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Opinion: 'The FE sector shouldn't celebrate the spending review too soon'

Jonathan Clifton (pictured), associate director for public services at the Institute for Public Policy Research, warns that despite the FE sector having avoided the most severe funding cuts, it has a difficult road ahead

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Today’s spending review by the chancellor gave a much better deal for education and skills than many people were expecting, with more money for apprenticeships and smaller cuts to further education budgets than had been feared. The chancellor was right to invest in education and skills that are essential for economic growth and social mobility.

But these announcements do not mean it will be plain sailing for the education sector in the coming years. Schools will remain better protected than many other parts of the system, but there will be a big cut to the Education Services Grant, which is used to support things such as school improvement and welfare services. This will be felt indirectly by maintained schools (who receive these services through local authorities) but it will result in a direct reduction in cash to academies. Schools will now be expected to fund these sorts of activities out of their regular budgets – continuing a long-term trend of the government trying to push more pressure on to school budgets rather than funding support services separately.

Given the chancellor’s (self-imposed) target to achieve a surplus at the end of this Parliament, it is probably right to pass on some cuts to secondary schools. Secondary schools have been relatively well protected over the past five years compared to other parts of the education system – who were hit much harder in the last round of spending cuts. By asking schools to take a bit of pain, the chancellor has been able to protect the budgets for sixth-forms and colleges.  

However, the FE sector should not celebrate too soon. The chancellor has only protected the 16-18 and adult skills budgets in cash terms per student, which means that sixth forms and colleges will still be hit by a real-terms cut of 7.8 per cent over the next four years as a result of inflation. This comes on top of even bigger cuts made to these budgets during the last Parliament. He has also left room to make other "hidden" cuts to 16-18 funding – for example, by changing the additional funding rates for certain subjects. With 70 FE colleges listed as in financial difficulty by the National Audit Office, there could be a difficult road ahead.

With their budgets squeezed, we can expect colleges to move into delivering more apprenticeships and higher-level skills in the coming years, as there will be more money available in these areas. The government’s levy on big employers was larger than expected and will bring in £3 billion to help cover the costs of apprenticeships. Asking businesses to contribute to the cost of skills training is a sensible policy – since they are the ones who will benefit. But there are real risks around the quality of apprenticeships that will be offered. When employers have a financial incentive to deliver lots of apprenticeships, there is a danger that quality will dip. The apprenticeship levy will therefore need to be accompanied by tight regulations on the content and quality of what counts as an apprenticeship – to ensure they really deliver valuable skills for the economy. IPPR has called for apprenticeships to be restricted to those under the age of 25 to ensure they benefit young people entering the jobs market.    

The other area that colleges might start to focus on is higher-level skills. There was a lot to be welcomed in the spending review on this topic, with student loans being made available for part-time and mature students for the first time, as well as for those studying higher-level skills in FE colleges. This will be important for the economy – as we face a shortage of people studying technical subjects beyond A-levels. It will also be important for social mobility – as it will provide a route for those who haven’t benefited from a full-time undergraduate degree to access training and development.

Read behind the small print, however, and it becomes clear that a lot of the funding for these announcements has come from cutting university students’ maintenance grants and making them take out loans for their living costs instead. The Department for Business, Innovation and Skills is expected to free up around £2.4 billion in this way. In the short-term, this helps the government to fund FE. But past experience shows that many students might never actually earn enough to pay back their loans. If this is the case, the extra spending for FE could be based on shaky foundations – and it will be a future government that has to pick up the tab. 

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