HC Deb 08 June 2004 vol 422 cc51-60WH 3.30 pm
Tony Baldry (Banbury) (Con)

Usually, in debates about funding, hon. Members present the Minister with a long shopping list of items that require additional funding. I have a shopping list, but there are only two things on it. The first is that the forthcoming comprehensive spending review should close what Ministers themselves acknowledge to be an unfair funding gap between schools and colleges. The second could well save Ministers money in the long term, if a unique bid for a college in Banbury is accepted.

To ensure clarity about what I am asking for, for north Oxfordshire, I have let the Minister have an advance copy of my comments. I know from previous experience that the Minister is courteous and conscientious, and I hope that that has given him and his officials an opportunity to look into the matters that I want to raise.

Colleges are imperative to improving the education and skills of young people and adults alike. There are only two ways of teaching vocational and educational skills—either through 14 to 16-year-old schools or at colleges. For 14 to 16-year olds, schools remain the institution most likely to give such opportunities. However, for 16 to 19-year-olds, colleges are vital. More than a third of 16 to 18-year-olds explicitly chose to study at a local college rather than a local school last year.

Colleges are also crucial to the training of adults. The Government have made a lot of noise about improving adult learning and skills, which I very much welcome. In some areas of my constituency, such as Grimsbury and Neithrop, more than half of adults have not always had the opportunity to acquire qualifications and skills. That skills shortage problem is the reason why a new further education college to be based in Banbury is so important. Given that, last year, colleges helped nearly 400,000 adults improve their basic numeracy and literacy skills, it is really only a college that can help adults in north Oxfordshire, in the fullest possible sense.

None of what I am asking for can happen without basic Government funding. Colleges are clearly achieving much, but those achievements are gained in the face of comparatively little support from Government budgets. It is confusing that colleges such as Oxford and Cherwell college, which covers north Oxfordshire, derive a third of their funding from sources other than the Learning and Skills Council, the Government's chosen mechanism for distributing moneys for further education. I might quote some figures on this, to the effect that if we compare like with like—if we compare the funding rate for an A-level in a school with that in an FE or sixth form college—we see that for 2002–03, there was about a 10 per cent. gap—£734 for schools, and £663 for FE colleges."—[Official Report, Westminster Hall, 18 May 2004; Vol. 421, c. 223WH.] Those are not my words but those of the Under-Secretary of State for Education and Skills. It is astonishing that the Minister can tell us that the Banbury campus and the Oxford and Cherwell college in my constituency receive almost £100 less to teach the same A-level course to similar students, simply on account of being a college, not a school. That means that one third of colleges, including Oxford and Cherwell college, are running with a continuing and growing deficit. It means, further, that even if Oxford and Cherwell was able to raise its share of the money to build a new and improved college at Banbury, getting funding from the Government would become doubly difficult.

Doubtless, when the Minister responds, he will allude to the increases in funding that colleges have received in the past year. Of course, I welcome such increases, as does the chief executive of the Oxford and Cherwell college. However, as she explained to me when we recently met, colleges continue to be relatively underfunded. Any I funding increases are lower than the increases that are being given to schools. She relied on figures that are supported by the Association of Colleges, showing that whereas colleges in Oxfordshire are expected to receive a 19 per cent. increase in funding, schools in Oxfordshire have benefited from a 60 per cent. rise in funding. That is more than double. Yet colleges have to meet many of the same Government targets as schools and the disadvantages run far deeper for colleges than that evident funding gap.

Let us consider the cash flow at Oxford and Cherwell college. I apologise to the House for listing it in detail, as it is not particularly gripping stuff; however, it illustrates clearly how even a relatively low increase in funding to colleges, compared to schools, is soon eaten up by additional costs that schools do not face.

Last year, Oxfordshire FE colleges paid more than £1 million in VAT. Schools are not even charged VAT. Given that they are often offering the same A-levels, it is monstrously unfair that colleges should be subject to VAT. Oxford and Cherwell also had to pay more than £250,000 in consultancy fees, covering costs such as accountancy and IT equipment. Yet colleges are unfairly excluded on any major Government procurement programmes for things like IT equipment. Instead, colleges have to go it alone at extra cost.

