concerned in the late 1970s that the recession might cause industry to reduce its expenditure on training at a time when the number of school leavers was increasing and unskilled jobs were declining, so that young people might be left unprepared for new jobs emerging when the economy revived.

1.5 In 1979, therefore, MSC carried out a major review of national training arrangements. This review led to the publi- cation of a consultative document in May 1981 and, after considering the response to this, the Government issued in December 198 1 a White Paper, “A New Training Initiative: A Programme for Action” (Cmnd 8455). For young people the White Paper confirmed two main objectives: to develop skill training; and to provide training and/or education opportunities for all those under 18. To meet them it set out a programme which included proposals for:

- better preparation for working life in initial full- time education;

- more opportunities for vocationally relevant courses;

- increased incentives for employers to provide better training for young people in jobs;

- closer co-ordination of training and vocational education both locally and nationally;

- the examination of longer term possibilities for more effective, rational and equitable sharing of costs amongst the beneficiaries of training.

1.6 As a main feature of this programme the White Paper proposed a new f 1 billion a year Youth Training Scheme (YTS), which would guarantee a year’s training for all those leaving school at the minimum age without jobs; and it endorsed MSC’s proposal to set up a working group to examine ways of developing such a scheme.

1.7 Theworkinggroup, theYouthTaskGroup, wasestab- lished in January 1982, representing a wide variety of inter- ests. Its report, in April 1982, put forward detailed pro- posals for a scheme which covered employed as well as unemployed young people. The report was accepted in gen- eral by the Secretary of State for Employment in June 1982 and the proposals formed the basis of YTS.

5

Part 2: Outline of the Youth Training Scheme

Nature of YTS 2.1 The aims of YTS arc to provide all participants with a better start in working and adult life through an integrated programme of training, education and work experience; to give employers access to a workforce equipped individually with some competence and practical experience in a range of inter-related jobs or skills: and to increase the versatility, adaptability and motivation of the workforce.

2.2 YTS is open to all 16 year olds who have left full-time education, whetherinemployment ornot; those 17yearolds who have become unemployed within the first year of leav- ing; and older disabled leavers up to the age of 21.

2.3 The scheme operates under three separate modes, Modes A, Bl and B2. Mode A is predominantly employer- based and provides almost 80 per cent of places. Modes Bl and BZ were introduced to provide training opportunities for young people who were unlikely to be catered for adequately on Mode A - which MSC prefer. Each mode provides one year courses of work experience including a minimum of 13 weeks off-the-job training and an introduc- tion to specific skis related to the occupational group in which the trainee works.

2.4 Mode A schemes are run by managing agents under contract to MSC. A majority of managing agents are private sector companies although one in five schemes is managed by a public sector body such as a local authority or nation- alised industry. A third of the schemes are managed by train- ing organisations including Industrial Training Boards and private training organisations. Chambers of Commerce and Colleges of Further Education (CFEs) may also act as man- aging agents. In the main these managing agents sub- contract the work experience element to other employers or act as an umbrella for a number of small companies.

2.5 Mode Bl schemes are run by sponsors, principally local authorities and voluntary organisations, under con- tract to MSC. The schemes are essentially practical invol- ving Training Workshops and Community Projects, many of which were formerly part of the Youth Opportunities Programme (the predecessor of YTS) but uprated to meet at least the current YTS requirements, and Information Tech- nology Centres.

2.6 Mode B2 schemes are run by managing agents under contract to MSC, mostly local education authorities and local authorities, and arc intended to provide places for young people who do not find a suitable place in either Mode A or Bl schemes. Many cater for special groups of young people including the handicapped. They are financed and run on similar lines to Mode A schemes but with a higher financial contribution from MSC to reflect the additional costs of the provision for these groups.

2.7 MSC undertook to launch YTS from April 1983, in time for Easter school leavers, and to introduce it in full by September 1983 with the guarantee of an offer of a place by the following Christmas for all 16 year olds who remained unemployed. A similar undertaking was repeated for Christmas 1984.

Financial arrangements 2.8 Under Mode A the managing agents arc paid a block grant per place (f1,850 for 1983-84 and f 1,950 from Sept- ember 1984) as a contribution towards the cost of providing supervision, training and a standard weekly allowance to the trainee (f25 in 1983-84 and f26.25 from September 1984). In addition they receive a fee off 100 for each training place contracted. Further, to encourage employers to participate in YTS, MSC apply a rule allowing employers to claim YTS terms for two of their normal intake for every three young people for whom they provide additional places through YTS.

2.9 Mode B2 schemes are also run by managing agents who are paid a fee off 100 per contracted place and may be funded in one of two ways for the training they provide. First, they may be paid on the same basis as Mode A schemes by receiving a regular grant on the basis of filled places with alimit off9lOfor 1983-84andf960fromSeptember 1984; alternatively they may be reimbursed the actual costs of training within the same prescribed limits. The total maxi- mum reimbursement was within a limit per place of 0,210 for 1983 -84 and f2,325 from September 1984 (including the trainee allowance but excluding managing agents’ fees).

