A major high street bank will “remain supportive” of a cash-strapped college that owes it over £6 million, despite fears the college may collapse following the last-minute failure of a second merger attempt.

The future of City College Southampton, which is surviving on government bailouts, was thrown into doubt this week when Eastleigh College pulled out of its proposed merger after the Department for Education rejected its bid for funds from the Restructuring Facility. 

Its first attempt to join up with another provider – Southampton Solent University – fell through in 2017, following a recommendation from the Solent Area Review.

City College’s accounts for 2017/18 warned that if its second merger failed, it would “require a standalone application to be approved to ensure it is able to continue operations into 2019/20” and would have to “seek additional long-term funding from the ESFA in order to remain in existence in the long term”. 

The accounts also stated that the college has £6.1 million of bank loans outstanding with Santander on terms negotiated in 2009, which has 16 years remaining. 

The college’s “forecast” show that one of the loan covenants will be breached, requiring the entire loan to be repaid in a single year.

The accounts go on to say:  “Santander has verbally stated it will not take any action on the college as it continues to work towards a merger.”

At the time of going to press, Santander told FE Week it remains “supportive of the college” despite its second failed merger, and the bank will continue to “work closely with them, as they explore their options”. 

The reassurance follows fears the college could be the first provider to be placed into administration under the new insolvency regime, which came into effect on January 31 and which allows colleges to go bust for the first time.

The Department for Education has made clear that there will be no more long-term bailouts available to colleges following the introduction of the insolvency regime.

A  DfE spokesperson would not confirm if it was considering placing the college into administration, but said: “All bids for funding from the Restructuring Facility fund are assessed through a rigorous governance and approval criteria, including whether a college is financially sustainable in the long term.

“We are working with City College Southampton to ensure learners aren’t negatively affected.”

The college told FE Week it was not entering into administration, nor had it begun an Independent Business Review – the start of insolvency proceedings.

Sarah Stannard, principal of City College Southampton, said: “City College Southampton is reassured by the constructive conversations we are having with key stakeholders and their commitment to ensuring that there is robust further education provision in Southampton.”

Stannard was due to stand down following the college’s merger, which was meant to be finalised by March 31, and at which point Jan Edrich, principal of Eastleigh, would have headed up both colleges. 

City College Southampton has since confirmed Stannard will be staying put, while trying to reassure students, staff and parents that it is “business as usual”.

The college, which is rated “requires improvement” by Ofsted and has around 5,000 students, has seen its financial health deteriorate to “inadequate” in recent years.

Its accounts showed that it has agreed with Santander a £500,000 ongoing overdraft facility, “however, this is insufficient to cover the expected cashflow shortfall occurring during January, February and March 2019” and an application for an unknown amount of exceptional financial support from the DfE has been approved “enabling the college to continue in operation in the short term”.

The financial statement also shows that its cash deficit deepened from £257,000 to £585,000 in 2017/18, and its total comprehensive income was just £1.3 million.

The new college insolvency regime

The news of the failed merger with Eastleigh College, which has put City College Southampton in imminent danger of insolvency, came little over one month after the new insolvency regime was introduced, which set out that, for the first time, troubled colleges will be able to go bust.

The Department for Education has made clear in its new regime that colleges like Southampton, which has been surviving on government bailouts, will no longer be saved by long-term bailouts and will be placed into administration if they fail.

The insolvency regime, which came into effect on January 31, aims at making it clear how colleges will be managed if they become insolvent, at the same time as protecting existing learners.

Prior to a corporate insolvency, government may commission an Independent Business Review into the provider to assess the options available, since the Restructuring Facility funding is no longer to be available. Some lending banks already commission these as part of their normal course of business.

In the event that a college runs out of money, they must now give the DfE notice that they want to appoint an administrator. The DfE then has 14 days to decide if it wants to apply to court for an education administration order – for their own administrator. Then the administrator appointed by the court will be required to act to avoid or minimise disruption to the studies of the existing students.

Administrators would first seek to rescue the college as a going concern. If this fails, they would seek to transfer the business to another institution. In some cases, some or all students could be transferred to another provider, or the college may be kept going until existing students have completed their course. At the same time the education administrator would also balance the needs and rights of lenders and other creditors and realise assets for their benefit.

 

Alternative providers in Southampton

If City College Southampton does collapse, administrators could transfer its existing learners to other local providers. The college, which is located in the city centre, has four other sixth-form colleges within a three-mile radius: St Anne’s Catholic School & Sixth Form College, Bitterne Park Sixth Form, Itchen Sixth Form College and Richard Taunton Sixth Form College. Further away there is The Hamble Community Sports College and the Totton College.

