Technical and Further Education Bill

Written evidence submitted by the Association of Colleges (TFEB 12)

Background

The Association of Colleges (AoC) represents and promotes the interests of 308 further education and sixth form colleges established under the Further and Higher Education Act 1992.

Colleges provide a range of education and training, helping to provide the skills and qualifications for students entering the workforce.

Key Facts and Figures

· Colleges educate and train 2.7 million people, including 1.9 million adults.

· 744,000 16 to 18-year-olds choose to study in college (compared with 433,000 in school).

· Almost every general further education college offers apprenticeships, with 306,000 people choosing to take one in college.

· 153,000 people study higher education in a college.

· Students aged 19+ in further education generate an additional £70 billion for the economy over their lifetimes.

Technical and Further Education Bill

The Technical and Further Education Bill is divided into three parts and makes provision to:

1. Take forward measures setting out the commitment in the Skills Plan to reform technical education by creating an Institute for Apprenticeships and Technical Education (IfATE).

2. Create an insolvency regime for further education and sixth form colleges established under the Further and Higher Education Act 1992.

3. Ensure that information relating to further education is passed onto the Secretary of State for Education once the adult education budget has been devolved to combined authorities.

Summary

Part 1 of the Bill makes provision to set up the Institute for Apprenticeships and Technical Education which we welcome as this includes taking forward important recommendations outlined in the Skills Plan.

Part 2 of the Bill sets out an insolvency regime for further education (FE) and sixth form colleges. After more than 20 years of self-governing status without an insolvency regime, colleges now need efficient and effective financial regulation because this was not part of the 1992 Further and Higher Education Act. It is unfortunate that the current plans come at a time when colleges are financially pressed due to funding cuts and issues such as pension contribution increases. This requires caution because of the potential impact of this legislation on the attitudes and behaviours of banks who are concerned about lending in an uncertain environment. The risk is that this impacts on the availability and costs of loans to colleges. There is therefore an urgent need for Government to provide better investment, stability and certainty in FE.

We support Part 3 of the Bill which makes provision for the national data system to continue with skills devolution.

Part 1: Institute for Apprenticeships and Post-16 Skills Plan

The Bill extends the remit of the Institute for Apprenticeships to cover technical education, in order to fulfill the commitments outlined in the Government’s Post-16 Skills Plan. The proposals involve reforming the technical education system, offering students a new technical option at age 16 which will allow them to pick from one of 15 technical education routes across a variety of subject areas. The extension of the remit of the Institute enables the Skills Plan to move forward, but there is a wider set of changes needed for successful implementation. This includes action to improve information and advice to young people and sufficient funding to employ high quality teaching staff, fund work placements and support industry standard facilities.

Whilst the remit extension is a necessary element of the plan, we believe there are a number of outstanding issues:

· Capacity: The Institute is not yet fully functioning and it will have a difficult task in supervising apprenticeship training supported by the new levy funded system and in ensuring that apprenticeship standards are appropriate and coherent. The Institute will also have challenges in improving access and quality in the apprenticeship programme. The new remit is a welcome move, but it will be a significant additional workload to redesign technical qualifications and establish the employer panels.

· Overlap: Schedule 1, Clause 27 of the legislation gives four agencies (IfATE, Ofsted, Ofqual, Office for Students [OfS]) the power to share information with each other but raises questions about the crossover between agencies. Ofqual, for example, regulates English and maths qualifications which will form an important part of the technical education programmes regulated by IfATE. The roles of IfATE and OfS will overlap when it comes to degree apprenticeships. IfATE and Ofsted both have a responsibility for the oversight of apprenticeship training quality.

· Representation: It is critical that IfATE should focus its work around the principle and practice of co-creation between employers and educationalists. Whilst we recognise that the Institute should be employer driven, there is a need to ensure that the right people are on the board of IfATE which should include a representative from the FE sector and from students. It is also important that the employer panels work closely with education and assessment specialists.