2.10 Under Mode Bl, sponsors of schemes are reimbur- sed, within certain prescribed limits, the agreed costs of adult staff wages (gross), operating and capital costs and the actual cost of trainees’ allowances. Off-the-job training costs incurred outside the schemes are also reimbursed in full within a prescribed maximum. On average, thecost of a filled place on Mode Bl was f3,600 in 1983-84, and f3.840 in 1984-85.

Administrative structure 2.11 To exercise general oversight over the YTS and to provide advice on strategy, planning and scheme content, MSC established a Youth Training Board (YTB) including representatives of MSC, the Confederation of British Indus- try, the Trades Union Congress and Local Authorities. The YTB also reports to MSC on progress towards YTS objec- tives and makes recommendations for changes. To provide professional advice to the YTB on YTS content and stan- dards MSC established an independent Advisory Group on Content and Standards.

2.12 The responsibility for identifying and appointing managing agents and sponsors to run the individual schemes rests with MSC’s 55 Training Division Area Offices. To advise them, MSC set up, for each, an Area Manpower Board under an independent chairman with members repre- senting industry, trade unions, education, local authorities and voluntary organisations. The functions of the Boards are, in the light of local needs, to assess the quality and nature of YTS courses, to encourage local support, and to monitor and evaluate the progress of YTS. The Boards do not have a formal link with the YTB. Local employers and organisations submit YTS proposals to the Area Offices, who appraise them and recommend suitable schemes to the Area Manpower Boards. MSC’s Large Companies Unit is responsible for negotiating national schemes with large companies but takes advice from Area Offices and the YTB.

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2.13 As well as arranging training courses for their own staff MSC have set up an Accredited Training Centre for each Area to provide training for the staff of training pro- viders, at an annual cost in 1983-84 of f2.3 million.

Monitoring of effectiveness 2.14 In consultation with the YTB and the Advisory Group on Content and Standards MSC have identified a number of key questions relating to the effectiveness of indi- vidual schemes. These arc whether:

- work based foundation training of the right quality and design is provided, and overall, reaches all groups of young people;

- young people are prepared effectively for work;

- trainees and ex-trainees are demonstrating an

ability to manage their knowledge and skills in responding to life situations;

- the training systems are accessible to young people, are relevant and directed at assessing trainees’ compet- ence; - training is being provided on a systematic basis;

- the YTS has had an effect on recruitment patterns and on the ability of young people to compete in the labour market.

2.15 MSC have established a programme of surveys, reviews and data collection to provide information on these questions. Although still in its early stages the programme has already produced information on several important issues which are discussed in the fol- lowing Parts of the Report.

Part 3: Provision and Take-Up of YTS Places

Determination of requirements and commissioning of schemes 3.1 The size and balance of the programme is determined by the Secretary of State for Employment, in conjunction with the Secretaries of State for Scotland and Wales, on the basis of recommendations made by the Commission. National estimates of places and entrants are produced by MSC’s Training Division to inform bids for financial resources in the Public Expenditure Survey. Area Offices of MSC’s Training Division, in consultation with the Careers Service and taking account of the views of MSC’s Employment Division, other local labour market intelli- gence and previous operational experience at local level, produce initial estimates of eligible young people and levels of take-up and prepare plans of places and entrants for their areas. Area and Regional plans arc reviewed and renegotiated if necessary within the framework of the national plan. Local programme teams are then respon- sible for negotiating with managing agents and sponsors locally within the agreed plan.

Results in 1983-84 3.2 The Youth Task Group had forecast 460,000 entrants to YTS in 1983-84 - to occupy 295,000 Mode A places, 85,000 Mode Bl places and 80,000 Mode B2 places. By the time YTS was launched in April 1983 MSC had already approved about 53,000 training places and employers seemed prepared to provide more Mode A places than originally envisaged. MSC therefore increased the Mode A target to 330,000 places out of a total revised target of 450,000, cutting back on Mode B2, and in July 1983 requested DE to ensure that the Careers Service placed entrants on Mode A schemes whenever possible.

3.3 By September 1983, when YTS came into full operation, MSC had appointed some 4,000 managing agents and approved 415,000 training places. By March 1984 the number of approved places had increased to 443,000 (see Table 1).

Table 1 Approved training places 1983-84

Mode A Mode Bl Mode B2

Revised Approved target Sept 83

330,caO 297,ooo 80,ooO 86,COO 40,Oca 32,Ocm

450,Ooa 415,OOil

Approved March 84

321,000 90,ooo 32,ooO

443.m

3.4 In October 1983, one month after YTS had become folly operational, MSC estimated that there would be a shortfall of between 10 and 20 per cent in the take-up of places. Although this would provide a greater choice for entrants, MSC realised that it could lead to financial difficulties for managing agents and sponsors and could jeopardise the future provision of places. MSC considered a number of options, including the possibilities of extend eligibility to fii the empty places, but concluded that it was

8

too late to introduce any major changes for 1983-84 and that the lessons learnt could be taken into account for 1984-85.

