How Skills England can avoid the political scrapheap

The average Premier League manager is in post for just under two years before they lose their job. Les Reed managed just 41 days at Charlton Athletic. In that context, the Institute for Apprenticeships and Technical Education (IfATE) reaching seven years old is an achievement.

But in the context of meeting the long-term learning and skills needs of our country, it’s not very long at all.

IfATE now follows a long list of predecessors including the Manpower Services Commission, Learning and Skills Council, Skills Funding Agency, Skills Advisory Panels, UK Commission for Employment and Skills (UKCES), Training and Enterprise Councils and more into the lengthening history of skills acronyms.

But will its successor, Skills England fare any better?

Trouble ahead?

The government says it wants Skills England to give a clear picture of the country’s skills needs, join up support to deliver that, and work with bodies like the Migration Advisory Committee (MAC) to help deliver national priorities.

But will it have the power to deliver real change?

Unlike IfATE, it won’t have a founding in legislation. Instead, it will be a Department for Education agency, with the Secretary of State deciding which of IfATE’s powers it can have.

Having a legislative base doesn’t mean you will succeed or survive (ask UKCES, among others). But it is one way in which you have clout.

And will Skills England be too narrowly focused?

If it is limited to producing skills forecasts, encouraging everyone to deliver them and approving apprenticeship standards and training allowed under the Growth and Skills Levy, it will fail.

The narrowness of the legislation (focused on transferring IfATE’s powers) means there is a risk Skills England will lack both power and breadth – a sort of IfATE-lite.

The good news is it’s early days. So what would it take for Skills England to be a success and avoid becoming the latest addition to the acronym scrapheap?

Independence and breadth of remit

A legislative base, including a duty to promote lifelong learning of all types, would be one way to cement the body’s independence. If not that, then its board and leadership will need to demonstrate it.

Skills England needs to focus on perhaps our biggest challenge: underinvestment and underutilisation of skills by employers: our research shows they’re spending 26 per cent less on training per employee than in 2005.

It also needs to look at learning at all levels and for all reasons. Medr, Wales’ new post-16 skills body, has a statutory duty to promote lifelong learning at a variety of levels and range of ways, including higher education. Will Skills England do likewise?

Real powers

These should include:

  • working with the MAC to agree plans with employers to increase their training and recruitment investment. That could be underpinned by a higher Immigration Skills Charge for sectors with highest demand for visas, with Skills England controlling the extra funds raised.
  • agreeing with sectors binding ways to increase employer training investment. That includes building it into the planned Fair Pay Agreement in social care to increase the pipeline of workers for that sector, and encouraging the introduction of additional skills levies (as in construction) in sectors where employers don’t increase their investment voluntarily.
  • overseeing devolution deals in England, signing off outcome agreements that show how many more people will get into work or improve their skills through greater local control of a single pot of employment and skills funding.

Looking out for skills

The government wants to move to clean energy by 2030, build 1.5 million homes in five years, cut NHS waiting lists and boost economic growth. Skills England must ensure workforce and skills plans are built into those, as well as ensuring the skills system delivers for industrial strategy priority sectors.

Skills England will not operate in a vacuum. The government’s manifesto commitment to a post-16 strategy offers hope of an open discussion about what a simplified system with sustained investment might look like.

No Premier League manager lasts forever, but for Skills England to succeed, it needs to be a lot less like Les Reed, and a lot more like Arsène Wenger.

The budget could bake in government inefficiency, unless…

Autumn budget, 2021. I was prising the cork out of a bottle of Lidl Cava and texting my mum to turn on her TV. Rishi was about to announce £559 million of funding for a side project I’d been working on.

We’d all laughed at the first attempt at official branding for Multiply that alternated ketchup-red and mustard-yellow lettering like a seven-year-old let loose with a bubble jet printer.

Then, laughter was replaced with slack-jawed disbelief when we’d finally scrolled further down the email to see that the then-chancellor’s reverence for maths was bringing half a billion pounds of new money to our national problem with adult numeracy.

