Financial risks must be addressed earlier
In its 13th Report of this Session, the Committee warns the declining financial health of many FE colleges has "potentially serious consequences for learners and local economies".
It finds funding and oversight bodies have been slow to address emerging financial and educational risks, with current oversight arrangements leading to confusion over who should intervene and when.
The Report says the Department for Business, Innovation & Skills and the Skills Funding Agency "are not doing enough to help colleges address risks at an early stage".
Adequate resources needed
It urges government to simplify arrangements for oversight and intervention, and to ensure the Further Education Commissioner has adequate resources to intervene when colleges are struggling.
The Committee calls for a more proactive approach in helping FE colleges prepare for the "significant financial challenges they face in the likely event of further funding cuts".
It also expresses concern about the effectiveness of area-based reviews of post-16 education – announced in July 2015, and described in the Report as "limited in scope" and having "the potential to be haphazard".
The Skills Funding Agency deemed 29 colleges to be financially ‘inadequate’ in the 2013/14 academic year. Its recent forecasts suggest around 70 colleges could be in this position by the end of 2015/16.
Meg Hillier MP, Chair of the PAC, said today:
"The government has been desperately slow off the mark to tackle a looming crisis in further education.
This is deeply worrying for a sector which equips people with skills and qualifications that can transform their life prospects, and by extension those of the communities in which they live and work.
College principals told our Committee of the difficulties they face in recruiting quality staff; of courses being cancelled, and of stalled investment plans.
There is no doubt further education is under significant pressure and it is both frustrating and sad to think of the potential going unfulfilled - particularly in cases where earlier intervention could have prevented problems from escalating.
There must be greater clarity over who is responsible for taking action when colleges face financial difficulties, when that action should be taken, and a fuller understanding of its effects.
There is a real danger of substantial further deterioration in the sector and government must act now to ensure FE is put on a stable financial footing."
Further education funding
Further education is formal learning outside of schools and higher education institutions, covering academic and vocational courses and training for apprenticeships. The further education sector in England receives around £7 billion of public funding each year, to educate and train around 4 million learners.
The Department for Business, Innovation & Skills funds adult learners via the Skills Funding Agency, while the Department for Education funds learners aged 16 to 19, primarily via the Education Funding Agency.
Around 240 further education colleges teach more than half of the sector’s learners. Around 700 providers are commercial or charitable bodies, teaching most of the remaining learners. Colleges are independent of government and manage their own affairs, with external intervention occurring only where a college is failing.
The sector is subject to oversight from several bodies: The Department for Business, Innovation & Skills is responsible for the overall regulatory framework and policy; the Skills Funding Agency monitors financial health and management; and Ofsted inspects the quality of provision, including the effectiveness of leadership and management.
The Further Education Commissioner – a role established in 2013 – intervenes in the most poorly performing colleges.
The declining financial health of many further education colleges has potentially serious consequences for learners and local economies, but the bodies responsible for funding and oversight have been slow to address the problem.
Too often, they have taken decisions without understanding the cumulative impact that these decisions have on colleges and their learners.
Oversight arrangements are complex, sometimes overlapping, and too focused on intervening when financial problems have already become serious rather than helping to prevent them in the first place.
The Department for Business, Innovation & Skills and the Department for Education appear to see area-based reviews of post-16 education as a fix-all solution to the current problems, but the reviews do not cover all types of provider and it is not clear how they will deliver a robust and financially sustainable sector.