DfE bailing out colleges

The government has announced new rules which will allow it to repeatedly bail out failing colleges that go bust, reneging on a previous commitment.

The new Technical and Further Education Bill announced on Thursday last week includes provisions to apply a ‘special administration regime’ to insolvent colleges and sixth forms in order to put the interests of learners ahead of the interests of creditors.

When it first announced the proposals in March, the Department for Education said it would not provide financial support to failing colleges once area review recommendations had been implemented – and that they would be allowed to go bust.

However, the DfE has now U-turned on that promise, and confirmed that extra cash would be made available if needed.

“The Secretary of State would of course want any special administration to be successful and will have wide powers to provide funding if necessary to achieve this,” it has now said, in a response to a consultation on the insolvency regime plans.

“Our intention is that these powers will allow funding to be provided by grant or loan as well as guarantee or indemnity”.

However, it did warn that colleges shouldn’t feel entitled to repeated bailouts, adding: “While the special administration regime will provide a necessary safety net for colleges and their learners, its use will be exceptional.”

The DfE’s volte-face was met with scorn by the Association of Employment and Learning Providers, which represents non-college FE providers.

The DfE’s volte-face was met with scorn by the Association of Employment and Learning Providers

“Observers might be forgiven for thinking that no matter how incompetently an institution is managed, the government will always bail it out,” said its chief executive Mark Dawe.

He reiterated AELP’s long-standing call for a level playing-field between the different types of provider, and urged the SFA to allow other providers to bid for ownership of failing colleges.

David Hughes, meanwhile, the chief executive of the Association of Colleges, welcomed the government’s focus on protecting the interests of learners – but didn’t comment directly on the U-turn.

A DfE spokesperson said: “Our insolvency proposals are about protecting students where a college has gone into special administration to ensure their studies are not disrupted.  Under these proposals, the funding would be used to protect learner provision while the future of the college is determined.

“Following the area review process, colleges in financial difficulty will no longer be able to apply for Exceptional Financial Support.“

The outgoing FE commissioner, Sir David Collins, told the education select committee last week that the area review process could produce “benefits of £200 million plus per year going forward”, for an upfront cost of between £2 million and £3 million.

According to the DfE, these savings will be based on the sector as a whole meeting “an operating surplus of three to five per cent of turnover”.

This, it said, would enable colleges “to invest between £200 million and £360 million more per year in high-quality technical education”.

Additionally, the DfE finally published a number of key area review documents in October, three months later than expected.

The implementation guidance, due diligence framework, and guidance for local authorities and local enterprise partnerships were all originally expected in July.

However they were finally released on October 19, alongside updated guidance and application forms for the restructuring facility, and for sixth form colleges to convert to academy status, as well as full details of the areas and colleges involved in waves four and five of the area reviews.

Editor Asks: Apprenticeships minister Robert Halfon on government u-turn on funding cuts

As it turned out, my exclusive interview with the new apprenticeships minister Robert Halfon was conducted just hours after the Independent, Guardian and Mirror had all reported a major government U-turn on apprenticeship rates.

“People are saying this is a U-turn, but actually I would describe it as listening with elephant-sized ears,” he volunteered – before the questions had even begun.

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How far does the u-turn go? Read our exclusive analysis

“I made it clear to you when you had the big [FE Week] event in parliament. I made it clear at party conference. I made it publicly clear in articles that we have listened –and that’s what my job is to do. The whole purpose of it was that it was a survey and a consultation, and so we’ve responded,” he said.

“FE Week, given what you’ve been up to, has been an incredibly important part of that consultation.”

That morning the government had announced that massive proposed cuts to the 16-18 apprenticeship framework rates would be softened by two measures: by increasing the £1,000 provider incentive with cash worth 20 per cent of the relevant funding band, and by adding £60 million to funding for providers for apprentices who live in a deprived area, or up to £600 per apprentice.

The minister, who appears uncomfortable with formalities, insisting I call him Rob, argued that when he “kept going on about social justice”, it wasn’t just warm words, and that this rethink shows he “really meant it”.

“FE Week, given what you’ve been up to, has been an incredibly important part of that consultation.”

