From education to employment

The Future of FE Funding – Are We Funding for Outcomes?

June Matte, CEO of PFM, independent financial adviser to higher education institutions and local government

While we all wait on tenterhooks for the somewhat delayed delivery of the Augar Review of Post-18 Education and Funding, it might be an opportune time to take a look at some of the challenges in funding further education and higher education.

The lowering of the cap on tuition fees

The rumours have been swirling that there is a potential lowering of the cap on tuition fees, which on its face should indicate a positive outcome for students but may instead have unintended consequences for the broader university sector.

With the significant efforts to attract more students from varied backgrounds including disadvantaged and first in families, the higher fees at the £9,000 level combined with lifting the caps on student numbers has created greater access by providing universities with more revenue, a portion of which has been targeted at outreach to students from underserved communities and academic support services to ensure that once enrolled students have the tools to succeed.

As the Government considers how funding across all sectors will be allocated, in higher education it must be focused on funding for outcomes.

While reducing student fees can be a positive outcome for students, if the reduced student fees are not replaced by other sources of revenue, most likely from grants, the result may actually be negative for students, especially those from the cohort who are less likely to go on to university due to resource constraints.

If the additional seats that have been made available by this uptick in funding cannot be sustained, the progress that has been made, 30% growth in number of disadvantaged students attending university, may disappear.

The plight of further education institutions

While there is much discussion in the lead up to the Review concerning funding for university places, the plight of further education institutions should not be overlooked.

Unlike their university peers, the funding sources for FE Colleges are more dispersed. They rely on a number of sources due in part to the distinct student types that they serve; including 16-18 year olds, post-18 year olds, part-time and adult learners.

Certainly the addition of the Apprenticeship Levy has received much focus and has generated added funding into the sector. 

However, there is a mixed opinion on how successful the application of the levy has been. Initially, there were concerns that the funds were accumulating and not being widely applied.

Now the evidence seems to point to an overspend of the funds with a significant portion of the funds being applied to ‘high fee’ apprenticeships training rather than more technical skills-oriented programmes.

If the objective was to help narrow the technical skills gap that employers have identified, it is unclear whether that objective will be met through the levy structure and whether instead, it is functionally reimbursing companies for training they would have otherwise traditionally provided without the subsidy.

Drop in funding and teaching resources

Aside from the Apprenticeship Levy, it does need to be noted that all parts of FE have seen cuts in funding with the Institute for Fiscal Studies reporting that allocated funding for 16 to 18 year old college students has declined 8% since 2010.

The University and College Union estimate that more than 23,000 posts have been eliminated in FE colleges between 2010 and 2017 in England.

This drop in funding and the associated teaching resources has contributed to the destabilisation of a number of institutions across the country.

Last year alone, £57 million in emergency government funding was doled out to support institutions in crisis. In some cases poor management and governance structures have contributed to the problems.

One of the Government’s strategies to bring financial stability and drive operational efficiency is to merge colleges on a regional basis.

These types of mergers can be successful, but it requires that significant planning work takes place in order to rationalise course offerings and ensure that administrative savings are actually being realised.

The Augar Review

As the Government turns its attention to higher education and FE funding as part of the Augar Review, it should be very clear as to the outcomes that it is trying to be achieve.

With those outcomes defined, it will be significantly easier to design a funding regimen that drives those outcomes. Unfortunately, it is not clear that the current system meets these fundamental principles.

The funding regimen is complex from the perspective of the institutions administering them, the businesses that rely on a supply of trained workers and most importantly the students it is designed to serve.

Expecting a 16 year old and their parents to navigate the current maze of programme acronyms and myriad of options to make an informed decision about their future may be wishful thinking.

If we are to produce the skilled technical workforce of the future, able to meet the demands of an increasingly complex global economy, we must design programmes that are:

  1. Accessible,
  2. Whose qualifications earned upon completion are easily understood by employers, and
  3. Provide funding that is actually designed to deliver these outcomes.

Merely reorganising the current system without meeting these fundamental goals will not create the opportunity for young or adult learners, will not provide value for money and will deny the economy the valued resources it needs to compete globally.

June Matte, CEO of PFM, independent financial adviser to higher education institutions and local government

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