3.5 Table 2 compares actual 1983-84 entrants with the Youth Task Group’s estimates and Table 3 shows the high- est occupancy level (in January 1984) in relation to approved places.

Table 2

YTG Estimates

Number Take-up 1983-84 eligible Actual

entrants

Unemployed 16 year olds 300,000 300,cQo 264,000’ Employer’s normal intake

16 olds year 200,000 100,wo 53,500* Eligible unemployed

17 olds year 60,000 60,000 52,500

560,000 460,ooO 370,OOa

* Apportioned on the basis of MSC estimates.

Table 3

Mode A Mode Bl Mode B2

1983-84 1983-84 Highest Highest Approved Entrants Occupancy Occupancy

Places Level %

321,ooo 247,000 184,000 57 90,oca 97,500 55,000 32,000 25,500 18,000 z:

443,Om 370,Oml 257,ooO 58

3.6 It is apparent from Table 2 that MSC were over- optimistic in assuming that all 360,000 eligible unemployed 16 and 17 year olds would join the scheme. The failure of the scheme to attract much more than half of the expected 100,000 employed 16 year olds might have been due in part to the novelty of the scheme and to competition from the Young Workers Scheme, which, however, ceased to be available to 16 year olds from April 1984. Occupancy levels have also been affected by the proportion of trainees leaving early (see paragraph 4.15).

3.7 Owing to the shortfall in occupancy of YTS places, the actualexpenditureontheschemefor 1983-84wasf377mil- lion compared with the f481 million planned. However, an NAO analysis suggested that MSC may have spent some f55 million (including f 18 million paid in 1984-85) on support- ing unfilled 1983-84 places, as indicated in the following paragraphs: two-thirds of these costs arose on Mode Bl which accounted for only one-fifth of approved YTS places.

3.8 Fees paid to managing agents for Mode A schemes in respect of unfilled places would have amounted to some f8 million. In addition MSC paid managing agents some f 11 million in compensation for irrecoverable costs arising from low occupancy levels coupled with the difficulty of filling vacated places (MSC expect to pay a slightly higher level of compensation for 1984-85).

3.9 For Mode Bl courses, costs arise as soon as a place is contracted and continue if it is subsequently vacated. MSC spent fl58 million on 1983-84 Mode Bl schemes. An aver- age of over 40,000 of the 90,000 approved Bl places were unfilled at any one time and, on the basis of five months’ statistics, MSC estimate that they had contracted for some 20,000 of these. The abortive cost attributable to 20,000 contracted unfilled places would have been about E36 mil- lion. MSC have pointed out that some over-provision was desirable to allow an element of choice, to meet special needs, to allow for the Christmas undertaking and to cater for peaks in occupancy; moreover, some trainees were allo- cated Bl places temporarily until suitable Mode A places could be found for them. MSC added that the over- provision of Mode Bl places was acknowledged and acted upon quickly: on renewal of schemes in 1984-85 provision of Mode Bl places was reduced by some 20,000. NAO did not identify any significant costs which could be attributed to unfilled Mode B2 places.

Provision of places for 1984-85 3.10 For 1984-85 MSC decided that in general providers of satisfactory schemes should be invited to offer as many places as in 1983-84, but that smaller schemes could be negotiated to suit local need. Overall, MSC planned for 405,000 1984-85 entrants within an estimate of E810 mil- lion, but with an expected expenditure of about f795 million. The assumptions on which these estimates were based included a pattern of entry similar to 1983-84, an average trainee stay of 43 weeks, and certain payment lags and cost increases. Table 4 shows a breakdown of these esti- mates over the three Modes together with the latest expected outturn.

Table 4

1984-85 Estimated Entrants Estimated Costs Original Expected Original Expected

outturn outturn fm fm

Mode A 314,000 284,cal 482 469 Mode Bl 73,ooo 85,oal 251 240 Mode B2 18,000 16,000 42 37 Other costs 35 12

405,oca 385,000 810 758

Impact of YTS on occupations and employers 3.11 Although YTS was designed to provide general, transferable skills with no overall national intention to steer young people into particular industries, MSC collect data on the distribution of schemes and places between types of training providers, occupational training families and industries. An analysis in October 1983 of all YTS schemes showed that training places were distributed between occupational training families (groups of occupations with similar training needs) as in Table 5. This analysis did not indicate any significant imbalance, the larger occupational families apparently having the highest proportion of places, although the proportions in the Technical and Scientific and Transport families were lower than might have been expected.

