AoC CPD session for staff

College funding

Julian Gravatt, AoC Assistant Chief Executive

21 April 2015

@julian_gravatt

Julian_Gravatt@aoc.co.uk

What you need to know

Three areas

1. Where colleges get the money from government

2. Key issues, main trends, what might happen next

3. How AoC makes a difference

What you learnt last time

From CPD session in 2012

Colleges get funding to keep education and training free or low cost

We’ve had national funding formulae for 22 years

Governments use funding to influence behaviour(eg right students taking the right courses at lowest cost)

It’s all about people. Who students are and what they do affects income

Vast data collection system makes it work

Sources: GFE Finance records 2008/09 to 2013/14 (adjusted); Financial plans 2014/15 to 2015/16

College Forecast

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

6,200,000

6,300,000

6,400,000

6,500,000

6,600,000

6,700,000

6,800,000

6,900,000

Total FE College Income

College Forecasts

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

0

20,000

40,000

60,000

80,000

100,000

120,000

FE College staff restructuring costs £'

000

Financial health assessment

College financial health (EFA/ SFA assessment)Cash based profitabilityNet current assetsLevels of borrowing

Purpose of financial health assessmentJudgement by the regulator (EFA/SFA) on strength/vulnerabilityUsed to determine which colleges need external interventionSometimes used to assess % capital grantUse to restrict access to apprenticeships, traineeships, 14-16 etc20 year old system, last updated in 2008

IssuesColleges with no borrowing can’t always get an overdraftDeteriorating financial results since 2012Wide range between different colleges

Financial health scores

Approx numbers Ratio Borrowing Solvency Operations

“Outstanding” 60 140 85 60

“Good” 65 65 40 45

“Satisfactory” 75 15 45 45

“Inadequate” 30 10 60 80

Scoring for 2013-14 from financial plans (FE colleges only

How colleges will improve their finances

Some or all of the following:

1. Better government policy (funding properly matching the task)

2. Cost reduction (to bring budgets back into balance)

3. Property sales to release cash (only open to some colleges)

4. Relentless focus on student/employer demand and need

5. Outsmarting the competition

6. Strong, positive, realistic leadership

College income

Colleges

SFA

FE College income2014-15 (£ millions)233 Colleges

EFA 2,823 (44%)SFA 1,734 (28%)Other 1,756 (28%)Total 6,396Surplus 34

Sixth form colleges2014-15 (£ millions)93 Colleges

EFA 822 (95%)Other 42 (5%)Total 864 Surplus 20

EFA

• DfE funds 4.3 mil primary and 2.7 mil secondary pupils via EFA and local authorities. Money based on pupil numbers & characteristics

• EFA funds 1.3 mil 16-18 year olds via a national formula. £4,000 for a full-time student; less for a part-timer; more for some courses (10%); extra for two types of disadvantage (English/Maths + postcode); a deduction for withdrawals; extra for large programmes

s

DFE’s funding for 16-18 year olds

£ bil

Schools budget 41.2

16-18 7.0

All other DFE 5.5

DFE RDEL 53.7

Alison Wolf on college funding

“The current funding regime for 16-19 year olds (and indeed post-19) is unique to this country in tying funding overwhelmingly to qualifications rather than to the individuals who take them. The system is completely opaque to the vast majority of the people working within the system, let along to the public at large. It imposes very large administrative costs on institutions and, as basic economic and management theory tells us, opaque systems are intrinsically inefficient and subject to extensive gaming.

