Not-for-profit network to come to Reading's rescue
With severe budget cuts making mergers or restructuring likely at up to one in three colleges, one organisation has been using its substantial cash reserves to position itself to pick up the pieces.
The Learning and Skills Network (LSN), formed in 2006 originally to carry out work for the Government's quality improvement quango, produced a surplus of nearly pound;10 million in 200809 alone.
It has used part of the cash to buy one of further education's largest dedicated consultancies, FE Associates. That gives it the expertise of around 50 former college leaders and managers to add to the curriculum experts it has in-house.
With the Learning and Skills Council predicting that around 100 colleges need to merge or restructure, LSN is trying to position itself as the rescue team of choice for institutions that begin to crack under the financial pressures.
John Stone, LSN's chief executive, said: "The ability in terms of such change and uncertainty to turn to interim management arrangements is something we expect to continue."
It marks a turning point where the not-for-profit company is aiming to build long-term collaborations with colleges to help them stay financially viable as funding falls, as well as carry out consultancy work.
The first sign of the shift is its proposed deal with Oxford and Cherwell Valley College (OCVC) to take over the FE work of Thames Valley University and resurrect Reading College. Already failing in 2003, Reading College was absorbed into the universit, but its latest inspection grades were "inadequate" across the board, although there are signs of improvements in its results.
Under the proposed deal, the Oxford college and LSN will form a joint company to take on the assets and liabilities of the university's FE department - it comes with one campus and an unknown deficit. While the parent body will be OCVC, Reading College will have its own principal and management team.
Sally Dicketts, principal of the Oxford college, said: "OCVC won't be able to sell Reading College and keep the money." She said she hoped the benefit would come from the two institutions developing curriculum ideas together, and said she expected to improve Reading's finances by providing central services such as IT and human resources more cheaply than the university managed.
Mr Stone said the plan had developed out of the Government's desire to see a range of different types of collaboration, after concerns that mergers were not improving standards. Mergers are back on the agenda as a result of the spending cuts, but Mr Stone said LSN believed there were better alternatives to large colleges swallowing up small ones.
"We developed quite a few ideas which would provide alternatives to conventional mergers but do a little bit more to protect community interests," he said. "It's a natural development for us. We floated the idea of running a college directly or getting involved in a partnership. Reading has provided an ideal opportunity to put our thinking into practice."
He said LSN was unlikely to try to take over a college without a partner - although the 157 Group has highlighted the possibility of private companies running colleges. It is also intending to address another possibility for collaboration: shared services. LSN's plan is to turn itself into a provider of services ranging from finance to IT, which colleges can buy instead of providing themselves.
As a not-for-profit charity and with economies of scale, LSN believes it can cut costs significantly. "We can be much more competitive in a not- for-profit model," Mr Stone said. "It's not to say we don't make surpluses, but we reinvest them in education."
But LSN's move into new territory has also been born of necessity. At the start, it was dependent on the Quality Improvement Agency (QIA), which increasingly handed contracts to major consultancy firms. Now QIA's successor, the Learning and Skills Improvement Service, is redirecting cash to providers.
Either approach could have meant the end of LSN if it had not sought out other sources of cash.
"From day one I have been diversifying not what we do but who we do it for," said Mr Stone. "We've gone from working for one organisation to working for well over 100. We feel very confident in the future."