Autumn Clerk’s Conference

Funding and finance update

30 September 2014

Julian Gravatt, Assistant Chief Executive, AoC

Julian_Gravatt@aoc.co.uk

@JulianGravatt

http://www.aoc.co.uk/term/funding-finance

Lots of activity - agencies, initiatives, acronyms etc

Periodic changes to the funding formula – 2003, 2008, 2013

Incessant fiddling with qualifications, prices and programmes

Funding used to nudge and control

Budgets that change every year despite multi year spending reviews

Desire to squeeze every ounce of value out of every pound spent

Twenty years of funding, what we’ve learnt

College accounts 2013-14

Government plansDeficit reduction Spending cuts 2009-18Spending review in 2015

Unprotected departments9.1% of GDP (2013-14)7.8% of GDP (2015-16)5.4% of GDP (2018-19)Spending cuts c40% to comeLoans may be a safe haven

The bigger spending picture

The DFE budget after 2015

DFE’s cash crunch: too many academies, sixth forms, pupils & promises 2015 to 2020: 10% growth in 11-16 pupils, 8% fall in 16-18s populationEducation is staff-intensive (80% of school income)Pensions + NI on-costs = 5% increase in cost of employing a teacher

EFA 16-18 funding

2015-16Decisions on 16-18 later than on schoolsEFA needs to fund costs of study programmes (more FT students)New A-levels, new Tech Levels, New traineeshipsIf cuts are necessary, EFA will cut rates, weightings or eligibilityEFA will confirm allocations by March 2015

2016-17Lagged funding introduced in 2010. Are there alternatives?Do councils get control of the 16-18 budget?Formula Protection Grant ends; Maths/English condition startsNothing will be clear until the post-election 2015 spending review

SFA Funding from 2016 onwards

BIS budgetSome big cuts likely in BIS spendingHEFCE + Student Grants + Science £8 bil out of £13 bil 19+ FE/Skills budget might be quicker to cutLEPs/Councils will continue to push for DWP & BIS budgetsExpansion of FE loans could take place in 2016

ApprenticeshipsCross-party support for apprenticeships (advanced & higher apps)Employer routed funding for apprenticeships by 2017 ?Government spends £1.5 bil. Will employers pay for training?

UnemploymentAreas of high unemployment despite the economic recoveryAll three parties have talked about under 25 benefit cuts (earn or learn)

Longer-term funding trends

PoliticsCurrent shift towards devolutionThe 2015 vote and Coalition negotiations determine next stepsEvents determine post-16 policy as much as ideologyPolitical views of ministers determine planning/market mix

Public spendingPost-election 2015 spending reviewThree things working against 16+ education- Demography (more children now, more older people)- Economics (deficit reduction continues to be a priority)- Politics (UK, devolution, EU issues)No appetite to rebuild the size of government Spending likely to dip around 2018

Financial health

College financesDeficits in 2012-13 (48% operating deficits, 10% cash based

deficitOfsted-related spending + capital projects = short-term

deterioration Staff costs 60-65% of incomePublic spending cuts -> 4% fall in EFA+SFA in 2014Rising costs and falling income

How Colleges need to respondUnderstand their position, their environment and their risksRelationships with SFA, EFA, Council, MP and their bankActively manage their financesThink about opportunities and what comes next

On a more positive note...

OpportunitiesColleges have friends and alliesEducation and skills matter both to the recovery & to societyGovernment will still be spending £70+ billion on education in 2020Income generation opportunities existQuality countsProductivity improvements from IT only partly realised in educationThere are some relatively simple things that can still be done

Known events

AutumnScotland referendum, 18 September 2014Party conferences, 21 September to 8 October 2014AoC annual conference, 18 - 20 November 2014Autumn statement, 4 December 2014

SpringBudget, mid March 2015Easter, 7 April 2015General election, 7 May 2015