Skip to main content

Government must get a grip on further education sector, with nearly half of colleges in financial measures

27 January 2021

The financial health of the college sector has been a cause for concern for many years. The financial health of the sector remains fragile – in 2018/19, one in three colleges reported an operating deficit. Financial pressures are having a detrimental impact on what colleges can offer students, including in cuts to mental health and other support services.

The COVID-19 pandemic will put further strain on the financial health of the sector, even as its importance grows in addressing labour market skills gaps and retraining workers in response to the economic impact of COVID-19. But in evidence to the Committee, the Department for Education (DfE) and the Education and Skills Funding Agency (ESFA) painted a picture at odds with "the much less positive situation on the ground".

Colleges’ autonomy can hamper the Department’s ability to protect learners and safeguard taxpayers’ money – for example, colleges are free to borrow sums that they may struggle to repay, and to run with financial deficits year after year.

But the Committee says it is “clearly iniquitous that sixth-form colleges have to pay VAT while post-16 academies and schools with sixth forms do not”, and notes that “successful implementation of the new T level qualifications risks being delayed by a lack of work placements” beyond colleges’ control.

The result is a situation where, in February 2020, government was intervening in nearly half of colleges for financial health reasons, and in recent years the Department has provided over £250 million in emergency funding, alongside other support, to ensure the continued functioning of colleges.

Meg Hillier MP, Chair of the Public Accounts Committee, said:

"The Covid pandemic has thrown our young people’s education and career qualifications into chaos, and the Department for Education’s handling of the crisis so far has been late and confusing, and it has left already struggling colleges squeezed when people need new skills more than ever.

As focus turns to rebuilding and reskilling for the ‘new economy’ that will emerge, this is a chance for DfE finally to take a hold and develop the proper, integrated vision for the college sector that it has lacked for so long. The young people training and qualifying in these times are the people who will rebuild our economy and society. The Department cannot keep putting sticking plasters over this gaping wound."

Further information

Image:  CCO