1. Assistant Chief Executive
Funding Forum
17 November 2015
Julian Gravatt,
Assistant Chief Executive
AoC

2. What I’ll cover (briefly)
The Autumn statement
Public spending on education
College funding
College finance
AoC’s 20 suggestions

3. Autumn statement

4. The Autumn statement What ‘s involved An update of tax/spending plans
Philip Hammond’s first fiscal event
New domestic policies (“ordinary working class people”)
A lot depends on the official economic forecast
GDP +/- 1% = +/- £25 bil
Hammond has dropped 2020 target to close deficit
No sign yet of a re-write of the 2015 spending review
Fiscal consolidation may be necessary

5. March 2016 budget starting point
Public spending plans
£10 bil surplus
Public spending 37% of GDP
Requires
£11 bil spending cuts in 2015 spending review
£8 bil additional savings from March budget (incl higher TPS)
Tax revenues to rise
GDP growth above 2% a year

6. GDP Past and Predictions (Bank of England)
Forecasts that GDP will slow but UK not yet in recession territory

7. Consumer Price Inflation Past & Forecast
After three years of low inflation (below 2%), CPI now expected to reach 3% in 2017

8. Autumn statement checklist
What to look out for?
New fiscal target in response to updated forecast
Some “discretionary fiscal loosening”
- will it be “targeted, timely and temporary” (IFS)
Short term tax cuts/spending rises balanced out in long term
Decisions likely to be left for the March 2016 budget

9. Public spending and colleges

10. The 2015 spending review Across the education budget
Flat cash settlement for schools at time of rising pupil numbers
Apprenticeship levy and more student loans
The decisions relating to colleges
National base rate (£4,000) fixed for four years
Adult education budget fixed in cash terms for four years
A £520 mil restructuring fund (linked to area reviews)
Sixth form college academy conversion option

11. Education funding School grants
(£32 bil/yr EFA to Academies direct in 2019 (?)
High Needs
(£5 bil/yr via councils)
16-18 grants
(£6 bil via EFA)
Levy funded
And SME co-funded
Apprenticeships
(£2 bil/yr by 2018
Adult Education
(£1.5 bil, via SFA & Mayors)
High cost HE
(£1 bil via HEFCE)
HE (and FE)
Student
Loans
(£20 bil/yr by 2020)
Other Govt contracts
(eg MoD, ESF)
Private & International
Fees

12. 3 million apprenticeships + the levy
“Apprenticeship spending will double over the decade”
2015 spending review
… via a new hypothecated tax

13. Public spending on education
The longer term trend
2012: Students pay for higher education (via loans)
2017: Employers pay for apprenticeships (via levy)
2020s: Skills devolution and localised business rates
So that…
Taxation pays for education from age 4 to 18
Users pay for everything else
Central government may have fewer funding levers

14. College funding

15. College key funding lines (£ millions)

16. Funding for 2017-18 EFA funding 16-18 budget cut between 2010 and 2015
National base rate protected (£4,000)
Target to save £160 mil over next 4 years (2.5% of spending)
Well established funding formula
Changes may follow Sainsbury report. Not until 2019
A massive English and Maths challenge for colleges

17. The EFA 16-18 Funding Formula
Programme Cost Weighting
Disadvantage Funding
Area
Cost Allowance
(up to 20%)
Student Numbers
National Funding Rate per student
Retention Factor
(up to 1) ( )
Band
Hours
Total 5
540+
£4,000
4 (*)
450+
£3,300 3
360+
£2,700 2
280+
£2,133 1
< 279
Programme %
Base 0%
Medium
20%
High
30%
Specialist
60%
Land-based
75%
Total Programme Funding
Disadvantage %
1 (GCSE Maths / English)
£480 per GCSE
2 (27% most deprived)
8 to 33% extra

18. 2016/17 Allocations: All institutions
Change in Student Numbers and Change in Funding
2016/17 allocations are provisional
Compared to 2015/16 final published allocations
Funding figures are total funding excl bursary and high needs
**All institutions includes: GFE Colleges, Art and Design colleges,
Agricultural & Horticultural College, Specialist designate colleges, Sixth form colleges, School sixth forms and Academies

19. SFA funding SFA funding
Apprenticeships in colleges +63% to £576 ( )
19+ FE in colleges: -54% to £889 mil ( )
Single Adult Education Budget (AEB)
More flexibility in how money can be used
Restrictions on who’s eligible (not workplace, FE loans)
Move towards devolution in 2018 where there’s a deal

20. Skills devolution Devolution deals with skills budget
Sheffield City Region, Tees Valley,
North East, Liverpool City Region,
West Midlands, Greater Manchester,
West of England, Greater Lincolnshire
East Anglia
Position now
Uncertainty on UK govt plans
Some deals may not hold
Some areas pushing for more

21. Apprenticeships for large employers (c19,000)
HMRC
Levy (0.5% of payroll)
Employer
directs recipient and price
Apprentice
Digital Apprenticeship Service
Registered Training Organisation
Skills Funding Agency
Payment on confirmation of training (ILR) and employer authorisation

22. Funding timetable for 2017-18
After the Autumn statement, hopefully before Christmas
Apprenticeship training register & funding timetables
EFA funding letter and allocation process
SFA Adult Education Budget framework

23. College finances

24. College finances A cocktail of issues
40 colleges with financial health notices of concern
c20 colleges with exceptional financial support
£1.5 bil in outstanding bank loans (90% with two banks)
2016 LGPS valuation (2013 outcome was a 79% funding level)
College insolvency in 2018 via Technical & FE Bill

25. Surplus / deficit

26. Improving the system

27. Autumn statement – AoC on funding
Short-term funding asks
Protect £4,000 rate & £1.5 ASB
Condition of funding flexibility
Higher apprenticeship rates plus an access & quality fund
Reform financial support to help disadvantaged young people
Long-term funding asks
Education spending 5% of GDP
Funding for skills plan
Capital equipment + a building fund
English Social Fund (a new ESF) as part of AEB

28. Autumn statement – AoC on system
Short-term system asks
Budget management (eg virement at 19, 3 year funding)
Bigger transition grant to implement area reviews
DFE should tackle school sixth forms & UTCs
Skills devolution green paper
Long-term systems asks
Level 3 maths for most by 2030 (needs more teachers)
A learning account system (in place of student loans)
VAT off education as part of Brexit
Pension reform

29. Assistant Chief Executive
Funding Forum
17 November 2016
Julian Gravatt
Assistant Chief Executive
AoC