The Association of Colleges estimates that going it alone will create another deficit of £40 million between the funding that colleges receive from the Government, and the costs that they actually incur. Consultancy is also costly for colleges because of the increasing amount of regulation and auditing to which they are exposed. Much of that auditing is also astonishingly unfair, not least in relation to the registration of students.

The bureaucracy of just registering a student is mind blowing: Oxford and Cherwell college has fallen foul of the registering scheme, which meant that, last year, it taught up to 100 students without being able to prove that it had done so under the new registering system that has only recently been introduced. It therefore lost more than £250,000 in funding for those students. It can ill afford to lose £250.000 simply because of an almost annual change in the way in which colleges have been regulated. It also pat s, as part of its cash flow, £500,000 on building maintenance. That is not to improve the buildings, but to ensure that they do not fall down.

Schools will receive more than £5 billion to help to improve their buildings in the next year, but colleges throughout England will, incomprehensibly, receive less than £400 million. Oxford and Cherwell college has also had to face a I per cent. rise in national insurance costs. Unlike schools, however, it has not had the necessary funding to fill that gap. Colleges have also faced a 5.5 per cent. increase in pensions contributions. Again, the Government have not helped them to cover those new costs in the same way in which they have helped schools.

It is crystal clear that there is a far from level playing field between schools and colleges. Evidently, there is very little of anything left in the pot for colleges after their basic costs and new burdens of bureaucracy have been deducted. As a result, there is considerable uncertainty for colleges. Uncertainly means instability, which leads to an inability to plan for the future. Not being able to plan for the future leaves colleges behind, while schools can continue to expand. This is starkly illustrated in north Oxfordshire.

The Under-Secretary of State for Education and Skills, the hon. Member for Enfield, Southgate (Mr. Twigg), and I recently attended the opening of a new technology centre at the excellent Warriner school in Bloxham. That is great news. Likewise, one of the best performing schools in my patch, Blessed George Napier school, unveiled plans this year for an impressive new sports centre. That is brilliant news for the school and the community alike. However, it could not contrast more starkly with the future of FE facilities in Banbury. Half the adult population in some areas of my constituency clearly need the opportunity to develop their education and skills at colleges, so we need further commitment to this important area of education. What makes matters worse still for colleges in Oxfordshire is that whenever they have provided the detailed plans that the Government have requested, those plans have been abandoned by the LSC.

One of the welcome reforms that were introduced as part of Government's "Success fog All" White Paper was the introduction of three-year planning and budgeting, which promised some stability in the system. However, the imposition of cuts to the provisional allocations, even where colleges have delivered successfully against targets, will create considerable instability and call into question the viability of the new system. Moreover, several colleges have told me that they will have to reconsider their ability to make pay rises in 2004–05 if they have to face budget cuts introduced by the LSC.

Colleges that are planning or executing capital programmes to modernise their facilities will now have to deal with a new area of uncertainty, which could create a problem in securing or retaining borrowing. Oxfordshire colleges drew up their three-year plan with the help of the LSC, and agreed with the LSC that their budgets would grow by 6 per cent. They agreed specifically that the number of adults in FE in north Oxfordshire would increase by almost 2,000 to 11,500 by 2007, and submitted that plan to the LSC.

What happened next? The LSC told them that it had not received the necessary funding from the Government, and the three-year plan was abandoned after less than a year. Teachers at Oxfordshire colleges now face the prospect of redundancy unless the necessary funding comes through after the comprehensive spending review. It is now vital that that funding is delivered. Without it, and with redundancies, colleges in Oxfordshire will simply be unable to meet the Government's targets, and will only fall further behind.

There are further disparities between counties in the funding that colleges receive from the LSC, even when they do meet the Government's targets. I understand from the chief executive of Oxford and Cherwell college that the LSC told Oxfordshire colleges that they had successfully met the community's needs and should receive £15 million for adult learning. However, when Milton Keynes colleges, which are exactly the same size and cover a similar sort of area, were also told that they met the same targets, they received £22 million for doing exactly the same thing.

