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Mr. Timms: I am pleased that my hon. Friend has drawn attention to this important matter. In Newham and similar areas, college expansions have been funded by regeneration grants from Europe, city challenge and elsewhere, and have been tied to funding for increased student places. If funding is no longer available for such expansion, the danger is that they will have to repay those regeneration grants.
Mr. Davies: I am grateful to my hon. Friend for pointing out that issue, which seriously affects a number of colleges. I hope that the Minister will also deal with that matter.
The Parliamentary Under-Secretary of State for Education and Employment (Mr. James Paice): I shall, if the hon. Gentleman sits down.
Mr. Davies: Indeed. I recognise the constraints on time, and I shall give the Minister the chance to respond to these points.
The Parliamentary Under-Secretary of State for Education and Employment (Mr. James Paice): As always, the hon. Member for Oldham, Central and Royton (Mr. Davies) omitted the crucial points. First, he omitted to tell us whether a Labour Government would reintroduce the non-cash-limited element of demand-led funding, which has been the centrepiece of this debate. The matter is about not cost but the principle of whether Labour would reintroduce it. Secondly, he reiterated the absurdity of the windfall tax apparently abolishing youth unemployment--a one-off measure paid for by a one-off tax.
It is nearly four years since further education and sixth form colleges left local authority control and were freed to become incorporated organisations. Their achievements have been formidable. Several hon. Members have described the exceptional growth, of which there is no doubt. Student numbers have grown by more than 30 per cent.
In opening the debate, the hon. Member for Hyndburn (Mr. Pope) referred to staff contracts and issues relating to the employment of staff, demonstrating that he seems more concerned about the numbers of staff than the students who are being taught. The staff "silver book" contract under which virtually all staff were employed at the time of incorporation--too many are still employed under it--stipulates a maximum of 21 hours a week teaching and 38 weeks' total work a year. I do not think that, in the last part of this century, such contracts can ensure that colleges efficiently use the staff they need.
Mr. Paice:
I cannot give way. I do not have time, because so many hon. Members spoke in the debate.
Since incorporation, the Government have increased resources to the further education sector, which now receives well over £3 billion a year. The sector will have noticed that, despite all their huffing and puffing today, the Opposition said nothing about providing any further direct funding.
The House may be aware that yesterday the Further Education Funding Council published a comprehensive set of performance indicators for the 1994-95 academic year, which has been placed in the Library. It contains a vast amount of information of both local and national application. It shows that the average achievement rate for students who completed their programmes was 71 per cent., which I am sure most colleagues would agree is not too bad.
If one unpacks that figure, however, one finds a massive variation in colleges. Although part of the variation can be explained by circumstances, colleges with the lowest rates of achievement should at least be giving as much attention to raising them as they are to securing further increases in student numbers. To put that into perspective, the worst achievement rates in the general FE sector are considerably below 30 per cent., whereas the best are over 90 per cent.
I turn to the issue of demand-led expansion funding and the events of recent weeks. It is correct that, in the 1991 White Paper the Government undertook to meet the additional costs of colleges' expansion above agreed targets, which became known as "super-DLE" payments. No Opposition Member has said that, until the current financial year, those payments have never been called on because the costs of the demand-led element have been met by the shortfall in performance of other colleges, such that the overall FEFC budget has been sufficient to meet the total costs.
The unforeseen and unprecedented expansion in student numbers in the 1995-96 academic year changed that. Student numbers in full-time equivalents rose by 11 per cent. and, in that total, the number of FEFC-funded part-time students rose by no less than 37 per cent. Although the rate of full-time equivalent student growth has slowed a little, it is still forecast to be about 8 per cent.
The Further Education Funding Council wrote to the Government on 30 November, after the conclusion of the public expenditure round, to say that its demand for DLE payments would be £82 million in the current financial year. A few weeks later, we were advised that the additional costs in the next financial year to meet the growth above target in the spring and summer terms of this academic year would be another £84 million. So, in the space of six or seven weeks, we were told that DLE would require over two years at least £166 million--excluding the rest of the next academic year. Those are substantial sums to find, but, according to our undertaking, we found the £82 million shortfall for the current financial year from other departmental spending.
A Government decision not to pay the £84 million for the first two terms of the next financial year--the last two terms of the current academic year--was never made. It was extremely unfortunate that the colleges were led to believe by a letter from the Further Education Funding Council that that might be so. The Government never took such a decision, and have therefore not changed their position. When we were able to look more carefully at the figures and examine the matter, I was able to announce, as hon. Members have said, that we shall ensure that that £84 million is met. It is due to colleges, it is being incurred with students in place, it will be met, and the Government will meet the greater part of it.
I know that a number of colleges are concerned about what can be described as borderline cases--precisely, whether a contract was in existence and arrangements were made. I know that the FEFC is consulting colleges on the issues, and I understand that it is sending a letter today to all colleges to try to ensure that the precise details are clear. I should make it absolutely clear that students who are already engaged on a course should have nothing whatever to worry about. There is no question, as has been suggested, of stopping students who are engaged in courses.
On a reasonable basis, we have met our obligations under the White Paper commitment. In the space of six weeks, we found an extra £150 million or so to honour our undertaking. That is a lot of money to find. I must tell Opposition Members that, even if funds are not cash limited, as those were not, they still have to be provided for in public expenditure plans within reasonable parameters of expectation. The sums that I have described could not by any means have been considered a reasonable expectation. We acted promptly to deal with the immediate issues, but rightly must also look at the future.
We are examining urgently with the FEFC measures to improve forecasting to ensure that such a problem does not arise again. Clearly, we did not have sufficient timely and precise signals. I said in my announcement on 5 February that we look to the council to meet all its future expenditure for the next academic year from its voted provision, which is in itself intended to provide for continued growth. I have also asked the FEFC to review the options open to it for the 1997-98 academic year in the light of my announcement and in consultation with colleges. I understand that it will be sending out a document shortly.
One particular issue that my right hon. Friend the Secretary of State and I have identified for urgent review is the practice of franchising by some FE colleges. The facts are quite striking. About a tenth of FE full-time equivalent students are in off-site franchised provision, and nearly three quarters of last year's unprecedented growth was due to franchising. I want to make it clear that I am not opposed in principle to franchising; it covers a wide range of courses and activities. Indeed, in my constituency, some excellent work is done where schools franchise from the local FE college. Franchising is, however, a matter of some controversy in the sector.
In its report on the FEFC a fortnight ago, the National Audit Office acknowledged the merits of franchising, but pointed out risks to the quality of provision and of the substitution of public funds for existing expenditure and training. The House will know that I have asked a working party to look into franchising urgently.
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