Divert £500m of HE funding to colleges, says Policy Exchange

19 Oct 15

The Department for Business, Innovation and Skills should redirect £500m from university grant funding into further education and extend the student loan system to FE students, the Policy Exchange think-tank has said.

Its report, Higher, Faster, Further, More, said public spending is skewed too much towards HE, hampering the growth of training needed for a range of technical and professional jobs in the UK labour market.

Jonathon Simmons, head of education at Policy Exchange, said HE is “significantly better funded” than FE, and added that universities have “substantial cash reserves” sitting in banks that could be better utilised.

He said: “The case for training and skills has never been more important ­‒ to help create 3 million apprenticeships, fuel the Northern Powerhouse, boost social mobility and drive economic growth.

“As well as degrees, we need many more people with high-class technical and professional skills. That means a flourishing further education system.”

The report found that universities have benefited from a 26% rise in overall income since 2009/10, with a marked increase since the latest changes to tuition fees, and are sitting on £12.3bn of unrestricted reserves, equivalent to 48% of the annual budget for the HE sector.

FE colleges on the other hand have seen a significant drop in revenue, with the adult skills budget cut by 24% since 2009/10. Policy Exchange highlights a recent National Audit Office study, which forecast that more than a quarter of the entire FE college network could go bankrupt within a year.

According to its report, statistics highlight the lack of technical graduates in the UK and the impact this could have on the future of the labour market.

For example, the Royal Academy of Engineers forecasts the UK economy will require 830,000 more engineers by 2020, and cites difficulties experienced by firms recruiting technicians qualified in science, technology, maths and skilled construction.

However, responding to the report, Nicola Dandridge, chief executive of representative body Universities UK, said it is “misleading to suggest universities are awash with cash reserves” and that it should not be seen as an “either-or choice” between HE and FE.

She explained that FE colleges successfully deliver degree-level courses and universities are also involved in the delivery of new, industry-designed degree apprenticeships. Dandridge added that the increased fee cap was introduced “largely as a replacement to direct cuts in government funding” and does not cover the cost of expensive courses such as science and engineering.

She said that universities have to “maintain minimum surpluses” to deliver the scale of investment required to meet student demands, build capacity and retain the sector’s world-class, competitive edge.

“Making such cuts to higher education would be a false economy”, Dandridge said.

A spokeswoman for the Department for Business, Innovation & Skills said: “Both higher and further education play a crucial role in the provision of professional and technical education at all levels, which are essential to meeting the skills needs of employers and helping to drive economic growth and productivity.”

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