Objective of education administration

Technical and Further Education Bill – in the House of Commons at 8:00 pm on 9th January 2017.

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Photo of Gordon Marsden Gordon Marsden Shadow Minister (Education) 8:00 pm, 9th January 2017

I beg to move amendment 1, page 8, line 4, at end add—

‘(3) Before an education administrator may perform functions specified in subsection (2), they must ensure an appropriate assessment is made and published of the impact of performing such functions, including, but not restricted, to—

(a) the impact on the quality of education provided to existing students of the further education body;

(b) the capacity of another body or institution to undertake any additional functions or provide education to additional students;

(c) the infrastructure of the local area, in particular transport;

(d) the ability of students to travel to another body or institution; and

(e) any financial impact on those students, including the cost of travel by students to attend another body or institution, and steps to mitigate those impacts.

(4) The Secretary of State shall make regulations to specify suitable bodies for making the assessments at subsection (3).

(5) Regulations made under subsection (4)—

(a) shall be made by statutory instrument; and

(b) shall be subject to annulment in pursuance of a resolution of either House of Parliament.”

This amendment would ensure that an appropriate assessment is made of any potential impacts on students and their education, if an education administrator puts a further education body into “special administration” and takes action such as transferring students to another institution or keeps an insolvent institution open for existing students. This amendment would also require the Secretary of State to specify suitable bodies to perform such assessments.

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Chair, Panel of Chairs, Chairman of Ways and Means

With this it will be convenient to discuss the following:

Amendment 2, in clause 18, page 9, line 15, at end insert—

“(e) suspend the Office for Students protection action for students.”

This amendment would give the court the power to suspend Office for Students’ student protection action for the period of insolvency in which the education administrator has responsibility for the management of an FE body .

Amendment 3, in clause 28, page 13, line 2, at end insert—

‘(1A) Sums guaranteed under subsection (1) shall include statutory pension obligations payable to staff employed by a further education body subject to an education administration order.”

This amendment would ensure that staff employed by an FE college continue to accrue statutory Teachers Pension Scheme and Local Government Pension Scheme pension obligations? during an education administration.

Amendment 22, in schedule 2, page 30, line 39, at end insert—

“3A The education administrator may not transfer assets of any further education body to a for-profit private company where he or she considers that more than half of the funding of the acquisition of the asset came from public funds.”

This amendment would ensure further education bodies with a track record of accruing assets publicly, could not be transferred to a for-profit private company.

Photo of Gordon Marsden Gordon Marsden Shadow Minister (Education)

May I wish you a happy new year, Mr Deputy Speaker?

We turn to the extremely important part of the Bill, which is one of the reasons why the Bill is in the form it is. I shall deal with that in a moment or two when discussing amendments 2 and 3. First, I wish to focus on the importance of clause 14 and of the Government’s welcome introduction into the Bill of the role of the education administrator. Although we welcome that, we want to probe, as we did in Committee, just how it is going to work in practice, and that is the purpose of amendment 1. It is extremely important to remember the end product we are all aiming at. We hope—and I believe, as I am sure the Minister does—that the number of occasions when the detailed insolvency provisions laid out in the second part of the Bill will be required will be as few as possible. Shortly, I will suggest why I think they are particularly necessary and deal with some of the related issues.

This amendment would ensure that an appropriate assessment is made of any potential impact on students and their education if an education administrator puts a further education body into special administration and takes action such as transferring students to another institution or keeps an insolvent institution open for existing students. It would also require the Secretary of State to specify suitable bodies to perform such assessments. The amendment has been tabled at the urging of the National Society of Apprentices and it touches on an area where the Minister and I have common ground: the importance of understanding what the end product of this new education administrator is all about. He or she is there to provide protections and support that would not be available in a traditional insolvency process. That is extremely important in terms of the position of young people, particularly those who might be at college as part of their apprenticeship or of other training.

