From education to employment

Building the future of FE: FE Capital Allowances – A missed opportunity?

Mark O’Reilly is Managing Director of Just Ask Scarlett

The UK Government has recently published its Plan for Jobs Strategy, in which it sets out the vision for a ‘new’, post Covid-19 skills economy.

The Government refers has also set out a vision for what it calls the ‘college of the future’, that imagined institution that becomes the central hub of skills and employment in our towns, cities and neighbourhoods.

A Welcome Boost

In the March budget, the Chancellor announced that £1.5bn of funding will be invested in FE between now and 2025. £200m of that funding was fast-tracked, under the FE Capital Allocation programme.

This funding will bring a welcome boost to many colleges in need of vital estate improvement and upgrades, especially as they grapple with the implications of reopening in the midst of social distancing restrictions.

But has it been a missed opportunity?

A report jointly published by Jisc and the AoC last week on ‘shaping the digital future of FE and skills’,  outlines the need for significant and rapid investment into IT infrastructure, online learning platforms, content development, staff upskilling and provision of supported learner access in poorer households.

However, the FE Capital Allocation provisions make any college expenditure that supports online provision, other than a rather narrow view of IT infrastructure, ineligible.

Make-do-and-mend Vs Strategic Investment

In the old days, under the capital funding regimes of the Learning Skills Council, FE Funding Council, and the Skills Funding Agency, the capital funding allocation of colleges was tied to estate condition, with the condition banding, reported via e-mandate returns, providing much of the justification for capital allocations.

The funding criteria meant that the investments made were often to ‘make-do-and-mend’ – keeping outdated FE estates serviceable, rather than fostering sector-wide strategic investment to keep pace with the developing employment and skills requirements of the internet age, which were moving at light-speed.

Then a few years ago, all that changed. The capital funding for FE was rerouted through Local Enterprise Partnerships (LEPs) and Combined Authorities (CAs), to “bridge the skills gap”. In my experience, of working across over a dozen of the LEP and CA regions, the resultant funding regime was inconsistent and patchy, with some LEPs and Combined Authorities outperforming others, both in terms of their speed out of the blocks and the quantum of funding that they secured from Treasury.

Many FE Colleges seemed subject to a form of postcode lottery, the result of a funding route that was often less influenced by the ‘needs’ of the sector, than by broader, regional economic priorities and competing draws on available capital.

The true impact of this strategic experiment, and the outcomes, in terms of skills, job creation, social and economic outputs, will take some time to work through.

The bidding and funding negotiating process, which FE Colleges had to navigate, could be arduous with LEPs under pressure to get funding allocated and money out of the door in line with Treasury funding contracts.

It coincided with the onset of area reviews which, in some regions, led to changing priorities and additional pressure on available capital. Crucially, it also saw a significant decrease in the amount of capital investment in the sector across the UK, compared to the levels distributed under the old FEFC and SFA days.

£1.5bn Funding For The FE And Skills Sector 

Recently, the Treasury, alongside the Department for Education has pledged £1.5bn of funding into the FE and skills sector in the period to 2025. Like previous incarnations of FE funding strategy, the detail of this funding, to what extent it is new and additional monies, rather than rebranded or reallocated, is somewhat lacking.

Equally, the source of this funding (its relationship to revenue assumptions associated with the Apprenticeship Levy for example) are unclear. Maybe the much-anticipated ’FE White Paper’ will help to clarify some of this.

Certainly, some insight into how future capital investment will be focussed, and routed, as well as clear timelines and an outline of the focus of investment, will help FE providers make better operational and strategic decisions in the coming months, which could be of existential importance to some of our more vulnerable providers.

FECA Funding Provision

That brings us to the recent funding provision under the FE Capital Allowance (FECA) programme. A few weeks ago, the Department for Education wrote to all FE Colleges with initial allocations of the c.£200m shared between 185 providers, with allocations ranging from some £4.6m to under £10,000.

Allocations have been calculated based on previous ESFA payments. Whether this was the correct way to cut up the cake is not the subject of focus here, although the logic behind it does deserve further scrutiny. The critical issue is the limitations placed upon colleges with regard to eligible expenditure.

