Learndirect case shows government IS ploughing millions into “too big to fail” contractors

Profile picture for user ddpreez By Derek du Preez March 1, 2018
Learndirect provides apprenticeships and training to thousands of people every year, yet it has been labelled as “inadequate” by Ofsted.

In the wake of Carillion’s collapse, the question is rightfully being asked about whether the government is propping up flailing contractors because they’re too big to fail. We at diginomica/government have long highlighted the government’s shocking track record in handing out contracts to outsourcers that continue to fail and yet receive millions of pounds from the taxpayer.

This week, a new report by the House of Commons Public Accounts Committee highlights just how systemic this problem is - despite politicians’ reassurances. The case of Learndirect, a long-standing private supplier of education and apprenticeships, shows that the government will make ‘special exceptions’ for companies that aren’t up to scratch, but are too embedded in Whitehall services to just simply turn away.

Learndirect trains over 20,000 apprentices each year, largely in skills like maths and IT, and claims itself to be the “UK’s largest provider of skills, training and employment services”.

However, MPs on the Public Accounts Committee have this week highlighted how the government continues to give Learndirect hundreds of millions of pounds, despite it being independently assessed as inadequate. The report states that Learndirect’s performance has been in “steep decline” since 2013.

Committee Chair, Meg Hillier MP, said:

Outsourcing is an abiding interest for our Committee but recent events have brought concerns about Government’s relationship with its contractors into sharp focus. In the case of Learndirect, thousands of learners have been let down amid poor oversight by Government and at significant public expense. There has been disruptive legal action and, finally, a scathing Ofsted report. Yet still Learndirect appears to hold the whip hand.

It expects to receive over £105 million of funding from its main government contracts for this year, a consequence of assessments made about the risk to public services should Learndirect’s funding be terminated.

It cannot be right that individual contractors should command such large sums of public money regardless of their performance. No commercial provider should be allowed to become so essential to the delivery of services that it cannot be allowed to fail.

Government has a duty to manage taxpayers’ exposure to risk diligently and we urge it to act on the recommendations set out in our Report.

The detail

The Education and Skills Funding Agency (ESFA), and its predecessor the Skills Funding Agency, gave Learndirect almost £500 million in the academic years from 2013 to 2017. However, the quality of Learndirect’s apprenticeships provision was in decline from 2012 and in 2015/16 it failed to achieve ESFA’s minimum standards for apprenticeships.

However, despite this downward trend, the company waited until September 2016 to develop an improvement plan. In March 2013, Ofsted rated Learndirect as ‘good’ for overall effectiveness, but by March 2017 Ofsted rated Learndirect to be ‘inadequate’.

Amazingly, Learndirect actually launched a legal challenge against Ofsted, claiming that it should not have inspected its apprenticeships provision, because it was about to be moved to another company in the group. The judge ruled fully in Ofsted’s favour, however the process delayed the information being made public for five months.

From May 2017, following the Ofsted inspection, ESFA had to consider whether to withdraw the company’s funding for further education activities. Learndirect, however, argued that unless it received £48 million in the 2017/18 academic year from ESFA then it would likely enter administration or become insolvent.

ESFA decided that the size of Learndirect, and its potential impact on learners, meant that it was an “unusual case”, to which special considerations should apply. It awarded Learndirect £45 million of funding for 2017/18 and extended the company’s contract to July 2018.

It’s also worth noting, that during this process it’s thought that Learndirect was ‘gaming the system’. Ofsted originally planned to re-inspect Learndirect at the start of November 2016, but agreed to defer its inspection when Learndirect claimed it was negotiating the sale of its apprenticeships business. Ofsted’s policy states that an inspection may be deferred if “the provision is due to merge, close or move, and it is decided that no useful purpose will be served in inspecting it.”

The sale of part of Learndirect’s business did not ultimately take place, and Ofsted did not carry out the inspection until March 2017, over four months later. Learndirect requested a deferral in March 2017, on the same grounds as those that prompted Ofsted to defer its planned inspection on November 2016, but this time Ofsted did not defer the inspection.

The report states:

Given Learndirect Ltd’s importance to the sector and the number of learners affected, Ofsted should not have been so easily put off in November 2016, and should have resolved to conduct its inspection earlier. Ofsted needs to develop a clear and consistent approach which takes better account of potential gaming by commercial providers.

My take

I would go as far as to say that this should be a national scandal. This is a company that is inadequately providing education services - an area the government is keen to enhance given the skills deficit in this country - and is yet receiving millions of pounds in public sector funding. Again, this is a case of a company getting away with being ineffective, because the government’s poor oversight and management. And unfortunately, this won’t be the last time it happens.