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Public Spending

Public spending decisions matter for colleges for several reasons:

  • the majority of college income comes from government. Colleges get funding to keep education and training free or low cost for young people (aged under 19) or for adults to overcome some form of disadvantage.
  • government uses funding to implement policy: Ministers and officials use funding to influence behaviour (eg. to ensure colleges enrol right students on the right course at the lowest cost).

There is a great deal of information and commentary in the UK about public spending in publications from HM Treasury, the Office of Budget Responsibility (OBR), National Audit Office (NAO), Institute of Fiscal Studies (IFS), Resolution Foundation (RF), Education Policy Institute (EPI) and others. These pages summarise key points from a college perspective and explain AoC's own work on public spending

Spending review

The Chancellor of the Exchequer will make a spending review announcement on Wednesday 25 November publication date for the 2020 spending review and the Office for Budget Responsibility (OBR) say this is when they will revise the official economic forecast. This will therefore be the day where:

  • we get the departmental budgets for 2021-2 (one year only)
  • an independent verdict on the public finances (including the scale of the Chancellor's recent uncosted promises)
  • some sign of the future fiscal intentions.

Everything in government is running at the last minute right now so it is possible that the Department for Education will need some time to sort its own budget out which might mean we don't get clarity on 2021-2 FE funding until December or January.

AoC's sent in a Spending review submission to HM Treasury on 24 September which asked for action in 20 areas

  1. Immediate actions to assist young and disadvantaged people
  2. A national & place-based plan, focused on growth sectors
  3. Development of higher technical education
  4. College business centres
  5. FE teacher pay and pensions
  6. A new deal for skills including higher funding rates
  7. Effective use of the National Skills Fund (see Item 6)
  8. Funding for growth sectors (see Item 6)
  9. Apprenticeship priorities
  10. Retraining
  11. Left-behind areas
  12. Higher 16-18 funding rates
  13. Increase in the population of young people
  14. A Post-16 student premium
  15. Young people with high needs
  16. Improving the quality of places of learning
  17. A new education formula for the long term
  18. Capital spending and financing
  19. Black Lives Matters
  20. Oversight and bureaucracy

AoC research on college funding and public spending (24 November 2020)

AoC assists researchers, think tanks and government officials understand and interpret college data and also carries out small-scale research on issues where there are gaps in knowledge. In 2019 we carried out research on 16-to-19 course costs. In autumn 2020, we published research on adult programme course costs to inform current DFE decision making about the National Skills Fund and adult education budget. Our report, Adult programme costs and rates

involved the analysis of cost and contribution rate for 15 course categories using data collected from colleges about the characteristics of those couses (class sizes, staffing requirements etc). The research concludes that most colleges are barely scraping a contribution from running these courses at current enrolment levels and that, even with maximum class sizes, some would barely break even. DfE's ESFA hasn't changed adult funding rates for at least seven years and has no process for checking whether the rates used in the AEB course matrix are sufficient to cover the necessary costs of a high quality programme.

Institute of Fiscal Studies annual report on education spending (3 November 2020)

IFS published a 175 page annual report on education spending on 3 November 2020. This is the 3rd report in a series and it reaches some firm conclusions:

  • every part of the education system is under financial pressure. This is partly because of upward pressure on pay and pensions
  • there are particular challenges for disadvantaged young people. The pandemic has made this worse.
  • although public spending on schools (particularly primary schools) has risen in the last twenty years, funding per pupil is less in real-terms than it was in 2010.
  • funding per 16-to-18 year old student has been cut since 2010
  • colleges face significant funding shortfalls and heightened uncertainty due to COVID challenges

AoC's comment on the report highlighted the IFS finding that government may spend an extra £500 million in the long-term on the 15,000 extra higher education students enrolled in autumn 2020 and the fact there is no extra funding for the extra 16-18 year olds enrolled this year.

These slides use some of the IFS data (Chart 1.1) to summarise the 50 year trend in education spending

Where did the £400 million allocated to 16-19 education go (2 November 2020)

Just over a year ago, on a sunny Saturday just before the start of term, Sajid Javid announced a £400 million increase in spending on 16-to-19-year-olds. This was part of a September statement in which HM Treasury agreed a 3-year funding deal for schools. At AoC we described the 16-19 funding increase as a "good start" and said it represented the "first meaningful investment in 16-to-19-year olds for a decade" but just over a year later, the money has largely been used up because DfE has left colleges to fund extra students, Covid costs and pension increases themselves. My nott on the AoC website tries to explain what has gone on. This one page slide summarises the argument

The National Audit Office verdict on college finances (16 September 2020)

National Audit Office's recent report on college finances concludes that colleges have a really important role to play in national life but that the way the system is organised in England gets in the way. Funding levels have been cut. The funding formulae are complicated. Ministers introduce big policy changes like the apprenticeship levy without evaluating the full impact but when a particular college gets into financial trouble – and is barely able to pay its bills – the oversight and intervention processes are lengthy and costly. Read more here