Brexit

It is just over half a year from Friday 29 March 2019 which is the date when the UK is due to leave the European Union (EU), but there is a lot of uncertainty about what will happen at that point.

The impact on colleges is less than in some areas of national life but 40 years in the EU has made a difference to our sector. Brexit could bring some big changes in the 2020s:

  • If there is economic disruption, changes in export markets for important industries or new trade deals, this will shape the demand for further education and training.
  • If there are changes to the rights of EU citizens in the 2020s, this will affect staff and students working in colleges.
  • if there is lower migration to the UK in future, this will reinforce the need to tackle weaknesses in UK education and make the country more self-sufficient in skills.

This part of AoC's website explains the main Brexit issues for colleges:

Update on the negotiations and what this means for colleges

The negotiations between the UK government and EU commission cover a large number of subjects which can be grouped into three stages:

  • the withdrawal agreement, which covers the status of UK and EU citizens, the Irish border and the UK's termination bill as at departure date.
  • an implementation agreement, which sets out ground rules for a phased UK exit from various EU rules and processes.
  • the future UK/EU relationship which will cover trade, security and a long list of other issues.

The two sides reached a provisional Stage 1 agreement in December 2017 covering citizen’s rights, the Irish border and UK’s termination bill. Many things were agreed but some issues remain to be discussed, for example the exact decisions on the Irish border or the future mechanism for solving disputes. A key agreement in Stage 1 was that the Uk and EU countries would maintain citizen's rights for nationals already living in each other's countries with an agreement on the processes by which governments would register citizens and through which they can exercise their rights. The Home office published detailed information in June 2018 on the planned EU settlement scheme which will open for applications in autumn 2018.

The two sides reached a second agreement in March which set out the implementation arrangements which provides for continued UK participation in a number of rules and systems up until December 2020. For example, the agreement provides for continuing UK payment into the EU budget until the end of the decade with the continuation of the European Social Fund, Erasmus and other schemes until then.

The Stage 3 negotiations are proving more contentious. The two sides did not reach agreement in time for the EU Council meeting in June. Discussions are continuing with the aim to reach agreement by October 2018.

The mantra from both sides is that "nothing is agreed until everything is agreed" so there is a small risk that there will a no-deal Brexit come 29 March 2019.

FE is a sector which is less affected by Brexit issues than many others but there are some points where it matters. Key points in the agreements so far:

  • Transition will last until 31 December 2020 which is 21 months after the official exit date of 29 March 2019. In a number of areas, the existing rules will continue during the transition period.
  • ESIF funds and rules are now confirmed as continuing until 31 December 2020 including (perhaps ominously) the application of all union laws including “financial corrections” and audit of accounts. The relevant text is around articles 130-131 
  • The text on citizen’s rights (articles 12 to 28) is now agreed between the two sides. Effectively there is an extension of the freedom of movement rules until 31 December 2020, though with the possibility of a different adjudication method after March 2019 to replace the European Court of Justice (ECJ). Anyone who moves from the EU27 to the UK or vice versa from the UK to a EU27 country acquiring rights to become a permanent resident if they stay for 5 years without significant absence. These rights extend to those who come to study and to family members.  Those moving here under these rules to education, vocational training and apprenticeships as host country nationals. Rights are cancelled for serious criminals (which is not tightly defined but mainly relates to people who have had custodial sentences of 12 months or more).
  • The government continues to have a number of red lines particularly around the power of the European Court of Justice (ECJ) after March 2019. This is a legal example of “taking back control” and only really concerns colleges if there are significant employment law or VAT cases taken to the ECJ.
  • The politics of all this continue to be interesting. In order to secure a “status quo withdrawal agreement”, the UK government has given ground on a number of issues which Brexiteer ministers said it wouldn’t. On immigration, the falling value of the pound and fears about UK as a place to come seems to have reduced EU migration from its 2016 peak. The government is due to set out its future migration plans in an Immigration White Paper which has been delayed to September 2018.

