MD2375 GLA European Social Fund Programme match funded AEB budget

There is approximately £148 million of London's European Social Fund (ESF) allocation which is uncommitted and available to Co-Financing Organisations (CFOs) to match-fund delivery of skills and employment support to Londoners who are disadvantaged in the labour market.

Subject to meeting a series of principles set out in a delegation arrangement agreed by the GLA and the Department for Education, from 1 August 2019, London Adult Education Budget (AEB) functions will be delegated to the Mayor.

The indicative annual budget for the AEB is approximately £311 million. The final budget for 2019/20 is expected to be confirmed in January 2019. The majority of the annual AEB funding will be used to award grant funding to Further Education (FE) Colleges, local authorities and Institutes of Adult Learning (IALs) for their London AEB delivery but, depending on the final budget awarded by DfE, it is expected that approximately £130 million will be used to competitively procure services required for the Mayor’s discharge of delegated London AEB functions.

The GLA intends to use a commitment of expenditure of approximately £71 million (over four years) on the services to be procured using AEB as match funding to enable it to draw down an equal amount of London’s uncommitted ESF. This will enable the GLA to commission a separate, additional 100% ESF-funded skills and employment programme, the “Mayor’s ESF 2019-23 Programme” concluding in 2023. This ESF funding might otherwise remain uncommitted, resulting in a loss of funding for skills and employment support for Londoners. In addition, it is expected that funding to replace European Structural and Investment Funds (ESIF) will be made available by Government post-Brexit through the UK Shared Prosperity Fund (SPF). Successful delivery of the current London ESF programme will help to support the case for devolution of the SPF to the Mayor.

The Mayor approved the proposal to use AEB as match funding to draw down ESF funding in March 2018 (under cover of MD2255: Devolution of the Adult Education Budget to the Mayor and committing remaining European Social Fund (ESF) in London). In addition, the Mayor approved the GLA’s proposed approach to the process for the procurement of the separate AEB services (under cover of MD2371 (Adult Education Budget Procured Provision Delivery Arrangements) which it is proposed will be used to provide the match funding for this Mayor’s ESF 2019-23 Programme.

An overview of the projects within the Mayor’s ESF 2019-23 Programme is provided below and further detail is provided in the Appendices. These projects have been developed to respond to priorities identified within the London Economic Action Partnership’s (LEAP’s) ESIF Strategy, the Mayor’s Skills for Londoners Strategy and other statutory Mayoral strategies.

Mayor’s ESF 2019-23 Programme services will be procured through an open and competitive process, in accordance with ESF requirements. This will be launched in October 2018, with contracts in place to ‘go-live’ from 1 August 2019. A detailed procurement timetable is provided in Appendix 1.

LEAP and LEAP Investment Committee endorsed the GLA's intention to use a proportion of the delegated AEB to match fund approximately £71 million of ESF to deliver employment and skills programmes for Londoners at their meetings on 27 June and 24 July 2018 respectively.

ESF provides funding for skills and employment projects in London through two main ‘Priority Axes’:

- Priority Axis 1, “Inclusive Labour Markets”, provides support to enable:

• Jobseekers and economically inactive people, particularly those most disadvantaged in the labour market, to access and sustain employment, including through skills development;
• Young people aged 16-24 who are not in employment, education or training (NEET) to access and sustain further education, training or employment;
• People who are marginalized and/or have multiple and complex barriers to participate in the labour market.

- Priority Axis 2, “Skills for Growth”, provides support for:

• Adults who are in work, but face barriers to progressing to a better or more secure role, particularly due to having low or out-of-date skills;
• Partnership activities which aim to increase employer participation in further education and training and improve its responsiveness to the needs of the local economy.

The Mayor’s ESF 2019-23 Programme comprises a mix of youth and adult skills and employment projects under these Priority Axes.

The Mayor’s ESF 2019-23 Programme focuses on areas which aim to most add value to existing national and regional programmes including those for which the Mayor is or will be responsible in the future, such as the Young Londoners Fund and the AEB. The proposals also reflect areas where there are currently gaps in provision, limited support available to meet needs, or where innovative approaches might help to identify improvements in the outcomes from current mainstream provision.

