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Policy and funding update

Julian Gravatt, AoC assistant chief executive. Policy and funding update. Area reviews Government policy & public spending College finance & funding Final thoughts. Area review timetable. Sept 15 Jan 16 May 16 Sept 16 Jan 17 May 17. Wave 1.

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Policy and funding update

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  1. Julian Gravatt, AoC assistant chief executive Policy and funding update

  2. Area reviewsGovernment policy & public spendingCollege finance & funding Final thoughts

  3. Area review timetable Sept 15 Jan 16 May 16 Sept 16 Jan 17 May 17 Wave 1 Wave 2 Wave 3 22 reports published 75% of colleges through process Completion by March 2017 Intervention will continue Wave 4 Wave 5

  4. Government policy

  5. What’s driving government Everything changed in 2016 • Brexit, Brexit, Brexit • New world order • New priorities and policies at home: - “ordinary working class people” (May, September) • “schools that work for everyone” (Greening, September) • “modern industrial strategy” (May, January)

  6. Education policies Schools green paper • More places in “good schools” (grammars, faith schools etc) • It is now six months since the policy was first announced Justine Greening’s social mobility plan • Tackling geographic disadvantage (“opportunity areas”) • Leadership and workforce training • Ensuring education really prepares young people for work and career success

  7. Industrial strategy – the proposals Six areas of action in the strategy (also a green paper) • Actions to improve basic skills • Creation of a new technical education system • Science Technology Engineering Maths (STEM) shortages • A new big UK skills forecast to identify sectors for action • A careers strategu • Testing new approaches to lifelong learning

  8. Some context Why skills policy has a higher profile • Productivity already low and Brexit could disrupt economy • Unemployment low (5%) yet govt wants to cut migration • Divisions and disaffection evident in society • Full-time higher education implies a £60,000 debt • People will work for longer and are saving less

  9. The new overlaps with the old The reforms that are already underway • School reform (new GCSEs, new curriculum, academies) • High needs (EHCPs, council control of funds) • Apprenticeships (3 million target, new standards, the levy) • Higher education (Office for Students, Teaching Excellence) • Further education (area reviews, skills devolution)

  10. Public spending

  11. Public spending Timetable at the Treasury/Cabinet level this year • Spring budget (8 March 2017) • EU negotiations (April 2017 to end 2018 • Autumn budget (November 2017) Timetable for college funding this year • EFA funding allocations for 2017-18 • SFA Adult Education Budget allocations for 2017-18 • SFA decisions on the register of apprenticeship training providers and tenders for training in small companies

  12. Context for the spring budget What was in the Autumn statement in November 2016 • Official economic forecast shows GDP down by 2020 • All fiscal targets set in 2015 breached. £21 bil deficit by 2020 • Key issue is shortfall in forecast tax revenues What this meant for public spending plans • Departmental spending plans unchanged (for now) • New capital spending (£35 bil) but not much on skills • 2017 efficiency review to find £3.5 bil in savings by 2019-20

  13. AoC’s budget submission Govt needs a reset on education and skills • Fair funding for 16 to 18 year old college students • Technical education package (workforce, equipment etc) • Maintain apprenticeship spending whatever the levy • A citizen’s skills entitlement (including digital skills) • An English Social Fund • Capital funding • Measures to improve efficiency & effectiveness of the system

  14. Headlines Announcements on economy, fiscal plans, tax and spending • Economy expected to grow in 2017 more than expected but forecast full of uncertainties because of Brexit • Inflation (CPI) expected to rise to 2.4% later in 2017 • Unemployment still below 5% • UK budget deficit below 3% of GDP in 2016-17 • Current target to eliminate deficit by 2021-22 • Budget includes £5 billion of extra spending over 5 years and £5 billion of extra tax income* in same period. Fiscally neutral if the forecasts are correct. * £2 bil of which is from NICs on self-employed

  15. Education announcements Full speed ahead on schools • Schools white paper out soon • More places in good schools (grammars, faith schools etc) • £1 billion more added to free school capital budget for period after 2020. New school buildings take time to come on stream. • DFE now able to invite more bids for new schools No action in some areas • No change on national school funding formula • Adrian Smith Maths review not yet published

  16. Technical education 16-19 year olds Towards a new system • Technical education routes now T-levels • £100 mil for 2019-20 academic year when first routes start • £500 mil a year extra in the early 2020s • Funding assumption 900 hours vs 600 now • Covers, perhaps, 20% of the age group • Work needed from EFA to include this funding and new assumptions into the 16-19 funding formula • Design of new T-Levels and implementation after 2019 have major implications for choices offered to all 16 year olds. Not clear where they will be available or who will offer them

  17. .. and for adults Institutes of Technology • £170 million over 3 years for 10-15 new IoTs • No new Treasury funding. Comes from within DFE budget • Developed from existing institutions, preferably FE colleges • Maintenance loans for Level 4&5 courses in future • Applications will be invited later in spring 2017 Lifelong learning • £40 million to pilot innovative approaches • No new Treasury funding. Comes from within DFE budget