Migration and freedom of movement

Migration from EU countries to the UK increased significantly in the 2000s as a result of:

  • the removal of barriers to freedom of movement within the UK
  • the availability of low cost travel
  • the willingness of employers to look at individual skills rather than their nationality
  • high employment levels in the UK compared to Southern and Eastern Europe.

The Government has had a target to reduce net migration since 2010 which has resulted in tighter controls on the ability of non-EU nationals to work, study and join families in the UK. Immigration was a big issue in the 2016 EU referendum campaign and there is a likelihood that the Government will adapt the controls in place for non-EU nationals to cover those from EU27. This will be politically and technically difficult because of the centuries old common travel area with the Republic of Ireland, the presence of three million EU27 nationals in the UK already, the presence of UK nationals in the rest of Europe and the dependence of some parts of the economy on an EU workforce. There are some sectors with as many as 20% of their workforce from Europe. The Home office is due to publish proposals in its Immigration White Paper in autumn 2018 following some expert reviews by the Migration Advisory Committee (MAC). Change is likely to take time.

Retraining and recruiting teachers

There are significant teacher shortages in colleges in construction, engineering, maths and other areas. Staff turnover levels are increasing, partly because of relative pay levels and workload pressures. There are also shortages in schools. There's a risk that a new migration regime for EU workers might make this worse because:

  • teachers leave for jobs in industry 
  • people from other EU27 countries who might have come to the UK in the past will stop doing so in future
  • Home Office might apply a blanket salary threshold (eg extend the £30k used for non-EU workers) which excludes lower paid staff in education. We want people in our sector who work for love as well as money.

There is no firm data on the proportion of EU nationals in colleges because it has not been necessary up to now to collect this. We have collected estimates from colleges via our 2017 workforce survey which suggests that colleges employ an average of 23 EU nationals. This adds up to a total of 7,000 people or 4% of the college workforce. 12% of colleges surveyed reported no known EEA employee whereas 5% reported more than 20. Colleges employ an estimated 189,000 people, of whom 76,000 are teachers.

The Office of National Statistics estimates that education as a whole has an estimated 4% of non-UK EU staff whereas higher education has 15%. Higher education may be an outlier because universities have a strong tradition of international partnership, income from multinational research projects and a tendency to employ their own graduates, an increasing number of whom come from the EU. The university workforce has expanded in the last 10 years (at a time of higher EEA immigration to the UK) while the college workforce has contracted by a few percentage points. It may also be relevant that college employment is geographically dispersed with substantial numbers in relatively small towns whereas UK's EU27 population is weighted towards bigger cities.

Students of sixth form age, adults and apprentices

There are complicated issues for students of sixth form age, adults and apprentices. Ministers have offered some protections for students starting courses in 2017 and 2018 that they will be able to complete their course on existing terms. There is no official data on the number of EU27 nationals in colleges. The sector used to collect nationality data via the Individual Learner Record (ILR) but it was unreliable and the collection has been discontinued. We estimate that the numbers might be around 40,000 (2%) but this is very much a guess. There are some points to note:

  • The transition agreement reached between the UK government and EU in March 2018 effectively extends existing arrangements and rules until 31 December 2020, though with some tweaks in the details. 
  • There are some wider issues relating to access to the UK education system which go beyond the EU. In terms of school admission, DfE guidance is that “children arriving from overseas have the right to attend state funded schools in England” except for children from non-European Economic Area (EEA) countries who are short-term visitors or whose permission to study was given on the basis that they attend an independent fee paying school. DfE’s School Admissions Code restricts the factors that can be used to decide admission which means that other EU nationals are treated on the same basis as UK nationals.
  • Increased mobility within the EU suggests that there are a higher proportion of children of other EU nationals in UK schools but DfE does not collect data on this issue in the school census. However it is worth noting that the national 2011 census reported that the vast majority of the UK residents born overseas were adults rather than children. The current school admission rules do not test nationality or residence (beyond current address) and it would be a massive reform if a decision was taken to do so. The trickiest area of all would be distinguishing between UK and Irish citizens.
  • Since the early 1990s, EU member states have offered access to further, higher and adult education on the same terms to nationals of other member states as citizens of their own state. The rule for publicly funded education and training outside schools are slightly more restrictive. EU nationals living and working in the UK have been able to enrol on further education courses or take apprenticeships on the same basis as UK citizens with the key test being three year's ordinary residence in any one of the 28 EU states plus some further countries. Existing education entitlements extend to the EEA (ie the EU plus Norway, Iceland and Liechtenstein).