There will be differing views of the merits and success of Multiply, but after indulging myself in that unusually exciting moment in the work of a civil servant, I returned to my day job on 16-19 policy. I let others get to work on dragging us up from among the lowest levels of adult numeracy in the OECD and reversing the decade-long decline we’d seen in take-up of adult maths.

I looked on with great interest though. £100 million of that money was earmarked for an online maths tuition platform.

I imagined one approach could have been building on the best of existing products’ industry-contextualised video lessons, low-stakes practice exercises and adaptive diagnostic assessments, quickly re-skinned for an older audience. Those elements could feed into the free entitlement to sessions with remote tutors which made up most of the hefty price tag.

In the back of my mind was how it could be used to supplement maths delivery to apprentices, mitigating one of the most common complaints from the sector.

And it wasn’t a huge leap from there to see it becoming a resource to support teachers of those continuing maths in their 16-19 study programmes; a sort of ‘Oak for resits’, eventually expanding to English too.

It won’t have escaped your attention that we don’t have a £100m online maths tuition platform. The project was shelved in 2023.

You will be forgiven for thinking this is a crap system

Perhaps two years and £100 million just wasn’t sufficient to set up a website. Admittedly, all I had to go on when I conceived it was the profitable X Files fan site I ran when I was fourteen years old.

Another big chunk of the Multiply millions was to fund research trials into effective approaches to adult maths. Three years later, those are just beginning.

The rest was devolved to local areas to experiment and innovate. It was hoped that the decline in participation could be reversed by offering more flexibility. FE rose to the challenge, teaching everywhere from buses to food banks.

But March 2025 brings the end of the three-year spending review period, meaning a funding cliff-edge. Right now, provision is winding down while local areas rush to spend the last of the cash.

You will be forgiven for thinking this is a crap system.

While I can poke fun at it taking years to set up a website, more complex projects such as local delivery require periods of procurement, implementation, staff recruitment, participant on-boarding and scaling up. Add six months of wind-down time to that and three years doesn’t seem too long after all.

Which is why my heart sank to see that our new chancellor, Rachel Reeves is set on running two-year spending reviews from now on. It guarantees continued inefficiency, ineffectiveness and chaos.

One solution, of course, would be to speed government departments the hell up.

Yes, I made myself laugh there too.

There is another option. Empower departments and local areas to offer five-, or even seven-year, contracts regardless of SR length. All you need is a three-month termination clause (which government contracts should have anyway) so that if priorities change, taxpayers’ money isn’t left committed.

That would shift the mindset of delivery to long-term, embedded quality, rather than this quick-buck, pop-up shop approach to government spending that we’re stuck in.

Treat colleges and schools fairly on any NI reform, unions say

Ministers have been told any imminent national insurance hikes must be fully funded for both schools and colleges.

Reports this week suggested the government will increase NI contributions for employers when it presents its first Budget at the end of this month. 

The BBC said this could be done by charging NI on an employer’s pension contributions, which are currently exempt. 

Daniel Kebede, the general secretary of the National Education Union, said it was “incumbent on the chancellor to protect public services from a further wave of cuts”.  

Chancellor Rachel Reeves “should reimburse public sector employers for additional costs, and at the same time use money raised from the private sector to increase funding for public services”, he said. 

Pepe Di’Iasio, general secretary of the Association of School and College Leaders, said: “We would expect the government to compensate public sector employers in the event of a rise in NI employer contributions, as has happened in the past, and for this to be new funding, not taken from money meant for children’s education.”

In 2021 under the Conservative government, schools were given help to deal with NI rises but FE colleges were left out.

Di’Iasio added: “If employer contributions do rise, it’s vital that the compensation covers the full cost of the increased contributions and that it is provided to colleges as well as schools.” 

When quizzed about NI reports this week, education secretary Bridget Phillipson said she would not “engage in speculation”, but “recognised the pressures that have been there in recent years”.

