College funding: Why the Covid crisis is far from over

Colleges are losing millions in funding owing to Covid-19 – and the government still doesn't have the answers, writes Lowell Williams

Lowell Williams

College funding: The Covid crisis is far from over

I had a dream about the future of further education colleges in England. It was a compelling dream. Colleges would be rightly recognised for the crucial role they play, for people, in reskilling and retraining, for productivity, in supporting employers, and for place, in building healthy communities. Government would publicly proclaim their worth and their centrality to the recovery of ravaged post-Covid-19 regional economies. The days of underfunding and unfulfilled promises were past. Colleges would never be overlooked or unfairly treated again.

And this summer, my dream seemed to be coming true…

The prime minister chose Dudley College of Technology at which to deliver his “project speed” speech on 30 June. He announced a “vast funding programme” for further education “because it is time the system recognised that talent and genius are expressed as much by hand and by eye as they are in a spreadsheet or an essay”. He met four apprentices, those talented young people. He discussed, at an acceptable social distance, productivity and technology with the college’s apprenticeship team and posed for the cameras at the construction site of a part-funded Institute of Technology.

On 9 July, the education secretary reemphasised the government’s commitment to FE, announcing “a major shift in how we treat further education…because further education is vital if we want our country to grow economically and our productivity to improve.”

But dreams can be deceptive, and reality is a harsh awakening.

News: West Midlands colleges fear £22m loss

More: DfE 'must support colleges at risk of losing £2bn'

Background: 13% of colleges fear their solvency is at risk

The crisis in apprenticeship funding 

In Dudley, I had the opportunity to warn the PM of an impending crisis for the region’s apprenticeship infrastructure. I was by no means the first to issue this warning. The Association of Colleges, college chairs and principals and many others before me have done so. He assured me of the government’s understanding and full support. 

This is the problem. While colleges are publicly funded organisations, they are classified by the Office for National Statistics as private organisations. Colleges operate as businesses in that they generate income from sales. They sell education and skills training, in differing programmes.

One key programme is apprenticeships and some colleges, but not all, are major providers of apprenticeships, responding to the government’s ambitious apprenticeship strategy  – remember Cameron’s three million apprentices pledge? Many of the apprenticeships they offer are in high-value priority sectors such as digital, advanced manufacturing and construction, those sectors now critical to rebuilding damaged regional economies.

College apprentices are the future skilled technicians and managers of companies with household names, like Jaguar Land Rover, and innovative advanced engineering SMEs many will never have heard of, such as Hencor Engineering in the Black Country.

But as with so many other businesses, Covid-19 has had a catastrophic impact. Between March and July 2020, college income from new apprenticeship starts – sales, in business-speak – simply dried up. The forward order book for starts from August 2020 doesn’t look much better, as employers in uncertain economic times freeze new apprentice starts.

Colleges with high volumes of apprenticeships also tend to be those colleges with good levels of income from commercial activity. They sell training services, mainly to employers, thereby reducing their reliance on government funding. Covid-19 has ensured this income has dried up too. Like other businesses, these colleges are suddenly faced with a dramatic and unforeseen loss of income.

A collective detriment of £22.5m

Colleges West Midlands, a collaborative partnership of 21 colleges in the West Midlands region, has assessed the impact of Covid-19 on five of the region’s apprenticeship providers: City of Wolverhampton College, Dudley College of Technology, Telford College, Walsall College and the Warwickshire Colleges Group. Loss of income from a fall in apprenticeship starts across these five colleges in the period March to July 2020 amounts to £5.4 million. By July 2021, these five colleges forecast a further loss of £9.1 million, totalling a combined loss of £14.5 million. Accompanying this is a fall in commercial income and additional Covid-19 health and safety costs leaving a collective detriment of £22.5 million. Extrapolate this on a national basis and the size of the problem becomes clear.

The impact on a college’s financial health is affected most strongly by the mix and balance of provision. The more apprenticeship provision a college has, the more pronounced the Covid-19 effect will be and in turn the greater the detriment to the college’s financial health. In short, those colleges who have wrung themselves inside out to deliver the government’s apprenticeship target and to reduce their reliance on public funding now find themselves financially hung out to dry by Covid-19.

It is widely recognised that the underlying financial health of the FE sector, pre-Covid, was fragile, the aftermath of some 10 years of underfunding. In the absence of any meaningful support, colleges with high volumes of apprenticeships are faced with two stark choices: use up their reserves, if they have any and while they last, to mitigate their current trading losses; or cut their costs now, that is, make redundant large numbers of their apprenticeship delivery staff. In reality, without support, these colleges will do both.

Rather than planning their strategic support for their region’s economic recovery, colleges are downsizing and deconstructing the very apprenticeship infrastructure their region will rely on, post Covid-19, to deliver the skilled workforce of the future.

'Government initiatives don't scratch the surface' 

The PM knows this. The government knows this. But they simply do not seem to have grasped the magnitude of the problem or are profoundly misguided in a belief that “additional traineeships” or the introduction of the “kickstart” scheme will somehow be the answer. These initiatives won’t even scratch the surface of the crisis for colleges supporting high volumes of apprentices.

Compare the government’s support for FE to their response to the arts and culture and health sectors. Covid-19 has fallen heavily on these sectors too but the government’s approach is starkly different. 

The Arts Council for England has carefully negotiated with Treasury financial packages of support for museums and cultural attractions. In addition to furlough payments, many museums have already received grants, “no strings attached” hand-outs, to compensate for loss of income from disrupted trading between March and August 2020. In some cases, these grants were in the millions of pounds equating to up to 20 per cent or more of annual turnover. Museums are now busily preparing applications to the Arts Council for further grants to support disrupted trading in the period to March 2021, or even more helpfully, for access to substantive, long-term loans, at low interest rates and with a repayment holiday at the outset. These loans may secure the long-term existence of many cultural institutions. 

In hospitals, complex funding arrangements overseen by NHS England were essentially abandoned at the outset of the Covid-19 outbreak and replaced by a simple “funding at cost” methodology. Hospitals were provided with sufficient funding, on a month-to-month basis, to operate at a break-even position, despite the fact that many of their routine services were suspended. Hospital chief executives were not calculating how many cancer consultants they would need to lay off as their clinics were not being used during the outbreak. Of course they weren’t! These critical staff would be needed in the restoration and recovery of the nation’s health service. 

So, what about colleges providing high volumes of apprentices? What about our regional skills infrastructures? What about the FE sector’s key workers? Why are they not being offered any meaningful support? Why are principals of FE colleges with substantive apprenticeship provision not applying, right now, to a “regional apprenticeship infrastructure protection fund”, for break-even funding, grants or low cost, long-term loans to protect the sector’s key workers and provision for future apprentices? Why not? 

I so wanted to believe my dream, to believe in “a major shift in how we treat further education”. But unless there is some immediate and meaningful support for those colleges supporting high volumes of apprentices, I just can’t.  

Bruce Springsteen, writing The River at the height of the depression in 1980s US asked rhetorically: “Is a dream a lie if it don’t come true/Or is it something worse?” 

It’s worse.

Lowell Williams is the former principal and chief executive at Dudley College of Technology and chair of Colleges West Midlands

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