Flexible Workforce Development Fund (FWDF): evaluation

3. Fund Development and Policy Context

Summary

The evaluation found that the guiding principles that underpin the Flexible Workforce Development Fund (FWDF) remain relevant. The main challenges in implementation are the principles of simplicity, minimal administrative burden and responsiveness to employer demand.

When the FWDF was developed in academic year 2017/18, the main policy drivers were: recognise the needs and expectations of Levy-payers; support workforce development in line with the Labour Market Strategy (2016); tackle in-work poverty; and ensure the Fund strengthens college engagement with industry. The Fund has evolved and so the needs and expectations of Small and Medium Enterprises (SMEs) are also now of similar relevance. The feedback provided through our employer survey suggests that the main policy driver for employers is upskilling and reskilling. The important role that the Fund has played in strengthening college engagement with industry also emerged strongly from our stakeholder consultations and employer survey.

Since the FWDF was developed, delivery has continued to evolve based on the feedback from partners and stakeholders, including employers, and the Fund has been responsive to external drivers (e.g. COVID-19). The policy landscape also continues to evolve, albeit there are a clear set of policy drivers at all levels, namely: inclusive growth; COVID-19 recovery and renewal; wellbeing; fair work; net zero; and community wealth building.

The policy review and all of the stakeholder engagement identified a strong and continuing rationale for interventions that support upskilling and reskilling. Not least because of COVID-19 and EU-Exit which have converged to create an uncertain future and have exacerbated existing skills shortages and gaps across different sectors of the economy. Taken together, the evaluation evidence found a clear and ongoing need to support the current and future workforce to be adaptable and flexible given that skills requirements will also continue to change.

Scotland's Future Skills Action Plan (2019) and, more recently, Scotland's National Strategy for Economic Transformation (2022) have reaffirmed the Scottish Government's commitment to workforce development. A priority within the Scottish Government is the climate emergency and transition to net zero which further reinforce the need for a focus on jobs and skills development. The climate emergency, however, did not appear strongly in the feedback from employers regarding skills gaps nor was it among the main drivers of change identified for their business. This might reflect factors such as limited understanding of the skills needed within the business to address the transition to net zero, rather than limited employer demand (which may take time to build).

Development of FWDF and timeline

The FWDF is a Scottish Government initiative, launched in academic year 2017/18, and created in direct response to feedback from the Government's consultation on the introduction of the UK Government Apprenticeship Levy (July 2016). Almost 80% of respondents to that consultation supported the introduction of a flexible fund to upskill and reskill existing staff.

The FWDF continues to be aimed at providing employers with flexible workforce development training opportunities to support: inclusive economic growth; address skills gaps; and boost productivity through upskilling or retraining employees for whom apprenticeships are not an appropriate route to address their training needs. Five guiding principles were identified to underpin the FWDF: simplicity; minimal administrative burden; cost effectiveness of delivery; transparency; and responsiveness to employer demand. These are customer-facing. The administrative burden to developing a multi-partner approach does, however, create the need for strong due diligence and dedicated administration.

Timeline

Year 1 (pilot year)

In this first year (academic year 2017/18), £10 million was made available by the Scottish Government for the FWDF. The Scottish Funding Council (SFC) administered the Fund on behalf of the college network in Scotland which created and delivered training programmes tailored to the needs of employers. The FWDF, launched on 7 September 2017, was available to UK Apprenticeship Levy-payers across the private, public and third sectors in Scotland, providing access to training up to the value of £10,000 per company.

An independent evaluation of the FWDF pilot year (2018), commissioned by the Scottish Government, explored what worked well and less well in the first year of the Fund. Although noting that the FWDF appeared to be operating well, the pilot evaluation also highlighted areas that could be improved and provided short-term and long-term recommendations. Some of the recommendations were implemented in Year 2 or in subsequent years.

Year 2

In Year 2 (academic year 2018/19) £10 million was again made available by the Scottish Government for the FWDF. The main changes implemented from Year 1 to Year 2 of the Fund were:

• The maximum amount available increased from £10,000 to £15,000 per annum for Levy-payer employers.
• Levy-payer employers were also given the opportunity to either involve supply chain employees in mutually beneficial training or relinquish access to funding from the FWDF for up to two supply chain companies of their choice.

The evaluation found that the supply chain opportunity has not been used to any great extent during Year 2 to Year 4 by Levy-payer employers. Indeed, subsequent evolution of the Fund in Year 4 (see below) has resulted in this option no longer being relevant (i.e. any employer can now apply to the FWDF directly). Although accessing the Fund via the supply chain route offers potentially greater funding for some employers.

Year 3

Year 3 (academic year 2019/20) of the FWDF began in August 2019, and was due to be delivered using the same model as Year 2, with a further £10 million made available from the Scottish Government.

The emergence and rapid spread of the COVID-19 pandemic in early 2020 was part of a global public health and economic crisis. As case numbers started to climb in the UK, the UK Government and the devolved administrations began introducing a series of measures aimed at reducing the transmission of the virus. These included restrictions on international travel, closure of all but essential shops and businesses and instructions to the public to stay at home and only go out for limited essential purposes such as shopping, exercise, and health appointments. These 'lockdown' measures had an immediate and severe impact on businesses and their employees, and the UK/Scottish Governments responded with a range of funding support schemes to avoid economic collapse.

