The insolvency regime proposed in the new bill will make sure colleges are delivering as a productive businesses as well as effective training providers, says Ian Pretty

The government’s Technical and Further Education Bill sets out proposals for a new insolvency regime for FE colleges. This is a big moment for a sector increasingly pushed to be more commercial and find better and more diverse revenue streams while simultaneously delivering the best, more productive learner experience possible.

It is no secret that there are colleges within our sector who through lack of students, lack of adequate facilities or lack of revenue are not achieving these goals. These colleges must change to live up to the promise of what further education should be, whether that be through a merger, a change in leadership, or a new strategic direction, but an option that has previously not been open to FE is that of insolvency.

The logic behind this is simple, if a college were allowed to close the provision for learners in that area would be threatened. In my view if a college is not able to fulfil its duties then the provision for learners is already threatened, already subpar, and something has to give.

The insolvency regime proposed by the government addresses an issue nearly twenty-five years in the making, when FE Colleges were transferred out of local government a new type of corporation was created but with no provision for what to do if that corporation fails to remain solvent. The central government has become a funder of last resort when these situations arise so as to protect learner access, but there is a better way, one that has been used across other public services where a continuation of service is essential such as energy, railways, housing and the post office.

Reliance on government funding has had its day in FE

A Special Administration Regime, with protecting learner access at its core, is the right way forward for the FE sector. It may never be used, and is a rare occurrence across other sectors, but it is vital that the option exist. Market forces affect colleges just as they do any business, and colleges must be responsive to them. The possibility of insolvency for colleges may force them to aim for bigger surpluses, control staff costs and cut capital spending, but also to seek new revenue streams, become more commercial and entrepreneurial. Reliance on government funding has had its day in FE, and that day is ending as funding sources change and decrease. For colleges to continue to offer the high quality provision they must, they need to look outside traditional funding sources and the Special Administration Regime may prompt them to do just that.

There are of course areas we would like to see great thought given as this bill proceeds through the Commons and then onto the Lords in the New Year. The first must be the absolute protection of the learner and an assurance that the service will continue even if, in extreme cases, the service provider does not. This must be done with thoughtfulness and care as there is no easy answer to issues such as how to ensure access for learners in rural areas, continued access to specific courses without prohibitive travel, continuity of provision and teachers during the course if the college is closing. These issues would be for the Special Administrator to facilitate answers to, and the bill addresses the importance of learner protection throughout, but they are issues that parliament should think carefully about.

Secondly, the possibility of insolvency for FE colleges may make partners such as banks, the Local Government Pension Scheme and other trading partners nervous and therefore either less likely to engage or more likely to insist on protections that are not helpful or realistic for the college. The government has a responsibility in the implementation of the insolvency regime to make sure that by offering a solution to one set of problems for financially unhealthy colleges, they are not creating another for financially healthy ones.

These challenges are not insurmountable, and the benefit of an insolvency regime to the sector is undeniable. At its best, the opportunity presented by this bill could ensure that each college across the country is delivering in the best way possible for its local community, as a productive business as well as an effective training provider.

Ian Pretty is chief executive of the Collab Group