It's time to bridge the funding gap

Mark Corney

The funding gap between 16 to 18-year-olds at FE colleges and school sixth forms is being addressed, if not closed. Now attention needs to turn to the bigger issue of the funding gap between 19-plus LSC activity and higher education.

The main issue is not about the competing interests of FE, HE and work-based learning. Funding, not sectors, ultimately frames the debate.

Currently, the state pays the full cost of education and off-the-job training up to 19 or the achievement of a level 3 (A-level equivalent), whichever is the sooner. And apart from waged trainees, 16 to 19-year-olds who are in full-time education and training are entitled to a mix of non-repayable child benefit, child tax credits and education maintenance allow-ances (EMAs).

By 200708, overall 16-19 spending will exceed pound;7.5bn. LSC-funded provision will reach pound;6bn, and 16-19 financial support will exceed Pounds 1.5bn. In terms of provision, pound;3bn out of the pound;6bn will go to FE. Clearly, FE is the "big brother" to schools and work-based learning providers rather than a "neglected middle child".

In terms of financial support, about pound;1bn will be spent on child benefit, pound;0.5bn on EMAs and an unknowable amount on child tax credits. It seems that child benefit is the largest identifiable source of 16-19 support.

Essentially, age 19 or a "first" level 3 are the combined cut-off points for entry into higher education, 19-plus LSC learning or, if necessary, Jobcentre Plus provision. Yet, 19-plus LSC learning is the "true" neglected child to higher education. In 200708, the 19-plus LSC budget will be slightly more than pound;2.7bn. By comparison, the undergraduate HE budget will be Pounds 5bn.

In 200708, financial support outside of tuition costs for HE students could be more than pound;3.6bn, with pound;0.9bn for grants and pound;2.7bn or more for income-contingent loans. This compares with LSC learner support funds of pound;0.2bn some of which goes to teenagers.

By 200708, overall spending on undergraduate HE will be more than Pounds 8.6bn, four times the total spent on post-19 FE and financial support for students.

In addition, there is a massive gap between 19-plus LSC level 3 funding and undergraduate HE. Only about pound;0.5bn of the 19-plus FE budget is spent on level 3, although not necessarily full level 3. It is accepted that Britain performs quite well in terms of the proportion of the adult workforce with level 4 (degree equivalent) qualifications, but does less well at level 3. This is not surprising, given the priority of HE funding compared to 19-plus LSC level 3 funding.

It is also accepted that the increased number of 19-year-olds with level 3 qualifications will be insufficient to close our international skills gaps.

Yet this simply highlights the choice between level 3 and HE in improving adult workforce skills.

If level 3 is the preferred route relative to level 4, the question is whether expansion should be delivered in the workplace or elsewhere.

Financial rate of return analysis suggests that people benefit more when vocational skills are taught in the workplace. But the fact remains that rates of return are higher for academic level 3 qualifications than for vocational level 3.

Nonetheless, it is debatable whether individuals and employers will pay the full cost of reformed level 3 qualifications, let alone cover financial support andor wage costs. Additional public investment will be required.

However, three principles should apply in distributing 19-plus level 3 funding:

* First, funding should be targeted on "first" full level 3 qualifications, thereby simultaneously achieving social justice and economic success.

* Second, significant financial rates of return to level 3 qualifications mean individuals and employers should pay a significant proportion of the fees.

* Third, 19-plus FE learners should be able to access loans for fees and learner support for "first" full level 3 qualifications. If the Foster Review was Act 1 of "The Great Skills Debate", the Leitch Review will be Act 2.

The next big issue is the gap between 19-plus level 3 and HE funding. Let the debate begin.

Mark Corney is director of MC Consultancy

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