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Short-term fix that changed face of funding

COLLEGES were incorporated in April 1993 as a result of a short-term fix by John Major's government to remove an activity from local government. The purpose was to keep council tax bills low by shifting funding to central government.

In 1991, local taxation was the biggest political issue of the day (apart from a war with Iraq). The poll tax had lost Margaret Thatcher her job.

Colleges were incorporated so that Mr Major could keep his.

Although incorporation was a short-term fix, it was also part of a series of longer-term strategies in the Conservative-controlled Department for Education. This strategy involved limiting the role of local education authorities by devolving power to schools with a tight framework of national regulation.

In the space of five years, the department had introduced a national curriculum, national testing, formula funding of schools, open enrolment and the Office for Standards in Education. The details keep changing but the structure of this reform was established between 1988 and 1993.

In FE, incorporation contributed to the additional objective of refocusing publicly-funded education on the needs of employers. Something had been lost in the 1980s as a result of mass unemployment, the collapse of apprenticeships and the decline in day release.

Change was also needed to enable colleges to cope with demand for education for16-year-olds and the need for an alternative to GCSEs.

Incorporation happened as general national vocational qualifications were being piloted as the classroom-based alternative to NVQs. Incorporation was one stage in a winding road from the Manpower Services Commission to the Learning and Skills Council.

Once the decision had been taken to incorporate colleges, civil servants needed to devise a way of making it happen. Colleges were given a new legal form which was a cross between a polytechnic and a grant-maintained school.

The Further Education Funding Council was set up with a wholesale transfer of staff from another quango, the Polytechnics and Colleges Funding Council, which was in the process of being wound up.

The FEFC's first acts were to re-issue PCFC circulars under a new purple cover, but it quickly established a reputation for uncompromising efficiency. This helped it through the risky process of giving colleges their new powers and gave it the momentum to establish its famous funding methodology.

A clever formula and a focus on students helped the FEFC implement an annual 5 per cent efficiency gain on the FE sector between 1994 and 1998.

Incorporation optimism quickly dissipated in the face of the public expenditure cuts made necessary by the Government's failure to balance its budget in 1993. These cuts forced a bitter dispute over lecturers'

contracts which is still only partially resolved.

Meanwhile, the beautiful simplicity of the FEFC's funding formula let loose all sorts of bizarre schemes for generating public funding. The franchising bubble ended in 1999 in the enquiries at Halton and Bilston. The FEFC reacted with an audit regime of unequalled severity, but its reputation for efficiency had been soured and it was ripe for reform.

New Labour's stated priority had been education, education, education but its focus between 1997 and 1999 was on school reform and university fees.

By 1999, when it turned to FE, it had the confidence to roll up the mess of post-16 quangos into a single monster organisation - the LSC.

Unlike the FEFC, the LSC would plan as well as fund post-16 education and its remit would extend to school sixth forms and work-based training.

The LSC had a poisonous inheritance from the FEFC and has a set of impossible targets from its political masters. It nevertheless took time to manage its start-up and to engage with the issue of how to regulate and manage its portfolio of colleges. For, despite the occasional rhetoric about the LSC dealing with an open market of training suppliers, the reality was that incorporated colleges occupied the largest share of the LSC's budget and targets. The LSC could work with colleges or reform them but it could not ignore them.

Incorporation is just as much a fact of life in 2003 as it was in 1993. The incessant initiatives and the various reforms have not changed the role of colleges as the owners of land and buildings, the employers of lecturers and the local organisations recruiting and educating learners.

Success for All may change the way that colleges work. Strategic area reviews may change the local organisation of colleges. Quangos are here today, gone tomorrow. As yet, there is no question over the future legal structure of colleges and no changes to the reform of 10 years ago. A week can be a long time in politics but a decade is a short time in the life of most colleges.

Julian Gravatt is finance director at the City

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