The disparities in funding simply keep adding up. Not only is there a funding gap of 10 per cent., which Ministers acknowledge, but an inexplicable disparity between the funding that colleges in one county receive from the LSC compared with colleges in another. This needs to be sorted out during the comprehensive spending review.

In recent years, I have had numerous meetings with staff and teachers' unions, and, like other hon. Members, have made numerous representations to Ministers. I suspect that part of the problem is that we have all been led in recent years to believe that matters were always about to improve. In 2001, the Prime Minister said: What we need to do … is to lift up the funding that is given specifically to sixth-form and further education colleges."— [Official Report, 28 November 2001; Vol. 375, c. 966.] In June 2002, the Minister for Children said: The Government are committed to raising the level of funding for colleges towards that of school sixth forms. By 2003—04 funding for further education will have risen by 26 per cent. in real terms since 1997. Further progress can only be made as resources allow and we cannot commit ourselves beyond the resources we secure. We are looking to the current Spending Review to provide the resources needed to deliver the Government's ambitious agenda for further education."—[Official Report, 13 June 2002; Vol. 386, c. 1409W.] In November 2002, at the Association of Colleges' annual conference, the Secretary of State for Education announced a new funding package for further education that indicated that there would be three-year funding plans for colleges and that for 2005—06 spending on FE would rise by 26 per cent. in cash terms and 19 per cent. in real terms. When hon. Members, like myself, were writing to Ministers or raising the issue in the House, we were being given answers that indicated those proposed new funding arrangements.

It took some time to realise that in reality the increase for most colleges was going to be nowhere near 26 per cent. or 19 per cent. For most colleges this year, the increase is only in line with inflation. Over the whole period, the increase in real resources per student is no more than 5 per cent. When that discrepancy became apparent, Ministers said that it would get sorted out in the comprehensive spending review. As recently as May this year, a junior Minister in the Department for Education and Skills said that hon. Members will be disappointed but not surprised that I cannot say…what the overall settlement will be for FE. The Department is still working through the detail but we hope to be able to make further announcements before the summer recess in July". It was also observed that the overall financial position is much tighter in this spending review than it was in the previous one".—[Official Report, Westminster Hall, 18 May 2004; Vol. 421, c. 222WH.] As an hon. Member who has listened to ministerial language for more than 20 years, such statements do not give me much cause for optimism. It is absurd that the average college gets its funding from more than 30 different sources. It is also deeply unfair that under the Government system the LSC will pay 100 per cent. of school sixth form costs, but only 35 per cent. of college building costs. College borrowing must cover the rest. I see no sense in using that discriminating funding formula for capital build programmes. Such a funding system hits the prospects of a modernised FE college in Banbury especially hard.

At present, Banbury is an area of low unemployment, but it has a serious skills shortage. The central requirement of colleges is to provide additional skills and training for adults. Level 2 is a basic qualification, and most employers look for far more than just level 2, but in some areas of Banbury that is all that many adults have been able to acquire. The LSC for Milton Keynes and Buckinghamshire, which also covers Oxfordshire, makes regular representations to Members of Parliament for Oxfordshire to outline the skills gap in the county. The LSC's latest strategy paper clearly states the need to: develop an entitlement for all 14–19 year olds in the area and that high employment means that the majority of our potential learners are to be found in the workplace. Our focus here will be on the achievement of Level 2, Level 3 in our key skills priority areas, management and Basic Skills. Colleges are clearly one of the best ways to enhance the education of adults. Not only have more than 300,000 adults improved their basic numeracy and literacy at colleges during the past year, but between 1997 and 2001, more than 2 million vocational qualifications were gained, whereas only 233,000 were gained through employers during the same period.

FE colleges are clearly a must, and Banbury needs an enhanced FE facility now. Sadly, as we have seen, the Government's funding formula leaves Oxford and Cherwell with a mountain to climb. Huge discrepancies in funding have left the colleges with a massive deficit, so they are starting on the back foot. The uphill struggle becomes even harder because at best they will receive only 35 per cent. of the building costs under the capital build programme because they are colleges and not schools.