Starts fell for most apprenticeships after ‘exceptional’ funding review

Almost 2,000 fewer people started adult care apprenticeships last year despite “exceptional” funding boosts.

Two care standards were among 10 popular apprenticeships chosen for an emergency government review of funding in late 2022. Those in scope were in skills shortage occupations and priority sectors where costs of delivery were hardest hit by inflation.

Funding band increases of between £500 and £5,000 were finally implemented the following summer ahead of the 2023/24 academic year, but training providers warned at the time that the rises fell short of what was needed to make the courses affordable.

FE Week analysis of new 2023/24 provisional government data shows that six of the 10 apprenticeships saw their starts decline despite the funding increases (full table below).

Adult care worker apprenticeships suffered the steepest fall in terms of volume. The level 2 standard dropped from 7,460 to 6,286 and the level 3 lead standard slumped from 10,180 to 9,541. Both programmes had their funding bands increased from £3,000 to £4,000.

Level 2 large goods vehicle (LGV) driver C and E dropped by the largest proportion of 33 per cent, falling from 1,380 in 2022/23 to 931 after its funding band was boosted from £7,000 to £8,000.

Starts on the level 3 motor vehicle and maintenance technical (light vehicle) apprenticeship fell 18 per cent from 3,730 to 3,066. The funding band for this standard went up from £15,000 to £16,000.

The remaining apprenticeships that dropped in starts were heavy vehicle service and maintenance technician, which fell from 1,260 to 1,125 despite a £5,000 funding boost to £20,000, and the production chef standard which sank from 2,360 to 2,225.

An FE Week investigation in March found nearly 200 training providers had ceased delivery of adult care worker apprenticeships since 2019 and annual starts on the programmes had nosedived.

The Association of Employment and Learning Providers believes the data shows the “consequences of not having a fully responsive system”.

Deputy CEO and director of policy Simon Ashworth said: “This means we see vital delivery capacity lost and high-quality providers leaving the market unnecessarily and through no fault of their own. Skills England must learn these lessons so that the skills system evolves into something that is more responsive to both demand and supply factors – not just on funding, but also on content and wider currency.”

He added that the challenge of having to successfully pass English and maths functional skills was another aspect affecting starts. 

“From our own research, we know that as DfE tighten their focus through provider accountability, tough decisions are then made by providers in terms of who gets recruited onto programmes such as adult care.”

Apprenticeship funding bands are said to be the government’s best estimate of the typical cost of training and assessment.

Reviews of the bands usually happen as part of revisions to apprenticeship content, which can be a lengthy process. The exceptional funding band review removed the need for content to be reviewed so that monetary decisions could be accelerated.

Twenty apprenticeships were originally chosen for the emergency review but only 10 ended up benefitting from it after the employer-led trailblazer groups for half of those in scope opted out.

Of the four apprenticeships in the review that had their starts increase, the level 2 engineering operative standard rose by the largest proportion of 19 per cent, shooting up from 1,500 to 1,790.

The level 3 senior chef production apprenticeship boiled up from 600 to 675, while the level 3 chef de partie standard rose from 240 to 251 and the level 2 commis chef simmered from 1,610 to 1,620.

A spokesperson from the Department for Education said: “We are committed to supporting high-quality delivery of apprenticeships. Spending on the apprenticeship programme is demand-led and employers can choose which apprenticeships they offer, how many and when.

“These increases have provided real benefit to providers and to support continued high-quality provision.”

Suicide risk over SEND confusion, coroner warns

A coroner has warned that schools and colleges are delaying applications for education, health and care needs assessments because they have misunderstood the rules – increasing the risk of suicides. 

The warning followed an inquest into the death of Jennifer Chalkley, who was 17 when she took her own life in 2021.

The inquest found her death was contributed to by an inadequate education health and care plan, failings in children’s mental health services and systemic multi-agency failures.