I wish to speak particularly to the proposed new subsections 3(c), 3(d) and 3(e) set out in our amendment. One thing that the NSoA’s research has shown—this was in 2014 and the figure may well have increased since—is that apprentices spend, on average, about £24 a week on travel, which equates to a quarter of the salary of an apprentice earning the apprentice national minimum wage. Additional research has indicated that some young people were choosing the apprenticeships they could afford to get to, rather than those they were keen to do. In the light of the area review process in England and the creation of fewer, more resilient colleges, we are concerned about the impact on those potential apprentices in terms of their travel time between provider, employer and home. We have had our disagreements with the Government over that review process and will doubtless continue to probe them strongly on it.

The Opposition believe it is important that the Institute for Apprenticeships and Technical Education takes a clear and early lead role in encouraging local authorities and transport companies to ensure that all young people, including apprentices, are covered by travel concessions. Without a high-profile champion for their needs, apprentices can too often be excluded from such concessions, because apprenticeships are perceived as employment rather than education and are excluded from the relevant definitions. The crux of the amendment is to ensure that the entitlement that the Bill gives to students to continue their education works in practice. The ambitions of the provisions on special administration are noble; the amendment is intended to be a safeguard against any unintended consequences.

The education administrator will be given four options for supporting students to continue their education if their college becomes insolvent. As discussed in Committee, the options are: a provision to sell assets to keep a college afloat; a provision to bring in another body to take on different functions of the college; a provision to transfer students to another college; and, finally, in slightly ambiguous wording, a provision to keep the college “going until existing students” can finish their courses. Those are all sensible options, and I do not think that anyone present would suggest that they should not be pursued by the education administrator should students’ education be put in jeopardy by insolvency. However, I have tabled the amendment to explore what they would actually mean and to propose an assessment of the impact of the decision on students and the local community. We hope that, through such an assessment, any negative effects could be mitigated appropriately.

I shall give some brief examples. If an administrator keeps a college going for existing students to finish, it would be entirely understandable, and possibly probable, that lecturers and staff at the college might look to leave. The involvement of an education administrator would essentially be a sign of a failed college, and the taking of that option would mean that their employer would be closing in the near future anyway. Any exodus of staff in such circumstances could have untold effects on the quality of education the students received. So we want to know from the Minister—as would students, I am sure—what transitional measures would be put in place to protect the quality of education being received in a college that was being kept open only on life support.

Should the administrator decide to begin to sell off college assets to deal with insolvency issues, what protections will there be so that resources that are integral to a learner’s studies will not be sold off? Computers spring to mind as possible attractive assets that could be sold quickly for a good taking, but selling them off could leave even fewer resources to share between the remaining students of the college and have a negative impact on their experience.

What about circumstances in which students need to be transferred to another college? How close to their homes and their old college would the new college be? How much more expensive would it be to get them there? College attendees spend a lot of money on travel, the cost of which is already risking making education inaccessible for the less well off. What financial support might be available to help them to access education at the new institution if the costs were considerably higher? Would the new college have the capacity to respond to an influx of new students?

Because of insolvency, some students could find themselves forced to travel longer distances, but there is no reference in the Bill to how they would be compensated. As I have said previously, mergers between colleges could be particularly harmful to the social fabric, and to the mobility of young people in rural and suburban areas. The implications for their being able to maintain their courses, which are, after all, the liability of the colleges, will be significant if issues such as travel are not considered.

When giving evidence to the Bill Committee, the new Further Education Commissioner said that

“provision at levels 1 and 2, in particular, needs to be as local as you can get it to the learners, whether in an urban or rural area.”––[Official Report, Technical and Further Education Public Bill Committee, 22 November 2016;
c. 27, Q35.]

He accepted that if people do not have the money to travel, they will not be able to do so.

Shakira Martin of the National Union of Students also gave evidence. She said:

“It is also not clear how the Government will make sure that the education the student receives in the college is kept open and to a high-quality standard.”––[Official Report, Technical and Further Education Public Bill Committee, 22 November 2016;
c. 51, Q69.]

Bev Robinson, the principal and chief executive of my local college, Blackpool and The Fylde College, and part of Lord Sainsbury’s panel, said she

“would wish to make sure that learning within a reasonable travel-to-learn pattern was protected as well as students.”––[Official Report, Technical and Further Education Public Bill Committee, 22 November 2016;
c. 51, Q70.]

