Technical and Further Education Bill (Seventh sitting)

Debate between Ranil Jayawardena and Gordon Marsden

Committee Debate: 7th sitting: House of Commons
Thursday 1st December 2016 Public Bill Committees

[Gordon Marsden]

The amendments are again intended to probe the primary concern of the education administrator. They are relatively terse because they remove particular references and lines. Before I comment on them, I will make the point about why we are concerned and then talk about the broader issues.

Amendment 3 expresses our belief that it is important to say that the education administration objective is the primary purpose. The Minister has given strong indications, notwithstanding the nature of the education administrator’s position and background, but we think it is important to say that the primary concern should be the special education administration objective, minimising disruption to learners.

With regard to amendment 4, I have sat on a number of Delegated Legislation Committees and, to be honest, I do not think I have ever seen such a meandering and imprecise phrase in brackets as “if possible”. That could cover a multitude of sins. That is not the sort of draftsmanship that one normally expects to see in a Bill of this nature, and that, too, makes us concerned to ensure that the education administration objective is the primary concern.

This is not just an issue that concerns us. The Association of School and College Leaders raised a number of questions about the education administrator in its written evidence to the Committee. It states:

“The proposed mechanism itself gives rise to numerous concerns and uncertainties.”

It refers to the powers that have been transferred to the education administrator, such as whether he or she can

“dissolve a corporation established by Act of Parliament”.

We may touch on some of those points later. It goes on to raise the issue we discussed earlier with amendment 34 about the licensed insolvency practitioner. It also asks

“what lines of responsibility there would be during that period over matters such as safeguarding. If that were found to be inadequate, who would then have oversight…?”

Would that be the education administrator? If so, what would the implications be for the college in question?

The Government’s own consultation response document raised issues surrounding the need for further protection of learners. The House of Commons Library briefing reports:

“Of particular interest to respondents was the proposed introduction of the SAR, and the special objective that would require the education administrator to avoid or minimise disruption of the studies of the existing students, and ensure that it became unnecessary for the FE body to remain in education administration for that purpose. Although many respondents were supportive of the need and ‘ambition’ for the special objective, almost two-thirds questioned whether it sufficiently reflected the needs of learners and creditors.”

I assume that means the issue that the Minister and I have been discussing about where the balance is between those two separate processes. For example, the Association of Teachers and Lecturers stated in its response that the proposed SAR, in focusing on students as consumers, did not recognise

“the individual and societal benefits of further education”

or

“the instability and disruption to learners and their studies that they will inevitably experience as a result of their college going into administration.”

The Minister may disagree with those assessments, but they shine a light on the concerns among people who teach in colleges of this nature, so they are germane to the amendments that we have tabled.

Last week’s evidence session with the banks was particularly concerning in relation to the lack of information on finances and their ability to lend in future—hence some of the questions I asked.

[Mr Jayawardena]

I respect the point that the hon. Gentleman is making, but he mentioned, in reference to subsection (2), a lack of clarity. Is it not true that the objective of education administration is set out very clearly in clause 14? It sets out that learners come first, ensuring that it becomes unnecessary wherever possible for the body to remain in education administration. However, on even rarer occasions it might be necessary for people to act in a different way in order to put learners first. That is what the Bill is trying to achieve.

[Gordon Marsden]

I know that is what the Bill is trying to achieve; the question that we are here to decide is whether the Bill, as drafted, actually achieves that. I do not want to trade clauses with the hon. Gentleman, so I will only say, as I have observed previously, that clauses 14 and 22, although they deal with different aspects of the functions of the education administrator, are somewhat ambiguous in that respect. I will not take up the Committee’s time, but I refer the hon. Gentleman to the explanatory notes to both clauses. He will see that there is some tension there, which is why we are probing in the way that we are.

We must take into account the pressures that the administrator will face. It was particularly interesting to hear what Richard Meddelton from Lloyds said. As we know, Lloyds is an extremely important player in the college funding world. He said:

“As a lender, the ranking—again, it is unclear at the moment—may well sit behind a creditor. In addition, as we interpret it, even as a secured creditor the security could be transferred into a separate entity.”––[Official Report, Technical and Further Education Public Bill Committee, 22 November 2016; c. 41-42, Q48.]

Richard Robinson said:

“The issue is that it does not specify where that ranking lies. That, for us, is very important. Although it could rank at the back, it could also rank ahead of us.”––[Official Report, Technical and Further Education Public Bill Committee, 22 November 2016; c. 48, Q65.]

--- Later in debate ---

[Mr Jayawardena]

rose—

[Gordon Marsden]

If the hon. Gentleman will allow me to finish the quotation, I will happily let him intervene.

Richard Meddelton went on to say that

“under the current system if we have security, we have priority. The reality is that we have viewed it as quasi-Government because in the past—obviously the past is no prediction of the future—that money has been forthcoming”.––[Official Report, Technical and Further Education Public Bill Committee, 22 November 2016; c. 42, Q49.]

