Select Committee on Education and Skills Minutes of Evidence


Memorandum from the Association of Colleges (FEF 03)

KEY POINTS

Structural developments

  a.  The policy framework for further education is much more fully articulated than was the case in the late 1990s—but those developments have thrown up a number of new issues.

  b.  AoC is concerned at the size of the central administration budget for the Learning and Skills Council, and at the level of bureaucracy which seems to be emerging, and the inconsistencies which have emerged between local LSCs.

  c.  It believes there is a pressing need for a clear national framework for many aspects of LSC activity, and for the development of greater transparency in its operation.

  d.  There is concern that LSC will develop an overly prescriptive approach to planning.

  e.  Government should make clear its vision of the shape of post-16 learning and skills provision, so that structural changes can be addressed on a coherent basis.

  f.  There is a pressing need for a more transparent and consistent approach to workforce development, including the place of franchising within the system.

Funding

  g.  Because much of the increase is earmarked for expansion in enrolments, despite the increases in Government funding for the FE sector, the overall unit of resource per student will be almost exactly the same in real terms in 2002-03 as in 1995-96—unlike schools which will receive substantial real increases in funding per pupil.

  h.  Funding available for participation—the core funding received by colleges—is continuing to decline rapidly, and by 2002-03 will be some 10 per cent below the 1995-96 level in real terms.

  i.  After the efficiency gains of the early 1990s, this represents a continuing squeeze on core funding of a magnitude which colleges are increasingly unable to manage without severe effects on financial health and solvency, staff pay, and ultimately the quality of the provision offered to learners.

  j.  Nor are schools and higher education now subject to a 1 per cent year on year efficiency gain still required of colleges.

  k.  The introduction of separate targets in respect of 16 to 19 and adult provision, and the complicated control and clawback mechanisms operated by FEFC, have sharply reduced the incentives for growth and effectively guaranteed under-performance against overall sector targets.

  l.  AoC believes there is a need both to plan for continuing expansion in provision, and to rethink the approach to sector management—with the aim of removing many of the detailed controls which exist, improving funding overall, and at creating new funding incentives which will foster growth and improve targeting.

  m.  Recent funding policies have tended to widen rather than to narrow the funding gap between schools and colleges, so that it now exceeds 20 per cent.

  n.  There are significant issues which have not been addressed in the work undertaken to date on how the allocation system works, on the incentives and steers which are to be given to providers, and on the mechanisms for monitoring performance and reconciling funding flows.

Governance and accountability

  o.  There has been a growing concern within the FE sector at the increasing degree of intervention in the management of colleges regardless of the effectiveness of their management. The Association would see no case for any strengthening of LSC powers in this area, rather it would wish to see intervention on a more selective basis, where circumstances warrant, with successful colleges given greater freedom to manage their own affairs.

  p.  A complex and intensive process of provider review has now been introduced by LSC. Not only has this not been the subject of any significant consultation with the sector—indeed it was instituted without providers being informed—it aims to make judgements about performance across a range of issues on the basis of questionable data without, in many cases, giving colleges any formal opportunity to be involved in the process.

  q.  Not only are the costs of operating a system of this complexity high, in terms of the managerial and administrative resources devoted to ensuring that funding rules and accountability requirements are met, it creates considerable instability for colleges. It also results in an increasing preoccupation by college management with regulatory issues, encouraging a culture of defensiveness with consequently less focus on the expansion and improvement of learning opportunities.

Staffing

  r.  The Teaching Pay Initiative has provided only a partial solution to college staffing problems. It is imperative that it be broadened both to deal fully with the pay problems in relation to teaching staff, and to deal with the equal pay problems for part-time lecturers, and the recruitment, retention, career progression and low pay issues for support staff and managers.

Qualifications

  s.  Curriculum 2000 has been a considerable success, but there remain operational issues which need to be addressed.

  t.  Only limited progress has been made towards unitisation of the curriculum, and the funding of provision not leading to recognised qualifications is as yet unresolved.

Student support

  u.  A national roll out of Educational Maintenance Allowances is imperative from as soon as possible, so that the momentum towards improved staying-on is not lost.

  v.  The available evidence would suggest that rather less money is now directed towards adult student support than under the LEA discretionary awards system.

  w.  The problems of raising money to support study are far greater for those in further education than those in higher education. While recognising the current concerns about levels of debt among HE students, it is evident that even before the inception of the new system, FE students faced much greater difficulties in accessing support, and are far more heavily reliant upon income from work, from borrowing, and from family support than most HE students.

INTRODUCTION

  1.  The Association of Colleges is the representative body for further education colleges, established by colleges themselves to provide a voice for the FE sector at national level. The membership includes colleges of all types—general further education, sixth form, agricultural and horticultural, art design and performing arts, and other specialist colleges. Membership covers colleges in England, Wales (through affiliation arrangements with Fforwm) and Northern Ireland (through the Association of Northern Ireland Colleges). Some 99 per cent of colleges in the three countries are in membership.

  2.  The Association welcomed the decision of the Committee to conduct a fresh inquiry into Further Education. The previous inquiry by the Committee in 1977-98 crystalised many of the important issues facing the sector at that stage of its evolution, and proved to be extremely influential in shaping its subsequent development. Since then however, further major changes have been introduced in both the policy and the structural framework within which colleges function, and in learning delivery. A further review is now timely.

  3.  The Association is pleased to have an opportunity to assist the Committee in this inquiry. The evidence which follows seeks to:

    —  Review the changes which have taken place since 1997, and assess their impact.

    —  Identify the issues which now face the sector.

    —  Offer views on the direction which the sector should take over the next few years.

Structural developments

  4.  The period since 1997 has been marked by profound shifts in Government policy towards post-16 learning and skills, in a number of key areas, notably:

    —  The policy framework within which public provision is delivered.

    —  The structures within which provision is organised and delivered.

    —  The approach to the funding, planning and management of provision.

    —  The framework for quality assurance and accountability.

    —  The approach to intervention.

  5.  It may be helpful to consider briefly the nature of these developments and their impact on colleges and on learners.

Policy framework

  6.  In its 1997 report the Committee reaffirmed the importance of the mission for further education, but drew attention to the need for Government to make clear its priorities for the sector and for resource allocation to support those priorities. In the intervening period, Government has responded strongly to that recommendation and in a variety of ways has both articulated much clearer goals for post-16 learning provision, and established new mechanisms for delivering those goals. Moreover, the priorities adopted reflect very closely the areas advocated by the Committee—16-19 provision, adult learning, widening participation, skills for employment, and basic skills—although in some areas (such as 16-19 provision) those priorities are more clearly defined than others (such as skills for employment).