St Anne’s Catholic School has an “outstanding” Ofsted rating and Bitterne has been ranked as “good” in its last inspection. Itchen and Richard Taunton both have a “requires improvement” rating.

Eastleigh College, a 20-minute car ride away from City College, could also be an alternative to learners. Located close to the city’s airport, the college was downgraded from “outstanding” to “good” by Ofsted earlier this year.

Anne Milton initially seemed in good spirits when I began our interview at a coffee shop at the University for East London’s (UEL) Docklands campus.

It was the morning of the third day of National Apprenticeships Week and she’d just finished meeting apprentices at an informal breakfast. 

Despite the event not entirely going to plan (a falling roof tile that very narrowly missed the minister but left two apprentices grazed and in need of medical attention) Milton was unfazed and keen to talk to apprentices about their courses.

But it did not take me long to trigger a change in mood, pointing out that just a few hours earlier, the National Audit Office had published a report criticising the government on a range of issues relating to the apprenticeship reforms.

“It is always a shame when these reports come out because I think they have an important part to play in the development of government policy, but by their very nature they 
are looking back rather than forward,” Milton said.

“It doesn’t always, I think, give a very accurate picture of what we are going to be seeing in six months’ time.” 

Milton clearly thinks there will be significant improvements in the next six months, but what is the evidence for this?

Readers will recall that the minister predicted in February 2018 that apprenticeship starts would really take off by September, but the latest figures for December starts show they are slipping backwards, a full 8 per cent down on the previous year. 

And last October it was announced that demand from small employers would be stimulated by halving their co-investment fee halved from 10 to 5 per cent.

More than four months on, the fee reduction has not been implemented and Milton was unable to even say from when it would begin.

“I would love to make an announcement now. Sadly, with much of one’s life in government, one waits for Her Majesty’s Treasury to say when you can do these things. And so we are always to some extent in the Treasury’s
hands.”

And on the thorny issue of limits to non-levy funding (UEL successfully tendered for non-levy, but was not awarded any, and is having to turn local businesses away), the promised changes to get small employers on to the Apprenticeship System keeps being delayed.

“Like with the reduction in co-investment, I am frustrated that the machinery of government is slow and sluggish, always. So I am somebody who wants to do everything yesterday,

“I am a terribly impatient person, so I am as frustrated as everybody else, but we will make announcements when we can make announcements.”

Milton’s frustrations should not really come as a surprise, given in her first speech as skills minister, back in July 2017. She responded to a question about the fall in apprenticeship starts by saying: “I am somebody who has absolutely no patience at all. I want everything done yesterday, and I will only forgive not doing it yesterday if it’s in an attempt to get it right.”

One thing that clearly wasn’t done right was the Department for Education’s budgeting for apprenticeships.

My own published analysis, now confirmed by the NAO, had found the average cost of starts on standards was running at £9,000, which is double what the government had budgeted for.

“I haven’t seen how they got to the figures they thought it would be,” Milton said.

“But you always have to take a bit of a leap in the dark when the programme is being driven by employers.

“Added to which, if you are going to improve quality – quality and money don’t always go together – but it is likely it will cost you more. So whether the original forecasts took all that into account, I don’t know.”

This raised the obvious question of whether the budget needed to be doubled to afford £9,000 per apprentice, or whether the average could be brought down by, controversially, restricting employer choice.

I ask, should public money be spent on management MBA apprenticeships at a time when 16-to-19 and level two apprenticeships are in such decline? 

“I think you want money spent on both,” Milton said.

“We have seen today 16-year-olds doing level 3 engineering. I mean, brilliant. But you also need businesses to be more productive, so people are thinking about how they manage. What sticks in people’s throats is people on £100,000 a year and the state subsidising their MBA. 

“There is no easy answer. You put more money in the pot or you restrict what you are doing. Those are the choices.”

So it seems likely the Treasury will have to find a way to increase the size of the pot to get even close to the 3 million starts target and fund all the popular and expensive degree and management apprenticeships.

Even the NAO report points out that restricting employer choice in an employer-led system would not only be unpopular it “could damage confidence in the programme”.

Milton concluded by saying: “I always look for more money, I will always look at whether we are absolutely sure this is where public subsidy should go – looking at both
things, always.”

The Department for Education has been accused of “locking out” small firms in a highly restrictive and secretive T-level tender.

A short procurement exercise was launched by the department on February 25 to find a company to help develop a “transitional” course, which 16-year-olds can take if they are not ready to start a T-level at level three, but who can “realistically achieve it” by age 19.

But the tender, which runs for just 15 days, has only been made available to suppliers in a specific category in its Dynamic Purchasing System (DPS).

