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What will the spending review mean for FE?

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Today, the government’s spending review will set out departmental budget cuts over the next five years. With funding for the Department for Business, Innovation and Skills (Bis) and the post-16 budget at the Department for Education expected to be reduced by between 25 and 40 per cent by 2019-20, few are expecting good news. But what announcements from chancellor George Osborne should we be listening out for, and what will the implications be for providers?

  1. Adult skills
    It’s not been a good year for adult skills funding. In February, the Skills Funding Agency announced an 11 per cent cut to the 2015-16 adult skills budget; a further 3.9 per cent reduction came in July. More cuts appear likely. For those focused on non-apprenticeship programmes – not least adult and community leaning providers – funding looks set to get even tighter, putting staff and courses at risk.
  2. Funding for 16-19s
    Only funding for under-16s is protected within the DfE budget. Further cuts could have serious consequences: larger classes, fewer student hours and a squeeze on teachers’ pay, whether that involves working longer hours or missing out on pay rises. Back office and support services for students could also be trimmed. And whereas schools with sixth forms can cross-subsidise from their pre-16 funding, sixth-form colleges appear particularly vulnerable.
  3. Apprenticeship levy
    The government plans to introduce an apprenticeship levy on all large employers in 2017. A rate of 0.5 per cent of payroll had been widely expected, but more recently a lower rate, closer to 0.3 per cent, has been hinted at by a number of insiders. According to Julian Gravatt, assistant chief executive of the Association of Colleges, this could bring up to £2 billion into the sector. But plenty of questions remain about exactly how the money will be used. Today should bring some answers.

    .@NickBolesMP: chancellor will announce contribution level for apprenticeship levy in #spendingreview #AoCConf

    — TES Further Ed (@tesfenews) November 17, 2015
  4. Capital funding
    Responsibility for capital funding has been held by local enterprise partnerships (LEPs) since the start of the financial year. But funding is pretty scarce. Although many institutions are in dire need of an influx of additional cash to improve their buildings and facilities, few will be holding their breath for good news from the chancellor.
  5. Area reviews
    The government’s guidance on area reviews states that it will “expect colleges, LEPs and local authorities with relevant devolved skills budgets to provide funding and support to implement changes”. Central finance, it adds, will be provided only “as a last resort”. But with major (and costly) mergers looking likely, additional funding to aid this transformation of the college sector would be welcome.
  6. VAT
    In February, MP Graham Stuart led a campaign for sixth-form colleges to be exempted from paying VAT. The Sixth Form Colleges’ Association (SFCA) has also lobbied hard on this issue and, with the bill for an average-sized college standing at £335,000 – an expense schools don’t have to worry about – there’s little wonder. The SFCA hasn’t given up hope that the issue may finally be addressed.
    For his part, skills minister Nick Boles has said that the matter is still under discussion with the Treasury – but the announcement of any move that would cost the government a significant amount of money would come as major surprise at this time.
  7. FE loans
    In June, Bis launched a consultation process on whether to open up funding for 19- to 23-year-old repeat learners and those taking further level 2 qualifications. This follows on from the introduction of the 24+ advanced learning loan, which attracted more than 70,000 applications from people aged 24 and over to study qualifications at levels 3-4.
    Expanding FE loans would provide an additional source of funding for college courses – but it could also price many learners out of education. The Association of Employment and Learning Providers has warned that “any reduction in eligibility for full or co-funding will reduce participation in learning”.
  8. Devolution
    Last year, Mr Osborne signed an agreement to put power into the hands of the devolved Greater Manchester Combined Authority by 2017 – including skills provision. Devolution of the skills budget may well spread to other parts of the country, too. This is likely to be for non-apprenticeship provision only, but would involve funding being diverted through the new local combined authorities, which would create a different relationship between colleges and funding agencies.
  9. Funding agencies
    Leaked documents from Bis have revealed that the department is looking to significantly reduce the number of partner organisations it works with. On the cards could be mergers between the Skills Funding Agency, the Education Funding Agency and the Higher Education Funding Council for England (Hefce) – although plans for the latter to merge with the Office for Fair Access, unveiled last week, could make this less likely.
    The implications would be critical for providers with government contracts. It might give the government an excuse to tear up the SFA’s existing register of providers – and make everyone reapply with tougher criteria. And any mergers would also leave many civil servants fearing for their jobs.
  10. Work Programme
    The flagship Work Programme has faced criticism since its launch in 2011 – not least in last month’s report by the Commons Work and Pensions committee, which found that 70 per cent of those on the scheme don’t go on to find long-term work. The Work Programme contracts run until 2016. Pilots of locally based commissioning as a possible replacement could suit the government’s devolution aims, with funding potentially funnelled through the new regional combined authorities. But a definite answer on what the new programme will look like is not expected until next summer.

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