Any data on nationality needs to be treated with care. A front page Sunday Telegraph story from May 2016 quoted an ONS estimate that 700,000 school children have one or more parent who are citizens of another EU country without explaining that this is a very wide interpretation. There are several senior UK politicians who are married to EU27 citizens and whose children would therefore be categorised as "foreign" under this definition.

The main source of figures on the numbers of HE students from the EU is taken from student loan data, which reports about 125,000 EU students at UK universities and £224 milllion was paid in fee loans to EU students on full-time courses in England (3.7% of the total). Colleges incidentally have almost no students in this funding stream because their higher education student population is non-residential. Around 70% of college HE students live less than 25 miles away from their place of study. There are significant numbers of EU students in universities in major cities. It is no accident that three of the five universities that recruited more than 1,000 EU students are in London.

The English approach to FE funding/fees gives EU27 exactly the same entitlements as UK students (and non EU students). Key rules are:

  • The course is in England (with some exceptions for armed forces)
  • The student has three year's ordinary residence in the UK
  • Because many FE funded courses are also free (16-18s, basic skills, Level 2, first Level 3 up to age 24), this acts as a government subsidy to EU27 citizens but also ensures that those living and working here attain education and skills for daily life and for work.

In recent years governments across the EU have been fairly ‎constrained by European Court of Justice (ECJ) judgements relating to freedom of movement/benefits/HE rules. The Danish Government lost a case in which they tried to restrict HE funding for their residents vis-a-vis commuters from Malmo. There have been other precedents in the benefit/tax credit areas. When it comes to students - the rules bar discrimination between home/other EU countries when it comes to fees/funding while allowing restrictions on maintenance support.

Departure from the EU would give the UK Government more control over funding rules relating to students but it is quite plausible equal treatment for EU27 citizens may continue as part of a deal to secure access to research funds or to avoid barriers to trade in services. 

There is an interesting issue in apprenticeships which ‎may not be widely understood:

  • Companies employing staff in the UK will pay the levy for anyone paid here (just as they pay employers NI for them) but a fair percentage of this payroll in some companies and public services will relate to EU27 national and non-EU staff.
  • The apprenticeship funding rules restrict spending to anyone with three year's residence.​

In other words, there will be companies paying the levy for members of staff who they cannot claim training funds to support.

European Social Funds

Colleges have used the European Social Fund (ESF) over the last two decades to help retrain and improve the skills of hundreds of thousands of people. Exit from the EU requires a fresh look at the priorities but should not result in any reduction in spending because this would widen existing social and economic divisions.

The latest stage of the Brexit negotiations involved agreement on several elements of the implementation (transition) period. This will run from the official leave date on 29 March 2019 to the end of December 2020. The latest iteration of the withdrawal agreement confirms that the UK will continue to make payments to the EU until the end of the 2014-20  budget and that, in return, programmes like ESF will continue with the same set of rules, audits, clawbacks etc. For those who have ESF contracts and who have compliance sorted, this is obviously good news.

In the longer term, the government has promised that a Shared Prosperity Fund will replace ESF though with different objectives. Whether Ministers keep the promise to maintain the same level of funding for social and regional funds remains to be seen. We believe the emphasis should be on providing a degree of continuity by maintaining funding levels but perhaps with less bureaucracy. Funds should be targeted on areas where economic activity is lower and unemployment is higher to narrow gaps in our society and to make the country work for everyone.