Table 5

Occupational Training Family

% of places by Mode A Bl B2 Total

AdminKlerical Agriculture Craft and Design Maintenance and Repair Technical and Scientific Manufacturing and Assembly Processing Food Preparation Personal Services and Sales Community and Health Transport Unclassified

21 14 11 19 4 7 2 5 3 6 5 4

16 15 18 16 2 3 3 2

13 15 15 14 1 1 1 1

2i 6

; 6 1; 2 10 4 3 3 1 1 2 9 22 27 12

3.12 MSC informed NAO that a corresponding analysis of training places between managing agents’ and sponsors’ industries did not give a true picture of their distribution because in many cases the work experience was provided in a different industry from that of the agent or sponsor. Allo- cation of training places was the responsibility of Area Man- power Boards who aimed to match local rather than national needs. However, since YTS is intended to help young people into employment as well as to provide general skills, it appears to me that MSC’s inability, through lack of reliable information, to identify any significant imbalance in the distribution of training places between different industries, may be an impediment to the effectiveness of the Scheme.

3.13 A sample survey conducted by the Careers Service indicated that the proportion of 16 year olds receiving at least six months training during employment increased from 17 per cent in 1978 to 32 per cent at the end of 1983. How- ever, employers providing YTS places are not obliged to offer participants contracts of employment even when the places represent normal intake; and they are free to replace all trainees with a new intake in each YTS year. MSC esti- mate that only 5 per cent of YTS participants have employee status, and YTS may initially have assisted the continuing decline in the number of permanent, employed training places in manufacturing industries (see Figure 1). Neverthe- less, one of the expected benefits of YTS is that the availabil- ity of young people with basic and adaptable skills should eventually encourage employers to offer more jobs invol- ving specialist training. A further decline in such jobs would throw doubt on whether YTS was achieving one of its important aims.

3.14 It did not appear to NAO that MSC’s monitoring of the effectiveness of YTS (paragraphs 2.14-2.15) was designed to indicate how far the scheme was genuinely creat- ing additional training places, mainly for 16 year olds, rather than persuading Mode A employers to use a replenishable and subsidised supply of school leavers for work, which would otherwise have provided continuing employment for those aged 17 and above. In reply to NAO’s enquiry on this point MSC stated that the YTS Providers’ Survey had been designed to cover this issue. It suggested that 69 per cent of places in Modes A and B2 were additional training places, that 24 per cent reflected jobs for 16 and 17 year olds brought within the Scheme, and 7 per cent repre- sented job substitution of trainees for older workers. In

9

addition, the whole of the Mode Bl provision, by its very~ moved on to employment with the employers who had pro- nature, represented additional training places. Follow-up vided them with work experience, which suggested a longer surveysofYTSleavershadshownthat 30percent oftrainees term commitment to trainees.

:. :,,,

:‘~I..

j- 1;; :

Figure 1

‘Manufacturing industries: Decline in employed trainees

80

70

60

so I-

,- ‘u

30

20

10

0 T 68

source DE Glzz,E (1981 figures nof available)

69 70 71 72 73 74 75 76 77 78 79 80 82 83 84

11

Part 4: Standards of Training Provided

Scheme assessment and monitoring arrangements 4.1 In appraising proposals for local YTS schemes, MSC’s Area Office Local Programme Teams consider them against the following criteria for basic transferable skills, off-the- job training and planned work experience:

- schemes should avoid narrow specialisation;

- thereshould beaminimumof 13 weeksoff-the-job training;

- there must be guidance and support for the trainee and assessment, review and recording of progress;

- training should be aimed at developing basic skills including computer literacy, personal effectiveness, the ability to learn, and awareness of the world outside employment as well as specific job and related skills;

- trainees should be provided with a training plan or programme.

4.2 Area Offices submit schemes they consider suitable for meeting local needs to their Area Manpower Boards for approval of the content and the allocation of places, although Area Managers may approve renewal schemes for 1984-85 and 1985-86 without reference to their Area Board.

4.3 Proposals for large national schemes are negotiated and appraised by MSC’s Large Companies Unit against the same criteria as local schemes, in consultation with Area Offices. Following approval of such schemes by a sub-group of the Youth Training Board the related training places are allocated directly to Area Managers. About one-fifth of the approved places in 1983-84 were arranged through the Large Companies Unit.

4.4 MSC now require Area Offices to monitor all schemes in operation at least quarterly to ensure that they continue to meet current requirements for scheme content, health and safety, take-up and the appropriate use of funds. Area Office staff aim to visit new schemes of all Modes within the first two months of operation to determine the level and focus of iheir monitoring, taking account of known strengths and weaknesses and any conditions imposed by the Area Manpower Board.

4.5 Some schemes providing places in a variety of areas of experience may be subdivided into distinct programmes for assessment. MSC’s original guidance required at least four overall assessments per year but allowed Area Offices to concentrate on single aspects of such programmes during their monitoring visits; but this has now been formalised to require quarterly assessments based on the evidence of all monitoring visits during the quarter.

