Colleges have difficult equation to balance

3rd April 2009 at 01:00

The capital programme has clearly been a victim of its own success in that demand has far outstripped what was originally expected. However, the publication of regional capital strategies as far back as 2006, which included estimates of future financial requirements, might have acted as an early warning sign to the difficulties we now face.

The Foster review of the programme is likely to confirm what Mark Haysom, the departing chief executive of the Learning and Skills Council, has already stated, that there has been mismanagement. The implications for colleges and their communities are potentially devastating.

Many colleges acted on encouragement from the LSC to develop ambitious and large-scale schemes as the council struggled to spend its budgets three or four years ago. However, once the tanker had been turned, it would always be very difficult to regain control, which led us to the halt that we saw at the end of last year.

Colleges are now left with a very difficult equation to balance. Many projects are ready for construction; vast sums have been invested in projects with the one vital ingredient missing - LSC capital funding.

For these projects, the need for physical buildings has long since been confirmed, as are the benefits they would bring, including reducing those not in education or training and providing work.

Colleges will be examining their ability to borrow more from a banking sector under strain. Potential disposal receipts will be reviewed in light of the uncertain future in the property market.

Local authorities will be swamped by an increasing number of colleges looking to secure alternative loan finance. If there are funds available, then how do they prioritise?

College projects linked to regeneration will increasingly be targeted at the doors of regional development agencies and, further than that, at private development funds and regeneration companies offering access to project finance but at a significantly higher return.

The options for colleges at this stage are still relatively wide, but all will depend on whether there is any programme at all after the Foster review.


West Nottinghamshire College

Total cost of project: Pounds 101.2 million

LSC share: Pounds 86 million

Current state of the project

All requirements - including detailed planning approval, contractors briefed and a funding package agreed and secured with bankers - are in place for the LSC to give the project final approval. The project was scheduled to begin on March 23 subject to LSC approval, which was expected on March 4.

Impact on staffing

167 full-time equivalent posts were planned as part of the college's growth strategy

The effect on students

- 850 fewer 16 to 18-year-old learners by 2011-12

- 2,600 fewer adult learners by 2011-12, the majority of whom are in the Government's high priority level 2 and level 3 categories

Cost to the college

Pounds 7.4m in lost income by 2011-12

The knock-on effects

The development of the adjacent technology park is dependent upon the college project proceeding. Failure to do so would jeopardise:

- the release of regional development agency funding for a business incubator unit;

- the creation of 630 jobs, mainly high quality, and Pounds 30 million inward investment;

- the generation of new business by students and former students;

- Access to student and academic expertise for businesses;

- contribution to the regional economic strategy;

- enhancement of employer engagement reputation;

- the regeneration of 175 acres of land by private developers, creating 5,000 jobs and 1,750 houses;

- 400 construction jobs, plus off-site manufacturing jobs;

- training for about 30 apprentices.

Estimated cost to the local economy - Pounds 1.27 billion over the next 20 years

Andrew Martin, Director of finance, West Nottinghamshire College.

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