In response to the wide-ranging challenges encountered, both on the demand-side of the FWDF (i.e. employers and employees) and on the supply-side (i.e. training providers), the delivery period for Year 3 of the FWDF was extended from the end of December 2020 to the end of December 2021. This resulted in a significant overlapping of funding and delivery in Year 3, Year 4 and Year 5 of the Fund.

Year 4

In Year 4 (academic year 2020/21) the Scottish Government investment in the FWDF doubled from £10 million to £20 million, in line with the Scottish Government Future Skills Action Plan (FSAP) commitment in September 2019. Following discussions with a wide range of stakeholders:

• £18 million was allocated to SFC. In addition to £13 million for Levy-payer employers delivered through the college network, a further £5 million enabled the introduction of support for non-Levy-payer SMEs through colleges and Open University in Scotland (OUiS). SFC continued to administer the Fund on behalf of colleges and OUiS.
• £2 million was allocated to Skills Development Scotland (SDS) to enable Levy-payers to access FWDF training through private providers. The eligibility and conditions offered through SDS to Levy-payers mirrored that of the SFC offer of up to £15,000. SDS has managed this through a grant arrangement to enable businesses to purchase the non-college based training they require for themselves.

Year 5

While not part of this evaluation, Year 5 of the FWDF (academic year 2021/22) began in August 2021. It is being delivered using the same model as Year 4 and will see a return to the normal delivery cycle:

• Applications had be submitted by 31 July 2022. It was generally promoted on a "first-come, first-served" basis, and to apply early.
• Training had to commence by 31 August 2022.
• Training had to be completed by 31 December 2022.

Continuing the revised model introduced in Year 4 allowed time for the changes to more fully bed in and address the ongoing challenges of the impact of Covid-19.

Policy drivers

At the time the FWDF was developed, the main policy drivers identified by the Scottish Government were to:

• Recognise the needs and expectations of Levy-payers.
• Support workforce development in line with the aims of the Labour Market Strategy (2016), particularly around upskilling and reskilling workers consistent with ambitions to raise productivity.
• Tackle in-work poverty.
• Ensure the Fund strengthens college engagement with industry.

The evaluation found that these continue to be relevant drivers for the FWDF.

The aim of the Scottish Government Economic Strategy (2015) was "Increased sustainable growth, with opportunities for all to flourish", with dual objectives of boosting competitiveness and tackling inequality. It recognised that "Investing in our people", for example, through workforce development, provides many benefits for employers and employees.

The Scottish Government National Performance Framework is for all of Scotland, and among other things provides a framework to track progress of government's purpose. The national outcomes of most relevance to the FWDF are Education (People are well educated, skilled and able to contribute to society) and Economy (We have a globally competitive, entrepreneurial, inclusive and sustainable economy). This recognises that workforce development provides mutual benefits for employees (e.g. career advancement) and employers (e.g. building and retaining a strong team).

The Scottish Government Labour Market Strategy (2016) acknowledged that a strong labour market can drive inclusive, sustainable economic growth. It supports growing and competitive businesses, high employment, and a skilled population capable of meeting the needs of employers.

Fair work is viewed as central to improving the lives of individuals and their families. A key priority is to support employability and skills, so that everyone, regardless of background, can participate successfully in the labour market. Workforce development interventions are crucial to help build and retain an engaged, skilled and productive workforce to help businesses achieve their growth ambitions and to respond to ever-changing needs.

Scotland's Future Skills Action Plan (2019) also highlights the importance of skills in helping individuals reach their potential and provides a thematic framework to demonstrate the development and re-focusing of Scotland's skills system. Improving productivity, inclusive growth, and fair work are reaffirmed as critical for Scotland's future success.

The Climate Emergency Skills Action Plan 2020/25 provides the framework for the skills investment needed to meet the global climate change challenge and successfully support Scotland's transition to a low carbon economy in a just and inclusive manner. It recognises the significant opportunities for developing new, quality green jobs and embedding green and circular economy skills. Within the context of COVID-19 recovery and renewal, the policy focus on ensuring a green recovery reinforces the need for a focus on jobs and skills.

The Scottish Government 10-year National Strategy for Economic Transformation (2022) sets out the priorities for Scotland's economy and the actions needed to maximise the opportunities of the next decade to achieve the vision of a wellbeing economy.The vision is "to create a wellbeing economy: a society that is thriving across economic, social and environmental dimensions, and that delivers prosperity for all Scotland's people and places. This will be achieved while respecting environmental limits, embodied by climate and nature targets". An action refers explicitly to the FWDF, reaffirming government's commitment to supporting workforce development: "Implement a lifetime upskilling and retraining offer that is more straightforward for people and business to access and benefit from". The Skilled Workforce Programme of Action highlights the importance of people having the skills they need at every stage of life to have rewarding careers and meet the demands of an ever-changing economy and society, and that employers invest in the skilled employees they need to grow their businesses.