The guidance associated with FECA allocations, provided by the DoE, states that:

“The FECA is to be used only for the condition improvement of substandard or deteriorating buildings in your college or institution estate. This will have been identified by the FE Condition Data Collection (FECDC) and graded as B, C, D or through your own more detailed survey.  This will include IT infrastructure, where identified as requiring remedial action in the FECDC survey or your detailed survey.”

So, as it stands, the funding can only be used to improve the condition of existing College estate, in line with the condition of estate identified in the FECDC surveys.

Allow FE Colleges ‘Freedom And Flexibility’

Now, I have no insight as to the length of time Treasury and the Department of Education were batting this one about, it could have been back in 2019, ahead of the UK Government’s 2020 Budget announcement that £1.5bn had been earmarked for capital expenditure in the FE sector.

In any case, it strikes me as maybe more than just a missed opportunity.

Given the pressure on education providers to transition to new, online delivery of whole swathes of provision, as well as other corporate and learner support service functions, wouldn’t it have been sensible to allow FE Colleges the ‘freedom and flexibility’ to use the grant in whichever way was most appropriate to support continuity of provision and in supporting learners?

Instead colleges, c.25% of which were identified as being financially vulnerable before the impact of COVID-19, are faced with the prospect of having to spend money on the upgrade of bricks and mortar estate over time-critical investment in IT systems, online and blended learning, online assessment and migration of back-office support activities to an online environment.

While the guidance suggests some investment in ‘IT infrastructure’ might be eligible, it is only where such upgrade was identified in a college’s FECDC report and expressly excludes terminals, software, web applications.  

Given FECDC reports were conducted between 2017-2019, surely their context has been superseded by the impact of the biggest crisis in UK education provision in the last 75 years!?

25% Match-Funding Could Impede Online Provision Investment

To make matters worse, in order to take advantage of the funding allocations, recipients are supposed to provide 25% match-funding. As match-funding also needs to be on eligible expenditure, this will have the effect of taking college resources away from investment in online provision, at a critical juncture.

Now, it may well be that DfE is already making moves to agree some softening of the FECA guidelines on eligible expenditure. But I fear not.

If colleges were to be allowed to use the funding on expenditure that could be demonstrated to be of tangible benefit to learners, and/or the overall viability of the institution, wouldn’t that be a better idea? Nowhere is this more applicable than in colleges’ mission-critical development of online provision and content.

Instead, it feels as though we are locked into a capital funding programme that is already somewhat anachronistic. There is no doubt that some colleges will have capital projects planned, which they were going to do anyway, and to which this funding might contribute. But was supporting those kinds of projects the intention? 

If Treasury’s intention was to support the sector in navigating an unprecedented operational landscape, then taking a pragmatic and flexible view on how colleges can spend their allocations might be a far better way of achieving broader policy objectives.

If the DfE, ESFA and Treasury policy-makers could revise the eligible expenditure criteria, and enable college leadership to spend their (FECA) allocations in the most appropriate way, then the funding, and the match-funding that could then be leveraged against it, could offer a far more impactful boon to the sector, would help to safeguard provision, and increase access to education and skills to learners across the UK.

Assuming this will not happen, then we should (at least) hope the anticipated FE White Paper sets out the Government’s tangible and measurable capital expenditure plans.

The Government really must consider the key findings and recommendations of the Jisc/AoC report and make the development of online provision and Virtual Learning Environments a priority.

And all of this needs to be supported by reliable timelines and milestones, and annual grant budget estimates, which will enable colleges to develop meaningful curriculum, estate and corporate strategy in the confidence that Government capital expenditure strategy helps, rather than hinders.

Mark O’Reilly, Managing Director, Just Ask Scarlett

Mark has extensive experience in capital expenditure funding in the FE Sector. He has authored sector best practice on Developing Business Cases for Capital Funding, Developing Estate Strategy and in employer and stakeholder consultation. He has worked on development of projects under the National College capital programme, FEFC, SFA and various LEPs and Combined Authorities. In total, Mark has worked on over £300m of UK and EU funded projects.

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