It concerns us that a bureaucratic system may end up locking out diverse level of expertise

The DfE has refused to tell FE Week which category it is allowing to bid, release the tender documents, list who is eligible to apply or even say how much the contract is worth.

Companies that wanted to bid in the tender but have been blocked have since contacted FE Week and expressed frustration.

Tom Bewick, chief executive of the Federation of Awarding Bodies, is not happy.

“It concerns us that a bureaucratic system like dynamic purchasing may in fact end up locking out the diverse level of expertise that we know T-Levels requires in order to be a success,” he said.

“Restrictive procurement practices of this nature and rushed timescales fly in the face of the government’s own stated objectives of trying to engage more small businesses in contract tenders.

“The majority of awarding bodies are small firms, so it is wrong that they are being unduly penalised as a result.”

Asked why it didn’t put the tender on wider platforms, such as Contracts Finder, and open it to all organisations, a DfE spokesperson said: “For a successful delivery, the T-level transition offer needs an organisation with specific technical FE expertise.

“We judged that there are a relatively small number of suppliers who would be able to deliver the contract and the DPS allows those with the relevant experience to bid for it.”

She told FE Week the department wishes to restrict the operational information within the tender document to the relevant organisations registered to bid for this contract, and that revealing the anticipated value of the contract could prejudice commercial negotiations.

The spokesperson added that the DPS is a legitimate route to market for public sector bodies as set out under the Public Contract Regulations 2015.

Suppliers can self-register on to the DPS against categories of work that they are able to deliver, of which there are 20.

The DfE then selects one or more categories of work that will be required to deliver a particular procurement and “launch” the tender.

The spokesperson was able to tell FE Week that the transition offer contract will run from May 2019 to September 2021.

The T-level transition offer needs an organisation with specific technical FE expertise

The winning bidder will support the phased implementation of the T-level transition offer in 2020 and 2021.

The course was recommended by Lord Sainsbury in his technical education report in July 2016, which the government’s post-16 skills plan then adopted at the same time.

The DfE was supposed to then carry out further work and consultation on this transition year “over the next six months”.

But further information on this hasn’t been forthcoming until this tender.

The winning bidder will be a single supplier and provide support for “participating post-16 providers to develop, package and deliver their local T-level transition offer”, which will be a type of 16-to-19 study programme, rather than a qualification in its own right.

They will also “encourage and facilitate participating providers to explore different approaches to implementing certain elements of the transition offer”.

The first three T-levels, which will be delivered from 2020 by 50 providers, will be in education and childcare pathway, design, surveying and planning, and digital production, design and development.

The government is “strengthening” the approvals process for its register of end-point assessment organisations following an FE Week exposé that raised concerns.

In an exclusive interview with this newspaper, the chief executive of the Institute for Apprenticeships and Technical Education revealed his organisation is working with the Education and Skills Funding Agency to make the register’s conditions more vigorous to “ensure we don’t get any rogues slipping through the system”.

Sir Gerry Berragan would not be drawn on what specific changes would be made, but did say that if the institute finds any assessment organisation that is not “fit for purpose”, he will recommend back to the ESFA that they should be removed from the register.

We are definitely going to improve our assessment arrangements

The ESFA is responsible for the register, although several sector leaders have questioned why the job wasn’t given to the exams regulator, Ofqual.

Last week, an investigation by this newspaper found a sole trader and a new company with no trading history were among 14 other end-point assessment organisations (EPAO) who successfully applied to the register in February.

With the total number of companies now on the register totalling 215, sector leaders urged the Education and Skills Funding Agency to “purge” the register, fearing that a dash for growth is being made at the expense of quality.

Last month FE Week reported concerns that there are currently 17 apprenticeship standards ready for delivery with no end-point assessment organisation in place, nine of which have starts totalling more than 1,500 – 1,417 of which are for the nursing associate standard.

Sector leaders also fear the EPAO register will be a repeat of what happened with the register of apprenticeship training providers (RoATP), which took on many firms that had little to no trading history.

The backlash against RoATP when it was first launched led to the government closing the register for nearly a year while it came up with a new and more robust approvals process.

The ESFA relaunched the register in December, and now, applicants must have traded for at least 12 months in order to be eligible and must provide a full set of accounts. No such rules are currently in place for the EPAO register.

As well as developing a more robust EPAO register, Sir Gerry told FE Week that the institute is going to publish a “more detailed” framework in the spring for what external quality assurance (EQA) of end-point assessments should cover.

“That will also help to quality assure the EPAOs and make sure they are fit for purpose and delivering what is required of them,” he said.