The banks have concerns about how the insolvency framework will work for them in financial terms. That will inevitably affect what the education administrator can do to fulfil the broader function that the Minister made.

[Mr Jayawardena]

I thank the hon. Gentleman for reminding us of the evidence we heard. Again, as we are discussing Lloyds, I refer Members to my entry in the Register of Members’ Financial Interests. Did Lloyds not also say, though, that at the moment they are not necessarily able to say that they would protect learners first, so in that respect this is a good thing for learners? However, the other banks, particularly Santander, said that the certainty would allow them to lend more. One bank does not necessarily speak for all.

[Gordon Marsden]

I accept that. I would only observe that Lloyds, as we know, is a particularly large and extremely important lender to colleges.

To sum up, although I will refer to these issues in relation to future amendments, we want to hear more detail on them from the Minister. On that point, I will conclude my remarks.

Ordered, That the debate be now adjourned.—(David Evennett.)

Technical and Further Education Bill (Sixth sitting)

Debate between Ranil Jayawardena and Gordon Marsden

Committee Debate: 6th sitting: House of Commons
Tuesday 29th November 2016 Public Bill Committees

[Gordon Marsden]

As I was saying, on clauses 2 to 12—we will obviously proceed to the second part of the Bill, which deals, in schedule 3, with the important issue of the innovation of education administrators—it is important to understand why the Government have to address these issues at this time. The reality is that these insolvency rules are important to protect, above all, students and those in colleges. Colleges are crucial for providing further education nationally and have an important local presence. When colleges have financial difficulties, that can affect many stakeholders, including students, employers, lenders, the funding and oversight bodies and the local communities in which they are situated. Colleges are, quintessentially, locally based and respond to local employment and skill needs. That is why they have been successful over the years in being able to adapt, sometimes in a rather more nimble fashion than universities—although there are community-based universities that resemble FE colleges in their output and remit more than they do traditional universities.

The reality is that the FE sector has experienced a prolonged period of funding cuts. The House of Commons Library briefing shows the scale of the reduction in funding: in adult further education and skills, funding fell from a 2010 baseline of

“£3.18 billion to £2.94 billion in 2015-16, a reduction of 8% in cash terms or 14% in real terms.”

The financial health of the FE college sector has been declining since 2010-11. There was a deficit in the sector in 2013 for the first time, and 110 colleges recorded an operating deficit. The number of colleges assessed by the Skills Funding Agency as having inadequate financial health rose from 12 to 29 in the same period. That decline in the sector’s financial health is one of the things that has fuelled what the Government have said here today.

We have already referred to the searing report produced by the National Audit Office in 2015, and I do not intend to go into detail on that again. It is obvious, and not an open secret, that the Treasury has insisted on a robust insolvency scheme as part of the quid pro quo for the additional funding that has gone into the sector. That is the reason for the profusion of these clauses in the Bill.

[Mr Ranil Jayawardena (North East Hampshire) (Con)]

Is it not also true that, from the evidence received, banks would welcome this certainty? The position for them is currently unclear, and that could help them lend more to the sector, which is invaluable in helping our students.

[Gordon Marsden]

I thank the hon. Gentleman for his intervention, and for the penetrating questions he put to the witnesses. Hopefully that will be a by-product of the process, and that is entirely right. I am also bound to observe that there are other factors pushing it down this route. One of those other factors is the underlying financial weakness of the sector. When the further education commissioner gave evidence—he talked of 82 or 84 colleges in a merger position—he was, to be blunt, far more optimistic and gung-ho about the outcome of those mergers than I would be. From memory, some other members of the Committee expressed a different point of view. The truth of mergers is that they do not always work out well, and this was commented on by Mr Pretty from the Collab Group. He made those observations based on his own experience. There are a number of factors here. Changing priorities in public funding is a reduction, it is how some colleges have struggled with large debts or partially completed capital investment projects. The latter partly reflects weaknesses in the planning and financing of capital projects under the former Learning and Skills Council.

Technical and Further Education Bill (Second sitting)

Debate between Ranil Jayawardena and Gordon Marsden

Committee Debate: 2nd sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

[Gordon Marsden]

Thank you.

[Mr Ranil Jayawardena (North East Hampshire) (Con)]

Q I refer Members to my entry in the Register of Members’ Financial Interests; I used to work for Lloyds Banking Group and spent time in corporate banking, dealing for a time with education, community and government customers. I will come to Lloyds in a moment, but first, Mr Jones, you said in your written evidence to the Committee that you think that this is a positive step and that lenders will have certainty. Can you explain the uncertainty that exists to you as a lender today?

Gareth Jones: From Santander’s perspective, the uncertainty has always been around the funding agencies and, when a college is struggling to make its payments, effectively where that interim funding will come from. There is also uncertainty about whether the current insolvency applies to college corporations at present. From a risk perspective, when we assess the underlying risk of a transaction, there has always been that uncertainty and we have had to make assumptions in the background. If the Bill is passed, the certainty it will provide is positive for us.