'Bank of FE' is just the first building block

25th September 2009 at 01:00
Editor's comment

Given the extent of the largely justified bad press received by banks of late, it is easy to forget that without modern banking nothing much would have happened since the late 17th century. And while life in the pre-industrial slow lane may at times appeal, one only has to imagine the dirt, disease and, of course, the state of dentistry in the 1600s to convince one that progress is a good thing.

Just about everything we take for granted today, including universal and occasionally free-at-the-point-of-delivery education, is there because banks lent people, and governments, money to get things done. This includes, dare it be said, borrowing to build new colleges. Except, of course, the Government didn't, or wouldn't, take enough money out of the cash machine.

The result is a kick in the teeth for the people who continue working and learning in leaking, unfit college buildings and for the further education system as a whole and the wider communities that depend upon its services. Two facts remain: colleges need new buildings; and the banks, in this case Barclays, are still in the business of lending money. It would seem, then, that Mark Dawe's capital taskforce (page 1) has come up with a potentially workable way to restart the college building programme.

The trick will be to persuade the wealthier colleges to pool their nest- eggs. It sounds reasonable as long as the rate of return on their money is no worse than received at present. But what happens when colleges wish to use their reserves to, for instance, pay for a new building? If too many colleges withdraw their reserves, borrowing risks outstripping deposits and, while Barclays will make up the difference, this will push up the cost of borrowing.

So, while Mr Dawe's team calculates that the sector has reserves of pound;1.5 billion, how much of that will colleges be prepared to deposit long term with Barclays, and how much will they wish to keep close at hand for instant access? Even if the scheme works it will not be enough and so the report proposes that the Government should "support" the cost of additional college borrowing.

As Pat McFadden, minister for business, innovation and skills, says (page 5), it is not as if the Government has invested nothing in college buildings - pound;2 billion in just over a decade in fact. That, interestingly, is about pound;200 million a year, which is not too far off the pound;240 million a year that the taskforce reckons it will cost Government in college borrowing for capital over the next 15.


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