Colleges demand action on soaring energy bills

College leaders have called on new Chancellor Kwasi Kwarteng for urgent support to tackle surging energy bills.

A letter, signed by 189 college leaders, and the Association of Colleges chief executive David Hughes, has been sent to the new occupant of 11 Downing Street urging him to use his forthcoming fiscal statement to boost college funding rates, tackle the staffing crisis and exempt colleges from VAT.

Colleges are central to the Government’s skills agenda, are crucial to the delivery of major reforms like T Levels, higher technical qualifications and apprenticeships and each year support 1.7 million students to boost their skills.

The new Chancellor and his officials are being urged to increase funding rates for 16 to 19-year-olds, which were last reviewed in 2021 before inflation spiked, and adult funding rates, which have not increased since 2010.

Colleges are struggling to recruit and retain staff due to teachers being able to earn more in industry, or schools where average pay is £9,000 a year higher. The Treasury is being asked to introduce a new workforce fund to help colleges recruit and retain staff in vital areas like construction, green energy and health.

In recent years, energy has cost the FE sector around £130 million annually. Unlike consumers, educational establishments including colleges are not protected by an energy price cap, meaning some colleges are now facing bills four-times higher than they were used to paying. If replicated nationally this could mean colleges are spending £520 million a year on energy – up from almost 2% of college income to around 8% – an increase nearly £400 million annually.

Colleges in England operate from 4,500 buildings across 800 sites. Although there is five-year Department for Education capital investment plan for further education, the last decade has seen a lack of investment leaving some colleges with old and unfit buildings making some particularly vulnerable to rising energy costs.

The letter – which was signed by eight out of 10 college leaders – also calls for colleges to be exempted from VAT, like schools currently are, if a long-awaited review by the Office for National Statistics later this month redesignates colleges as being in the public sector.

David Hughes, Association of Colleges Chief Executive said: “As Kwasi Kwarteng is handed the keys to Number 11, he faces a long list of demands from across society and industry to help alleviate inflationary pressures.

“Outside of the cost-of-living crisis, few challenges will be as important as tackling the skills shortages which are holding back businesses and the economy. Supporting colleges must be at the top of his priority list. Cutting VAT on skills and paying college staff better will deliver the economic growth the new PM has promised.”

Notes to editors

Click here for a PDF of the letter.

The letter to the Chancellor outlines the following three priorities:

1. The 16-19, apprenticeships and adult education funding rates should be reviewed, and raised in response to inflationary pressures
2. A new key sector workforce fund should be established, to support colleges with recruiting and retaining teaching staff in priority sectors, where the college workforce crisis is already limiting training and education opportunities for young people and adults alike
3. In the event that the ONS redesignate colleges to be public sector, there is a particular opportunity to remove VAT liability from colleges – in line with schools and other public sector organisations. This would improve college finances to the tune of around 3 per cent of turnover, making significant inroads into the additional cost pressures created by the energy crisis.

The full text of the letter is as follows:

Dear Mr Kwarteng,

We are writing as the leaders of over 180 of the country’s further education colleges, sixth form colleges and designated institutions to welcome you to your new role as Chancellor of the Exchequer and to ask you to consider urgent action to tackle the three-fold impact of inflation and energy price increases on students, staff and colleges.

Colleges play a unique and pivotal role in providing the professional, academic and technical skills development that promotes social mobility, economic growth and improved productivity for individuals, employers, communities and the economy – all of which is of course critical as we work to drive economic recovery and to continue to redress long-standing regional and social inequalities. Colleges also play a vital role in supporting their learners as they navigate life’s challenges – a role that will be more important than ever in the context of the ongoing cost of living crisis we face.

Recent government policy has recognised the importance of technical education and skills, for example in the 2021 spending review – but these efforts risk being undone by a burgeoning economic crisis which is overwhelming students and staff, and significantly impacting on college finances.

Colleges have fixed budgets from the Department for Education but are facing energy price rises this academic year that will quadruple the cost of gas and electricity. This will cut the resources we have for staff at a time when colleges are already struggling in the face of the widening gap between college pay and what skilled teachers can earn in industry and in schools. Staff are leaving colleges every week to return to industry – for up to double their college salary – or to teach in schools on an average of £9,000 more per annum. This is already hampering the expansion of technical education, the preparation of young people for working life and our work to support employers in filling skills gaps. Meanwhile the society-wide issues for households in covering higher energy and food bills will hit our students disproportionately because many have limited resources, placing additional burden on college resources.

There are very serious risks to college solvency and in turn UK skills development if nothing is done, which is why we are asking you to prioritise measures to meet these challenges in your next fiscal statement. There are three particular priorities, which we would ask you to consider:

1. The 16-19, apprenticeships and adult education funding rates should be reviewed, and raised in response to inflationary pressures

1. A new key sector workforce fund should be established, to support colleges with recruiting and retaining teaching staff in priority sectors, where the college workforce crisis is already limiting training and education opportunities for young people and adults alike

1. In the event that the ONS redesignate colleges to be public sector, there is a particular opportunity to remove VAT liability from colleges – in line with schools and other public sector organisations. This would improve college finances to the tune of around 3 per cent of turnover, making significant inroads into the additional cost pressures created by the energy crisis.

We are committed to supporting people, employers and communities through the challenges we face over the coming months and years, and to building a fairer, greener and more productive economy into the future. We look forward to working with you and colleagues across government in support of this and hope and trust you will give genuine consideration of the priority actions outlined above.