Skip to main content

College insolvency consultation - AoC response (9 Feb)

19 June 2019

DfE published a technical consultation on the college insolvency regime just before Christmas. The consultation ran until 12 February 2018. AoC's response to the consultation is available for download here AoC note on the college insolvency consultation 9 feb 2018.pdf AoC note on the college insolvency consultation 9 feb 2018.pdf (PDF,104.18 KB) Aoc intevention slides jan 2018.pptx Aoc intevention slides jan 2018.pptx (PPTX,689.59 KB) 20180110 FE insolvency consultation - presentation.pptx 20180110 FE insolvency consultation - presentation.pptx (PPTX,106.09 KB) What is happening? The government consulted on introducing a college insolvency regime in 2016 and secured Royal Assent for legislation in the 2017 Technical and Further Education Act. The new law has two elements: It will be possible in future for an insolvent college will be dealt with in a similar way to an insolvent companyIn most cases the Secretary of State will appoint an education administrator who will have the duty to protect courses for learners alongside the duty to secure the best outcome for creditors. When will this take place? The new rules are due to take effect at the end of 2018. Officials want to put the regime in place before the Restructuring Facility ends on 31 March 2019. Why is this happening? There are currently no clear rules about what would happen if a college ran out of money and the government did not stand behind it. When the Conservative Government transferred colleges out of local government in 1992, it created a new type of statutory corporation but it did not make any rules for cases where a college ran out of money. Instead central government (via a succession of funding agencies) has ended up being the funder of last resort - to protect the college's students, courses and assets. The special administration regime for colleges is similar to the arrangements put in place in recent years for energy companies, railway, housing associations and the post office. The aim is to protect a public service while creating an orderly process to deal with a situation where the organisation providing that service has run out of money. How will this work in practice? The new college insolvency regime will supplement the existing intervention regime run by EFSA and the FE commissioner. Officials describe the college insolvency regime as a "last resort" rather than a "normal route" to secure change. Once the new arrangements come into force, there will be several lines of control in place: Governing bodies, who have a duty to ensure the solvency and viability of colleges ESFA, which has financial oversight FE commissioner, who intervenes where the college has a notice to improve Independent Business Review, a new process for colleges in severe financial distress The college insolvency regime is a last resort if the interventions listed above fail.