Major review launched to bring colleges back into public sector

After ten years in the private sector, the ONS are now considering whether to reclassify colleges as public sector organisations.

After ten years in the private sector, the ONS are now considering whether to reclassify colleges as public sector organisations.

31 May 2022, 11:05

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A major review has been launched which could see colleges brought back in to the public sector. 

The Office for National Statistics (ONS) has today announced that further education colleges, sixth form college corporations and designated institutions are to be assessed and possibly reclassified. 

The ONS is run by Sir Ian Diamond, the UK’s national statistician, who also chaired the Independent Commission on the College of the Future. The stats body carries out regular reviews of parts of the economy to decide how they should be accounted for in the national accounts. 

Currently, colleges are classified as part of the private sector, a decision the OfS took in 2012.

Possible reclassification of colleges to the public sector was first revealed by FE Week two years ago when the government’s further education white paper was being developed.

The very same white paper, Skills for Jobs, and its resulting legislation, the Skills and Post-16 Education Act 2022, appear to be the catalyst for the ONS’ current assessment of colleges’ classification status. 

A Department for Education spokesperson said: “Our colleges play a vital role in making sure young people and adults continue to gain the skills they need to progress and secure jobs and we want that to continue.

“Any decision to reclassify colleges will not change this driving mission. We will await the decision of the Office for National Statistics review and, if required, will work closely with colleges to ensure any transition from the private to government sector happens in as smooth and seamless way as possible.”

The ONS expects to have completed its review of colleges by September, and will conduct a similar review of universities in January 2023.

Documents published by ONS on their plans to assess the classification of colleges say:

“Following the Skills for Jobs White Paper published in January 2021, and subsequent legislative changes with the aim of improving the skills and post-16 education sector in England, ONS will carry out a review of the sector classification of FECs, SFCCs, and Designated Institutions, in England in the context of the latest international guidance.

“As part of this process, ONS will consider the content of the Post-16 Education Act 2022 alongside other relevant Acts, such as the Education Act 2011 and the Further and Higher Education Act 1992.”

Status change could mean financial windfall for colleges

While it’s not an official consultation, FE Week understands that sector organisations will be able to make representations. 

In a statement David Hughes, chief executive of the Association of Colleges, said: “It’s important to understand the decision to hold a consultation – and the review itself – is taken by the ONS and DfE and politicians are not driving it. How the government responds to any changes, if indeed there are any, is largely up to them. 

“Many other institutions deemed by ONS to be public sector operate under a variety of different rules already. Colleges in Scotland and Northern Ireland are now public sector and we have been learning from their experiences since that happened.

“Nonetheless, this is a significant review, and we will be active in the discussions to inform any decisions by ONS, and help them navigate the framework of laws, policies and rules which govern the relationship between DfE and colleges. Our initial sense is that DfE is taking a very open-minded approach to see what positives this might bring as well as trying to avoid any potential negatives, should ONS decide to make a change in status.”

In a briefing for college leaders, seen by FE Week, Hughes states that officials at DfE have used the private sector status of colleges “as a justification for excluding colleges from some of the funding paid to schools (most recently the national insurance compensation but also VAT relief, business rate compensation, risk protection, financial support for teacher training etc).”

A change to public sector status could, Hughes adds, allow DfE to decide to “make changes in many or all of these areas in the future” and possibly backdate any extra funding.

Bill Watkin, chief executive of the Sixth Form Colleges Association, said: “Sixth form colleges will continue to do an outstanding job for students, irrespective of whether they remain in the private sector or move to the public sector. The key issue is what a move to the public sector would mean in practice, and there are a lot of unknowns and details to work through.

“Our assumption is that sixth form colleges would be treated in the same way as 16-19 academies and other public sector providers, which would include benefiting from a VAT refund scheme. We’ll be working with ONS, HMT and DfE in the months ahead to ensure there is a fair and swift conclusion to this major review”.

College borrowing rules shouldn’t change until 2025

Sector representatives are keen to stress that colleges should proceed as planned with existing contractual commitments. AoC’s briefing advises colleges to continue to sign construction contracts on imminent capital projects where loans are required to cover costs.

AoC’s briefing advises colleges that changes to college borrowing rules shouldn’t come in to effect until 2025 at the earliest so that it aligns with DfE’s current capital funding cycle. This “should not hamper colleges from investing in their estate”.

Recent college accounts data shows that the FE college sector owes just over £1.1 billon in borrowing.

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