  7.  In a number of significant respects the policy framework has developed beyond that envisaged in 1997. Some particular examples would be the further expansion of provision embodied in the growth targets set out following the Comprehensive Spending Review, the establishment of an entitlement to learning up to age 18 set out in the Learning and Skills Act 2000, the establishment of learndirect, the creation of new funding mechanisms such as the Standards Fund, the enhanced emphasis on quality and standards, the initiatives to tackle skills issues following on from the work of the National Skills Task Force, the reforms to learner support, and most recently the moves to create a more integrated approach to the 14 to 19 phase as a whole set out in the White Paper Schools: Achieving Success. The policy framework is in consequence much more fully articulated than was the case in the late 1990s—but those developments have thrown up a number of new issues, on which we comment further below.

Learning and Skills Council

  8.  Foremost among the structural changes has been the creation of the Learning and Skills Council. The Association strongly supported the moves—which emerged originally from the review of the Training and Enterprise Councils—to bring together into a single framework responsibility for the funding of almost all post-16 learning outside higher education. It accepted too, the need, which the Committee itself advocated in its previous report, for a greater degree of planning within the system, and consequently supported the enhanced planning powers granted to LSC under the Learning and Skills Act 2000.

  9.  In accepting however the overall structure proposed in the White Paper Learning to Succeed for LSC the Association was concerned that the Council and its local arms should operate in such a way as to minimise bureaucracy and to maximise the flow of funds to support learning. In this respect the Association viewed with concern the announcement last autumn of the size of the central administration budget of the Council—which at £188 million for the current year is some 10 times that of the FEFC. These concerns have been reinforced by the lack of a clear framework in many areas for the relationships between the LSC National Office and local LSCs, the inconsistency in approach between local LSCs in relation to further education matters, and the extent to which even at this early stage many local LSCs are seeking to become involved in the day-to-day operation of colleges. It remains the belief of the Association that a much slimmer and more streamlined administration is both possible and desirable, and that much remains to be done to create a coherent approach within the Council as a whole.

  10.  In its response to the White Paper the Association expressed also its belief that LSC should operate in an open and transparent manner, consulting widely on all issues of importance before decisions are taken, and should expect to publish or otherwise make available full information about its activities. Although the Council is as yet at a very early stage of its existence, the record to date has in several important respects fallen short of these aspirations. Communication, for example, has been a major area of concern, with little or no information publicly available in respect of important initiatives, erratic circulation of significant documents, and confusion about the channels through which information is to be made available to colleges and other providers. Similarly, while in some areas the Council has worked hard to ensure that the impact of changes is fully taken into account in the decisions which have been made (an example would be the new funding system), in other areas there has been little or no consultation on matters which have a significant impact on colleges (for example, changes to the planning and accounting guidelines). The lack of representation from the FE sector on some local LSCs, and the low levels of expertise in respect of FE matters, has tended to compound these problems. Early and significant improvement in the consultation and communication processes must, in the view of the Association, be a priority.

Planning

  11.  In its previous report, the Committee recommended a more planned approach to provision, both at the strategic level (by Government) and at the local and regional level. Government has responded at the strategic level by developing a much clearer statement of priorities for the sector, and by allocating resources in support of those objectives. In many respects this has brought much needed clarity to the sector, but the manner in which these arrangements have been implemented have also imposed a degree of micro-management on colleges which does not sit easily with the Committee's own view that Government should not seek to "run" the sector at a detailed level. We comment further below on some of the issues this has thrown up.

  12.  At the local and regional level, many of the detailed recommendations of the Committee have of course been overtaken by the structural changes introduced since 1997, but the broad approach advocated by the Committee is reflected in the new LSC arrangements. In supporting a more planned approach to provision within the new LSC framework, the Association was concerned however that a proper balance should be struck between local, regional and national needs, and that the system should remain flexible and responsive to individual and employer demand. In particular it was concerned that planning should build from the bottom up, rather than seeking to impose a national approach from the top-down, and should draw on the plans of providers and local learning partnerships. The process proposed in the LSC Corporate Plan assigns a considerable role to local LSCs in the overall planning process, but in doing so appeared to envisage a much more limited role for providers than the Association believes to be both necessary and desirable. It remains the Association's view that providers—especially large and diverse providers such as colleges—have a much greater awareness of the needs of learners and employers than any local planning body. Equally, it does not believe that an attempt to prescribe patterns of provision in detail could be effective—rather, substantial providers should be given considerable flexibility to respond to those needs, within an agreed local framework. At the same time, the framework established in the LSC Corporate Plan left a number of key questions—such as that of the relationship between the broad national targets the Council has set for itself and the allocation of funding for learning programmes, or the way in which college strategic plans would be reflected in those drawn up by the Council—unanswered. Nor has the Council yet made clear how it will assess local plans against sectoral, regional and national skill needs. The Association believes that more consultation is needed on these matters.

  13.  It is as yet too early to assess the impact of the new approach or to judge how far these concerns have been taken into account. Much will become clearer when the initial local LSC plans—currently the subject of consultation at a local level—have been finalised, the Council's own national plan completed, and the resource allocation process for 2002-03 undertaken. But it is already evident that very different approaches are being adopted in different local LSCs, with much greater engagement of colleges and Learning Partnerships in some areas, and that there are pressures within the system for an overly-prescriptive approach. The Association believes it will be important to monitor this experience and to feed back to the Council the issues which emerge. It looks forward to the development of a more co-ordinated approach across the LSC as a whole as the new framework develops.

Rationalisation and mergers

  14.  In its 1998 report the Committee expressed the view that there should be scope for rationalisation of FE providers without damaging diversity and competition, and recommended that mergers should be planned with a clear rationale, with guidance from Government as to the criteria on which mergers should proceed. Considerable rationalisation has taken place since then, with a substantial number of mergers having been approved. Although the criteria for approval adopted by FEFC emphasised the importance of ensuring the maintenance of adequate provision, the underlying reality has been that most mergers have been driven by financial weakness on the part of one or more of the partners. Restructuring of provision has rarely been undertaken as part of an overt plan aimed at more effective matching of supply and demand on an area wide basis. It is as yet unclear how LSC will approach this aspect of its responsibilities: although the Council has formally delegated responsibility for dealing with merger proposals to local LSCs, the policy framework within which such decisions are taken has not yet moved forward from that adopted by FEFC.