Could he provide any reassurances that these new measures won’t be scrapped after 12 months? Not quite:

“The framework 20 per cent is a transitional measure and the idea is to help the providers adapt,” he said.

“It will reduce over time as the new standards come through.”

As for the disadvantage funding, this £60 million is “for one year”, he said, adding: “I am doing, again as part of my agenda on social justice, a serious review which will report sometime next year on what is genuinely the best way to incentivise, encourage and help disadvantaged people to do apprenticeships.”

Moving on to the apprenticeship levy, I asked him whether he thought large employers would look to use their whole levy pot, as was suggested in DfE research published the same day – a situation which would leave precious little funding available for smaller employers.

He was quick to dismiss the DfE’s research, saying: “I completely utterly reject that proposition, because I meet employers when I go all over the country. Some large employers say they love it, and they’re going to have apprenticeship; others just say they won’t.

“The treasury and others did serious studies to make sure the money was available. You know about all the incentives there are for smaller businesses to take on apprentices, which are guaranteed by the government, so I don’t think there is any evidence to say that this money won’t be there for smaller employers.”

He continued: “Obviously we always keep everything under review, and we’d work out what to do if that occurred, but I completely reject that it is going to happen, because there are many employers who don’t want to take up apprentices and many who do – and that is the whole purpose of the levy.”

In next week’s Editor Asks…part two, we tackle whether employer ownership of apprenticeships is compatible with social justice, the lack of assessment organisations, subcontracting, and whether the CBI is right to be concerned about timescales.

Rise in SFA contracts for small providers

Plans to cut the number of recipients of Skills Funding Agency cash have been shelved in an attempt to increase the provider base for degree and higher-level apprenticeships, and advanced learner loans.

A total of 1,023 providers received direct SFA funding this academic year, up from 984 at the start of 2015/16.
The SFA first attempted to introduce a minimum contract threshold of £500,000 five years ago, designed to cut the number of providers it funded directly.

FE Week understands that more than 200 providers lost their agency business when this policy was introduced, because they were unable or unwilling to increase their contracts to the half-million mark.

The SFA previously told FE Week that this minimum contract policy had “allowed efficiencies to be realised within the sector through a reduced agency role, economies of scale, and more opportunities for shared services between training organisations”.
But advanced learner loan contracts were introduced in August 2013, and they were this year expanded to include 19-23 year olds.

This year’s data shows a clear jump in the number of contracts – surprisingly a quarter (255) of these were providers with total allocations of under £500,000.

FE Week analysis also shows that 87 contracts (nine per cent) were for under £100,000, while a further 63 (16 per cent) fell below £250,000.

When asked to explain this, an SFA spokesperson told FE Week that “the number of contracts has risen” because it was “expanding the provider base for delivering degree and higher level apprenticeships”.

The agency had “completed a series of expression-of-interest exercises to expand the provider base” ahead of 2016/17, she added.
And this year’s contracting process had been “more efficient for providers and the SFA”, because all contracts for the year were issued through the digital skills funding service.

Paul Warner, policy director at the Association of Employment and Learning Providers, was sceptical about this apparent change in approach by the SFA, and claimed that the department is facing “capacity challenges”.

“The number of providers under the £500,000 contract value threshold has gone up quite significantly, which supports our view that the changes made in August 2011 were misguided and not properly thought through,” he said.

“Given the government’s views on subcontracting, and the capacity challenges facing the SFA, it will be interesting to see how the final proposals for the new register for apprenticeship training providers will impact on the numbers.”

This is not the first time the SFA’s minimum contract-level policy has been called into question.

In May 2013, FE Week reported that 50 providers had been given total allocations of less than £500,000 – the smallest of which was for just £11,274.

The total amount allocated to the 50 providers was over £7 million, raising concerns that the SFA had abandoned the policy.

But, despite the number of allocations coming in below the minimum, the SFA said at the time that it would “continue to apply the principles of minimum contract values”, and that “the level at which these are set for individual procurement exercises is driven by the ability of providers to meet the needs of their communities and the provision procured.”

You’re fired! Lord Sugar could cut ties with DfE over apprentice champion role

The entrepreneur Lord Alan Sugar could be about to quit his role as the country’s apprenticeships champion after receiving no contact from government officials after six months on the job, FE Week can reveal.

