No deal: Why wheeler-dealing college mergers must end

The secrecy that goes with college mergers has to stop, says Ian Pryce, who proposes a more transparent approach
17th September 2019, 10:03am


No deal: Why wheeler-dealing college mergers must end
College Finances: Let's Put An End To The Dodgy Dealings

Whatever your views on Brexit, I have always hoped that colleges would support my campaign for a no-deal approach to college bail-outs (or exceptional financial support, to use the more palatable phrase).

In recent years, we have become used to Education and Skills Funding Agency and Department for Education staff using the word "deal" to describe their secretive approach to resolving the problem of colleges falling into severe financial difficulty, particularly in the context of a merger where these deals are used to facilitate, perhaps even strong-arm, institutions to come together.

Background: The college mergers on the horizon for 2019

News: £400m boost for colleges: 16-18 funding finally raised

Opinion: College merger: Sometimes, bold change is needed 

Interestingly, the last few weeks has seen the publication of two important, and refreshingly honest, reports from the DfE that touch on the effectiveness of the current deal approach.

The impact on learners

The first was The Impact of College Mergers in Further Education. This is a comprehensive evaluation of mergers and tests whether they produce the desired results. The hypothesis is that mergers should increase surpluses, reduce the proportion of income spent on staff, increase income to asset ratios, reduce debt ratios and improve student achievement. But the analysis tellingly showed no significant improvement at all on average. And actually, the mergers in the study resulted in lower surpluses, higher staff costs and lower student achievement. The conclusion is clear. Bigger is not better, bigger is just bigger.

The second was Area review: end of programme report, an assessment of the area reviews and the extent to which recommendations have been implemented. In those simple terms, the answer was pretty positive. The vast majority of proposed mergers and restructures were complete. However, the report lists the amounts spent on implementation, huge amounts going to a tiny number of colleges via these individually constructed and negotiated deals.

Overall, £433 million was made available to make area review mergers work.

The chancellor's funding promise

We have been quick to praise the chancellor for his announcement of between £400 million and £500 million of extra funding next year across the whole sector as a move both welcome and generous. It will make a huge difference to colleges. Yet, here's a report saying a similarly huge sum was given to a handful of colleges in a secretive, opaque, non-uniform way to ensure mergers that, based on the above research, have no significant impact on learners. Wouldn't it have been better to have used that money to increase the base funding rate by 4.7 per cent instead?

There will be an argument that much of that £433 million would have been needed to prop up the colleges being saved by the merger - but all of it was predicated on merger as a condition of getting the support. If merger makes no difference then that money should be available to all colleges in trouble (or perhaps all colleges) regardless of whether they wish to merge. If you are in trouble, you are in trouble. The research says merger won't alter that.

If you accept this logic, then any college should be able to apply - or simply get - exceptional support. The process should be open and transparent, not a matter of agreeing to a deal. The methodology should be a matter for consultation with the sector.

A transparent system

Some will parrot Tolstoy and say that colleges in happy health are happy in the same way but colleges in trouble are unhappy in different ways. This then excuses the need to have special, negotiated deals that involve others like the banks. Given that our staff and students have paid the price of bankers' folly for over a decade, banks should be happy with whatever they are given and certainly not prioritised. Equally the secrecy and the non-involvement of neighbouring colleges means we ignore the negative impact of bail-outs on well-run local neighbours and that is just plain wrong.

If there was a process in which everyone was told that a college in trouble was assessed using transparent metrics as needing £X million of exceptional support, this would allow other local colleges to propose more cost-effective solutions or put on record the potential negative impacts on them. 

I would love to see a system akin to planning consent where proposed exceptional financial support has to be put in the public domain for consultation and objections. That external scrutiny would keep everyone on their toes.

Only by ditching the wheeler-dealing and the secrecy are we going to see funding effectively spent. We want funding to follow the learner, not follow the exiting principal and finance director.      

Ian Pryce is chief executive of Bedford College

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