AoSEC Principals’ Event Tuesday 7 th July 2015 Martin Doel: AoC Chief Executive Richard Atkins:...
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Transcript of AoSEC Principals’ Event Tuesday 7 th July 2015 Martin Doel: AoC Chief Executive Richard Atkins:...
AoSECPrincipals’ Event
Tuesday 7th July 2015
Martin Doel: AoC Chief ExecutiveRichard Atkins: AoC President 2014/15 & Principal, Exeter College
Outlook for Colleges 2015-2020
• The Government: a) the mandate
b) the personalities
c) the policies
• Colleges: a) funding and finance
b) options for the new government
c) how will college finances improve?
• Working with Government
The Government
Personalities
Nicky Morgan Nick BolesSajid Javid
The Government
Personalities
Jo Johnson Matthew Hancock
Greg Clark
The Government
• Mandate
• Personalities
• Policies
The Government
• Personalities
• Policies
• Apprenticeships• Young unemployed• Devolution• Trade Unions • Schools• Money
The Government
• Personalities
• Policies
• Apprenticeships and Skills• 3m apprenticeships
Source: LSect
The Government
• Personalities
• Policies
• Apprenticeships and Skills• 3m apprenticeships• Remove ‘low value classroom based’ courses• Degree apprenticeships• National colleges
The Government
• Personalities
• Policies
• Apprenticeships• Devolution
• Northern Powerhouse• Elected mayors• Area reviews?
The Government
• Personalities
• Policies
• Apprenticeships• Devolution • Young unemployed
• Cap benefits• Earn or learn• Apprenticeship, training or citizen
service
The Government
• Personalities
• Policies
• Apprenticeships• Devolution • Young unemployed• Trades Unions
• 50% turnout required• 40% threshold of those entitled to vote• Mandate time limited
The Government
• Personalities
• Policies
• Apprenticeships• Devolution • Young unemployed• Trades Unions• Schools
• Coasting schools/Regional Schools Commissioners
• JCP Advisor in schools• Protect 5-16• 500 new free schools and a UTC ‘in reach of
every town’
The Government
• Personalities
• Policies
• Apprenticeships• Devolution • Young unemployed• Trades Unions• Schools• Money
• Balanced budget by 2018• 20% cut for unprotected budgets
Political Timetable
Summer 2015General election (7 May 2015)Formation of new government (8 May 2015)Parliament returns (18 May 2015)Queens speech (27 May 2015)Budget (8 July 2015)First legislation (eg Education, Welfare, Tax, EU Referendum bills)
Autumn 2015Ministerial decisions on big issuesChanges in agencies? Ofsted? FE commissioner? SFA? HEFCE?Spending review (by November 2015)HE recruitment with no student number controlsCollege responses to the new climate/new funding
The bigger spending picture
Government finances:Deficit to be closed this decade;- via tax income - plus spending cutsOffsetting extra spending on;- pensions, debt interest (AME)- NHS (protected DEL)
Conservative plans:Budget surplus by 2018No increase in headline tax rates£30 bil in fiscal consolidation£5 bil tax measures£12 bil benefits & tax credits£13 bil departmental cuts
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
Taxes
PSCE
RAME
RDEL
Deficit
Public finances (in £ billions, constant cash)
The Emergency Budget
• The 2015 budget (8th July)• Budget will update tax & spending forecasts• Legislation to implement tax promises• Start of 2015 spending review• Greater clarity on departmental spending plans
Departmental spending £ bil 2016 to 2018
Protected (NHS, Schools, DFID) 160 +5?
Fairly difficult to cut (Defence, rUK) 70 0
Post 16, Police, Local Govt, the rest 86 -18 (20%)
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
Funding of English Colleges
Six areas:
• 16 to 18 education
• Adult skills budget
• Apprenticeships
• Devolution of budgets
• Further education loans
• Higher education
(1) 16-18 education – DFE Budget
• DfE funds 4.3 mil primary and 2.7 mil secondary pupils via EFA and LA. 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
£ bil
Schools budget 41.2
16-18 7.0
All other DFE 5.5
DFE RDEL 53.7
(1) 16-18 education – students and funding
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 whichDisadv
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
(1) 16-18 Education – Developments;In 2015-16Funding driven by student data (this year’s recruitment)FE college recruitment down c3% 14/15Funding down in 2015/16English and Maths funding condition a significant challenge
In 2016-17 and beyondBig question - will 16-18 be protected at allForecast that 16-18 population will fall by 8% from 2015 to 2020Savings simply by maintaining not raising participation %EFA will make some small technical savings in 2016-17Further cuts either to rates or factors?Adjustments to lagged number system? Local commissioning?It takes time to adjust any formula involving schools
(2) SFA funding – BIS budget;
£ bil
HE & Science 7.9
19+ FE 2.9
All other BIS 2.4
BIS RDEL 13.2
• BIS funds 1m undergraduates via HE student loan scheme (£40,000+ in student debt with a forecast 45% write-off) Student loan outlays £14 billion a year and rising
• SFA funds 2m adults over 19 and 800,000 apprentices (aged 16 upwards) via a several different national formulae
(2) SFA funding – where does it go?
