A cash-strapped college in line for a multi-million pound emergency bailout has announced plans for a make-or-break merger – its second attempt at finding a forever partner.

North Shropshire College, which is currently consulting on proposals to merge with Herefordshire and Ludlow College, expects to receive £3 million in exceptional financial support to ensure that “adequate cash balances will be in place until December 2018”, according to its 2016/17 accounts.

Speaking exclusively to FE Week, Ian Clinton, North Shropshire’s interim principal, said the college needed the cash as its “merger plans were delayed whilst our board sought a suitable partner college”.

It had been set to join forces with Reaseheath College but – as previously reported by FE Week – these plans fell through in August after the colleges failed to secure government cash to support the merger.

Ian Peake, Herefordshire and Ludlow College’s principal, insisted he was “confident that the two colleges together can be sustainable in the long term, financially”.

But he admitted the colleges needed even more cash – this time from the restructuring facility – to “get over the initial hurdle of both the debt and the gap between income and expenditure”. 

The restructuring facility was originally designed to provide funding to support colleges to implement post-area review changes, but is increasingly being used to prop up struggling colleges.

North Shropshire’s 2016/17 accounts, seen by FE Week, revealed it to be in dire financial straits, and dependent on the merger and further government bailouts for its future survival.

They highlighted a “material uncertainty” over the college’s “ability to continue as a going concern should the exceptional financial support not be received and/or should the merger not take place as expected on August 1 2018”.

The accounts showed the college had an operating deficit of £1.85 million on a turnover of just over £9 million, along with debts payable within one year of more than £6.1 million.

It was rated grade three at its last Ofsted inspection in May – up from its previous ‘inadequate rating’.

At the time the accounts were approved, on December 15, the college was involved in a structure and prospects appraisal to identify a new merger partner – subsequently announced as Herefordshire and Ludlow College.

According to the consultation document, the merged college will take advantage of “economies of scale” to “direct the vast majority of its resources to front-line services”.

Consultation on those proposals opened February 5, with the actual merger set to take place on August 1.

The body that regulates qualifications in England has added its voice to fears about the government’s plans for T-levels.

Ofqual is worried about proposals to use a single awarding organisation per qualification, and the FE sector’s ability to cope with yet another set of significant reforms.

It made its concerns known in its response to the Department for Education’s consultation on the new technical qualifications, which was published today.

Under current T-level plans, technical qualifications at levels two and three will be offered and awarded by a single body or consortium, under “a licence covering a fixed period of time following an open competition”.

Ofqual said it has a “statutory objective relating to efficiency of the market” and is, to some degree, “neutral” about whether one or many providers offer particular qualifications.

However, “we have advised on, and government is aware of and managing, the risks related to the single provider model”, it said in its submission.

We have advised on the risks related to the single provider model

“We will take a close interest in transitional arrangements between current qualifications and the T-level programme to ensure that learners are not disadvantaged and there is sufficient clarity about the qualification system.

“We will also look carefully at the impact of this reform programme on the wider regulated qualification market with an aim of mitigating and managing, as far as possible, any resulting systemic risks.”

The single-provider model is a controversial component of T-levels, which are due to be rolled out from 2020.

Research conducted by Frontier Economics in 2017, on behalf of the DfE, concluded that limiting access to a single AO may create a “risk of system failure” both in the short- and long-term.

It warned that if a single AO fails, it may be that no alternative AO can step in.

Ofqual’s response to the consultation also mentions the scale of reform FE is currently undergoing, which it said is placing “significant loading on the sector”.

“We think it is also important to recognise the potential scale of reform we are embarking on and the implications for the system,” the regulator said.

“The reform of the apprenticeship system is in train, but there is still much to do. We are also midway through the reform of English and maths functional skills qualifications that will roll out in 2019. And 2018 will see the first awarding of applied general and tech level qualifications that changed substantially in 2016 to meet government performance table requirements.”

Against this backdrop, the government wants to review level two, four and five qualifications, in addition to the introduction of T-levels.

Any subsequent reform would place significant loading on the sector

The “wide-ranging implications” of these reviews will “clearly need careful consideration”, Ofqual said.

“Any subsequent reform would place significant loading on the sector. This is not just an issue for colleges and schools; it also has implications for the capacity of the organisations leading the programmes.”