  15.  There have however been other important developments in this area, of which the Committee will be aware. The introduction of area inspections led by OFSTED has created a new mechanism for reviewing the effectiveness of provision on an area-wide basis. In several cases such reviews have led to proposals for significant structural change, with a particular emphasis on the creation of more dedicated 16 to 19 provision. Alongside this, the Government launched last autumn and initiative to designate colleges with high quality provision in particular curriculum areas as Centres of Vocational Excellence. While welcoming such initiatives, the Association believe there are a number of questions arising from the developments—such as the nature and mission of general further education colleges—which have not as yet been addressed. The further proposals in the paper on post 16 organisation and inspection which followed the White Paper Schools: Achieving Success, raise similar issues in relation to the co-ordination of school and college provision. In the Association's view there is an urgent need for Government to make clear its vision of the shape of post-16 learning and skills provision, so that LSC decision making on changes to the institutional structure and resource allocation at a local level reflects a coherent approach to the development of provision.

Franchising

  16.  While recognising that high quality franchising can play a valuable role in the FE system the Committee was concerned in 1998 that is should not be allowed to distort the way colleges work, and made a number of recommendations aimed at ensuring that franchising was only delivered in the local area of a college, that it was funded at levels which reflected underlying costs, and that high quality was maintained. Following that report, FEFC introduced a number of changes to the funding system aimed at ensuring that colleges exercised proper control of the provision, gave priority to local provision, and received funding at levels aligned with underlying costs. The FEFC Inspectorate also gave greater priority to the evaluation of franchising provision in inspections. As a consequence, franchising has declined substantially as a component of FE sector provision, and in doing so has affected the ability of the sector to meet the Government's own targets.

  17.  In addition, the Committee recommended that Government make clear the grounds on which it will provide public funding for workplace training, and apply such criteria equitably to all aspects of post-16 training. As yet the changes which have been introduced—for example the adoption of a common assumption across LSC funding programmes that employers and/or individuals will contribute 25 per cent of the cost of provision—do not provide the clarity the Committee were seeking, and there remain considerable inconsistencies in the way in which Government programmes support training for employment. These issues will become of increasing importance in the context of the wider approach to workforce development the Government is now seeking to develop, and in the view of the Association there is a pressing need for a more transparent and consistent approach across all the main publicly-funded programmes in this area.

Inspection bodies

  18.  The Committee was concerned also in its earlier report that there should be greater commonality of approach between the different inspection bodies. In the structural changes introduced by the Learning and Skills Act 2000 Government has sought to address these issues by requiring formal co-operation between OFSTED and the new Adult Learning Inspectorate, and the adoption of a Common Inspection Framework to establish commonality of inspection standards. In its response to the White Paper Learning to Succeed the Association made clear its preference for a single inspection body for all post-16 provision outside higher education, and is concerned that the continuing involvement of two separate bodies may present difficulties in practice. We comment below on some of the experience of the first inspections, but it is as yet too early to judge the effectiveness of the new arrangements. However, at this very early stage, in the Association's view there remains a need for further development to ensure that an inspection regime originally developed to meet the needs of pre-16 compulsory education is suitable for much larger and more complex organisations such as colleges, where the vast majority of students are over 21 years of age.

FUNDING

CSR and SR2000

  19.  The Committee was concerned in its earlier inquiry at the effects of the funding policies which had prevailed in the mid-1990s on the FE sector, and made a number of recommendations about the future direction of funding policies. Subsequent to that report the Government announced the outcome of the Comprehensive Spending Review for the period up to 2001-02, and this was further elaborated in the Spending Review announced in summer 2000 which rolled the plans forward to 2003-04. Those plans represent a considerable shift from the funding policies which had prevailed up to 1998-99, and one which was warmly welcomed within the sector. The overall effect of those plans will be to lift the total funding available to the sector from £3,102 million in 1998-99 to £4,266 million in 2002-03, excluding the assumed employer contributions (full details for 2003-04 have yet to be announced)—a rise of over 20 per cent in real terms.

Funding policies

  20.  However, a considerable part of the funding increase is accounted for by a planned growth in student numbers. The effect is that the overall unit of resource per student will be almost exactly the same in real terms in 2002-03 as in 1995-96. Furthermore, within that total, an increasing proportion is earmarked for specific initiatives (such as the Standards Fund, Teaching Pay Initiative, and capital investment) while that available for participation—the core funding received by colleges—is continuing to decline rapidly, and will by 2002-03 be some 10 per cent below the 1995-96 level in real terms. The following table provides the detailed figures:

FUNDING PER FTE STUDENT IN GOVERNMENT-FUNDED FURTHER EDUCATION IN ENGLAND

  
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
  
actual
actual
actual
actual
actual
provisional
planned
planned
Total Funding/FTE student, cash (£)
3,040
3,050
3,070
3,130
3,360
3,360
3,600
3,670
Real terms index
100
97
95
94
99
97
102
101
Participation Funding/FTE student, cash (£)
3,040
3,050
3,070
3,130
3,300
3,280
3,220
3,260
Real terms index
100
97
95
94
97
95
91
90
adjusted to exclude employer contributions


  21.  After the efficiency gains of the early 1990s, this represents a continuing squeeze on core funding of a magnitude which colleges are increasingly unable to manage without severe effects on financial health and solvency, staff pay, and ultimately the quality of the provision offered to learners. It underlies many of the continuing problems which the sector faces. Moreover, this approach is in marked contrast to the policies now in operation for schools (where total funding per pupil is planned to rise by 29 per cent in real terms between 1995-96 and 2003-04—after having been held effectively static in real terms in the early 1990s), and for higher education (where funding has stabilised in real terms, after declining up to 1998-99).

  Nor are these sectors now subject to a 1 per cent year on year efficiency gain still required of colleges. It is of vital importance to the health of the FE sector that these issues are addressed positively and quickly.

