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How the college insolvency regime might reshape FE

The FE sector can adapt to the new insolvency regime, despite its challenges, writes Stefan Drew

College insolvency regime

FE was always a safe bet. Colleges and sixth-forms would never go bust. The government would always bail them out.

Safe, that is, until the insolvency regime reared its head and sent a collective shiver down the FE spine. Governing bodies no longer have their safety net and life will never be the same again.

I frequently hear it said about FE that it is about second chances and the local community. These are laudable missions but will they be enough in future? 

Read more: More than 100 colleges 'at risk' of insolvency

More news: Insolvency regime leaves big questions unanswered

Background: The new college insolvency regime

Let’s examine the role of an FE college. It may have worthy aims but the governors, or directors (as I believe it more useful to consider them), have various legal and fiduciary duties.

Charity law means the corporation must abide by its charitable objectives and certain other legal requirements, but nowhere does it say anything about second chances. And in none of the cases I’ve examined do corporate objectives specifically mention apprenticeships, T levels or even 16 to 19 courses. In most cases, they don’t even mention young people.

The insolvency regime does, of course, make provision for existing students to be made a priority. But that isn’t the same as determining the type of student, or courses, that a college should focus on.

It is however incumbent upon corporations to make good decisions and to survive if they can. That might best be served via a merger but in most cases, it is hard to say that is preferable to surviving as an independent legal entity.

Professional advice

It is also incumbent upon “governors” to adhere to good governance procedures. Arguably this now means taking professional advice before making key decisions in many areas including finance, property, land sales, etc. Where it is shown that poor decisions have been made the directors could be disqualified and worse.

This being the case it is surely necessary for colleges to reconsider their purpose, direction and focus.

Bearing in mind their responsibilities and current funding, corporations have to make hard decisions. Unless there is a legal requirement for them to continue to run poorly funded curriculum (and what parts are well funded), corporations may decide that the legal responsibility to provide, say, 16 to 19 education, lies with the government and not a particular college.

Adaption is possible

Unthinkable? No doubt many will be horrified at the thought. But if the decision is to run unviable courses, or survive in a format where the charitable objectives can be fulfilled, then what else can corporations do?

And maybe it isn’t so radical. In recent years many of the colleges have stripped out A levels and a raft of vocational courses that weren’t viable due to poor recruitment and/or funding. There is no law to stop them from cutting courses.

This might sound like the end of FE as we know it. And perhaps it will be. FE can’t change the law, it can only work within it.

However, FE colleges can adapt to this new environment. This needn’t be the end.

Survival and adaptation

Charles Darwin wrote “it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.

FE needs to learn this lesson, for I submit that the same applies to corporations.

We need to be more commercial. This was recognised by the AOC’s recent promotion of a “commercial workshop”. It was aimed at VPs, Curriculum managers etc.    

I would argue that they should have included CEOs and governors as this is a far bigger issue than can be tackled by curriculum managers and VPs alone.

But where might being more commercial lead?

The commercial college

FE has choices. It can adopt a “we’ve always done it this way” approach and make no changes.

Or if funding makes survival questionable, and they recognise no legal or moral duty to offer say, apprenticeships, T-levels or other 16-19 courses, they could cherry-pick those they currently see as financially viable OR drop them all over time.

In this most extreme case, they could opt solely for the full cost, smaller, more commercial provision etc. The benefits could include no Ofsted owing to no funding being required.

This will appal many, but it is a viable option. There are myriad examples of private training organisations that do very well from this approach. They find individuals happy to pay viable fees for courses that run seven days a week and turn over £millions.

The insolvency regime offers challenges and opportunities where the most adaptable will survive and dinosaurs die.

Stefan Drew is an education consultant, and was previously director of marketing at two FE colleges

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