4.6 Area Offices draw up a report on each monitoring visit and advise the scheme provider of any action required. Using clear guidelines they classify the programme’s overall performance into one of four categories: above current requirements; meeting current requirements; requiring some improvements; and requiring major improvement.

12

Summarised results arc reported to the local Area Man- power Board and to MSC Headquarters. Area Offices are also required to compare scheme placements with targets and report monthly on significant variations. Summaries of performance achieved are submitted periodically to the Youth Training Board, to the Commission and to DE Ministers.,

4.7 As an independent check of scheme quality, each of MSC’s nine Regional Offices has a Quality Adviser who examines areas of general concern in a selection of schemes, sending a quarterly report to MSC’s Quality Branch.

4.8 In addition to MSC’s monitoring, HM Inspectorate of Schools has a right of access to all CFEs but may examine any employer’s YTS provision only with his agreement. Early indications suggested that less than half of Mode A managing agents used CFEs in 1983-84,44 per cent of them providing off-the-job training on their own premises. More recent information from the YTS Providers’ Survey shows that 66 per cent of managing agents make some use of CFEs while 24 per cent of agents provide all the off-the-job train- ing in house.

Results of assessment and monitoring arrangements 4.9 In 1983-84, to ensure that numerical targets were met in the first year of YTS (particularly the undertakingto offer a place by Christmas 1983 to all 16 year olds who remained unemployed), and to allow providers time to develop their programmes, MSC advised Area Manpower Boards to endorse schemes which did not meet the current require- ments, provided that the managing agent agreed to intro- duce the missing elements within a specified time. For 1984-85 all existing providers must meet the current requirements but discretion may be exercised for new pro- viders or schemes of developmental interest.

4.10 MSC collect statistics on assessments of schemes which show that in 1983-84 some 79 per cent of program- mes and 92 per cent of places were assessed. The remainder did not call for assessment because they were never occu- pied. Statistics are not held centrally of monitoring visits but such information is collected and maintained by each of the 55 Area Offices. MSC told NAO that they believed from the evidence available that most schemes and their component programmes had been assessed more than once, and that the great majority had attained current standards.

4.11 Table 6 summarises the results of monitoring assess- ments reported to MSC Headquarters. It shows that in the eight months to July 1984 there was only a relatively slight fall in the proportion of places assessed as requiring improvement. Because not all individual assessments have been comprehensive (paragraph 4.5), these figures may understate the number of programmes not fully meeting the normal YTS criteria. Moreover, the scheme requirements were raised in April 1984.

Table 6 Scheme places assessed by category

November March July 1983 %

1984 %

198h %

Above requirements 5 6 6 Meeting requirements 60 60 65 Needing some improvement 31 29 25 Needing major improvement 4 5 4

4.12 In 1984 MSC carried out a special evaluation of the quality of a sample of 32 YTS schemes. They concluded that most managing agents were convinced YTS was an import- ant and worthwhile development; that YTS was being delivered more effectively in some schemes than others, though this was to be expected in the first year of the scheme; that there was some evidence that YTS had brought about a change in recruitment practices by some companies; and that YTS was giving young people a better chance of getting a job through being able to prove job performance and showing the right attitude to work. However, they found also that there was a marked lack of understanding by man- aging agents and sponsors of certain aspects of the standard criteria; and a lack of integration between programme elements, particularly when off-the-job training was carried out externally. As a result MSC have taken steps to remedy these problems by organising further courses and seminars run by the Accredited Training Centres and through improved guidance and monitoring by Area Offices.

4.13 In July 1984 HM Inspectorate of Schools issued a report on ‘The Youth Training Scheme in Further Educa- tion, 1983 -84’) concerned with the contribution of the edu- cation service to YTS. While noting that the education service had responded quickly to demands, it concluded that there was little evidence of integration between work experi- ence and other aspects of schemes; that MSC’s guidelines had not secured a significant change to a broader based training; and that some trainees had been allocated courses inappropriate to their needs, abilities and interests.

4.14 MSC Quality Branch’s first summary of reports from Quality Advisers was presented to the Advisory Group on Content and Standards in November 1984. The report indi- cated that while schemes were generally improving, weaker schemes were not in all cases being brought up to current requirements sufficiently quickly. It stated that large num- bers of managing agents’ staff had little or no background in training and that MSC could do more to attract them on to Accredited Centre courses, which should be made more practical and relevant. Real progress had been made towards the integration of YTS elements, though lack of liaison between managing agents and providers continued to be a major problem.

Evidence of effectiveness of YTS 4.15 It is too early in the life of YTS to expect to find con-

elusive evidence of its effectiveness in equipping young people with experience and skills which will make them useful to employers. One piece of evidence which is import- ant however is the number of young people who leave YTS early (ie those leaving more than 4 weeks before the end of a scheme). It is not possible from MSC records to relate early leavers to their times of joining and thus to deduce what proportion of each intake has left early; but Table 7 below shows that early leavers constituted 55 per cent of all YTS leavers between April 1984 and March 1985.