Financial health

  22.  Despite the shifts in funding policy, the financial health of the FE sector continues to give cause for concern. Over the period from incorporation to 1997, the trading losses for the sector as a whole amounted to some £280 million. In subsequent years, the overall outturn appears to have been marginally positive, but the sector as a whole has made little progress towards eliminating those early losses. The benefits of the improved funding allocations only began to filter through in 1999-2000, and given the approach to funding allocation analysed above can at best only slowly improve the trading position. Indeed, the clawback mechanisms have led to increasing amounts of funding being reclaimed by FEFC and now LSC. Within the sector a considerable proportion of colleges has traded at a loss each year, and for a few colleges losses have been recorded over several years. On the last published figures some 15 per cent of colleges are in financial health category C, and vulnerable to any adverse movement in the financial position (and the recent revisions to the financial health criteria—introduced without consultation—are tending to drag down the assessment of some relatively strong colleges). Despite the mergers and restructuring which has been encouraged over several years a number of colleges are known to be in recovery, with special LSC funding support, to maintain their solvency. In the light of this experience, the Association believes that if the sector is to be placed on a sound financial footing, there is a pressing need for changes to the funding regime aimed at providing greater stability and predictability for college funding, as well as at improving funding levels.

Widening participation

  23.  The funding plans allow for an increase in overall enrolments of some 700,000 above the level achieved in 1996-97, in line with the target set in 1998. That target was set after a period of considerable expansion in enrolments, which had lifted overall sector enrolments to some 3.9 million, from the base of around 2.7 million at the time of incorporation. Since then overall enrolments have declined slightly, to some 3.7 million in 1999-2000. However, the Association believes there have been a number of reasons for the loss of momentum in regard to growth. A major one has been the curtailment of franchising—at the peak franchising accounted for over 700,000 enrolments, but much of this has been replaced by direct provision. But there have been other factors as well. The loss of growth incentives with the withdrawal of DLE meant that for several years those colleges with opportunities to grow did not receive the funding to do so. At the same time, the introduction of separate targets in respect of 16-19 and adult provision, and the complicated control and clawback mechanisms operated by FEFC, have sharply reduced the incentives for growth and effectively guaranteed under-performance against overall sector targets. For example, colleges which have under-recruited for 16-19 year olds may have monies clawed back, while turning away adult students for lack of funds. Nor has the overall economic background of the last few years, with jobs plentiful and real wages rising, encouraged either employers or individuals to seek improved qualifications or skills.

  24.  Alongside this, the evidence available suggests that the mechanisms for encouraging colleges to target growth on groups which have traditionally not participated in further learning after school have had only a limited effect. Nor has it been possible to find a mechanism for allocating widening participation funds which is demonstrably better than the post code system adopted by FEFC. Although the proportion of enrolments attracting the widening participation factor increased over the period 1997-98 to 1999-2000 from 25.1 per cent to 26.9 per cent, overall numbers in this group scarcely changed. As yet no detailed evidence is yet available as to the reasons for this. It seems likely however that the low level of the widening participation premium (fixed at an average uplift of about six per cent initially—since increased to 10 per cent for 2001-02) failed to match the additional costs involved in delivering learning for this group, let alone to provide a strong incentive to steer growth (although the new National Rates Advisory Group has commissioned some work on the costs of disadvantage in an effort to illuminate these issues). In addition, the premium itself was funded from within overall sector resources—no additional funding was provided by Government—so that a net increase in funding of some seven per cent for the widening participation group has been bought at the price of a reduction of three per cent for other learners. At a time when overall sector funding levels have been in decline in real terms the outcome is not in the Association's view surprising.

  25.  Despite this disappointing recent record, the Association believes that there is still a pressing need to expand participation in post 16 learning and skills. If Government objectives for

    —  Widening curriculum opportunities for 14-16 year olds to offer a more vocational approach

    —  Encouraging greater involvement in learning for 16-19 year olds currently not in education, employment or training

    —  Securing 50 per cent participation in higher education among those under 30, by 2010 (and building up achievement at level three to support this)

    —  Reducing substantially the numbers of adults with poor basic skills

    —  Continuing the drive for workforce development and vocational up-skilling

are to be delivered then it will be vital that adequate resources be provided to allow colleges the play the key delivery role which has been envisaged.

  26.  In the light of these factors the Association believes there is a need both to plan for continuing expansion in provision, and to rethink the approach to sector management—with the aim of removing many of the detailed controls which exist, improving funding overall, and at creating new funding incentives which will foster growth and improve targeting. We comment further below on the regulatory aspects of this.

Earmarked Funds

  27.  As noted above, earmarked funds now account for an increasing proportion of total sector funding. The Association accepts that some of the elements of funding should be excluded from the core funding delivered to colleges through the mainstream funding formula, either because the activities to which it relates are not susceptible of funding in this way (for example, capital investment) or because Government needs to provide incentives to encourage activities to which it wishes to give priority. However, in the constrained funding environment in which colleges have operated in recent years, the Association would question the balance which is now being struck. The allocation of some 10 per cent of overall funding for earmarked purposes is in its view excessive. In particular, it does not believe that is necessary to operate a separate funding stream for the Teaching Pay Initiative, and would wish to see this absorbed into core funding as quickly as possible. Nor does it see it as necessary to maintain the Standards Fund at its current level, or to continue some of the controls on access to these funds (such as the match funding requirement for staff development). Rather it believes that the bulk of these funds should be absorbed into core funding as quickly as possible, with accountability established through normal monitoring and inspection, and through a college's own quality assurance programmes.

Entitlement and the 16-19 Funding Gap

  28.  The Committee were concerned in their 1998 report at the disparities in funding levels between schools and colleges in relation to 16-19 provision, and advocated an entitlement approach to provision for young people. Considerable progress has been made since then in implementing those recommendations. In response to the reforms to 16-19 provision under the Qualifying for Success initiative announced by Government in early 1999, FEFC developed in conjunction with the sector funding arrangements which reflected closely an entitlement model of the kind envisaged. Although there remain aspects of that model which have not been fully developed, the model has been widely accepted in the sector and elsewhere (and now underpins the proposed approach to funding school sixth forms). In the Association's view this has proved an effective vehicle for supporting the new curriculum approach. The entitlement concept recommended by the Committee has been further consolidated in the Learning and Skills Act 2000 which effectively creates a right to publicly funded learning for all young people up to age 18.