The businessman, best known for his role in the hit TV show The Apprentice, was appointed “enterprise tsar” by former prime minister David Cameron back in May.

But in the wake of the turmoil in the Conservative government following Brexit, Lord Sugar believes he has been neglected by officials and says he will now “rethink” his position, according his spokesperson.

The Department for Education first appointed Lord Sugar to the role amid much fanfare, and said he would “be undertaking a series of roadshow events across England”, speaking to local school leavers and businesses “championing enterprise and apprenticeships”, and to “encourage businesses to take on apprentices themselves.”

But he has not been on any roadshows since the appointment was made, and none are scheduled for the rest of 2016.

Speaking exclusively to FE Week, the former Labour peer’s spokesperson said: “The appointment was made by David Cameron prior to Brexit. Since the total reshuffle of the government post-Brexit, this role seems to have taken a low priority with the various government officials.

“Lord Sugar has not done any road shows and there are none scheduled for 2016.

“He has had no contact with the new government regime and he will rethink his acceptance to the role if and when he is contacted by the relevant government officials.”

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The Department for Education refused to comment on Lord Sugar’s involvement in the enterprise tsar role, insisting that more information would be given “in due course”.

“There is nothing to add at this stage,” a spokesperson told FE Week. “Nothing has changed with his role and to say otherwise would be speculation.”

If he does quit the role, Lord Sugar would be the second high-profile figure to leave a government apprenticeship position this year, following Nadhim Zahawi’s departure as the prime minister’s apprenticeship advisor in August.

Mr Zahawi was first appointed to the position by Mr Cameron in November last year to support the Conservative manifesto pledge to deliver three million apprenticeship starts by 2020.

But his spokesperson told FE Week that Mr Zahawi no longer held the role following Mr Cameron’s sudden fall from grace in July. No one has been appointed to fill the position.

This has been Lord Sugar’s second stint as a government enterprise champion, after he served in the role for Labour in 2009, when he was made a life peer under the then-prime minister Gordon Brown.

But he quit the Labour party last May, blaming what he described as “negative business policies and the general anti-enterprise concepts” under Ed Miliband’s leadership.

Lord Sugar was knighted in 2000, and reportedly joined the billionaire’s club in 2015, with his estimated fortune currently standing at £1.15bn.

He founded his most famous business enterprise, the computer and electronics firm Amstrad, in 1968.

He was chairman of Tottenham Hotspur football club from 1991 to 2001, and is now best-known for following in the US presidential hopeful Donald Trump’s footsteps, by fronting the UK spinoff of his TV series The Apprentice on the BBC

At the time of his appointment to the enterprise tsar role, Lord Sugar said he was “delighted” to be taking on the challenge.

He said he would be “travelling the length and breadth of this country to tell young people why apprenticeships are a great way for them to build their skills – and talking about the opportunities for starting their own business, hopefully instilling some entrepreneurial spirit”.

Nick Boles, who was skills minister at the time, said he was delighted that Lord Sugar had agreed to help the government “bang the drum for apprenticeships and enterprise”.

Apprenticeship funding ‘u-turn’ – but how far does it really go?

Despite the very public “U-turn” the government made on proposed apprenticeship cuts on Tuesday, funding is still due to be cut from key frameworks by up to 50 per cent, exclusive analysis by FE Week has shown.

In August, this newspaper discovered that cuts proposed by the Department for Education would cause framework funding rates for 16- to 18-year-olds to tumble by more than half, and would disproportionately fall in some of the nation’s most deprived areas.

And following the extreme pressure brought to bear by our #SaveOurApprenticeships campaign, the DfE announced on Tuesday that it would introduce two measures to arrest the decline – by paying an extra 20 per cent on the funding band limit for 16-18 year-olds, and promising £60 million of “additional support in areas of disadvantage”.

However, FE Week has crunched the numbers again (click here to download) and found that while the cuts aren’t quite as steep as before, most frameworks will still feel cuts of 20 per cent or more.

For instance, before the U-turn, we calculated cuts of between 27 and 50 per cent to construction skills at level two. After it, the cuts range from 14 to 37 per cent – figures which could still devastate the sector. In other popular sectors such as hairdressing and engineering, our analysis revealed that at levels two and three respectively, there could still be a maximum drop of 49 to 51 per cent.

