ARE0002 - Evidence on Area reviews of post-16 education

ARE0002

Written evidence submitted by the College of Haringey, Enfield & North East London

Context

The College of Haringey, Enfield & N.E. London (CONEL) is a large general further education college with campuses in Tottenham and Enfield. In 2015/16 there were about 20,000 enrolments, including 2,000 EFA funded 16-18 year olds, 15,000 SFA funded adult learners, and 1,700 apprentices. The college was formed as a result of a merger between the College of North East London and Enfield College in 2008 and is currently in merger discussions with two neighbouring colleges, Waltham Forest College and Barnet & Southgate College.

The Area Review Process

The process has taken up a lot of senior management time since it started in March, an estimated day a week on average. This has been compounded for CONEL because of the way London was carved into four sub-regions, putting our two main campuses into two different Area Reviews. In our view this has not been productive, primarily because the Area Review process has not addressed the key challenges confronting the college. With London devolution just round the corner the Area Review has provided an opportunity to gather information about patterns of college provision which will be useful when considering London’s future skills strategy, but this could have been done far more efficiently by a central research team. By November, when local steering groups are due to make recommendations, it will be too late to have much effect on most merger decisions and too early for the incoming London Mayor to wish to make any firm decisions.

Area Review is in any case a poorly-designed instrument for dealing with the specific problems of colleges in their particular, local contexts. This is because the success of each FE college is dependent not only on the effectiveness of their own management actions, but the impact on them of decisions by other key actors in the Post-16 terrain – schools and universities – over which they have no influence.

It’s also an instrument that doesn’t tackle the fundamental issues that lie behind the problems facing many FE Colleges: the failure over decades to develop a coherent and clear government policy for high quality technical and professional education, backed up by a stable and consistent funding regime. It’s a sticking plaster, not a remedy. The issues raised by the Public Accounts Committee in December last year remain unresolved.

Mergers

The mergers of London Colleges so far announced have been the result of discussions which began before London’s Area Review and have taken place with little or no reference to the Area Review process.

In CONEL’s case, we began discussions in the summer of 2015 – before the Area Review process was first announced - the trigger being the further round of government cuts to the Adult Skills Budget that year. In fact the announcement of Area Reviews confirmed our suspicion (later proved wrong) that the government was going to announce further cuts in the 2015 Autumn Spending Review and had the effect of accelerating our discussions.

The London Area Review has in practice been mainly focussed on finding a solution for the small number of colleges in serious financial difficulty. This is not likely to be easy, since there are little or no financial or other incentives for strong colleges to take on the considerable risks of merging with loss-making and debt-laden colleges, especially at a time of such uncertainty about future funding priorities and policies.

There is also – crucially – no direct way for Area Review Commissioners or anyone else to force college governors to take merger decisions against their will.

Savings and Financial Sustainability

The Area Review process is surely a case of closing the stable doors after the horse has bolted. Successive governments have failed to support the FE sector adequately and if this trend continues, the current round of mergers will only delay the inevitable collapse of all but the strongest colleges.

Mergers do not in themselves provide a magic wand to protect colleges from sliding into financial ruin, but they do provide a temporary buffer against the predictable long term consequences of continuing decline in college income.

There are two main reasons why so many FE colleges have got into such financial difficulties.

Adult Funding Cuts

As Alison Wolf has noted (“Heading for the Precipice, June 2015, p22), funding for classroom-based adult skills declined from 66% to 44% of the total adult education budget between 2002 and 2009. The Coalition government planned and implemented a further overall reduction of 14% in the Adult Skills Budget between 2011 and 2015. The problem is not just the reduction in overall funding levels, but the way in which funding regimes have pushed colleges towards low level /high-volume areas – adult basic skills and employability courses – and away from high level/ specialist areas – most technical courses – where employers report the greatest skills shortages and productivity problems. The funding inequality between academic and technical education is reflected in the stark contrast between the fortunes of universities – which have seen an enormous increase in income since the introduction of student loans up to £9000 a year for even the lowest-cost courses and FE Colleges, which have seen a decline in income which make delivery of high-cost courses difficult to maintain.

Increased competition for 16-18 year old students

The active encouragement and funding incentives given to Academy Schools, UTCs, Free schools and others to expand their Sixth Form provision led to a drop in the number of school leavers going to FE Colleges in many areas, particularly ones where local authorities supported 11-18 schools. As the participation age was lifted to 18, continued emphasis was placed on young people aspiring to university as their best option for success, which meant that more lower-attaining pupils were encouraged to stay at school and attempt sixth form study. This situation was compounded by the decision in 2014 to lift the Higher Education student number cap, which led many low-tariff universities to reduce their entry requirements even further and in many cases make unconditional offers of a university place. School sixth forms swelled with young people who then went on to get degrees which gave them little advantage in the job market and left them with a sizeable student loan debt. Meanwhile colleges struggled to fill technical education courses and apprenticeships in subjects – like Engineering, Digital Skills, Construction – desperately needed for London’s economic growth.

Our experience at CONEL illustrates these trends. In 2008/9, when CONEL merged with Enfield College, it had an annual income of £52m. By 2015/16 this had declined to £32m, a drop of nearly 40%.

Since 2010/11 our EFA income has dropped from £15m to £11.5m (down 18%), but in the same period the big story has been the drop in SFA income from £27m to £14m (down 48%).

Nevertheless, despite this step decline in income, CONEL has managed to achieve annual surpluses in every year except one since 2008, and has avoided getting into any major debt. Cash reserves have been maintained at healthy levels and £20m of investment in new and refurbished buildings has been funded with minimal bank loans. This has been achieved by biting the bullet and implementing year after year of staffing cuts and other efficiency savings. But this has only been possible because CONEL was large enough from the start to make cuts without having to withdraw from any major course areas.

The evidence so far (e.g. “The Evidence Base on College Size and Mergers in the Further Education Sector” DIUS, 2008) is that there is no direct correlation between the size and shape of a college and its financial and quality strength. The key to success is the quality of governance, leadership and management, not the size of the institution.

However, small colleges, unless they have a buffer of private or charitable funding to supplement government grants, are always vulnerable to changes in government funding priorities. Unless they have powerful allies, they will always struggle to exercise influence over local or national policies, to lobby effectively to protect their interests. And as soon as the financial going gets tough they can quickly find themselves struggling to survive.

So our conclusion is that although size is no security against failure - and no guarantee of success - it does have significant advantages if managed well. We would therefore argue that a large college is now a necessary, if not sufficient, condition for long term success.

To that extent, we support the Area Review’s focus on brokering college mergers, but the problem is that putting two financially weak colleges together – or even a weaker one with a stronger one - risks simply compounding the problem. There are no significant “back office” savings left to make in FE Colleges and the savings in management and administrative costs that can be achieved through merger are no more than small change in the wider picture of financial viability.

The Regional Schools Commissioner, Local Authorities and the London LEP

While the Regional Schools Commissioner has intervened helpfully in discussions involving local sixth form provision, local authorities and the LEP have been largely spectators in the Area Review process, with little or no power to do anything. The London Borough of Haringey’s recent STEM Commission initiative has been very constructive in developing local education strategy, but this has been completely independent of the Area Review process.