Somehow colleges are expected to conjure up the rest of the budget themselves. That is not an easy task, but Oxford and Cherwell college is trying to meet it. It has, for example, sold the Rycote college site for £9 million. However, the costs involved in the sale came to a staggering £3 million, leaving only £6 million for a new campus to be built at Bicester. That £6 million is being ring-fenced for investment in a much-needed new FE facility in Bicester, which is excellent news, but sadly means that there will be little money for a new Banbury campus. To put that £6 million into perspective, a new FE facility at Banbury would cost at least £27 million, which does not account for any land purchase. Improvements that are desperately needed for buildings at Bicester are estimated to total about £12 million. Improvements are also needed on the Oxford campus and could cost anything up to £25 million. Therefore, £6 million for a college that will cost at least £27 million offers little optimism for Oxford and Cherwell college to go it alone in Banbury.

Oxford and Cherwell college has come up with an alternative for a campus at Banbury, which I very much hope the Minister's Department will consider seriously. Drayton school in Banbury is also looking for new facilities. Drayton school and Oxford and Cherwell college have sensibly teamed up together to consider an alternative approach. They have put in a bid to the academies unit in the Minister's Department. The college for Banbury, which Drayton and the college are proposing, is unique in England and Wales. No other consortium has put together a bid of this sort before. The proposed college for Banbury would be for 14 to 19-year-olds and take up to 400 students. The college would offer courses for adults, which Banbury needs. The consortium is looking to build such a campus at Banbury relatively soon and, if its bid were successful, the college would be running by 2007. The bid for a college of that sort was submitted to the academies unit in April this year. I understand that for the bid to be successful and to go on to the next stage it will need to be supported by a sponsor, and that such a sponsor will be a private company. I am aware of which sponsor is being approached for the Banbury campus, and that company will need to provide £2 million for the Drayton school and Oxfordshire colleges' bid. It will then be left to the Government to decide whether to fund up to £20 million to build the college at Banbury.

Until that sponsor is secured, the Government will not even consider a formal written proposal from Oxfordshire county council, which is co-ordinating the bid. That raises two concerns. First, most bids for any new college building tend to be successful only in inner-city areas. The Minister's Department has approved recent proposals in Manchester, Liverpool and Birmingham, but very few bids have been approved anywhere other than in inner cities. It would be a huge mistake if Ministers were to overlook the Drayton school and Oxford and Cherwell college bid on the misunderstanding that north Oxfordshire and Banbury are all leafy lanes and comfortable middle England. The demographics that I have described in some parts of my constituency show that that is not the case. There is a real need for an enhanced FE college in Banbury.

My second concern is that because the type of college being proposed for Banbury by Drayton school together with Oxford and Cherwell college has never been suggested before, Ministers may need to consider any written proposal earlier than they might otherwise do. They would surely be better able to judge the bid if they were to consider a written proposal from Oxfordshire county council. It may be more difficult to secure the sponsorship of a private investor when the proposal is unfamiliar, and that problem can be avoided only if those involved are given the opportunity to provide a further explanation to the academies unit.

From even a cursory glance, the Banbury campus bid is worth taking forward. A college at Banbury operated by Drayton school and Oxford and Cherwell college would cut costs. When one considers the cash flow of Oxford and Cherwell college, which I outlined earlier, a joint venture would be an excellent opportunity for Ministers to help bridge the funding gap that it is experiencing.

Therefore, I ask the Minister to consider two points. First, funding for colleges across the UK, and particularly in Oxfordshire, will be enhanced by reforming the monstrously unfair funding system that disadvantages colleges. Secondly, I ask the Minister to consider seriously the Drayton school bid together with Oxford and Cherwell college for a new college campus at Banbury.

