Managing colleges’ financial sustainability

Public Accounts Committee Closed Inquiry
Opened: 22 Oct 2020 Closed: 25 Mar 2021 Parliament page
Following our report earlier this year on the f uture of University Technical Colleges , the Committee is launching an inquiry into the financial sustainability across Further Education and sixth-form colleges. The NAO recently reported on the Department for Education’s efforts to prevent colleges from getting into financial difficulty and … Read more
1 Recommendation
28 Conclusions
1 Report
1 Oral session
3 Letters
1 Event
Activity timeline 7 events
21 Sep
2021
Correspondence
20 Jul
2021
Correspondence
26 Mar
2021
Report published
23 Feb
2021
Correspondence
27 Jan
2021
Report published
26 Nov
2020
Oral evidence
26 Nov
2020
Formal meeting (oral evidence session) · The Wilson Room, Portcullis House
Oral evidence sessions 1 session
26 Nov 2020
View on parliament.uk
Managing colleges’ financial sustainability
Eileen Milner · Education and Skills Funding Agency Matthew Atkinson · Education and Skills Funding Agency Susan Acland-Hood · The Department for Education
Title HC No. Published Items Response
Thirty-Eighth Report - Managing colleges’ financial sustainabili… HC 692 27 Jan 2021 29 Responded
Recommendations & Conclusions
29 results
2 Conclusion
Thirty-Eighth Report - Managing co…
Rising pension costs are putting significant pressure on college finances.
Rising pension costs are putting significant pressure on college finances. Staff costs, including pension contributions, typically account for around two-thirds of colleges’ running costs, and have been rising in recent years. Employer contributions to the Teachers’ Pension Scheme rose by … Read more
Government Response
2: PAC conclusion: Rising pension costs are putting significant pressure on college finances. 2: PAC recommendation: The Department should write to us, within three months, setting out what it has … Read more
HM Treasury
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3 Conclusion
Thirty-Eighth Report - Managing co…
It is clearly iniquitous that sixth-form colleges have to pay VAT while post-16 academies and...
It is clearly iniquitous that sixth-form colleges have to pay VAT while post-16 academies and schools with sixth forms do not. As part of the area reviews of post- 16 education and training provision, sixth-form colleges were given the option … Read more
Government Response
3.1 The government agrees with the Committee’s recommendation. Target implementation date: August 2021 3.2 State and academy education providers are typically engaged in ‘non-business’ activity as there is no charge … Read more
HM Treasury
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4 Conclusion
Thirty-Eighth Report - Managing co…
Successful implementation of the new T level qualifications risks being delayed by a lack of...
Successful implementation of the new T level qualifications risks being delayed by a lack of work placements. In May 2018, the then Permanent Secretary at the Department requested and was given a ministerial direction, as he had concerns about the … Read more
Government Response
4.1 The government agrees with the Committee’s recommendation. Target implementation date: July 2021 4.2 It is crucial that industry placements are high-quality to ensure that students have a successful T … Read more
HM Treasury
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5 Conclusion
Thirty-Eighth Report - Managing co…
The Department’s funding decisions are based on previous years’ student numbers, which risks holding back...
The Department’s funding decisions are based on previous years’ student numbers, which risks holding back colleges that are growing. Funding for students aged 16 to 19, which makes up around half of college income, is based on the previous year’s … Read more
Government Response
5.1 The government agrees with the Committee’s recommendation. Target implementation date: June 2021 5.2 Each year, the department looks at in-year recruitment by providers of students aged 16-19 years and, … Read more
HM Treasury
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6 Recommendation
Thirty-Eighth Report - Managing co…
The Department’s, the ESFA’s and the Further Education Commissioners approach to intervention takes too long,...
The Department’s, the ESFA’s and the Further Education Commissioners approach to intervention takes too long, costs too much and is not effective in making colleges more sustainable. At February 2020, government was intervening in nearly half of colleges for financial … Read more
HM Treasury
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7 Conclusion
Thirty-Eighth Report - Managing co…
Students are losing out as colleges cut mental health and other support services in response...
