With great power comes great responsibility: what should governors think about when deciding to merge? asks Smita Jamdar
The number of stories in FE Week recently about how decisions to merge colleges are made may be a reflection of the paucity of guidance and advice to governors.
Before the Education Act 2011, the ultimate decision on any merger lay with the Secretary of State. The decision to propose a merger was that of the relevant funding agency, after public consultation, and the suitability of merger proposals and prospective partners was judged against criteria promulgated by the funding agencies.
The 2011 Act introduced a new power of governing bodies to dissolve their corporations and transfer their assets and liabilities to “prescribed bodies”. Incidentally, the prescribed bodies include private for profit companies, provided they are established for educational purposes, although in such cases the dissolving college’s property transfers subject to a charitable trust to be used exclusively for charitable purposes. The power is therefore one that has the potential to change forever the landscape of FE and the nature of FE providers.
This new power was not accompanied by much guidance as to how governing bodies should go about making this highly significant decision. Instead, we had the publication of New Challenges, New Chances, the government’s strategic vision for FE. Though not particularly detailed, this set out the government’s expectations that in making decisions about the future shape and delivery model of their colleges, governors would be expected to be accountable to their local communities, learners and employers, and to work with LEPs and local authorities.
The power has the potential to change forever the landscape of FE”
Any changes to delivery models could be undertaken only after completing a college structure and prospects appraisal, and wide, transparent and meaningful consultation of the communities they serve. Partner selection was expected to be transparent through open and competitive procurement practices.
Are there other obligations that should guide governing bodies in making merger decisions? In my view, there are other areas of law that impose duties on colleges and their governors which could be relevant to deciding whether and if so with whom to merge.
Firstly, charity law and the duty it imposes on trustees to act in the best interests of their charities. Without the open, transparent and competitive process to which the minister referred, how can governors be sure that the partner they choose provides the best possible future and opportunities for their learners?
Secondly, the public law constraints on exercising discretionary powers such as this, which imply obligations to exercise those powers following careful, rational and reasoned deliberation. These obligations, again, may not be satisfied without openness and receptiveness to the range of options available to the college to deliver the best outcome for learners.
Thirdly, the obligations under the Financial Memorandum in terms of accountability for public funds and value for money, which presuppose a measured and balanced consideration of all the available options.
And finally, the single equality duty that requires decisions to minimise adverse impact and improve opportunities for disadvantaged learners from protected groups.
So despite the absence of specific guidance, there seem to be a range of legal obligations and duties that point in the direction of a transparent and a reasoned decision-making process. Even if there weren’t such obligations, one has to wonder why governing bodies would do anything else, given that these are not commercial mergers where private interests make confidentiality and exclusivity required characteristics, but, rather, are decisions that determine the future of educational charities with substantial public assets on which the cleansing spotlight of public accountability and scrutiny should surely fall.
Smita Jamdar, partner and head of education, SGH Martineau LLP