Table 7

Early L=37VfTS All Leavers %

1984

April - June 45,100 66,uH) 68 July-September 57,900 167,300 35 October-December 43,700 66,800 65

1985 January - March 50,600 60,800 83

197,300 361,100 55

The Table reflects the seasonal pattern of entry into YTS, the high proportion of completers in the summer months coming from the peak of YTS entry a year earlier.

4.16 An important indicator of the scheme’s effectiveness will be the extent to which those completing YTS courses succeed in gaining employment. MSC have introduced a national trainee follow-up programme, based on a 15 per cent sample of leavers three months after they have left YTS. The results for the first five months of these surveys are shown in Table 8: between 49 and 62 per cent of leavers had found employment within three months and between 27 and 38 per cent were unemployed.

Table 8 Destination of YTS Leavers: 15 per cent monthly sample.

1984 June

Leavers in: Sept-

July August ember October

No. of leavers in sample 3981 3884 7841 7351 3667

% % % % % Into Emolovment 56 62 62 56 49 LJnempl&&i 35 28 27 29 38 Full Time Education 4 7 2 Another YTS

: 3 5 9

Other 3 2 ; 62

2 -- -- -

100 100 100 100 100

13

Part 5: Control of Costs

Basis of cost sharing 5.1 The 1981 White Paper (see paragraph 1.5) emphasised that, in the longer term, responsibility for training should lie with employers; and it proposed an examination of the possibilities for more effective, rational and equitable shar- ing of the costs between trainees, employers and the taxpayer. In a 1984 White Paper “Training for Jobs” (Cmnd 9135), based on the experience of the previous two years, the Government confirmed their view that training should be primarily a matter for investment by employers and that trainees should contribute through lower incomes; but they stated that central and local government should ensure the provision of relevant education and, for the time being, bear most of the costs of YTS.

5.2 In making their proposals for YTS, the Youth Task Group concluded that the financial arrangements should provide for contributions from the State, employers and young people, each of whom would derive benefit. They considered that YTS financing should provide an incentive to employers to take part in the scheme and to train more young persons than they would otherwise have done, while taking into account that the training would go beyond the immediate needs of the employer.

5.3 They proposed that administrative and financial arrangements for Mode A should be as simple and straight- forward as possible with the minimum of bureaucracy, and recommended that Exchequer subventions should comprise two elements - a trainee’s allowance and contribution towards the employer’s training costs.

Determtnatton of trainee’s allowance 5.4 In considering the level of the trainee’s allowance the Youth Task Group had regard to the high quality of training intended to be offered and to the different groups of young people involved - those remaining in full-time education without financial assistance, the unemployed, and existing employees. They concluded that it was desirable to main- tain, in real terms, the allowance of fZ5 a week paid under the Youth Opportunities Programme and recommended an initial annual allowance of f1,400-fl,450. However, the Secretary of State eventually approved for 1983 -84 a some- what lower allowance of f1.250 (f25 per week) which he inareased to f1,312.50 (06.25 per week) from 1 September 1984.

Determination of MSC grants towards YTS training costs 5.5 For Mode A schemes the Youth Task Group recom- mended a block grant which would be sufficient to induce participation by an employer who did not currently recruit young people. They suggested a figure of f 1,850, so as to leave a contribution towards training costs of f400-f450 after the employer had paid the trainee’s allowance the Group had recommended. NAO found no evidence of how this level of contribution was determined, but noted that it was broadly consistent with DES’s later estimate, on certain assumptions, of f355 per trainee for off-the-job training at CFEs. The Secretary of State accepted the level of block grant at fl.850 for 1983-84, so that with the reduced trainee’s allowance the actual contribution towards training costs became f600. MSC reviewed the block grant in July

14

1984 in preparation for the second year of the scheme. The Secretary of State then approved an increase to f 1,950 from 1 September 1984, including the trainee allowance of f1,312.50 (fZ6.25 per week).

5.6 For Mode Bl, in which the trainee is not contributing to a provider’s business, the MSC contribution is designed to cover a substantial proportion, if not the whole, of costs within certain prescribed limits (see paragraph 2.10). The extent and contributions to costs are based on the experience of operating similar schemes under the Youth Opportunities Programme.

5.7 For Mode B2 the limit is higher than the contribution to Mode A costs, again to reflect the particular nature of provision and the special groups for whom it is intended, but it is less than the Mode Bl contribution to reflect that, in part, trainees may contribute to the costs of the work experi- ence providers through the value of the work they perform on placement.