  29.  In addition, DfES published in late 1998 the results of further work which had been undertaken on the comparison of resourcing levels between school sixth forms and similar provision in colleges. That work showed that on average in 1995-96 the cost of delivering a 3 A level outcome in maintained school sixth form amounted to £7,380, while that for a general FE college was £6,250, and for a sixth form college £5,910. Expressed in terms of resource inputs, the average level of funding per student in a general FE college was some 17 per cent less than the average school sixth form, and the average sixth form college some 20 per cent less. The Association has updated those calculations to take account of funding policies since then. Comparisons are complicated by the changes in curriculum, but the Association believes the gap has certainly not closed and has probably grown since then, as the following table illustrates:

16-19 FUNDING GAP

  
Schools
FE Sector
  
1996-97
2001-02
1996-97
2001-02
3 A Level Package
2,886
3,530
2,403
2,520
index
100
100
83
71
Actual A Level Mix
  
3,530
  
2,780
index
  
100
  
79
4AS + 3A2
  
3,530
  
3,030
  
  
100
  
86


  30.  As the Committee will be aware, the Government has now decided that funding for school sixth forms will be transferred to LSC with effect from April 2002. It has further decided that school sixth forms will in future be funded in accordance with a formula which is essentially the same as that to be used for colleges, subject to a guarantee that funding will not fall in real terms. The Association welcomed those decisions, and believes they will make the task of harmonising funding easier, as well as improving the planning and co-ordination of provision. Ministers have given undertakings that they will seek to close the funding gap between schools and colleges, and to do so by converging college funding upwards. The pace of movement has however yet to be determined and will be heavily dependent upon the outcome of the current Spending Review. In the meantime, the policies already in place for post-16 funding in schools will cause that gap to continue to widen. In the view of the Association, it is imperative that early action be taken to set a timetable for harmonisation of funding levels, so that the disadvantage suffered by students in colleges can be eliminated.

Spending Review 2002

  31.  As the Committee will be aware, a further Spending Review is under way which will fix public expenditure allocations up to 2005-06. The Association has already submitted to Ministers its initial views of the priorities for post-16 learning and skills, and will be forwarding its detailed recommendations in November. If Government objectives are to be achieved it believes that it will be necessary in particular to provide resources to:

    —  Deliver further growth in participation for young people, with the longer term aim of full participation up to age 18

    —  Develop vocational learning opportunities for 14-16 year olds

    —  Improve incentives for providers and encourage innovative delivery

    —  Enhance the widening participation premium to reflect costs

    —  Harmonise funding levels across sectors, to ensure equality of opportunity

    —  Carry forward the commitment to 50 per cent participation in higher education among the under 30s

    —  Support that goal by encouraging many more young people and adults to progress to level 3

    —  Continue the programmes for tackling inadequacies in basic skills and social exclusion

    —  Encourage workforce development and vocational up-skilling

    —  Establish an entitlement to publicly funded learning up to level 3

    —  Improve quality and standards

    —  Improve core funding for colleges

    —  Simplify funding streams, reduce bureaucracy and maximise resources for learning

    —  Extend the EMA pilots to a national scheme as early as possible

    —  Rationalise approaches to student transport

    —  Enhance support for adult learners, through both grants and loans, using ILAs as the main channel.

Funding and Allocation Methodology

  32.  As part of the process of creating a more unified approach to the delivery of learning and skills within the new LSC framework, DfES has undertaken a substantial amount of development work on a new funding methodology. Following extensive consultation on the architecture of the new methodology, a new funding system was introduced for work-based learning at the beginning of the current financial year. Those changes have themselves had a significant impact on some colleges, as well as on private training providers and employers. a critical review of the initial model will be essential if the approach is to be seen to be reflective of the true costs of provision—and in this respect some further thinking will be required, in the Association's view, around the question of the balance between public and private contributions. Alongside this, LSC has now issued for consultation proposals for a new approach to college funding, for implementation in 2002-03. As yet the implications of the new approach are unclear, but in the view of the Association, it will be important to ensure that the proposals do not destabilise institutions or result in unintended shifts in provision, either by effecting significant reallocation of resources or by changes in pricing of different types of provision. Nor is it clear whether any significant degree of simplification of the extremely complex FEFC funding model can be achieved (as the Committee advocated in its earlier report). At the same time, the Association believes that serious consideration needs to be given to reducing the multiplicity of funding streams which colleges are now required to access—at least 73 on the Association's own analysis.

  33.  In addition, although the new methodology will provide the baseline for calculating school funding (subject to the real terms guarantee) as yet its applicability to the other main components of LSC funding—adult and community learning and work based training—is unclear. At the same time, as noted above, there are significant issues which have not been addressed in the work undertaken to date on how the allocation system works, on the incentives and steers which are to be given to providers, and on the mechanisms for monitoring performance and reconciling funding flows. In the view of the Association considerable work remains to be done before a common approach to funding across all LSC programmes can be introduced.

GOVERNANCE AND ACCOUNTABILITY

Acountability

  34.  In its 1998 report the Committee made a number of recommendations aimed at improving the quality and transparency of college governance—for example in relation to codes of conduct, registers of interests, and access to governing body information. Most of those recommendations have subsequently been adopted as standard requirements, following further guidance from FEFC and the Association itself. In one or two areas—such as whistleblowing and freedom of information—those developments have reinforced by other initiatives from outside the sector. In addition, Government has reshaped the membership of governing bodies along more representative lines. After consultation with the sector, reforms have also been introduced to strengthen the independence of the clerk to the corporation, and fresh guidance issued on the role of clerks. In the Association's view these reforms have ensured that standards and accountability and transparency within the FE sector now match or exceed those available in other areas of the public sector.

  35.  Alongside this there have been considerable increase in the range and level of monitoring and auditing of college activities. This has done much to improve both the transparency of the sector and the monitoring of college performance—to the extent that it is probable that colleges are now subject to more detailed scrutiny than any other education sector. These developments have however made increasingly heavy demands on colleges, and consume considerable amounts of both management time and administrative resources, at a time when resourcing continues to be under pressure. While strongly supporting the need for transparency and accountability, the Association would question the necessity for some of these activities and whether the costs involved outweigh the benefits which accrue.