David Lammy, the Labour MP who helped FE Week spearhead its campaign, has reacted with fury to our calculations, and has promised to raise the matter in a special parliamentary backbench debate on Tuesday (November 1).

He said: “The government has to explain why – even after this U-turn – its updated funding proposals will still result in cuts of 50 per cent.

“Whilst the government has reinstated the additional support for disadvantaged young people, it has only committed to maintaining this funding for one year and offered no further guarantees.

“I am pleased to have secured a backbench debate on the issue to enable MPs from all sides to make their voices heard.”

The DfE refused to comment directly on FE Week’s figures. Instead, its spokesperson said: “Through the new levy, £2.5 billion will be invested in apprenticeships by 2019-20 – twice what was spent in 2010-11.

“What we need is a simple system that works for all, which is why we have confirmed that the cost an employer will pay for an apprenticeship is the same, regardless of age.

“This week, we confirmed that to help market transition, providers will get an extra 20 per cent for training a young person on a framework. This is on top of the £1,000 paid per 16- to 18-year-old apprentice to both the employer and training provider.”

Mark Dawe, the chief executive of the Association of Employment and Learning Providers, echoed Mr Lammy’s sentiment, saying: “There are still cases where the funding for frameworks is dramatically lower.

“We need to understand these specific cases and demonstrate to the government the concern about the ability to deliver these and the consequences, if there are no further changes.”

Robert Halfon, the apprenticeships and skills minister who will preside over these cuts, confirmed in an interview with FE Week’s editor Nick Linford that neither of the DfE’s new measures would be permanent – and that the extra £60 million would only last for 12 months.

He will answer Mr Lammy’s questions during Tuesday’s debate, while he is also likely to face tough questions on the funding changes surrounding the new apprenticeship levy launching in April at a Commons sub-committee on education, skills and the economy hearing the following day.

At last month’s #SaveOurApprenticeships launch, Mr Halfon conceded that “we need to look at all of those apprenticeship funding figures – and we are”.

Jonathan Slater, the top civil servant at the DfE, also claimed during a recent meeting of the public accounts committee that getting the funding rate right for young people from deprived areas “is one of the most active debates we’ve been working through”.

Court date set for AoC judicial review over new sixth form

The court start date has been set for the Association of College’s first judicial review against the government in more than a decade.

The AoC revealed a month ago that it was going to take legal action over the Department for Education’s controversial decision to fund a new sixth form at Abbs Cross Academy and Arts College, in Hornchurch.

It believes that the government’s own rules were not followed when the department’s regional schools commissioner approved the request from the Loxford School Trust

These state, for example, that sixth forms should only be created in schools which expect to enrol 200 students or more.

They should also be graded ‘good’ or ‘outstanding’ by Ofsted, offer a full programme of at least 15 A-levels, and not impose a financial burden on the rest of the school.

When asked this week about progress with the case, an AoC spokesperson said: “We can confirm that the hearing is due to start on November 1.”

The hearing is scheduled to last for one day only, and the Administrative Court venue will be announced the day before the hearing. The listings office said it is likely to be within the main Royal Courts of Justice, in London.

David Hughes, chief executive of the Association of Colleges, previously told FE Week: “We thought long and hard about this action, recognising that the legal costs would be high.

“We will have invested over £50,000 on this process; an investment we felt was necessary at this stage because we wanted to secure clarity on such an important issue.”

Abbs Cross fell from a ‘good’ Ofsted rating to ‘inadequate’ in June 2015, and has since been subject to a number of section eight special measures monitoring inspections, one in December 2015 and the following in March this year.

The results of the third was published this month, with inspector John Lambern stating: “Having considered all the evidence I am of the opinion that at this time leaders and managers are taking effective action towards the removal of special measures.”

The review is being launched by AoC in partnership with Havering Sixth Form College, which is 1.5 miles away from Abbs Cross.

The outcome could have a bearing on the way the government approves new selective schools, and establish the status of guidance to the regional schools commissioners.

A DfE spokesperson said: “We are aware of the judicial review. It would not be appropriate to comment while proceedings are ongoing.”

