Colleges are responsible for the buildings and space they use for education and training, which they either own or lease. Colleges fund capital expenditure themselves using a combination of their own cash, bank borrowings and Government grants.
Capital spending in colleges
Colleges spend considerable sums on advanced machinery, laboratory equipment, workshops and vehicles but are under financial pressure to improve their operating surpluses and conserve cash. Total capital investment has fallen from £1.5 billion in 2009-10 to around £1 billion now and continues to fall. This is directly attributable to the lack of direct capital funding for colleges but is also a result of the withdrawal of private finance. An increasing number cannot persuade banks to lend more, do not have property to sell and do not generate sufficient cash. There is no good reason why FE colleges do not qualify for the formula grants paid by DfE to sixth form colleges and schools or why there has been a dedicated equipment fund paid by HEFCE to higher education providers (including colleges) but noting equivalent in further education. This capital funding gap will become more serious as the post-16 population starts to rise. The National Infrastructure Plan records plans to spend £23 billion between 2016 and 2021 on school places will be little help because school buildings are not being designed for technical education requirements. There is the case for a capital budget to unlock this issue and to provide suitable equipment and purpose-built facilities that maximise efficiency, support larger class sizes and support specialist facilities. Efficient use of space in new buildings allows other space to be released or re-used.
Growth Deals and Local Enterprise Partnerships
Since 2015-16, Local Enterprise Partnerships (LEPs) have provided capital grants to some FE colleges as part of the Growth Deal process.
The indicative skills capital budget within this local enterprise partnership (LEP)-controlled fund is a total of £0.5 billion over a four-year period and this is unlikely to be used because of pressure from other priorities and the difficulties that colleges have in raising private investment.
There are 38 LEPs and the growth deal process involves an agreement with the Department of Communities and Local Government over a budget that covers transport and hosuing as well as skills.
Growth Deals and College Capital Projects
The government has made some important announcements today about capital funding to colleges in 2015-16 via local enterprise partnerships (LEPs).
These are contained within 39 Growth Deals which set out the agreement reached between the Cities and Local Growth Unit and LEPs. All the deals are on the government website
The information on individual LEP plans is spread out across 39 documents. A few deals name projects connected with skills but some deals have no projects listed at all; some of the larger LEPs will hold a further bidding round. Note that the "LEP commitment" stated in the deals will generally be money provided by the college themselves on a matched funded basis.
Capital Funding Presentation
This presentation given by AoC chief executive, David Hughes, to AoC's Estates conference summarises current capital funding issues.
Capital Reference Group
Between 2009 and 2015, AoC organised a Capital Reference Group at the request of the then Secretary of State. This group discussed issues of importance in capital funding and provides advice to Government on capital funding. The group met two to three times a year, is chaired by a college principal (currently Mike Potter CBE, Principal and Chief Executive, Guildford College Group), comprises nine representatives from colleges across the nine English regions, a number of representatives of specialist colleges and officials from SFA, EFA and BIS. AoC provides the secretariat. Minutes of recent minutes and key papers are below.