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
13 Recommendations
16 Conclusions
1 Report
1 Oral session
3 Letters
1 Event
Activity timeline 6 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
Oral evidence sessions 1 session
26 Nov 2020
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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
20 results
Clear
2 Recommendation Accepted
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
The government accepted the recommendation and confirmed a letter was sent to the Committee on 18 February 2021, detailing its assessment of pension cost pressures and how these were factored into funding decisions.
HM Treasury
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3 Recommendation Accepted
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
The government agrees to work with HM Treasury to assess the merits of making VAT rules consistent for schools and colleges, with a target implementation date of August 2021. The department will engage with HMRC and HMT to explore potential routes and gauge ministerial appetite for legislative change.
HM Treasury
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4 Recommendation Accepted
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
The government agrees with the recommendation and will write to the Committee by July 2021 to provide assurance on T Level work placements. This will include details on the impact of COVID-19 and plans for further support to ensure enough high-quality placements are available.
HM Treasury
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5 Recommendation Accepted
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
The government agrees with the recommendation to consider changing the funding formula to reflect real-time student numbers, setting a target implementation date of June 2021. For 19+ funding, the department is developing a consultation on formula changes to reduce burdens and improve stability, and is considering systems based on real-time activity.
HM Treasury
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6 Recommendation Accepted
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
Government Response
The government agreed to the recommendation, committing to consult sector stakeholders and publish an updated college oversight: support and intervention policy by May 2021 to improve intervention arrangements and address Committee recommendations.
HM Treasury
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7 Recommendation Accepted
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
The government agreed to the recommendation, committing to conduct a national survey on FE learners' experiences during COVID-19, including pastoral support and teaching quality, with fieldwork in summer 2021 and results published thereafter.
HM Treasury
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8 Conclusion Accepted
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
The government agrees with the committee's recommendation and will conduct a national survey of Further Education learners during the 2020-21 academic year, focusing on pastoral support, teaching quality, and lost learning. The survey, to be finalized in March 2021 and fielded in summer 2021, will inform future policy.
HM Treasury
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9 Conclusion Accepted
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
The government stated it had already implemented a response, providing a letter to the Committee on 18 February 2021 outlining how the department assessed pension cost pressures and accounted for them in funding decisions.
HM Treasury
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10 Recommendation Accepted
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
The government accepted the recommendation and stated that it had already provided a letter to the Committee on 18 February 2021, detailing its assessment of pension cost pressures on colleges and how these influenced funding decisions.
HM Treasury
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11 Conclusion Accepted
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
The government agrees with the committee's implicit recommendation to work with HM Treasury to assess VAT consistency by August 2021. The department's Tax and Expenses Team will engage with HMRC and HMT to explore potential routes and ministerial appetite for legislative changes.
HM Treasury
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12 Conclusion Accepted
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
The government agrees with the committee's implicit recommendation to work with HM Treasury to assess VAT consistency by August 2021. The department's Tax and Expenses Team will engage with HMRC and HMT to explore potential routes and ministerial appetite for legislative changes.
HM Treasury
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13 Recommendation Accepted
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
The government accepted the recommendation and committed to engaging with HMRC and HM Treasury by August 2021 to explore potential routes for making VAT rules consistent across education providers and to gauge ministerial appetite for legislative changes.
HM Treasury
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14 Recommendation Accepted
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
The government accepted the recommendation and committed to writing to the Committee in July 2021 to provide assurances regarding T-level work placements, the impact of the pandemic, and the department's support plans.
HM Treasury
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15 Recommendation Accepted
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
The government accepted the recommendation and committed to writing to the Committee in July 2021, providing assurances on T-level work placements, detailing the impact of COVID-19, and outlining plans for further support.
HM Treasury
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16 Recommendation Accepted
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
The government accepted the recommendation, committing to provide the Committee with a written update by July 2021 on the availability of T-level work placements, the impact of COVID-19, and planned support measures.
HM Treasury
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17 Conclusion Accepted
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
The government agrees with the committee's implicit recommendation to consider real-time funding for colleges by June 2021. For 19+ funding, the department is developing a consultation on formula changes to improve stability and increase high-value provision, testing policies based on real-time activity.
HM Treasury
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18 Conclusion Accepted
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
The government agrees with the committee's implicit recommendation to consider real-time funding for colleges by June 2021. For 19+ funding, the department is developing a consultation on formula changes to improve stability and increase high-value provision, testing policies based on real-time activity.
HM Treasury
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19 Conclusion Accepted
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
The government agrees with the committee's implicit recommendation to consider real-time funding for colleges by June 2021. For 19+ funding, the department is developing a consultation on formula changes to improve stability and increase high-value provision, testing policies based on real-time activity.
HM Treasury
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20 Recommendation Accepted
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
The government accepted the recommendation, committing to consult with stakeholders and publish an updated college oversight policy by May 2021, which will address intervention arrangements and the ESFA's role as regulator. The committee will receive a copy of the updated policy.
HM Treasury
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22 Recommendation Accepted
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
The government accepted the recommendation and committed to consulting with stakeholders to review and publish an updated college oversight policy by May 2021, which will address the Committee's recommendations and improve intervention arrangements.
HM Treasury
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Government Response AI assessment · 29 of 13 classified
Accepted 20
Not Addressed 9
Total 13 recs + 16 conclusions
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
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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