1. Longer term funding issues Julian Gravatt, 18 June 2014

2. 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

3. College income and expenditure (all types) 1993-42012-3% FEFC, EFA+SFA 2,3645,627+138% Other1,1501,943+68% Income3,5087,570+115% Staff2,3904,806+101% Supplies1,1252,822+151% Expendit3,5157,628+117% Surplus(7)(58) % Diversity32%26% % Staff cost68%63% College accounts (FE & SFC) Colleges have increased fully funded student numbers at a time when eligibility has widened. Fees have been harder to secure than external contracts. Colleges do more sub- contracting and set aside 8% of income on depreciation and interest but spending on staff predominates Average College income £7 mil in 1993, £22 mil in 2012 GDP deflator up 51% in same period

4. Fewer colleges, different students 19932014Change FECs302218-84 SFCs12093-27 AHCs3715-21 ADC133-10 SDIs1610-6 Total488339-149 Colleges Merger waves (eg 1998 to 2002) Some transfers to HE sector A few new SFCs 16-18 year olds Colleges have held share of students 16-18 All sectors 19942012Change Full-time9261,327+43% WBL179110-45% Other162197+19% Sub-total1,2661,635+29% Work219149-32% NEET136190+39% Total1,6241,973+21% Adults in Colleges 199620042013 Numbers2,5853,0911,879 Adult learning The decline of the evening class?

5. Sixth form college finances now Sixth Form College Finances (2012-13 accounts) £9 mil income on average (£4 to £20 mil range) Overall surplus £13 mil on £873 mil income (1.5%) Several deficits in 2012-13 (19 reported deficits, 9 cash based deficit) Staff costs 69% of income (62% in FE colleges) 89% income from EFA Debt repayment (20% of income in 2011 -> 12% by 2013) Only 1 SFC assessed to have inadequate financial health in Jan 2014 Some big concerns about the immediate future

6. Revenue funding 2014-15 OutcomesThings to note EFA 16-18FPG helps some colleges 18 y/o mitigation helps others Colleges advance funding Full-timers New Maths/English condition Tighter sub-contracting rules Apprenticeships and Adult Skills 16-18 recruitment down 19+ ASB and apps on target Apprenticeships expectation 17% ASB cut (23% on 19+ skills) No tolerance or transition New apprenticeship trailblazers New traineeship plans Employer routed funding by 2017? LoansColleges using c66% of facility 2014-15 facilities up 27% SFA Loan growth plans now Extension of loans in 2016?

7. Sixth form colleges in 2014-15 Sixth Form College Funding 2014-15 A series of cuts to full-time student funding 2011 and 2015 Action to limit year-on-year change but end-point is lower £/student New EFA funding formula introduced in 2013-14 Funding designed to support study programmes, English and Maths No money for inflation Many SFCs have policy to expand to maintain income Student numbers forecast to rise by c3.5% in 2013-14 (+60 per SFC) EFA allocations for 2014-15 up by an average +0.5% in 2014-15 Cash funding per 16-18 student falls by c3% in 2014-15

8. 16-18 Funding in 2015-16 EFA faces a 16-18 cash crunch in 2015 The size of the 2015-16 budget is unclear 1.1% cuts for non-school DFE announced in 2013 Autumn Statement Growth in 16-18 numbers plus the costs of extra FT students Risk that there’ll be more cuts to rates or funded numbers AoC, ASCL and SFCA working with others to protect budget SFA also faces a continuing sharp but unclear reduction in budget EFA and SFA will be confirming allocations in spring 2015 Important to confirm 2015-16 allocations before election

9. Public spending after the election Public spending 2015 to 2020 Years 7,8 and 9 of a 9 year plan Treasury plans to close deficit by 2018 Lab/Lib Dem target is 2020 After the election, a spending review Decisions by December 2015 Current plans for 2016-17 £10 bil RDEL cut, £5 bil NI rise For period 2015-16 to 2018-19 £34 bil (8%) cut in RDEL Unprotected depts £80-100 bil

10. Pensions and budgets NowBy 2016 TPS employer14.1%16.48% NI employer10.4%13.8% Employer on-costs26%33% Staff cost ratio67%? Cost of employing a teacher to rise by 5% plus any payrise TPS Aim is to recover underfunding Lower discount rate High pay growth assumption 2015 reforms don’t save enoug h Costs SFC 1% of income National insurance DWP simplifying the rules £5 bil extra NI pays pension costs Costs SFC 2% of income NowBy 2016 TPS members (avg)9.6% NI employee10.6%12%

11. Funding from 2016 onwards DFE budget between 2015 and 2020 10% growth in 11-16 pupil numbers (280k extra 11-16s) Costs of promises (eg free meals) and new institutions 8% fall in 16-18 population (low point is 2018) 83% of 16s in education, 10% in training or work, 7% NEET

12. Funding from 2016 onwards 16-18 issues Lots of questions but answers unlikely until 2015 Formula Protection Grant ends (2015-16 is the final year) Maths/English condition takes effect (from 2016-17) New A-levels in place and New Tech Levels promoted EFA may need adjustments to 16-18 formula Will these be designed to cut funding? BIS issues Some big cuts likely in BIS spending (requires HE reform) Any political decision on HE fees will have an impact from 2017 Employer routed funding for apprenticeships by 2017 ? Expansion of FE loans likely to take place in 2016

13. Longer-term funding trends Politics The 2015 vote and Coalition negotiations pretty important Events determine post-16 policy as much as ideology Political views of ministers determine planning/market mix Public spending Post-2015 spending review may change tax/spending mix Demography underpins student number trends and budgets Three things working against 16-18 education -Demography (more children now, more older people) -Economics (deficit reduction continues to be a priority) - Politics (future of UK discussions) No appetite to rebuild the size of government Spending likely to dip around 2018

14. Thinking about funding and finance At a national level Important to stick to the facts and explain the consequences Necessary to connect with people at an emotional level Better to find friends than enemies For individual colleges Pessimism can be contagious. College fortunes vary significantly Quality counts Opportunities within £65 bil DFE+BIS revenue budget Productivity improvements from IT only partly realised in education. Some government budgets continue to rise (eg FE and HE loans). Worth thinking about income generation Vital to keep staff and governors onside