Building sustainable funding for FE digitisation

Peter Lauener recently announced that the SFA may soon allow FE colleges to sell assets and reinvest the proceeds in technology and digitising services.

Until now clawback arrangements relating to assets originally funded by capital grants meant colleges could only invest in new physical assets.

The debate on social media afterwards suggests there’s a bigger policy issue at stake here.

It’s an interesting development because it crosses a line – property usually appreciates in value so is part of the college sector’s main assets. Because technology depreciates over a shorter period of time – often as little as 5 years – investment in technology would ideally be funded from income to avoid eroding the long-term asset base.

Comparing this to daily life

Imagine I decide to sell my house to buy a car because the logistics of commuting to work are causing me a problem. Yes, it’s financially feasible, and would certainly solve my transport issues, but my financially savvy friends might tactfully say it’s not my shrewdest long term investment move – unless I’ve addressed the consequences.

The bottom line is that the reduction in (mainly public purse) income means that the sector is having to dip into assets to cover costs that should be funded in the normal operational and investment cycle. The challenge for FE is that the ability to invest is already affected by the fact that many funding cycles are annual or highly volatile – it’s hard to make a case for payback period of more than one year, and it’s tough to invest for even longer without the certainty of income.

This is a challenge that the education sector faces continually. The House of Commons, Committee of Public Accounts report in December discussed the impact funding policy complexity has on colleges’ ability to compete.

These issues included:

“very late funding decisions, including a funding cut only days before the start of the 2015/16 academic year, overly complex funding arrangements, whereby funding comes from many different sources for different students attending the same course and instances where colleges are seemingly treated differently from other education providers offering similar services, for example in relation to VAT rules”

The report highlights large debts for some colleges associated with capital funding decisions made by the Learning and Skills Council. It’s a sobering, but worthwhile read.

So back to the recent proposal. The idea is not unlike selling off school playing fields, or the sale and leaseback arrangements on public buildings – both of which attracted controversy because of the impact on health and costs, respectively.

Yet it’s understandable that FE is in this situation.

Predictions of consolidation across the sector – most recently at the 2016 emfec conference from Stuart Cutforth Principal and Chief Executive of Chesterfield College – may well be right; and the immediate needs of the sector and its students must be addressed to avoid disadvantaging a generation of learners. Reusing the proceeds of asset sales – particularly those that are underutilised or no longer work with new learning models – might solve an immediate problem but what happens when that digital estate itself needs replacing and upgrading?

Nonetheless, it’s an investment that is clearly needed. The value of digitising learning, and the infrastructure that sits behind it is championed by many, JISC for example have been proactive and full voiced in working with the sector to support the adoption of the Feltag recommendations, now nearly two years old. According to BIS, these recommendations will be embedded within the Area Reviews.

The recent policy mantra has been that FE must act more commercially, which includes delivering a wider range of apprenticeship programmes. There are many great examples of the FE sector doing just this through forging close links with employers and commercial organisations (Nigel Rayner’s article here is an interesting synopsis of the challenges faced).

Ultimately though, the most effective way of doing this is to give the sector more stable and longer-term funding, and in doing so allow its control over shaping services to meet the needs of the current and future generations of learners and employers. Only this will make a more productive planning and investment cycle – at the heart of other commercial organisations – possible without stripping the sector’s assets.

The likely consolidation in the sector provides a real opportunity to redesign educational services. This must be combined with funding policies that enable long term and sustainable investment in learning technology without overly eroding the FE sector’s asset base.

What’s certain, is that this is a debate set to continue.

Helen Hayes is head of products and services at YMCA Awards