Briefing for MPs Second Reading Technical and Further Education Bill

Background The Association of Colleges (AoC) represents and promotes the interests of 317 Colleges Further Education Colleges and Sixth Form Colleges established under the Further and Higher Education Act 1992.

Key Facts and Figures Colleges provide a range of education and training, helping to provide the skills and qualifications for students entering the workforce.  Colleges educate and train 2.7 million people, including 1.9 million adults.  744,000 16 to 18-year-olds choose to study in college (compared with 433,000 in school).  Almost every general further education college offers apprenticeships, with 306,000 people choosing to take one in college.  153,000 people study higher education in a college.  Students aged 19+ in further education generate an additional £70 billion for the economy over their lifetimes.

Technical and Further Education Bill The Technical and Further Education is divided into three parts and makes provision to:

1. Take forward measures setting out the commitment in the Skills Plan to reform technical education by creating an Institute for Apprenticeships and Technical Education (IFATE).

2. Create an insolvency regime for further education and sixth form colleges established under the Further and Higher Education Act 1992.

3. Ensure that information relating to further education is passed onto the Secretary of State for Education once the adult education budget has been devolved to combined authorities.

Part 1: Institute for Apprenticeships and Post-16 Skills Plan The Bill extends the remit of the Institute for Apprenticeships to cover technical education, in order to fulfill the commitments outlined in the Government’s Post-16 Skills Plan. The proposals involve reforming the skills and technical education system, offering students a new technical option at the age of 16 which will allow them to pick from one of 15 technical education routes across a variety of subject areas. The plan requires a wider set of changes which include action to improve information and advice to young people and sufficient funding to employ high quality teaching staff and support industry standard facilities.

While the remit extension is a necessary element of the plan, we believe there are a number of outstanding issues:

 Capacity: The Institute is not yet fully functioning yet is already being given a new role. It will have a difficult task in supervising training supported by the new levy funded system and in ensuring that

apprenticeship standards are appropriate and coherent. It will be a major task to redesign technical qualifications outside qualifications, although there is sense in running these in parallel with work on apprenticeships.

 Overlap: Schedule 1, Clause 27 of the legislation gives four agencies (IFATE, Ofsted, Ofqual, Office for Students (OfS) the power to share information with each other but raises an issue over the crossover between agencies. Ofqual, for example, regulates English and Maths qualifications which will form an important part of technical education programmes regulated by IFATE. The roles of IFATE and OfS will overlap when it comes to degree apprenticeships. IFATE and Ofsted both have a responsibility for the oversight of apprenticeship training quality.

College Insolvency Regime (Special Administration Regime) Although colleges are enshrined in legislation, there is a lack of clarity about what happens when an institution encounters financial difficulty. Over the past twenty years government funding agencies have acted to protect students, courses and assets, but a clear legal framework is now overdue. The vast majority of colleges have strong governance, professional management and sound finances but the sector is under increasing financial pressure mainly as a result of government spending cuts, and questions remain over where responsibility in this area lies. This bill is designed to change the situation by:

 Extending some of the insolvency laws which apply to companies and registered charities to colleges (which are statutory corporations and exempt charities).

 Giving the Secretary of State the power to appoint a special administrator who will have duties not just towards the college’s creditors (banks, Local Government Pension Scheme, staff and suppliers) but also a duty to avoid or minimize disruption to the studies of existing students as a whole.

The special administration regime is the central part of the insolvency proposals and is enacted through clauses 13 to 34. The Government foresees using the regime rarely “in the unlikely event that a college fails financially”. The Government has previously created similar special administration regimes in other sectors including energy and railways. The idea is to protect a public service while creating a financial framework to govern the independent organisations that provide them. This can be summarised as “the service continues; the service provider may not”.

Areas of Concern A short consultation regarding these insolvency plans took place in July 2016 and AoC argued that while the Government is right to regulate this area of college financial affairs, there are some areas of concern:

 The impact on investment: The financial weakness in individual colleges can often be attributed to a particular mistake or decision, but cuts in public spending across post 16 education and rising expectations across the sector have led to situations where finances are fragile. AoC believes that investment should be at the forefront of Government plans, and are calling for spending on education and training to increase to 5% of GDP in the Autumn Statement.

 Funding for restructuring: The college insolvency regime is being introduced alongside a Treasury controlled restructuring facility which is designed to support restructuring where finance is not available from banks (which lend £1.5 billion to colleges). However, the terms and conditions of this support are restrictive. Currently no grants or loans have been agreed and there has been a delay in 2016 in the necessary turnaround in several colleges.

 The complexity of financial regulation: The new role of education administrator joins an already complex landscape of financial oversight. There are currently four different bodies of government with this role. These include the Education Funding Agency (EFA), Skills Fund Agency (SFA), FE Commissioner and the Transaction Unit. All these bodies report to the joint SFA/EFA Chief Executive, but use differing measures of financial performance. This inconsistency must be resolved by 2018.

 The place of college higher education students: The college insolvency regime will be introduced at the same time as a student protection regime takes effect in higher education under the control of the new Office for Students. The Government has missed an opportunity to introduce a legal regime covering both further and higher education corporations. This would mean that colleges will have an additional regulatory burden which may make it harder to secure finances or develop their higher education provision.

 Communication: There is significant risk that these plans will alarm many across the further education sector, financial institutions and local government. Potential Governors may be dissuaded from joining due to disqualification regulations (Clause 37), banks may require further security on loans and there is a risk local government may misconstrue funding arrangements – including on the Local Government Pension Scheme.

Skills Devolution The Government’s ambitious skills devolution plans involve the transfer of the entire post-19 education and skills budget outside apprenticeships and higher education to new combined authorities and a corresponding transfer of powers. The aim is to focus efforts and public funds where they will have most effect and to align decisions on skills with other activities to promote economic growth. The target for this reform is 2018 and it will sit alongside some

continuing national systems. Colleges are keen to make the new arrangements work but there are weaknesses which result from the way in the overall approach to devolution.

The process up to now has been deliberately haphazard with different areas having slightly different powers. There is a standard skills devolution menu for nine parts of England but with less than two years ahead of implementation, there remain many unanswered questions.

Colleges are keen to work with local government and the new combined authorities on shared problems but are concerned about the uncertainty and the prospect of having to re-explain what they do to a new set of people1.

The Public Accounts Committee reviewed the overall process in summer 2016 and came up with a range of recommendations including the need for clear objectives, a menu of options, an achievable timetable, budget transparency, work to develop local capacity and proper accountability2.

1 Ewart Keep “The long term implications of devolution and localism for further education in England” FETL/AoC. 2 Public Accounts Committee “Cities and Local Growth” July 2016.