I see nothing in the Bill, and little has been said by Ministers, about where the funding to support the process will come from.

Research released in 2015 by the NUS and the Association of Colleges showed that only 49% of FE students—virtually half—could always afford their travel costs. The average travel time for those surveyed was two hours and 48 minutes a day, with an average distance of 11 miles. Four in 10 young people were relying on financial support from parents or guardians for travel costs. The situation is exacerbated by the lack of a national funding scheme. Even the minority of councils that offered discount travel to young people are unlikely to do so now following continuing Government cuts. This amendment would at least require that such things be considered, so that appropriate measures could be put in place.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West 8:30 pm, 9th January 2017

My hon. Friend is much more familiar with the Bill than I am. On the clarity that he seeks to introduce by this amendment, does he share my concern—perhaps he does not, because he knows the Bill better—that it is not clear in the Bill what an education administrator is? I know that he or she will be an officer of the court and that they will carry out certain functions. Training is central to what we are talking about on the Bill, yet I cannot see anything that says there has to be certain qualifications for an education administrator. It is a bit fuzzy.

Photo of Gordon Marsden Gordon Marsden Shadow Minister (Education)

As usual, my hon. Friend is perceptive. If we had the time and if it was within the scope of this amendment, I would acquaint him with the debates in Committee during which we discussed that matter at some length. Although we have not moved any more specific amendments in that area—obviously, this is something for the other place—the Minister needs to reflect further on what, if anything, needs to be put in the Bill to answer perfectly legitimate and important questions such as the one my hon. Friend has just asked.

There are a number of effects that the invocation of these education administration powers may have on students, but that is precisely the point of the amendment: to ensure that whatever impacts these powers have in practice, they are assessed within the local circumstances of the colleges in which those changes are needed.

Let me turn now to amendment 2, with which I hope the Minister will have some sympathy. Again, if he not happy with its structure, perhaps we can juggle with it. The amendment would give the court the power to suspend student protection action by the office for students for the period of insolvency in which the education administrator has responsibility for the management of an FE body.

The Association of Colleges is particularly keen to see amendment 2 addressed. It is concerned that the insolvency regime is being introduced at the same time as a separate protection regime takes place in higher education under the control of the new office for students—that Bill has entered its Committee stage in the other place only today. We have some sympathy with its belief that the Government have missed an opportunity to introduce a joint legal regime, covering both further and higher education corporations. However, we are where we are, and that is the basis on which this proposal is being put tonight, so this Bill needs to be amended to remove duplication between the HE intervention regime and the FE regime. This affects colleges that want to maintain or develop their HE provision, which is an important part of the system and which involves up to 150,000 students. I feel strongly about this because it affects my local college, Blackpool and the Fylde College, which has up to 1,000 students.

We have two Government Bills creating two separate control systems with two sets of obligations on colleges. Ministers will say that special administration and the OFS powers will be used only in exceptional cases, but, inevitably, colleges will have to prepare for the worst. If they have higher education provision, they will need to boilerplate—double insulate—their finances to satisfy the organisations with which they deal. This could make it a lot more expensive to run HE provision than it needs to be. The purpose of the amendment is to confirm that the OFS regime will be suspended during a special administration.

I wish to speak briefly to amendment 3, which addresses the need to ensure that staff who are employed by an FE college continue to accrue statutory teachers’ pension scheme and local government pension scheme obligations during an education administration. This issue has been raised not just by the Association of Colleges, but by the University and College Union. Colleges employ large numbers of staff and not all of them are teachers. In addition to caretakers, catering staff and cleaners, they employ learning support assistants, IT technicians and administrators. On Second Reading, we made a point of emphasising that, just as with universities, it is not simply teachers, administrators and bureaucrats who keep these institutions going. The same is true of FE colleges. We would be appalled if, as a result of any of these issues, people’s pension rights or their potential pension rights were affected.

