AoC responds to ONS reclassification of colleges as public sector

Responding to the ONS reclassification of colleges, David Hughes, AoC Chief Executive said: “Colleges work best when they are able to act independently in the interests of the communities they serve. The ONS decision to reclassify should not impact that, but these changes on their own risk making colleges less fleet of foot in meeting the needs of their students, employers and communities.

“The new arrangements borrow from the academies model which was built with schools in mind and is not a good starting point for managing the relationship with colleges which are very different institutions by size, role and character. Colleges are not simply big schools. They are anchor institutions within their localities acting as a conduit between the supply and demand of skills within local labour markets and in doing that they need freedoms to act and invest.

“We pressed officials to use this change as an opportunity to accelerate the funding and accountability streamlining that DfE promised in the Skills Act earlier this year. They have responded in part with new rules leaving colleges in control of their budgets, reserves and capital projects. Still, we advised against bringing in the other controls in the middle of the financial year and without consultation. It is helpful that DfE will be distributing the remaining funds from the three-year capital budget via a formula in the spring and also bringing forward revenue payments to March 2023 but we need to see whether these fully compensate for the new borrowing restrictions.

“AoC has discussed these issues with DfE and colleges over the six-month duration of the ONS review and we will continue to push for the best outcomes for everyone.

There are five key steps DfE could take immediately:

1. Implement VAT changes for colleges akin to those for schools
2. Act as Local Government Pension Scheme guarantor for colleges as they do for schools
3. Support teacher recruitment, as they do for schools
4. Add colleges to its centralised buying schemes like business rates, licences, insurance etc. which are all funded for schools
5. Provide capital funding to compensate for borrowing restrictions and help colleges save energy by winter 2023."

Notes to editors:

1. When colleges were incorporated in 1993, they were designated as private sector not-for-profit organisations. In 2010, colleges were moved into the public sector following an ONS decision. This was later reversed in 2012 by a change in law and colleges have remained in the private sector since.
2. Following the passing of the Skills Act, the ONS announced in May 2022 it would again look at the classification of colleges. The ONS review was taken independently of Government. Among other things it used international benchmarks to help determine the classification.