Hadlow College scandal and government response is an FE watershed moment

FE Week’s story of Hadlow College being the first to be taken through a new education insolvency regime is a massive watershed moment.

It is the culmination of two years of policy and legislative work that civil servants are keen to put to the test.

The Treasury had become fed-up with the Department for Education quietly bailing out colleges with multi-million pound hands-outs known as exceptional financial support.

So where take-overs or mergers couldn’t solve the problem, it was felt new legislation was needed to protect learners whilst allowing the institution to go into administration.

But letting a college go bust means potentially leaving lenders like Barclays Bank out of pocket, so the Treasury set-aside £700 million fund to help colleges pay off their DfE and bank debts early.

Just over half of the restructuring fund, as it was named, was used before it stopped taking applications last September.

And in January the new college insolvency regime became law, leaving Hadlow College to face being the first test case.

The DfE appears to have not entirely ended hand-outs, with £40 million already committed “where it was essential that funding was provided”.

But with financial irregularities and investigations into the scandal swirling around Hadlow Group, there was perhaps an inevitability that insolvency would follow.

So the government is unlikely to take the blame and the Association of Colleges has been quick to blame previous management and governance, rather than funding constraints.

And in terms of personal gain, it is worth reflecting on the fact that by the time the financial irregularities had been exposed the salaries of both the deputy principal and the principal had more than doubled to over £200,000 each.

It seems Hadlow College has been picked for putting through the insolvency regime, as opposed to West Kent and Ashford, because it is in the most financial trouble and being a specialist agricultural college with so many subsidiaries it is presumably the most difficult part of the group to find new owners.

As the local MP and senior Conservative, Tom Tugendhat, is right to say it would be a huge loss to the local community were the college to be lost, but sadly this could well be the result.

The wider question is whether this test case will lead to college insolvencies becoming anything more frequent than what the skills minister predicted would be “rare”.

If there is a positive to be taken from this tragedy it is that it will be a massive wake-up call to governors concerning their responsibility in stewarding such high value assets.

MOVERS AND SHAKERS: EDITION 281

Your weekly guide to who’s new and who’s leaving.

Carl Lygo, Vice chancellor and CEO, Arden University

Start date: April 2019

Previous job: Chairman of the governing body, UCFB

Interesting fact: In 2018, he was honoured with the ‘outstanding contribution by an individual’ title at the Education Investor Awards.

Pete McCabe, Head of Edge Future Learning, Edge Foundation 

Start date: May 2019.

Previous job: Senior head of outreach, assessments and outcomes, The Prince’s Trust

Interesting fact: He once cooked alongside two-Michelin Star chef Michel Roux Jnr.

Keith Shiels, Principal, Lowestoft Sixth Form College

Start date: May 2019

Previous job: Vice principal, Lowestoft Sixth Form College

Interesting fact: He is a keen cricketer in his spare time.

David Oglethorpe, Pro-vice-chancellor and dean of Cranfield School of Management, Cranfield University
Start date: September 2019

Previous job: Dean of the management school and professor of environmental sustainability, University of Sheffield

Interesting fact: In his rugby days, he propped against three British Lions

Mystery surrounds second delay to Havering College merger plans

A cash-strapped college’s future has been thrown into doubt after a merger it was depending on to sort out its finances was delayed for a second time in mysterious circumstances.

A formal merger between Havering College of Further and Higher Education, Havering Sixth Form College and New City College – which are currently part joined in a federation – was supposed to be concluded last month, after an initial delay in January this year.

But this hasn’t come to fruition and all three colleges have remained tight-lipped, saying no more than that the plans have been postponed.

Havering College was hit with a financial notice to improve in June last year, after it reported a £3 million loss in 2016/17. The deficit increased to £3.2 million one year later.

The college was heavily reliant on this merger to go ahead to resolve its financial struggles, and had requested an overdraft of £1 million from Barclays Bank and exceptional financial support of £2.25 million from the ESFA as “cashflow risk-mitigation measures”. It is not known whether these requests have been granted.

In its 2017-18 accounts, the college warned that if these requests were not approved and the planned merger failed to proceed to completion, “there would be a material uncertainty regarding going concern”.

