ACER chief exec’s forum
Politics, funding and finance update
20 October 2014
Julian Gravatt, Assistant Chief Executive, AoC
Julian_Gravatt@aoc.co.uk
@JulianGravatt
http://www.aoc.co.uk/term/funding-finance
Politics – where we are now
Uncertainty
8 months before the 2015 general election
Coalition governing parties in open disagreement
UKIP and Greens both doing well enough in polls to secure MPs
Labour better able to convert votes into seats
Result currently difficult to call
The Scotland vote is prompting discussions on the constitution
Education
Gove removed with Morgan seeking to consolidate reforms
DFE oversight of academies & school improvement areas of change
New national curriculum, GCSEs, A-levels and tech quals
Ofsted consultation on post-2015 single inspection framework
AoC manifesto designed to secure helpful but feasible proposals
Schools, apprenticeships and university fees all big political issues
Higher education
The issues
Convergence of interest in Level 4 & 5 higher skills
National Colleges, New Polytechnics?
A need for “medium skills” & to fill old jobs with new people
Alternatives to three-year full-time degree desirable
Challenges
HE student loan system unsustainable & offers wrong incentives
HE reform politically toxic
HE regulation is a mess
Complicated issues about degree awarding & qualifications
Breaking the mould in higher education
AoC paper has attracted some interest
Worth considering college opportunity in advanced/ higher ed
Planning the next 12 months
Autumn 2014
Party conferences, 21 September to 8 October 2014
EFA Funding Letter, October 2014 (hopefully)
AoC annual conference, 18 to 20 November 2014
Autumn statement, 3 December 2014
Skills Funding Statement, December 2014 (hopefully)
Spring & Summer 2015
Budget, mid March 2015
2014-15 allocations, by end of March 2015
Easter, 7 April 2015
General election, 7 May 2015
Coalition negotiations, May 2015
Spending review, June to October 2015 (hopefully)
Politics and funding
Before the election
General avoidance of boat-rocking
Decisions on 2015-16 allocations made before the election
Departmental budgets fixed up 31 March 2016
Autumn statement may add to, subtract from or devolve budgets
After the election
Post-election 2015 spending review (budgets from 2016-17 onwards)
Demography: More children now + more old people = post-16 squeeze
Cross-party agreement: closing deficit, cutting taxes & protecting NHS
Spending likely to dip around 2018
The bigger spending picture
800
Government plans
Various budgets get bigger
Pensions, interest, NHS etc
Deficit reduction via RDEL cuts
Unprotected departments
9.1% of GDP (2013-14)
7.8% of GDP (2015-16)
5.4% of GDP (2018-19)
NATO 2% target for defence
Spending cuts c30-40% to come
Loans & fees a safe haven?
700
600
500
Taxes
400
PSCE
RAME
RDEL
300
Deficit
200
100
0
-100
x
The DFE budget after 2015
DFE’s cash crunch: too many schools, pupils & promises
80% of school income spent on staff; on-costs up 5% in 2015-16
UTCs, free schools & studio schools enrol 1% of 16-18s
2015 to 2020: 11-16 pupils +10%, 16-18 population -8%
Pressure for devolution (councils, combined authorities or LEPs?)
Core 16-18 funding system continues for now
EFA 16-18 funding, 2015-16
Process
16-18 funding letter due shortly
Same systems (rates * lagged numbers * historic funding factors)
ILR data vital (R15 in October, R04 in December)
EFA will confirm data in January and allocations by March 2015
Issues
EFA needs to fund costs of study programmes (more FT students)
If cuts are necessary, EFA has to cut rates, numbers or weightings
Usual raft of tricky topics (GCSE Maths/English, free meals, large
programmes, new A-levels, sub-contracting etc)
BIS budget
BIS budget in 2015-16
£14 bil Student Loans
£13 bil DEL
HEFCE + Grants + Science
£8 bil
19+ FE/Skills budget
£3.5 bil
Various contradictory options are in play
1: Devolve skills & DWP budgets to local govt or LEPs
2: Employer-routed funding for apprenticeships3
3: Expansion of FE loans to 19 year olds & Level 2
4: New earn-or-train options for under 21s on benefit
5: New SFA funding approach borrowed from EFA?
SFA funding, 2015-16
Process
Skills funding statement due in December 2014
Devolution may start to apply (councils or LEPs)
Core SFA funding system continues until a new one is in place
Issues
BIS may need further cuts to SFA and/or HEFCE budget in 2015-16
Apprenticeships continue to be the first priority
Trailblazers will be in their second year (well-funded in 2014-15)
Traineeship funding approach may be revised
Usual raft of tricky topics (reconciliation, ESOL, 24+ loans etc)
Financial health
College finances
Deficits in 2012-13 (48% operating deficits, 10% cash based deficit
Ofsted-related spending + capital projects = short-term deterioration
Staff costs 60-65% of income
Rising costs & falling income
How Colleges need to respond
Understand your position, your environment and your risks
Relationships with SFA, EFA, Council, MP and your bank
Cashflow management, risk management & financial analysis
Governing bodies responsible for solvency & viability of college
Use AoC’s ETF-funded governance support programme
Think about opportunities and what comes next
On a more positive note...
Opportunities
Colleges have friends and allies
Education and skills matter both to the recovery & to society
Government will still be spending £70+ billion on education in 2020
Income generation opportunities exist
Quality counts
Productivity improvements from IT only partly realised in education
There are some relatively simple things that can still be done
Reminders
AoC conference 18 to 20 November 2014
More information on funding and finance issues here
•http://www.aoc.co.uk/term/funding-finance