Autumn Clerk’s Conference Funding and finance update 30 September 2014 Julian Gravatt, Assistant Chief Executive,

Lots of activity - agencies, initiatives, acronyms etc Periodic changes to the funding formula – 2003, 2008, 2013 Incessant fiddling with qualifications, prices and programmes Funding used to nudge and control Budgets that change every year despite multi year spending reviews Desire to squeeze every ounce of value out of every pound spent Twenty years of funding, what we’ve learnt

College accounts

Government plans Deficit reduction Spending cuts Spending review in 2015 Unprotected departments 9.1% of GDP ( ) 7.8% of GDP ( ) 5.4% of GDP ( ) Spending cuts c40% to come Loans may be a safe haven The bigger spending picture

The DFE budget after 2015 DFE’s cash crunch: too many academies, sixth forms, pupils & promises 2015 to 2020: 10% growth in pupils, 8% fall in 16-18s population Education is staff-intensive (80% of school income) Pensions + NI on-costs = 5% increase in cost of employing a teacher

EFA funding Decisions on later than on schools EFA needs to fund costs of study programmes (more FT students) New A-levels, new Tech Levels, New traineeships If cuts are necessary, EFA will cut rates, weightings or eligibility EFA will confirm allocations by March Lagged funding introduced in Are there alternatives? Do councils get control of the budget? Formula Protection Grant ends; Maths/English condition starts Nothing will be clear until the post-election 2015 spending review

SFA Funding from 2016 onwards BIS budget Some big cuts likely in BIS spending HEFCE + Student Grants + Science £8 bil out of £13 bil 19+ FE/Skills budget might be quicker to cut LEPs/Councils will continue to push for DWP & BIS budgets Expansion of FE loans could take place in 2016 Apprenticeships Cross-party support for apprenticeships (advanced & higher apps) Employer routed funding for apprenticeships by 2017 ? Government spends £1.5 bil. Will employers pay for training? Unemployment Areas of high unemployment despite the economic recovery All three parties have talked about under 25 benefit cuts (earn or learn)

Longer-term funding trends Politics Current shift towards devolution The 2015 vote and Coalition negotiations determine next steps Events determine post-16 policy as much as ideology Political views of ministers determine planning/market mix Public spending Post-election 2015 spending review Three things working against 16+ education -Demography (more children now, more older people) -Economics (deficit reduction continues to be a priority) - Politics (UK, devolution, EU issues) No appetite to rebuild the size of government Spending likely to dip around 2018

Financial health College finances Deficits in (48% operating deficits, 10% cash based deficit Ofsted-related spending + capital projects = short-term deterioration Staff costs 60-65% of income Public spending cuts -> 4% fall in EFA+SFA in 2014 Rising costs and falling income How Colleges need to respond Understand their position, their environment and their risks Relationships with SFA, EFA, Council, MP and their bank Actively manage their finances Think about opportunities and what comes next

On a more positive note... Opportunities Colleges have friends and allies Education and skills matter both to the recovery & to society Government will still be spending £70+ billion on education in 2020 Income generation opportunities exist Quality counts Productivity improvements from IT only partly realised in education There are some relatively simple things that can still be done

Known events Autumn Scotland referendum, 18 September 2014 Party conferences, 21 September to 8 October 2014 AoC annual conference, November 2014 Autumn statement, 4 December 2014 Spring Budget, mid March 2015 Easter, 7 April 2015 General election, 7 May 2015