5.8 The expenditure and cost per place for each YTS Mode can be summarised as follows:

Table 9

Mode A ModeBl ModeB2

Grants to sponsors 1983-84 f1,850(1) f3,600” f2,21OQ’ 1984-85 f1,950(1, f3,840~~ f2.325”)

1983-84 Expenditure f236.5m f111.6m f20.5111 Approved Places 321,CKIO 90,000 32,000 Entrants 244,723 83,697 25,559 unit Cost per full course”’ f2,228 f4.015 f1,869”,

No&x (I) In addition a f 100 administration fee per contracted place is paid. (2) Average grant per filled place. (3) Maximum grant payable. In addition a f ICOadmiais- tration fee per contracted place is paid. (4) Based on actual cost per trainee/month attended. (5) This figure does not take into account delays in the submission of 1983-84 claims by local authorities for off-the-job training which were claimed and paid in 1984-K

Arrangements for ensuring financial compliance 5.9 Although Mode A managing agents (paragraph 2.4) are remunerated through a block grant and a fixed manage- ment fee, these are subject to certain conditions: the agent must spend them exclusively on the promotion and running of the training programme; he should have due regard for economy; and he should use his best endeavours to fii train- ing places. MSC pay the grants on the basis of monthly claims by the agents. The 1983-84 Mode A agreements required the claims to be supported by audited accounts, including balance sheets, but MSC agreed not to enforce the requirement, since the basis of remuneration was pre- determined and they have deleted the condition from 1984-85 agreements. Agents are now required to maintain, for MSC inspection, separate detailed records of how all monies received from the Commission are spent; and MSC

reserve the right to call for audited accounts. MSC intended to supplement this arrangement by increased financial monitoring and statistically based surveys.

5.10 Mode Bl providers (paragraph 2.5) are required to submit claims for actual costs incurred within the specified maxima (paragraph 5.6); to maintain, for MSC inspection, detailed supporting records, including a register of capital assets; and to have due regard to economy. They are not permitted to make profits for themselves from YTS and must submit audited accounts at the end of each scheme

. year. Mode B2 managing agents (paragraph 2.6) are also reimbursed on the basis of monthly claims. They are subject to specific conditions on the use of funds and they must maintain detailed records of expenditure and make them available for MSC inspection; but they are not required to submit audited statements.

5.11 MSC’s financial monitoring of Modes A and B2 has been limited. Area Offices have carried out three financial monitoring visits during each 12 month scheme, but only to verify that trainees were receiving the correct allowances. They did not examine the managing agents’ detailed records of expenditure to verify Mode B2 claims or to assess the appropriateness of the Mode A block grant.

5.12 Financial monitoring of Mode Bl, on which MSC consider that the proper use of funds is most at risk, has been more detailed and has included an initial appraisal of spon- sors’ accounting and financial control systems. On subse- quent visits Area Offices have tested compliance with con- trol procedures.

5.13 A report in October 1984, commissioned by MSC from consultants, included recommendations that:

- MSC financial monitoring should concentrate generally on initial evaluation and reviewing final results, and otherwise on areas and cases of high risk;

- payment should be linked to the achievement of agreed performance standards;

- all Mode A final claims in respect of training places made available should be supported by an independent audit certificate;

- MSC grants for YTS should be recognised as incentives to managing agents, so that an element of profit would be acceptable;

- MSC should obtain access to more and better financial skill.

5.14 In reply to NAO’s enquiry as to the action they had taken on these recommendations, MSC stated that:

- the consultants’ report had been accepted in prin- ciple by MSC senior management; - a small project team had been established to develop the concepts recommended, pilot new finan- cial appraisal and monitoring systems and implement new procedures (by November 1985) in time to impact on the YTS negotiations for 1986-87 provision;

- the need for more professionally-qualified accountancy staff would be reviewed, as would the training needs for existing staff (in terms of both skills

and attitude), in order to deliver this new approach to financial appraisal and monitoring.

The work arising from the recommendations made by the consultants was being given priority by Training Division and was currently on schedule.

Reasonableness of Mode A block grant 5.15 As stated in paragraph 5.11, MSC have not con- ducted any systematic examination of Mode A managing agents’ financial records to confirm the adequacy, or other- wise, of the block grant paid for Mode A schemes. But they have conducted a “Providers’ Survey” of costs claimed to have been incurred by some 900 managing agents and spon- sors, in all three modes. The replies, received in November 1984, suggested that a small number of providers had found income plus benefits to be greater than costs, that more had broken even, and that a majority expected to make a loss (Table 10).

Table 10

Percentage of Providers in each Mode who

achieved broke made a results a surplus even IOSS unclear

Mode A 11 29 53 7 Mode Bl 16 45 36 3 Mode B2 5 33 53 9

5.16 A more detailed analysis of the reported information for Mode A suggested that an average filled YTS place cost the provider f470 (Table 11). However, NAO considered that these results needed to be treated with caution because they were based on a questionaire and follow-up oral ques- tions rather than an examination of financial records. Indeed, many of the respondents claimed to have had great difficulty in identifying the information required. Further- more, the average costs were distorted by the high expendi- ture associated with training apprentices and other long- term trainees who represented 18 per cent of the young people covered in the survey.

