Colleges facing a funding rate cut for their full-time 18-year-old learners will be protected from the controversial move inflicting more than 2 per cent damage to budgets.

Skills Minister Matthew Hancock has written to providers telling them the Department for Education (DfE) would cap losses resulting from the 17.5 per cent cut, due to come into force next academic year.

He said the one-year protection measure would affect more than 450 colleges and schools.

Mr Hancock said: “We will cap any losses resulting from this change to the funding for 18-year-olds at 2 per cent of the institution’s programme funding from the Education Funding Agency.”

He added: “This protection for 2014/15 will give schools and colleges more time to adapt to the change, including for those students who are already on courses and give greater certainty over future funding.”

Croydon College principal Frances Wadsworth, who was expecting to lose around £511,000 from her £26m annual budget, told FE Week: “Even though it’s only protection for a year, it comes as a huge relief.”

Martin Doel, Association of Colleges chief executive, said: “While the mitigation is welcome, and a vindication of our representations on behalf of colleges, it remains the case that 16 to 18-year-olds are funded at a level that is 22 per cent less than 11 to 16-year-olds.

“Despite the mitigation this situation has been made worse by the cuts. In the context of raising the participation age to 18, the time has come to review funding from 11 to 18 to ensure that all young people are given the chance to realise their potential.”

The prospect of a mitigation measure had been raised in an Education Select Committee hearing in December, when Education Secretary Michael Gove told MPS he was willing to “have a look” at pushing the cut, due to be introduced next academic year, back until September 2015.”

While recognising that a 2 per cent cap will alleviate the full extent of the damage in the short term, it does not address the fundamental issue of how hard FE colleges are being hit financially

His comments were followed by publication of an official impact assessment that showed general FE colleges would be among the worst-hit of all institutions — with an average reduction in funding of 3 per cent. For land-based colleges it was 2.5 per cent, for commercial and charitable providers it was 1.5 per cent, and for sixth form colleges it was 1.2 per cent.

But for school sixth forms it was just 0.4 per cent. However, the report did not say how much the funding rate cut was expected to save.

Lynne Sedgmore, 157 Group executive director, said: “We had hoped for more discussion on this issue as it has such far-reaching consequences.

“While recognising that a 2 per cent cap will alleviate the full extent of the damage in the short term, it does not address the fundamental issue of how hard FE colleges are being hit financially.”

Sixth Form Colleges’ Association deputy chief executive James Kewin said: “Clearly some mitigation is better than none, but we still do not believe the cut to funding for 18 year olds should have been made in the first place.
“A 2 per cent cap, as part of what appears to be a one year deal, will offer little more than a crumb of comfort to the institutions affected.

“As the government seems determined to make a further cut to the 16 to 19 budget in the autumn — in what would be the fourth cut in four years — the benefits of this mitigation could potentially be wiped out later in the year anyway.”

——-editors comments——

Cut fight continues
It may just be for one year, but mitigation for the controversial 18-year-old funding cut is welcome nonetheless.
That’s not to say the fight against this unfair cut should be over, though.

The National Minimum Wage for apprentices is set to rise by 5p an-hour to £2.73, the Department for Business, Innovation and Skills (BIS) has announced.

The 2 per cent rise will come into force on October 1.

The move, which was recommended by the Low Pay Commission (LPC) after the government asked how it could increase wages without making employment and apprenticeships unaffordable for employers, has been welcomed by business groups.

However, the National Union of Students (NUS) has said the rise was not enough to persuade more young people to take on an apprenticeship.

Joe Vinson, NUS vice-president for FE, said: “The new minimum wage for apprentices is still shockingly low.

“Our own research has shown that the current apprenticeship minimum wage could be a major deterrent for those who would otherwise consider apprenticeships — a 5p rise isn’t going to do anything to get more study leavers to take one up.

“If the government is serious about apprenticeships, it should recognise that forcing young people to choose between this paltry wage and the prospect of full-time employment at the minimum wage is bound to put people off.”

Lynne Sedgmore, executive director of the 157 Group said : “This is a welcome rise and an acknowledgement of the very important role that apprenticeships play in the future development of a skilled workforce.”

