Changes to 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 will mean for these various laws because this will be a decision for the UK Government in future, is tied up in the UK/EU exit negotiations and would be affected by the UK’s wider international commitments.

Future changes that could impact colleges relate to areas such as customs and GDPR. If in the future UK-EU relationship the UK charges tariffs on EU imports, there may be customs declarations required for items purchased in the EU. Brexit places the UK outside the EU GDPR zone. For data transfer between the UK and EU, legal cover via contractual clauses may be required. 

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 welcome less regulation but it is not clear that Brexit would deliver it for them. Most education regulation is home-grown:

  • 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
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 limit 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 and some Conservative MPs have described this as an idea worth considering. 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.