It comes after the National Audit Office criticised assessment arrangements in its apprenticeship progress report this week, which said the institute needs to “improve” to ensure they are “conducted in a fair, consistent and robust manner”.

Responding to the criticism, Sir Gerry said: “Yes, we are definitely going to improve our assessment arrangements as we know more and develop, and as the demand for them increases.”

An ESFA spokesperson said the application process for the register of end-point assessment organisations “is robust and we have sought to continuously develop the process to ensure it remains relevant and the bar for entry remains high”.

She said management of the register is an “ongoing process”, but would not reveal what is being strengthened or when the sector can expect the changes to come into force.

Asked if he thought the ESFA was the right organisation to run the EPAO register, Sir Gerry said: “The register enables people to be paid and that is what the ESFA does, it pays people. I think it is quite right that the organisation that pays them should be the organisation that verifies if they are fit for purpose.”

 

The Department for Education is waiting for the Treasury to let them announce a start date for when the 10 per cent employer co-investment will be halved, FE Week can reveal.

In his Budget speech in October, chancellor Philip Hammond announced that the contribution non-levy paying companies pay towards apprenticeship training would fall to 5 per cent.

Following this, the Treasury told FE Week the start date for the new policy would be April 2019, but quickly backtracked claiming this was a “misunderstanding”.

“Further details will be set out soon, including dates,” the spokesperson added.

More than four month later, no start date has been forthcoming leaving the sector frustrated, and concerns are growing that small businesses may be putting off taking on apprentices until the change is made.

In an interview with FE Week editor Nick Linford this week, apprenticeships and skills minister Anne Milton expressed her equal “frustration” at the delay, and said the Department for Education is waiting on the Treasury.

“I would love to make an announcement now,” she said.

“Sadly, with much of one’s life in government, one waits for her majesty’s Treasury to say when you can do these things. And so we are always to same instance in Treasury’s hands.”

Milton added: “I share frustrations of people who are trying to deliver apprenticeships, train apprentices and plan their business. Government is always quite slow to make decision on these things so I completely understand the frustrations and I share them.”

When asked why it was holding up the announcement almost five months after the Budget, the Treasury would only say: “We will be announcing the date in due course.”

The chancellor Philip Hammond is due to deliver his Spring Statement next Wednesday, where he will give an update on the country’s economic situation since October’s fiscal event. It is not clear if an announcement will be made then.

The decision to cut SME’s contribution by half was made as part of a “£695 million package to support apprenticeships”, and will only apply to new starters when the change comes into effect.

However, it is unclear if the contribution will also apply to levy-paying employers when their levy pot is empty.

The Association of Employment and Learning Providers had been heavily campaigning to scrap the rule altogether as it believes it puts SMEs off apprenticeships, and is the reason why starts have fallen so much since the introduction of the levy.

But Milton has argued that “a contribution from somebody is important, because it requires their buy-in to what they’re getting into”.

Adults earning less than the national living wage and who live outside of Mayoral combined authorities with devolution deals will continue to benefit from fully funded training next year.

Prior to 2018/19, adults had to have been on benefits to receive full funding for education courses.

Last year, the Department for Education launched a trial enabling providers in receipt of ESFA funded adult education budget to fully fund learners who are employed and in receipt of a low wage and cannot contribute towards the cost of co-funding fees.

The DfE confirmed today, in its publication of the draft AEB funding rules for 2019/20, that this trial will continue next year.

It pointed out that the low-wage threshold has been increased from £15,725.50 to £16,009.50 – so anyone in employment earning less than this amount will benefit.

“The trial will help to increase AEB participation and lift social mobility barriers to learning for those who would not otherwise engage due to course fees being unaffordable,” today’s announcement said.

Current AEB fee remission rules focus on providing full funding for eligible unemployed adults – such as those on benefits – young people aged 19 to 23 with skills below level two, and adults aged 19 and over who do not have English and maths up to level two.

Currently, individuals who do not fall into one of these categories may have to contribute up to 50 per cent towards the cost of their learning.

The new full funding eligibility criteria include those that are “eligible for co-funding for provision, up to and including level two” and “earn less than £16,009.50 annual gross salary”.

To confirm learner eligibility providers must have “seen evidence of the learner’s gross annual wages in these circumstances, for example, this could be a wage slip or Universal Credit statement, within three months of the learner’s learning start date, or a current employment contract, which states gross monthly/annual wages”.

They must also “enter the ILR monitoring code (363) for every eligible learner they fully fund through this trial, this is imperative as we will use data collected to inform future adult funding policy development”.

