The government has announced plans to make colleges and charities exempt from paying VAT when they share services.

It has been heralded as “unusual good news” for colleges and could lead to innovative savings through cross-college – or even cross-sector – partnerships.

In the Autumn Statement, which was published by the Treasury last week, it states: “Following consultation after Budget 2011, the Government will introduce a VAT exemption for services shared between VAT exempt bodies, including charities and universities.”

The Association of Colleges (AoC) say they “welcome the fact that action is being taken” in response to the consultation, which was held by HM Revenue & Customs (HMRC) in June.

“Among the tax changes scheduled for 2012 is a plan to change the way in which VAT is levied on universities, colleges and charities when they share services,” the AoC response to the paper states.

“Our experience in supporting shared service projects in colleges suggests that there will be long-term savings to match the loss of VAT income which results from these plans.”

Colleges are exempt from paying VAT when they deliver education and training.

However, they currently pay tax on some supplies and likewise have to charge students VAT for products which are tax eligible, such as the sales of coffee, and food to non-students

Bob Deed, a financial director and consultant, said: “The VAT exception for shared services is unusual good news for colleges. It removes an obstacle to joint working.

“However, the devil will be in the detailed requirements of the Revenue and Custom.

“Moreover, many college managers are wary of sharing anything with anybody in an increasingly competitive environment.”

Mr Deed added: “The Policy Costings issued alongside the Autumn Statement recognise that the probable take-up is uncertain and likely to be low for both colleges and charities.

“Nevertheless, the VAT exception may allow some brave colleges to innovate and generate some savings by working with other colleges or even organisations outside the sector such as charities, higher education institutions and local authorities.”

Colleges currently pay an estimated £210 million in irrecoverable VAT each year.

An AoC spokesperson said: “Colleges are able to reclaim some of the VAT which they pay to the extent that they have non-exempt business activity, but this is not normally more than five per cent or so.

“Some agricultural colleges have a high proportion of VAT-able business and might claim more like 20 per cent of their lost VAT.”

The HM Revenue & Customs consultation, titled ‘VAT: Cost Sharing Exemption’, said that by removing a VAT charge colleges would benefit from efficiency savings.

The report states: “It is designed for use by businesses and organisations unable to recover all of the VAT they incur on their purchases, such as charities, universities and further education colleges.”

It later adds that to be compliant with European legislation, colleges would need to become members of an independent ‘cost sharing group (CSG)’, which would be put in charge of supplying VAT exempt services.

The AoC said in response to the consultation that the exemption could provide the sector with annual savings of between £15 and £30 million.

“We would expect that many colleges would consider forming or joining a CSG; more than 100 colleges (from a total of 347) are already involved in Shared Services Projects,” the response states.

“Colleges inform us that they would consider transferring the following into a CSG: payroll; IT maintenance; data storage; finance functions; management information and systems; health and safety advice and guidance; procurement; facilities management and catering.”

A charity forced into administration by a crippling pension liability and decreasing income has been forced to cut jobs.

Global financial experts PricewaterhouseCoopers (PwC) have revealed to FE Week that 23 jobs have been lost from Learning and Skills Network (LSN).

Ian Oakley-Smith, David Hurst and Karen Dukes, of PwC, were last month appointed as the joint administrators of LSN, which provides educational expertise for businesses and agencies in the public and private sector across the UK and abroad.

Although it was business as usual for LSN’s staff, the axe has since fallen on 23 jobs, all of which were based at LSN’s head office in Holborn, London.

Prior to the losses, LSN employed 117 staff over five locations – with 48 in London. A further 14 work at offices in Oxford, 16 in Olney, 26 in Cambridge and 13 in Belfast.

A statement read: “PwC can confirm having reviewed the ongoing requirements of the business, regrettably there have been 23 job losses.

“A skeleton staff is being retained in Holborn to help the administrators with queries from interested parties and as support for the rest of the business.

“The administrators are working closely with employees affected by this decision to ensure they receive the support they need during this difficult time to assist with their claims for redundancy and other compensatory payments.

