Memorandum submitted by the Association
of Colleges
1. The Association of Colleges (AoC) represents
and promotes the interests of Colleges and their students. Colleges
provide a rich mix of academic and vocational education from basic
skills to higher education degrees. Colleges currently play a
major role in meeting the individual and joint objectives of both
Departments. Colleges educate twice as many young people aged
16 to 18 than schools, they train many thousands of
apprentices, provide 11% of higher education places and account
for 49% of vocational qualifications achieved each year.[2]
Colleges have a major contribution to make in improving 14-19 education,
in widening access and improving higher education and in helping
businesses recover from the recession.
2. We welcome the Committee's interest in
further education funding and the role of the Skills Funding Agency
(SFA). Our evidence covers the following topics:
— The role of the Skills Funding Agency
(SFA) in the new skills system
— Government policy and the SFA
SECTION 1: THE
ROLE OF
THE SKILLS
FUNDING AGENCY
IN THE
NEW SKILLS
SYSTEM
Role of the SFA
3. The Skills Funding Agency (SFA) is a
new executive agency which starts work in April 2010 and
which is part of the Department for Business Innovation and Skills
(BIS). The Government set out plans to create the Skills Funding
Agency in the 2008 "Raising Expectations" White
Paper.[3]
It implemented these plans in the Apprenticeships, Skills, Children
and Learning Act 2009[4]
The SFA takes over some of the powers and staff from the Learning
and Skills Council (LSC) and has the task of delivering a number
of policies set out in the Government's Skills Strategy, Skills
for Growth.[5]
BIS allocated SFA a £4.7 billion budget for its first
year (2010-11) in a Skills Investment Strategy published in November
2009.[6]
4. The decision to create the SFA followed
on from the decision in 2007 to split the Department for
Education and Skills into two and to disband the Learning and
Skills Council. The SFA takes over the work of the LSC for those
aged 19 and over but there are a number of important differences:
— As an executive agency of BIS, the SFA
does not have a separately constituted board. SFA staff will be
civil servants.
— Due to the fact it will fund only post-19 learning
the SFA has a smaller budget (£4.7 billion in 2010-11[7]
compared to the LSC's £11 billion budget in 2009-10[8])
and fewer staff (1,800 compared to 3,300 in the LSC).
— SFA will be managing a declining budget
(because of the planned reduction in expenditure after 2010[9])
whereas LSC budget rose year on year as a result of the expansion
in 16-18 education and the growth in its remit. The SFA's
narrower remit means that it will face tougher spending choices.
— The SFA will be expected to focus on
the delivery of Government policy, with a primary focus on supporting
access to learning (by employers, individuals and apprentices)
and on funding colleges and training providers to deliver the
priorities set out in national and regional strategies.
— The SFA will continue to collect data
on all parts of further education but will now do so as a service
for the Young People's Learning Agency (YPLA) and for 150 local
authorities.
— The SFA will work explicitly via Regional
Development Agencies (RDAs) in contrast to the LSC which was only
required to consult them on its plans.
Complexity
5. AoC fears that the way in which the LSC
has been disbanded and the SFA has been created could make a complicated
further education system more rather than less confusing. Colleges
will work to two national agencies where there was previously
one and there are new roles for the UK Commission for Employment
and Skills, RDAs and local authorities. The neat division of education
and training at age 19 that sounds rational in theory has
turned out more complicated in practice. There are a number of
areas where the new system will be particularly complicated:
— the SFA will be responsible for apprenticeships
for those from age 16 upwards and will have to negotiate
with the 43 sub-regional groups of local authorities responsible
for funding the education of these 16-18 year olds.
— the SFA will be responsible for about
80,000[10]
students aged 19 in Colleges and schools, many of them taking
full-time education courses like A-levels and National Diplomas.
Many young people do not complete their sixth-form level education
by the age of 19.
— the SFA will not be responsible for support
given to young adults aged under 25 who have severe learning
difficulties but it will be responsible for the education programmes
of those with moderate learning difficulties.
— the SFA will regulate the 260 further
education colleges but will provide less than 50% of their revenue
funding. The largest share of College funding will come via local
authorities and will be paid for the education of 16-18 year
olds.[11]
— the relationships between SFA, RDAs and
local authorities is not yet tested and is likely to keep changing
(see below).
Cost
6. The SFA administration budget in 2010-11 will
be £81 million.[12]
AoC is disappointed that Government does not expect to make any
savings from this large-scale reform or to significantly simplify
the way in which the system is managed. Almost all the 3,000 people
working for the LSC are being transferred to new posts, either
in SFA, YPLA, RDAs or local government. At a time when the Government
will be cutting teaching and training expenditure for those over
19, it has effectively ring-fenced spending on administration
to ensure a smooth handover in 2010. It has also failed to establish
a clear baseline for the calculation of benefits and costs of
the reorganisation of funding arrangements in future years ie
there is no benefits realisation plan for these changes.