Students are losing out as colleges cut mental health and other support services in response to financial pressures. The Department’s funding for colleges fell by 20% in real terms over the six years from 2013/14 to 2018/19, and the ESFA … Read more
Government Response
7.1 The government agrees with the Committee’s recommendation. Target implementation date: August 2021 7.2 The department will be conducting a survey looking at the experiences of Further Education learners during … Read more
HM Treasury
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1 Conclusion
Thirty-Eighth Report - Managing co…
On the basis of a report by the Comptroller and Auditor General, we took evidence...
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) and the Education and Skills Funding Agency (the ESFA) on managing the financial sustainability of colleges.1
Government Response
Based on a report by the National Audit Office, the Committee took evidence on 26 November 2020 from the Department and the ESFA on managing the financial sustainability of colleges. … Read more
HM Treasury
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8 Conclusion
Thirty-Eighth Report - Managing co…
Financial pressures are affecting provision for students.
Financial pressures are affecting provision for students. They have caused some colleges to narrow their curriculum and reduce the length of courses. Some FE colleges have significantly reduced enrichment activities for students, such as careers advice and employability activities, and … Read more
Government Response
7.1 The government agrees with the Committee’s recommendation. Target implementation date: August 2021 7.2 The department will be conducting a survey looking at the experiences of Further Education learners during … Read more
HM Treasury
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9 Conclusion
Thirty-Eighth Report - Managing co…
Staff costs typically account for around two-thirds of colleges’ running costs, and have been rising...
Staff costs typically account for around two-thirds of colleges’ running costs, and have been rising in recent years. Colleges usually offer the Teachers’ Pension Scheme to their academic staff and the Local Government Pension Scheme to their support staff. Employer … Read more
Government Response
2.1 The government agrees with the Committee’s recommendation. Recommendation Implemented 2.2 A letter was provided to the Committee on 18 February 2021 setting out what the department has done to … Read more
HM Treasury
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10 Conclusion
Thirty-Eighth Report - Managing co…
The Local Government Pension Scheme has had a deficit in recent years, and colleges have...
The Local Government Pension Scheme has had a deficit in recent years, and colleges have had to make payments to help cover the deficit, in addition to their standard contributions.16 Committee Members have been told of concerns about the potential … Read more
Government Response
2: PAC conclusion: Rising pension costs are putting significant pressure on college finances. 2: PAC recommendation: The Department should write to us, within three months, setting out what it has … Read more
HM Treasury
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11 Conclusion
Thirty-Eighth Report - Managing co…
Between September 2015 and March 2017, government oversaw a programme of 37 area reviews of...
Between September 2015 and March 2017, government oversaw a programme of 37 area reviews of post-16 education and training provision across England. As part of the programme, sixth-form colleges were given the option of becoming academies and, by 2018/19, 24 … Read more
Government Response
3: PAC conclusion: It is clearly iniquitous that sixth-form colleges have to pay VAT while post- 16 academies and sixth forms do not. 3: PAC recommendation: The Department should work … Read more
HM Treasury
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12 Conclusion
Thirty-Eighth Report - Managing co…
The Sixth Form Colleges Association has estimated that the requirement to pay VAT means that...
The Sixth Form Colleges Association has estimated that the requirement to pay VAT means that the average sixth-form college diverts around 4% of its funding away from frontline provision.20 Based on funding data in colleges’ accounts for 2018/19, this would … Read more
Government Response
3: PAC conclusion: It is clearly iniquitous that sixth-form colleges have to pay VAT while post- 16 academies and sixth forms do not. 3: PAC recommendation: The Department should work … Read more
HM Treasury
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13 Conclusion
Thirty-Eighth Report - Managing co…
The Department explained that VAT treatment was a longstanding issue and that VAT registration had...
The Department explained that VAT treatment was a longstanding issue and that VAT registration had a range of implications not just the payment of VAT. It said that it had regularly raised the situation with HM Treasury, but did not … Read more
Government Response
3: PAC conclusion: It is clearly iniquitous that sixth-form colleges have to pay VAT while post- 16 academies and sixth forms do not. 3: PAC recommendation: The Department should work … Read more
HM Treasury
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14 Conclusion
Thirty-Eighth Report - Managing co…
T levels are new technical qualifications which follow GCSEs and are equivalent to three A...