The Association for Employment and Learning Providers (AELP) welcomed the move, announced on Wednesday (March 12).

An AELP spokesperson said: “This seems to be about the right level of increase and should remind everyone employers are already making a significant contribution to the overall cost of an apprenticeship.

“We believe the wage level on its own does not constitute a barrier to entry for employers, but it has to be considered within the overall cost equation.”

The LPC’s report, published last month, also recommended an apprentice pay survey should be carried out this summer.
An apprentice pay survey was carried out in 2012, but not last year, and a BIS spokesperson confirmed it would conduct a survey this year, but she could not give a specific timetable or say if there would be any further surveys.

Nevertheless, the Confederation of British Industry’s chief policy director, Katja Hall, welcomed the rise. She said: “The government’s decision to accept the Low Pay Commission’s recommendation is a sensible one and will not put jobs at risk.”

John Allan, national chair, Federation of Small Businesses, said: “The government’s decision not to go beyond the Low Pay Commission’s recommendation is welcome.

“To help the smallest firms plan ahead, we would like the Low Pay Commission to take a longer term approach when making recommendations on future minimum wage increases.”

The adult National Minimum Wage is to rise 19p (3 per cent) to £6.50 an-hour; 10p (2 per cent) for 18 to 20-year-olds to £5.13; and, 7p (2 per cent) for 16 and 17-year-olds to £3.79.

The Association of Colleges declined to comment.

Awarding bodies are facing another month’s wait to find out if their qualifications have been saved from a public funding cut after Skills Minister Matthew Hancock stepped in to ensure “niche high value qualifications are not dismissed”.

Awarding bodies were invited to make cases for their qualifications to be struck from a list of qualifications that, from August, would no longer be paid for by the taxpayer.

The revised catalogue was due to be published on February 28.

But it is understood that Mr Hancock has taken a personal interest in the process of deciding on exemptions, leading to a delay.

A spokesperson for both the Skills Funding Agency (SFA) and the Department for Business, Innovation and Skills (BIS) said: “We want to be certain that there is a robust working process in place before we share the outcomes with the sector.
“This is running within acceptable timeframes and we will communicate the progress of the exception submissions directly with the awarding organisations concerned shortly.

“We are currently running an independent exceptions process for awarding organisations to submit qualifications for funding for 2014/15 and BIS is keen to have an oversight of the process to ensure that niche high value qualifications are not dismissed.”

The minister’s hands-on approach has meant the release date for the revised catalogue has been put back to April 2. It has led to frustration within the sector.

A spokesperson for NCFE (formerly the Northern Council for Further Education) said: “We had heard that the updated 2014/15 catalogue might not be out until April 2 and were frustrated by news of this delay.

“Ultimately we have a commitment to our customers and their learners and with this in mind, we are eager to keep them informed about which qualifications have been approved for funding for the 2014/15 session.

“However, there have now been signs that the SFA is getting information out ahead of the revised timescale and we welcome this news.

“It helps us to know this information in a timely manner so that we can in turn, help our customers plan ahead and gain access to fundable qualifications which promote achievement, success and progression.”

A spokesperson for City & Guilds said: “We did not submit any exceptions on February 6.

“Nevertheless we are aware of the delays and while it is not an ideal situation, we understand this is part of the broader reviews going on around funding for vocational qualifications.

“In the meantime, City & Guilds will continue to work with all relevant parties involved.”

It comes after the SFA published documents containing its funding rules, formula and rates, which did not show any major changes since last year.

Stewart Segal (pictured), from the Association of Employment and Learning Providers said: “Funding rates have not increased for some years and providers who are faced with on-going cost inflation have had to deliver more for less.
“With the budget reductions for the next two years, this is a particularly challenging environment.

“Providers need the maximum flexibility in terms of the way budgets are managed so that they can continue to respond to employer and learner needs. As budgets have reduced we have also seen more and more restrictions on budgets and programmes. This will inevitably affect all providers and restrict the engagement of some learners and employers.”

The Skills Funding Agency is considering whether a London college should face financial investigation after a shock £4.1m black hole emerged in its books.

Ealing, Hammersmith and West London College confirmed it was involved in “constructive discussions” with the agency after auditors discovered an “unexpected deficit”. A leaked internal report allegedly puts forward the possibility “data falsification” and called for a fraud probe.

