New Challenges, New Chances and New Freedoms for FE Colleges
Over the last few years, as readers will be aware, there have been changes in the Further Education landscape which, with the entry into force of the Education Act 2011 have given Further Education Colleges the ability to take advantage of various new freedoms.
In a nutshell, the Education Act 2011 removes a wide range of restrictions and controls on college corporations, putting colleges on a similar footing to charities operating within the independent/private sector. There is no longer a requirement for a college corporation to seek permission to change its Instrument and Articles and the Act has reduced the essential components of constitutional documents to a smaller, minimum core. In addition, there a number of new organisation and business models which are available to Further Education Colleges (and other providers) and these, in the context of the changing landscape of education generally, will allow FE Colleges to collaborate in different ways with both employers and other education providers – including academies, free schools and university technical colleges.
Are There Any Changes To Colleges’ Powers?
The Education Act 2011 (the Act) does not change the principal powers of Further Education Colleges but, in making changes to their supplementary powers, gives them additional freedom to operate. The key changes to the supplementary powers are;
• the removal of the previous requirement for consent to be obtained before a College could form or invest in a company being used for the provision of education which was wholly or partly publicly funded; and
• the removal of the requirement for consent of the Skills Funding Agency for borrowing and capital transactions.
These legislative changes led to the Office For National Statistics notifying the Treasury that, with effect from 1st April 2012 (when the Act came into force) Further Education Colleges would be reclassified to the private sector. The removal of the majority of central controls over FE Colleges’ operation and the reliance instead on greater accountability to stakeholders and the law in general has been welcomed although commentators anticipate a “re-pricing” of the risk associated with lending to Further Education Colleges as a result of their freedom from central controls. This may mean higher borrowing costs for Colleges and, with an individual college’s governance and management taking on a greater role, will inevitably mean, as is the case with businesses and charities operating in the private sector, certain institutions will become more attractive to lenders than others.
What about changes to the Instrument and Articles of Government?
The position before the Act was that the FE Corporation would have the power to amend its Instrument and/or Articles subject to consent of the relevant regulatory body. Whilst it has been unusual for individual colleges to exercise this power, a new standard form has generally been issued every few years after consultation with the sector.
The Act automatically modifies the Instrument and Articles of all FE Corporations and gives an institution a new power further to modify or to replace its Instrument and/or Articles, provided that certain core requirements are complied with. These are that;
• the Instrument must set out the number of members, eligibility for membership, that staff, students (and, in relation to sixth form colleges, parents of students under the age of 19) must be included as members and that the Instrument set out details of appointment of members;
• the Instrument must contain information about the College’s procedures, in particular how the College may be dissolved and its property, rights and liabilities transferred;
• there must be a Chief Executive of the College and a Clerk to the Governing Body;
• the Instrument must set out the responsibilities of both the Chief Executive and the Clerk and of the College itself including, for example, as to the determination (and periodic review) of its educational character and mission, the oversight of its activities, the effective and efficient use of its resources, its solvency and the safeguarding of its assets;
• the College publish arrangements for views of staff and students to be canvassed;
• the Instrument allow for a change of name (subject to the Secretary of State’s approval);
• the Instrument must set out how both the Instrument and the Articles may be amended (or replaced) – although there is a prohibition on any change which would result in the College ceasing to be a charity;
• the Instrument must provide for the Instrument and Articles to be made available (free of charge) to members of the public as well as its staff and student; and, finally
• that the Instrument must provide for the authentication of the application of the College’s seal.
What about Merger and Dissolution?
One of the more significant changes is to permit the Corporation to take a decision to dissolve the College. The Act sets out a requirement to publish details of any proposal to do so, together with additional prescribed information, to consult and to take account of the views of those consulted. As mentioned above, the College’s Instrument must specify how a resolution for dissolution must be passed and for the transfer of the institution’s property, rights and liabilities.
The Act provides that transfers of property, rights and/or liabilities of an FE Corporation on dissolution must be to a prescribed body, being one of a list of institutions including, for example, another FE Corporation, a Sixth Form College Corporation, a school or academy, a local authority and an HE Corporation. Importantly, the consent of the body to whom it is proposed to transfer any such property, rights or liability must be obtained for the transfer to proceed and the recipient institution must either be a charity or subject to a requirement that the property received is only used for exclusively educational charitable purposes.
So what should Colleges do next?
There is no requirement for Colleges to do anything as a result of the Act’s changes, unless they choose to do so. However, the Act’s changes are part of the Government’s vision, set out in the “New Challenges, New Chances” document published in December 2011, of a dynamic FE sector in the UK which will play an important part in the overall drive to achieve a more “user-focused” education and skills system and contribute to economic recovery and many colleges will be considering whether they can take advantage of the increased operating freedoms to enhance their offering. There is a strong emphasis on collaboration, particularly now that players in the education market as a whole are more varied and, with an increased emphasis on apprenticeships and other skills-specific training, opportunities exist for FE colleges to build closer relationships with business as well as with other providers of education.
Clearly, Colleges now also have the ability to consider, more fundamentally, plans they may have to work in a different way. The new power to dissolve an existing FE Corporation will enable consideration of conversion to a different legal form – an obvious example being a limited company, possibly as a vehicle for a joint venture, or as part of a larger group of education providers. There has also been a focus on mutualisation.
The key is for each individual institution to develop a clear view of what that institution seeking to achieve and, once the strategy is certain, to consider whether it might better be delivered by making a change or changes which the Act will now permit. What is appropriate for individual institutions will, to a large extent, be dictated by their existing relationships with businesses, other providers and the local environment as well as the nature of the governors’ leadership. Many Colleges may decide to continue without making significant changes to their strategy and methods of delivery; other Colleges may already be pursuing strategies which necessitate significant and substantial changes.
How can legal (and other) advisers help?
It is important that strategic decisions are taken in the context of consultation and advice; there will be no statutory guidance and there can be no “one size fits all” solutions. If we can provide support and advice, from a legal and/or governance perspective, we would be very pleased to do so. Please contact Caroline Redhead at firstname.lastname@example.org or any member of the Education Team on 01228 552222.All Factsheets