Oxford and Cherwell college has little chance of being able to build a college at Banbury on its own. Under the capital build programme, funding is granted only on the basis that the college is able to prove its ability to pay for the development and its ability tomorrow. Oxford and Cherwell college is unable to do either. Funding over recent years has put paid to that. Moreover, even if it were successful on the capital build programme, it would only receive 35 per cent. of the cost of building a college at Banbury.

With this continuing deficit, even with £6 million available from the sale of Rycote college—which, as I explained, is earmarked for a new campus at Bicester—the best opportunity for a new campus is the joint bid by Drayton school and Oxford and Cherwell college. A college run by both a school and a college would in essence halve the costs and double the resources. That must be good news. It would meet the particular needs of Banbury and the surrounding area by addressing adult learning needs. The college would meet many of the Government's own objectives.

These aims can be achieved only if Ministers seriously consider any written proposal from Oxfordshire county council. If they do so, Banbury may be able to have its much-needed college by 2007. I hope that the Minister and his officials will give some help to the county council in working its way through these regulations so that we can secure the necessary sponsorship from the private sector to move this project forward.

3.49 pm
The Minister for Lifelong Learning, Further and Higher Education (Alan Johnson)

I congratulate the hon. Member for Banbury (Tony Baldry) on securing the debate. I am pleased to have this opportunity to recognise the achievements of the further education sector. It is difficult to overstate the importance of FE. It is a sector that provides a diverse range of opportunities to more than 6 million learners, 4 million of them in general FE colleges, and 2 million in the workplace. Thousands of businesses are involved, as is every community in the country.

I would like to take a few minutes to set out the important role of FE and of the Government's reform agenda for the sector before moving on to some of the specific points that the hon. Gentleman raised. I welcome this opportunity to listen to views on pressures and priorities but it is important to put such comments into context. He said that people always say that things are always about to improve. The 2002 spending review was unprecedented for FE, with increases of more than £1 billion for the sector in the three years up to 2005–06. I was bemused by the quotes in his speech. Last year, every college in the country received an increase in funding of at least 6 per cent. in real terms, and every spending request made of the Learning and Skills Council was met; it was an extraordinary year. The year that we are entering is the most generous of this most generous ever three-year spending review settlement.

I fully accept the points made about the past. I will make a few crude political points to the hon. Member for Banbury. I accept that he is the worst person to make them to, as he has always had an independence of mind that makes him invulnerable to suggestions that he should consider the proposals of his Front Bench colleagues. However, I need to make the comments anyway to put the issue into context. This is an extraordinarily generous spending review settlement for FE, and it opens up a host of opportunities. The investment was essential to help us build the capability and capacity necessary for a sector able to respond to the needs of the 21st century.

People in FE are continually telling me that the sector was the Cinderella of the educational world. That is true, but there is a limit to how many times they can simply repeat that. My response to the FE sector, in view of the spending review of 2002, is that Cinderella is now going to the ball. The sector is crucial; it is key to our inextricably linked twin aims of social inclusion and economic success, and it needed the amount of investment that it received. I am not suggesting for a moment that the investment closed the historical funding gap of the early 1990s—that was when a previous Government incorporated FE colleges and, to a certain extent, locked in the funding disparity. I am saying that the spending review gives us the opportunity to do more in FE than we have ever been able to do before.

We want everyone to be able to acquire the dignity of self-improvement. We want all employers to have access to skills that they need to compete globally. To do that, we must have a properly funded FE sector. The extra investment of the spending review of 2002 helped to launch our successful strategy 18 months ago. Part of that strategy was to direct additional resources into delivering learning. For the academic year 2003–04, core funding rates per qualification increased. Our expenditure plans for the period to 2005–06 should allow that trend to continue. We are pleased with the response of the sector to "Success for All"; it is a genuine commitment and a partnership between Government, the LSC and FE providers based on trust.

The skills agenda and the 14-to-19 strategy being worked out by the Tomlinson working group present real challenges for the sector to ensure choice and opportunity for all. The issue is not just money; we need to change ways of working and make the best use of existing resources.

