Written evidence submitted by the Association of Colleges


  1.                                     The National Audit Office report on the financial sustainabily of colleges in England[1] reaches a number of related conclusions:






  1.                                     NAO staff started their work at the end of 2019 and visited several colleges before March but a lot has happened since the 2018-9 financial year which is the year on which they report:







  1.                                     NAO reported an improving financial position for the sector in 2018-9 but also that the sector collectively made a deficit (on an adjusted operating basis) of £80 million. Colleges will not finalise their 2019-20 accounts until January 2021 but we expect the lost summer income to result in a deterioration. The full-year impact of the loss in income, increased costs and the loss of new apprentices are likely to largely wipe out the extra 16-18 income in 2020-1 and leave many colleges financially weaker by summer 2021[7]. What happens after that depends, in part, on the 2020 spending review decisions.


  1.                                     Colleges earn on average 65%[8] of their income from government grants because the majority of their students are under 19 or are low income adults taking courses at Level 3 skills level or below. Another 15% of the sector’s income is routed via government agencies in the form of apprenticeship training payments or student loans. Treasury and DfE decisions on public spending matter very much to the ability of colleges to support national objectives, the recovery, the development of skills and the improvement of less successful towns and regions. However, there are some other issues which deserve attention:






November 2020




[2] Based on their 2018-9 accounts, 65% of colleges had good or outstanding financial health which was an improvement from 61% in 2013-4 but this meant 85 (35%) had inadequate or requires improvement financial health

[3] By the end of 2019, Ofsted judged 82% of colleges as being good or outstanding compared to 74% two years earlier in 2017

[4] 13 colleges have been in full intervention and 10 in early intervention for a full 3 years

[5] Ofsted briefing on further education and skills, October 2020

[6] DFE made a number of changes to funding rules in April 2020 and following months which are reported in the FE operational guidance

[7] A longer note explaining this is on the AoC website here

[8] Figures in this paragraph from an analysis of college 2018-9 accounts

[9] DfE’s College Oversight and Intervention regime published in February 2019

[10] By the 31st March (66% through the academic year), DfE has paid 60% of grant to colleges. DfE pays grant to colleges on the 18th of the month while making an even 1/12th payment on the 1st of the month to academies


[12] AoC Report of the High Volume Apprenticeships Advisory Group