Further education institutions will have to spend around £285,000 each on average to make up for a shortfall in government funding for apprenticeships, a new survey by the Association of Colleges (AoC).

This is the result of a decision by the Education and Skills Funding Agency (ESFA) to allocate far less to individual colleges than they had asked for to provide apprenticeship training for employers too small to pay the apprenticeship levy.

Some £485 million has been allocated to 714 providers - more than 200 of whom are colleges - to cover a 15-month period, which started last month and ends in April next year. However, the gap between what organisations asked for and what they were allocated ranges from between 30 and 60 per cent across the regions of England, according to the AoC.

Risky business

It has conducted a survey of colleges across England that highlights the risk that institutions will be taking over the coming months.

Colleges will be risking almost £300,000 each, on average, in ensuring that apprenticeships remain on offer to those who need them, in the hope that the ESFA will step in to cover the overspend.

The gap between what they need to deliver in terms of apprenticeship programmes and what they have been allocated means that colleges will overspend by 44 per cent on average, according to the survey.

Julian Gravatt, deputy chief executive of the AoC, said: “The non-levy funding system is effectively forcing colleges to take a gamble in spending an average of £285,000 to fund apprenticeships that are not covered by the non-levy allocation”.

He added: “It has been normal in the past for colleges to take risks with funding and to overdeliver, but the government is putting in place a college insolvency regime and the banks are reluctant to provide short-term lending, so the risk is now much bigger”.

Under pressure

Stewart Cross, director of information and integration at the College of Haringey, Enfield and North East London, commented: “Colleges like us are taking a risk - if we overdeliver we will not get the funding. If we get stung by delivering unfunded apprenticeships then we will have to make big cutbacks to our non-levy provision”.

New College Durham was only allocated around half of what it was seeking in funding, according to John Widdowson CBE, its principal and chief executive. He said: “The financial risk is that we incur the cost up front and we don’t then get the income”.

It’s not just colleges that are affected by the funding shortfall. Some providers are already having to stop replacing staff who leave, in a bid to stay afloat. Haddon Training bid for £1.5 million but was allocated £832,000. Chris Hewlett, the firm’s managing director, admits that there is a recruitment freeze at the company: “We have reduced staff. We had about 72 - I think we’re down to about 54 now”.

A Department for Education spokesperson said: “We have awarded hundreds of providers across the country with initial awards totalling £485 million”. They added: “All awards were given based on the quality of the tender submitted against a rigorous set of criteria”.

This is an edited version of an article in the 23 February edition of Tes. Subscribers can read the full story here. To subscribe, click here. To download the digital edition, Android users can click here and iOS users can click here. Tes magazine is available at all good newsagents

Want to keep up with the latest education news and opinion? Follow Tes FE News on Twitter, like us on Facebook and follow us on LinkedIn