The Mayor’s ESF 2019-23 Programme will also reflect LEAP’s skills and employment priorities of sustained employment, career progression and progression in learning, with funding incentives in place to reward providers for progression and job sustainability.

The following paragraphs provide an overview of the proposed programme of delivery. Additional information, including indicative budgets and outputs and outcomes, is provided in Appendices 2-4.

- Occupational Skills Programmes, focused on:

a Equipping unemployed and economically inactive adults and young people who are NEET with the industry relevant and pre-apprenticeships skills they need to progress into sustainable employment in key London sectors (see Appendix 4, project 1b);
b Providing disadvantaged adults aged 18+ who are in work, but earning below the London Living Wage (LLW), to progress within work through industry-relevant higher-level skills development relevant to key London sectors (Appendix 4, project 1b).

- Improved provision and outcomes for English for Speakers of Other Languages (ESOL) through two complementary projects:

a Support for unemployed adults aged 18+ who are at pre-entry and entry level 1 ESOL to help them improve their English, employability and social integration skills in order to progress into further learning or work and integrate into society (Appendix 4, project 2a);
b Re-training and upskilling for ESOL practitioners, focused on developing their teaching, expertise and confidence to enable them to progress in work and support the delivery of high quality ESOL provision in London (Appendix 4, project 2b).

- Improving participation and achievement in English and Maths through innovative pilot approaches to engaging and retaining participants and delivering training, including provision of wrap-around support, for adults who are in-work but do not have at least level 2 in these subjects (Appendix 4, project 3).

- Parental Employment programme with two complementary projects (Appendix 4, project 4) piloting approaches which provide a package of training, advice and guidance and wrap-around support, including financial advice and childcare, to enable:

a Workless parents with young children, particularly those with lower level qualifications, to enter or re-enter the workplace in a manner that works for them and their families;
b Low paid parents who are in work, particularly those with lower level qualifications, to progress in their careers, providing them with the skills and knowledge that can lead to higher earnings.

- Targeted employment support for adult Londoners with complex barriers, through two projects delivering innovative approaches to support ex-offenders (Appendix 4, project 5a) and homeless people (Appendix 4, project 5b) to access and retain employment, working with employers and taking a multi-agency approach to overcome the barriers faced.

- Targeted support for young people aged 16-24 who are NEET and have specific complex needs or characteristics - e.g. care leavers, people with alcohol or substance misuse issues, homeless people etc. – offering tailored programmes and taking a multi-agency approach to address the complex barriers faced by these young people and support them further education, apprenticeships or employment (Appendix 4, project 6).

- A gangs prevention project offering intensive and long-term support for young people aged 15-18 who are involved in, or at risk of being involved in gangs, supporting them to return to education or move on to employment or an apprenticeship (Appendix 4, project 7).

- Three projects for young people aged 16-24 who are NEET and have learning difficulties, disabilities or mental health issues, delivering individually tailored support to access sustained employment or further education (Appendix 4, project 8).

- Facilitating continuing participation for 15-19 year olds who are at risk of becoming NEET in order to improve their retention and achievement rates in education, leading to improved life chances and progression opportunities (Appendix 4, project 9).

- Careers Clusters, building on the previous successful Career Clusters and aiming to improve the provision of careers education, information, advice and guidance (CEIAG) by bringing schools and colleges together to develop employer-focused activities for pupils, helping teachers understand London's job opportunities and supporting pupils to access work placements and internships (Appendix 4, project 10).

Estimated project values and delivery geographies for each of the above projects are provided in Appendix 4. The majority of projects will be delivered at either a pan-London or a sub-regional level, and most contract values will be in the region of £2 million for the four-year contract period.