Table 11

Trainee allowance/wages and benefits Cost of off-the-job training Other costs of agency function Net test of work experience supervision

f f 1,548

426 717

1,474 4,165

Less: unavoidable supervision cosfs gross output contributions

457 1,017

1,474 Net cost of course Block grant and other income’ Net cost to managing agent

* Includes compensation for unoccupied places

2,691 2,221

- f470

5.17 MSC considered that some of the costs reported were likely to have been overstated. In particular, they were unable to reconcile the high level of work experience costs with respondents’ comments that work experience supervi- sion was easy to absorb. In reply to NAO’s enquiry whether

15

they proposed to undertake any direct cost examination as a vided a dependable check of the reasonableness of the grant. check on the reasonableness of the Mode A block grant, Whilst they were considering further study of this issue, MSC stated that a number of important elements @articu- which could well include examination of financial records, larly work experience supervision costs and the offsetting considerable emphasis would also be placed on those contribution to output by trainees) were unlikely to be elements of costs and benefits which would be unlikely to be reflected in scheme financial records. For this reason they identified there. did not believe that a check of financial records in itself pro-

:i ‘1

Part 6: Other Educational and Youth Training Initiatives

6.1 In developing YTS MSC has had in mind other initiat- ives in the field of vocational education and training both within and outside its own sphere. The main ones are as follows.

Education for work 6.2 The Technical and Vocational Education Initiative (TVEI) is designed to encourage 14-18 year olds to obtain qualifications and skills needed for work. It provides, ini- tially on a pilot basis, full-time, integrated, four-year courses of general, technical and vocational education covering the whole curriculum. MSC are responsible for developing and funding TVEI, but courses are provided in schools through local education authorities so that individ- ual projects meet local needs. Currently 62 projects are in operation, each of which will eventually cater for up to 1,000 young people at an average additional cost of about E600 per place per year. MSC are to expand the initiative further and expect it to cost $250 million over the period 1983-84 to 1991-92.

6.3 The DES Certificate of Pre-Vocational Education (CPVE) is to comprise a range of pre-vocational courses in schools and CFEs leading to a national certificate at 17 plus. These courses will last for one year and will comprise three elements: a common core of general education, including practical and social skills and knowledge of the world of work; vocational studies which may lead from the broadly based to the more specific according to the needs of the indi- vidual student; and additional studies which may include further studies in core or vocational areas, and/or recre- ational activities. Pilot schemes began in September 1984 and the new CPVE will be available on a full time basis from September 1985.

6.4 These two schemes need careful co-ordination with YTS if duplication of provision is to be avoided. This applies particularly to CPVE where MSC accept that there is some overlap. Although CPVE is educationally based whereas YTS is based on work experience, MSC are considering using CPVE in an appropriate form as a qualification within

YTS programmes. MSC told NAO that they were reviewing the inter-relationship with DES and other interested parties.

Training for jobs 6.5 In January 1984 the Government’s White Paper “Training for Jobs” (Cmnd 9135) set out a number of further objectives for the training arrangements for all ages. For young people it underlined the need for co-ordinated arrangements to help them progress from education to work as smoothly and effectively as possible; and the need for public sector provision for training and vocational educa- tion to become more responsive to employment needs at both national and local levels.

6.6 In pursuit of these aims the White Paper announced that MSC’s responsibilities would be extended to enable them to purchase a more significant proportion of work- related Non-Advanced Further Education (NAFE) pro- vided by local education authorities. Of the estimated f800 million devoted to this field in England and Wales in 1783-84, some f90 million was provided by MSC as a cus- tomer, either directly or indirectly, for courses or services: this share would increase to f 155 million in 1985-86 and to f200 million (one quarter) in 1986-87. At the same time the White Paper made it clear that the Education Departments, as well as other education interests, should be fully involved in the development of training and education programmes.

6.7 MSC and the Local Authority Associations have reached agreement, endorsed by Ministers, that from Sept- ember 1985 MSC will return to each local education author- ity an amount equal to the NAFE adjustment to the expendi- ture target resulting from the change. But MSC will require the authorities to spend these funds on work-related non- advanced further education, and will seek assurances that this has been done.

6.8 For 1986-87 and beyond a working group of represen- tatives of MSC, the Local Authority Associations and other interests has been set up to devise more detailed machinery and guidelines.

17

Glossary of Abbreviations

CFE

CPVE

DE

DES

MSC

NAFE

NAO

TVEI

YTB

YTS

College of Further Education

Certificate of Pre-Vocational Education

Department of Employment

Department of Education and Science

Manpower Services Commission

Non-Advanced Further Education

National Audit Office

Technical and Vocational Education Initiative

Youth Training Board

Youth Training Scheme