Incorporation may have been a challenge too far for many, but it has left colleges free to meet the needs of their local areas, says Matthew Hancock

I must admit that Incorporation was an event that rather passed me by in 1993 — I was rather more occupied preparing to take GCSEs. It was, nevertheless, an event that profoundly influenced my life because I went on to take an A-level at the newly-incorporated West Cheshire College and, in due course, to take on my current role as minister.

At the time, many people in the sector and in Parliament saw the 1992 Further and Higher Education Act as an intensely ideological, centralising measure, as it took colleges and polytechnics — and the money that went with them — out of local education authority (LEA) control and made principals accountable.

So, too, the remit of the new Further Education Funding Council that made clear that colleges’ main purpose was to provide courses leading to a list of vocational qualifications specified by the Secretary of State.

Many feared this would be the death knell for both the study of humanities in FE and informal adult education.

Yet the incorporation of colleges as free-standing legal entities has led to professionalisation of their leadership.

For a very few colleges, Incorporation was a challenge too far, leading to risky business plans, failed enterprises and poor financial control.

With freedom comes greater need for colleges to demonstrate they are working in the best interests of their learners”

The knee-jerk reaction of the last government to this handful of cases was to introduce new controls across the board on governance and funding, to tie leaders up in knots, to restrict both their freedom to act and the incentives that come from being held robustly to account.

Our changes since 2010 have freed colleges from this mass of restrictions so that they can once again take charge of their own destinies.

Free colleges are able to develop a wider and healthier relationship with local partners — including communities, local enterprise partnerships and, crucially, directly with employers — than they had in the days of LEA control. They can develop to meet the needs of their local areas.

With freedom comes greater need for colleges to demonstrate they are working in the best interests of their learners, employers and broader communities.

Accountability matters, so more data on student outcomes is necessary. And strengthened governance matters too, to hold principals’ feet to the fire on behalf of students.

The government’s efforts to secure greater transparency and accountability continue, but to an increasing extent with colleges as willing partners.

That is the best way to preserve colleges’ freedom — and to help ensure everyone in the UK is given the chance to reach their potential.

Skills Minister Matthew Hancock

Incorporation in 1993 gave colleges the welcome ability to respond quickly and flexibly to changing circumstances.

Colleges became legally free to adjust their staffing, to reshape delivery methods and remodel their estates as needed, without unnecessary restraint from local bureaucracy.

By itself however, this operational autonomy would have been insufficient to guarantee responsiveness to the demands of students.

The single most important step in ensuring such a focus was the introduction of a standard national funding system that reflected student numbers and necessary differences in the cost of provision.

In effect, the funding system introduced by the Further Education Funding Council and carried on by the Learning and Skills Council, created the level playing field necessary for the operation of a free and open market.

It contained incentives for efficiency, but in general did not seek to distort the market in one direction or another, reflecting variations in the cost of teaching different subjects, working in different areas and supporting different types of students.

It is important to keep this simple point in mind because over the past 20 years there has been a constant temptation to use the funding system in a more manipulative way, usually with damaging results.

What is needed going forward is more such fine-tuning and less wholesale redesign”

The competition between institutions introduced by a demand-led funding model has been generally healthy — it has encouraged innovation and helped high quality provision to expand.

However, perverse outcomes are certain to follow where funding levers are pulled too hard and too sharply, or there are crude attempts to steer provision according to prevailing political fashion, as was the case in the franchising debacle of the mid-1990s, in programmes that simply assessed existing competence under Train to Gain or in the recruitment of longstanding employees to adult apprenticeships.

It is good that in their recent reports both Professor Alison Wolf and Sir Michael Wilshaw spoke out about the dangers posed by ill-thought financial incentives.

As well as supporting a well-functioning market, the FE funding model has had other successes.

The convergence process removed unjustified differences between those institutions that had always been generously funded and those that had been starved of cash.

Interestingly, it has taken nearly 20 years more for similar unjustified differences between college and sixth-form funding to be properly addressed.

FE funding incorporated the disadvantage uplift over a decade before politicians started to talk about a pupil premium in schools, and the mechanism for additional learning support (ALS) was key to driving up the extent and quality of provision for learners with learning difficulties or disabilities.

The sector has learned from the weaknesses of both models.

The lack of evidence on how the disadvantage uplift was spent makes it hard to assess its impact, while the excessive requirements for accountability around ALS led ultimately to wholesale gaming. The new arrangements seek to strike a better balance.