We believe that there are more than 70,000 people in colleges who are not teachers and who are eligible in law to membership of the local government pension scheme. There is some evidence that the Bill has raised concern among those running local government pension schemes and that it is already resulting in additional financial demands on colleges. We do not think that it is the Government’s intention to use the process to renege on debts to the LGPS, because that would simply pass on the costs to all the other employers, including councils themselves, but colleges have no choice in law about whether to offer LGPS membership. The fact is that they do provide access to decent pensions for 70,000 people, and the purpose of the amendment is simply to clarify that staff employed by an FE college continue to accrue those obligations and that the Government will ensure that any additional debt accrued is covered. That would ensure that statutory TPS and LGPS pension obligations are suspended but that employed staff can continue to accrue entitlements, but that that does not result in penalty interest, which is written into TPS and LGPS rules once they recommence.

In case the Minister thinks that this is only a hypothetical issue, it is worth making the point—the UCU has done so—that there are already real concerns about pension scheme deficits in certain colleges, and that the regulation, if the issue is not addressed, could cause alarm with lenders and raise interest rates, which could of course negate the stated aim for the introduction of insolvency regulations and preclude the increased confidence in the insolvency scenario that the Government and we are very keen to see.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

May I assure my hon. Friend that the Minister is well aware of that scenario, because my local college, the City of Wolverhampton College, has a big pension problem, and when I have discussed it with him he has been extremely helpful in trying to resolve it?

Photo of Gordon Marsden Gordon Marsden Shadow Minister (Education)

I am grateful to my hon. Friend for that intervention, because he has provided a specific example of precisely the issue that has led us to table the amendment.

Amendment 22—I give notice that we will be pressing it to a vote—would ensure that further education bodies with a track record of accruing assets publicly could not be transferred to a for-profit private company. We had a significant discussion about that in Committee. For the benefit of those who were not in Committee, and indeed those who were, I will try to summarise it as briefly as possible, because I think that the principle is extraordinarily important.

The current situation raises some significant questions about what would happen to the transfer of assets. The information states that assets should be transferred only to charitable bodies, and it is on that point that I wish to focus my remarks. Where the bodies are not charities, assets must be transferred in accordance with the charitable purpose of the trust. It then links to a list of prescribed bodies to which assets could be transferred, including sixth-form colleges and governing bodies. The point that I am making is that it is expected that all transfers should be made to charitable bodies, but that is not the same as saying that that is required.

When colleges were incorporated in 1992, it took them formally outside the aegis of local authorities. My hon. Friend Kelvin Hopkins spoke eloquently about that in Committee. We have to take into account that the asset base in many cases was built up with local authority support and funding over 20 or 30 years. I reminded the Minister in Committee about my own local college, Blackpool and the Fylde College, which he has visited. He went to the Bispham campus, which has buildings and elements that go right back to the 1950s and ’60s. When the Building Colleges for the Future process took place in 2000, we did not get the new college that we hoped we would for a variety of reasons to do with where we were in the food chain. Nevertheless, I am illustrating that the estates of many buildings we are talking about have been accrued either on an active financial basis or by the ceding of land by local authorities and other organisations.

Photo of Catherine West Catherine West Shadow Minister (Foreign and Commonwealth Affairs) 8:45 pm, 9th January 2017

Does my hon. Friend agree that there is a particular issue in higher value areas, where it may be tempting to build some more flats on public land that should actually be used for the common good?

Photo of Gordon Marsden Gordon Marsden Shadow Minister (Education)

My hon. Friend has a double qualification to speak on the subject: as a Member of Parliament for the constituency she represents and through her previous career as a distinguished local government leader in London. She knows whereof she speaks and she is absolutely right that the problem is accentuated in those areas.

Money has come in over the years including pre-1992 and in the major Building Colleges for the Future programme that the Labour Government introduced in the 2000s. Then, of course, significant sums of money were put in by regional development agencies and sometimes through regional growth fund developments and offshoots of European structural funding. As I said, FE colleges deliver not just FE, but higher education. If we are in a situation whereby 10% to 12% of total HE provision is being delivered by FE colleges, it is really important that we do not lose that position.

