Question to the Department for Education:

To ask the Secretary of State for Education, with reference to the Further education reclassification: government response, published on 29 November 2022, what assessment she has made of the potential impact of new private sector borrowing rules on further education colleges.

Following the decision by the Office for National Statistics (ONS) to reclassify colleges to the public sector, the department is supporting colleges to meet the requirements of managing public money, while retaining many of their key areas of autonomy and flexibility.

Managing public money means public sector organisations may only borrow from private sector sources if the transaction delivers value for money for HM Treasury. The department has put in place a consents process for any new commercial borrowing that colleges would like to undertake. Department officials are working through the requests for January in priority order and will respond to colleges as quickly as possible.

Where the department has been unable to consent to commercial borrowing, it will consider if there is any scope for finding alternative ways to support projects that colleges were intending, pre-reclassification, to self-fund through commercial borrowing.

In response to the ONS decision on reclassification, the department has designed a package of measures to enable colleges to deliver on the priorities in the Skills for Jobs White Paper, and to continue to invest in their estates. This includes an additional £150 million allocation of capital grant funding for condition improvement for 2023/24. These allocations are available at: https://www.gov.uk/guidance/fe-capital-funding#fe-reclassification-capital-allocation. Allocations will be paid in April 2023.

The department is bringing forward £300 million of funding by March 2023 to smooth the payment profile and help colleges with their cashflow. This was communicated to the sector on 18 January.