In order for the merger to go ahead, Havering College was dependent on Barclays Bank approving a combined financial plan with an “acceptable aggregate deficit position”, according to minutes from a board meeting in February.

But Gerry McDonald, the group chief executive of New City College who also became Havering College’s interim chief executive in October following the sudden retirement of Maria Thompson, said in that meeting that Barclays Bank had indicated “they are running out of time for the combined financial plan to be considered by its credit committee in order to enable the novation of the HCFHE debt to NCC”.

This meant it was “unlikely” for the merger to take place on April 1, 2019 as had been planned.

The corporation commented in the meeting that it “seemed strange for Barclays Bank to be taking such a position considering that they have been aware of the merger timeline for a while”.

McDonald explained that the draft 2019-20 financial plan for NCC showed a deficit, and the combined effect with the projected deficits from HSFC and HCFHE “would paint a very grim picture” to the bank.

He said that if a revised combined financial plan was not acceptable to the bank’s credit committee, then “disposal of assets might be necessary”.

Havering College currently operates out of its main campus in Ardleigh Green, Essex, as well as a construction focused campus in Rainham, Essex, which received a £5.4 million funding grant from the Greater London Authority to expand in September 2017. It sold its Quarles campus site in Harold Hill, Essex, in 2017.

During an NCC board meeting in December governors questioned why the college was merging with a college in “such financial difficulty”. It was then noted that Havering College has “a stable 16-to-18 base” to generate income but has “suffered recently with poor financial management and an ill-informed property strategy”.

Havering College’s latest accounts show the college had breached a bank loan covenant for its Barclays loan agreement of £3.9 million in 2017-18.

In July, the bank wrote to the college saying that the covenant breach would be waived.

But the bank had anticipated that the loans and finance leases would be novated under existing terms to New City College upon merger.

Barclays declined to comment on whether it was still supporting Havering College following the postponement of the merger when approached by FE Week.

During the Havering College February meeting McDonald suggested the merger could be delayed once again until August this year.

Havering College declined to comment on what the merger delay means for its future.

The college is no stranger to failed mergers: it was supposed to link up with Barking and Dagenham College in August 2017, but this collapsed after Havering decided it was “no longer the best option to achieve the college’s aspirations for its students, staff and local communities”.

New City College was formed by the mergers of Tower Hamlets College and Hackney Community College in August 2016, Redbridge College in April 2017 and Epping Forest College in August 2018, becoming one of the largest groups in the country.

Providers face further wait on tender outcome as GLA wrestles with queries

Providers awaiting the outcome of the Greater London Authority’s adult education budget tender will not be told the outcome for weeks, despite the list of winners being approved by the mayor over a month ago.

The delay, which has left many providers frustrated, has been blamed on a “large number of queries” raised by applicants. 

They were bidding for a share of the adult education budget being devolved to the GLA on August 1, 2019.

The authority’s annual budget will be £306 million, of which £130 million is being procured over four years.

The GLA launched the tender in October, with a submission deadline of December 21, and received 202 bids for the total amount of £811 million.

A list of winning providers was then “endorsed” by the authority’s adult education budget (AEB) board on April 10 and feedback to bidders was meant to be released on April 23, with a standstill period commencing April 24 to May 3.

But more than a month later and with just over two months to go until the devolution handover, providers have told FE Week they have yet to be informed whether they have secured an AEB procured contract.

Explaining the delay, a spokesperson for the Mayor of London Sadiq Khan, said: “Funding decisions have been slightly delayed due to the need to process a large number of queries raised by potential providers’ applications.

“Applicants will be advised if their bid has been successful during the next few weeks.”

By contrast, providers applying in the West Midlands Combined Authority tender for AEB funding have this week been made aware of the results.

The delays to the GLA’s procurement come despite plans for the authority to topslice £3 million from the AEB every year to cover administrators’ wages, as revealed by FE Week in May last year.

The mayor was warned in September that a team of 72 administrators may not be enough to handle the fund when devolution kicks in, with procurement being a key issue.

