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Who'll tame the funding jungle?;FE Focus

Rae Angus says colleges need financial discipline as well as ending wasteful competition

Just before leaving the Scottish Office, Brian Wilson stated the Government's mission for further education: "Our goal is that there should be no street, or scheme or village in Scotland where people think that further education is not available or appropriate to them." Achieving such an ambitious objective will obviously be a costly matter.

The Education Minister called Scottish further education the "can do" sector. It certainly provides a crucially important service for the economy: 43 colleges accounted for 305,400 student enrolments in academic year 1996-97, and numbers have risen since. This is a major contribution in a country of 5 million souls. Colleges are also the linchpin of a number of centrally funded programmes aimed at improving work skills and reducing social exclusion.

Until this year, policy expectations of colleges have risen faster than funding. But Christmas came early when the summer spending review allocated nearly four years' funding in three. In return, colleges are to offer an extra 40,000 student places. For its part, the Government has said that it will provide a strategic framework to "improve co-ordination between colleges and maximise access to all courses without needless competition". A consultation paper is expected soon; old wine in new bottles is not.

The issue of needless competition in post-16 education and training merits closer attention. Although no one knows even the ballpark in which efficiency savings from rationalising provision in tertiary education (including universities) are to be found, amounts are likely to be significant. If the budgets for the upper years of secondary school and relevant parts of the training budgets of local enterprise companies are included, the ending of wasteful competition offers a potentially rich source of funds at no extra cost to the Exchequer.

Reaping efficiency savings would make a big difference to service provision. However, this field of endeavour is heavily populated with sacred cows, and none are ready for slaughter.

It is now recognised that there are too many colleges in Scotland, and that some longer term savings are expected by way of mergers - mainly in the central belt. Elsewhere, competition between further education colleges does not appear to have been a serious problem, and it could be incorrect to extrapolate to the rest of the country when forging national arrangements.

Competition between colleges of further education and the new universities is different. Both have been chasing the same students - partly for educational reasons, partly to prevent funding losses. As the newer universities have expanded provision in activities traditionally served by colleges, some colleges have moved towards "junior" university status. Any policy on competition should address these wider issues, for it makes no more sense for there to be needless competition between a local college and university than it does between two nearby colleges.

One answer is to modify the financial pressures that make competition for students a necessary feature of an organisation's planning and operation - even its culture. Beating the college, university, or secondary school along the road is not machismo. It is currently the principal means of securing future funding.

Constructive competition is good for students, communities and employers, for the same reasons that it is good for consumers in the market-place. While wasteful competition is a bad thing, not all competition is wasteful. Achieving an appropriate policy balance between fruitful competition and co-operation may not be an easy matter. There are dangers.

The withdrawal of too much competition from the sector, without the introduction of compensating financial disciplines, could cause problems for a Government wishing to foster growth and greater efficiency. Funding arrangements have, hitherto, been based on a college growing its share of student numbers faster than the average of other colleges. While this may work for some colleges, for the ones which find it difficult to grow competition is an illogical and penal exercise. Averages can be extremely hard taskmasters.

Arguably, the discipline of competition has been given too great a burden to carry in funding arrangements. Too little attention has been paid to costs, and efficiency has been addressed rather obliquely: as the by-product of competition, not a stand-alone discipline. There has been no real parallel development of the health service's "clinical audit".

In the colleges themselves, the focus of attention has been elsewhere - on aggregate levels of funding in the sector. The widely held act of faith in further education is that the entire sector is underfunded. It is an absolutist view which takes insufficient notice of relativities among colleges like unit costs, unit prices and productivity levels.

As a sector, further education has undoubtedly been underfunded, but that is only part of the story. Relative costs and prices can tell a different tale. Put bluntly, some colleges are paid much more for delivering the same service. The reasons given are interesting.

Remoteness or size are readily adduced as "objective" reasons for cost differences. But sometimes the reasons fit reality awkwardly. The main cost of a college is staffing - accounting for up to 80 per cent of total costs - not size or location. Moreover, unit costs are not acts of God, beyond the wit or influence of people. They are, literally, manageable. A glance across the sector is the clearest evidence of the need for cost disciplines as a substitute for competition.

After all, why should some colleges get about 90 per cent more for doing the same thing?

More up-to-date information is also needed, as is more comprehensive data. This is partly because published unit cost figures do not take European funding into account. The omission is an important one. When European Union funding is added, the relative efficiencies of Scotland's further education colleges can become even more disparate, simply because EU funds are not distributed evenly among them.

The popular argument against including European money in cost calculations is erroneous. It is that some colleges serve areas of deprivation, and they do. But it is the people who are deprived, not the colleges serving them. Colleges can get extra funding simply because of their location - irrespective of their unit costs.

For example, one of Scotland's colleges recently got as much as 15 per cent of its total funding from Europe, on top of its share of grant-in-aid. Aberdeen College, Scotland's largest, got 0.5 per cent. Next year it will get nothing. Soon it will not be alone.

The enlargement of the European Union will cause pounds and euros to move eastward, to help out countries like Poland, Hungary, the Czech Republic and the eastern part of Germany. This financial migration is simply a matter of time. Colleges need to prepare for these losses, not hope against hope that they will not happen.

Fortunately, change is imminent in further education. It will probably involve a new funding formula; it will certainly entail a new further education funding council from April next year. The formula and the council need to achieve at least two things: the reduction of unit costs, and a narrowing of the cost gap separating the most and least efficient colleges. Under a Scottish Office funding unit, progress in the past few years has been good. Even better performance depends on the availability of, and access to, harder and faster data, and the imposition of cost disciplines on the inefficient.

The Government will deliver the extra funding next year to make "further education, further education, further education" better. The sector needs a rather different response next time round. After a beneficial spending review, "more money" cannot be the answer! Unless ministers are content with existing levels of financial achievement in the sector, they need to address not only competition in the sector, but across a much wider range of education and training.

They also need to replace needless competition with greater financial discipline. The removal of needless competition is an eminently sensible policy, but only if cost-effectiveness is addressed by other means. Take away the discipline of competition, without providing a substitute, and a vacuum will develop. Colleges, like nature, abhor a vacuum, and ends and means are not naturally congruent in FE, any more than they are in other public services.

Rae Angus is principal of Aberdeen College. The views expressed in this article are purely personal.

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