Ofqual also included a few veiled digs in its responses.

“It seems difficult to assign ‘ensuring comparable standards of performance’ and ‘supporting fair access’ as roles for a qualification,” it said about the qualification’s purpose. “We think that broader issues such as these are more appropriately addressed in the delivery of the qualifications.”

In terms of schedule, Ofqual said its “experience of reform suggests that the T-level development timeline remains very taut, even against a 2020 timeline”.

And regarding “grade comparability”, the regulator stated: “For us to maintain grade standards effectively, it will be important for us to understand in more detail the aspirations for qualification grade comparability. We believe that it is our duty as the statutory regulator to consider them carefully before they are approved for delivery.

“The Institute for Apprenticeships has the statutory responsibility for approving the qualifications and Ofqual would need assurance that they could be delivered in compliance with our regulatory framework.”

The T-levels consultation closed on February 8.

It sought opinions on the planned implementation of the new post-16 technical qualifications, which the government claims will set a new “gold standard” in training, set to emerge from 2020.

FE Week previously asked providers’ opinions on what we see as the six key questions in the consultation. Answers from the AoC, Association of Employment and Learning Providers, the Learning and Work Institute, and the Federation of Small Businesses can be read here.

A new college campus identifier will be introduced into individualised learner records from 2018/19, potentially paving the way for campus-level inspections at mega-colleges.

The additional data will identify a “campus within a college group and no longer a separate legal entity but previously operated as an incorporated college with a UKPRN”, according to new guidance published today by the Education and Skills Funding Agency.

A campus identifier will “allow identification of provision delivered across the various sites of merged institutions”.

The new identifier will be in use from the start of 2018/19, which means that colleges will have a year’s worth of campus-level data in time for the new Ofsted common inspection framework, expected from September 2019.

“Ofsted continues to discuss the possibility of campus level inspection with the Department for Education,” a spokesperson for the education watchdog said.

“We will consider it as part of the inspection of the whole college as we review the education inspection framework.”

The prospect of campus-level inspections at mega-colleges with multiple sites was raised during an FE Week interview with Ofsted boss Amanda Spielman last March, who said they were under “active” consideration with the DfE.

And Frank Coffield, emeritus professor of education at UCL’s Institute of Education, has previously called for campus-level inspections.

“The area reviews are creating even larger colleges, for instance Nottingham, which now has 40,000 students. That Ofsted can or would judge such a huge enterprise by applying one summary term to it is, I repeat, unjust,” he wrote in FE Week in September.

 

An FE college that was only instituted in 2014 has been issued with a financial notice to improve, just six months after its former leader retired.

Prospects College of Advanced Technology, which converted from an independent training provider to college status four years ago, when it became the first to be instituted in 20 years, was hit with the notice – published today – on January 30.

“PROCAT has been assessed as having inadequate financial health by ESFA following a review of the college’s latest outturn figures for 2016/17 and the revised budget for 2017/18 and associated information, submitted to ESFA 5 January 2018,” it said.

As part of the conditions of the notice, the college will receive a visit from the FE commissioner Richard Atkins and his team to carry out an “independent assessment of the college’s capability and capacity to make the required changes and improvements within a reasonable period of time”.

The college must also supply a draft recovery plan setting out how it will “secure the college’s financial position”.

PROCAT, which had a turnover of £9 million in 2015/16, is currently led by Ros Parker.

She took over from the former principal Neil Bates, who retired at the end of July after more than 30 years at the helm.

Under his leadership, the Essex-based charity, formerly an independent training provider known as Prospects Learning Foundation, legally reclassified as an FE college – the first time this had been allowed by the government since 1993.

Following PROCAT’s transfer to college status, the provider underwent an £11.5 million expansion of its main Basildon training base and now has around 2,000 learners.

In its first ever Ofsted report in February last year, Mr Bates led the college to a ‘good’ grade.

But questions were asked of the rating after the report’s publication was delayed by 90 days after its inspection – three times as long as the average 30 days between inspection and report being published.

FE Week has asked the college for a copy of its latest accounts, but has not yet received them.

 

Staff at more than a dozen colleges have voted overwhelmingly to strike over pay.