Oxford and Cherwell college has already taken determined action to ensure that it can meet the needs of learners and employers in the local community. I am aware that the college is not in a strong financial position; that is hardly surprising, given that it is the result of a merger of three colleges that were all in poor financial health. However, the financial forecast—prepared as part of a reorganisation proposal submitted to the Department—demonstrates that the new college expects to fall into financial health category A, the strongest level of financial status, by the end of four academic years. In order to attain that, the new college needs to meet the key assumptions set out in its reorganisation proposal. Those include considerable economies of scale—for example, there will be one senior management team instead of three—and comprehensive reviews and rationalisation of the college's curriculum and its property portfolio.

The hon. Gentleman talked about capital funding. He said that the capital pot for schools was £5 billion, and that further education's was £400 million. Those figures are accurate, but I ask him to reflect on the fact that there are 21,000 schools and approximately 400 FE colleges. Furthermore, while we are talking about property portfolios, incorporation gave colleges independence, including control over their own assets, such as land and buildings and the ability to use those flexibly. That flexibility does not apply to local authorities to which schools are responsible. That must be borne in mind.

I am advised that the LSC has committed considerable financial resources up to £3 million to help the college meet the costs of the reorganisation. The college has a new, dynamic senior management team that is co-ordinating the reviews and developing a longer-term strategic plan that will deliver the financial improvements envisaged in the reorganisation proposal. The LSC has every confidence that the new management team is of a sufficient calibre to develop Oxford and Cherwell into a flourishing, flagship college for central and north Oxfordshire.

On funding for capital investment, the Government have set out plans for huge increases in the capital funding that is allocated to the Learning and Skills Council for investment in the post-16 learning and skills sector. Capital funds allocated to the LSC will increase to more than £400 million in 2005—06, which is an increase of more than 60 per cent. in real terms compared with 2002–03. The key priorities for that investment are updating and improving vocational training facilities, including centres of vocational excellence, supporting structural change arising from area reviews, examination of provision for 14 to 19-year-olds, meeting the requirement of the Disability and Discrimination Act 1995 and transforming facilities for information and communications technology-supported learning. That level of support means that for the first time there is a long-term approach to building and redeveloping the FE infrastructure.

I understand that the Oxford and Cherwell college Rycotewood site has recently been sold, as the hon. Gentleman said, and that the proceeds, which came to some £9.25 million, will be received when the college has vacated the premises at the end of the current academic year. That site has been expensive to maintain and it is clearly not in the college's financial interest to remain there. In response, the local LSC has been working closely with the college to develop a proposal, which is currently going through the LSC approval process, for relocating the Rycotewood provision to sites in Oxford and Bicester. If that were successful, it would be supported with LSC capital grant support. While I am dealing with that subject, the 25 per cent. cap has gone and the LSC now judges all capital expenditure requests on their merits.

It is difficult to comment on the college's 2004–05 allocations because those have yet to be agreed. I accept that there are some problems, but they are the problems of success, in the sense that previously the LSC always had some funds available because of underperforming colleges. "Success for All" has meant a huge improvement across the range, which has led to some problems. All colleges received an indicative settlement six months ago and now, because of their success, they are finding that there are problems. We are considering that closely. We recognise that there is a problem and we hope to find a solution in the near future.

I should also like to mention the Drayton school proposal, which was a major part of the hon. Gentleman's speech He should not be surprised that we are waiting until a sponsor is on board. The proposal was submitted to the academies unit, which considers proposals for academies, and academies carry the need for a private sector sponsor. We want sponsors to have ownership and the opportunity to input into an extremely exciting proposal.

We accept that we need to encourage and facilitate joint proposals between schools and colleges. That is eminently sensible where it is the best solution to meet local needs, but we need to consider ways in which systems operate to help that happen. I will take away some of the procedural points that the hon. Gentleman raised, but I hope that he accepts that a sponsor needs to have a say in hove the final proposals work out.

The aim of all our proposals is to achieve excellence in education standards and skills to give everyone the opportunity to develop and learn. We can only do that with a sector that is properly recognised for the excellent service that it has always provided, and if it is properly provided with the finance to do its job properly.