It also heard that Howard of Effingham School, in Surrey, where Jennifer was enrolled until 2020, delayed making an application for an EHC needs assessment after misunderstanding the rules.

The school’s SENCo told the inquest: “We are required to prove that we have put up to £6,000 of support in place before applying. This is guidance that we are given by Surrey.”

Senior coroner Richard Travers said evidence “suggested that this belief was widespread amongst schools, colleges and others, both in and beyond Surrey”.

But he said the SEND code of practice actually states youngsters with special needs “must be identified as soon as possible so that their needs can be assessed and met as soon as possible”.

Travers made clear that the school’s errors regarding the financial rules were a “genuine misunderstanding” and that the school had tried to support Jennifer within the system as they understood it.

At the inquest hearing the evidence showed that in September 2021, shortly before her death, Jennifer started a course at a new college but staff there did not receive her safeguarding file from her previous educational establishment. As a result the college’s “ability to recognise and manage Jennifer’s needs and risks, including her risk of suicide, was undermined”.  

In a prevention of future deaths (PFD) report, published Monday, Travers warned: “I am concerned that the misunderstanding by schools and colleges is delaying or preventing applications for statutory assessments being made in some cases and thereby acting as a barrier to ensuring all children and young people with additional needs are receiving effective support as soon as possible.

“I am concerned that this creates or increases the risk of avoidable suicidality developing.”

Surrey County Council has updated its guidance to make clear schools do not have to spend £6,000 before applying for an EHC needs assessment.

But the PFD report said evidence received from a college in the county showed the misunderstanding still persists.

Travers wrote that the error likely stems from England’s school and early years finance regulations, which set the high-needs-costs threshold at £6,000.

He said: “I am concerned the misconception persists nationally and that, for the reasons set out above, action is needed to ensure all schools and colleges understand, clearly, that spending an additional £6,000 on a child is not a pre-requisite to applying for a statutory assessment.”

Margaret Mulholland, SEND and inclusion specialist at the Association of School and College Leaders, expressed concern about the “notional” SEN budget and believed it “could be a source of confusion”.

She said some councils “may ask for proof of spending” over a certain threshold but this is not a legal requirement.

“There desperately needs to be more investment in the SEND system to ensure decisions are being based on the needs of children rather than available funding,” she added.

The Howard Partnership Trust, which runs Howard of Effingham School, did not respond to a request for comment.

The Department for Education and Surrey County Council are required to respond to the PFD report by December 9. Both were approached for comment.

Samaritans are available 365 days a year. You can reach them on free-call number 116 123, email them at jo@samaritans.org or visit www.samaritans.org to find your nearest branch.

‘Uncertainty’ frustrated £2.6bn skills fund delivery, report finds

Tight timelines and “uncertainty” in spending rules have frustrated delivery of a £2.6 billion skills and business support scheme, a government report has confirmed.

With just under six months left before the three-year UK Shared Prosperity Fund reaches a budget ‘cliff edge’, the Ministry of Housing, Communities and Local Government (MHCLG) has released an ‘early update report’ on how money has been spent so far.

It confirms concerns voiced by several English regional mayors, that the scheme’s has been beset by complexity, cash delivery delays and rule changes.

Between February and March this year, evaluators from Frontier Economics and BMG Research interviewed ten teams from local authorities and organisations commissioned to deliver projects in ‘people and skills’, ‘business support’ and ‘communities and place’.

Projects that are participating in the evaluation include Liverpool City Region’s £7.5 million ‘ways to work’ scheme, County Durham’s £4.9 million employment support and the Greater London Authority’s £2.9 million ‘E-business support’ with digital skills.

Unclear requirements

During the planning and delivery stages department “could have been clearer or more timely” about what its requirements would be, researchers reported.

Project teams struggled with “uncertainty” around final funding allocations, with some forced to “scale down their delivery plans” after receiving less than expected.

Most project teams said the three-year period – which stacked most of the funding’s release to the final year – was “a challenge” due to the need to plan projects.

