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FE Briefing - The White Paper and other recent developments

  • United Kingdom
  • Education

04-02-2021

January saw a flurry of papers and briefings from the Government affecting the HE and FE sectors. We have highlighted below a number of headline issues arising out of the following publications:

• House of Commons Public Accounts Committee: Managing colleges’ financial sustainability, published by the House of Commons on 27 January 2021.

• The FE White Paper: Skills for Jobs: Lifelong Learning for Opportunity and Growth, published by the Department for Education on 21 January 2021.

• Interim Conclusion of the Review of Post-18 Education and Funding, published by the Department for Education January 2021

• Office for Students’ (OfS) response to Department for Education’s announcement on Funding, published by the OfS on 21 January 2021.

This briefing does not summarise each of the policy documents, but instead highlights issues which we think are of importance from a legal and governance perspective.

This briefing is aimed primarily at public sector further education institutions. It will be of interest to private providers and universities too. We have published a briefing for higher education institutions HERE.

Public Accounts Committee: Managing colleges’ financial sustainability

The PAC report recognises what many in the FE sector have stressed for years, that “financial pressures are having a detrimental impact on aspects of college provisions for students.”

The PAC report stresses the need for the Government to develop a proper plan for further education given the essential role the FE sector is to play in addressing the national skills gap and to make clear the funding commitments it intends to make to support that reform. The FE White Paper is intended to be that strategy.

The PAC report’s recommendations include:

• pension costs - requesting that the DfE set out in writing within the next three months what it has done to assess pension cost pressures on colleges and how it has taken this into account as part of its funding decisions. In practice we are seeing colleges looking at pension savings through the use of subsidiary companies; we expect this to continue and indeed become normal.

• VAT – recommending that the DfE should work with HM Treasury to assess the merits of making the rules on VAT consistent for schools and sixth form colleges. The VAT savings to be made by sixth form colleges converting to a 16 to 19 academy has meant that numerous sixth form colleges have now converted and we are seeing that it is still of interest within the sector generally. If colleges are offered this possibility, or indeed other forms of VAT mitigation, then it is likely to drive behaviours and corporate structures in the sector.

• lagged funding – highlighting that it is detrimental to colleges with growing student numbers, and recommending that the DfE consider funding by way of more up to date, real time, information.

• intervention – the DfE should set out within three months what action it intends to take to improve its intervention arrangements, and how it will assess the outcome of these actions. This has been picked up in the White Paper, but detail is scarce. Many in the sector are calling for more support for colleges, rather than oversight and sanctions. Could this involve DfE appointed turnaround directors?

• mental health - the DfE should research the extent to which college support services are meeting student needs. We are already seeing this area being one of focus for many colleges.

The difficulty for the Government will be walking the line between college autonomy, which has significantly increased over the years, and the requirement that public monies be safeguarded.

FE White Paper

The White Paper sets out how the government intends to reform further education to support people to obtain the skills the economy needs and how it will deliver the Lifetime Skills Guarantee. The emphasis is on technical education and the role of employers within that. It seems likely that this will involve more funding for the further education sector (at the expense of the higher education sector?). One element of this is £1.3 billion over the next five years through the Further Education Capital Transformation Programme. This will be welcomed by a sector which has suffered chronic capital underfunding for many years.

The FE White Paper has been generally well received by the sector.

Local Skills Improvement Plans

The White Paper proposes putting employers at the heart of the system. Proposals include colleges, other providers and local stakeholders developing new Local Skills Improvement Plans (LSIPs) to be piloted in Trailblazer local areas (to be announced early 2021). The Government will set up a new Strategic Development Fund (SDF) to facilitate changes to provision that have been endorsed by local employers. The SDF will offer capital and revenue funding to help colleges respond to locally agreed priorities. If this funding is “new money” to the sector, then it is to be welcomed as colleges may choose whether or not to engage. The concern though would be if these LSIPs distribute core funding, as this could lead to yet another funder and regulator of the sector.

Simpler Funding

The Government proposes to:

• ensure that providers have more autonomy to use funding how they see fit in order to meet the needs of learners and the skills needs of local employers, including those articulated in LSIPs;

• reform the accountability system to focus less on process and more on the effectiveness of provider performance and the outcomes they achieve; and

• create a simpler funding system.