“All other staff remaining at LSN have been briefed with the administrators working closely with them over the coming weeks as the business continues to operate as normal.”

The charity’s demise has been partly placed on their turnover of around £13 million for the 2010/11 financial year – which is a substantially smaller figure compared to the £27.5 million during the previous tax year and £42.6 million in 2008/09.

Also, while PwC say LSN have been experiencing “no debt”, the charity has a “contingent pension liability” of around £8 million, which also added to its downfall.

In other words, if every member of staff retired and drew on their pension, LSN would be left with a multi-million pound deficit.

It is for those reasons that PwC say the board of trustees at LSN came to the difficult realisation that they could not carry on any further.

However, the process of selling off the different “business streams” of LSN is continuing.

LSN is made up of separate businesses: Technology for Learning, National Extension College (NEC), Education, Skills and Research, Development Services, Learning and Skills Development Agency (Northern Ireland) and Learning and Skills Network.

A PwC statement added: “The administrators have received a number of enquiries from interested parties and are working hard with these parties to help them assess the financial position of the business streams they are interested in so that final offers can be received.”

They have been in the pipeline for several months, but last week the government confirmed a raft of new further education (FE) reforms.

Key policies including the introduction of FE loans for the over 24s from 2013 and more freedoms for colleges have been announced following the release of the sector-wide consultation on FE reforms; New Challenges, New Chances.

The report, issued by the Department for Business, Innovation and Skills (BIS), highlights the overall FE and skills investment in 2012-13 will be £3.8 billion.

Of this, say BIS, £3.6 billion will be routed through the Skills Funding Agency (SFA), before falling to £3.4 billion by 2013-14 and £3.3 billion by 2014-15.

It will be supplemented by £129 million and £398 million respectively provided through FE loans for adult learners aged 24 and over on Level 3 or higher courses.

Other measures see businesses “helping to develop courses that best meet their needs for growth”, while the sector will also be actively supported by promoting excellence in teaching and developing a package of education products aimed at global opportunities.

Business Secretary Vince Cable said: “Further education plays a critical role in extending opportunity, forging social cohesion and fostering enterprise.

“But we need to place more trust in the sector’s ability to understand and meet local communities skills needs.

“By giving more freedom to colleges to set courses based on local skills needs, and increasing businesses’ role in designing qualifications, we will empower students, colleges and employers to drive economic recovery.”

Colleges will, as expected and as set out in the recently approved Education Bill 2011, be given greater freedoms from central government control, allowing them to set courses based on local employer needs.

This includes streamlining, reducing bureaucracy and removing regulation – such as removing central government targets, bringing together various funding streams and giving colleges greater financial freedom over borrowing and investment.

Students will also be “empowered” to make informed choices, by pulling together comparative data on training providers and the launch of the new National Careers Service in April 2012, which has previously come under criticism from campaigners, who say it does not provide enough face-to-face guidance for youngsters.

At the same time, BIS say they we will take swift action to “failing provision”, providing intensive support and, if necessary, intervening to ensure “alternative and innovative delivery approaches are secured” for the future.

Skills minister John Hayes added: “These measures will place students at the heart of the FE system, free colleges to meet local skills needs and give the sector the financial certainty it has so long desired.

“By giving students the power to make informed choices over which course is best for them and ensuring funds are prioritised, towards those most in need, we will build the skilled workforce businesses need to thrive and communities need to prosper.”

The Skills for Life survey headline findings also published by BIS highlighted one in ten adults – aged 16 to 65 – lack basics in both numeracy and literacy skills.

To address this, English and maths training will be boosted, including apprenticeships providers to offer training to GCSE standard.

Skills Funding Agency could take funding away from providers who try to poach employers

Providers could miss out on vital apprenticeship funding if they are found to be poaching employers.

The hard-line has been taken by the Skills Funding Agency (SFA) in the wake of a number of complaints from providers, who have already set up agreements with employers, in recent months.

Although the number of complaints has not been revealed, the National Apprenticeship Service (NAS) say the figure is on the rise.

