Download aoc 9 mar 2017 policy and funding update julian gravatt

Policy and funding update
Julian Gravatt, AoC assistant chief executive
Area reviews
Government policy & public spending
College finance & funding
Final thoughts
Area review timetable
Sept 15
Jan 16
May 16
Sept 16
Jan 17
Wave 1
Wave 2
Wave 3
22 reports published
75% of colleges through process
Completion by March 2017
Intervention will continue
Wave 4
Wave 5
May 17
Government policy
What’s driving government
Everything changed in 2016
• Brexit, Brexit, Brexit
• New world order
• New priorities and policies at home:
-
“ordinary working class people” (May, September)
-
“schools that work for everyone” (Greening, September)
-
“modern industrial strategy” (May, January)
Education policies
Schools green paper
• More places in “good schools” (grammars, faith schools etc)
• It is now six months since the policy was first announced
Justine Greening’s social mobility plan
• Tackling geographic disadvantage (“opportunity areas”)
• Leadership and workforce training
• Ensuring education really prepares young people for work and
career success
Industrial strategy – the proposals
Six areas of action in the strategy (also a green paper)
• Actions to improve basic skills
• Creation of a new technical education system
• Science Technology Engineering Maths (STEM) shortages
• A new big UK skills forecast to identify sectors for action
• A careers strategu
• Testing new approaches to lifelong learning
Some context
Why skills policy has a higher profile
• Productivity already low and Brexit could disrupt economy
• Unemployment low (5%) yet govt wants to cut migration
• Divisions and disaffection evident in society
• Full-time higher education implies a £60,000 debt
• People will work for longer and are saving less
The new overlaps with the old
The reforms that are already underway
• School reform (new GCSEs, new curriculum, academies)
• High needs (EHCPs, council control of funds)
• Apprenticeships (3 million target, new standards, the levy)
• Higher education (Office for Students, Teaching Excellence)
• Further education (area reviews, skills devolution)
Public spending
Public spending
Timetable at the Treasury/Cabinet level this year
• Spring budget (8 March 2017)
• EU negotiations (April 2017 to end 2018
• Autumn budget (November 2017)
Timetable for college funding this year
• EFA funding allocations for 2017-18
• SFA Adult Education Budget allocations for 2017-18
• SFA decisions on the register of apprenticeship training
providers and tenders for training in small companies
Context for the spring budget
What was in the Autumn statement in November 2016
• Official economic forecast shows GDP down by 2020
• All fiscal targets set in 2015 breached. £21 bil deficit by 2020
• Key issue is shortfall in forecast tax revenues
What this meant for public spending plans
• Departmental spending plans unchanged (for now)
• New capital spending (£35 bil) but not much on skills
• 2017 efficiency review to find £3.5 bil in savings by 2019-20
AoC’s budget submission
Govt needs a reset on education and skills
• Fair funding for 16 to 18 year old college students
• Technical education package (workforce, equipment etc)
• Maintain apprenticeship spending whatever the levy
• A citizen’s skills entitlement (including digital skills)
• An English Social Fund
• Capital funding
• Measures to improve efficiency & effectiveness of the system
Headlines
Announcements on economy, fiscal plans, tax and spending
• Economy expected to grow in 2017 more than expected but
forecast full of uncertainties because of Brexit
• Inflation (CPI) expected to rise to 2.4% later in 2017
• Unemployment still below 5%
• UK budget deficit below 3% of GDP in 2016-17
• Current target to eliminate deficit by 2021-22
• Budget includes £5 billion of extra spending over 5 years and
£5 billion of extra tax income* in same period. Fiscally neutral if
the forecasts are correct.
* £2 bil of which is from NICs on self-employed
Education announcements
Full speed ahead on schools
• Schools white paper out soon
• More places in good schools (grammars, faith schools etc)
• £1 billion more added to free school capital budget for period
after 2020. New school buildings take time to come on stream.