‎The amount of ESF funding received by colleges fluctuates widely because of the stop-start nature of government procurement and the complexity of the funding rules. At its height (in 2014-5) colleges received £100 million in ESF income and £18 million in direct European grants which is high because the previous programme was coming to an end. This represented almost 2% of total income and is less in absolute and relative terms than the £1 billion a year (3% of total income) received by UK universities from EU research funds. Nevertheless, the money is very important to colleges in the more economically disadvantaged parts of the country. The money is concentrated in a small number of colleges..

This is how one college used ESF funding in the 2007 to 2013 period:
“Calderdale College is running the Skills Enhancement Fund project with up to £33 million of ESF funding via the Skills Funding Agency. The project, which ends in 2015, engages with employers to invest in skills development and helps them respond to changes in market needs and the economy. Through contracts with providers and employers, the project has so far supported 43,400 starts on learning and helped people to gain over 14,700 accredited qualifications or units.”

The Work and Pensions Select Commitee published a report in April 2018 which set out the issues

Student mobility and Erasmus+

The EU has encouraged student and staff mobility through schemes such as Erasmus+ for over 30 years. Erasmus+ aims to modernise education, training and youth work across Europe whilst encouraging a better understanding of different societies and the sharing of educational practice. The transition agreement reached between the UK government and EU in March 2018 effectively extends existing arrangements and rules until 31 December 2020, though with some tweaks in the details. 

Since 2014 (the current Erasmus+ programme cycle), UK colleges have received around €43.5m for vocational projects through Erasmus+, benefiting over 100 colleges. In the same time period, for mobility programmes alone the UK has received around €81m in Erasmus+ funding. €39m of this funding has been awarded to colleges. 200 separate mobility grants have been made to 95 UK colleges, with a 20% increase in funding to UK colleges in 2017 compared to 2016.

Whilst the big focus in the past has often been on university student mobility schemes for a semester or a year abroad, there have already been 34,239 UK vocational mobilities through Erasmus+ in the current funding cycle. College student and staff participants account for half of these. Erasmus+ has been successful as it provides a mechanism for college students to undertake short placements in Europe. Short placements fit better with how college courses are traditionally delivered and the work or family commitments that college students often have. The opportunity for a European placement attracts students to college courses and can improve retention and student outcomes. In some parts of the UK, a lack of local work placements has meant that placements in Europe, in subjects areas such as social care or childcare, have been essential. There is no equivalent UK scheme to Erasmus+, and any future domestic scheme arguably could not guarantee the same work experience, foreign language and cultural benefits that Erasmus+ provides.

AoC’s 2017 survey of college international activity showed that EU countries formed the second most important international markets for colleges after China. The survey also highlighted the strong wish of colleges for continued UK participation in Erasmus+ after Brexit. The UK is also one of the largest host countries for Erasmus+ mobilities. Our strong vocational education system, population size and our place as the home of the English language mean the UK has welcomed significant numbers of Erasmus+ participants from EU27 countries. There is therefore considerable concern at European Commission level about the withdrawal of the UK from Erasmus+ after Brexit. At the present time there is no commitment from the UK Government to remain in Erasmus+ beyond the current programme cycle. However, there is clear acknowledgement of the soft power of Erasmus+ and of the benefits to students. There may be options for the UK to continue participation after exit from the EU as a non-EU programme country such as Norway or Iceland. AoC will continue to push for the UK to remain in Erasmus+. 

Changing regulations (state aid, procurement)

There are quite a few rules which constrain ESFA, colleges and others in the education system designed on the basis that we provide services that trade across the EU and where the objective is to promote competition.

UK membership of the EU means that a large body of legislation has been shaped by EU directives including employment, public procurement, consumer protection, competition, energy, intellectual property and social security law. It is a matter of conjecture what EU exit would mean for these various laws because this would be a decision for the Government in future, would be tied up in the UK/EU exit negotiations and would be affected by the UK’s wider international commitments. Some of the laws that vex colleges most (for example public procurement laws or state aid) are part of World Trade Organisation (WTO) commitments. Exit from the EU might allow some flexibility because their main focus is to improve competition for services where there is cross-border trade. There is very little of this in further education and training. However the UK Government has pressed for decades for governments to open their markers and economies so it is not that likely that it will choose to close them off in our sector. AoC nevertheless continues to push for a more intelligent approach to developing education and training capacity.