The delay to the GLA’s tender comes just weeks after the authority’s own risk register re-graded the devolution programme from green to amber for the first time.

Papers included in the agenda for a board meeting on April 10 predicted £950,000 of implementation funding would not be enough to cover all the implementation costs up to the end of July 2019, mainly due to rising system costs of GLA OPS – the Grant Management System – which is expected to handle the majority of AEB expenditure.

At the meeting, the board endorsed spending up to £650,000 from the implementation budget and the GLA reserves to develop GLA OPS, after it had already agreed in February to increase the spend on developing systems for the AEB programme from an average of £54,000 per month to £105,000 per month.

The GLA is one of seven English mayoral areas which are taking control of their areas’ AEB this year.

Devolution expert Dr Gareth Thomas told FE Week in October that while the authorities “may be able to complete the procurement and contracting” it was less certain that providers would “be able to adapt their delivery models and put appropriate partnership arrangements in place” in time.

This, he warned, may lead to “market instability”.

‘We are restless for solutions’: Grenfell community meets the PM about ‘threat’ to local college

Campaigners battling to save a college campus that serves the community affected by the Grenfell Tower disaster have pleaded with the prime minister to intervene.

In a private meeting with Theresa May and communities secretary James Brokenshire that lasted over an hour on the evening of May 8, members of Grenfell United spoke of the “existential crisis” facing Kensington and Chelsea College.

The embattled college, which received its fifth consecutive grade three report from Ofsted earlier this year, is progressing with merger talks with Morley College – a year after plans to join up with Ealing, Hammersmith and West London College collapsed following huge local opposition and intervention from the FE Commissioner.

A failure by the government and RBKC to deliver on the future of the college will provoke further anger

KCC’s latest accounts show that it has hit a deficit of more than £10 million in the past three years which is eating into its “significant” reserves of £34.6 million.

The reserves, which are quickly shrinking, were built up partly by the controversial sale of KCC’s Wornington Road campus, sold to the local council for £25.3 million in 2016, despite local opposition.

An independent review conducted by consultancy firm Kroll later concluded that the sale was not in the interests of its local community. KCC’s new leaders subsequently branded the sale as “plainly wrong” and “shameful”.

The college is preparing to launch restructure plans, described by campaigners as “brutal”, aimed at saving £1.5 million in staff costs. This is despite the proposed merger with Morley College, whose bid “promised to protect staff contracts”, according to the Save Wornington College Campaign.

The group, which had a standalone bid for KCC turned down in March, is asking for “immediate intervention” to stop the redundancy plan and to ensure that the government “buys back the Wornington Road property from the Royal Borough of Kensington and Chelsea with a covenant for permanent educational use”.

Campaigners are hoping last week’s meeting with the prime minister and the communities secretary will quickly prove fruitful to their cause.

“The Save Wornington campaign welcomes fresh intervention from the PM and James Brokenshire but we are now restless for solutions,” a spokesperson for the campaign group said.

“So much energy and input comes from our vibrant community, they deserve answers and reparation. We won’t be shrugged off.”

She continued: “SWC, KCC staff and the local community are frustrated at having to fight continually to safeguard this vital institution. This college must be saved as reparation for Grenfell.

“The eyes of the North Kensington community are watching what happens at Wornington and a failure by the government and RBKC to deliver on the future of the college will provoke further anger. This community demands to be heard.”

Number 10 said it could not comment on last week’s meeting since it was private.

Kensington and Chelsea College’s current principal, Andy Cole, took the reins in February last year from Dr Elaine McMahon, who served as the college’s interim principal when Mark Brickley resigned with immediate effect in 2016. He was responsible for the Wornington site sale.

Brickley made the sale in the face of falling income at the college: in 2012 its income sat at £27.5 million but had fallen to just £9.25 million by 2016. However, the Kroll report found that the former principal had made the decision in a secretive manner, without consulting staff and the local community.

Naraindra Maharaj was the chair at the time. Mary Curnock Cook became chair in May 2017 but resigned in July 2018 following criticism from campaigners about her leadership. She has since been replaced by Ian Valvona.