£ millions Total
19+ Apprenticeships 755
16-18 Apprenticeships 732
Apprenticeship grants for employers
131
Apprenticeships 1,487
£ millions Total19+ further education 1,328
ESF funding via SFA 250
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
(2) SFA funding developments;
In 2015-16SFA funding letter out very lateOverall spending (including capital and loans) cut by 5%Apprenticeship funding protected“Other ASB” (adult further education ) cut 24% in 2015-16Plan to simplify the rules slightly in 2015-16
In 2016-17 and beyondWhat happens to SFA funding depends partly on HE20% cuts imply• End of HE maintenance grants• Significant cuts to ASB ‘of which is not apprenticeships’ Contradictory policies about how to route the FE budgetDecisions may be made fairly quickly
(2) Several options for SFA funding
Several options for reform of SFA funding:
1. Devolution of budgets 2. Apprenticeship funded via employer vouchers (“discount
codes”)3. Expansion of FE loans 4. Action to reduce numbers under 21 on benefit
The bigger the reform, the less things change in the short-term!
(3) Devolution
• 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• Strategic Area Reviews?
http://www.aoc.co.uk/news/devolution-skills-policy-and-budgets-some-practical-issues
(4) Apprenticeships
In 2015-16Apprenticeships a priority (“blue collar conservatism”)£1.6 bil apprenticeship budget (16-18 , 19+) is ring-fencedExpansion 2009 to 2013; consolidation since 2013Concern that college apprenticeships are reliant on sub-contractingOverhaul of qualifications (295 trailblazers in place by July 2015)
In 2016-17 and beyondAction to expand apprenticeships (incl. marketing campaign)“3 million apprentices” = 50% growthTransition to new qualificationsApprenticeship vouchersOpportunity in the chaos for colleges to develop new programmes?
Likely funding changes over next 2 to 3 years
Area My best guess
16-18 funding Continuing slices from the 16-18 budget
SFA funding More cuts , more apprentices, more devolution
Apprenticeships Grow, grow, grow plus big system reforms
FE loans FE loan extension but possibly not until 2017
HE Depends on how the new HE market works out
Capital LEP skills capital, possibly a re-capitalisation fund
Sources: GFE Finance records 2008/09 to 2013/14 (adjusted); Financial plans 2014/15 to 2015/16
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
6,200,0006,300,0006,400,0006,500,0006,600,0006,700,0006,800,0006,900,000
Total FE College Income
College Forecasts
29 colleges out of 242 (12%) are now rated as inadequate for financial health –increased from 15 (6%) in 2009/10
11 of the 29 were new cases from the review of financial statements for 2013/14
2 of the 29 have now merged with other colleges in April following intervention
Deterioration in financial health driven by the reduction in cash based profitability first and now reduced liquidity
New measures of financial health may see increased numbers assessed as inadequate in 2015/16
Key factors affecting profitability:• Cohort decline on 16-18 year olds• Increased competition – new 16-18 provision in schools, academies, free schools, UTCs etc.• Reducing public funding for adults• Drive to increase investment from other sources e.g. growth in 24+ Advance Learning Loans• Changes to financial contributions from individuals (adult learners)• Prioritising funding for apprenticeships and traineeships• Substantial increase in employer pension and NI contributions
OFFICIAL
Financial health of General FE Colleges
Sector borrowing has grown from £1.4bn (2009/10) to £1.6bn (2013/14) to support capital investment
Income has reduced threatening serviceability – borrowing to income has increased from 20% to 25%
22% of colleges had borrowing over 40% of income in 2013/14 – the FE Commissioner has suggested this as a warning sign
The number of colleges borrowing has increased – 25% of colleges had no borrowing in 2009/10; 15% in 2013/14
The average level of borrowing for those with some borrowing has increased marginally from £7.1m in 2009/10 to £7.6m in 2013/14
Colleges built up cash reserves but these are being used to support capital and cash deficits
Lending to the sector is dominated by Barclays and Lloyds – approx. 70% as sole lender in 2012/13; 12% was a mix of banks; Santander had less than 10%
Banks are increasingly intervening due to covenant breaches – the sector risk profile has also reduced the appetite to lend – increased reliance on Government for liquidity support for cash crises
OFFICIAL
Borrowings and banking across General FE Colleges
2012/13 2013/14 2014/15 2015/160
20
40
60
80
100
120
Outstand-ingGoodSatisfac-tory
2012/13 2013/14 2014/15 2015/160
10
20
30
40
50
60
Outstand-ingGoodSatisfactoryInadequate
These charts show the trends in financial health, using un-moderated auto-score data from the 2014/15 financial plans submitted July 2014.
