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After an anxious year, what will 2016 bring?

There were sighs of relief over the spending review, but major change still lies ahead

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FOLLOWING months of seemingly endless stories about funding cuts, 2015 ended with some welcome relief for the FE sector. In the government’s spending review, chancellor George Osborne announced that FE would not face the severe cuts that had been predicted.

The budget for adult skills will be protected (in cash terms at least), and the overall budget for the Department for Business, Innovation and Skills (BIS) was trimmed by 17 per cent – significantly less than the 40 per cent that had been mooted.

But while many may have breathed a sigh of relief, the pace of change for the sector shows no sign of slowing.

So what developments should the sector look out for in 2016?

 

Apprenticeship levy

We know that it will be placed on all large employers in 2017, with a contribution rate of 0.5 per cent of payroll (outside of a £15,000 allowance). We know it will be collected via PAYE. We know it is expected to bring up to £2 billion to the sector. And we’ve heard plenty about the government’s target of creating 3 million apprenticeships by 2020.

But many unanswered questions remain. For example, what help will there be for small- and medium-sized businesses? The next budget address in March should tell us a bit more about the government’s intentions.

 

Area reviews

The government’s five waves of area reviews are underway, with the second wave due to begin later this month. Across the sector, the outcomes of the first reviews are eagerly anticipated, with colleges in other regions keen to glean whatever lessons they can.

While wholesale mergers are one likely outcome of the area reviews, greater sharing of back-office functions could allow many providers to retain the overall number of sites while cutting costs. And then there was the somewhat surprising insistence last month by education secretary Nicky Morgan that the reviews apparently weren’t really about saving money at all. More details in the coming months should help to make things clearer.

 

Devolution

What is already crystal clear is that 2016 will herald the start of the process of devolving the non-apprenticeship part of the budget for adults from the Skills Funding Agency (SFA) to Local Enterprise Partnerships (LEPs) in some parts of the country. But this is not expected to be fully devolved for another two years. The local elections in May for England, Scotland and Wales could change the political landscape of Britain – and also bring forward devolution announcements to ahead of the period of purdah.

 

Traineeships

The government has announced that, from August, all training providers – even those rated inadequate or as requiring improvement by Ofsted – will be allowed to offer young people traineeships. The expansion of the flagship programme, which was designed to provide students with the skills required to embark on an apprenticeship, has been modest so far. Will this announcement finally help to kick-start it?

 

Funding for adult skills

The autumn statement wasn’t as bad for the adult skills budget as people had feared; the government said that it would be protected in cash terms for the next five years. However, that still represents a real-terms cut to the budget. Exactly what the implications will be for providers remains to be seen. It’s also worth keeping an eye on the timetable for reforming functional skills qualifications.

 

Capital funding

Capital funding has been largely devolved to LEPs, which are supposed to put out to tender; providers can then bid for pockets of cash. This will prove vitally important for colleges and independent training providers alike. The government has also promised an update on plans to convert some colleges to institutes of technology as part of its strategy to boost UK productivity. LEPs are waiting for guidance on this but, whatever happens, they will need capital funding to make the government’s plans a reality.

 

Funding agencies

Ahead of the spending review, there was plenty of speculation about a possible merger between the SFA and the Education Funding Agency (EFA). But no news was forthcoming. The biggest clue so far may have come from Keith Smith, director of funding and programmes at the SFA, who told a workshop at the Association of Colleges’ annual conference in October that there would be no SFA or EFA contracts by 2020.

This could be due to vouchers for provision such as apprenticeships being devolved to LEPs. So will there even be a funding agency in five years’ time? Some may have doubts, but the Association of Employment and Learning Providers reckons that at least one will remain in some form. “At the end of the day there will always be an agency of some sort, even if it has a different name on the door,” a spokesman says.

 

Sixth-form colleges

As part of the spending review, sixth-form colleges have been offered the chance to convert to academies in the new year. The main attraction for many will be the opportunity to save upwards of £300,000 a year in VAT. The government has revealed that the process will be orchestrated through the area reviews, but exactly how this transition will take place – and how many colleges will take the plunge – is still anyone’s guess.

 

Work Programme

The Work Programme will be replaced with a new Work and Health Programme. Contracts for the existing programme may not end until 2017, but a tender for its replacement will be launching in the spring. With speculation that the contracts will be significantly less lucrative than those currently on offer, providers face an anxious wait for clarity.

 

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