Industrial action is due to begin in the coming weeks, and the majority of staff are planning a two-day walkout, according to the University and Colleges Union.

The dispute follows what a spokesperson for the union described as “a disappointing” pay offer of one per cent, made last September by the Association of Colleges, which represents the colleges on pay.

“The overwhelming support for strike action at these colleges shows the depth of anger about continued attempts to hold down pay in further education,” said UCU’s general secretary Sally Hunt.

“Strikes are always a last resort for staff, but years of derisory pay offers have failed to keep up with the rising cost of living and patience is wearing thin.”

Overall, 92 per cent of staff at affected colleges voted for strike action, on an average turnout of 63 per cent.

Full details of action at each of the colleges will be confirmed in the coming days.

The colleges involved and how staff voted is set out in the table below:

The AoC expressed regret that it was unable to offer more last September.

“We wish we were in a position to make a better recommendation today, but current funding levels for colleges do not allow us to do so,” claimed its boss David Hughes.

The National Joint Forum, made up of the unions representing college staff, had submitted a claim for an across-the-board rise of around six per cent in April.

But the final offer made by the AoC was just one per cent, or the sum of £250 “where this is more beneficial”.

This was despite the police and prison officers learned earlier this month that they would will this year receive a pay rise above the one-per-cent cap imposed on the rest of the public sector.

Mr Hughes has spoken this evening of his sadness at the ballot result.

“I appreciate that the decision to strike is never a decision taken lightly, but it is disappointing that this action is being taken so soon after we agreed to work together with unions to campaign on fair funding for colleges,” he said.

“I am very committed to that joint work to keep up the pressure on government.

“When we made the recommendation of 1 per cent, or a minimum of £250, we were clear that this was the maximum we believed was affordable by colleges, given the severe funding cuts which they have been subject to in recent years.

“We have been campaigning and putting pressure on the government to address the inadequate funding levels and that has been recognised by no less than the chief inspector and the FE Commissioner themselves. We will not waiver until we achieve fair funding for colleges.

“I have said before that it is not acceptable that teachers in schools are earning on average £37k compared with only £30k in colleges; we all know that the funding cuts colleges have had to cope with are responsible and that is our focus for action.”

Private providers are being let off millions of pounds in unpaid VAT because the tax office gave them bad advice, FE Week can reveal.

ITPs were meant to start adding a 20-per-cent charge to advance learner loans courses when the scheme was introduced in 2013, but it seems as though the rule has not been applied consistently.

HMRC finally seems to have realised that it is missing out on considerable sums of money, and has now published “clarification guidance” emphasising that all independent providers – many of which were unaware of the requirement – must pay VAT.

It is not forcing providers to make up missed payments from the past, admitting that its previously conflicting guidance had been an error of its own creation.

FE Week has seen a 2016 letter from the tax office, for example, which wrongly informs an unnamed private provider that it doesn’t need to charge VAT.

In the letter, officials mistakenly state that an exemption applies to VAT payments because the loans are an “agreement made between itself [the provider] and the secretary state for business, innovation and skills”.

HMRC has caused a great deal of confusion among providers

It suggests the loans are “training supplies which are to be treated as being funded by the Skills Funding Agency within the scope of VATA94” – for which the tax doesn’t apply.

HMRC’s official view is that advance learner loans are “a loan which is ultimately funded by the student and not by the secretary of state” meaning that they do not “result in the course qualifying for exempt treatment”.

It is understood that most other private providers have received the same incorrect advice since 2013, and the total amount of unpaid VAT could run into the millions.

The clarification implies HMRC accepts that providers have been given erroneous advice, and suggests that it will only chase future payments.

“The policy outlined in this brief is operative with immediate effect as it’s a clarification of HMRC’s existing policy,” states the guidance, published in January.

“HMRC will write to any business that has received an incorrect ruling or guidance and will issue a revised ruling, from a current or future date.

“If businesses have adopted an incorrect treatment on the advice of HMRC, they should write to us quoting Revenue and Customs Brief 2 (2018) by March 31 at the latest, providing evidence if there are individual circumstances to be taken into account.”

It added businesses which “don’t do this” will be expected to “apply the correct treatment from the date of this brief”.

