Select committee: Public Accounts Committee
Recommendation 3
Thirty-Eighth Report - Managing colleges’ financial sustainability
Published 27 Jan 2021
Addressed to HM Treasury
Public Accounts Committee Managing colleges’ financial sustainability All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Recommendation (the committee's words)
It is clearly iniquitous that sixth-form colleges have to pay VAT while post-16 academies and schools with sixth forms do not. As part of the area reviews of post- 16 education and training provision, sixth-form colleges were given the option of becoming academies and, by 2018/19, 24 sixth-form colleges had converted. There is a financial incentive for colleges to convert because colleges have to pay VAT while academies (and other schools) do not. The Sixth Form Colleges Association estimates that the requirement to pay VAT means the average sixth-form college diverts around 4% of its funding away from frontline provision. This would equate to around £20 million per year across the remaining sixth-form colleges. The Department believes that, despite regular discussions between the two departments, the issue of inconsistent VAT treatment is not a priority for HM Treasury. Recommendation: The Department should work with HM Treasury to assess the merits of making the rules on VAT consistent for schools and colleges. 6 Managing colleges’ financial sustainability
From: Public Accounts Committee, Thirty-Eighth Report - Managing colleges’ financial sustainability (HC 692), 27 January 2021
Government response
The government responded to the whole report on 26 March 2021.
Summary written by Accountability Index from the government's response. It is not the government's own words.The government states that it "agrees with the Committee's recommendation" on each of the seven recommendations in the response, with target implementation dates given for several.
- On VAT, it agrees with the recommendation and says the department will "explore the potential routes and efficacy" of it with HMRC, and will engage HMRC/HM Treasury "to gauge ministers' appetite" for changing or implementing legislation (target date: August 2021).
- On funding based on student numbers, the department says it is "currently developing a consultation" on how a change to the college funding formula could help, and is "considering the advantages, disadvantages and possibilities" of a system based on real time activity.
- On intervention, it will consult sector stakeholders to "review and publish an update" to its college oversight support and intervention policy in May 2021, and the Committee will be provided with a copy.
- On T Level work placements, the department will write to the Committee in July 2021 setting out what assurances it has that there will be enough industry placements, and the impact of COVID-19 on their availability.