Intervention

  36.  While accepting that in the great majority of cases colleges governors discharge their duties in an appropriate manner, the Committee was concerned also in its earlier report in a small number of cases there had been a breakdown in accountability mechanisms within colleges. It recommended that FEFC should play a more interventionist role in cases of college mismanagement. Experience since 1998 has regrettably brought to light a small number of further cases of mismanagement—almost all of them, in the Association's view arising from the laisser faire climate prevailing in the early years of incorporation. In response to these events, Government introduced new powers for FEFC—and now LSC—allow the Council to appoint additional governors to college corporations, together with a number of other changes in the operation of the system aimed at strengthening the position of the funding body—such as the transfer of responsibility for the audit of funding claims to auditors appointed by LSC. As a consequence LSC now has a considerable range of statutory powers to intervene. Although it is as yet too early to judge how the Council will use these powers, experience with FEFC showed that the Council was able to impose changes where it felt it necessary to do so.

  37.  Alongside these formal changes, the period since 1998 has seen a widening of FEFC (and now LSC) intervention using non-statutory powers, through for example the imposition of special funding conditions, or the requirement of recovery plans (which often include significant management changes) for colleges in financial difficulties, or through the use of earmarked funds as a tool to focus on aspects of college operation believed to be of concern. As a consequence, intervention at a variety of levels has become widespread across the sector, and is no longer restricted simply to cases of mismanagement or serious college weakness. While accepting therefore the need for the funding body to be able to intervene where circumstances demand, there has been a growing concern within the FE sector at the increasing degree of intervention in the management of colleges regardless of the effectiveness of their management. The Association would see no case for any strengthening of LSC powers in this area, rather it would wish to see intervention on a more selective basis, where circumstances warrant, with successful colleges given greater freedom to manage their own affairs.

Quality Improvement

  38.  Alongside this shift, the period since 1988 has also seen a growing emphasis on quality and standards of performance within the FE sector. The well-established mechanisms for inspection have increasingly been reinforced by a burgeoning quality improvement role for the funding body, the extensive use of standardised performance indicators, and the increasingly selective use of targeted funds to secure a focus on aspects of institutional performance which are perceived to be inadequate. In addition, as part of this role, FEFC had developed a process of regular review of institutions. That approach had raised a number of concerns among colleges in that the judgements made did not always appear to be well-founded, and there were only limited opportunities to challenge the outcome. Those problems have been compounded in the much more complex and intensive process of provider review which LSC has now introduced. Not only has this not been the subject of any significant consultation with the sector—indeed it was instituted without general notification to providers—it aims t make judgements about performance across a range of issues on the basis of questionable data without, in many cases, giving colleges any formal opportunity to be involved in the process. The inconsistencies in the operation of the process at local LSC level, apparent lack of any quality assurance framework for the initial reviews, and the lack of clarity about how the outcomes of the reviews will be used, has served to increase the concerns—although it is understood that some at least of these issues are now being addressed. While accepting therefore the importance of the emphasis on quality and standards, and the need for LSC to have a role in relation to quality improvement, the Association is concerned that there has been no opportunity for public debate about how that role should be discharged or what form it should take.

Inspection

  39.  The evidence from the inspections undertaken by the FEFC Inspectorate over the last few years showed that standards of provision in colleges were for the most part high, with only some six per cent of work overall graded as less than satisfactory, with around 65 per cent judged good or outstanding. In some aspects of provision—such as basic skills—the proportion of unsatisfactory provision is noticeably higher than this average. In recognition of the need for improvement the Association is working with the Adult Basic Skills Unit within DfES to gather and disseminate good practice both within the FE sector and outside. The Association is also running on behalf of LSC the national basic skills quality initiative which aims to support providers in improving the delivery of basic skills. As the annual reports of FEFC Chief Inspector have made clear, much progress has been made in improving quality over the last few years—although there remains considerable scope for further improvement. FEFC Inspection evidence has also shown that in only a small minority of colleges—less than 10 per cent —are standards poor across a significant part of their provision.

  40.  As yet only a small number of inspections have been completed under the new Common Inspection Framework—covering only some one per cent of colleges, and a group which is by no means representative of the sector as a whole. In the Association's view it is not possible at this stage to draw firm conclusions about the effectiveness of the new approach, or about standards of provision as judged under the new criteria. What is however apparent is a shift in emphasis in the inspection focus towards the quality of teaching and learning in classroom and workshop. While welcoming that in principle, the Association would note that colleges that have been inspected under the new system have felt, in particular, that in some cases the work that they carry out at entry level 1 and level 2 does not appear to be given the emphasis and weight within the inspection that it deserves. It is this level of provision that both attracts and meets the needs of those who failed within the school system and are utilising further education as a second chance. It is in consequence crucial that these aspects of provision—which lie at the heart of the Government strategy for widening access—are given appropriate recognition within the inspection framework, and that judgement are not skewed by towards full-time 16-19 provision of level 3 qualifications at the expense of other areas of work. While recognising that it will take some time for colleges to adjust to the new approach, this early experience tends to reinforce the original concerns as to the need for two separate post 16 inspection bodies, and about the appropriateness of the OFSTED approach to provision for adult learners, most of whom are studying on a part-time basis.

  41.  In addition, while supporting in principle the drive to improve levels of retention and achievement, it is important that colleges are not penalised in the inspection gradings for recruiting those students whom it is far harder to retain, for example, asylum seekers or those with metal health difficulties. This would clearly be a disincentive to colleges in their efforts to widen participation and stimulate demand for learning from currently underrepresented groups.

Deregulation

  42.  In the light of the developments over the last few years the Association and its member colleges have become increasingly concerned at the growing burden of regulation within the FE sector. As outlined above, the system now in existence is characterised by

    —  Multiple funding streams with little or no scope for virement

    —  A complex funding methodology, with different rules in respect of different funding streams

    —  Multiple targets and accountability requirements

    —  Extensive information demands

    —  Rigid and complicated clawback mechanisms

    —  Intensive inspection, audit and review requirements

    —  Increasing intervention in institutional management

  43.  Not only are the costs of operating a system of this complexity high, in terms of the managerial and administrative resources devoted to ensuring that funding rules and accountability requirements are met, it creates considerable instability for colleges. This inevitably arises from the uncertainties about whether funding will be lost if targets are not met or are only partially met, and the damaging consequences of under-performance. It also results in an increasing preoccupation by college management with regulatory issues, encouraging a culture of defensiveness with consequently less focus on the expansion and improvement of learning opportunities.