A spokesperson for KCC said the college is “fully supportive of the proposal for the government to buy the site from RBKC under covenant for educational use” and its leaders are “lobbying together with various partners, including community organisations, to achieve a swift and positive resolution to this matter”.

He added: “Management proposals launched last week are aimed at bringing pay costs closer to the sector average whilst protecting provision at both its sites. With the exception of two small curriculum areas generating income of less than £75,000, it is proposed to retain all provision at existing income levels.”

College to axe A-level department at a time of quality and financial concerns

A college that crashed two grades from ‘outstanding’ last year is consulting on plans to close down its A-level provision – putting around 20 jobs at risk.

Highbury College, which is also in a precarious financial position partly because of an ongoing legal battle with a Nigerian state to recover a £1.4 million debt, informed staff of plans to shut its sixth form academy yesterday.

“Unfortunately, due to low predicted uptake, the sustainability of the sixth form academy is currently under consultation with staff, students and their families,” said an internal email to staff, seen by FE Week.

Due to low predicted uptake the sustainability of the sixth form academy is currently under consultation

“The consultation period will last for 30 days. If staff have questions or concerns during this period, or wish to contribute to the consultation, please contact myself, your line manager or a member of HR who will be happy to help.”

Highbury College offers 15 A-level subjects, according to its website, but its current number of learners is unknown.

A source close to the college told FE Week that between 15 and 20 jobs could be lost if the decision is made to stop offering the provision. They added that the closure could come as soon as September, which might affect current first year students.

Highbury College did not provide comment at the time of going to press.

The college saw its Ofsted rating drop to ‘requires improvement’ in April 2018, with the report criticising leaders and governors for being “slow to reverse the college’s decline in performance”.

Inspectors found that “too much” teaching of 16 to 19 learners is “lacklustre” and “uninspiring”, while attendance at most lessons is “low”.

“Too few students are clear about what they have learned and what they need to do to improve their work,” the report added.

A follow-up monitoring visit was published for the college by Ofsted in January, which found it to be making ‘reasonable progress’ in all areas.

The consultation on the future of A-level provision is the latest in a string of troubles for Highbury College, which blocked access to FE Week’s website on its servers in January following an investigation by this newspaper into a failed Nigerian venture that could cost it a fortune.

The college’s attempt to suppress the media coverage from its staff led to the story being published to a wider audience, following articles by the Press Gazette, Private Eye, and Portsmouth’s The News.

It also attracted heavy criticism from top sector officials, including skills minister Anne Milton, who said she was “absolutely shocked” by the action, and Ofsted chief inspector Amanda Spielman, who said she was “astonished”.

Following the condemnation, the college unblocked access to FE Week a week later.

Highbury’s financial position has “deteriorated over the last three years”, according to its 2017/18 accounts.

The financial statements showed a deficit of £2.48 million, and as at July 31, 2018, the college had £5.4 million of loans outstanding with bankers on terms negotiated in 2008, which cost £293,000 in interest payments in the year to July 2017. This was, however, fully repaid in August 2018 from the proceeds of the sale of its City of Portsmouth Centre.

The centre was sold by Highbury in August for £5.7 million, which was more than £4 million less than it was previously valued.

Stella Mbubaegbu

Meanwhile, FE Week continues to press the college to release its corporate expense claims for the past five years.

A Freedom of Information request for the information was submitted in October, to which Highbury finally responded to in February despite FOI law stating responses should take no longer than 20 working days, or 40 working days if the organisation needs to apply the public interest test.

Highbury refused the request, claiming it was “manifestly unjustified, inappropriate or improper use of a formal procedure”.

FE Week is currently challenging this with the Information Commissioner’s Office.

From a previous FOI, it was revealed that Highbury’s principal, Stella Mbubaegbu, used college cash to pay for a first-class return flight from London to Dallas at a cost of £4,132. The college has refused to say whether or not this flight was work related.

Love Our Colleges Week re-convenes ahead of the comprehensive spending review

Following the first national Colleges Week last October, the Association of Colleges has held a further week of activities to raise awareness of funding cuts and cost increases in the sector.

This smaller-scale campaign was boosted most visibly on Twitter, with many principles and senior leaders using the social media platform to share their passion for the sector, and students revealing the impact college education has had on their lives.