  18. What’s next on public spending Next steps for the government • Treasury will now work on autumn budget including efficiency review (“6% savings by 2019-20”) • Much in government depends on Brexit negotiations Next steps for the government • EFA allocations just published • SFA allocations out in late March (no change) • Uncertainty on skills devolution • Apprenticeship D-Day 1 May 2017

  19. College finances

  20. College key funding lines (£ millions)

  21. Surplus / deficit 2009-10 2011-2 2013-4 2015-6

  22. Pension contributions rising Teachers Support staff College TPS 91 LGPS funds LGPS Employer Range 10-25% Average 15.8% Rising in 2017 TPS Employer 16.48% Could rise in 2019 Support staff Income-related Contributions 5.5-12.5% Income-related Contributions 5.5-12.5%

  23. College finances A cocktail of issues • Flat cash funding at a time when costs are rising • Financial weakness in some colleges (15% judged financially inadequate; 5% in distress) • Issues with banks, pensions and insolvency regime • Competing teams (SFA/EFA, FE commissioner, TU) • Austerity to continue until 2022 on current plans • Cashflow is everything

  24. Intervention after area reviews end Colleges accountable to various organisations • The bank (if they have a loan) • SFA/EFA (if finances is satisfactory or inadequate) • Ofsted (which has a risk-based inspection cycle) • FE Commissioner (referral from SFA or Ofsted) • Students, employers and communities

  25. College funding

  26. Where public money goes School grants (£32 bil/yr EFA to Academies direct in 2019) 16-18 grants (£6 bil via EFA) High Needs (£5 bil/yr via councils) HE (and FE) Student Loans (£20 bil/yr by 2020) Levy funded And SME co-funded Apprenticeships (£2 bil/yr by 2018) High cost HE (£1 bil via HEFCE) Adult Education (£1.5 bil, via SFA & Mayors)

  27. College funding Stability in two main funding lines, upheaval in the third • EFA funding predictable until tech ed reforms in 2019 • Adult education / skills predictable in short-term • An entirely new apprenticeship system in 2017

  28. 16-18 funding for 2017-18 EFA funding • Same system; some changes to data (eg Band 2) • National base rate protected (£4,000) • Formula adjusts allocations based on student characteristics • Allocations may be reduced where sub-contracting ends • Change to A-levels, GCSEs, Applied General, Technical quals) will bring funding change • A massive English and Maths challenge for colleges

  29. English and maths Number of 16-18 GCSE English students Number of 16-18 GCSE Maths students

  30. 2016/17 Allocations: All institutions Change in Student Numbers and Change in Funding

  31. 19+ funding The decisions made in the 2015 spending review • An apprenticeship levy raising £2.6 bil/year • Student loans for postgrads and 19+ level 3 • Protection of adult education budget at £1.5 bil/year • Devolution deals with combined authorities

  32. Adult education budget Significant change in 2016-17, continuity in 2017-18 • Single adult education budget (AEB) with more course flexibility but more restrictions on who can be covered • Continuing issues with (and controls on) sub-contracting • Underspending in 2016-17 (SFA handing money back) • Devolution in 2018? Delays and not happening in East Anglia • “Flat cash” (Year 2 allocation = Year 1 allocation)

  33. 3 million apprenticeships + the levy “Apprenticeship spending will double over the decade” 2015 spending review … via a new hypothecated tax

  34. Apprenticeships for large employers (c19,000) Large employer HMRC Levy (0.5% of payroll) Employer directs recipient and price Digital Apprenticeship Service Apprentice Skills Funding Agency Registered Training Organisation Payment on confirmation of training (ILR) and employer authorisation

  35. Apprenticeships for small employers (1 million) and large employers who have used levy Small employer Employer pays 10% of price Apprentice Skills Funding Agency Registered Training Organisation Payment of 90% on confirmation of training and co-payment to those with contracts

  36. Apprenticeships A new chaotic market • Spending decisions devolved to 20,000 employers • New system, new formula, new rates, new standards • Lots of standards for higherand degree apprentices • Tenders decisions in March for all post-April 2017 starts • Allocations for continuing apprentices • Difficult to predict now what will happen with the levy

  37. Some final thoughts

  38. What other colleges are doing Variety of issues • Area reviews resulting in more mergers • Public spending reductions have added to financial pressure • Ofstedplus English and Maths have had a disruptive effect • Many FE colleges dealing with falls in 16-to-18 enrolments • Apprenticeships are a near-term priority • Technical education reforms may be an opportunity

  39. College economics (what’s in the box?) Class size Income Student taught hours Positive completion Staff costs per teaching hour Student satisfaction Student / teacher time / effort /love Costs of running the college

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