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Pragmatism is the best policy on buildings

AUGUST is the month when many colleges have a serious go at their buildings. Maintenance work gets crowded into a few short weeks in summer.

Many colleges are upgrading their buildings this year in anticipation of the Disability Discrimination Act. This year, there will be a number of brand new buildings.

Total spending on college buildings amounts to pound;500 million a year and expenditure is on the increase. The Labour Government reintroduced public funding for capital projects in 1999 and keeps putting more into the Learning and Skills Council's budget. At the same time, colleges have been able to finance developments by selling surplus sites and taking loans at low interest rates. Some have built-up reserves over the past decade which they can also use. The result has been a building boom across the sector which has gone some way to reverse the underinvestment of the 1980s and early 1990s. The chance for college managers to do something about their buildings came with incorporation. This put principals in charge of buildings and created a chance to make changes. The planning of these changes happens behind the scenes. A few college managers, business governors and LSC technocrats spend a lot of time on property. Principals do not get appointed because they know about property, but dozens of them have managed successful multi-million-pound projects. It is one of the successes of incorporation, but you might miss it.

The delivery of major capital projects has not happened without problems.

Much time and effort has been spent in recent years testing the private finance initiative (PFI) but college PFIs are almost non-existent. As a recent Treasury review confirmed, PFI is only worth doing on big projects (pound;20 million or more). For the firms leading the PFI market, college buildings are too small and too dependent on government.

Another obstacle has been the local government planning system. Most college buildings were built without planning permission as there was a time when councils did not need it for their own projects. But not any more. Planning is needed for new buildings and the redevelopment of old ones. Projects can be stopped on a whim. Colleges need to get the best price for the buildings they are selling but face all manner of obligations. The pressure to provide affordable housing occasionally gets in the way of building affordable colleges.

The other challenge to getting new buildings off the ground is the jungle of administrative rules about European Union procurement and LSC funding.

It takes determination to get projects going and the process can take years. Large projects need teams of advisers, none of whom comes cheap.

College managers spend years learning how to deliver a project but only do it once. This is the downside of independence. Incorporation made things happen but the knowledge of how to do it does not always get shared.

This could change if the LSC took a greater role in development. After a decade in which government has taken a back seat, the LSC's planning-led system may require it to drive forward changes. This could be a feature of some strategic area reviews (where all post-16 education and training is co-ordinated by local learning and skills councils). The LSC nationally might be able to use its size to get a better deal from construction firms and advisers but this would be a new departure.

Local LSCs would need new skills to manage projects on the ground. They also could not force developments over the heads of unenthusiastic colleges. It is one thing for a college to take a calculated risk in a capital project of its own choosing, another for a project to be imposed on it from on high - something that would constitute a major threat to college autonomy.

Finance will be another area of debate between LSC and colleges. The council wants to stretch its budget by reducing the grant it pays for each project. Colleges with good financial standing will get less than the standard 35 per cent in future. The attractions for the LSC are obvious but the policy is not without risks. If higher borrowing replaces grants, some colleges will be vulnerable to interest-rate changes. The colleges that borrow also need to make operating surpluses. Colleges only make surpluses if LSC funding is adequate. What the Government saves on the swings, it may lose on the roundabouts.

A pragmatic approach is sensible, even if it requires patience. Reports can recommend radical change. The reality of implementation means that local LSCs will need to work with colleges. Colleges have made a good fist of managing their land and buildings over the past 10 years. Their help will be needed in the next.

Julian Gravatt is finance director at the City Lit, London

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