SFA relationship with RDAs
7. In July 2009, Ministers set out plans
to integrate the work of SFA more closely with Regional Development
Agencies (RDAs). The RDAs will draw up two documents:
— a single Regional Skills Strategy in
consultation with local authority leaders, sub-regional bodies
and Sector Skills Councils. This strategy will have a 20 year
outlook and will articulate all skills needs in the region; and
— a Regional priority statement, which
will be used in drawing up the annual SFA budget.
8. This reform builds on the experience
of the London Skills and Employment Board which was set up in
2006 and chaired by the Mayor of London. AoC believes that
closer integration of the skills system and the regional development
process makes sense because, up to now, RDAs have held separate
budgets for skills. However there are a number of issues which
will need to be addressed:
— Some regions are more cohesive entities
than others; some are more effective than others. There is a risk
that a greater role for RDAs in an already complicated system
could slow up decision-making and make it more difficult for Colleges
to respond to employer and community demand.
— In recent years, some RDAs have been
reluctant to engage with the education system or have shown limited
understanding of the work that Colleges and other training providers
carry out. AoC has carried out a project with the Learning and
Skills Improvement Service to explore good practice in RDA-College
links in London and the North West.[13]
— The future role of RDAs continues to
change. In December 2009, the Government confirmed that various
powers over adult skills would be devolved to the Manchester and
Leeds city regions.[14]
SFA relationship with local authorities
9. The SFA will not have a direct relationship
with local councils in 16-19 education but there are other
areas where it will need to engage with local authorities:
— Local authorities have new powers and
duties in economic development, both as a result of legislation[15]
and as a result of the recession. The Department for Work and
Pensions sees councils as major partners in its current job creation
schemes.[16]
— A number of councils are keen to take
over new powers in post-16 education and training, including
those involved in the City region pilots mentioned above. Several
County Councils (including Kent and Oxfordshire)[17]
made bids to the Communities and Local Government Department in
2009 to take over the work of the SFA in their area.
10. The 2010 reforms in further education
and skills create a good opportunity for a stronger local government
role in improving the lives of local people. Colleges have good
relationships with councils and wish to develop this further.
Notwithstanding this, AoC is keen that Government keeps a firm
hand on the development of the system. The skills system is not
local because of the extent to which people travel to work and
study. Central government will be paying more than £50 million
to local councils and transferring 950 people from the LSC
so that they can manage 16-19 education. At a time of public
spending restraint, Government will secure greater efficiency
from maintaining national systems and reducing the costs of those
systems.
SECTION 2: GOVERNMENT
POLICY AND
THE SFA
11. The SFA is a delivery organisation but
the way in which it works will be determined by the Government
policies given to it. There are a number of issues of possible
interest to the Committee.
Targets
12. The Government set ambitious targets
for the employment and skills system in the 2007 Spending
Review, which was completed before the recession started and which
runs until 2011. The review set ambitious targets for increasing
participation and achievement levels in qualifications considered
economically valuable. Specific targets were set for skills for
life,[18]
level 2, level 3 and level 4 qualifications.
13. The ambitious nature of the qualification-level
targets and the fixed amount of public money available to the
LSC has had a dramatic effect on the further education and skills
system in recent years. AoC understands that more than 90% of
the budget earmarked for the Skills Funding Agency in 2009-10 is
already spent on areas covered by national targets, leaving very
little room for local flexibility or responsiveness.
14. A new set of Government objectives will
be needed for the period after 2011 to take account of progress
to date, the changing economic circumstances and a tighter public
spending environment. In AoC view, the Government's objectives
for the first half of this decade should be to achieve the following:
— a continued increase in the number of
people taking higher education courses to achieve the aim of a
better skilled population;
— responsive and intensive education training
programmes for those who are unemployed to ensure a fast return
to the job market;
— consolidation of the apprenticeship campaign
under the new National Apprenticeship Service;
— continued emphasis on basic skills and
on economically valuable courses but with more flexibility about
national qualifications and with greater delegation to those delivering
education and training, working in partnership with business and
local government;
— action to increase individual investment
in learning by using learning accounts or an extended programme
of student loans. Individuals and employers could be empowered
under such a scheme and be able to pay for course costs with a
mixture of fees, loans and skills accounts; and
— more collaboration between colleges,
universities and independent training providers to reduce the
cost of education and training by organising viable groups and
minimising overheads, by collaborative purchasing and action to
reduce quality assurance and assessment costs.
Skills strategy "Skills for Growth"
15. The Skills Strategy published by BIS
in early November 2009 reinforced the existing direction
of Government policy but contained a number of new targets and
initiatives. These include:
— a new goal that three-quarters of people
should participate in higher education or complete an advanced
apprenticeship or equivalent technician level course by the age
of 30;
— the need to develop new progression routes
to higher education;
— efforts to reduce the many, many agencies
who oversee the work of Colleges;
— firm plans for the expansion of skills
accounts; and
— new measures to assess the performance
of the further education and skills system.
