Memorandum 1
Submission from the Department for Innovation,
Universities and Skills
THE FE CAPITAL
PROGRAMME
Background
1. This memorandum refers to the Further
Education capital programme and recent events relating to its
funding and administration.
2. The purpose of the programme is to support
the refurbishment and renewal of the FE college estate. The Learning
and Skills Council is responsible for the administration of the
programme. DIUS is responsible for policy regarding the programme
and for monitoring LSC performance.
3. Since 1997 around £3 billion has been
invested in modernising FE facilities. This involved more than
700 projects in 330 colleges, covering the vast majority of the
FE estate. Only a small minority of colleges have not received
any capital funding.
4. Towards the end of 2008 it became clear to the
LSC's governing Council that there had been an unsustainable rise
in demand from colleges. The Council therefore decided to defer
all approvals of capital projects until detailed work had been
undertaken with colleges to establish a fuller understanding of
the situation.
5. The deferral did not affect projects that
had already been given final approval for funding and which had
not yet completed.
The Foster Review
6. The Secretary of State and the chair of the
LSC jointly commissioned Sir Andrew Foster to conduct an independent
review of the causes of the increased demand for funding, the
LSC's internal processes and the lessons to be learnt for the
future. His report was published in March 2009.
7. Sir Andrew found that the programme was slow to
gather momentum. As recently as in 2007-08 it was under spent.
But by 2008-09 the rate at which proposals came forward began
to increase. So did their cost, and the share of the cost borne
by the LSC. Demand for capital funding began to outstrip supply.
And the absence of a proper long term financial strategy and inadequate
management, information and monitoring led to delay and confusion
in addressing the issue. More detail on the recent history of
the further education capital programme is set out in the Foster
report.
8. DIUS accepts Sir Andrew's conclusions—in
short, that this is an excellent programme which has successfully
benefited students and communities—but that it has been
mismanaged. This mismanagement resulted in there being substantially
more applications in the pipeline than could be funded in this
Spending Review period. 79 projects had received the first stage
of approval in principle with a funding requirement from the LSC
of £2.7 billion and there was a further requirement of £3
billion for proposals that had been submitted for approval in
principle.
9. Sir Andrew made several recommendations regarding
open and early consultation with the sector and improved information
and management. He also said that the priority was "to agree
how the present demand-led approach to the programme is replaced
by a needs-based approach with explicit priorities and choice
criteria." DIUS and LSC accepted the recommendations in full
and they are now being implemented.
Changes in the Learning and Skills Council
10. On 23 March, in recognition of the deficiencies
in how the LSC had managed the programme, Mark Haysom resigned
as Chief Executive. Geoffrey Russell was appointed as acting Chief
Executive, with the immediate task of urgently increasing the
certainty and clarity around the programme.
11. Geoffrey Russell appointed an external team from
Grant Thornton to review the financial data held by the LSC about
capital projects. He also appointed a new Director of National
Projects to take responsibility for the capital programme and
to work with a new sub group of the Council charged with overseeing
the programme.
DIUS
12. Sir Andrew found that the scrutiny by DIUS
of LSC management of the capital programme had been insufficiently
rigorous. The Secretary of State therefore asked the Permanent
Secretary to carry out a review of the DIUS's relationships with
all of its Non-Departmental Public Bodies to ensure that there
is clarity about accountability and responsibility. This is underway.
Budget 2009
13. On 22 April Budget 2009 announced additional
capital funding for FE colleges of more than £300 million
in the current spending round. In addition, recognising the long-term
nature of capital projects, the Government is planning a continuing
FE capital investment in future years. The planning assumption
is £300 million a year from 2011-12 to 2013-14, to be confirmed
at the next Spending Review. This provides a provisional £1.2
billion in total to 2013-14 which should allow around £750
million for new schemes.
14. The additional investment will allow a limited
number of projects to be taken forward in this spending round—that
is, those that are most urgent and with the greatest needs. It
also allows for planning for a limited future programme of projects
running into the next Spending Review period based on a stringent
assessment both of need and value for money.
Next steps
15. On 24 April Geoffrey Russell wrote to all
college principals describing next steps. He set out the proposed
new criteria and process for selection of projects to go forward
in this spending round. In line with the Foster report, consultation
with the college sector is taking place through a panel of college
Principals that has been convened with the support of the Association
of Colleges. The LSC are also consulting with the Local Government
Association and the Regional Development Agencies.
16. In addition to selecting a limited number of
projects to go forward in this spending round, the LSC will develop
a process for establishing a new needs-based priority list of
projects that will be considered for funding in the next spending
review period. Projects will not receive approval for funding,
however, until after the outcome of the next Spending Review has
been announced.
17. The LSC will work with independent property
consultants to assess expenditure incurred by colleges in
developing projects and how the longer term value of that expenditure
can be maximised. That will provide the basis for identifying
cases where a contribution to potential liabilities by the LSC
is appropriate. Through its normal financial intervention process,
the LSC will continue to ensure that no college is unable to meets
its financial obligations as a result of decisions on capital
projects.
18. For the future, the Government will work
to ensure that the arrangements for management of the FE capital
programme under the Skills Funding Agency and Young People's Learning
Agency reflect the recommendations in the Foster report.
April 2009
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