Colleges would love less regulation but it is not clear that Brexit would deliver it for them. The Ofsted system was designed to meet English priorities and issues. The system of qualifications and awarding bodies has adapted to fit EU classifications and requirements on mutual recognition but is recognisibly and distinctly English. The UK has four different national education systems which allows different approaches in different places regardless of what might happen at EU level. Other sources of regulation in English colleges include a very English approach to funding (described by Professor Alison Wolf as being unique in the world). Child protection rules, health and safety laws, freedom of information and other causes of additional work for colleges are all very heavily influenced by the government in Westminster. The Foreign and Commonwealth Office's balance of competence review of education from 2013 concluded that EU policy making had some impact on UK policy but not that much and arguably EU less influential than OECD.

VAT after Brexit

The UK introduced Value Added Tax (VAT) on the day that it joined the EU. VAT rules in EU members states are partly controlled by the EU treaties because a slice of VAT revenues is used to calculate contributions to the total budget. This means that college students are disadvantaged by the current unjust VAT regime which reduces the resources available to them by about 3% compared to school sixth form students. Government funding levels fix the full-time funding rate for 16 to 18-year-olds at £4,000 until 2019 which is 20-25% less than paid to pre-16, half that available for HE students and insufficient to build a better technical education system.

There are two sets of VAT rules that could be reviewed once the UK Government has more control over the legislation:

  • the rules that limits public service VAT refunds to councils, academies and national museums‎ but leave colleges outside the fence.
  • the rules that exempt education (schools, private schools, colleges, universities) from VAT but leave private training providers and private universities outside the fence.

Colleges lose out from the first set of rules but benefit from the second. AoC has argued for years that the government should extend the VAT refund scheme to all sixth form education. There is risk in seeking changes in VAT rules is that UK Government might use its new found flexibility to "do a New Zealand" and extend VAT ("Goods and Services Tax") to just about everything‎. This is not beyond the realms of possibility. Labour's 2017 manifesto proposed VAT on private school fees. Given the importance of education and training to future economic success, any changes to VAT rules should be introduced with care. The VAT paid by colleges for 16 to 18-year-olds acts as a form of learning tax which reduces the resources available to the most efficient and effective sixth form providers.

Impact of Brexit

In March 2017, the Prime Minister formally notified the President of the European Council of the UK Government's intention to withdraw from the European Union using the procedure set out in Article 50 of the Lisbon treaty. The aim is to ensure that the UK has left the EU by March 2019. The terms under which the UK will leave are uncertain and depend on the negotiations but the Prime Minister's letter set out some aims for the negotiations which include the following points:

  • the aim should be to agree a deep and special partnership that takes in economic and security co-operation
  • it would be helpful to secure early agreement on citizen's rights
  • another aim should be to minimise disruption and secure as much certainty as possible.
  • regulatory frameworks should support a fair and open trading environment.

The Prime Minister updated and explained these objectives in speechs at Lancaster House (January 2017), Florence (September 2017) and Munich (February 2018). Individual ministers also set out objectives in speeches in spring 2018. There is a wealth of information about the government's objectives on the Department for Exiting the European Union website and many public commentaries and blogs on the subject if you know where to find them. This blog from Chris Grey, a Royal Holloway university professor, provides a critical running weekly commentary of every development with lots of useful links. 

The economic effect of Brexit have been widely discussed and is a topic of some controversy. Official forecasts from the Office of Budget Responsibility continually emphasise the uncertainty but identifies spme possible effects:

  • inward migration is less likely to increase between now and 2019 in the way that it might have done given the better performance of the UK economy compared to many EU countries
  • business investment may slow down as a result of uncertainty
  • a weaker pound pushes up domestic inflation but helps some exporters
  • interest rates may stay lower for longer than they would otherwise be
  • it will take longer for the Government to reduce the budget deficit

More information

If you have any queries about the information on this page, please contact Julian Gravatt in the first instance.