‘Still early stages’

As a result, delivery was “typically still in early stages” when researchers carried out their interviews.

Some complained that MHCLG made changes to data monitoring requirements “even once some projects were being delivered”.

Despite interviewing project teams reaching the end of the second year of the scheme, researchers said it was “too early to tell” how beneficial projects will be “given the early stage of delivery”.

But design and planning of the UKSPF’s interventions “generally worked well” with consensus that they would not have happened without the funding, and the scheme was less “bureaucratic” than its predecessor, the European Social Fund.

Extend ‘vital’ fund

Naomi Clayton, director for policy and research at Learning and Work Institute said the report highlights the “vital” role the fund plays in flexible employment and skills provision, particularly in disadvantaged areas.

She added: “It also echoes our concerns about the short delivery window, impacted by late changes in the start date for skills investment.

“As it stands, UKSPF ends in less than six months’ time, which means projects may already be scaling down and losing staff.

“Short-termism and instability have an impact on the ability of programmes to reach their potential – and will ultimately mean that the government’s long-term ambition for an 80 per cent employment rate will be harder to achieve.

“The government needs to avoid the impending cliff edge in provision and to establish a long-term plan.”

Last week, the Local Government Association called for the scheme to be extended for 12 months to provide “stability and certainty” to councils and local businesses.

A full evaluation of what impact interventions had in 26 specific projects will cover the period up to March 2025, and will attempt to follow how many people were supported “on their journey from economic activity into employment”.

Is Skills England looking through the policy lens backwards?

With Skills England, we may have a great opportunity to finally make the skills system in England work. But even if we do, will that be enough?

The overarching, indispensable assumption present in every previous attempt at reform has been that we can and must simplify the skills system.

And sure, a single source of data and a clear definition of our skills needs is fundamental.  But the skills system isn’t simple, and never will be. This fact has consistently undermined the successful implementation of a comprehensive skills strategy and its delivery.

For a start, skills are not some homogenous category: they range from entry to degree level and across industrial sectors and even sub-sectors. The skills landscape is necessarily complex.

Some industries are growing, some contracting. Some face the opportunities of technology, others face annihilation by it.

Then, what a job-seeking 16-year-old needs is very different to an unemployed adult or to someone in work who needs upskilling or reskilling.  While the skills framework is applied to all, the nature of delivery, the skills taught and even the nature of the assessment will differ.

A coherent stable framework of skills when workforce skills needs can change (sometimes dramatically) every few months is a significant challenge.

Providing  the certainty of a structured set of learning outcomes and qualifications which enables flexibility in delivery and assessment without the constraint of time-sapping regulation and control represents a mountain to climb.

What is the right balance of knowledge, skills and behaviours, the right balance between the practical and the theoretical? This question needs answering for every sector: critical ones like social care and early years that are experiencing workforce shortages, as well as the sexier technology and engineering sectors.

And are we happy to allow a range of teaching and assessment approaches, or do we continue to allow regulators to restrict innovation by constantly re-defining inputs rather than outcomes?

We all understand the benefits of units, and the benefits of focused skills development. Unitised delivery doesn’t need to mean losing the end goal of a full qualification that gives individuals mobility. 

The skills landscape is necessarily complex

For others in work, a short, sharp programme focused on a particular skill or knowledge may be all that is needed.

And while qualifications are important, what about ‘soft’ skills like teamwork, leadership, resilience and communication?  These are relevant for everyone on skills programmes and often determine success in work. 

Next, how do we balance regional demands versus national priorities without Skills England feeling too remote and detached from reality on the ground?

Individuals are mobile.  Are we saying we should only be training people in the skills for the region they live in? Qualifications generally give a wider set of skills and allow employee mobility.

On the flip side, larger employers will benefit from consistency across regions, but their needs are not necessarily aligned with regional agendas and priorities. Indeed, they are sometimes conflicting. How do we satisfy them all and avoid erosion of confidence in the system? 