What is needed going forward is more such fine-tuning and less wholesale redesign.

Every three or four years government seeks to introduce fundamental reform, always described as simplification and usually also as making the system more responsive — and on most occasions neither description has been true.

Currently, two different departments are developing increasingly divergent models for young people and adults — a move that will certainly complicate planning and increase overheads — and at the same time there are suggestions that funding for adult skills should go directly to employers, while others argue that it should go into a single funding pot administered by local enterprise partnerships.

Now is a good time to remember the very real benefits brought about by a single national funding methodology and the damage done to learners when we have got it wrong.

Lynne Sedgmore is executive director of the 157 Group

Julian Gravatt remembers the first week of Incorporation. The reforms may be a distant memory, but they still pack a punch to this day

For someone like me, who joined a college in 1992 to help it with self-government, Incorporation was a big deal. All the staff at Lewisham College had a letter to tell them they had a new employer.

Ruth Silver, then principal, held an event for local stakeholders to persuade them the college was on the turn.

Meanwhile, in the finance office, we switched off the council’s computer system.

The college started life with no cash, but a week later a cheque for £1.8m arrived in an envelope from the Further Education Funding Council.

If it hadn’t come, we’d have had to delay the payroll beyond Easter . . . but all’s well that ends well.

Within a year or so, we had survived the bankruptcy of our training and enterprise council, secured an excellent inspection grade and were negotiating a £10m loan to fund a new building.

Twenty years on, Incorporation is a distant memory, but the reforms it brought still have an impact.

Incorporation was a collective experience for colleges that introduced a degree of standardisation to a diverse sector.

If [the cheque] hadn’t come, we’d have had to delay the payroll beyond Easter”

A small and ambitious funding council introduced far-reaching changes that are still with us today: national prices and rules, an emphasis on qualifications, a comprehensive data collection and a process for merging institutions.

In the years that followed, standardisation has allowed other sector organisations to operate and has given the English college sector a strength it might otherwise lack.

Incorporation gave colleges their freedom, but funding realities forced them to make quick changes. After years of relative neglect, they found themselves in a relentless annual cycle of policy and budget reform. Although it is easy to count the costs and the losses, the sector has become more flexible and able to manage change.

Colleges have successfully tackled adult basic skills, worked with employers on apprenticeships and helped millions of young people move from school to work.

One rarely noticed the legacy of Incorporation was charitable status for colleges. The Major government boldly privatised the railways, but when it came to further education it made a large gift to charity.

The 1993 settlement ensured colleges remained non-profit making and gave their governing bodies long-term duties. Competition has forced them to be business-like but they avoided the follies of the UK’s millennial debt binge and retained a local presence in places poorly served by private companies.

The past five years in the UK have been so extraordinary it’s impossible to predict the next 20. If you work in a college, you face a tough present and an uncertain future. But I am confident the progress and experience of the recent past mean that we’re as well-placed as anyone for the next steps.

Julian Gravatt, assistant chief executive Association of Colleges

What did Incorporation do for sixth-form colleges? Well, says David Igoe, few principals and governing bodies would choose to go back to local authority control

In 1992, sixth-form colleges came under schools regulations and were funded and administered through the local authority. Incorporation in 1993 came, therefore, as both a surprise and a shock, not least to find ourselves thrust into the new world of FE, jostling and competing with much larger general FE colleges and their tertiary cousins.

We liked the sound of the freedom and autonomy that came with Incorporation, with new opportunities to expand into the adult market, the ability to borrow and control capital expenditure and manage our own estates. We were less keen on the 5 per cent annual efficiency requirement in the early years, coupled with convergence to the FE mean level of funding. This was harsh for many sixth-form colleges that did not have the economies of scale afforded to general FE and financial collapse reduced our number from 126 at Incorporation to 100 by 2000, with most lost to merger with larger, general FE colleges.

The average sixth-form college had around 800 students in 1993; today it has 1,650 and rising”

Despite the setbacks, most sixth-form colleges prospered and grew through the 1990s. Cutbacks did not affect quality; most colleges ‘resolved’ their financial position by increasing class size and rationalising senior management teams. Paradoxically, performance outcomes rose in inverse proportion to increases in class size that by 2000 were an average of 19 compared with 11 at Incorporation. The greatest change was in size of institution. The average sixth-form college had around 800 students in 1993; today it
has 1,650 and rising.

