Banks given £201m to clear college debts during area reviews

Colleges had over £200 million of bank debt paid off by the Treasury during the post-16 area reviews, but civil servants say it is “too early” to determine the programme’s success.

An ‘Area review: end of programme report’ was published by the Department for Education this afternoon to provide a “factual record” of the implementation of the programme, which kicked off in September 2015 and officially ended in March this year.

It noted how, as part of the spending review 2015, the government offered up a £432 million restructuring facility to help with the implementation of recommendations made by the FE Commissioner.

Today’s report stated that between 2016 and 2019, 157 “transition grants” were awarded to colleges, and £201 million (46 per cent) of the restructuring facility was used to pay off commercial debts.

It means that combined college debt has gone from £1.6 billion in 2014-15, to £1.48 billion in 2017-18.

The DfE is no rush to publish which colleges won individual awards, citing grounds of commercial sensitivity associated with the contractual terms of both loans and grants.

Today’s report stated that following this “large investment” in the FE sector, the “expectation is that, going forward, colleges will manage themselves effectively to ensure their sustainability, and support will be available through early engagement with the ESFA or the FE Commissioner”.

It showed the number of general FE colleges in England has shrunk from 241 to 193, while the number of sixth form colleges has reduced from 93 to 54 – which included 23 academy conversions.

Colleges with a financial health rating of ‘inadequate’ has gone down from 37 to 21 as a direct result of the mergers.

Although it is “too early” to determine the long-term financial position of the college sector, early analysis “suggests that area reviews have had a broadly positive impact to date”, today’s report said.

“The area review programme and the financial support it provided delivered a great deal of focussed progress in a relatively short time to re-shape the sector and deal with some of the most difficult financial cases,” it added.

“It will take time for financial efficiencies to be fully realised and for the benefits of stronger leadership to show in improved financial performance and Ofsted grades. Some early inspections have had promising results but we will continue to track and monitor performance.”

The DfE said it intends to publish an evaluation report in 2022, which will focus on the impact of the programme.

A spokesperson said: “The area review programme has helped in supporting colleges to be more financially sustainable, which is crucial if we want to continue to deliver the skilled workforce we need for the future.

“We are really pleased that the area review programme has encouraged collaboration and has made it possible to maintain provision in areas that could have been under threat of losing access to a local FE college.

“We are continuing to build on this through the work of the FE Commissioner and the college oversight regime to support colleges to go from strength to strength. We have also recently pledged a £400 million boost to help colleges and FE providers to continue to deliver high-quality education and training and recruit and retain the brilliant teachers and leader they need.”