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 colleges provide services that trade across the EU and where the objective is to promote competition.

UK membership of the EU has meant 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.  Now that the UK has left the EU, the UK government has consulted on changes to public procurement and state aid rules. Some of the laws that vex colleges most (for example public procurement laws or state aid) are part of World Trade Organisation (WTO) commitments. An immediate impact of the UKEU TCA in spring 2021 has been to introduce new customs barriers at the UK border though these mainly apply to exports of goods rather than imports.

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 £4,188  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.