Nearly half of colleges at risk of collapse as new cost pressures emerge

Nearly half of colleges in England could be at risk of becoming insolvent in the next decade, as Ministers have admitted that a pensions black hole will cost colleges over £100 million every year.

There are currently 38 colleges subject to a notice to improve financial health, but Ministers have admitted that this figure is likely to rise to 100 in the next decade. These are all institutions that the government has officially warned to “ensure they were familiar with the insolvency regime procedures.”

Ministers have also admitted that further education providers are facing another stealth cut of £142 million a year after 2020 as a result of rising pension costs.

£80 million of these cuts will fall on further education colleges, which means each college would face an average of over £300,000.

By contrast, the government’s recent announcement of £38m of capital funding for T-Levels, at £142,000 per college is less than half of the cost pressure they are facing as a result of rising pension costs.

Labour’s Shadow Education Secretary Angela Rayner, speaking at the annual conference of the Association of Colleges, contrasted the government’s package with Labour’s pledge to increase FE capital investment by £140 million in the year they take office, and would then increase total capital spending to £1 billion per year over the course of a parliament.

Funding for further and adult education has already been cut by over £3 billion in real terms since 2010, and the latest stealth cuts will increase the risk of colleges becoming insolvent in the years ahead, Labour warned.

Last week, the Commons voted for a Labour motion demanding that the government address education cuts in the forthcoming comprehensive spending review.



Angela Rayner MP, Labour’s Shadow Secretary of State for Education, speaking at the Association of Colleges’ annual conference, said:

“The Prime Minister promised that austerity is over, but it clearly isn’t for the one hundred colleges facing the real risk of insolvency after years of relentless cuts. Since 2010, funding for 16-18 year olds’ education has been cut by 8 per cent in real terms, with further and adult education having been cut by over £3bn a year.

“We have seen the number of adult learners fall by one million since 2010 and overall spending on adult skills fall by almost half, just at the time when we need to develop a skilled workforce more than ever, with Brexit looming.

“Now it has been revealed that the Treasury is imposing new unfunded pension costs of £80 million a year from 2020, amount to over £300,000 per college. So I want to reiterate our call on the government to give all schools and colleges the certainty they need and guarantee that their budgets will be protected from these stealth cuts.

“Yet there was not one word or a single extra penny for further education in the Budget. The Education Secretary provided just £38m in capital funding for the supposedly flagship T-Levels. Last month, I was proud to celebrate Love Colleges week. But colleges have had neither love nor money from this government.

“That is why the next Labour government will invest in further education as part of a National Education Service for the many, not the few. We will restore funding for 16-18 year olds, fund the sector to deliver free lifelong learning and invest a billion pounds to deliver T-Levels that are a genuine gold standard in technical education.”