Recommendation 5

The Department’s funding decisions are based on previous years’ student numbers, which risks holding back colleges that are growing. Funding for students aged 16 to 19, which makes up around half of college income, is based on the previous year’s learner numbers; other factors, such as retention rates, are based on data which are two years old. This means that colleges with increasing numbers of learners or improving retention rates are not funded for their full level of provision. This may become a growing problem, as learner numbers are expected to increase over the next few years as the population of young people rises. The ESFA reports that it is reviewing various aspects of the FE funding system – which, it acknowledges, is very complex – including how it uses lagged data. Recommendation: The Department should consider a change to the formula for funding colleges which takes account of real time or more recent information about student numbers. It should report back to us by the summer about how funding could be delivered that better reflects colleges’ real time position.