All contracts will be paid based on outputs and outcomes delivered. However, it is recognised that output/outcome payment models can sometimes dissuade smaller organisations from bidding and, subject to the outcome of due diligence checks, advance payments may be offered to support providers’ cashflow in the early phase of delivery. Advances will be recovered against payments due for delivery of outputs and outcomes. This aligns with practice on the GLA’s current ESF 2014-20 Co-Financing programme.

Contracts will start from 1 August 2019 and delivery will finish in June-July 2023, allowing two to three months for final reporting, project closure and for the GLA to submit all final claims to EPMU in Autumn 2023. While all contracts will be awarded for 4 years, break and review points will be included to mitigate risks of:

• Available AEB match funding reducing during the four-year period;
• Programme-level underspend by enabling the GLA to reallocate funding between contracts which are underperforming and those that are performing well; and
• Being unduly restricted from any changes to the Mayor’s ESF 2019-23 programme that may be made after the 2020 Mayoral election.

Because the expenditure of AEB service provision is to be used to provide match funding through a separate programme of delivery, 100% of the cost of delivering this Mayor’s ESF 2019-23 programme, including the management and administration costs (M&A), will be recoverable from ESF, subject to ESF compliance requirements being met.

Expenditure on delivery of the Mayor’s ESF 2019-23 Programme services described in paragraph 2.5 above is expected to be in the region of £64.5 million. Up to 10% of the value of this delivery expenditure may be claimed to cover the M&A costs of the programme. The maximum budget available for M&A costs up to 30 September 2023 is therefore approximately £6.5 million. Based on current estimates, GLA officers do not anticipate that the full £6.5 million will be required for M&A, but the situation will be reviewed once the current procurement process has been completed and any potential underspend may be reallocated to project delivery at a later stage.

In addition to the staff costs associated with developing, procuring and managing the Mayor’s ESF 2019-23 Programme, other M&A activities which may be supported include:

- Consultancy support to fill gaps in in-house resources or expertise. This could cover specification development, development of programme management tools and materials, or external professional expertise to develop contract and procurement templates.

- Commissioning a programme evaluation (in accordance with the ESF funding requirement that an overall programme evaluation is completed by the end of the programme delivery period). A programme evaluation is likely to include: support to delivery partners to develop self-evaluation strategies; work to develop appropriate social outcome indicators; individual project evaluations for pilot projects, particularly where they may inform future development of the mainstream AEB provision; and a meta-evaluation of the programme.

- Programme-level marketing, publicity and events, including venue hire, catering, publicity and facilitators for market warming and procurement information workshops, provider on-boarding events and training, provider networking and best practice events, and project steering group meetings.

- Costs associated with collection, analysis and reporting of management information to meet the ESF requirements, including development of existing systems (noting that the ESF Managing Authority expect the GLA to have adequate systems in place to monitor and manage the programme so only additional costs directly related to meeting ESF requirements will be met, and the purchase of equipment costing more than £1,000 is ineligible).

ESF rules require that all ESF CFO contracts, whether for project delivery or M&A activities, are awarded through an open, fair and transparent process in accordance with the EU public procurement regulations. GLA officers are working closely with the TfL Procurement team to ensure that the Mayor’s ESF 2019-23 Programme procurement complies with these requirements and the GLA’s Contracts and Funding Code. On completion of the procurement process, specific contract awards falling within this programme will be approved (as ESF expenditure) by the Executive Director responsible for Skills and Employment, in accordance with the Mayor’s scheme of delegation “Mayoral Decision-Making in the GLA”.

M&A expenditure related to this Mayor’s ESF 2019-23 Programme will be approved at the appropriate level for the expenditure incurred, in accordance with the Mayor’s scheme of delegation “Mayoral Decision-Making in the GLA”.

Section 149(1) of the Equality Act 2010 provides that, in the exercise of their functions, public authorities – of whom the Mayor is one – must have due regard to the need to:

• Eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under the Equality Act 2010;
• Advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; and
• Foster good relations between persons who share a relevant protected characteristic and persons who do not share it.

Relevant protected characteristics are age, disability, gender re-assignment, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

The Mayor is required to comply with the duty to have due regard detailed above in making any decisions relating to the Mayor’s ESF 2019-23 Programme.