College Insolvency Regime (Special Administration Regime)

Although colleges are enshrined in legislation, there is a lack of clarity about what happens when an institution encounters financial difficulty. Over the past twenty years, government funding agencies have acted to protect students, courses and assets, but a clear legal framework is now overdue.

The vast majority of colleges have strong governance, professional management and sound finances but the sector is under increasing financial pressure mainly as a result of government spending cuts, and questions remain over where responsibility in this area lies. This Bill is designed to change the situation by:

· Extending some of the insolvency laws which apply to companies and registered charities to colleges (which are statutory corporations and exempt charities).

· Giving the Secretary of State the power to appoint a special administrator who will have duties not just towards the college’s creditors (banks, Local Government Pension Scheme, staff and suppliers) but also a duty to avoid or minimise disruption to the studies of existing students as a whole.

The special administration regime is the central part of the insolvency proposals and is enacted through clauses 13 to 34. The Government foresees using the regime rarely "in the unlikely event that a college fails financially". The Government has previously created similar special administration regimes in other sectors including energy, health and railways. The idea is to protect a public service whilst creating a financial framework to govern the independent organisations that provide them. This can be summarised as "the service continues; the service provider may not".

Areas of Concern

A short consultation regarding these insolvency plans took place in July 2016 and AoC argued that while the Government is right to regulate this area of college financial affairs, there are some areas of concern:

· The impact on investment: The financial weakness in a small number of individual colleges can often be attributed to a particular mistake or decision, but cuts in public spending across post 16 education and rising expectations across the sector have led to situations where finances are under increasing strain. Funding in FE is also set to remain cash-flat, unlike in higher education, at a time when costs and inflation are rising. AoC believes that investment should be at the forefront of Government plans, and are calling for spending on education and training to increase to 5% of GDP.

· Funding for restructuring: The college insolvency regime is being introduced alongside a Treasury controlled restructuring facility which is designed to support restructuring where finance is not available from banks (which lend £1.5 billion to colleges). However, the terms and conditions of this support are restrictive and no support has yet been agreed. The slow progress of grants or loans has caused unnecessary delays in the necessary turnaround in several colleges.

· Appointment of the education administrator: The education administrator (EA) is required to be an insolvency practitioner and yet a critical part of this role is to protect student interests rather than financial creditors. It is essential therefore that the criteria for appointing the EA includes experience and knowledge of FE to ensure that the decisions made are taken in the context of an education institution and with the needs of students at the forefront. It would also be worth clarifying the criteria for when an EA is appointed and whether a specific action would trigger this.

· The relationship between the education administrator and Further Education Commissioner: The Bill does not make clear what interaction there will be between the EA and FE Commissioner and who will intervene and at what point. Whilst we recognise that the FE Commissioner isn’t a statutory post, it would be useful to clarify what the relationship will be and at what point interactions between the two post-holders will take place.

· The complexity of financial regulation: The new role of education administrator joins an already complex landscape of financial oversight. There are currently four different government bodies with this role. These include the Education Funding Agency (EFA), Skills Funding Agency (SFA), FE Commissioner and the Transaction Unit. All these bodies report to the joint SFA/EFA Chief Executive, but use differing measures of financial performance. This inconsistency must be resolved by 2018. It is likely that this complexity would slow down the investment decisions which might need to be made in the event of an insolvency.

· The place of college higher education students: The college insolvency regime will be introduced at the same time as a separate student protection regime takes effect in higher education under the control of the new Office for Students. The Government has missed an opportunity to introduce a legal regime covering both further and higher education corporations. This would mean that colleges will have an additional regulatory burden which may make it harder to secure finances or develop their higher education provision.

· Communication: There is significant risk that these plans will alarm many across the further education sector, financial institutions and local government. Potential Governors may be dissuaded from joining due to disqualification regulations (Clause 37), banks may require further security or overprice the risk into loans and there is a risk that local government may misconstrue funding arrangements – including on the Local Government Pension Scheme.

November 2016

 

Prepared 29th November 2016