Given all of the above, perhaps the simplification the skills sector is crying out for is not, in fact, in skills provision itself. It seems to me the simplification we need is actually in the regulation, rules, data gathering, evidence requirements and the funding system.

If we weren’t looking at skills through the lens of government-funded programmes and processes, maybe we would be in a much better starting place. 

So, is Skills England just for government-funded programmes or for all skills development in England? And what should employers be paying for themselves without subsidies or incentives?

Employers believe the apprenticeship levy is theirs to spend. But it never was. Only 2 per cent of them even pay it. Government should surely be correcting market failure and incentivising the market rather than funding everything.

What about those not working for a levied employer? What about a government’s future priorities where there are currently limited jobs? And is Skills England determining the cost of delivery or allowing someone else to do that? 

Skills England faces an enormous challenge given its remit. And it might even meet that challenge, but if there is no clarity about who funds what along with effective regulation, processes and procurement, it’ll be irrelevant in the end.

Just like all previous attempts to simplify the skills sector.

Deadline for results checking service extended after tech issue

The deadline for schools and colleges to check their GCSE and post-16 results has been extended after technical issues in its first year back being run in-house by government.

The Department for Education said it was aware of issues affecting logging in and downloading of data files for those trying to complete the key stage 4 and 16 to 18 autumn checking exercises.

This allows schools and colleges to check that DfE holds the correct exam results information, which is then used to calculate performance data.

It is the first year the management and production of performance data has been moved in-house and delivered directly by the department under a new portal. It was previously run by technology and assessment firm RM.

In an update, the DfE said they are “working hard to resolve” the issue.

“We will be extending the deadlines for both the KS4 and 16 to 18 Autumn checking exercises to ensure schools and colleges have a 2-week window to check their data.

“We will confirm the revised closing dates and will provide further updates here in due course.”

DfE confirmed schools and colleges would not be penalised due to the problems. The data was due to be published next Thursday. FE Week sister publication Schools Week has asked DfE if this will be pushed back.

‘Disappointing’

The Confederation of School Trusts said in an update to members that some schools break up for half term at the end of this week and “many colleagues were not able to access the site at the start of the week”. 

The Association of School and College Leaders had also been aware of issues from members. 

Tiffnie Harris, data specialist at ASCL, said: “This is the first year that the DfE has taken the checking exercises in-house, having previously been with an external provider. 

“It’s disappointing that this change has coincided firstly with a delay to the start of the checking exercise, and then with technical issues. 

“While we are pleased that the DfE has agreed to extend the deadlines, we sincerely hope these problems will be ironed out ahead of next year.”

DfE’s guidance says the new ‘check your performances measures data’ services was used for the 2024 key stage 4 June checking exercise. This asks schools and colleges to check the correct pupils are listed. 

The new portal “has a similar look and feel to other online services that the department uses to interact with schools and colleges. 

“The portal has been designed to improve accessibility and provide clear navigation. This allows schools and colleges to view and if necessary, amend your school or college performance data by a more streamlined process than in previous years.”

EPI outlines ‘clear picture’ that college finances are worse than unis

The government has been urged to not “forget” FE when making higher education spending decisions after researchers found more colleges are in deficit, have larger deficits and are less able to meet debt obligations than universities.

Analysis was published by the Education Policy Institute today as Labour’s first budget draws near.

The think tank pointed out that rising inflation, frozen tuition fees and falls in international students have put universities in a “financial precipice”, highlighting forecasts from the Office for Students that 40 per cent of higher education institutions are expected to run at a loss in 2023/24.

Concern over university finances has led to rumours that Labour could increase tuition fees as it considers the HE funding model in the long term.

This follows a push by university representatives to be allowed to increase undergraduate tuition fees by inflation and receive extra funding for up-front teaching costs of priority subjects.

EPI said FE has been “largely ignored” in this debate despite Labour’s manifesto promise of a “comprehensive strategy” that would “better integrate” further and higher education.