The aim of ESF is to improve opportunities for people who are disadvantaged in the labour market. The Mayor’s ESF 2019-23 Programme will support Londoners who need skills and training to access a job or progress in work, including people with no basic skills, lone parents, people from black and minority ethnic backgrounds, people with disabilities and people in low paid or low skilled jobs. All projects include targets for engaging and supporting disabled people, BAME people and women, those groups having been identified in the “Skills Strategy for Londoners: Evidence base” (GLA, June 2018) as having lower than average employment rates.

Contractual agreements with delivery partners for the Mayor’s ESF 2019-23 Programme will require providers to comply with all applicable existing and future equal opportunities laws, regulations and guidance, and GLA guidance in relation to race, nationality, ethnicity, disability, gender, sexual orientation, age, religion or belief.

GLA officers will periodically monitor successful projects to verify that equalities policies, procedures and processes are understood and applied by staff and project participants; that they are being monitored and reviewed; and that any underperformance against agreed equalities targets is being investigated and relevant mitigation actions are being taken.

As a CFO, the GLA is required to report to the London European Programmes Management Unit (EPMU), the Managing Authority (Department for Work and Pensions), and LEAP’s London European Structural & Investment Funds Committee (LEC) on a programme basis, as well as by individual project. In addition, projects will be required to comply with stringent ESF rules and are subject to multi-level audits by EPMU and by national and European audit authorities. Audits can take place up to 8 or 10 years after delivery has finished. There is a risk of clawback or financial penalties being applied if any irregularities are identified through these audits.

The team responsible for implementing the GLA’s CFO responsibilities transferred to the Skills and Employment team in June 2018. The team has extensive experience of managing previous ESF Co-Financing Programmes and has consistently achieved low-risk audit ratings from the Managing Authority, the ESF Audit Authority and internal audit. To minimise the risks associated with ESF evidence, audit and clawback requirements and to ensure consistency of programme reporting, the Skills and Employment team will be responsible for managing the procurement and delivery of the Mayor’s ESF 2019-23 Programme.

Under cover of MD2255 the Mayor approved the seeking of the full amount of ESF underspend which was uncommitted at regional level. Since then, detailed programme development work has highlighted the risk that the procured AEB contracts will underspend compared to the Mayor’s ESF 2019-23 contracts, resulting in a shortfall of ESF eligible match. In addition, AEB providers may be less experienced with ESF compliance and so some procured AEB provision may not be eligible as match funding. To mitigate these risks, the GLA will seek to draw down a smaller proportion of London’s ESF allocation than previously estimated and the value of the AEB provision which is procured as potential ESF match will be greater than is required to provide match funding for the £71 million Mayor’s ESF 2019-23 programme, providing a ‘reserve’ to offset any underperformance on the match funding. The ESFA is intending to draw down approximately £16million of London’s remaining unallocated ESF allocation to deliver generic provision to support young Londoners aged 15 to 24 who are NEET and a London Community Grants programme, match funded by national ESFA programmes.

The allocation to the GLA of £71 million ESF to procure and deliver the Mayor’s ESF 2019-23 Programme requires approval from EPMU, acting on behalf of the ESF Managing Authority for England. Applications for this allocation will be submitted to EPMU in early October. In order to meet the proposed ‘go-live’ date of 1 August 2019, aligned to the ‘go-live’ date for the AEB match funding, procurement will need to begin prior to receiving EPMU approval for the proposed use of ESF. This will mean that some M&A costs associated with the development and procurement of the programme will be incurred by the GLA ‘at risk’ before the outcome of the GLA’s ESF applications. However, the GLA’s outline proposals were presented to the LEC meeting on 17 July 2018 and the GLA CFO has been working closely with EPMU to ensure that the Mayor’s ESF 2019-23 Programme meets London ESF priorities and complements other ESF activities in London. Therefore, GLA officers believe that the risk that the ESF applications will be unsuccessful is minimal. Although small, the risk will be highlighted to potential bidders in the Invitation to Tender and no commitment to the award of all or any contracts will be made by the GLA until the GLA’s ESF funding allocation has been confirmed by EPMU.

