Education Funding for 18-year-olds

Debate between Julian Lewis and Matt Hancock

Tuesday 28th January 2014 Westminster Hall

[Matthew Hancock]

I will absolutely ensure that that happens. In fact, I will ensure that such discussions take place with all colleges. It is important, however, to set out why we took the decision we did.

We were faced with a cut across Government to make savings to reach our goals on reducing the budget deficit. I need not stress the wider argument about the necessity of reducing the deficit, but life would be easier for a Minister and throughout our country if we did not have a budget deficit of £100 billion, and if we had not had an even bigger deficit three years ago. We all know who is responsible for that. There is tension on the Opposition Benches between those who recognise and acknowledge the need to deal with the problems left by the Labour Government and the others. Not least, I recognise the reasonable approach taken, and the suggestion of alternatives, by the hon. Members for Hackney South and Shoreditch (Meg Hillier) and for Rochdale (Simon Danczuk); that is in contrast simply to complaining about things and saying, “Aren’t we in a terrible mess?” It is difficult being a Minister when there is no money left, but we all know whose fault that is. I will not stress that any more.

I care about the individual impact on colleges. For example, I would be delighted to visit Cambridge—I think I have a campaigning visit in the diary. According to our figures, which we are in the middle of confirming with colleges, as a result of the decision, Long Road sixth-form college will have a reduction in funding of 0.7% and Hills Road college of 0.2%. Those figures are to be confirmed with the institutions, but that is the scale in those instances. The impact assessment sets out the effect for types of colleges.

The reason for our decision is partly that it is in tune with other things that we are trying to do, not least raise the participation age. Many people have talked about NEETs, and I bow to no one in my support for FE colleges and their work in reducing the number of NEETs, but the biggest impact comes from the level of education at the age of 16, and from those who are in FE at 16 and 17 and whom we have to keep there. We are raising the participation age up to 18 years, with cross-party agreement, and are insisting that everyone stays in some form of education up to that age. We are focusing the funding on that.

The reasons underpinning the funding decision, therefore, are the decision to return funding for 18-year-olds to last year’s levels; our raising of the participation age; the need to do so much work to ensure that people stay in education at 16 and 17; and the fact that on average—this is not the case for everyone—18-year-olds spend less time on their education, even when it is full-time education. Furthermore, as the impact assessment says—this ought to be recognised in the debate—those who are 18 in education are no more likely to be disadvantaged than anyone else.

[Dr Lewis]

I had an exchange with the hon. Member for Bethnal Green and Bow (Rushanara Ali) earlier. Given that there will be this extra emphasis on people up to the age of 18, is it at least the Government’s aspiration to get rid of the value added tax anomaly?

[Matthew Hancock]

I am well versed in the VAT issue and recognise the argument. Removing the VAT anomaly would cost £150 million, which is the same amount that we have had to save through the measure we are debating, so I am afraid that I simply have to plead having no money to deal with it. All I will say is that I fully acknowledge the argument.

A sixth-form or FE college has a private sector designation from the Office for National Statistics that leads to the VAT charge, but it also gives the college much more power over borrowing. On the one hand, a sixth-form or FE college has much more power to manage its finances, but on the other hand, it has to pay VAT. I note that in the past couple of years, there have been two new sixth-form colleges. Yes, there have been new 16-to-19 free schools, but there have also been new sixth-form colleges, so some people have taken the decision, even though they know that they will have to pay VAT, to go down the sixth-form college route, because they get extra flexibility in managing their finances. I completely acknowledge the VAT issue, but there is a flip side to the argument, which is why some people go for paying the VAT, even though they might not need to do so.