The think tank looked at the 2022/23 Education and Skills Funding Agency’s annual college accounts database and data from the Higher Education Statistics Agency (HESA) to assess the state of the two sectors’ finances over the last six years.

Here’s what researchers found.

Half of colleges are in a deficit

Since 2017/18, a steadily growing proportion of HE providers have been in an operating deficit, with this figure reaching a record high of 36 per cent in 2022/23. 

At the same time however, a consistently greater proportion of colleges have been running deficits, hitting a high of 75 per cent in 2021/22 before falling to 49 per cent in 2022/23.

EPI said the fall in the proportion of colleges reporting deficits in the latest year of available data, 2022/23, is in “large part” a result of additional 16 to 18 spending included as a part of the 2021 spending review. 

Researchers said the £615 million cash boost for the sector has “not been as impactful as expected” given the scale of inflation in the past year and without maintaining or increasing this level of funding in the 2024 spending review, this trend is “unlikely to continue”.

Proportion of providers in operating deficit, 2017/18 – 2022/23

Sources: HESA income and expenditure data, 2017/18 – 2022/23. ESFA financial management: college accounts, 2017/18 – 2022/23. Expenditure figures are adjusted to remove the impact of changes to pension costs.

College deficits are also larger than unis

EPI also found that since 2017/18, the mean income-weighted operating deficit as a percentage of total income has remained positive for HE providers, reflecting the first chart that indicated a consistent minority of providers in deficit.

In 2022/23, this figure fell to 3 per cent, its lowest since 2019/20, the year before providers began to see some cost savings as a result of shifts to online teaching and lowered use of campus facilities in the wake of the pandemic.

Colleges experienced the opposite throughout this period. Despite a brief sector surplus of 1 per cent in 2019/20, the sector deficit plunged in the following years, hitting -5 per cent in 2021/22. 

The sector did however return to a surplus n 2022/23, boosted by the additional funding from the 2021 spending review, but remains below the higher education average.

Operating surplus/deficit as a percentage of total income (income weighted), 2017/18 – 2022/23

Sources: HESA income and expenditure data, 2017/18 – 2022/23. ESFA financial management: college accounts, 2017/18 – 2022/23. Expenditure figures are adjusted to remove the impact of changes to pension costs.

Colleges less likely to meet their debts

EPI explained that the ratio of a provider’s short-term assets (such as cash, inventory, and receivables) to its short-term liabilities (such as payroll, taxes, and money owed to suppliers) is known as the “current ratio”. This is an indicator of the provider’s liquidity, or its ability to pay short-term debts.

Researchers found the average current ratio for both sectors has increased steadily since 2017/18 and has always remained above the 1.2 threshold. This is a “positive indicator” for both, suggesting on average they are “increasingly able to meet their short-term obligations”.

In higher education, the average ratio is considerably higher at 2.9 in 2022/23, with 19 per cent of providers falling below the 1.2 threshold. In further education however, the average ratio sits at 1.8, while 25 per cent of providers have a current ratio below 1.2.

Mean current ratio, 2017/18 – 2022/23

Sources: HESA key financial indicators, 2017/18 – 2022/23. ESFA financial management: college accounts, 2017/18 – 2022/23. 

Proportion of providers with current ratio below 1.2, 2017/18 – 2022/23

Sources: HESA key financial indicators, 2017/18 – 2022/23. ESFA financial management: college accounts, 2017/18 – 2022/23. 

Place FE funding decisions alongside HE

EPI said these financial metrics show a “clear picture: when compared to their higher education counterparts, more further education providers are in deficit, their deficits are larger, and they are less able to meet those debt obligations”. 

Given this, the Treasury “must place further education alongside higher education in terms of funding priorities in the upcoming budget”, the think tank said.

EPI added: “Ultimately, further education must be seen as part of a holistic system of post-18 education of the kind Labour pledged to develop in its 2024 manifesto. This can’t happen unless both sectors are financially sustainable.”