Spending review could be perfect storm for colleges

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John Stone, chief executive of LSN, writes for ePolitix.com about the impact the government spending review will have on further education.

On 20th October the coalition government will announce Whitehall's winners and losers with the anxiously anticipated spending review, which will set out the administration's approach to reducing the budget deficit over the course of this parliament. Across non-protected areas an average saving of 25 per cent is required – an unprecedented figure in recent history.

To some extent further education has always been considered the poor relation of universities and schools, and this has been reflected in the policy focus of successive governments. However, given recent policy developments, there is a real risk that the spending review could present a perfect storm for colleges and plunge the sector into decline, something which will hit the most disadvantaged in this country the hardest.

The first hit is the possible scrapping of the Educational Maintenance Allowance (EMA), for which right-wing think tanks and pressure groups, such as Policy Exchange, Institute of Directors and Tax Payers Alliance have been lobbying for some time. EMAs are means-tested allowances of between £10 and £30 a week to help young people between 16-19 stay in education. Around 45 per cent of 17-19 year olds in full-time education receive EMAs, a disproportionate number of whom attend further education colleges as opposed to school sixth forms or sixth form colleges.

Evidence suggests that EMAs raise the participation rate of eligible young people by an average of 5.9 per cent. Since EMA recipients attend further education colleges in disproportionate numbers, any cut to EMAs will be hardest felt by colleges, in their intake numbers and corresponding funding.

The next concern is the programme of benefits reform, the beginning of which was announced within the emergency budget. From 2011/12, child benefit will be frozen and a series of reforms will be introduced to child tax credits which will reduce payments to families with joint incomes above £26,000. Whilst the spending review is likely to focus primarily on the departmental programme spending, it is unlikely that these two benefits will come through unscathed for 2011/12 – 2014/15. The best case scenario will be no further reductions to those announced in the emergency budget, although this seems unlikely.

The impact of child benefit reform on colleges may not be obvious at first, but upon examination, however, families with 16-19 year-olds in full-time education and unwaged training are eligible for universal child benefit and means-tested child tax credit, and it's their children – those from lower-middle income families – who are most likely to attend general FE colleges. Reforms to these benefits, especially if combined with the abolition of or cuts to EMAs, could tip the balance for parents with combined incomes of £26,000 - £30,000, making supporting their children in further education no longer a viable option.

The next and final piece of the picture is the forthcoming policy response to the recently published further education fees review, conducted by former chair of the LSC, Chris Banks. Much like the higher-profile Browne review of higher education funding, the FE fees review sought to determine how, in times of financial stringency, further education courses for adults should be funded. The Banks review concluded that learners and employers will need to contribute more to further education and that this should push the sector towards being more demand-led and responsive.

Whilst Mr Banks' conclusions are in accordance with the view generally accepted across the sector, his review failed to propose any specific measures for ensuring that, when implemented, his recommendations do not result in a substantial reduction in the number of adult learners studying in FE colleges.

Over the course of the Labour government, employers have become accustomed to schemes, such as Train to Gain, which provided free training to their staff. Perhaps more crucially, the private sector is only just recovering from the recession. These two factors make it a very difficult time to coerce businesses for money for something which delivers return on investment only in the medium to long term.

It's unnecessary to say that this is also a difficult time to ask learners for more money. At the end of 2008, disposable income reached its lowest level for a decade and there is no sign of improvement, especially for those on lower incomes. Whilst those wishing to enter higher education benefit from low-interest government loans on which repayments only begin after an earnings threshold, there is no such scheme for those entering further education. And Mr Banks doesn't propose one.

The combination of all these pressures – EMA, child tax credit, child benefit and need for greater employer and individual contributions – could drastically reduce the number of young people and adults turning to further education. This will have a direct knock-on effect on funding and on the amount of funding being spent on teaching and learning, as overheads for colleges will remain constant. Staff numbers will have to be cut, the quality of provision is likely to suffer, and we could see colleges enter a period of decline from which it will be very difficult to recover.

Colleges are well aware of the prospects for funding and many of have started to factor, as best they can, for the foreseeable financial circumstances. However, the impact of policy changes on the demand for their courses is less well understood, and will require far more consideration from both policy makers and providers, before the system can be subjected to the risk of unintended consequences.

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