There are a number of good (and some less good) reasons why the system has evolved as it has….It is hard to believe that we alone need to maintain a system of such complexity that senior college staff need to attend annual fee-bearing courses so that they can understand – partially – how they are being funded and how they can game the system” (Wolf review, 2011, page 120)

The EFA 16-18 funding formula

Total Programme

Funding

Band Hours Total

5 540+ £4,000

4 (*) 450+ £3,300

3 360+ £2,700

2 280+ £2,133

1 < 279

Programme

%

Base 0%

Medium 20%

High 30%

Specialist 60%

Land-based 75%

Disadvantage %

1 (GCSE Maths / English) £480 per GCSE

2 (27% most deprived) 8 to 33% extra

Programme Cost

Weighting

Disadvantage Funding

Area Cost

Allowance(up to 20%)

Student Numbers

National Funding Rate per student

Retention Factor

(less than 1)( )

……plus extras (if applicable)

Programme Cost Weighting

DisadvantageFundingStudent Numbers National Funding

Rate per student Retention Factor( ) Area Cost Allowance

Large programme

factor

High Needs Students

Formula Protection

Funding

Total Programme

Funding

Bursaries & Free Meals

16-18 students and funding (2014-15)

Students Instit 16,17

18 FT PT H/Needs

Total Average

Colleges 332 519 116 105 18 755 2,274

Schools 2,099

411 19 23 3 457 218

Special Schools

552 3 - - 14 17 30

Comm & Charit

282 31 9 36 2 77 273

Total 3,265

964 141 164 37 1,306 400

£ millions Prog Of which

Disadv

H/N BursaryFree

Meals

Total

Colleges 3,372 420 110 135 3,616

Schools 2,057 110 20 43 2,121

Special Schools 13 1 137 2 152

Comm & Charit 291 48 145 16 305

Total 5,721 577 275 196 6,193

BIS funding for 19+ FE/Skills

£ bil

HE & Science 7.9

19+ FE 2.9

All other BIS 2.4

BIS RDEL 13.2

• BIS funds 1 million undergraduates via the HE student loan scheme (£40,000+ in student debt with a forecast 45% impairment) Student loan outlays £14 billion a year and rising

• SFA funds 2 million adults over 19 and 0.8 million apprentices via a several different national formulae.

/

SFA funding – where does it go?

£ millions Total

19+ Apprenticeships 755

16-18 Apprenticeships 732

Apprenticeship grants for employers

131

Apprenticeships 1,487

£ millions Total

19+ further education 1,328

ESF funding via SFA 461

Community learning 210

Offender learning 128

19+ financial support 127

Employer ownership (est) 70

ESOL mandation 50

Other SFA, 2014-15 A/Year

2,374

Colleges in 2014-15

Total %

19+ FE 971 73

19+ Apps 284 38

16-18 Apps 277 36

The SFA 19+ funding formula

Band (£) A B C D E

Certif (13+), GCSE 724 811 941 1,159 1,246

Certif (25+) 1,265

1,417 1,645 2,025 2,176

Diploma (37+) A-level 1,987

2,225 2,582 3,179 3,417

Diploma (49+) 2,573

2,882 3,345 4,117 4,425

Access course 3,022

3,384 3,926 4,825 5,197

Diploma (73+) 4,170

4,670 5,421 6,671 7,172

Diploma (133+) ND 6,602

7,395 8,583 10,564 11,356

Apprenticeship adjustments

%

16-18 +7%

Over 24 -20%

Large employer -25%

For each learning aim

Disadvantage Funding

(8 to 33%)

Area Cost

Allowance(up to 20%)

Weighted funding rate

Fee assumption (less 50%)

Traineeships

100+ hours £500

200+ £700

500+ £900

Achievement element

(20% at end)

Apprenticeship trailblazers

Band (£) 5 4 3 2 1

Maximum govt contrib

2,000

3,000 6,000 8,000 18,000

Employer contribution

1,000

1,500 3,000 4,000 9,000

Completion element

500 500 900 1,200 2,700

16-18 element

600 900 1,800 2,400 5,400

Small business element

500 500 900 1,200 2,700

BIS has approved 130 new trailblazers, some at Level 3, mainly at Level 4 +c300 trailblazers likely to be ready by summer 2015Funding via different set of rates and rules but recorded on ILR

Apprenticeship Vouchers

Employer New EmployerDatabase (SFA)

College or Training Provider

Funding System(SFA)

RegistrationTo get a Discount Code

£ less a discount

ILR

£ The Discount

Strong push for local control of skills

LEPs have ESF & skills capital funding

#DevoManc

6 Metro areas + London (40% popul)

The 39 LEPs?