The tax does not apply to FE colleges and not-for-profit organisations.

However, many providers are upset at having to fork out more money.

“HMRC has caused a great deal of confusion among providers in terms of providing conflicting guidance,” said the Association of Employment and Learning Providers’ boss Mark Dawe. “We are currently consulting with members and deciding what the best way forward is.”

Our contract is now 20 per cent less income, there’s no other way of looking at it

FE Week spoke to a private provider boss who is furious with HMRC.

“As we understood it, advance learner loans were government funding like any other type of funding which would be exempt from VAT,” said Samuel Riley, the director of the North West Skills Academy in Manchester. “Most providers are in that boat. This will massively affect us now.”

He explained that providers cannot simply add the 20-per-cent charge to the courses for learners to pay, and the amount would now have to be taken from the value of existing contracts.

“Our contract is now 20 per cent less income, there’s no other way of looking at it,” he insisted.

He also pointed out that, if advance learner loans cash is not “perceived as government funding, why is it in scope for Ofsted?”

Mr Riley claimed his organisation had numerous meetings with the Student Loans Company, which administers the loans but which had never brought up VAT.

Advance learner loans, originally known as 24+ loans, were introduced in 2013/14 for students studying courses at levels three or four and aged 24 and older.

A spokesperson for the HMRC recognised that VAT on FE loans had not been enforced properly, but would not say how much money it has failed to collect.

“When we became aware that the policy was not being applied correctly we issued guidance to give greater certainty to providers on what needed to be paid,” they said.

Every adult should get £10,000 for a minimum of two years just to spend on education or training, so long as they do not already have a degree, according to the influential UCL Institute of Education.

And employers should be allowed to spend apprenticeship levy funds to top up these costs, including on training that doesn’t take the form of apprenticeships.

The money – which the authors of a new report have called a “national learning entitlement” – would be used to pay for courses in either further or higher education.

The authors also pointed out that their plan, at £8.5 billion per year, is somewhat cheaper than a similar plan Labour proposed at the 2017 general election for a National Education Service.

This would also make sure everyone is able to access free, lifelong learning, at a projected cost of around £10 billion. 

The report unveiled today said that employers would be expected to support this entitlement, with the government “loosening” the rules governing the way the levy is apportioned.

It “should be broadened to cover other kinds of adult training, says the paper, allowing employers to top up the £5,000 entitlement,” a UCL spokesperson explained at the launch of the report, entitled ‘A national learning entitlement: Moving beyond university tuition fees’.

“The apprenticeship levy is in itself a reasonable idea, but it is poorly designed and the resources raised can be spread beyond just apprenticeships,” claim the authors.

They cite research carried out by the CIPD in January which found a “clear majority” of levy-payers “would prefer a general levy, compared with just 17 per cent who like the current form”.

The estimated costs are around £8.5 billion a year, but the changes to the levy rules could add an extra £1 billion.

The apprenticeship levy, which came into force in April last year, is currently paid by employers with an annual pay bill of £3 million or more, and is set at 0.5 per cent of this pay roll cost.

It’s expected to raise £2.5 billion a year by 2020, which can only currently be spent on apprenticeship training.

Written by Tom Schuller, Sir Alan Tuckett and Tom Wilson, the report sets out changes to post-18 education funding which could create a “broader and more inclusive system” that would “encourage learning at all ages by a diverse range of students”.

The £10,000 they want for the national learning entitlement would be spread over at least two years, and spent on any “publicly provided, or publicly recognised, education and training”, including courses at colleges and independent training providers, as well as universities.

To avoid the “sad fate” of the Individual Learning Accounts debacle in the late 1990s, which was scrapped due to fraud, “the entitlement will be cashable only for formally organised programmes in recognised institutions”.

Any courses funded through the entitlement could be taken over a period of years, creating a “flexible system” with “multiple stopping-off and re-entry points” that would allow learners to “weigh up their prospects and tailor their learning to their current circumstances”.

The proposals would reinvigorate the FE and adult provider market, as it would “encourage and enable other sectors and institutions to offer more opportunities for learners of all kinds”.

“Colleges and adult learning institutes, voluntary organisations and private providers can be relied on to come forward with courses of all shapes and sizes,” they suggested.