Financial sustainability of colleges in England

In light of our findings and the fact that more colleges are expected to face financial difficulties following the COVID-19 pandemic, we recommend that the Department and the ESFA should take the following actions: a) Set out a clear vision for the role, structure and funding of the college sector as part of the long-term reform programme. The Department and the ESFA have spent considerable sums helping colleges in financial difficulty to survive. But colleges now need a better understanding of government’s strategy for them, and confidence that funding arrangements will support them to fulfil that role.

b) Assess systematically how far colleges are responding to financial pressures by narrowing their provision and reducing student support services. This work should include identifying colleges that have made efficiency savings without curtailing provision, and sharing this good practice across the sector.

d) Evaluate, and take action to improve, the effectiveness of the early and formal intervention regimes in improving colleges’ financial sustainability. At a time of significant funding and cost pressures, intervening successfully is particularly challenging. However, it is important for the ESFA to identify the factors that make intervention more likely to lead to sustained improvements in colleges’ financial health.

e) Learn lessons from the first two college insolvency cases. This work should include evaluating the cost, timeliness and impact of the education administration process and identifying improvements for future cases.