Two thirds of sixth form colleges forced to drop courses

The government is being urged to increase funding for 16- to 18-year-olds ahead of this year’s autumn statement, as two thirds of sixth form colleges report dropping courses due to cost pressures.

The worrying figure is a key finding of the Sixth Form Colleges’ Association annual funding impact survey, the results of which are published today.

It is based on responses from 80 out of 90 of all SFCs, 53 (66 per cent) of whom said they had dropped courses as a result of funding cuts and cost increases.

The majority of SFCs (58 per cent) have also reduced or removed extra-curricular activities available to students including music and drama, sport and languages.

SFCA chief executive Bill Watkin (pictured above) called the findings a “wake-up call” to the government and urged ministers to take action.

“The message from the most effective and efficient providers of sixth form education is clear – more investment from government is essential if sixth form colleges, school and academy sixth forms are to continue providing young people with the high quality education they need to progress to higher education and employment,” he said.

The SFCA’s report comes ahead of the autumn statement on November 23, which will set out the government’s spending plans over the coming months.

The Association of Colleges has also called for greater funding for 16- to 18-year-olds in its autumn statement submission, published earlier this month.

An increase in the base rate for 16 and 17-year-olds, currently £4,000, was further needed to “avert a funding crisis in academic and technical education for that age group,” the AoC said.

The 2015 spending review and autumn statement was less damaging for the FE sector than previously feared.

Former chancellor Mr Osborne said at the time: “We will not, as many predicted, cut core adult skills funding for FE colleges – we will instead protect it in cash terms.”

“We will maintain the current national base rate of funding for our 16 to 19-year-old students for the whole parliament.”

The SFCA report said that last year’s funding impact survey had been “influential” in securing this commitment from the government, which it said was “clearly preferable to a further cut”.

But it noted that the funding freeze came after three rounds of funding reductions, which left SFCs particularly hard-hit.

It said: “While the underfunding of 16-19 education affects all providers, the impact on SFCs is particularly acute as they enrol more disadvantaged students and cannot cross subsidise from 11 to 16 funding as many schools and academies do.”

The report also noted that one “glaring inequality” between SFCs and other sixth forms was the “absence of a VAT refund scheme”, which meant that SFCs had on average £385,914 less to spend on education over the past year.

The announcement in last year’s spending review that SFCs could convert to academy was intended to address this VAT issue.

And according to the SFCA survey, 69 per cent of SFCs are now actively exploring academisation.

The AoC also addressed the VAT issue in its autumn statement submission, and pressed for VAT to be “removed from all publicly funded education” for 16- to 18-year-olds “on the day that the UK leaves the EU”.

When invited to respond to the SFCA survey findings, a DfE spokesperson said: “Every young person should have access to an excellent education and we have protected the base rate of funding for all post-16 students until 2020 to ensure that happens. We’ve also ended the unfair discrimination between colleges and school sixth forms and we now ensure funding is based on student numbers rather than discriminating between qualifications.

“On top of this we are providing more than half a billion pounds this year alone to help post-16 institutions support students from disadvantaged backgrounds or with low prior attainment.”

FE Commissioner backs widening of area reviews

A post-16 review of sixth forms outside of the FE sector would be “very helpful”, the FE Commissioner has told the Education Select Committee.

Sir David Collins spoke out on the issue this morning, during a special evidence session for the committee’s enquiry in to ongoing area reviews of post-16 education, which currently do not directly involve schools.

He said: “A general post-16 review of sixth forms would be very interesting nationally and I’m sure the college sector would welcome it.”

The evidence from such a review would “show very clearly the kind of changes that might be needed”, Sir David said in response to questions from committee member Ian Mearns, Labour MP for Gateshead.

He had asked if it would be valuable for the government to conduct a separate review into sixth form provision outside of FE – as schools sixth forms have been excluded from the current area review process.

Sir David added that sixth forms had been encouraged “along the lines of ‘this will give people greater choice’”, but said this has put pressure on schools to maintain and develop their sixth forms “ almost at any cost in some areas”, leading to “inefficiencies” and “serious weaknesses in quality”.