152 Counties, Unitaries & Boroughs

Scope of devolution unclear

All 16+ FE? 19+FE less Apprentices?

Could happen in stages

http://www.aoc.co.uk/news/devolution-skills-policy-and-budgets-some-practical-issues

Devolution

Funding update – where are we right now?

EFA (16-18 education)Little change but English and Maths are major issuesAverage funding down by c3% (because student numbers down)

ApprenticeshipsBudget ring-fenced but major reform programme underway

SFA (19+ further education)24% cut in “other Adult Skills Budget”, slightly moderatedSignificant impact in London because of position of colleges

Loan supported education24+ advanced learning loans - money available to growNo student number controls in higher education

What policies are on offer?

Education (“schools”)Various promises on the DFE budgetCurriculum changes in next few yearsMaths/English to 18, Tech Bacc (Lab)500 more free schools (Cons)RSCs –vs- Directors of school standards

Higher education (“universities”)Labour promise a fee reduction to £6,000

Skills (“apprenticeships”)Conservatives: 3 million apprentices. Labour: a guarantee at 18

Devolution Conservatives: more devolution. Labour: an English Devolution Act

Government financesDeficit to be closed this decade… via tax income .. plus spending cutsOffsetting extra spending on… pensions, debt interest (AME)….NHS (protected DEL)

Politics & events have an influence

Depending on who gets in..Unprotected DEL cuts after 2015

The bigger spending picture

2009-10

2010-1

2011-2

2012-3

2013-4

2014-5

2015-6

2016-7

2017-8

2018-9

-100

0

100

200

300

400

500

600

700

800

TaxesPSCERAMERDELDeficit

Public finances (in £ billions, constant cash)

The 2015 spending review£60 billion deficit & £90 bil public sector borrowing in 2015-16 Economic growth will narrow deficitChancellor estimates £30 bil in savings (£12 bil welfare, £5 bil interest)Labour promises imply much smaller spending cutsConservatives and Labour now boxed in on Income tax, VAT and NI

The budget

£ bil 2016 to 2019

Protected (NHS, Schools, DFID) 160 +5?

Too difficult to cut (Defence,rUK)

70 0

Post 16, Police, Local Govt, the rest

76 -30?

Departmental spending plans (worst case!)

Funding changes after the election

Area My best guess

16-18 funding Continuing slices from the budget

SFA funding More cuts , apprentices & talk about devolution

Apprenticeships

300 new qualifications, work on vouchers

FE loans FE loan extension but possibly not until 2017

HE Depends on the election. £6k fees under Labour

Capital LEP skills capital, possibly a re-capitalisation fund

What next?

Summer 2015Election result (8 May 2015)Formation of new governmentParliament returns (18 May 2015)Queens speech (27 May 2015)Budget (June/July 2015)First legislation (eg a Labour bill on £6,000 fees)

Autumn 2015HE recruitment with no student number controlsSpending review (by early December 2015 at the latest)Ministerial decisions on big issuesChanges in agencies? Ofsted? FE commissioner?College responses to the new climate/new funding

AoC approach to funding & finance

Representing and promoting collegesAoC will get best deal by talking about what colleges do & could doMoney will follow if the public & policy-makers are inspiredEvidence-based arguments linked to national objectivesPapers, blogs, articles (http://www.aoc.co.uk/term/funding-finance)

Services to membersAim for marginal gains (eg capital, mitigation, rule-changes etc)Funding briefing every 2 weeks1-to-1 adviceSupport for College Finance Directors Group (CFDG)Funding issues part of Policy, Regions, Comms etc work

What it’s useful to remember

Financial£7 billion incomeDown c5% in 2015-16FE college £27 mil income (average)Sixth form college £9 mil College share of main funding streams varies

The futurePublic spending squeezed for a generationColleges are resilient and part of the solutionYoung people, employers, future workforce all 16-18s, Apprenticeships and Loans (for fees) are all in the mixAoC active in all main areas to maximise opportunities