I do not want to rehearse—indeed, we do not have time to tonight—the arguments that were made in 2011 about the private for-profit sector training coming in and being involved with various equity funds whose investment platforms were very much focused on a broad area. I would say, as many in the sector would, that although the private equity funding sector can be extremely profitable and useful, it is based on a relatively short-term view of providing management and initial capital to buy other companies and then taking them off the public share markets. It is entirely reasonable for us to be concerned about what might happen when it comes to the disposal of lands with significant amounts of public assets. The question is not simply whether it is a good thing to transfer a significant number of public sector assets to a private provider, but what the financial guarantees are. More importantly, there are issues regarding the nature of the body and the guarantees to the students and the people employed there if such organisations use the insolvency to take on those colleges.

Ministers may talk about guarantees for staff under TUPE, but I am sure that hon. Members realise that TUPE does not offer protection forever and a day. I have had significant experience of that in my constituency in Blackpool over the years with people who have been outsourced from the civil service and TUPE-ed into other organisations that have then passed on to someone else, at which point their automatic rights and security of tenure have almost become extinguished. Those are our concerns and they are not irrelevant. They are concerns of pragmatics and of principle. It is not as though there have not been concerns in the area previously.

In December 2014, the Public Accounts Committee severely quizzed officials from the Department for Business, Innovation and Skills, which then had responsibility for the matter, about why private providers were allowed to engage in untrammelled expansion without proper quality checks. In February 2015, the Committee published a report that said that BIS has repeatedly ignored advice from the Higher Education Funding Council for England about vast sums of public money going to for-profit colleges without due process and consideration. There is the potential, as Martin Doel, the former chief executive of the Association of Colleges, said, for private organisations to

“asset strip colleges’
buildings and facilities” or “pick” assets.

So, for the avoidance of doubt, we are not saying that we would oppose any private sector takeover of a college in any circumstances; we are saying that the education administrator will have to make a judgment. We are also saying that, without the protection in this amendment, the potential for the things I have described to happen would be very high, and that is why we are determined to press the amendment this evening.

Photo of Robert Halfon Robert Halfon Minister of State (Department of Education) (Apprenticeships and Skills)

I thank Gordon Marsden again for his amendments. I will begin by discussing amendment 1, which affects clause 14. I have to stress that, in the unlikely event that an FE body becomes insolvent, we want to ensure that any disruption to students’ studies is avoided or minimised as far as possible. It will be for the education administrator to deal with that, and according to the relevant clause in the Bill, they will be an insolvency practitioner—they are likely to come from one of the bigger companies and to have education experience. It will be the same system as with insolvent companies.

The education administrator will decide how the special objective will best be achieved. Clause 14(2) does no more than suggest ways in which that might be done. The education administrator will need to consider the specific circumstances of any insolvency and then determine the most appropriate approach. It is inconceivable that they would draw up proposals for achieving the special objective without having had discussions with a wide range of stakeholders, such as the Further Education Commissioner, student bodies and others, and without considering a wide range of pertinent issues.

Our expectation is that that will include discussions with the key stakeholders, local authorities and others. Where appropriate, it may also involve—I brought this up in Committee—a conversation with the care leaver’s personal adviser. We discussed in Committee the additional personal and pastoral support that care leavers might need. I undertook to consider the matter further, and I hope Kelvin Hopkins will be pleased that we are keeping the promise we made in Committee. We will ensure that the guidance to local authorities on their corporate parenting responsibilities, being introduced through the Children and Social Work Bill, includes advice on the role of personal advisers in the event of a college insolvency affecting a young person for whom they are responsible.

We expect the education administrator, in developing their proposals, to take account of the quality of alternative provision and, if it is necessary for students to complete their studies in other locations, to consider the impact of travel distances. The hon. Member for Blackpool South will be aware that we provide funding to colleges to support disadvantaged and vulnerable young people. In addition to the disadvantage funding for post-16 places—£550 million in 2016-17—which can be used to subsidise college buses, there is also the 16-to-19 bursary fund and the fund for the particularly vulnerable. Colleges will be able to offer this funding to eligible students who transfer to them under a special administrative regime. There may be scope for the education administrator to set up a scheme to cover some or all of the additional travel costs if students do have to travel to another location.

In Committee, the hon. Gentleman said:

“We do not want this to become” a

“long-winded, time-consuming process”—[Official Report, Technical and Further Education Public Bill Committee, 1 December 2016;
c. 174.]

