There are 266 colleges in England and they are under serious financial pressure. The outlook for the sector has deteriorated in the last 12 months despite funds made available in recent Treasury budgets and despite the widespread agreement that education and skills matter for the country's future.
AoC's 2018 report on college finances explains the key figures and trends in more detail.
The immediate financial issues for colleges are:
- Falling income from 16-to-18-year-olds Education of 16-to-18-year-olds account for 41% of FE college income and 77% of sixth form college income/ This income is falling because there are fewer 16 to 18 year olds in the population and falling numbers staying in education. DfE funding for 16 to 18 education in colleges will fall by 2.1% in 2018-19 because the autumn 2017 census reported a 2.4% fall in student numbers.
- Apprenticeship challenges: Apprenticeships accounted for 10% of total FE college income in 2016-17. Despite expectations of higher apprenticeship income, the numbers starting apprentices in 2017-18 has fallen and actual spending has been well below expectations. Colleges expect apprenticeship income to fall in 2018-19 compared to 2017-1
- Unavoidable pay costs. Staff costs account for 65% of FE college and 71% of sixth form college income in 2016-17. This is above the FE commissioner benchmark of 63% and which reflects the pressure to keep pay competitive and higher social costs.
- Refusal of the government to cover inflation. The Consumer Price Index has risen by 7% in the last five years and is expected to rise by 4% between now and 2020 but the funding rates paid to colleges have been fixed in terms of cash since 2013. DfE has found money from its budget to protect funding per school pupil and to support pay increases but there is nothing similar to protect colleges or post-16 education.
- Withdrawal of finance. Colleges are able to borrow but for the last three years the sector has been paying back more to the banks than they are taking out. Total college debt fell from £1.5 billion in July 2015 to £1.25 billion in 2016-17. The banks have become very cautious as a result of the new college insolvency laws and DfE plan to remove exceptional financial support where colleges run out of cash.