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Another fine funding mess

The long night of the 2005 general election left many with a hangover on the Friday, but for college managers engaged in the 2005-6 budget process, the Learning and Skills Council letter in The TES denying any funding problems just added to the let-down.

The Government and LSC think colleges should be grateful for recent spending increases and the attention they now get. There have been messages about the need to expand 16-18 participation and respond to the skills strategy. And there has been a recent emphasis on the limits of public funding. If colleges didn't know there would need to be changes to adult learning, then they obviously haven't been listening.

But the trouble, as colleges see it, is that they have been listening - and took on trust what they were told. They have been let down. Seriously let down.

Start with something simple, such as timing and planning. Colleges were promised that 2004-5 would be better because of the LSC's new way of doing things. Rather than fighting over the details of funding rules, colleges would be trusted. Three-year development plans would re-introduce stability. Plan-led funding would make budgeting reasonable. And the new business cycle would create a rational, transparent approach to deciding priorities and allocating budgets.

Compare that to the reality. The three-year development plans agreed in 2003 have been constantly up for renegotiation in 2004 and 2005. The new set of three-year development plans agreed in 2005 will cover one year's funding only. Plan-led funding replaced arguments at the end of the year - but at least these were arguments over compliance with a published rule-book. Now local LSCs try to adjust budgets in-year, in line with an unpublished set of rules.

Meanwhile, the new business cycle has been implemented according to plan.

The problem is the plan was to tell colleges their funding allocations in May, which was always going to be too late if big changes were required. As a result, colleges are now forced into short-term cuts rather than a careful reconsideration of their strengths, weaknesses and contribution to priorities.

Such process issues alone might not have been difficult if there had been more clarity over the budget. There have been a number of false leads.

Colleges are told now that they should be cutting "non-essential learning" - whatever that is - or raising fees.

But back in autumn 2004, there was a rather half-hearted approach to the fees issue. It took the Department for Education and Skills and LSC a year after the skills strategy to publish a consultation paper on fees. And then the decision on the consultation was to make a relatively modest change in the fee assumption from 25 to 27.5 per cent. This assumption still translated into 15 per cent fee increases to keep abreast of inflation but, tough as this is, it is a long way short of the rises needed to fill gaps in public funding.

These gaps have arisen because of the divergence between the LSC budget and its targets. The Association of Colleges has repeatedly drawn attention to the widening gap. We have been mostly ignored, or criticised for scaremongering, yet we may actually have underestimated under-funding.

Our analysis of the three-year settlement for colleges announced in 2004 assumed that the LSC's 2004-5 budget was robust. As it has turned out, the LSC has lacked funds to deal with the ever-expanding pressure placed on it by government priorities. This, in turn, has squeezed the funds available for colleges and others in 2005-6. It was always clear that 2006-7 would be a nightmare year for FE because of the greater priority placed on schools and higher education. But 2005-6 had looked sustainable - an impression reinforced by the LSC's January funding guidance which talked of 16-18 growth and maintaining adult learning volumes.

It is now obvious that there will be budget cuts in 2005-6 and that many colleges will only maintain student numbers by accepting cuts in the price paid per student. Colleges were promised a 5 per cent increase in prices in 2005-6: 2.5 per cent for inflation, 2.5 per cent to implement promises in Success for All. Many colleges are being asked to accept much less but still deliver growth to meet government priorities. Talk of giving decision-making to the frontline is hollow when the entire budget is dictated by Whitehall targets. The promises in Success for All about investment to build and deliver quality look hollower still.

Over the next two months, the LSC will start presenting its Agenda for Change. This will, no doubt, include good ideas. But the first question on most lips is this: how the hell did we end up starting from here?

Julian Gravatt is director of funding and development at the AoC

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