Transcript Document

College finance conference, 9/10 June 2015
The 2015 spending review
Julian Gravatt, Assistant Chief Executive, AoC
[email protected]
@JulianGravatt
http://www.aoc.co.uk/funding-and-corporate-services/fundingand-finance/reports-and-presentations
Last Thursday’s “in-year budget review”
“The Chancellor confirmed that Whitehall departments outside of protected
areas like the NHS, schools and aid have responded to the Treasury’s call for
them to rapidly identify options to reduce spending this year.
Whitehall departments have found a further £3 billion savings this financial
year – a significant first step toward the savings required. This is equivalent to
around 3% of unprotected departmental spending this year.
The government has wasted no time in getting on with the job of fixing the
public finances: where savings will need to be made in future years and it is
sensible to bring them in earlier, it is doing so. By reducing budgets now,
Ministers are helping to smooth the ride towards the overall saving target”
Treasury statement, 4 June 2015
Political timetable
Summer 2015
General election (7 May 2015)
Formation of new government (8 May 2015)
Parliament returns (18 May 2015)
Queens speech (27 May 2015) – 32 bills
Budget (8 July 2015)
Autumn 2015
Spending review (by November 2015)
Ministerial decisions on big issues
Funding settlements for 2016-17
The bigger spending picture
Public finances (in £ billions, constant cash)
800
Government finances
Deficit to be closed this decade
… via tax income
.. plus spending cuts
Offsetting extra spending on
… pensions, debt interest (AME)
….NHS (protected DEL)
Conservative plans
Budget surplus by 2018
No increase in headline tax rates
£30 bil in fiscal consolidation
£5 bil tax measures
£12 bil benefits & tax credits
£13 bil departmental cuts
700
600
500
Taxes
400
PSCE
RAME
300
RDEL
Deficit
200
100
0
-100
The government budget
“Our deficit reduction plan has two phases. The first
will see us continue to reduce government
spending… that will require a further £30 billion in
fiscal consolidation over the next two years…..we
will find £13 billion from departmental savings; the
same rate of reduction as in this Parliament”
Page 8, Conservative manifesto
Departmental spending
2015-16
£ bil
2016 to 2018
Protected (NHS, Schools, DFID)
160
+5?
Fairly difficult to cut (Defence,rUK)
70
0
Post 16, Police, Local Govt, the rest
96
-18 (20%)
Total DEL (2015-16)
316
-13
DFE & BIS budgets
£ bil
Schools budget
16-18
7.0
All other DFE
5.5
DFE RDEL
Schools budget
41.2
Science
4.6
HE
3.3
19+ FE
2.9
All other BIS
2.4
BIS RDEL
13.2
41.2
53.7
AoC’s budget submission (5 July 2015)
Spending reductions & management of the system
Take care about cutting too quickly or too far.
A modernisation fund & coherent approach to capital funding
Tackle government-created inefficiency (eg pensions, exams, VAT)
16-18 education
Don’t cut the £4,000 full-time rate or funding per student
Continue to raise the participation rate towards 100%
Rationalisation, including closure of uneconomic sixth forms
Adult further education
Don’t just tinker to reach 3 million apprenticeships (eg tackle careers)
Extend FE loans to 19 year olds and lower level courses
Harmonise FE & HE student support
Consolidate budgets; try outcome agreements; caution on devolution
16-18 education issues & options
In 2015-16
Funding is driven by data about students (this year’s recruitment)
FE college recruitment down c3% this year. Funding down in 2015
English and Maths funding condition is a significant challenge
In 2016-17 and beyond
Big question whether 16-18 is protected at all
Forecast that 16-18 population will fall by 8% from 2015 to 2020
Savings simply by maintaining not raising participation %
EFA will make some small technical savings in 2016-17
Further cuts either to rates or factors?
Adjustments to lagged number system? Local commissioning?
It takes time to adjust any formula involving schools
SFA funding issues & options
In 2015-16
SFA funding letter was out very late
Overall spending (including capital and loans) cut by 5%
Apprenticeship money protection
“Other ASB” (adult further education ) cut c20% in 2015-16
Plan to simplify the rules slightly in 2015-16
In 2016-17 and beyond
What happens to SFA funding depends partly on HE
20% cuts imply ending HE maintenance grants and stripping 19+ FE
Contradictory policies about how to route the FE budget
3 million apprenticeships must be achieved
Decisions may be made fairly quickly
Options for SFA funding
Several options for reform of SFA funding
1.
2.
3.
4.
Devolution of budgets
Apprenticeship funded via employer vouchers (“discount codes”)
Expansion of FE loans
Action to reduce numbers under 21 on benefit
The bigger the reform, the less things change in the short-term!
College income
EFA
SFA
FE College income
2014-15 (£ millions)
233 Colleges
EFA
SFA
Other
Total
Surplus
2,823 (44%)
1,734 (28%)
1,756 (28%)
6,396
34
Colleges
Sixth form colleges
2014-15 (£ millions)
93 Colleges
EFA
Other
Total
Surplus
822 (95%)
42 (5%)
864
20
How colleges will improve their finances
Some or all of the following:
1.
Better government policy (funding properly matching the task)
2.
Cost reduction (to bring budgets back into balance)
3.
Property sales to release cash (only open to some colleges)
4.
Relentless focus on student/employer demand and need
5.
Outsmarting the competition
6.
Strong, positive, realistic leadership