T levels are new technical qualifications which follow GCSEs and are equivalent to three A levels.23 In May 2018, the then Permanent Secretary at the Department had concerns about the feasibility of delivering T levels by the target date of … Read more
Government Response
4: PAC conclusion: Successful implementation of the new T-level qualifications risks being delayed by a lack of work placements. 4: PAC recommendation: The Department should write to the Committee before … Read more
HM Treasury
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15 Conclusion
Thirty-Eighth Report - Managing co…
T levels combine classroom learning and ‘on-the-job’ experience during a work placement of around 45...
T levels combine classroom learning and ‘on-the-job’ experience during a work placement of around 45 days (20% of the overall time) over the two-year course.26 Committee Members have heard from college principals about difficulties in recruiting students, largely because of … Read more
Government Response
4: PAC conclusion: Successful implementation of the new T-level qualifications risks being delayed by a lack of work placements. 4: PAC recommendation: The Department should write to the Committee before … Read more
HM Treasury
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16 Conclusion
Thirty-Eighth Report - Managing co…
The Department acknowledged that the move to T levels was challenging, particularly delivering work placements...
The Department acknowledged that the move to T levels was challenging, particularly delivering work placements which were an important element of the new qualifications.28 The ESFA emphasised the additional funding it had given to colleges to create work placements, and … Read more
Government Response
4: PAC conclusion: Successful implementation of the new T-level qualifications risks being delayed by a lack of work placements. 4: PAC recommendation: The Department should write to the Committee before … Read more
HM Treasury
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17 Conclusion
Thirty-Eighth Report - Managing co…
Most college funding follows the learner, and each college’s funding is largely determined by the...
Most college funding follows the learner, and each college’s funding is largely determined by the funding rates per learner and the number of learners it has. Funding for students aged 16 to 19 was by far the largest funding stream … Read more
Government Response
5: PAC conclusion: The Department’s funding decisions are based on previous years’ student numbers, which risk holding back colleges that are growing. 5: PAC recommendation: The Department should consider a … Read more
HM Treasury
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18 Conclusion
Thirty-Eighth Report - Managing co…
While colleges with fewer students than in the previous year, or with worsening retention rates,...
While colleges with fewer students than in the previous year, or with worsening retention rates, benefit from the ESFA’s approach, colleges who recruit more students during an academic year than the number they were originally funded for may not receive … Read more
Government Response
5: PAC conclusion: The Department’s funding decisions are based on previous years’ student numbers, which risk holding back colleges that are growing. 5: PAC recommendation: The Department should consider a … Read more
HM Treasury
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19 Conclusion
Thirty-Eighth Report - Managing co…
The ESFA acknowledged that the FE funding system was complicated and said there were a...
The ESFA acknowledged that the FE funding system was complicated and said there were a range of reasons for this including the complexity of the college sector itself, with colleges offering very different programmes and catering for very different groups … Read more
Government Response
5: PAC conclusion: The Department’s funding decisions are based on previous years’ student numbers, which risk holding back colleges that are growing. 5: PAC recommendation: The Department should consider a … Read more
HM Treasury
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20 Conclusion
Thirty-Eighth Report - Managing co…
Colleges’ autonomy means that, for example, government does not have the power to appoint or...
Colleges’ autonomy means that, for example, government does not have the power to appoint or remove college staff. Colleges can borrow commercially, and they may make financial surpluses or deficits.35 We asked the ESFA whether its intervention powers were adequate. … Read more
Government Response
6: PAC conclusion: The Department’s, the ESFA’s and the Further Education Commissioner’s approach to intervention takes too long, costs too much and is not effective in making colleges more sustainable. … Read more
HM Treasury
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21 Conclusion
Thirty-Eighth Report - Managing co…
The intervention regime for colleges incorporates a number of phases, from prevention work, through early...
