More than a quarter of FE colleges face financial meltdown

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Further education colleges face a ‘looming financial crisis’, a committee of MPs has warned.

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Seventy FE colleges face being deemed as financially 'inadequate', the report said

The number of colleges deemed to be ‘financially inadequate’ is forecast to more than double in the next year from 29 in 2013/14 to 70 in 2015/16.

The Public Accounts Committee report said that the Department for Business, Innovation and Skills (BIS) and the Skills Funding Agency are ‘not doing enough to help colleges address risks’ early on.

It said that oversight arrangements are complex, sometimes overlap, and too often intervene when financial problems have already become serious, rather than helping to prevent them in the first place.

College principals told the committee of the difficulties they face in recruiting quality staff, of courses being cancelled, and of stalled investment plans.

Around 240 colleges teach more than half of the sector’s intake, while 700 businesses or charities teach the remaining students.

The Department for BIS funds adult learners through the Skills Funding Agency, while the Department for Education funds 16 to-19-year-olds through the Education Funding Agency.

Committee chair Meg Hillier MP said, ‘The Government has been desperately slow off the mark to tackle a looming crisis in further education.

‘This is deeply worrying for a sector which equips people with skills and qualifications that can transform their life prospects, and by extension those of the communities in which they live and work.’

‘There is no doubt further education is under significant pressure and it is both frustrating and sad to think of the potential going unfulfilled - particularly in cases where earlier intervention could have prevented problems from escalating.

‘There must be greater clarity over who is responsible for taking action when colleges face financial difficulties, when that action should be taken, and a fuller understanding of its effects.'

The Association of Colleges welcomed the committee's recognition of the damage funding cuts have already done to colleges, as well as how these are exacerbated by late funding decisions. The association is calling for three-year funding allocations to be introduced to allow for better planning and for more resources to help colleges facing difficulties.

The association's chief executive Martin Doel said, ‘While last month’s Spending Review provided colleges with a better than feared outcome, there remain significant financial pressures on the sector which the Public Accounts Committee has rightly pointed out. These will include the costs of recruiting and retaining specialist staff, the high costs involved in equipping young people with the English and maths qualifications they didn’t get in school and the uncertainty created by the new apprenticeship voucher system and devolution of budgets.'

In response, Neil Carmichael, chair of the Education Committee, said, ‘We need a thriving, innovative FE sector to help equip people with the skills and qualifications to boost our economy and drive improvements in the nation’s productivity.

‘Funding for further education has to match the Government’s ambitious goals for the FE sector and ensure colleges have the financial security to plan ahead and achieve these aims.

‘The Education Committee has already stated it will be looking at the Government’s forthcoming funding proposals for schools and we will want to consider whether to explore post-16 funding as part of this inquiry.’

Read the report ‘Overseeing financial sustainability in the further education sector’ .

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