But sixth-form colleges have never felt entirely at home in the FE sector. This was recognised by Andrew Foster who singled us out in his influential 2005 report into the future of FE. He recommended we be recognised for outstanding quality and protected from further merger. This suggestion found some substance in the Apprenticeships, Skills, Children and Learning Act of 2009 that created a new ‘designated’ legal entity for sixth-form colleges. It also placed them under the stewardship of the Department for Education — unlike the rest of FE, which remained with the Department of Business, Innovation and Skills.

So what did Incorporation do for us? The 94 remaining sixth-form colleges have emerged as a strong, confident sector with an impressive track record of performance and operational management. We still have financial worries and have been hit hard in the current round of cuts and efficiency requirements; but we’ve been through this before.

Incorporation gives us the means to manage our own destiny, a prize we would not want to give up. Few sixth-form college principals and governing bodies would choose to go back to local authority control. We are the true pathfinders for a model of education based on self-managing, autonomous institutions that is now being promoted as the model for all progressive institutions — they happen to be called academies and free schools.

David Igoe, chief executive, Sixth Form Colleges Association

The state-of-the-art Gordon Banks Sports Centre helped win Newcastle-under-Lyme College (NULC) the West Midlands Sports College of the Year award while its new music technology centre has also won plaudits nationally.

The college building strategy is credited with helping more than double the number of 16 to 19-year-old students, from 1,500 to 3,700 (3,300 FTE), in a decade.

Karen Dobson, NULC principal, now has her eyes set on a nearby redundant fire station in the latest phase of a carefully thought-out expansion programme to meet a prediction of even further growth in student numbers.

For someone who comes over as so visionary, however, she is surprisingly cautious when talking estates strategy.

“Be careful what you aim for,” she says.

“If all the lessons since Incorporation have taught us anything, it is to plan for where you ultimately want to be rather than what’s in the current funding pot.”

Four things favour her latest building proposal — healthy financial balances, new learner demands, the capacity to raise the necessary cash privately and confidence that, if necessary, she could make a viable bid under the government’s £270m capital money for FE announced in the Chancellor’s 2012 Autumn Statement.

But Dobson reckons the stop-go strategies, shifts of government policy and inducements to spend regardless have not served the sector as well as they might.

With hindsight, NULC played its cards right, she says, concentrating on its strengths as a substantially 16 to 19 tertiary college with some adult and community learning — £18m versus £4m a year.

“In the late 1990s we built a new cheap and cheerful building for around £2m and shifted our A-level provision there from wooden potable classrooms. It was a bright building and nothing special, but it highlighted how poor the rest of the estate was,” explains Dobson.

And here, she points to the second key lesson since Incorporation.

“Take your staff with you — consult them at every stage,” she says, warning not to get carried away with an architect’s grand plans and in doing so forgetting the people who work and learn in the new environment.

“Staff were involved in considering everything — what things were given space, facilities, size and shape, things like that.

“We tried to give them what they wanted and needed. As a result, because people were given clear explanations, we don’t get moans and groans if there’s disappointment.

“A lot of work was done to make sure the staff and managers were aware of the limitations and they knew why they could not get everything. Our architects were great and had lots of meetings with the curriculum teams.”

The new building was done and dusted by 2008 despite the capital funding fiasco.

But Dobson was appalled to see other colleges “left on a precipice” with delayed maintenances and knocked-down buildings.

“If our finance manger handled it like that we would have been out of business years ago,” she says.

“You would hope a government would have an overall pot size clearly in mind and stick to it” — a third lesson for principals and estates managers.

Will the £270m meet current national building needs?

“There is not enough money, but it might start the ball rolling and spur others on,” she says, bringing her back to the central point about careful planning.

“New freedoms are helping us to go for private funding.

“The problem is there is so much uncertainty — new funding means the government wants us to be more for less. There is the loans issue at 24-plus. Are colleges going to gamble on such growth materialising?

“If you are not financially viable, it’s not sensible to take on more borrowing. The banks are tight with money and colleges are no longer seen as safe customers as they previously were with the economic situation.”

But this is really not so different from the position 20 years ago.

“Now and again people who have not been able to achieve things say you are lucky,” concludes Dobson.

“Yes, true, but even without the lucky bit, it took a hell of a lot of work and was not done overnight.”