Capital funding priorities in a world of devolution, LEPs ... · • Grant + Cash + Asset sales + Loans • New buildings customised for each College . College funding – some history

Capital funding priorities in a world of

devolution, LEPs, Skills plan and

industrial strategy

David Hughes, AoC Chief Executive

Capital funding

How we go to where we are now

College capital projects – starting point

• A College success over the last 25 years

• College ownership and direction of projects

• Mixed funding model (unlike schools)

• Grant + Cash + Asset sales + Loans

• New buildings customised for each College

College funding – some history

• Colleges started self-governing in 1992 with a £800 mil repairs backlog

• LSC (2001-10) supported c£5 bn in college

investment with c£2.5 bn in grants (despite 'crisis' in 2009)

• Coalition protected capital budget at lower level

• SFA (2013-5) supported £0.8 bn in college

investment with c£0.45 bn in grants • Decision in 2013 to create Local Growth Fund

Positive impact of capital investment:

More student numbers Higher student performance Increased employer engagement Income generation Economic regeneration

BIS research on capital investment (2012)

Devolution

Devolution policy

• Long standing desire to devolve/decentralise at same time as centralist tendency in 2000s

• Various vehicles & initiatives, eg RDAs, Total Place,

City Deals, Local Growth Fund

• LEPs & Combined Authorities are current vehicles from new devolution impetus led by Osborne,

• Not clear where May Government stands on this, though Industrial Strategy strong on regional disadvantage & differences

Skills devolution

Devolution deals with skills budget

West Midlands, Greater Manchester,

Liverpool City Region, West of England

Tees Valley, Sheffield City Region,

East Anglia (now just Cambs&Peterboro)

Greater London (2019-20)

In queue to get a deal

Lancashire, Solent, Yorkshire

Skills capital

• Skills capital routed via LEPs since 2015

• Three Growth Deal rounds in 2014, 2015, 2016

• Original skills capital budget c£300 mil/year

• Indicative budget in Growth deal 3 c£120 mil

• Industrial strategy (“£170 mil for IoTs”) implies a lower level of funding

College finances

A cocktail of issues:

• Flat cash funding at a time when costs are rising

• 16-18 funding rate 22% lower than schools 11-16

• Financial weakness in some colleges (15% inadequate)

• Issues with banks, pensions and insolvency regime

• Austerity to continue until 2022 on current plans

College income and finances

Surplus / deficit

(1.0%)

(0.5%)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

English College Surplus / Deficit as % of Income

2009-10 2011-2 2013-4 2015-6

College capital funding – where are we now

• Despite successes in the past, the capital funding model for colleges is broken

• College estates overall still in need of major investment

• Government grants at lowest ebb since 1998 • Restructuring facility limited in scope

• The two main banks would prefer to cutback

• Some colleges can proceed on basis of strong

internal finances and/or property sales

Developing a positive agenda

What’s driving government

Everything changed in 2016

• Brexit, Brexit, Brexit

• New world order

• New priorities and policies at home:

- “ordinary working class people”

- “schools that work for everyone”

- “modern industrial strategy”

The priorities colleges identify for AoC

Apprenticeships

2017 AoC budget submission

Some of the things we asked for

• Fair funding for colleges - increase £4,000 rate to 11-16 rate,

increase £1.5 Adult Education Budget, guarantee

apprenticeship spending

• Improvements to the system - condition of funding E & m

flexibility, review of sixth forms

• Longer-term targets - education spending 5% of GDP, higher

Maths attainment by 2030

• A Brexit skills plan - English Social Fund

• A funding package for the skills plan – more teaching hours,

more capital funding

Capital & estates – final thoughts

• Colleges are self-governing

• Government is (right now) only a partial and an unreliable funder

• Opportunities for some to work with LEPs and combined authorities

• Focus on how to increase income,

rationalise space, reduce costs & meet employer needs.