  44.  These issues are not unique to the college sector—there are similar concerns in relation to schools and universities—but the complexity of the further education system means that the burdens are almost certainly greater than elsewhere. Action is already being taken to address the problems in relation to both schools and higher education, but they have not as yet been recognised in further education. The Association has expressed its concerns on these matters to Ministers, and in doing so has offered a variety of ideas as to how the regulatory burden could be eased: a response is awaited.

STAFFING

Recruitment and Retention

  45.  The Committee drew attention in its earlier report to the major contribution which both teaching and support staff had made to the achievements since incorporation. While strongly endorsing that view, the Association has become increasingly concerned at the impact of funding constraints on the ability of colleges to recruit and retain staff with the skills to deliver high quality learning. The efficiency squeeze arising from the funding policies of the mid-1990s led to the shedding of perhaps as many as 20,000 jobs within the sector, and an increasing erosion in pay levels because of the inability of many colleges to pay even the rises recommended as a result of national negotiation. In the last 12 months alone the equivalent of some 3,000 jobs have been lost. The Association's own analysis suggested that through the 1990s pay in further education dropped by close to 20 per cent relative to the private sector. A survey conducted by the Association in September 2001 shows there are some 3,000 vacancies among teaching staff and 3,400 among support staff and management in colleges, with colleges having spent around £1.5 million on advertising in seeking to fill these posts. Turnover of staff is as high as 10 per cent for teaching staff and up to 20 per cent for support staff and managers. The key subject shortage areas among teachers are basic skills, computing and IT—areas of high importance in terms of skills development and the delivery of Government objectives—and also some specialist trades such as plumbing. The main reasons identified for such a high turnover are the lower salaries on offer compared with schools and the private sector for both teachers and managers, and comparisons with the private sector for support staff.

  46.  Within the funding constraints which have faced the sector, the Association, as the national negotiator on behalf of colleges, has sought to tackle these problems as fully as possible by undertaking authoritative research to present sound evidence to Government, and by seeking to forge a new relationship with sector unions in which past differences could be resolved. In particular, it has sought to ensure in spite of real problems in regard to ability to pay, that nationally recommended pay rises matched those of the schools sector, and it has through joint working with unions created a new framework of national employment agreements for local negotiation by individual colleges. It accepts nevertheless that much remains to be done to modernise pay and conditions within the sector, and is seeking to address these issues with union partners.

Teaching Pay Initiative

  47.  While the erosion in external pay relativities is not unique to further education, it has been exacerbated by the pay reforms which are now being introduced for teachers in schools (which comes on top of a loss of relativity against school teachers amounting to some 7 per cent since the early 1990s). The Association welcomed the Teaching Pay Initiative launched by Government last year as a first step towards tackling these problems, and has worked closely with DfES to create an approach which meets college needs, while delivering the improvements in standards which Government is seeking.

  48.  That initiative has however provided only a partial solution to college staffing problems. The monies available (£65 million in the current year rising to £135 million in 2003-04) are in themselves insufficient to deal fully with current pay problems in relation to teaching staff. Moreover, the limitations on the scope of the scheme will not allow colleges to deal with the equal pay problems for part-time lecturers or the recruitment, retention, career progression and low pay issues for support staff and managers. The Association believe it imperative that the initiative be broadened in the next phase to deal with these issues—in particular, to provide opportunities for all staff to develop, and to receive initiative payments. In addition, TPI adds yet another funding stream for which colleges must bid, and has involved considerable administrative time and expense. In the view of the Association it is imperative that the bureaucracy be reduced and the monies allocated to colleges as an integral part of core funding.

Training and Development

  49.  In emphasising the importance of the staff contribution to the success of further education, the Committee gave welcome support to the creation of the Further Education National Training Organisation. FENTO has now been established for several years and in the Association's view has made a valuable contribution to the development of competence standards for sector staff and to the promotion of staff development generally. It is as yet too early to assess the impact of the recent announcement by the Secretary of State of the reform of NTOs to create new Sector Skills Councils, but the Association believes that the wider reform this embodies is necessary if sectoral skills needs are to be effectively represented within the new structures for post-16 learning. Alongside this, training programmes for principals and governors are also now well established. At the same time, substantial resources (£80 million in the current year) have been allocated through the FE Standards Fund to support staff development in the sector.

  50.  In addition, the Government has now established a requirement for all new full-time teaching staff to achieve a recognised teaching qualification within two years of entering the profession. It is also proposing, as part of the reforms to 14-19 education announced in Schools: Achieving Success, to legislate to remove some of the barriers to staff movement between schools and colleges. The Association warmly welcomes these initiatives, which it firmly believes will help to raise standards across the sector. But it believes it will be equally important to ensure continuing emphasis on updating the skills of the existing workforce.

  51.  In its previous report the Committee expressed some doubts about the role being undertaken by the then Further Education Development Agency. In the intervening period the Agency has been re-organised, and shifted its role to become more heavily engaged in the development and delivery of Government programmes. More recently it has been transformed into the Learning and Skills Development Agency, with a remit across the whole post-16 learning sector. While LSDA has made a useful contribution to the development of the sector over the last few years, in the Association's view there remains an ambiguity about its role. It would suggest that two alternative models are possible—either a Government agency funded under arrangements agreed with DfES, or an independent sector body operating at arms length, earning its revenue from undertaking open contracts. The former would imply that the Agency would not be able to offer a view independent of Government, but would allow DfES to provide funding for an agreed programme of research and development activities, without the necessity for competitive tendering. The latter would allow LSDA freedom to offer an independent view, but would require that Government projects be awarded only after open, competitive tendering, as with other independent agencies. The current arrangements do not conform clearly to either of these models, and in the Association's view the status of LSDA should be clarified. In addition, depending upon the model chosen, it believes the performance of LSDA should be subject to a process of independent review at regular intervals, either by an inspection body (such as ALI) or through the quinquennial review process adopted for other Government agencies.

