News analysis: Colleges count the cost of a job half done

8 Jun 09
The Learning and Skills Council is being abolished after a series of high-profile disasters, the most damaging of which - the Building Colleges for the Future programme - has left a £5.7bn deficit

8th May 2009

The Learning and Skills Council is being abolished after a series of high-profile disasters, the most damaging of which – the Building Colleges for the Future programme – has left a £5.7bn deficit

By Neil Merrick

When Labour decided to pull apart the funding system for post-16 education created less than ten years ago, it might have hoped that its rejected quango – the Learning and Skills Council – would disappear without too much fuss.

But instead of ensuring the smooth run-up to the handover of funding powers to local authorities and a new set of quangos next April, the LSC is instead stumbling hopelessly through its final 18 months.

The problems started last autumn when thousands of youngsters in further education colleges and school sixth forms were kept waiting for their £30-per-week education maintenance allowances. This was after a new contractor, appointed by the LSC, ran into major technical problems.

More recently, the LSC bungled an announcement over how much funding further education colleges and schools would receive to teach 16–19 year olds in 2009/10. With increasing numbers of teenagers enrolling on courses during the recession, Chancellor Alistair Darling was forced to find an extra £655m for 54,000 student places in last month’s Budget – a move that, on the face of it, appears to have pacified the sector.

But the problems surrounding education allowances and sixth-form budgets pale in comparison with the traumas encountered by the Building Colleges for the Future programme, which complemented the more successful Building Schools for the Future scheme.

At first, while colleges welcomed the opportunity to upgrade facilities, the number of grant applications was relatively low.

About 12 months ago, LSC officials began pushing colleges to come up with more proposals. By December, the programme was oversubscribed and had to be suspended.

Among the 79 colleges that had applications approved in principle but are still awaiting funds is Barnsley College. It had hoped to receive £40m from the LSC towards its £70m capital improvement programme, the bulk of which went towards a main building worth £50m.

Demolition work started last year, leaving part of the campus resembling a building site. More worryingly, the college took out a £10m bank loan and spent £2m of its own money in preparation.

College principal Colin Booth believes the LSC should keep its side of the bargain and find the money it promised as far back as 2007. Contractors are claiming they might be forced to make staff redundant if they cannot continue work soon.

In theory, the college could be put at risk financially and be declared insolvent. ‘We are not in a financial crisis, but if we don’t build a new building then our liabilities are probably higher than the volume of our assets,’ says Booth.

It is little consolation to Barnsley to know that it is in good company. In addition to the colleges that received approval for new buildings in principle, a further 65 carried out feasibility studies and submitted bids. The estimated shortfall is about £5.7bn.

In March, LSC chief executive Mark Haysom virtually accepted full blame for the fiasco and resigned. One week later, a review by Sir Andrew Foster, former controller of the Audit Commission, castigated the council for management failures and the absence of a proper financial strategy.

The £300m promised for FE capital projects in the Budget is nowhere near enough to help all the colleges left in limbo, even if – as expected – a similar sum is available for the next three years.

A letter sent to college principals on April 24 by Geoff Russell, the LSC’s interim chief executive, says colleges wishing to receive funds must demonstrate need, value for money and that they can proceed with work quickly. Colleges were also advised to scale down their proposals and ask for ‘more modest sums’ ahead of a meeting on June 3, when the successful bids will be determined.

Colleges were given one week to re-present their cases by completing a nine-page questionnaire and answering about 100 questions. Colin Booth says he accepts the need to look for savings, especially in construction, but adds: ‘I don’t want to enter into anything where we are no longer providing a high-quality building that meets the needs of students in the twenty-first century.’

The BCF affair has highlighted the extent to which government departments monitor the quangos they rely on to provide public services. The Department for Innovation, Universities and Skills promised to review its relationship with arm’s-length agencies after Foster criticised it for ignoring the looming FE buildings crisis until it was too late.

‘The implementation approach did not include a robust financial strategy or a regional or national approach to prioritisation,’ he said.

Many believe it suits the government to let quangos take the blame. ‘The LSC does what the government tells it,’ says Dan Taubman, senior national education official at the University and College Union. ‘If an agency is going, it’s a convenient place to dump everything that you’ve messed up.’

By all accounts, morale at the LSC is low, with the Public and Commercial Services union threatening industrial action over the terms under which staff will transfer to the Skills Funding Agency and Young People’s Learning Agency.

Malcolm Trobe, policy director at the Association of School and College Leaders and a member of the LSC national council, says it faces a tricky 11 months. ‘It’s trying to do the same job [as before] and take steps forward, effectively for its demise.’

While many will not be sorry to see the back of the LSC, there are fears that the new system could be more bureaucratic. Julian Gravatt, assistant chief executive at the Association of Colleges, says: ‘The direct costs and diversion of management time means there will less money going towards education.’

Gravatt also believes there could be long-term repercussions for relations between colleges and government officials. In the same way as colleges were urged to apply for buildings grants, they were also encouraged to increase work-based training through Train to Gain, a scheme that failed to spend 40% of its £520m budget in 2008/09. Since March, he says, the LSC has ‘slammed on the brakes’ after more trainees than forecast enrolled on courses.

This raises questions as to what extent colleges should rely on verbal assurances rather than written contracts when planning courses and major capital works. ‘There is a real danger that this is going to make colleges more risk-averse,’ says Gravatt.

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