AoC North West Principals and Chairs Political, funding and financial issues for colleges 15 October 2015 Julian Gravatt, Assistant Chief Executive, AoC.

AoC North West Principals and Chairs

Political, funding and financial issues for colleges

15 October 2015

Julian Gravatt, Assistant Chief Executive, AoC

[email protected]

twitter: @JulianGravatt

What I’ll cover (briefly)

Politics

Funding

Finance

A majority conservative government

National politics

Overall majority (12 seats); 5 year term

Lots of big issues (eg Migration, EU, UK issues)

The manifesto is the programme for govt

Education and skills policy

Manifesto was short on detail compared to schools & universities

2 million jobs, 3 million apprenticeships in 5 years

Devolution is a prominent policy and may cut across initiatives

New policies since the election (the levy, Institutes of Technology

etc)

Conservative manifesto - Schools

Education (“schools”)

Protection of school funding (5-16)

Moves towards national funding formula

Infant free school meals continue

English Bacc compulsory

Coasting schools to get new leadership

500 new free schools (takes total to 900) = 5% of sector

Good and outstanding schools can expand

No profit making schools

Conservative programme – HE & FE

Higher education (“universities”)

Build on successful funding reforms

Abolition of cap on student numbers

Teaching excellence framework

A green paper is now on its way

Skills

3 million apprenticeships (now with a levy to help pay for them)

A UTC near every city (now also Institutes of Technology)

A national programme of area reviews (invented in June 2015)

The public spending context

Tax and spending (George Osborne’s 8 July budget)

Balanced budget by 2019-20 (one year later than the original

plan)

Long list of tax cuts, tax rises, tax credit and benefit cuts

Some costs: Minimum wage £7.20/hr (2016), £9 (2020)

Some savings: End to HE maintenance grants (saves £2.5 bil)

Some income: Apprenticeship levy on large companies

Departmental spending cuts now £20 billion over 4 years

The spending review (decisions by 25 Nov)

“A country that lives within its means”

Treasury set spending review objectives on 21 July

Departments asked to model 25% & 40% cuts

Spending review submissions and 38 Devolution bids by 4

SeptemberDepartmental spending cash figures 2015-16

£ bil2016 to 2020

£bil2019-20

£bil

Protected (NHS, Schools, Defence, DFID) 188 ? ?

Partly protected (Scotland, Wales, NI) 47 ? ?

Post 16, Police, Local Govt, the rest 80 -20 60?

Total RDEL (2015-16) 315 +5 320

s

DFE & BIS budgets

DFE budget £ bil

Schools budget 41.2

16-18 7.0

All other DFE 5.5

DFE RDEL 53.7

BIS budget £ bilScience 4.6

HE 3.3

19+ FE 2.9

All other BIS 2.4

BIS RDEL 13.2Apprenticeships 1.5

Future funding landscape?

16-18 education (from EFA)

ApprenticeshipVouchers

(16+)

FE Loans

Adult skills(partly

devolved)

HE Loans

High needs

Fees, Contracts & International

Planning for 2016-17

What we know

1. There will be 16-18 cuts but unclear what. Won’t be 10% in

2016

2. The 19+ future is loans, employers & councils

3. Longer-term reforms mean fewer smaller changes in 2016-

17

4. Shift to outcomes (destinations, progression & employment)

5. Everything that hits you hits the competition

Spending review risks

Some of the items on this list may be decided in next 6

months

1. Cuts to 16-18 funding rates (ie £4,000 for 16/17s; £3,250 for

18s)

2. Smaller 16-18 cuts (free meals, bursaries, disadvantage,

part-time)

3. Apprenticeship spending cuts (because the levy will pay)

4. More cuts to 19+ further education (on top of 24% in 2015)

5. Cuts to HEFCE’s student opportunity fund

6. Further extension of FE loans

7. Changes to capital budgets (currently routed via LEPs)

8. Funding (or none) to implement area reviews

9. Devolution of budgets to councils, combined authorities/LEPs

10.Something else (rise in interest rates?)

AoC’s spending review proposals

The ten things AoC put to the Treasury

1. Equalise key stage 5 and key stage 4 funding (at £4,800)

2. Three year funding allocations

3. No school sixth form with fewer than 250 students

4. If government wants mergers, it will need to pay for them

5. Cut costs of VAT and public sector pensions

6. Extend FE loans

7. Simplify 19+ funding via outcome agreements

8. Levy: 0.5% of payroll, all employers with +250 staff

9. Long-term initiative to recruit/retain English and Maths staff

10.2 depts, 3 agencies, 4 databases,10 commissioners.

Rationalise?

Reviewing post-16 colleges

National programme of area reviews

Designed to prevent an increase in financially weak colleges

Will cover entire country by 2017

BIS wants some new Institutes of Technology

Wave 1 (Birmingham, Greater Manchester, Tees Valley, Solent,

Sussex)

The reviews themselves

Initiated because of a national risk assessment or local initiative

Economic analysis plus an option appraisal

Colleges only (not always co-terminuous with LEP areas)

Once area review starts, college shouldn’t start their own

reviews

Implementing area reviews

Implementation

No money (so far)

College self-government remains

Mergers can be complicated (AoC information note on its way)

Big leadership task, so there needs to be a clear benefit

What to do now

Lots of data (property, finance, student numbers) – are you

ready?

Think through options

Prepare for moral pressure to be applied e

Mergers

College to College merger process

Merger process evolved in 1990s

Type A: Both colleges dissolve themselves to create a new

college

Type B: One college dissolves, transfers itself to the other

FEFC/LSC pro-merger 1997-2007; Ministers anti-merger 2007-

2014

Mergers more complicated than they used to be

- higher stakes in terms of inspection, performance etc

- creditors (banks, LGPS etc) are much more nervous

- there are perhaps 100 policies to harmonise

Financial health of colleges

Causes of financial weakness in some colleges

1. Govt spending cuts (down 27% in real terms since 2010)

2. Time taken to cut costs and/or respond to priorities

3. Capital investment decisions & associated borrowing

4. Reductions in student numbers

5. Mistakes (always obvious in retrospect)

How colleges will improve their finances

Some or all of the following:

1. Better government policy (funding properly matching the task)

2. Cost reduction (to bring budgets back into balance)

3. Property sales to release cash (only open to some colleges)

4. Relentless focus on student/employer demand and need

5. Outsmarting the competition

6. Strong, positive, realistic leadership

A new context

What we know and don’t know

Expect the unexpected – what were your New Year

predictions?

Changes to public spending permanent

More scrutiny & expectations where public money is involved

Big reforms take time. There may be some transition

Fewer people in place to implement decisions – more DIY

Keep a focus on the core business & key stakeholders