15. Foster states that "proposals [after the
2005 Budget] at first remained stubbornly behind the curve of
the total capital budget"
but "by early 2008, powerful drivers were increasing both
the amount of grant support required from the LSC, and the speed
at which proposals were being brought forward for approval".
These drivers were:
- "The good news about the
success of the programme had spread. Colleges that had been sceptical
or wary at the outset saw the impact on colleges that had been
modernised and renewed";
- Colleges applying after the "first wave
of 'early implementers'" had "relatively less strong
balance sheets and narrower financial margins" and needed
a higher proportion of LSC grant support;
- Early successes meant colleges had higher expectations
"fuelling increases in both the scale of projects and their
- "The standards of environmental sustainability
were also increasing, with a requirement to meet BREEAM [Building
Research Establishment Environmental Assessment Method] 'excellent'
criteria introduced in March 2008";
- "Inflation in construction industry costs";
- Mindful of "the need to use or lose in-year
budgets" the LSC "promoted the programme intensively",
according to Foster, "local LSC teams actively solicited
projects from colleges and worked with college principals to turn
more modest proposals into wholesale upgrading of the entire college
estate" (we comment on this in paragraphs 70-77);
- Nervousness arose on the part of colleges about
two aspects of Machinery of Government changes: Foster states
that "The budget split between FE and 16-19 capital after
the establishment of DIUS and DCSF had increased nervousness that
resources thought ring-fenced for colleges might be diverted to
schools" and that colleges also "feared the impact that
the establishment of the new YPLA and SFA in 2010 might have on
their ability to participate and access funds"; and
- The economic downturn "was having a triple
effect. Colleges were finding it harder to realise their private
contribution through borrowing and land sales; as the building
industry contracted there was increased capacity to take college
work more rapidly through development stages; and some foresaw
growing pressure on public sector borrowing, making a tight fiscal
settlement likely after 2010." 
16. Together, these factors led to an exponential
increase in applications and approvals, which Foster refers to
as becoming "a veritable tsunami".
But the LSC and DIUS did not realise that this rapid increase
was happening until it was too late. We explore the reasons for
this in the following sections of the report.
17. Foster's analysis seems to have been well received.
The memorandum from DIUS stated that it "accepts Sir Andrew's
The Acting Chief Executive of the LSC said "Andrew Foster's
report was extremely helpful to me in that respect. It was a clear
analysis and it also made some very sensible recommendations."
Mark Haysom, the former LSC Chief Executive, told us that:
I agree with an awful lot of his analysis. Where
I would disagree would be at the margin, and I could argue about
individual, small things, but I cannot see any value in that.
I would not choose to express things in quite the way he has on
occasions, but, fundamentally, I agree with him.
commend Sir Andrew Foster for his thorough review of the FE capital
programme and his perceptive description of events in 2008 and
2009. We have drawn on his work throughout this report.