Policy and funding update Julian Gravatt, AoC assistant chief executive

AoC priorities Apprenticeships

Area reviews Government policy & public spending College finance & funding Final thoughts

Area review timetable 18 reports published Sept 15 Jan 16 May 16 Sept 16 Jan 17 Wave 1 Wave 2 Wave 3 18 reports published 55% of colleges through process Completion by March 2017 Intervention will continue Wave 4 Wave 5

Area review implementation Meeting 1,2,3,4 and 5 Merge Partnership Standalone Restructuring Facility Self-fund Transaction Unit In 1993, there were 488 colleges 23 years later, 324 (1/3rd fewer)

Government policy

What’s driving government Everything changed in 2016 Brexit, Brexit, Brexit New world order New priorities and policies at home: - “ordinary working class people” (May, September) - “schools that work for everyone” (Greening, September) - “modern industrial strategy” (May, January)

Education policies Schools green paper More places in “good schools” (grammars, faith schools etc) Justine Greening’s social mobility plan Tackling geographic disadvantage (“opportunity areas”) Building capacity (leadership, workforce training) Ensuring education really prepares young people for work and career success

Industrial strategy – the proposals Six areas of action in the strategy (which is a green paper) Actions to improve basic skills Creation of a new technical education system Addressing STEM shortages (eg Maths free schools) Addressing sector-specific skills gaps Higher quality careers information and advice (eg admissions) Testing new approaches to lifelong learning

Some bigger issues Why skills policy has a higher profile Productivity already low and Brexit will make UK poorer Unemployment low (5%) yet govt wants to cut migration Divisions and disaffection evident in society Full-time higher education implies a £50,000 debt People will work for longer and are saving less

The new overlaps with the old The reforms that are already underway School reform (new GCSEs, new curriculum, academies) High needs (EHCPs, council control of funds) Apprenticeships (3 million target, new standards, the levy) Higher education (TEF, OFS, Challengers) Further education (area reviews, skills devolution)

Public spending

The Autumn statement A fairly low key document Official forecast: GDP 2.4% smaller by 2020 All fiscal targets set in 2015 breached. £21 bil deficit by 2020 Key issue is shortfall in forecast tax revenues Public spending plans Departmental spending plans unchanged (for now) 2017 efficiency review to find £3.5 bil in savings by 2019-20 New capital spending (housing, broadband, research etc)

AoC’s budget submission Govt needs a reset on education and skills Fair funding at 16. KS5 rate = KS4 rate Technical education package (workforce, equipment etc) Maintain apprenticeship spending whatever the levy A citizen’s skills entitlement (including digital) An English Social Fund Capital funding Plus changes to annual budgets, pensions, VAT etc

What next on public spending Timetable of changes between now and 2020 Spring budget (8 March 2017) EU negotiations (April 2017 to end 2018 Autumn budget (November 2017) The year of substantial changes could be 2019 Exit date from EU New technical education routes start National school funding formula Run-up to the 2020 election

College finances

College key funding lines (£ millions)

Surplus / deficit 2009-10 2011-2 2013-4 2015-6

Pension contributions rising Support staff Teachers College TPS 91 LGPS funds LGPS Employer Range 10-25% Average 15.8% Rising in 2017 TPS Employer 16.48% Could rise in 2019 Support staff Income-related Contributions 5.5-12.5% Income-related Contributions 5.5-12.5%

LGPS valuations are college specific

College finances A cocktail of issues Flat cash funding at a time when costs are rising Financial weakness in some colleges (15% judged financially inadequate; 5% in distress) Issues with banks, pensions and insolvency regime Competing teams (SFA/EFA, FE commissioner, TU) Austerity to continue until 2022 on current plans Cashflow is everything

College funding

Where public money goes School grants (£32 bil/yr EFA to Academies direct in 2019) 16-18 grants (£6 bil via EFA) High Needs (£5 bil/yr via councils) HE (and FE) Student Loans (£20 bil/yr by 2020) Levy funded And SME co-funded Apprenticeships (£2 bil/yr by 2018) High cost HE (£1 bil via HEFCE) Adult Education (£1.5 bil, via SFA & Mayors)

16-18 funding for 2017-18 EFA funding Same system; some changes to data (eg Band 2) National base rate protected (£4,000) Formula adjusts allocations based on student characteristics Allocations may be reduced where sub-contracting ends Change to A-levels, GCSEs, Applied General, Technical quals) will bring funding change A massive English and Maths challenge for colleges

English and maths Number of 16-18 GCSE English students Number of 16-18 GCSE Maths students

2016/17 Allocations: All institutions Change in Student Numbers and Change in Funding 2016/17 allocations are provisional Compared to 2015/16 final published allocations Funding figures are total funding excl bursary and high needs **All institutions includes: GFE Colleges, Art and Design colleges, Agricultural & Horticultural College, Specialist designate colleges, Sixth form colleges, School sixth forms and Academies

19+ funding The decisions made in the 2015 spending review An apprenticeship levy raising £2.6 bil/year Student loans for postgrads and 19+ level 3 Protection of adult education budget at £1.5 bil/year Devolution deals with combined authorities

Apprenticeships A new chaotic market Spending decisions devolved to 20,000 employers New system, new formula, new rates, new standards Lots of standards at Level 4+ RATP procurement, hopefully on a rolling basis ITT for small employers Allocations for continuing apprentices Will there be a slow start in summer/autumn 2017?

Adult education budget Significant change in 2016-17, continuity in 2017-18 Single adult education budget (AEB) with more course flexibility but more restrictions on who can be covered Continuing issues with (and controls on) sub-contracting Underspending in 2016-17 (SFA handing money back) AEB procurement (contract-funding) for one year Devolution in 2018? Delays over last six months “Flat cash” (Year 2 allocation = Year 1 allocation)

Higher education / advanced level FE Higher education reforms Higher full-time fee cap (£9,250 in 2017) subject to TEF No cap on recruitment, but declining demand New OFS in 2018; new rules on quality and student protection Advanced level FE College loan facilities were increased by 27% in 2016-17 Tighter controls on growth (note John Frank Training)

Some final thoughts

Different college roles Funding / Finance Although opportunities exist, financial pressure will increase Fewer officials = less sophisticated funding models Continuing push to give power to consumer (levy, loans etc) Commercial skills will be at a premium Data / MIS Integrity of ILR data remains crucial Knitting systems together (admissions, destinations, CRM)

College economics (what’s in the box?) Class size Income Student taught hours Positive completion Staff costs per teaching hour Student / teacher time / effort /love Student satisfaction Costs of running the college