Economies of scale

FE colleges have always done more with less, so it’s time that they were allowed to be free from bureaucratic burdens

By Lynne Sedgmore

The new Government has made its first announcements about where budget cuts are to be made. With the Department for Business, Innovation and Skills (BIS) facing a huge £836 million reduction, the 157 Group strongly welcomes the decision to protect funding for 16 to 19-year-old education and training.

A £200 million cut to the Train to Gain budget will be reinvested in further education colleges and apprenticeships; three-quarters will fund 50,000 new apprenticeships with the remaining £50 million allocated to help fund capital investment in those FE colleges most in need. This is the right thing to do, for FE colleges and providers have a key role in helping to equip the country with the skills needed to move out of recession and unemployment.

The 157 Group, made up of 28 of the largest and most successful colleges, has been arguing for some time that any cuts must avoid hitting frontline services and concentrate instead on increasing efficiency, reducing bureaucracy and streamlining intermediary bodies. In November last year, we estimated that reductions in the staffing of several intermediary bodies could save about £175 million a year, without detriment to learners.

The funding mechanism for the sector has become increasingly complex and fragmented. We would like to see funding for schools, universities and FE colleges simplified and levelled. This should be reflected in a streamlined national and regional structure that enables colleges to carry out critical functions such as accreditation, peer review, awarding body functions and continual improvement themselves. Funding should follow the learner.

To meet market demands and learners' needs, we advocate the expansion of an employer-responsive national skills qualification system that accredits smaller chunks of learning and creates more flexible and personalised learner pathways. We want more autonomy and flexibility to be entrepreneurial, free from bureaucratic burdens, so that we can lead our colleges to achieve desired outcomes, locally and nationally.

The further education and skills sector has a well-deserved reputation for achieving more with fewer resources, for doing more with less. We believe that further, significant efficiency gains can be made through economies of scale, without sacrificing the quality of education or damaging learner choice. These could include collaborative ventures, shared services, cost-sharing vehicles and outsourcing – moves that are becoming increasingly common in our sector.

In the future, it will be difficult for colleges to survive without scale. The use of different business and operational models will help secure the success of FE colleges, ensuring major efficiencies and protecting the interests of learners. Changes to legislation and college governance would allow for the development and implementation of more sophisticated merger, management buyout, collaboration, federation and shared service models, facilitating mergers between successful college and failing, weak or smaller colleges. In some cases, there may also be compelling arguments for strong colleges merging with other strong colleges.

And as for 14-19 diplomas, there is a need to rethink the elaborate consortium arrangements and concentrate partnership working only where it can be shown to add value. Also, colleges are well-placed to act as central hubs, especially for vocational learning – they can provide the expensive practical facilities and the expertise of industrially qualified staff. Managing shared services and the joint procurement of practical facilities for 14 and 15-year-olds means that colleges can secure significant economies for their local communities.

While scale brings considerable cost advantages, there is also evidence that pupil performance can increase with scale. Some of the best A-level results come from sixth-form and tertiary colleges where student numbers are greatest, despite receiving lower funding per head than for sixth-formers in schools. The potential savings from the more efficient organisation of sixth-form studies are enormous.

This is an exciting time for our sector, and we envisage significant freedoms, within a less centralised system, for colleges to play a critical role in building skills, helping reduce unemployment and improving social cohesion.

27 May 2010

Lynne Sedgmore. Executive Director of the 157 Group,