THE MANAGEMENT OF GROWTH IN THE ENGLISH
FURTHER EDUCATION SECTOR
THE
MANAGEMENT
AND
FUNDING
OF
GROWTH
7. In July 1997 the then Secretary of State wrote
to the Funding Council specifying that the key aims of funding
for further education were that it should achieve growth in student
numbers, expand participation and secure greater efficiency. Emphasis
was also placed on securing improvements in student retention
and achievement rates. The Secretary of State wished the Funding
Council to fund colleges in a way that provided them with a direct
incentive to expand participation, by relating colleges' funding
to actual student enrolments. He gave an undertaking that the
total resources made available to the sector would be in part
determined by the actual numbers of students recruited.[5]
8. The Funding Council responded by introducing a
revised funding methodology, applicable from academic year 1994-5
onwards and based on funding units. The funding methodology contained
three elements: demand-led funds; additional funds; and guaranteed
core. The core rate varies between colleges: the sum depends on
a college's average level of funding per funding unit in the previous
gross allocation. The rate of funding per unit in 1996-97 was:
demand-led funds £6.50; additional funds £16.68. The
largest element, known as core funding, guaranteed colleges 90
per cent of their previous year's gross allocation from the Funding
Council. The other two elements constituted the incentives for
growth, wider participation and improved rates of student success.
In order to grow or to maintain a stable funding situation, most
colleges needed to apply for an additional funding element, not
only to cover the 10 per cent reduction in their gross allocation
of the previous year, but also to achieve the efficiency gain
implicit in Departmental funding for further education since incorporation.
The additional funding element was allocated at a rate determined
each year by the Funding Council (£16.68 per funding unit
in academic year 1996-97).[6]
9. In addition, prior to the changes in funding described
in paragraphs 12-13 below, colleges could enrol students over
and above their planned numbers and receive a demand-led element
of funding. The funds to meet this demand-led element were provided
from a non-cash limited Parliamentary Vote. The demand-led element
was available for both full-time and part-time students and was
funded at a much lower rate per unit of student activity (£6.50
in academic years 1994-95 to 1996-97 inclusive).[7]
10. In 1992 the then Secretary of State set a target
for the new sector to achieve 25 per cent accumulative growth
in numbers of full-time equivalent students funding by the Funding
Council over the three financial years from 1992-93. No particular
groups of people or curriculum areas were identified within this
target,[8] We asked the
Department about the adequacy of the target setting processes.
They told us that, in the event, the target of 25 per cent growth
by 1995-96 had not been met. Between financial years 1992-93 and
1995-96 growth of 19.6 per cent was achieved, and between academic
years 1992-93 and 1995-96 the growth was 22.2 per cent. The Department
nevertheless considered that it was a phenomenal achievement for
the new further education sector over a three year period to have
achieved growth at that level.[9]
11. In November 1995 the Department's updated projections
envisaged growth of 25 per cent over the six academic years from
1992-93 to 1998-99. However, growth in academic year 1995-96 is
estimated to have been substantially above the projected level.[10]
The Department told us that 25 per cent growth was achieved two
years early, with overall growth of 26 per cent being achieved
in the period 1992-93 to 1996-97 (Figure 1).[11]
Figure 1: Growth in further education (full-time
equivalent student basis)
Note: Projections of full-time equivalent student
numbers cover all further education provision delivered by sector
colleges including specialist designated institutions, by external
institutions, and higher education funded by the Funding Council.
12. In February 1997, the Department notified the
Funding Council that, whilst they would meet the greater part
of the cost of growth concurred up to and including academic year
1996-97, all future expenditure on further education would need
to be met within the planned expenditure provision.[12]
We put it to the Department and the Funding Council that it could
have been expected that the funding mechanism would lead to uncontrolled
growth. The Funding Council replied that the funding methodology
had been structured to encourage what were regarded as extremely
ambitious targets for further education, which had not grown significantly
for the previous five years or so. They said that a number of
incentives had been put in place to recruit more students and
that the expansion had been within the broad Government targets.[13]
The Department told us that in the first two years of the demand-led
element of funding the growth had been manageable. However, in
December 1996 they were facing two years of being £82 million
and £84 million above their budget, and had to take action
to rein in that spending.[14]
The Funding Council told us that whilst colleges would only receive
funding for the agreed level of students, there would be no penalty
for overshooting. However, if colleges delivered less than their
target they would receive less funding.[15]
13. The Department emphasised that they had been
able to meet the additional growth from within their Vote and
told us that they saw this as a well managed outcome. They did
not accept that their action had had a devastating effect on the
sector, or that it had come about because of inadequate controls.
Colleges had been encouraged by the Funding Council to take account
in their financial forecasting of the possibility that demand-led
funding would come to an end, and not to enter into long-term
commitments based on income derived from demand-led provision.[16]
14. We asked the Department about their system for
monitoring and control. They told us that they thought it was
improving, though not yet good enough. They said that further
education was a difficult sector for forecasting. There were some
17,000 qualifications and a large number of part-time students
who entered college at different times in the year, making it
harder than in schools or in higher education to make firm projections
of student numbers and expenditure. When the Funding Council had
been set up the information coming from colleges had been poor,
with an estimate of student numbers at one point in the year.