General Further Education Colleges (GFEC)
Sixth Form Colleges (SFC)
2332
Moderation could, in a small number of cases, lead to changes in these
scores (eg for capital reasons)
Headlines to note: Both SFCs & GFECs
have an overall declining trend in outstanding financial health
Nationally, aggregate GFEC forecasts show an operating loss in 2013/14 for the first time ever with an aggregate deficit of £64m
43% of GFECs are forecasting an operating deficit for 2013/14
Aggregate SFC forecasts show a reduction in surpluses from £54m in 2012/13 to £30m in 2013/14
Aggregate SFC cash reserves drop from £224m in 2012/13 to £176m in 2014/15
2015/16 will see significant downward changes in funding
(apprenticeships, adult, removal of 16-18 protections)
Colleges’ own forecasts are known to be subject to optimism bias…
Falling demographic up to 2019 – already some
colleges’ student number forecasts for 2014/15 are
proving 982)
This time last year, 15 GFECs were forecasting 2013/14
financial health inadequate – the financial plans received this July confirm there are 27
During 2013/14, no SFCs had forecast inadequate financial
health – yet two financial notices to improve were
issued in May 2014 (a further two are likely in October)
… so, 2014/15 and 2015/16 outturns will be worse than figures suggest.
What does the latest college financial health analysis now show us?
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
7. Consolidation of colleges and training providers
What’s on the Minister’s mind?
• 14 or 16? UTC?• Colleges; have we got the right mix?• Reorganisation of colleges; who should decide?• Qualifications; have we got the right ones?
ACTION / POLICIES ESSENTIAL PRECONDITIONS END STATE
ADEQUATE
FUNDING
A pattern of effective colleges
responding to (local) economic
need with a dual
mandate
The creation of 3 million high quality apprenticeships
All young people to have employability skills including English & maths
An end to intergenerational unemployment
A rejuvenated higher technical & professional education system
A more productive economy with higher wages and greater individual prosperity
WORKING WITH A GOVERNMENT AGENDA
STABILISE
SIMPLIFY
SUSTAIN
An employer led skills
system that is market-driven
A pattern of effective colleges
responding to (local) economic
need with a dual
mandate
ACTION
An end to intergenerational unemployment
Loans & cash advances
Grants
Area reviews
Freedom to dispose of assets
Protection 16-18 funding
Loans for adult education and maintenance
Consolidation and specialisation
MODERNISATION FUND - ‘something for something’ fund
‘Other’ ASB to be grant and lagged funding
Direct funding for off the job training in apprenticeships
Outcome agreements with LEPs/CAs
FE CommissionerSTABILISE
SIMPLIFY
SUSTAIN
ACTION / POLICIES ESSENTIAL PRECONDITIONS END STATE
STABILISE
SIMPLIFY
SUSTAIN
A pattern of high quality cost effective, open access tertiary and sixth form
colleges
ADEQUATE
FUNDING
An effective careers guidance and education system
Pathways and support to young people who have failed to achieve benchmarks by age 16
Rigorous and respected technical and academic qualifications for 16-18 year olds
Accurate assessments of value added performance taking account of student starting points
An education system that promotes excellence and opportunity for all
WORKING WITH THE GOVERNMENT AGENDA
Best use of scarce resources in dealing with demographic trends
Two Alternative Futures (1)
Money
Ofsted Grades
Finances
Reputation
Devolution
Consolidation and
Specialisation
A lot less
Down
NTIs increased
Down
Imposed
Externally driven
AUTONOMYLOST
(SCOTLAND)
Two Alternative Futures (2)
Money
Ofsted Grades
Finances
Adaptation
Devolution
Consolidation and
Specialisation
Less but not quite as much
Mediated
Stabilised
Enabled
Influenced
Internally driven
AUTONOMYRETAINED(WALES)
Allies and Alliances
• Allies
MPs Peers LAs/LEPs Think tanks Employers Media
• Alliances
ASCL and Academy Associations
College Groups AELP Wider Sector
QUESTIONS?
Questions
• Consolidation and Specialisation
Collaboration and competition Specialisation: 4/5 or 3/4/5 Area reviews Outcome agreements
• Defining Colleges
Adaptive layer? or Serving an economic community?