Report on rebuilding English further education colleges

28 July 2009

A report by the Public Accounts Committee published today states there has been a serious failure by the the Learning and Skills Council in its management of the programme to refurbish and rebuild further education college buildings around the country.

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"The Learning and Skills Council has been guilty of a very serious failure in its management of the programme to refurbish and rebuild further education college buildings around the country. The Council behaved recklessly by approving too many projects and allowing colleges’ expectations of financial support to outstrip what it could afford by nearly £2.7 billion.

"The programme had looked promising in its earlier stages. It had stimulated capital investment in the further education estate, much of which was in poor condition, and completed schemes generally provided good value for money. However, by early 2008, the Council was no longer controlling the flow of projects which were becoming unaffordable. The Department’s oversight of the Council was remiss for it failed to recognize that this was going on.

"The future of the programme is now beset with considerable uncertainty which must be dispelled as soon as possible. Some colleges are heavily committed to projects on which they have incurred costs. Some straight talking is needed from the Council so that colleges in this position are aware of the difficult decisions they will have to take.

"There remains a risk that some colleges are taking on more debt than they can reasonably service. The Council must keep under close review the financial health of the further education sector, especially in the current economic downturn."

Mr Leigh was speaking as the Committee published its 48th Report of this Session which, on the basis of evidence from the Department for Innovation, Universities and Skills and the Learning and Skills Council, examined progress on the programme of renewal of the physical infrastructure of further education colleges in England.

In 2001, the newly established Learning and Skills Council (the Council) took over a programme of capital works in the further education sector. The programme was needed to renew an estate that was too large, with much of it in poor condition and no longer fit for modern educational purposes. By March 2008, a total of £4.2 billion of projects had been approved ‘in detail’, including grant support from the Council of £1.7 billion, and about half of the estate had been renewed.

Since April 2008, there has been a very serious failure in the management of the programme, with the Learning and Skills Council failing to introduce measures to prioritise projects and control the total cost of the programme. It approved ‘in principle’ 79 colleges’ projects, which required nearly £2.7 billion of Council funding more than it could afford. Following an independent review, the Department for Innovation, Universities and Skills (the Department) and the Council have applied needs-based criteria to inform decisions on taking the programme forward.

Before the current problems arose, the programme had achieved some successes. The joint funding approach makes use of colleges’ reserves, access to secured loans and disposal of surplus assets, together with grants from the Council. It has enabled the estate to be reduced in size, and the buildings are generally of good quality and are contributing to increased learner participation.

The economic downturn could affect colleges’ ability to fund projects by restricting their access to loan finance or their ability to sell surplus assets. The indebtedness of the sector is rising. Whilst the overall level of debt remains affordable, the Council needs to monitor closely the financial health of some colleges, particularly those that have borrowings that exceed 40% of their annual income.

In 2010, the Council is expected to be dissolved and its functions taken over by the Skills Funding Agency and the Young People’s Learning Agency. There needs to be clarity about responsibilities for the capital programme, and additional administrative burdens on colleges must be avoided.

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