Reclassification one year on: Capital, control and confusion

It’s been twelve months since colleges were returned to the public sector and colleges must learn to live with red tape and uncertainty

It’s been twelve months since colleges were returned to the public sector and colleges must learn to live with red tape and uncertainty

free speech

1 Dec 2023, 5:00

This time a year ago, we discovered that colleges were, after all, in the public sector and had been since 1993. The office for national statistics (ONS) made this declaration, citing an international statistical standard introduced eight years earlier, in 2014.

ONS is a slow and methodical organisation. It looked again at laws passed by Parliament in the 1990s and, because the statistical rules had changed, the ONS national accounts committee changed its mind. No longer private sector, it said. Colleges have been public sector all along.

Unlike ONS, the department for education moved quickly. Within minutes of the ONS announcement, DfE ministers presented a statement to parliament and the education and skills funding agency (ESFA)’s chief executive sent a letter to college principals. Following treasury orders, they introduced a series of new controls on college decisions.

With immediate effect, colleges were ordered to ask for approval on issues like taking out loans, offering financial support to other organisations via guarantees and making voluntary severance payments worth more than three months of salary.

The DfE gave governing bodies a six-month notice period for new approval rules for offering high pay to senior staff, but all other controls started from 29 November 2022. The government only acts this fast when there’s a crisis or when they need to pre-empt bad behaviour. It was an over-reaction and not a good start to a new era. 

So, while the rest of the world may remember last November as the ChatGPT launch date, a group of college leaders will remember it as the time when the government created hassle, doubt and unproductive paperwork. In a few cases, this almost derailed long-planned building projects. As the weeks and months passed, DfE and ESFA officials sorted things out, created new forms to fill and invented a process for colleges to borrow from the government instead of banks.

A year on, things have settled down and reclassification is old news.

The rules are in place. They are an irritant but they’re now quite familiar. Discussions in leadership teams have reverted to other challenges.

The rules are in place – an irritant, but quite familiar

The talk at this November’s AoC conference was about novel and contentious technology rather than tedious accounting rules. But college public sector status is now a fact of life, and that won’t be changing soon. ONS made an all-encompassing judgement about colleges and it would require a big reform to change their mind.

There isn’t the political appetite now to comprehensively deregulate colleges and take apart the intervention apparatus piece by piece. With £6 billion in public spending going to the sector and a high profile for skills, it’s hard to think of a scenario in which a future government would make this choice. This leaves the college-DfE relationship in an unsatisfactory state.

Having promised financial freedom in the past, DfE is now the main lender for colleges alongside its roles as majority funder, curriculum promoter, occasional capital project manager, charitable regulator and intervention agent.

Different teams of officials have different tasks but there’s a risk of conflicting messages. College leadership teams retain the most important duties: organising staff, managing courses, talking to employers and addressing student needs. But they do so with an increased list of government instructions.

Meanwhile, colleges now find themselves back in the public sector just at the point when top-down treasury financial control is greatest.

This leaves colleges less certain than ever about future capital funding – not just how much they’ll have but how it will come. At a time when student numbers are rising, there is growing pressure to provide skills for the economy. Where investment is needed to modernise buildings for new uses and new sources of energy, this is an obvious worry.

In the end, independence is a state of mind. Whatever their classification or accounting status, colleges have a social purpose.

The new controls are a responsibility and reclassification has been a distraction but if we let it get in the way of all the things we need to do, we’ll only have ourselves to blame.

More from this theme


Colleges facing long delays for severance pay approvals 

One college still awaiting for approval on a retrospective exit payment

Anviksha Patel
Colleges, Reclassification, Skills reform

DfE promises to ‘streamline’ high-end principal salary sign-offs

Lengthy delays are impacting college boss recruitment

Anviksha Patel
Colleges, Reclassification

New borrowing rules posing cashflow problems for colleges

Rules imposed last year amount to a 'perfect storm', FE leaders warn

Joshua Stein
Colleges, Reclassification

No plans to exempt colleges from VAT, says Treasury secretary

Colleges ‘do not fit the rationale’ for exemption which would cost £200m a year

Anviksha Patel

Your thoughts

Leave a Reply

Your email address will not be published. Required fields are marked *