The Chancellor announced in August and October 2016 that the government would guarantee funding for ESF projects agreed before the UK leaves the EU. Subsequently the Brexit Withdrawal Agreement between the UK and the EU published in March 2018 confirmed that the UK would continue to participate in the ESF programme until 2023, subject to a final negotiated agreement. This guarantee still meant that, should final negotiations on Brexit result in a ‘no deal’, the Government might only fund projects which had formal commitments at the point the UK left the EU. However, in July 2018, the Government extended this guarantee. This extension allows EPMU, acting for the Department for Work and Pensions (DWP), to continue to approve new ESF projects after EU Exit until the end of 2020 and confirms that these projects will continue to receive funding over their lifetime to September 2023.

The indicative annual budget for the AEB will be approximately £311m, with the final budget expected to be confirmed in early 2019. Most of this budget will be administered via grant funding Further Education (FE) Colleges, local authorities and Institutes of Adult Learning (IALs). However, depending on the final award by DfE, it is expected that approximately £130m will be competitively procured. The GLA intends to use £71m (over 4 years) of this procured AEB as match funding to draw down an additional £71m from London’s uncommitted ESF. This will enable the GLA to commission additional ESF funded skills & employment programmes which will end in 2023.

It should be noted that as the AEB provision for the match funding is being administered via a separate programme, 100% of the £71m Mayor’s ESF 2019-23 Programme allocation (including the Management & Administrative costs) will be recovered from the ESF, subject to the usual ESF audit / compliance regime. From the gross £71m ESF budget, up to 10% of the value of Mayor’s ESF 2019-23 Programme delivery can be claimed for management and administration up to the 30 September 2023. The project team have estimated this to be in the region of £6.5m for the duration of the programme.

All bidders for the ESF 2019-23 Programme contracts will be subject to financial due diligence to ensure that providers are solvent, fit and proper and to provide the GLA with assurance that they will be able to deliver against their contractual obligations.

Sections 1 – 4 of this report indicate that:

- the decisions requested of the Mayor fall within his exercise of the GLA’s general powers to do such things considered to further or which are facilitative of, conducive or incidental to the promotion of economic development and wealth creation, and social development in Greater London; and

- in formulating the proposals in respect of which a decision is sought officers have complied with the GLA’s related statutory duties to:

a Pay due regard to the principle that there should be equality of opportunity for all people;
b Consider how the proposals will promote the health of persons, health inequalities between persons and to contribute towards achievement of sustainable development in the United Kingdom; and
c Consult with the appropriate bodies.

It is proposed that expenditure is to be funded using ESF Funding which is the subject of an application to the GLA’s EPMU and that is also reliant upon the Secretary of State for Education’s delegation of the London AEB functions to the Mayor. If therefore, the Mayor is minded to approve the expenditure proposed officers must exercise caution before committing to any expenditure in reliance of such funding before the London AEB delegation has been finalised and ESF applications approved by EPMU (acting for DWP).

Officers must also ensure that:

- The services required are procured by Transport for London Commercial Procurement (and in liaison with EPMU as necessary) who will determine the detail of the procurement strategy to be adopted in accordance with the GLA’s Contracts and Funding Code and ESF requirements;

- Appropriate contracts are put in place between and executed by the GLA and successful bidders before the commencement of such services; and

- Given that the proposed expenditure extends beyond the current Mayoral term, they observe the principle that an incumbent administration should not unreasonably fetter the discretion of any future administration, ensuring that all of the necessary documentation contains provisions enabling the GLA to terminate at any point for convenience and any project milestones, outputs and (ESF) claims are structured so as to minimise the impact of the exercise of such termination rights.

In taking the decisions requested, the Mayor must have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity and foster good relations between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not (section 149 of the Equality Act 2010). To this end, the Mayor should have particular regard to section 3 (above) of this report.