The Funding Council had since introduced the Individualised Student
Record, providing a clear record for every individual student
of his or her enrolment, retention and qualification. The Department
had also taken steps with the Funding Council and HM Treasury
to monitor funding and forecasting more closely. The Department
considered that a great deal had been done to improve forecasting,
and commented that the removal of the demand-led element of funding
had made it easier. However, they acknowledged that it would be
wrong to suggest that they could get it absolutely right each
year.[17]
15. Between academic years 1994-95 and 1995-96 the
number of funding units claimed by colleges is expected to have
increased by 11 per cent, compared with an increase in full-time
equivalent student numbers of 8.5 per cent in the same period.[18]
We asked the Funding Council whether this suggested that colleges
were maximising their income without providing more and better
education. The Funding Council emphasised that the funding system
was designed to reward colleges first of all in proportion to
the amount of study that particular students were involved in.
For example a student doing three A levels would have more units
than a student with two A levels. Colleges had seen that they
should maximise the numbers of qualifications for which students
study, for example the addition of a course on computer literacy
to a student's A-level programme. For the first time, the funding
system recognised students' achievements, with success in examinations
attracting around 10 per cent of funding units. This had had a
positive effect as many courses did not previously lead to a qualification.
The Funding Council said that this represented real activity which
had been rewarded with additional funding. Funding units also
reflected additional support for students with learning difficulties,
and for the provision of childcare.[19]
16. An analysis of the sources of income for further
education colleges for 1995-96 is at Figure 2.
Figure 2: Income distribution of further education
colleges
Between academic year 1992-93 and 1996-97 the number
of students funded from sources other than the Funding Council
is forecast to have declined by 21 per cent to some 0.81 million
students.[20] The Committee
therefore asked the Department what action they had taken to stop
this trend. They said that there were a number of reasons why
students from other sources had reduced, and that one was the
decision by the previous Government to move the further education
training grant from Training and Enterprise Councils to the Funding
Council.[21] The Funding
Council said that colleges had been active in generating outside
funding with, in academic year 1995-96, some £670 million
worth of funding coming from non-Funding Council sources. Much
of that came from sources such as the European Structural Funds,
but around £400 million resulted from teaching contracts
and what was generally known as trading by colleges. They referred
to the extensive training contracts, particularly in the competency
routes up to National Vocational Qualification level five. Nevertheless,
they recognised that colleges were only at the tip of the iceberg
in increasing the amount of funding from the private sector.[22]
17. With the removal of local education authority
controls and boundaries, colleges became free to attract students
from different and wider catchment areas, in competition with
schools, other colleges, and private training providers.[23]
We asked the Department about duplication of provision in a local
area and the lack of co-ordination between schools and colleges.
They said that the Government had made it clear in their consultation
document "The Learning Age" that it believed that competition
had gone too far and that there needed to be a move back to greater
collaboration. The Secretary of State had recently published a
paper on accountability within the sector, and one of the proposals
was to increase the presence of local education authority members,
as well as college staff and students, on college governing bodies.
In 1997-98, £16 million was being set aside in the further
education Collaboration Fund to encourage collaboration, particularly
between colleges and the post-16 schools sector. The Funding Council
and the Local Government Association were also working together
to look at the problems arising from competition between schools
and colleges.[24]
Conclusions
18. The Committee recognise the considerable achievement
of colleges in achieving growth in full-time equivalent student
numbers of around 26 per cent between academic years 1992-93 and
1996-97. We note that this level of growth was achieved two years
ahead of the Department's projection. We recognise that the funding
system is intended to reward colleges for providing a better service
to students, but are concerned that colleges may have been seeking
to maximise their income without necessarily providing more and
better education. The number of funding units claimed by colleges
has grown faster than the increase in student full-time equivalent
numbers. We note that the Department did not set specific targets
for growth, and recommend that clear targets be established both
nationally and at local level.
19. We observe that the Department's procedures for
forecasting growth in student numbers were not sufficiently rigorous,
but that steps are now being taken by the Department and the Funding
Council to improve their monitoring and forecasting. These steps,
which we view as important, include the Funding Council's development
of the Individualised Student Record as a means of monitoring
the levels of student activity. We recognise that colleges have
been active in seeking to generate outside funding from outside
the public sector but note that there remains significant untapped
potential for developing such sources of income. We urge the sector
to exploit this potential to the full.
20. We consider it worrying that competition for
students has led to a lack of co-ordination between colleges and
the post-16 schools sector and that this may have led to colleges
incurring unnecessary expenditure. We welcome the steps now in
hand to promote greater collaboration within the further education
sector and between further education colleges and schools offering
16-18 provision, and so improve local value for money. We urge
the Department and the Funding Council to take forward the agenda
for greater collaboration as quickly as possible.
5 C&AG's Report (HC 259 of Session 1997-98), paras
1.2 and 1.5 Back
6
ibid, para 2.9 Back
7
ibid, para 2.9 Back
8
ibid, para 1.3 Back
9
Q48 Back
10
C&AG's Report (HC 259
of Session 1997-98) paras 1.3, 2.3 Back
11 Q90 Back
12
C&AG's Report (HC 259 of Session 1997-98) para 2.18 Back
13
Q37 Back
14
Q41 Back
15
Q44 Back
16
Qs 41-42 Back
17
Qs 7-8 and 90 Back
18
C&AG's Report (HC 259 of Session 1997-98), para 2.14 Back
19
Qs 2-3 Back
20
C&AG's Report (HC 259 of Session 1997-98), para 2.5 Back
21
Q6 Back
22
Qs 33-34 Back
23
C&AG's Report (HC 259 of Session 1997-98), para 1.7 Back
24
Q52 Back
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