• DFE now able to invite more bids for new schools
No action in some areas
• No change on national school funding formula
• Adrian Smith Maths review not yet published
Technical education 16-19 year olds
Towards a new system
• Technical education routes now T-levels
• £100 mil for 2019-20 academic year when first routes start
• £500 mil a year extra in the early 2020s
• Funding assumption 900 hours vs 600 now
• Covers, perhaps, 20% of the age group
• Work needed from EFA to include this funding and new
assumptions into the 16-19 funding formula
• Design of new T-Levels and implementation after 2019 have
major implications for choices offered to all 16 year olds. Not
clear where they will be available or who will offer them
.. and for adults
Institutes of Technology
• £170 million over 3 years for 10-15 new IoTs
• No new Treasury funding. Comes from within DFE budget
• Developed from existing institutions, preferably FE colleges
• Maintenance loans for Level 4&5 courses in future
• Applications will be invited later in spring 2017
Lifelong learning
• £40 million to pilot innovative approaches
• No new Treasury funding. Comes from within DFE budget
What’s next on public spending
Next steps for the government
• Treasury will now work on autumn budget including efficiency
review (“6% savings by 2019-20”)
• Much in government depends on Brexit negotiations
Next steps for the government
• EFA allocations just published
• SFA allocations out in late March (no change)
• Uncertainty on skills devolution
• Apprenticeship D-Day 1 May 2017
College finances
College key funding lines (£ millions)
£3,500
£3,000
FE 16-18
£2,500
£2,000
FE AEB
£1,500
£1,000
£500
£0
FE
Apprenticeships
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Surplus / deficit
3.0%
English College Surplus / Deficit as % of
Income
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
(0.5%)
(1.0%)
2009-10
2011-2
2013-4
2015-6
Pension contributions rising
Support
staff
91 LGPS
funds
Support staff
Income-related
Contributions
5.5-12.5%
College
LGPS Employer
Range 10-25%
Average 15.8%
Rising in 2017
Teachers
TPS
TPS Employer
16.48%
Could rise in 2019
Income-related
Contributions
5.5-12.5%
College finances
A cocktail of issues
• Flat cash funding at a time when costs are rising
• Financial weakness in some colleges
(15% judged financially inadequate; 5% in distress)
• Issues with banks, pensions and insolvency regime
• Competing teams (SFA/EFA, FE commissioner, TU)
• Austerity to continue until 2022 on current plans
• Cashflow is everything
Intervention after area reviews end
Colleges accountable to various organisations
• The bank (if they have a loan)
• SFA/EFA (if finances is satisfactory or inadequate)
• Ofsted (which has a risk-based inspection cycle)
• FE Commissioner (referral from SFA or Ofsted)
• Students, employers and communities
College funding
Where public money goes
School grants
(£32 bil/yr EFA to Academies direct in 2019)
16-18 grants
(£6 bil via EFA)
High Needs
(£5 bil/yr via
councils)
HE (and FE) Student Loans
(£20 bil/yr by 2020)
Levy funded And SME
co-funded
Apprenticeships
(£2 bil/yr by 2018)
Adult Education
(£1.5 bil, via SFA & Mayors)
High
cost
HE
(£1 bil
via
HEFCE
)
College funding
Stability in two main funding lines, upheaval in the third
• EFA funding predictable until tech ed reforms in 2019
• Adult education / skills predictable in short-term
• An entirely new apprenticeship system in 2017
16-18 funding for 2017-18
EFA funding
• Same system; some changes to data (eg Band 2)
• National base rate protected (£4,000)
• Formula adjusts allocations based on student characteristics
• Allocations may be reduced where sub-contracting ends
• Change to A-levels, GCSEs, Applied General, Technical quals)
will bring funding change
• A massive English and Maths challenge for colleges
English and maths
Number of 16-18 GCSE English
students
Number of 16-18 GCSE Maths
students
2016/17 Allocations: All institutions
Change in Student Numbers and Change in Funding
200%
Change in funding
150%
100%
50%
0%
-100%
-50%
0%
50%
-50%
-100%
Change in students
100%
150%
200%
19+ funding
The decisions made in the 2015 spending review
• An apprenticeship levy raising £2.6 bil/year
• Student loans for postgrads and 19+ level 3
• Protection of adult education budget at £1.5 bil/year
• Devolution deals with combined authorities
Adult education budget
Significant change in 2016-17, continuity in 2017-18
• Single adult education budget (AEB) with more course flexibility
but more restrictions on who can be covered
• Continuing issues with (and controls on) sub-contracting
• Underspending in 2016-17 (SFA handing money back)
• Devolution in 2018? Delays and not happening in East Anglia
• “Flat cash” (Year 2 allocation = Year 1 allocation)
3 million apprenticeships + the levy
“Apprenticeship spending will double over the decade”
2015 spending review
… via a new hypothecated tax
Apprenticeships for large employers (c19,000)
Large employer
Apprentice
Registered
Training
Organisation
Levy (0.5% of payroll)
Employer
directs
recipient
and price
Payment on
confirmation of training
(ILR) and employer
authorisation
HMRC
Digital
Apprenticeship
Service
Skills Funding
Agency
Apprenticeships for small employers (1 million) and
large employers who have used levy
Small employer
Apprentice
Registered
Training
Organisation
Employer
pays 10%
of price
Payment of 90% on
confirmation of training
and co-payment to
those with contracts
Skills Funding
Agency
Apprenticeships
A new chaotic market
• Spending decisions devolved to 20,000 employers
• New system, new formula, new rates, new standards
• Lots of standards for higher and degree apprentices
• Tenders decisions in March for all post-April 2017 starts
• Allocations for continuing apprentices
• Difficult to predict now what will happen with the levy
Some final thoughts
What other colleges are doing
Variety of issues
• Area reviews resulting in more mergers
• Public spending reductions have added to financial pressure
• Ofsted plus English and Maths have had a disruptive effect
• Many FE colleges dealing with falls in 16-to-18 enrolments
• Apprenticeships are a near-term priority
• Technical education reforms may be an opportunity
College economics (what’s in the box?)
Class size
Income
Student
taught hours
Positive
completion
Staff costs
per teaching
hour
Costs of
running the
college
Student /
teacher time
/ effort /love
Student
satisfaction