From September, the AEB is being devolved to six combined authorities – in Greater Manchester, Liverpool City Region, the West of England, the West Midlands, Tees Valley, and Cambridgeshire and Peterborough – as well as the Greater London Authority.

As a result, the extension of the trial “only applies to individuals resident in areas of England outside of the MCAs/GLA areas undertaking ESFA funded AEB learning,” the DfE said.

The MCAs and GLA will publish their own funding rules “that will apply to providers in receipt of devolved AEB funding”.

Last year, the GLA said adults in the capital who earn less than the London living wage of £19,890 will have their training fully funded from 2019/20.

Its published funding rules confirm this: “You may fully fund learners who are ‘employed’ and would normally be co-funded [if they] earn less than the London Living Wage as an annual gross salary on the date of the learner’s learning start date.

“Learners will be deemed to earn less than the London Living Wage as an annual gross salary if they earn less than the hourly London Living Wage at that point in time, multiplied by 37.5 (hours per week), multiplied by 52 (weeks per year).

“Based on the 2017/18 London Living Wage, this would be £19,890, but AEB Procured providers will need to check the updated rates each year.”

Today’s National Audit Office report into apprenticeships is a “shame” because it only reflects on the past and doesn’t account for policy that will make a difference in the future, the apprenticeships minister has said.

Anne Milton spoke with FE Week’s editor Nick Linford this morning during a visit to the University of East London where she met with apprentices to hear how the programme is helping their careers, in the middle of National Apprenticeship Week.

The interview also came just hours after the NAO published its apprenticeship progress report, which raised various concerns including a “risk” that the programme is not financially sustainable after the average cost of training an apprentice hit double what the government predicted.

But Milton didn’t find the report to be of great value.

“It is always a shame when these reports come out because I think they have an important part to play in the development of government policy but by their very nature they are looking back rather than forward,” she said.

“I read the NAO report in quite a lot of detail and I don’t think it accounts for the changes that we are clearly seeing. I’ve seen all through apprenticeship week the changes that we are going to be able to measure six months from now.

“It doesn’t always, I think, give an accurate picture of what we are going to be seeing in six months’ time.”

You can read the main findings from the NAO’s report here.

Today’s event at the UEL was used by the minister to celebrate the university’s apprentices, who are training in sectors ranging from nursing and teaching to civil engineering and digital and technology solutions.

Lauren, an apprentice nursing associate with UEL, told FE Week the apprenticeship is helping her progress in her position from a healthcare assistant to a nursing associate at Queen’s Hospital in Essex.

“The reason why I’m doing this is because it will help me progress further in my career path to become a registered nurse,” she said.

“I won’t be left with any debt and I can pay my bills as well, it’s helping me live and it’s absolutely wonderful I can do this as a mature student.”

 

William is also at UEL, training to be a civil engineer.

“I’m doing a six year course working at Blue Engineering working on live projects,” he told FE Week.

“The benefit is not only being in no debt but also getting paid full time and learning on the job.”

Read the full ‘Editor Asks’ interview in the next edition of FE Week this Friday.

Main picture caption: Skills minister Anne Milton (centre left) with nursing associate apprentices and Jane Perry, UEL’s director of strategy and external engagement (right)

National Audit Office criticism of the Institute for Apprenticeships and Technical Education standards approvals process has been rejected by its chief executive.

In an exclusive interview with FE Week, Sir Gerry Berragan ruled out prioritising the development of particular standards, those that “could add the most value”, when clearing the backlog.

There are currently 254 apprenticeship standards in development, according to the IfATE website.

But those in priority sectors that are likely to have significant demand, such as the level three early year educator for nursery nurses and childminders, have joined the queue with other standards in development like the level three for gunsmiths and level three assistant puppet maker.

The NAO report said: “The department and the institute have not seen it as their role to prioritise any particular standards, meaning that those introduced first were not necessarily for apprenticeships that could add the most value.”

When asked if this was something being considered, Sir Gerry ruled it out on the grounds it was “immensely difficult” and they were never asked by the Department for Education to even consider it.

“This goes back to our statutory requirements, we respond to their needs and develop new standards,” he told FE Week.

“Ultimately we are responding to employer demand. It was never asked of us to approve standards on that basis and nor would it be appropriate for us to do so.

“It is immensely difficult because when you look at the industrial strategy and sector plans and speak with sector employers all of them have huge priorities, they all have competing demands and they will all tell you they are the most important to get approved. It is quite difficult to prioritise on that basis.

“Given the task we had was to improve the number of standards available we really got on with those that are closer to being ready and get them over the line and that is how we got results, 400 standards ahead of time.”

Read the full interview with Sir Gerry on Friday in the next edition of FE Week.