However, he said, including schools sixth form in the area reviews that he has overseen so far “couldn’t be done”, and would have “would have made the whole process I think impossible”.

This was because there were “far too many institutions”, “far too many individuals” and “far too many independent bodies”.

“There is not a whip behind this, there isn’t a ‘you must do this or you must do that’,” he said.

“This is a persuasive exercise that encourages colleges to look at what is needed in their area and look at where there’s a better way forward.”

He added: “But it is encouraging that many local authorities are using this opportunity to conduct parallel reviews of small schools sixth forms in their area and I think that will be helpful.”

His comments reflected some of the frustrations expressed early in the discussion by Theresa Grant, chief executive officer of Trafford Metropolitan Borough Council.

Ms Grant said: “There’s quite a lot of duplication of curriculum. However, the exclusion of sixth forms has really hampered that analysis.

“The impact really of excluding them, the impact for the colleges was they felt that they were being done to, because others were being excluded.”

She added: “It had quite an impact and quite a lot of negativity which was unnecessary in my view.”

Ms Grant said that she felt the exclusion of schools sixth form had affected colleges’ willingness to cooperate with the area review process “because they did feel it was a done to exercise and had it been everybody in scope they would have had no excuse”.

During the hearing, Sir David also revealed to the committee that the release of thirteen area review reports has been delayed by three months, in order to allow the new Education Secretary to “get up to speed”.

The reports from waves one and two of the area review have apparently been completed and “ready since April” and should be “coming out in the next week or so”, he said.

The delay, he commented, was due to “the change of government and the new secretary of state wanting to review everything that was going through her in tray I think before it became published”.

He added: “There’s no mystery behind it other than the fact effectively we’ve had not a change of government but change of secretary of state a change of minister and that’s been the delay.”

When asked if the new minister had sought to make any changes to the report, Sir David said: “No, I think it’s purely wanting to read them through, check them, get up to speed with what’s happening in the areas.”

Insolvency regime plans in new Technical and Further Education Bill

A new Technical and Further Education Bill published today has set out proposals for a new insolvency regime for FE colleges.

The legislation also includes a proposal to extend the role of new vocational training policing body, the Institute for Apprenticeships, to cover technical education.

The plan, it confirmed, is now is to call it the Institute for Apprenticeships and Technical Education, taking into account monitoring of the 15 new ‘professional and technical’ routes with apprenticeship or substantial work experience planned through the skills white paper unveiled in July.

A Department for Education spokesperson said: “This move will mean the institute, which was set up to be the ultimate decision maker for approving apprenticeship standards, will now ensure that all technical training available to young people and adults is of the highest quality and based on the needs of employers.”

The government launched its consultation on insolvency arrangements for general FE and sixth form colleges three months ago.

This included the plans for a new special administration regime (SAR).

A DfE spokesperson said of the measures in the new bill, that it is “working with colleges, through the area reviews programme, to ensure that is the case”.

“But, in the event that a college becomes insolvent in the future, a new regime will be introduced to ensure that learners will be protected.

“We will ensure that disruption to their studies is avoided or minimised as far as possible.”

He added the insolvency regime will address the “current absence of any provisions for college insolvency, giving creditors certainty for the first time about how their claims will be dealt with”.

Apprenticeships and Skills Minister Robert Halfon said: “I am clear that to build a country that works for everyone, each part of the education system needs to deliver for our young people.

“High-quality technical and further education is not only vital in opening up doors to young people in some of the hardest to reach areas of the country, it also helps local businesses get the skilled workforce they need to drive up the productivity and economic growth that our economy needs.

“The reforms in this bill are fundamental to the government’s vision of ensuring all young people have the opportunity to fulfil their potential.”

Shadow skills minister Gordon Marsden was less positive about the “cobbled together” legislation.

He said: “It looks like, stung by criticism of the potential negative effects on students of some of their rushed area reviews in FE and recent failures in the sector, the government are cobbling together material already in their skills plan with promises of student protection in this new bill.

“Despite fine words about technical education they have left the FE sector, not least with their cuts in English for speakers of other languages (ESOL) and adult skills funding, in quite a perilous state.

“FE Colleges, students and providers need protections that are robust but not micro-managed via Whitehall civil servants who don’t have the background or resources to do so.”