An agency spokesperson told FE Week it was working with the college and said it had not ruled out a further investigation.

He said: “We take any allegations of financial irregularity extremely seriously and will act in cases where there is sufficient evidence to do so. In this particular case, we are working with the college to determine if any further investigation is needed.”

The 25,000-learner college, which has been allocated £21.4m from the agency for 2014/15, including more than £18m from the adult skills budget, said the deficit had been identified last year.

A college spokesperson said: “The college suffered an unexpected deficit in its finances in the last financial year, ending July 31, 2013. The audited accounts, as audited by Baker Tilly, the college’s external auditors, show an operating deficit of £4.1m.

“Consequently, the governors commissioned the college’s internal auditors Grant Thornton to undertake an extensive review to understand how this had come about.

“The outcome of this initial review led on to a review of management information systems and processes in the college.
“Changes to financial systems and processes have been made as a result of this review and are continuing to be made.”

The college has ruled out wrong-doing in connection with the deficit, after a draft version of a report by Grant Thornton was apparently leaked to London’s Evening Standard newspaper. It said: “It is critical that concerns around falsification of data and the existence of an additional bank account (that was not known to senior team) are subject to urgent fraud investigation.

“While minor discrepancies could be attributed to human error, and we have not been able to obtain conclusive proof, the number of changes and their magnitude…suggest the possibility of data falsification.”
But the college has claimed the final version of report from Grant Thornton, handed to the college in September last year, ruled out any wrongdoing.

A spokesperson said: “The [Evening Standard] story refers to a leaked document which is a draft internal audit report by Grant Thornton from last summer but not the final audit report which was completed in September 2013. That final report highlighted the auditors ‘had not identified any conclusive evidence of fraud’.

“Led by interim principal Dr Elaine McMahon CBE, the college is working on a viable financial action plan and continues to have constructive discussions with the Skills Funding Agency.”

The college said it would not release the final report, claiming it was a “confidential, internal audit”.

Further evidence has emerged that the government already favours GCSEs, with Skills Minister Matthew Hancock having described Functional Skills as “stepping stone” qualifications.

Functional Skills are set to be dropped as the accompanying qualification for apprenticeships in favour of tougher new maths and English GCSEs from 2017 — but they are still supposed to remain equivalent to GSCEs until then.

However, a parliamentary written response from Mr Hancock referred to Functional Skills as “stepping stones” to GCSEs.
He said: “Students [aged 16 or over] whose initial assessment shows they are not ready to re-take GCSEs may take one of the interim qualifications as a stepping stone to GCSE, which can include Functional Skills and free-standing mathematics qualifications recognised by the funding condition.”

Sue Southwood (pictured), programme manager for the National Institute of Adult Continuing Education, said: “While GCSE is seen as the level two ‘gold standard’ by the government, Functional Skills may be a more appropriate level two qualification for many adults to achieve.

“For instance, while GCSE English requires an appreciation of literature and poetry, some adults will want a syllabus that helps them to, for instance, write emails or read reports.

“It’s terribly important these qualifications retain their value so adults who put so much effort in to achieving them are not faced with still not being good enough.”

Mr Hancock’s comments came just weeks after the DfE said it would not accept Functional Skills as equal to GCSEs for early years’ educator training courses.

The DfE claimed its rejection of Functional Skills would “raise the overall quality of literacy and numeracy skills of those entering the workforce”.

Stewart Segal, chief executive of the Association of Employment and Learning Providers, said: “We have to retain Functional Skills. The DfE’s latest GCSE entry requirements for early years’ educators are a major concern in terms of acting as an unnecessary barrier to young people entering the profession. It could be the thin edge of the wedge and we have already raised our concerns with government.

“Employers consistently tell us that they like Functional Skills because it develops skills that can be applied in the workplace.”

But Joy Mercer, director of policy for the Association of Colleges, said: “We remain concerned that GCSE is seen as a standard for competence in English and maths when Functional Skills does the same.

“Colleges are clear what their obligations are within study programmes. Students should be aiming for a GCSE but must be able to achieve a qualification that meets their needs and their future job ambitions.”