AoC London, 29 June 2017 National policy, funding etc

1. Julian Gravatt, AoC deputy chief executive AoC London, 29 June 2017National policy, funding etc

2. The 2017 general election The vote • Return to two party politics (Con 42% of vote; Labour 40%) • Higher turnout (69% - it was 61% in 2005) • Labour revival (vote up from 30% in 2015 to 40% in 2017) • A new map (Labour Canterbury; Conservative Mansfield) • Con 318, Lab 262, SNP 35, DUP 10, LD 12; Other 6; SF 7 • 321 votes needed to win if all MPs vote

3. The 2017 general election The vote • Return to two party politics (Con 42% of vote; Labour 40%) • Higher turnout (69% - it was 61% in 2005) • Labour revival (vote up from 30% in 2015 to 40% in 2017) • A new map (Labour Canterbury; Conservative Mansfield) • Con 318, Lab 262, SNP 35, DUP 10, LD 12; Other 6; SF 7 • 321 votes needed to win if all MPs vote

4. The 2017 general election Government • Teresa May still PM • Majority of cabinet return to same roles (Greening, Clark and Hammond back). Some junior ministerial changes (Milton replaces Halfon) • Brexit negotiations overshadow everything • Limited (2 year) queen’s speech with no education bill • Conservative/DUP confidence and supply deal

5. The Conservative / DUP deal What’s in the deal … and what’s not • Confidence votes • Queen’s speech (2017) • Budget (2017, 2018) • Brexit • Security • Pensioner protection • Some money for NI • Anything after Easter 2019 • Legislation (other) • Regulations (other) • This could affect • College insolvency • Skills devolution • Office for Students framework

6. The £1 billion….

7. Minority government A minority government • PM required to consult cabinet, 1992 committee & MPs • What gets done in Parliament depends on deals • The budget process becomes an even bigger vehicle • Another election might happen -> affects time horizons • DFE ministers will focus on areas they can or need to act eg. school funding, opportunity areas, technical education

8. Technical education A big domestic priority for the government • Part of the industrial strategy • Funding from Treasury starts in April 2018 • T-level pilots due in AY 2019-20 with full 15 routes by 2021 • Big emphasis on work placements • Colleges (and UTCs) seen as having a big T-level role

9. The 2017 general election AoC, colleges and the political process • Our manifesto had 6 themes. All still relevant • UK needs to be more self sufficient in skills, to improve productivityand to fund post 16 education properly • We are encouraging ministers to take forward some promises, for the FE/HE funding review • Some immediate issues: English and maths condition of funding, 16-18 retention, apprenticeship allocations, IoTs • Individual MPs may be important in helping colleges

10. Public spending and funding

11. The pre-election public spending plan Figures as % of GDP Starting assumptions from from the March 2017 budget • £3 bil saving by 2019 (“6% of non-protected budgets”) • Everything depends on GDP. This depends on world events, Brexit, financial stability, migration, productivity etc 2016-17 FY Spending 39.3% Receipts 36.7% Net borrowing 2.7% 2021-22 FY GDP 10% up Spending 38.0% Receipts 37.3% Net borrowing 0.7%

12. Public spending overall plan From the queen’s speech statement “We will reflect on the message voters sent at the General Election – while always remembering that we have to balance the books and eliminate the deficit we inherited following the financial crisis. This is to ensure that future generations doe not pay where we fail to live within our means” “We have committed to budget balance – matching what the government spends with what we raise in taxation – by the middle of the next decade” Translation: Room for lower tax or extra spending in next budget

13. The DFE budget, key components 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)

14. College income lines and % share 16-18 education £3,200 mil 31% 55% 42% FE 13% SFC 4% High Needs £120 mil 2% 50% 65% HE Fees (Loans) £400 mil Levy and SME Apprenticeships £500 mil Fees & contracts £300 mil FE Fees (Loans) £110 mil 30% Other income £500 mil ESF £50 mil Adult Education £900 mil HE teaching £100 mil 5%

15. 16-18 education funding 16-18 education £3,300 mil Of the total £6 bil budget 42% FE 13% SFC 40% Schools Well established national student numbers based formula • Total 16-18 down 10% since 2010 and still falling • Fall in student numbers in 2016-17: FE -3.2%, Schools -3.6% • Some short-term issues (English/Maths, retention factor) • Longer-term reform (£500 million/year for T-levels by 2021-22

16. 2017/18 Allocations: All institutions Change in Student Numbers and Change in Funding

17. Adult education Adult education £880 mil Of the total £1.3 bil budget 65% FE 20% community learning 15% other (incl Unis, private provider) National historic allocations, formula to price students • Budget cut every year for ten years 2005 to 2015, now fixed • Restricted eligibility rules because of apprenticeships & loans • College underperformance in 2015-16 and worse in 2016-17 • Skills devolution starts in 2018-19 but there’s a risk of delay • Industrial strategy in autumn 2018 may clarify devolution plans

18. Skills devolution Devolution of adult education due in 2018 West Midlands, Greater Manchester, Liverpool City Region, West of England Tees Valley, (Greater) Cambridgeshire Devolution of adult education in 2019 London

19. Apprenticeships Apprenticeships £500 mil Of the total £1.6 bil budget 30% FE 70% private providers • Everything changes • £2.6 bil levy supporting £2.0 bil English spending in 2017-18 • Carry-in allocations worth £1.0 bil due to be confirmed in July • Levy payers have 24 months to spend 110% of what they pay • Squeeze on allocations for non levied apprentices with plan for new procurement covering 15 months from Jan 2018

20. 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

21. Flat cash funding No inflation in post -16 education • 16 to 18 rates fixed for 4 years (eg £4,000 rate) • Adult education budget fixed at £1.5 bil/year • Apprenticeship rates based on old rates • No uprating for 5+ years With some exceptions • RPI indexing on HE fees • HEFCE grants up c1%

22. Judging college performance

23. A cocktail of financial challenges Rising staff costs College credit crunch Competition for students Flat cash funding Poorly controlled pension system Funding reform and uncertainty

24. E&T 16-18 Achievement Rates 2015/16 Provider Type

25. Introduction

26. GCSE English and Maths A*- C Achievement

27. Headline Summary - Ofsted

28. College strategies

29. College strategies Some starting points • Severe rationing of government funding • Emphasis on skills (apprenticeships, T-levels) • Technology continues to offer hope of change • Tough intervention regime (college insolvency from 2018) • DFE wants colleges to succeed

30. What other colleges are doing Variety of responses • Merger (30% of colleges). More to come • A few are expanding 16-18s but most face declines in 2016 • Income diversification (HE, apprentices, international) • Relatively few new capital projects • Emphasis on maintaining Ofsted rating • Agree your plan, deliver it, be flexible as things change

31. Finally Items for checklist • Financial plan • Estates fire safety survey and plan • Work placements • Apprenticeship delivery & bid • Adult education budget plan