16. AoC supports the aims of the strategy,
in particular the new focus on higher skills but we remain concerned
at the gap between the policy and the resources available to achieve
it as well as the implied re-prioritisation of limited funds away
from developmental learning. In different areas of the country
the mix of skills levels will differ and there needs to be flexibility
within the system to meet these different needs.
BUDGETS
17. In its last two Budget statements, the
Treasury has already made some important changes to the funding
of education and training:
— the April 2009 Budget pencilled
in a £400 million efficiency gain in 2010-11 for
further and higher education. Before its dissolution, the Department
for Innovation Universities and Skills (DIUS) agreed additional
efficiency targets with the Treasury which are being passed on
to HEFCE and the LSC. The comparative savings figures are £180 million
and £340 million with FE taking a larger cut despite
being the smaller sector of the two;
— in the same statement, the Treasury allocated
£655 million for additional 16-18 places and £300 million
for further education capital funding; and
— the December 2009 Pre-Budget report
set a further £300 million efficiency gain for further
education and skills by 2012-13. The Treasury say that will involve
cuts to non-participation[19]
budgets, higher fees and more efficiency in delivery. Significantly
the 2012-13 efficiency gain required from higher education
is higher—£600 million—with the contribution
expected to come from a shift to part-time study close to home.
18. Government promises to protect spending
on the NHS, schools and the police combined, with rising debt
and benefit costs, imply that future spending reductions will
fall disproportionately on other areas including post-19 education.
The scale or distribution of any cuts are not spelt out in the
report but will presumably be detailed when the Treasury sets
2011-12 and 2012-13 budgets.
SECTION 3: REVENUE
FUNDING
Government spending on further education and skills
19. The Government plans to spend about
£20 billion on education and training for those over
the age of 19 in England in 2009-10[20].
The majority of this expenditure went on higher education teaching,
research and student support, including £6.3 billion
via the Higher Education Funding Council for England (HEFCE) and
£4.8 billion on student loans which are capitalised
by Government on the assumption that graduates will repay the
loans over the next 30 years.[21]
20. Government spending on further education
and skills in 2008-09 is about quarter of this total, at
£5.0 billion. In the five years from 2002-03 to
2008-09, total spending on higher education in England rose by
6.5% a year while spending on further education and skills rose
by 1.9%.[22]
These differences are reflected in the funding available per full-time
equivalent student.[23]
Chart one illustrates the difference:
21. The differing fortunes of the two areas
reflect the political decisions made by the Government when it
passed the Higher Education Act 2004 (which introduced tuition
fees). In AoC's view, the Government's 2009 review of higher
education needs to include a significant rebalancing of expenditure
towards part-time higher education, a determined effort to control
costs and a shift towards private funding via student loans.
Skills and adult funding
22. The Skills Investment Strategy published
in November 2009, and subsequent guidance in December 2009[24]
has serious and far-reaching implications for College budgets
in the 2010-11 academic year:
— the adult learner responsive[25]
budget for the 2010-11 academic year will be 11.6% lower
than it is in 2009-10. The actual cut applied to each College
will be contained within a range—no more than 25% but at
least 5%;
— the changes will be achieved by a 3%
reduction in overall funding rates, the 20% reduction in skills
for life weighting, a 5% increase in the assumed proportion of
course fees paid by the student or their employer and a 50+% reduction
in developmental learning spending;
— some Colleges will earn more income from
the LSC employment and apprenticeship programmes to offset some
of these reductions but, unlike in earlier years, the constraints
on the 16-18 education budget mean that a significant number
of Colleges will face a drop in overall LSC income in 2010-11.
Although the Government is making money available for substantial
growth in numbers of 16-18 year olds (a 4%) increase, funding
per student will not increase at all in 2010-11 even to take
account of inflation;
— the planning assumptions assume continuing
growth in numbers, including marginal increase in skills for life
enrolments (outside numeracy) even while budgets are being cut;
and
— the SFA will make allocations on the
basis of the mix of College provision in the 2008-09 academic
year, with a look at the proportion of courses in nine priority
areas, which extend to initial teacher training and trade union
education.
23. Over the last five years, the Government
has shifted hundreds of millions of pounds out of adult learning
into other areas of activity, principally Train to Gain. This
gives Colleges relevant experience in dealing with funding changes
which they will draw upon heavily. However the scale of the reduction
in 2010-11 is noticeably larger than in previous years.
SECTION 4: CAPITAL
FUNDING
24. The mismanagement of the college capital
programme by the Learning and Skills Council is well documented.
