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FE in the Public Sector – All Pain and No Gain?

Some of us are old enough to remember working in Further Education when it came under local authority control. Colleges in different areas had widely different levels of funding and investment, and in many places were saddled with a legacy of low quality post-war buildings or older estates that were poorly adapted to modern needs. In the cash-strapped locality where I worked, getting any repairs and maintenance done was a teeth-grindingly slow process, and any work done was usually of poor quality. New buildings were as rare as a White Christmas, and thrown up as cheaply as possible. I taught for years in a Portakabin with a leaking roof and a heating system that veered crazily between tropical and arctic temperatures. And this was nothing extraordinary; it was the 1980s norm for many working in public sector education.

So the removal of FE colleges from local authority control in 1992 by the Conservative government was widely welcomed across the sector. Incorporation breathed new life into colleges, enabling them to start developing and modernising their estates through a mix of government funding, land sales and commercial borrowing. With the boom in funding under New Labour a few years later, FE grew rapidly in confidence and capability.

It’s not surprising, then, that the decision by the Office for National Statistics (ONS) to reclassify FE Colleges as public sector organisations, has re-awoken the bad memories of the past. College leaders up and down the country, already struggling with the steady erosion of funding levels over the past decade, are now faced with the prospect of the return of a top-down bureaucracy that threatens to stifle innovation and development. All this isn’t helped by the impression that the DfE is poorly prepared for this sudden change – despite the fact it was completely predictable – and unable to answer basic questions about how it will work in practice.

Why has this happened? The short answer is the introduction of the 2022 Skills Act, which has given the English Education Secretary greatly enhanced powers of intervention over colleges. The underlying issue is not that almost all colleges rely on public funding – most universities do too – but that FE colleges are place based institutions, primarily serving a local catchment area. This means that a market model, in which struggling colleges are allowed to go out of business just as private companies are, is impossible to maintain. Leaving local communities without a college is simply not an option, so governments have to step in to ensure an acceptable level of local provision. The ONS has decided that the level of supervision now in force means that in practice colleges are no longer independent. Whatever the merits of the arguments for and against, it’s a logical decision.

So what will be the impact? Let’s be optimistic and assume that the uncertainty and confusion over colleges’ current commercial loans and future capital projects will be sorted out quickly. What can we expect moving forward, and in particular what tangible benefits, if any, can we hope for now we’re in the public sector?

The immediate answer appears to be - none! The call for colleges to be granted the same VAT exemption that schools enjoy has already been rebuffed by the Department for Education. There’s no sign that colleges will get access to any of the DfE’s centralised purchasing schemes that offer software licenses, insurance, books, professional services and many other things at preferential rates. In fact there’s so far no indication of any material benefit to colleges at all: the move to the public sector is all downsides and dangers, with vanishingly few positives in sight.

The DfE has already published guidance filled with reassurances that Colleges will be able to retain many of their financial freedoms under the new regime. But this goes alongside a whole boatload of new regulations and procedures, including the production of a new Financial Handbook for Colleges next year. It’s a bit like being told that you’re going to have to exchange your car for a new one which might be just as good as the old one, but comes with a host of new restrictions on the way you can drive it and twice as much paperwork to keep it on the road. Most of us would ask, “can’t we keep the old one, please?”

So what would make the move into the public sector more palatable? The DfE has offered a couple of sweeteners, including the provision of extra capital funding to cover the gap left by the end of commercial borrowing, and the promise to “smooth out” funding payments across the year to help with cash flow problem. But there is surely an opportunity to do much more. For example:

  • To immediately add FE Colleges to the DfE’s centralised buying schemes.

  • To extend the VAT exemptions that schools enjoy to FE colleges. The argument that colleges are involved in business transactions because they charge fees for some adult students is weak. The vast majority of colleges are overwhelmingly reliant on government funding.

  • To establish a national FE Teachers’ Pay Review Body, parallel to the existing School Teachers’ Review Body. This would make annual recommendations to government on pay and conditions, with the expectation that the cost of any pay awards would be fully funded through increases to FE funding allocations. The current pay negotiation system for FE is dysfunctional and increasingly ineffective, with the result that most FE lecturers’ pay has fallen well behind that of school teachers, making it more and more difficult for colleges to recruit and retain teaching staff.

In a recent article on the Conservative Home website, ex-universities minister Lord Willetts expressed his disappointment at the ONS decision, and raised the spectre of the university sector following the FE sector in a move, in his words “ to grow the public sector by stealth”. In my view, this is unlikely, since universities retain full control of their financial operations and still have considerable autonomy in most of their teaching and research activity. And if the experience of the FE sector remains so unsatisfactory, with little practical advantages on offer to offset the increased bureaucracy and central control, it’s hard to see HE bodies being anything other than outraged by any future move to reclassify them into the public sector.

The combination of having a public benefit mission while being able to operate in a business-like way has been a great formula for FE Colleges. It would be a great shame if this happy hybrid was to be discarded, and we must fight to ensure its best features are retained, even if in a new form.


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