Recommendation 6

The Department’s, the ESFA’s and the Further Education Commissioners approach to intervention takes too long, costs too much and is not effective in making colleges more sustainable. At February 2020, government was intervening in nearly half of colleges for financial health reasons. Some colleges remain in intervention for a long time—for example, seven have been in formal intervention for five years or more—and 75 colleges have been in and out of early intervention more than once. The Department has spent substantial sums of public money on supporting colleges in intervention, including £253 million on emergency funding for 36 colleges with cashflow problems. This emergency funding was originally intended to take the form of repayable loans, but much of the money is now not expected to be repaid. Two colleges in Kent have been in the insolvency regime since mid-2019 and the ESFA expects these cases will end up costing it over £60 million. Payments to the education administrators amount to £6 million (10% of the total) so far, and could increase further. The ESFA acknowledges that intervention often Managing colleges’ financial sustainability 7 does not feel supportive to colleges and reports that it is taking action in response to Dame Mary Ney’s 2019 report on college financial oversight arrangements, which recommended the ESFA develop a more nurturing relationship with colleges. Recommendation: The Department should set out within three months what actions it plans to take to improve its intervention arrangements, and how it will assess the success of these actions.