Our immediate concern is the weakened financial state of some
Colleges. Across the country, Colleges spent more than £300 million
on projects that were not cleared for funding in 2009. Although
some Colleges have been able to take their projects forward on
a more modest scale, using their own funds, many cannot. The College
sector as whole is likely to write off £200 million
in costs in its 2008-09 accounts. The consequences of reporting
deficits and maintaining overdrafts are that some Colleges will
be unable and unwilling to take new risks. Many Colleges are also
re-evaluating their activities to improve their overall financial
viability. The consequences of this will become apparent in the
next few months as individual Colleges take decisions to close
sites, restructure departments and drop loss-making courses. The
nature of the College calendar and the size of the financial problem
in some Colleges mean that decisions need to be taken now so that
changes take effect in September 2010. There will be difficult
outcomes in some cases. For example, it is likely that some Colleges
will need to close multi-year courses before some students have
completed their final years.
25. AoC has been working constructively
with LSC and BIS in recent months on capital-related issues and
continue to press for prompt action on providing financial support
for those Colleges in serious difficulty.
APPENDIX ONE
REVENUE FUNDING
— Train to Gain—must be used
for employed people taking level 3, level 2 and skills for
life courses leading to approved qualifications. Some recent flexibilities
around volunteers and qualification units. Funding is heavily
weighted towards achievement of qualification so the available
funding (averaging £800 per learner) sometimes doesn't
cover much more than the assessment.
— Adult responsive funding—can
be used for a wide variety of courses leading to approved qualifications
but targets set and managed by LSC increasingly push colleges
to use it for skills for life, level 2 and 3 courses
plus foundation learning tier. This has squeezed courses considered
to be developmental learning by 75% in three years with partially
successful attempts to ring-fence areas which are considered important
but don't lead to a PSA target (eg level 4 vocational courses,
courses for students with learning difficulties over age of 25,
trade union courses, Princes Trust).
— 19-24 and 25+ apprenticeships—must
be used for people with apprenticeship agreements taking courses
leading to one of the full frameworks.
— Higher education (HEFCE) funding—must
be used for courses prescribed under the 1988 Education Reform
Act (degrees etc) with LSC picking up the tab for non-prescribed
courses in colleges. Curiously HEFCE funds non-prescribed courses
in universities which means that colleges can get funded for some
employer relevant modules if they franchise from a university
but not if they have a direct funding contract.
— Personal Community and Development
Learning—just about anything can be funded as long as
college meets the funding agreement with the LSC and has agreed
plans with local partnership.
— Response to redundancy programme—short-life
programme partly funded by European Social Fund which provides
up to £1,500 per individual to deliver a regionally-agreed
contract.
— Six month offer—another
short-life programme for individuals unemployed for six months
or more funded out of the adult learner responsive pot.
— Integrated employment and skills trials—pilots
running to test methods for allocating funding in line with job
outcomes.
— Flexible New Deal—major
DWP scheme to train the long-term unemployed with the intention
of getting them back into work.
12 January 2010
2 AoC key facts http://www.aoc.co.uk/en/about_colleges/facts_and_figures/ Back
3
Raising expectations enabling the system to deliver, cm 7328 March
2008 Back
4
Apprenticeships Skills Childrens and Learners Act 2009 Back
5
Skills for Growth, cm 7641, November 2009 Back
6
Skills Investment Strategy, November 2009, http://www.bis.gov.uk/wp-content/uploads/publications/Skills-Investment-Strategy.pdf Back
7
Skills Investment Strategy, November 2009 Back
8
LSC annual statement of priorities, November 2008 Back
9
Treasury Select Committee report on the 2009 Pre-Budget Report,
January 2010 Back
10
AoC analysis of individual learner record data, January 2010 Back
11
AoC calculations from College accounts and LSC funding allocations Back
12
2010-11 Skills Investment Strategy, November 2009 Back
13
AoC/LSIS report due to be published in spring 2010 Back
14
City region announcement made in Pre-Budget report, December 2009 Back
15
Local democracy, Economic Development and Construction Act 2009 Back
16
For example in the Future jobs fund Back
17
Both proposals have been shortlisted by the Local Government Association
http://www.lga.gov.uk/lga/aio/6820540 Back
18
Qualifications designed to improve everyday skills such as numeracy
and literacy. Back
19
Grants allocated for costs incurred not directly linked to education
and training. An example would include the brokerage fees payable
under Train to Gain Back
20
DIUS departmental report, page 60, July 2009, combining further
and higher education figures Back
21
DIUS Departmental Report, page 65 Back
22
Calculations from DIUS Departmental report, page 60 Back
23
Figures from DIUS departmental report, page 78 Back
24
Skills Funding Agency guidance note 1 on 2010-11allocations Back
25
Grants payable to Colleges and others for the education and training
of those aged over 18 at the date of registration. Back
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