The SFA, in Update 84, said: “We have recently received complaints from some providers that employers, for whom they have an agreement with to deliver training, have been approached by other training organisations in an attempt to persuade the employer to transfer its delivery to them.

“Where it appears that this has occurred we reserve the right not to fund the delivery.”

A spokesperson for the NAS added: “The NAS has been made aware of a rise in employer poaching incidents over the last few months.

“We regularly remind providers that this is not an acceptable practice and we are committed to reviewing any incidents that they are made aware of.”

Chris Lang, vice principal finance and resources at Cambridge Regional College, described to FE Week two different methods of poaching that his institute had experienced.

The first involves providers who are aware of an agreement, but they approach the business regardless, with offers of free training.

Often, he said, this can come from a college promoting its own success story.

New providers then phone the business, which in turn call the original provider and say they have been offered free training.

While some businesses will call the college to ask for a discount, others will simply call to say they have changed providers.

Mr Lang said: “You can’t even go out and promote your own success. It’s like ambulance chasing.”

He added: “We’ve been charging fees for about four years. They range in price and we publish them, so other colleges and providers must know what our fees are. We are under constant pressure to have a no fee policy to market ourselves competitively.”

The second has seen providers contacting employers without the knowledge that they have an agreement in place. It is something which Mr Lang says has been occurring for “three to four” years, but it has so far gone without reproach.

He added: “One view is they’re not meeting their contract so they go out and offer low or no fee because they are desperate to meet it.

“We mail shot people but we don’t say we are doing it free and undercut people. If they say they work with somebody, we log it and won’t call them again. If they want to change, they can contact us. I don’t have a problem with free market and businesses are free to choose. But they aren’t choosing on a level playing field.”

Teresa Frith, the senior skills policy manager at the Association of Colleges, said competition should be on quality and not price. She said: “I would hope that it’s really about the quality of the provision and not the price of the provision. What I don’t want to see is the learner disadvantaged.”

She also said businesses being approached should consider what they are getting. “Are they getting like for like? Are they getting less?” she said.

Meanwhile, the Association of Employment and Learning Providers (AELP) has stressed its support for the action. Graham Hoyle, AELP chief executive, said: “We support the approach that the SFA is taking.”

More than half a dozen further education (FE) colleges will benefit from government funding for 19,000 new higher apprenticeships.

The successful bids, unveiled by Business Secretary Vince Cable in Cornwall last week, will be funded by £18.7 million of the Higher Apprenticeship Fund (HAF), worth £25 million in total.

They will be in sectors such as advanced engineering, construction and financial services.

Business Secretary Vince Cable said: “Investing in skills is central to our drive to boost business and productivity and make the UK more competitive.

“By radically expanding the number of degree level apprenticeships for young people, we will put practical learning on a level footing with academic study.

“This is an essential step that will help rebalance our economy and build a society in which opportunity and reward are fairly and productively distributed.”

The government will invest £17 million in nineteen partnerships between training providers and employers, as well as an additional £1.7 million being invested into two new ‘Trailblazer’ projects in industries such as science, manufacturing and engineering.

Among the successful bidders were eight FE institutions; City of Bristol College, Babington Business College, Chesterfield College, Hull College, Leeds College of Building, Newcastle College Group, North West Kent College and the Peter Jones Academy for Enterprise.

City of Bristol College will be offering 600 higher apprenticeships from level 4, equivalent to the first year of a degree course, up to level 6, equivalent to a full honours degree, in partnership with local firms such as Airbus and Bristol Media.

The Peter Jones Academy for Enterprise will create 1,020 level 5 apprenticeships, enabling learners at level 3 to enter senior business development roles at employers such as Orange, T-Mobile and Jaguar Land Rover.

Newcastle College Group (NCG) will be developing 120 high level apprenticeships in energy engineering with specialist companies such as Bell Valves and Shepherd Offshore.

Skills Minister John Hayes said: “By reviving apprenticeships the Government has started to build a world class skills system to rival our country’s great reputation for academic excellence.

“We’ve driven up quality across the board, more than doubled the number of new advanced apprenticeships, created new routes into higher levels of practical learning and given employers more control of how the training budget is spent.