Most people within the sector would welcome a simplification of further education funding. But it is hard to see how this could be achieved at the same time as new local funders are being created, adult education is still devolved in many areas and the Government is calling for more accountability of colleges.

Greater Accountability

From next year all colleges will have an annual conversation with Government to discuss strategic objectives, risks and opportunities and showcase good practice. It remains to be seen what impact such conversations might have on colleges as independent statutory corporations if the Government does not agree with those strategic objectives.

There will be shorter timeframes for intervention. It will be interesting to see the detail of this when is it announced as the Government already has wide powers in this regard. Many in the sector are calling for more support for colleges which need it, as opposed to more external scrutiny.

There will be more powers for the Secretary of State for Education to intervene locally to close or set up college corporations, bring about changes to membership or composition of governing bodies or review leadership, or take other actions where there are long term weaknesses. Again, how this will marry with colleges as independent corporations remains to be seen. And again, the Secretary of State already has wide powers in this regard, but generally chooses not to use them.

The Government will work to level up standards of governance. Could this mean a new statutory code of governance in colleges? If it does mean this, then we would hope that such a code would be an enabling one, such as the AoC’s Code of Good Governance. A heavily prescriptive and mandatory code would be unlikely to work for all colleges in all situations.

Colleges will be told how to recruit CEO’s, including an external voice on recruitment panels. Of course the recruitment of a CEO is a matter for a full Corporation, so a panel could only ever advise on this anyway.

Colleges will be given a clear strategic role to delivering advanced technical and higher technical skills to boost national productivity and support progression, and will be asked to ensure that their mission statements centre on this core purpose. Will this have an impact on the charitable objectives of colleges? If it does, this would be a huge shift in college governance. But if not, it would arguably mean nothing at all as colleges would still be required to further their existing objects.

A new competency and skills framework for corporation members is proposed, along with new requirements for Boards in respect of self-assessment and external reviews. This is all to be welcomed as good governance (and indeed many colleges do this already). But a one size fits all approach is unlikely to work across the sector.

The role of subcontracting will be reviewed (which was in train anyway). It appears that there will not be a ban on subcontracting, but main providers will need to prove (even more than now) how they are delivering value in monitoring delivery.

The Register of Apprenticeship Training Providers will be refreshed, again, with more stringent requirements around quality and finance.

The Government also wants to raise standards in Independent Training Providers, as well as in colleges. It will take a stronger role in ensuring that Independent Training Providers are meeting skills needs by stopping poor-quality or financially inadequate Independent Training Providers from delivering provision. Quite how this will marry with simpler funding rules remains to be seen.

Review of Post-18 Education and Funding

This paper is an interim conclusion of the review of post 18 education and funding that was launched by the Government in 2018, a full conclusion only being published alongside the next Comprehensive Funding Review.

It is interesting that most HE reforms have been delayed whilst the FE reforms have been largely implemented in the White Paper. Along with the contents of the reports, this shows a continued rebalancing of focus from HE to FE.

The emphasis in this paper is around technical, rather than academic, higher education, which ties in with the emphasis on technical education in the FE White Paper. Along with the Lifelong Loan Entitlement perhaps making technical HE more attractive, as will the intention to bring more modularisation into HE.

As in FE, there is an emphasis on technical qualifications being employer led. This should be more familiar to colleges than it is to universities.

The Office for Students’ (OfS) response to Department for Education’s announcement on Funding

The OfS has responded to the White Paper, stating the areas on which it is going to consult (in February 2021) in respect of funding changes. These include:

• 50% reduction to high cost subjects which it has not identified as strategically important (e.g. performing arts, creative arts, media studies and archaeology). Those high cost subjects that are deemed strategically important will see an increase in funding;

• London targeted allocation and London weightings being removed entirely from 2021-2022;

• Capital funding for providers should be distributed through a bidding competition rather than through a formula method; and

• £20 million of funding for student mental health and hardship.

Whilst increased funding for student mental health mirrors one of the recurrent themes in these documents, there are a number of colleges and universities, especially in London, who will be disproportionately affected by some of these proposals, perhaps even to the extent that it risks their financial viability.