Part-time and Agency Staff

  52.  The DTI investigation into the use of staffing agencies which the Committee welcomed in its previous report has now resulted in a number of detailed changes in the legislation, covering part-time employment. Further legislation—such as the Part-time Workers (Less Favourable Treatment) Regulations 2000—has also imposed new obligations on employers. The Association supports the greater protection which this has given to part-time staff in colleges, and has developed with union partners a national employment framework for part-time workers. However, the sector employs some 135,000 part-time staff who are likely to benefit from these improvements, and the Association is concerned that as yet the additional costs involved have not been properly reflected in sector funding allocations. Colleges continue to make use of staffing agencies where they are the most appropriate route for recruitment of the necessary skills and expertise, but the available evidence would suggest that they only account for a minority of the part-time staff in the sector. As the Committee will be aware, the Association does not now endorse any particular provider.

QUALIFICATIONS

Curriculum 2000

  53.  The reforms proposed by Government to broaden the learning programme for 16-19 year olds have now been implemented. As the Committee will be aware, there have been a number of difficulties in the first year, primarily around the assessment arrangements, which resulted in the decision last summer by the Secretary of State to commission a review by Professor David Hargreaves, Chief Executive of the Qualifications and Curriculum Authority. The Association welcomed the review and believes that the initial recommendations, and the subsequent Government decisions, will go a long way towards resolving the initial difficulties while preserving the key elements of the new structure. It would welcome a stronger steer to universities to take account of the reforms, and in particular key skills, in making offers to prospective students. It will continue to work with QCA to strengthen the framework for the longer term. Specifically, the Association is concerned that the curriculum planned at levels 1 and 2 may not be sufficient to address the needs of a cohort of learners with a wide range of abilities and a negative experience of learning and examination. Consideration needs to be given to the requirements of those students who formerly would have taken the GNVQ programmes at Foundation and Intermediate levels, due to be withdrawn in 2004. The Association is also concerned of the negative effect colleges will experience due to changes in the reporting of part of the achievement data which is used in the published league tables. It believes that sector performance will be misrepresented by the new tables and this may reflect both on the perception of the success of Curriculum 2000 and on recruitment in September 2002.

Adult Learning

  54.  As yet however only limited progress has been made towards establishing the feasibility of a unit based system for adult qualifications. It remains the belief of the Association that restructuring along these lines would allow learning to be packaged and delivered in ways which will match individual needs much more effectively, thereby improving access and incentives towards lifelong learning. The "bite sized chunks" programme promoted by LSC and the new qualifications structure for adult basic skills offer useful models which could be built on, while the utilisation pilots mounted by FEFC and the reforms to the funding system to allow the funding of much shorter courses provide valuable experience of how the funding system could support a utilised approach. There are however, further issues which now need to be addressed in relation to the funding by LSC of provision which does not lead to recognised qualifications—especially provision for adult and community learning—both as regards the priority to be given to such work and the funding arrangements: these are currently being addressed by LSC but as yet the longer term policy framework has not been settled.

STUDENT SUPPORT

Reforms

  55.  The Committee's earlier report set out a package of recommendations for improvement of the further education student support. The reforms which Government has since introduced have gone a considerable way towards realisation of those recommendations. A key change has been the transfer of responsibility for providing student support away from local education authorities to the Secretary of State, which has allowed funds to be channelled through LSC into much enhanced college Access Funds. Coupled with the funding improvements which Government has been able to fund within the previous spending reviews, this has helped to reverse the erosion in FE learner support which has occurred through the 1990s—with some £110 million now available to FE students through this route as compared with an expenditure of around £80 million on discretionary awards immediately before the changeover. However, it needs to be recognised that even if the expenditure on Educational Maintenance Allowances is taken into account (around £150 million in the current year), total expenditure on FE student support is now only at roughly the same level in real terms as before college incorporation.

  56.  The creation of dedicated funds for residential bursaries for those students who have to reside away from home in order to access the learning programmes they need, and for childcare (which included the funding previously provided through FEFC funding units) has proved effective in targeting areas of particular need. It has however become increasingly evident that even when allied with other childcare initiatives, this aspect of the programme falls a long way short of potential demand.

16-19 Year Olds

  57.  In the 16-19 field, as the Committee will be aware, the Government has launched a pilot programme of Educational Maintenance Allowances. Initial evaluations have shown that the provision of financial incentives to children from poorer homes can have a significant effect on staying on rates, and on student motivation and behaviour. The future of that programme is as yet unknown, although Ministers have indicated that if the pilots prove successful, a national scheme would be considered, and that consideration would be given to funding this through the reform of child benefit for 16-19 year olds, as the Committee recommended. In the view of the Association a national roll out is imperative from the earliest possible date, in order that the momentum established in the pilots towards improved staying-on is not lost.

Adult Learners

  58.  In relation to adult learner support, progress has been slower. There have of course been benefits from the increased Access Funds, but the available evidence would suggest that rather less money is now directed towards adults than under the LEA discretionary awards system. The National Skills Task Force made a number of recommendations aimed at providing better support for adult learners, including the introduction of income contingent loans—in line with the Committee's own views. The Government's response—announced in the White Paper Opportunity for All in a World of Change—indicated that £20 million would be made available to support a number of pilot initiatives. As yet there has been no announcement as to what form those pilots might take.

  59.  In addition, the Government launched the very successful programme of Individual Learning Accounts with an initial grant of £150 for the first million learners to access the accounts. That target has now been surpassed and the accounts now rely on a system of discounts. In the view of the Association, the ILA concept has considerable power to incentivise learners of appropriately developed: it has submitted its own suggestions to Ministers as to how this might be achieved.

Research Evidence

  60.  Despite this progress, it remains the case, as the Committee noted in its earlier report, that funding levels for adults in further education fall dramatically short of those available to students in higher education. Even after the reforms of the last few years, only some £70 million is available in total for adult learner support in further education, as compared with over £2 billion available to HE students (of which some £94 million is for hardship, opportunity bursaries and fee waiver alone). Yet the research commissioned jointly by DfEE and FEFC from Professor Claire Callender (published as The Hardship of Learning) showed the actual expenditure on maintenance and study while a full-time student at similar levels for the two groups, while the problems of raising money to support study were far greater for those in further education. While recognising the current concerns about levels of debt among HE students, it is evident that even before the inception of the new system. FE students faced much greater difficulties in accessing support, and are far more heavily reliant upon income from work, from borrowing, and from family support than most HE students.

  62.  In the view of the Association such gross disparities constitute a major barrier to learning for many adults. Failure to address the issue will it believes severely undermine the Government's drive to enhance participation in higher education among those who fail to reach level 3 by age of 18 or thereabouts.

Association of Colleges

October 2001


 
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