NAO reveals £ 726million in bailouts and college loans with ‘almost half’ intervention
Nearly three-quarters of a billion pounds of public funds have been spent to bail out and restructure colleges, while the government is intervening in nearly half of them, a new report has revealed.
The National Audit Office today released its report on the financial sustainability of colleges in England, which details how the Department of Education has spent “large sums” to keep colleges open, while core funding for the sector has declined.
As of February 2020, the government was intervening in 48% of all open colleges – more than a tenth being in formal intervention.
FE Week also calculated that £ 725.8million was spent on bailouts and restructuring finance, based on NAO figures – with £ 431million alone provided to 45 colleges for mergers and other structural changes.
The chair of the influential House of Commons public accounts committee, Meg Hillier, said the report “paints a grim picture of the difficult situation in the college sector.”
“The government has supported some colleges at great expense, but this has only masked the flaws in the system,” she continued.
The Education Department promised its “next White Paper will strengthen our colleges,” but declined to reveal how.
As first reported by FE Week in May, it is believed that the changes to the legislation will allow the government to appropriate failed colleges rather than forcing them into insolvency.
The government also spent £ 253million on 36 colleges which had ‘serious cash flow options’ under the Education and Skills Funding Agency’s ‘exceptional financial support’ program.
However, the NAO has now found that ESFA has waived its recovery of almost half – £ 99.9million – of the funding, which was originally supposed to be repayable. The device was discontinued in March 2019.
Colleges of education administration or about to be swallowed up £ 41.8million in ESFA emergency funds, reports NAO, of which £ 26.6million has been spent on the insolvency of Hadlow College and West Kent and Ashford College, both of which were placed under administration in mid-2019.
The report said that the DfE’s field exam program had “likely helped to limit the financial deterioration of the sector,” citing the DfE’s projections that one-fifth of colleges would be in inadequate financial health in 2020 without the exams, against 11% of colleges that fall into this category.
But while the DfE has financially supported colleges that would otherwise have been forced into the administration of education, student funding has plummeted.
We recognize the issues facing colleges and other providers
Funding for 16-19 year old students decreased by seven percent in real terms between 2013/14 and 2018/19, with the funding rate for 18 year old students being directly reduced in 2014/15 by £ 4,000 at £ 3,300.
Adult education and support services (excluding learning) fell 35% between 2013/14 and 2018/19, according to the NAO.
The NAO recommended that the government evaluate and improve the effectiveness of its intervention regime, which was also criticized by Dame Mary Ney’s 2019 Report on Government Oversight of Colleges.
The government has also been asked to “learn the lessons” from the bankruptcies of the two colleges and to assess the cost, opportunity and impact of the education administration process.
A spokesperson for the DfE pointed out that the report notes that standards in the VET sector are high, with 82% of colleges being ‘good’ or ‘excellent’ in 2019, ‘but we recognize the problems facing colleges and other providers ”.
They highlighted the £ 400million funding increase for students aged 16 to 19 that took effect this academic year and measures taken to stabilize the sector during COVID-19, such as guaranteeing payments from grants, the provision of additional investments through the 16-19 year old scholarship fund.