Policy and Funding Update for Colleges: AoC Priorities, Apprenticeships, Area Reviews

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

2. AoC priorities Apprenticeships

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

4. Area review timetable Sept 15 Jan 16 May 16 Sept 16 Jan 17 Wave 1 Wave 2 Wave 3 18 reports published 55% of colleges through process Completion by March 2017 Intervention will continue Wave 4 Wave 5

5. Area review implementation Area review Meeting 1,2,3,4 and 5 Partnership Merge Standalone Self-fund Restructuring Facility Transaction Unit In 1993, there were 488 colleges 23 years later, 324 (1/3rd fewer)

6. Government policy

7. 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)

8. Education policies Schools green paper • More places in “good schools” (grammars, faith schools etc) Justine Greening’s social mobility plan • Tackling geographic disadvantage (“opportunity areas”) • Building capacity (leadership, workforce training) • Ensuring education really prepares young people for work and career success

9. Industrial strategy – the proposals Six areas of action in the strategy (which is a green paper) • Actions to improve basic skills • Creation of a new technical education system • Addressing STEM shortages (eg Maths free schools) • Addressing sector-specific skills gaps • Higher quality careers information and advice (eg admissions) • Testing new approaches to lifelong learning

10. Some bigger issues Why skills policy has a higher profile • Productivity already low and Brexit will make UK poorer • Unemployment low (5%) yet govt wants to cut migration • Divisions and disaffection evident in society • Full-time higher education implies a £50,000 debt • People will work for longer and are saving less

11. 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 (TEF, OFS, Challengers) • Further education (area reviews, skills devolution)

12. Public spending

13. The Autumn statement A fairly low key document • Official forecast: GDP 2.4% smaller by 2020 • All fiscal targets set in 2015 breached. £21 bil deficit by 2020 • Key issue is shortfall in forecast tax revenues Public spending plans • Departmental spending plans unchanged (for now) • 2017 efficiency review to find £3.5 bil in savings by 2019-20 • New capital spending (housing, broadband, research etc)

14. AoC’s budget submission Govt needs a reset on education and skills • Fair funding at 16. KS5 rate = KS4 rate • Technical education package (workforce, equipment etc) • Maintain apprenticeship spending whatever the levy • A citizen’s skills entitlement (including digital) • An English Social Fund • Capital funding Plus changes to annual budgets, pensions, VAT etc

15. What next on public spending Timetable of changes between now and 2020 • Spring budget (8 March 2017) • EU negotiations (April 2017 to end 2018 • Autumn budget (November 2017) The year of substantial changes could be 2019 • Exit date from EU • New technical education routes start • National school funding formula • Run-up to the 2020 election

16. College finances

17. College key funding lines (£ millions)

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

19. 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%

20. LGPS valuations are college specific

21. 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

22. College funding

23. 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)

24. 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

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

26. 2016/17 Allocations: All institutions Change in Student Numbers and Change in Funding

27. 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

28. Apprenticeships A new chaotic market • Spending decisions devolved to 20,000 employers • New system, new formula, new rates, new standards • Lots of standards at Level 4+ • RATP procurement, hopefully on a rolling basis • ITT for small employers • Allocations for continuing apprentices • Will there be a slow start in summer/autumn 2017?

29. 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) • AEB procurement (contract-funding) for one year • Devolution in 2018? Delays over last six months • “Flat cash” (Year 2 allocation = Year 1 allocation)

30. Higher education / advanced level FE Higher education reforms • Higher full-time fee cap (£9,250 in 2017) subject to TEF • No cap on recruitment, but declining demand • New OFS in 2018; new rules on quality and student protection Advanced level FE • College loan facilities were increased by 27% in 2016-17 • Tighter controls on growth (note John Frank Training)

31. Some final thoughts

32. Different college roles Funding / Finance • Although opportunities exist, financial pressure will increase • Fewer officials = less sophisticated funding models • Continuing push to give power to consumer (levy, loans etc) • Commercial skills will be at a premium Data / MIS • Integrity of ILR data remains crucial • Knitting systems together (admissions, destinations, CRM)

33. 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