AoC chief executive David Hughes said: “The financial viability of colleges is as hard as it has ever been. This is despite the fact they are embedded within their local community and work with employers to provide solutions to people of all ages.

“If we want to achieve success, locally, regionally and nationally, we must ensure they are properly supported.”

The Department for Education told FE Week that neither skills minister Anne Milton nor education secretary Damian Hinds had plans to visit any college this week as part of the campaign, but shadow education secretary Angela Rayner took part in the initiative by visiting Sheffield College.

Angela Foulkes, chief executive and
principal, The Sheffield College, and Angela
Rayner, shadow Education secretary

She warned that “years of cuts have created a crisis in further education”, meaning that “support for students has been slashed, teaching hours are falling, staff are thousands of pounds worse off, and providers are being pushed ever closer to the brink”.

A number of other events took place across the country, with deputy Mayor of London for skills Jules Pipe visiting Southwark College on Tuesday.

He toured the campus with principal Annette Cast and AoC director Mary Vine-Morris, stopping by creative arts classes and looking in on rehearsals for a Shakespeare performance.

Pipe said: “I’ve really enjoyed meeting staff and students today. I work on some key priorities for the Mayor, including ensuring that we have a skills system that addresses the needs of London residents. Meeting young people who are passionate about their chosen subjects and really have a sense of direction and what they can achieve is so inspiring.”

Meanwhile, the Nelson and Colne College, Accrington and Rossendale College and Lancashire Adult Learning held a “Governor, Learner and Apprentice Speed-Networking Event”, at which governors asked students a range of questions about life at the three colleges and whether they feel that college is preparing them for their futures.

Jesse Tuzara, a level 3 ICT student, said: “I found the networking event really useful. The governors were very friendly and approachable and they were genuinely interested and eager to know more about the students. The event also gave me a chance to express to them the skills I have developed at college, my next step and what I want to do in the future.”

Also this week, 11 students at Kirklees College were invited to tour the Houses of Parliament and listen to one of the debates taking place.

Local MPs for Kirklees Tracy Brabin, Paula Sherriff, Barry Sheerman and Thelma Walker were in attendance as students quizzed them on fair funding for FE, lowering of the voting age to 16 and Brexit.

Principal Marie Gilluley said: “We were extremely lucky to be given the invitation to join our local MPs in parliament during Love Our Colleges Week. This campaign is extremely beneficial and we fully support the work that is going on by the AoC to highlight the importance of better investment in colleges.”

The Love Our Colleges campaign is a partnership between the AoC, National Union of Students, Association of College and School Leaders, University and Colleges Union, Unison, GMB, TUC and National Education Union.

It is calling on the chancellor to increase the 16-to-19 funding base rate from £4,000 to £5,000 in the upcoming spending review.

Revealed: The 21 winners of the West Midlands AEB tender

The first winners from a devolved adult education budget (AEB) competitive procurement process have been told the good news.

The list of 21 providers (see below) which have been awarded AEB contracts by the West Midlands Combined Authority (WMCA) has been sent only to the providers, but has also been seen by FE Week.

WMCA is one of seven combined authorities which is due to take control of the adult education budget for its area from the 2019/20 academic year.

From August, the ESFA will transfer responsibility for the adult education budget for the WMCA area to the authority, which is worth £125.6 million in the 2019/20 academic year.

WMCA put up to £28m of its overall AEB out to competitive tender, with minutes from a meeting of the authority’s board saying this was done in January. The minutes also say the contracts were due to be awarded in April and provision is scheduled to commence in September 2019.

The contracts from this procurement are intended to be awarded for an initial period of one year, with an option to extend for a further two years.

A spokesperson for the West Midlands Combined Authority told FE Week “After confirmation of award on May 27, the next stage will be the on-boarding of providers. There may be further targeted commissioning where we see gaps in the overall market response.”

The tender was split into two lots: one focuses on tackling unemployment among young people and supporting priority groups such as care leavers, the homeless, and long-term unemployed people; another focuses on improving the skills of low-paid, low-skilled workers and increasing apprenticeship take-up.

