Technical and Further Education Bill

Debate between Lord Aberdare and Baroness Pidding

Report stage (Hansard): House of Lords
Monday 27th March 2017 Lords Chamber

[Lord Aberdare (CB)]

My Lords, I too will speak mainly on Amendment 16, spoken to by my noble friend Lady Wolf, although I regret that I am not able to support it, so I hope that that is not the end of a beautiful noble friendship.

I am concerned that Amendment 16 would make it harder for independent training providers, which provide a significant proportion of the technical education we so desperately need, to compete on fair terms with FE colleges. I should perhaps declare an interest as having been an independent training provider in the distant past.

The effect of the amendment as worded would be to increase the price of such courses offered by commercial and charitable contract-funded providers in order to cover the cost of underwriting the loans made to students with an external financial institution. This would mean that the cost incurred by the vast majority of loan recipients, who will not suffer curtailment of their studies due to insolvency, would increase, even if only by a relatively small percentage. It might also discourage high-quality independent providers from offering loan-funded courses, not just because of the extra cost but because of the extra administration and bureaucracy involved, thereby limiting the range of options available to learners and, as the noble Baroness, Lady Cohen, said, providing a barrier to entry for potential new providers.

The amendment would not apply to FE colleges and other bodies covered by the insolvency regime being created by the Bill, so learners at FE colleges, which might be at least as likely to fail, would be protected by a special insolvency regime without any extra cost.

FE college loan-funded courses already have the additional benefit of being exempt from VAT, so most independent providers are already likely to face a 20% cost disadvantage. Apart from that, the cost and complexity of setting up the sorts of schemes proposed in Amendments 14 and 16 seem likely to considerably outweigh their effectiveness or value. If some special provision for independent training providers were needed, it would surely be better to take a similar approach to that proposed for colleges based on government underwriting, as I believe has happened in practice in the past. Of course, in some cases, independent training providers may even be partly owned by further education colleges, as was the case with the provider First4Skills, which was 60% owned by the City of Liverpool College and had to call in the administrators. I am not clear how the amendment would address a situation such as that.

Finally, I know that many independent training providers would be happy to help put a clear mechanism in place so that learners could easily transfer to another provider if their existing provider failed. For all those reasons, I believe that the amendment is not the right way forward.

[Baroness Pidding (Con)]

My Lords, noble Lords may remember that I spoke some weeks ago on this Bill at Second Reading and described the challenges that the UK labour market will face in the coming years and decades. Such times need flexible legislation, so as not to tie the hands of government, the UK labour market and private providers. I believe that it would be a mistake to complicate and overlegislate, and then expect any improvement on the current system.

I agree with the sentiment of Amendments 14 to 16. It ought to be our duty to make sure that students are not left stranded after provider failure, through no fault of their own. However, it is my fear that these amendments may do the very opposite of their well-meant intention. I am particularly concerned by Amendment 14, explicitly subsection (3). I want to stress that however well intentioned it is to demand that private providers set contingency funds that can be used only for the purposes outlined in subsection (2), it risks placing additional financial commitments and burdens on providers unnecessarily. It would also, inevitably, deter excellent private providers from offering loan-funded courses, given these extra commitments.

Given that the Government have made a commitment to helping students affected by provider failure by providing them with alternative providers, it is my belief that this well-intentioned legislative burden is not necessary. It will simply overcomplicate the system and deter private providers from offering excellent qualifications and training.