Further Education Bodies (Insolvency) Regulations 2018

Baroness Garden of Frognal Excerpts

Tuesday 30th October 2018 Grand Committee

I finish with a word of caution to the Government. Given the chilly financial climate that their policies have created for colleges and the uncertain future to which I referred, they should be very careful about using the new rules contained in these regulations without considering the consequences.

[Baroness Garden of Frognal (LD)]

My Lords, I too thank the Minister for introducing the regulations. It is always somewhat frustrating that discussion of regulations offers no chance to amend, but of course it gives us an opportunity to challenge and seek clarification from the Government on rationale, detail or implementation.

We on these Benches found the Technical and Further Education Act a deeply depressing piece of legislation. Our further education sector makes an enormous contribution to education and the economy but continues to be overtasked, underfunded and underappreciated. The Bill was largely about potential insolvency in further education—hardly a resounding message of support. Of course, it introduced the baffling T-levels, which were not sought by the sector and continue to be baffling months after their inception. They risk undermining the highly regarded vocational qualifications that have served this country well for generations, but we will keep the perplexities of T-levels for another debate.

I declare an interest as a vice-president of City & Guilds, an organisation I worked with for some 20 years. For more than 140 years, it has been an immense source of employment skills for the nation. City & Guilds has always worked with FE colleges, which play a crucial part in delivering world-class qualifications that are highly regarded in the UK and overseas by employers across the whole range of work-related skills.

We note that a number of FE colleges have fallen into financial difficulties. Can the Minister tell us how many of them have actually become insolvent? I note that the Explanatory Memorandum indicates that,

“in reality we expect that FE colleges entering insolvency would be a very rare event”.

One wonders why, in that case, so much of the Act was devoted to such insolvency. We gather too that:

“The Department will publish two sets of guidance before the instrument comes into force”.


Will the Minister say when we can expect these sets of guidance? Apparently there is to be no monitoring to assess whether there are,

“any unexpected burdens or tensions within the FE sector”.

Any legislation that imposes additional burdens and tensions on an overburdened sector should surely be dismissed instantly. Would it not be prudent to have some sort of review?

Will the Minister also say what part in those financial difficulties has been played by the unwelcome and damaging burden of providing GCSE resits in maths and English? If ever a policy was designed to reinforce failure in learners, these resits are that policy. Young people who may have brilliant workplace skills are forced into taking exams again and again which have little, if any, relevance to the work they wish to do, and they fail time and again. This is hardly encouragement for the future. Colleges have been tasked with this depressing and resource-intensive duty. When will the Government realise the negative and counterproductive impact of their obsession with academic qualifications, regardless of the talents of young people or the relevance of those qualifications to the things that young people actually want to do? Can the Minister say if and when the Government have plans to review the GCSE resit policy?

I share the concerns of the noble Lord, Lord Watson, over the drop in funding for FE, which is surely unacceptable with all the pressures put on it.

Can the Minister say what provision has been made for private providers? What progress has been made in developing comparable safeguards for apprentices and other learners who are with private providers, especially in view of the collapse of 3aaa? What about the looming collapse of learndirect? Do these regulations have any implications for protecting learners if there are subcontracting arrangements, for instance? We know that colleges and private providers are entangled in highly complex subcontractors. The Minister may have an answer on this, but if he does not, perhaps he could write to me.

We do not seek to challenge these regulations, but we express again our deep concerns over government policies towards vocational, or even technical, education. We hope that wise heads will appreciate that it is in the national interest, and in the interest of learners, to give every possible support and status to those who seek to acquire the work skills the country so desperately needs. I look forward to the Minister’s reply.

[Lord Jones (Lab)]

My Lords, I thank the Minister for his cogent introduction and my noble friend for his eloquent steer in a debate such as this. My remarks will be very brief. The regulations refer to Section 124A of the Insolvency Act, which is headed “Petition for winding up on grounds of public interest”. Will the Minister expand on how he perceives the public interest in the context of this sphere of education? The matter is complicated, and obviously the provision is necessary, but can he give a recent instance of where a specific further education establishment has been perceived to be insolvent? Has that happened? Does he know of a sixth-form college that has been wound up? Has that happened?

Paragraph 7 of the Explanatory Memorandum on the policy background is helpful. Does the Minister know whether exceptional financial support has been given to one of these institutions? Like others in this debate, I think the further education sector is crucial to the future of Britain’s economy. In particular, FE colleges might help us save what remains of our manufacturing base.

--- Later in debate ---

I turn now to the question asked by the noble Baroness, Lady Garden. First, I pay tribute to the great work of City & Guilds, which is a vital part of the framework for education post 16. She asked specifically about the numbers we expect to become insolvent. I cannot give a number on that, but I restate what I said a moment ago—that we see this as a last resort. On her question about resits, I know that this is a matter of some emotion for people. It is worth saying that employers value the fact that young people have to face up to the basics of English and maths; they appreciate it. I understand that this can be demoralising. I come from a family of seven children. Only two of us passed maths O-level, so I know what it is like to be in a family of low-achievers. However, most jobs today include a high level of technical involvement. Not grasping the basics of good English comprehension or basic maths skills will put young people at a disadvantage for the rest of their lives.

[Baroness Garden of Frognal]

There is no objection to the fact that young people are helped by being able to read, write and add up. The point is that GCSEs are very academically focused and the content of those syllabuses is completely inappropriate for many people who have technical skills and could happily do a functional test paper but not the academic papers of GCSE; it is the GCSE exam that is the bugbear, not the fact that people need to be able to read, write and add up.

[Lord Agnew of Oulton (Con)]

I will certainly take the noble Baroness’s views back to the department and reiterate them; I understand exactly what she is staying. She also raised a question about providing guidance to governors. We are committed to providing clear guidance, particularly on their duties and liabilities under insolvency law. The general College Governance guide, last published in 2014, will be updated. Both sets of guidance have been drafted and are being developed with the stakeholders—the Insolvency Service, the Association of Colleges and the Sixth Form Colleges Association—ready for publication in, we hope, the next few weeks.

The noble Lord, Lord Jones, asked whether I have any specific examples of colleges that have become insolvent. The short answer is no, as they have so far resolved their issues. In 2016 we created the restructuring facility, a fund from which some £330 million has been drawn across the sector. That has been used specifically to help them carry out the restructurings and some of the mergers to which other noble Lords referred, so there has been a period of consolidation over the last two years.

The noble Lord also asked about sixth-form colleges. There is a provision—this also addresses the point made by the noble Baroness, Lady Garden—for sixth-form colleges to convert to academy status. If they do that, they get the benefit of VAT recovery. The question was: why cannot everybody do that? The reason is that it is a complicated process. It is an option that we have offered to sixth-form colleges but not all of them have taken it up.