The 13 separate providers chosen for the lots include Serco, the major public services contractor, which received a grade 3 in an Ofsted inspection of its apprenticeship provision, but redeemed itself by making ‘significant progress’ in two areas of an ensuing monitoring visit.

Advanced Personnel Management Group (UK) Limited, another provider for the workers’ lot, received a grade 3 at its last inspection, with inspectors finding tutors did not use information of most learners’ starting points well enough to identify their prior learning.

Phoenix Training (Midlands) Ltd received a grade 3 as well, and had to withdraw certain adult programmes after its plans to develop longer-courses and apprenticeships failed.

Several providers which have been chosen have not been inspected yet.

In addition to the 21 main providers, WMCA expects to be also supporting 46 subcontractors indirectly.

WMCA’s providers are the first to be revealed for any of the combined authorities that are taking over the adult education budget for their region this August.

The adult education budget mayoral board of the Greater London Authority endorsed a list of organisations to receive contracts in April.

The Liverpool City Region Combined Authority has agreed to award contracts to 19 bidders, subject to due diligence and contracts being signed and returned.

FE Week understands Tees Valley Combined Authority is currently in the final stages of funding awards and is expected to make a decision in the coming months.

The West of England Combined Authority is making decisions on allocations at its next committee meeting on June 14.

The procurement exercise being run Greater Manchester Combined Authority is still live, according to a spokesperson.

ESFA to finally invite small employers and providers to trial apprenticeship system

The Education and Skills Funding Agency is preparing to invite non-levy employers and providers to test its digital apprenticeship system.

The agency will introduce this change over a “transition period” through an “expressions of interest phase”, with those chosen commencing the trial from summer 2019.

Currently, only big employers with an annual total pay bill of over £3 million who pay the levy can use the online apprenticeship service to access training funds generated through the policy.

It will lead to increased workforce productivity among SMEs

Small employers were originally expected to be added to the service in April 2019, but was delayed for another year to “ensure a more gradual transition”.

After the delay was announced in August 2018 the ESFA extended contracts for providers delivering training for small employers until March 2020, which is how non-levy-payers train up their apprentices.

But as FE Week revealed in February, training providers’ non-levy funding is running dry and some have even had to turn apprentices away. Many fear the same will happen in 2019/20 as their allocations will not be big enough to meet demand.

“Moving non-levy employers onto the apprenticeship service will give small and medium sized businesses a greater choice of quality training providers, and the opportunity to have more control over apprenticeship training decisions for their business,” Eileen Milner (pictured), the chief executive of the ESFA, said today.

“Employers understand the needs of their sector and know better than anyone about how best to use their apprenticeship funding.

“By working with smaller employers, the ESFA will get insight into the skills needs of a wider range of businesses which will help us to remove barriers employers have when recruiting an apprentice.”

Association of Employment and Learning Providers chief executive Mark Dawe said this is a “critical and welcome advance in the reform of apprenticeships”.

“By releasing all employers and providers from the previous contracting system, the government is enabling employers to exercise genuine choice over the apprenticeships that they wish to offer and any registered provider needed to support the training,” he added.

“It will lead to increased workforce productivity among SMEs and make a real difference to social mobility with more apprenticeship opportunities available to young people across the country.”

And Sir Gerry Berragan, chief executive of the Insitute for Apprenticeships, said he also welcomed the move that will “support small and medium sized enterprises towards taking on more apprentices”.

During the transition period, more details of which will be released “shortly”, the ESFA will continue to run contracts with providers who have won provision through procurements for apprenticeship starts with non-levy employers.

“This will give the ESFA time to create the right service functionality to meet employer needs,” the agency said.

Through the apprenticeship service employers can: manage their apprenticeship funding, select a suitable apprenticeship standard and an end-point assessment organisation, as well as advertise an apprenticeship and select a suitable provider to deliver their apprenticeship training.

They can also give real-time feedback on the quality of training provision they receive, have control over the amount of apprenticeship funding paid to their training provider on their behalf, and provide government with apprenticeship “demand data to ensure an valuable apprenticeship market place”.