1. Policy and funding update
Julian Gravatt, AoC assistant chief executive

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

3. Area review timetable 22 reports published
Sept Jan May Sept Jan May 17
Wave 1
Wave 2
Wave 3
22 reports published
75% of colleges through process
Completion by March 2017
Intervention will continue
Wave 4
Wave 5

4. Government policy

5. 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)

6. Education policies Schools green paper
More places in “good schools” (grammars, faith schools etc)
It is now six months since the policy was first announced
Justine Greening’s social mobility plan
Tackling geographic disadvantage (“opportunity areas”)
Leadership and workforce training
Ensuring education really prepares young people for work and career success

7. Industrial strategy – the proposals
Six areas of action in the strategy (also a green paper)
Actions to improve basic skills
Creation of a new technical education system
Science Technology Engineering Maths (STEM) shortages
A new big UK skills forecast to identify sectors for action
A careers strategu
Testing new approaches to lifelong learning

8. Some context Why skills policy has a higher profile
Productivity already low and Brexit could disrupt economy
Unemployment low (5%) yet govt wants to cut migration
Divisions and disaffection evident in society
Full-time higher education implies a £60,000 debt
People will work for longer and are saving less

9. 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 (Office for Students, Teaching Excellence)
Further education (area reviews, skills devolution)

10. Public spending

11. Public spending Timetable at the Treasury/Cabinet level this year
Spring budget (8 March 2017)
EU negotiations (April 2017 to end 2018
Autumn budget (November 2017)
Timetable for college funding this year
EFA funding allocations for
SFA Adult Education Budget allocations for
SFA decisions on the register of apprenticeship training providers and tenders for training in small companies

12. Context for the spring budget
What was in the Autumn statement in November 2016
Official economic forecast shows GDP down by 2020
All fiscal targets set in 2015 breached. £21 bil deficit by 2020
Key issue is shortfall in forecast tax revenues
What this meant for public spending plans
Departmental spending plans unchanged (for now)
New capital spending (£35 bil) but not much on skills
2017 efficiency review to find £3.5 bil in savings by

13. AoC’s budget submission
Govt needs a reset on education and skills
Fair funding for 16 to 18 year old college students
Technical education package (workforce, equipment etc)
Maintain apprenticeship spending whatever the levy
A citizen’s skills entitlement (including digital skills)
An English Social Fund
Capital funding
Measures to improve efficiency & effectiveness of the system

14. Headlines Announcements on economy, fiscal plans, tax and spending
Economy expected to grow in 2017 more than expected but forecast full of uncertainties because of Brexit
Inflation (CPI) expected to rise to 2.4% later in 2017
Unemployment still below 5%
UK budget deficit below 3% of GDP in
Current target to eliminate deficit by
Budget includes £5 billion of extra spending over 5 years and £5 billion of extra tax income* in same period. Fiscally neutral if the forecasts are correct.
* £2 bil of which is from NICs on self-employed

15. Education announcements
Full speed ahead on schools
Schools white paper out soon
More places in good schools (grammars, faith schools etc)
£1 billion more added to free school capital budget for period after New school buildings take time to come on stream.
DFE now able to invite more bids for new schools
No action in some areas
No change on national school funding formula
Adrian Smith Maths review not yet published

16. Technical education 16-19 year olds
Towards a new system
Technical education routes now T-levels
£100 mil for academic year when first routes start
£500 mil a year extra in the early 2020s
Funding assumption 900 hours vs 600 now
Covers, perhaps, 20% of the age group
Work needed from EFA to include this funding and new assumptions into the funding formula
Design of new T-Levels and implementation after 2019 have major implications for choices offered to all 16 year olds. Not clear where they will be available or who will offer them

17. .. and for adults Institutes of Technology
£170 million over 3 years for new IoTs
No new Treasury funding. Comes from within DFE budget
Developed from existing institutions, preferably FE colleges
Maintenance loans for Level 4&5 courses in future
Applications will be invited later in spring 2017
Lifelong learning
£40 million to pilot innovative approaches

18. What’s next on public spending
Next steps for the government
Treasury will now work on autumn budget including efficiency review (“6% savings by ”)
Much in government depends on Brexit negotiations
EFA allocations just published
SFA allocations out in late March (no change)
Uncertainty on skills devolution
Apprenticeship D-Day 1 May 2017

19. College finances

20. College key funding lines (£ millions)

21. Surplus / deficit

22. 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 %
Income-related
Contributions %

23. 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

24. Intervention after area reviews end
Colleges accountable to various organisations
The bank (if they have a loan)
SFA/EFA (if finances is satisfactory or inadequate)
Ofsted (which has a risk-based inspection cycle)
FE Commissioner (referral from SFA or Ofsted)
Students, employers and communities

25. College funding

26. 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)

27. College funding
Stability in two main funding lines, upheaval in the third
EFA funding predictable until tech ed reforms in 2019
Adult education / skills predictable in short-term
An entirely new apprenticeship system in 2017

28. 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

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

30. 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

31. 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

32. Adult education budget
Significant change in , continuity in
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 (SFA handing money back)
Devolution in 2018? Delays and not happening in East Anglia
“Flat cash” (Year 2 allocation = Year 1 allocation)

33. 3 million apprenticeships + the levy
“Apprenticeship spending will double over the decade”
2015 spending review
… via a new hypothecated tax

34. Apprenticeships for large employers (c19,000)
HMRC
Levy (0.5% of payroll)
Employer
directs recipient and price
Apprentice
Digital Apprenticeship Service
Registered Training Organisation
Skills Funding Agency
Payment on confirmation of training (ILR) and employer authorisation

35. Registered Training Organisation
Apprenticeships for small employers (1 million) and large employers who have used levy
Small employer
Apprentice
Employer
pays 10% of price
Skills Funding Agency
Registered Training Organisation
Payment of 90% on confirmation of training and co-payment to those with contracts

36. Apprenticeships A new chaotic market
Spending decisions devolved to 20,000 employers
New system, new formula, new rates, new standards
Lots of standards for higher and degree apprentices
Tenders decisions in March for all post-April 2017 starts
Allocations for continuing apprentices
Difficult to predict now what will happen with the levy

37. Some final thoughts

38. What other colleges are doing
Variety of issues
Area reviews resulting in more mergers
Public spending reductions have added to financial pressure
Ofsted plus English and Maths have had a disruptive effect
Many FE colleges dealing with falls in 16-to-18 enrolments
Apprenticeships are a near-term priority
Technical education reforms may be an opportunity

39. 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