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Funding package tied with strings

Looking forward to your share of the record funding increase? There are a few complications, reports Andrew Mourant

No one in the financially malnourished world of further education looks a gift horse in the mouth. But the extra funding comes with enough strings and demands to dash hopes of financial stability and improved pay, at least for this year. It seems the financial situation of many colleges will remain as precarious as ever.

On paper it looks good: an extra pound;1.2 billion of investment in FE over the next three years. Total public expenditure will rise from pound;4.4bn in 20023 to pound;5.6bn in 20056 - equivalent to 19 per cent in real terms.

But in a recent submission to the House of Commons education select committee, Dr John Brennan, chief executive of the Association of Colleges, warns of problems ahead for 20034. "Many colleges see little or no improvement in their funding positions in real terms, and a significant number face a decrease," he said.

Among new complications that may cut the cash available to colleges are performance-related funding (under the Government's FE strategy Success for All), which links extra funding to targets; the transfer of responsibility for teachers' pension increase from the Treasury to the education sector adding pound;100m to colleges' costs; consolidation of monies for the Teachers' Pay Initiative and the staff development element of the Standards Fund which targeted cash at specific schemes. On top of this there are higher national insurance and pensions contributions.

While things may improve in 20045 and 20056, in real terms the gain for most colleges will be only 5 per cent, Dr Brennan says. He says making funding contingent on performance has created huge uncertainty. "Linking improvements to delivery of demanding targets is imposing real constraints on the sector's ability to address the erosion in relative pay."

And then there are as yet unknown changes that loom to funding mechanisms arising from the Skills Strategy and the funding review of adult learning.

Dr Brennan estimates that for most colleges the real rise in funding will amount to about 1 per cent in 20034 rather than the 2 per cent envisaged in Success for All. But higher employers' national insurance contributions and a further increase in contributions to teachers' and local government pension schemes, will use up even this 1 per cent rise.

Since colleges were told in May of their Learning and Skills Council funding allocation for 20034, reports reaching the AoC indicate that the increase in cash will fall short of the 4.5 per cent envisaged in Success for All. In fact some fear it will dip below the expected inflation level of 2.5 per cent.

That's the bad news. The good is that Dr Brennan reckons the position is likely to improve in 20045 and 20056, with a cumulative funding increase reaching 5 per cent above inflation.

The AoC has welcomed the advent of three-year development plans which have eliminated the often dramatic but unpredictable changes in government funding year on year, and the abolition of betes noires such as "clawback" - where colleges have to return money to the council if results or student numbers are worse than expected.

But it is unclear how far annual performance reviews and associated changes in funding will erode the stability such measures are designed to bring, says Dr Brennan. Headline improvement targets for enrolments, employer engagement, success rates and teacher qualifications will only add to existing pressures.

Plans to review the funding of adult learning could also hold an unpleasant surprise. Funding may be switched to reflect new priorities in the the Government's skills strategy. "While there would be widespread support for giving priority to adults lacking adequate basic skills or level two qualifications, if it meant withdrawing support for other groups, or dismantling other areas of learning need, there would be major ramifications reducing incentives to fund other initiatives," says Dr Brennan.

"Changes in funding incentives might also have a big impact. The sector will wish to ensure the system remains sensitive to a wide variety of learning needs."

The LSC says it is committed to simplifying the way it funds colleges and other providers. Besides getting rid of the dreaded clawback, there will be no cut in funding for those achieving 97 per cent or more of their planned activity. There will also be responsive growth payments for colleges that significantly exceed targets in priority areas.

Natfhe, the lecturers' union, says it is still trying to get to grips with the funding implications of Success for All. "Some colleges have clearly done very well but, while we haven't taken systematic soundings, we think the picture is patchy," says Dan Taubman, Natfhe's official for education.

He is due to meet LSC officials today for a detailed briefing on the financial implications. "Clearly we are worried about how pay will be affected by its implementation," says Mr Taubman.

"This has to be resolved. We're also unhappy about funding differentials.

The good colleges will become better and there'll be a knock-on effect on the rest."

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