I share that view. It is in the interests of students and staff to have certainty as soon as possible about what will happen. Requiring formal assessments to be carried out in the way proposed by the amendment would lengthen the process and reduce the education administrator’s discretion to find the best way of achieving the special objective. That is not to say that we do not agree that these issues are important, but I have shown that they are at the front of the education administrator’s mind.

On amendment 2, I understand the issue about double protection and why the hon. Gentleman has tabled the amendment. The amendment is unnecessary because the court, on hearing an education administration application, already has the discretion to make any interim order it thinks appropriate. If it is necessary or appropriate to make an order relating to an existing student protection plan, the court has the power to do that under the provisions of the Bill.

On pensions, we have followed as far as possible the provisions of the ordinary administration regime that exists for company insolvencies. We propose to adopt similar provisions for college insolvencies, which, as I say, will be very rare indeed. As with any administration, once the administrator has adopted the employment contracts of the staff they decide to keep on, they are personally liable for the costs of those individuals, such as their salary and their pension contributions. They would take on the appointment only if they were confident that sufficient funds were available to meet the costs. Some pension contributions will continue to be made and benefits accrue. Some staff may be made redundant, whether at the start of the education administration or subsequently, but this will of course be in accordance with statutory employment rights. For these staff, contributions to the pension fund will end once they are no longer employed by the body, but this is no different from the position of any other person leaving their employer’s pension scheme. It is important to be clear, however, that the benefits individuals have accrued in the scheme prior to the end of their employment will not be lost.

I accept that the hon. Gentleman feels very strongly about the transfer issue. FE colleges are statutory corporations with very significant freedoms to deal with their own assets. A solvent college is free to transfer property to any person or organisation it chooses. In order to benefit, the college would of course expect to receive value when transferring an asset to a third party, and in general this would mean transferring at market value, although this depends on the nature of the transaction as a whole. In this case, however, we are talking only about a situation where a college has failed financially and is insolvent—an extreme case.

I need to make it clear to the hon. Gentleman that there are four vital protections that act as a quadruple lock to safeguard assets that belong to the college, which may well have been paid for with money from the public purse but have to be dealt with because the college is insolvent. First, unlike solvent, operational colleges that wish to transfer property, if the education administrator decides to make a transfer scheme, they are restricted as to whom they can transfer the assets. These bodies are prescribed in the secondary legislation made under section 27B of the Further and Higher Education Act 1992. They are public sector bodies with educational functions. In addition, transfers can be made to private companies, but the company must be established for purposes that include the provision of educational facilities.

Secondly, just as with any other action of the education administrator, any transfer scheme must be for the purposes of achieving the special objective of avoiding or minimising disruption to students’ studies. Thirdly, creditors have a general right to challenge should they consider that the education administrator is selling things “on the cheap”, for example. Finally, the Secretary of State or Welsh Ministers must approve the proposed transfer scheme. Any approval will include, among other matters, consideration of whether it is for the purposes of achieving the special objective. I believe that the quadruple lock answers the hon. Gentleman’s concerns.

I thank the hon. Gentleman for his amendments, and thank other hon. Members for their contributions to the debate. I hope that my response has reassured him, and the House, on his underlying concerns. I therefore ask that the amendments be withdrawn.

Photo of Gordon Marsden Gordon Marsden Shadow Minister (Education)

I have listened carefully to what the Minister has said and taken note of his views and the proposals he has made. On that basis, we are prepared to withdraw amendment 1.

On amendments 2 and 3, I heard the reassurances that the Minister has given, but when the Bill reaches the other place there needs to be a further examination of the very important issues around the pension schemes. I am not entirely convinced that the assurances made, which I am sure have been made in good faith, will actually do the business.

As regards amendment 22, I thank the Minister for his explanation of what he described as the quadruple lock, but I am afraid, not least because of seeing past practice, that we have to plan in this Bill not for the best circumstances but for the worst. This is also a really important issue of public policy that we should establish within the Bill. On that basis, we wish to press amendment 22 to a vote. I beg to ask leave to withdraw amendment 1.

Amendment, by leave, withdrawn.

Schedule 2