DfE offers colleges ‘reassurance’ over at risk capital projects

A 'possible' DfE-backed loans scheme for colleges is being explored

A 'possible' DfE-backed loans scheme for colleges is being explored

25 Jan 2023, 15:58

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The Department for Education has confirmed plans to “possibly” introduce its own loans scheme for colleges after restricting the sector from commercial borrowing, as officials seek to reassure leaders over their “at risk” capital projects.

Colleges have had to gain special and rare permission to borrow commercially since November 29, 2022, when the Office for National Statistics changed their classification from private to public sector.

The overnight ruling has put numerous capital projects in jeopardy, as previously reported by FE Week.

In an update today, the DfE said it “recognises” the challenges the new borrowing rules present and reminded the sector that £150 million additional capital grant funding will be shared among to colleges in April (individual allocations can be found here).

Officials admitted that for “some” projects this new additional funding “may not be sufficient” in addressing any funding gaps resulting from reduced access to private sector borrowing.

The DfE’s finance and provider market oversight (FPMO) team is working directly with affected colleges in “priority order” through the new borrowing consents process.

Today’s update revealed that officials are also working on other “options”, including a “possible DfE-backed loans scheme for colleges that were intending to borrow commercially in order to fund a capital project”.

The department added: “We want to reassure you that DfE continues to be committed to all its capital programmes (e.g., FE capital transformation, post-16 capacity fund, Institutes of Technology or T Level capital), including projects which had been planned with commercial borrowing.

“Our intention is that projects funded through these programmes should continue.

“We will provide a further update in the coming weeks.”

Skills minister Robert Halfon revealed earlier this month that, as of January 11, the DfE had already responded to six colleges which had urgent requests for commercial borrowing in December. It is not clear whether these requests were accepted or rejected.

The DfE has received 63 other consent requests, of which 36 have capital projects as part of the request, from 24 colleges.

Julian Gravatt, deputy chief executive of the Association of Colleges, previously told FE Week that a DfE-backed loans scheme for colleges was on the cards, but said it was “unclear what the terms are” and warned there is a “risk of delay while the two sides discuss the amount”.

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