The intervention regime for colleges incorporates a number of phases, from prevention work, through early intervention and formal intervention to, in the most serious cases, 31 C&AG’s Report, paras 1.7–1.8 and Figure 1 32 Q 43; C&AG’s Report, para 2.10 … Read more
Government Response
6: PAC conclusion: The Department’s, the ESFA’s and the Further Education Commissioner’s approach to intervention takes too long, costs too much and is not effective in making colleges more sustainable. … Read more
HM Treasury
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22 Conclusion
Thirty-Eighth Report - Managing co…
At February 2020, seven colleges in early intervention had entered it when the policy was...
At February 2020, seven colleges in early intervention had entered it when the policy was introduced in November 2015; 75 colleges had been in early intervention for two or more separate periods; and seven colleges in formal intervention had been … Read more
Government Response
6: PAC conclusion: The Department’s, the ESFA’s and the Further Education Commissioner’s approach to intervention takes too long, costs too much and is not effective in making colleges more sustainable. … Read more
HM Treasury
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23 Conclusion
Thirty-Eighth Report - Managing co…
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which...
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges maintain their teaching and other services for learners. At the … Read more
Government Response
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges … Read more
HM Treasury
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24 Conclusion
Thirty-Eighth Report - Managing co…
The ESFA told us that some amounts that were originally given as loans then had...
The ESFA told us that some amounts that were originally given as loans then had to be converted to grants because not enough work had been done at the outset to assess whether there was a realistic expectation of repayment. … Read more
Government Response
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges … Read more
HM Treasury
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25 Conclusion
Thirty-Eighth Report - Managing co…
In January 2019, the Department introduced an insolvency regime for colleges, which applies aspects of...
In January 2019, the Department introduced an insolvency regime for colleges, which applies aspects of corporate insolvency law and involves a special administration regime known as ‘education administration’. The overriding priority while a college is in education administration is to … Read more
Government Response
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges … Read more
HM Treasury
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26 Conclusion
Thirty-Eighth Report - Managing co…
The ESFA confirmed that the administration processes for the two colleges were largely complete, although...
The ESFA confirmed that the administration processes for the two colleges were largely complete, although some statutory duties and administrative tasks remained to be done.46 It estimated that it would have spent more than £60 million on the two cases … Read more
Government Response
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges … Read more
HM Treasury
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27 Conclusion
Thirty-Eighth Report - Managing co…
In July 2020, the government published an independent review of college financial oversight by Dame...
In July 2020, the government published an independent review of college financial oversight by Dame Mary Ney. The review made a number of recommendations with a view to improving the support individual colleges and the sector received, and enhancing oversight … Read more
Government Response
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges … Read more
HM Treasury
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28 Conclusion
Thirty-Eighth Report - Managing co…
As mentioned above, between September 2015 and March 2017, government oversaw a programme of 37...
As mentioned above, between September 2015 and March 2017, government oversaw a programme of 37 area reviews of post-16 education and training provision across England. The area reviews aimed to ensure that there was the right capacity to meet the … Read more
Government Response
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges … Read more
HM Treasury
View details
29 Conclusion
Thirty-Eighth Report - Managing co…
The Department has not had a clear long-term strategy covering the college sector’s role, structure...
The Department has not had a clear long-term strategy covering the college sector’s role, structure and funding in an integrated way.56 The Department said that there had been individual elements of long-term strategy, such as giving employers more of a … Read more
Government Response
Between November 2014 and March 2019, the ESFA paid £253 million to 36 colleges which had serious cashflow problems. The purpose of this emergency funding was to help the colleges … Read more
HM Treasury
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Correspondence 3 letters
21 Sep 2021 Correspondence from Susan Acland-Hood, Permanent Secretary, Department for Education, re 38th PAC Report of Session 2019-21 – Managing colleges’ financial sustainability, dated 14 September 2021
Parliament page
20 Jul 2021 Correspondence from Correspondence from Susan Acland-Hood, Permanent Secretary, Department for Education, re PAC Report Managing Colleges’ Financial Sustainability: Recommendation 4, dated 12 July 2021
Parliament page
23 Feb 2021 Correspondence from Susan Acland-Hood, Permanent Secretary, Department for Education, re PAC Report Managing Colleges’ Financial Sustainability: Recommendation 2, dated 18 February 2021
Parliament page