“We’re now targeting resources even more closely on the skills, firms and sectors that will lead economic recovery.”

A second round of bids will be opened in early 2012 and focus on further areas needed to support economic growth.

(Read the full press release here)

What colleges are saying:

Derek Whitehead, Deputy Principal at Leeds College of Building, said: “The College is honoured to be approved as a lead partner on this exciting Higher Apprenticeship initiative. It will help support both employers and learners within the construction industry to access work based learning at a higher level and will be a viable alternative to full-time university study. Partners and employers nationally are extremely supportive of this project.”

Debra Gray, Assistant Principal for Curriculum Development and Delivery at Chesterfield College, said:“We’re absolutely delighted to be at the forefront of Higher Apprenticeships. We have a long history of Apprenticeships success, particularly in Emergency Care, and the Level 4 Higher Apprenticeship will build on this established model. The higher level qualification will match industry standards and provides learners with valuable experience via our strong links with both private and NHS ambulance services. The new qualification will leave learners ready for active work in Emergency Care and we’re pleased to offer this new practical, high level skills route into the industry.”

Dr Elaine McMahon CBE, Chief Executive and Principal of Hull College, said: “Higher Apprenticeships have much to offer. They will provide exciting new employment opportunities, progression options and higher earning potential for apprentices, while at the same time supporting employers to develop higher skills within their workforce and increase productivity and innovation that will boost the economy. The Higher Apprenticeship Fund programme will play a key role in restoring economic growth. Strong education and business partnerships will be a key feature of Higher Apprenticeships – this is exemplified in our approach and the decision to launch the first new programmes from TNT’s Headquarters.”

Robin Ghurbhurun, Deputy Principal at Newcastle College, said: “We are delighted to have been successful in our bid to develop a Higher Level Apprenticeship in Energy Engineering. This news cements our position as one of the leading providers of apprenticeships in the north east and is testament to the strong commitment that employers have for higher level skills. Through the development of this qualification we will be able to address skills shortages in the region and support the growth of the north east as a hub for the energy sector.”

Chancellor George Osborne confirmed a number of policies designed to put tackle youth unemployment during his Autumn Statement yesterday.

Mr Osborne emphasised a Youth Contract worth over £940 million that will offer young people on Jobseekers Allowance work experience, apprenticeships and jobs.

“Private sector work experience for every young person unemployed for three months,” the Chancellor said.

“After nine months, we will help pay for a job or an apprenticeship in a private business. Some 200,000 people will be helped in this way.”

The Youth Contract reinforces the government’s committment to funding wage incentives of £2,275 for 160,000 young people, as well as an additional 40,000 incentive payments to encourage small firms to take on a young apprentice.

The Autumn Statement, published as a report by the Treasury, states there will also be a new programme, funded by £50 million each year, to support the most disadvantaged 16 to 17 year-olds back into education, an apprenticeship, or a job with training.

The annual report outlines an additional £4.5 million investment over the next two years to “support work experience as part of post-16 learning”.

The Autumn Statement also confirms the £250 million vocational training programme, designed to entice businesses into investing in skills and apprenticeships.

The scheme will be piloted early next year and give eligible employers direct access to public funding, completely bypassing colleges and traditional training providers.

Other plans included the government’s intention to create an improved careers information portal in April 2012 as part of the National Careers Service.

The report says the public will be able to access “up to date, employer sourced information on occupations, progression routes, qualifications and wages.”

The statement also includes a reform of basic numeracy and literacy provision for adults. A new funding method will be implemented focusing on the skills a learner has gained, rather than just the qualification they’ve received.

Mr Osborne also revealed tax changes scheduled for 2012, including a change the way in VAT is levied on universities, colleges and charities when they share services.

There will also be an additional £1.2 billion in capital funding for the Department for Education, with £600 million earmarked for 100 new free schools. The Chancellor said he hopes to see new Maths Free Schools for 16 to 18-year-olds.

For more, see next week’s FE Week.

• What do you think? Let FE Week know your views on the Autumn Statement by commenting below or e-mailing your thoughts to news@feweek.co.uk