Further Education Funding

– in Westminster Hall at 12:00 am on 18th May 2004.

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Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury) 12:00 am, 18th May 2004

The last time I was before you in Westminster Hall, Mr. Deputy Speaker, I had to seek your permission to escape early to meet my 12-year-old son outside St. Stephen's Entrance. I can assure you that there will be no similar problems today—I am here for the duration.

I am pleased to have the opportunity to raise this important issue. The full title of the debate is:

"Funding for education of 16–19 year olds at schools and further education colleges".

I want to look first at the comparative funding arrangements for 16 to 18-year-olds at those two types of institution and then at the impact of the different funding regimes on 19-year-olds at further education colleges. It is important to recognise right at the start that FE colleges have a higher proportion of students from low-income households and backgrounds with some deprivation than do school sixth forms. Clearly, it is important that those people are treated equitably. First, however, I shall set out some facts.

Between them, local colleges have 4 million students, including almost twice as many 16 to 19-year-olds as schools. The Department for Education and Skills forecasts that there will be a further 10 per cent. increase in the number of 16-year-olds at colleges in 2004–05 as education maintenance allowances are extended across the country.

Under the increased flexibility scheme, colleges also cater for 14 to 16-year-olds. Some 110,000 study two days a week for vocational courses at their local colleges, and the figure could rise to 200,000 by 2007–08. The scheme appears to be working well in my home county of Norfolk, and Easton college tells me that it has successful partnerships with schools but needs to secure long-term funding if they are to become a real, lasting commitment.

Colleges are far and away the major supplier of education and training for 16 to 18-year-olds, and nearly two thirds of those in education will soon be in local colleges, not schools. For many years, the Association of Colleges has argued that the funding gap between schools and colleges is utterly unjustifiable. In simple terms, schools were 10 per cent. better funded than colleges in 2002, which, according to the AOC, meant that colleges had £1,000 less per student per year to deliver the same package of three A-levels. That was particularly unfair given that many young people in colleges, especially general FE colleges, come from more difficult backgrounds. Indeed, 27 per cent. of young and adult students in colleges come from the 15 per cent. of wards that are most deprived.

We all thought that convergence—closing the funding gap—was high on the Government's agenda and a major rationale for the formation of the hugely expensive Learning and Skills Council, which was given responsibility for funding all provision for 16 to 18-year-olds. The Government have been remarkably candid in acknowledging the problem, and there have been many promises from the Prime Minister and a succession of Ministers about closing the gap. That suggests that they acknowledge not only that such a gap exists but that it should be closed in a defined period. If that is not the case, their commitments are pretty worthless.

Let me quote some of the Government's statements. In November 2001, my hon. Friend Bob Russell asked the Prime Minister whether he was aware that funding for young people in our sixth-form colleges was significantly less than that for young people attending sixth forms in schools. My hon. Friend acknowledged that the problem had arisen from the formula created by the previous Conservative Government, which provided roughly £1,000 a year less to colleges, and asked whether the Prime Minister would increase their funding to the same level as for schools. The Prime Minister replied:

"What we need to do, without in any way penalising sixth forms in schools"— that is clearly important—

"is to lift up the funding that is given specifically to sixth-form and further education colleges."—[Hansard, 28 November 2001; Vol. 375, c. 966.]

In June 2002, the Minister for Children, when she was Minister with responsibility for higher education, said:

"The Government are committed to raising the level of funding for colleges towards that of school sixth forms. By 2003–04 funding for further education will have risen by 26 per cent. in real terms since 1997. Further progress can only be made as resources allow and we cannot commit ourselves beyond the resources we secure. We are looking to the current Spending Review"— something I will return to—

"to provide the resources needed to deliver the Government's ambitious agenda for further education."—[Hansard, 13 June 2002; Vol. 386, c. 1409W.]

In July 2002, the Minister for the Arts, then the Secretary of State for Education and Skills, told the Select Committee on Education and Skills:

"We have done nothing to close the gap. That also is subject to the spending review. It is a manifesto commitment of the Government and an over-time move to close the gap but we have not made progress on that yet."

So the Government have a clearly stated position: there is a gap, it needs to be closed and, in a sense, the work is behind schedule.

It is clear that in the past two years, Ministers have placed great reliance on the 2003 to 2006 spending review to resolve a serious problem that effectively short-changes two thirds of 16 to 18-year-olds, many of whom come from the poorest backgrounds. The effects on college funding of the 2003 to 2006 comprehensive spending review initially looked promising. At the Association of Colleges annual conference in November 2002, the Secretary of State for Education and Skills announced a new funding package for further education, which was warmly welcomed. It ended the year-on-year cuts for colleges that had happened since 1993, and signalled three-year funding plans for colleges so that they could plan more effectively. The headline point of the new funding package was that total spending on FE would rise by 26 per cent. in cash terms and 19 per cent. in real terms in the period to 2005–06, based on a 2002–03 baseline. Ministers have repeated that figure time after time in response to requests on how the gap would be closed. Indeed, the percentage increase is an impressive figure.

How does the funding gap between schools and colleges look now? Were and are Ministers right to place their reliance on the 2003 to 2006 comprehensive spending review to redress the unjustifiable imbalance?

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

Does my hon. Friend agree that there is not only the issue of the funding of sixth-form colleges versus schools, but a question about whether the Government are delivering on their commitment to fund a three-year programme of investment in the colleges? The principal of Yeovil college has written to me this week to say that a number of colleges in the south-west have been informed that there is a funding gap in the Learning and Skills Council budget, which will mean that the previous pledge to deliver three-year improvements in funding may be reneged on. Can we hope that the Minister will clarify that today?

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

I am grateful for that intervention, and I hope that the Minister will clarify the position. I understand that there was a meeting last Friday at the Learning and Skills Council and that there were serious concerns about a shortfall in funding compared with what was anticipated. I hope that we will get clarity on that from the Minister.

Analysis of the overall 2003 to 2006 comprehensive spending review package shows that for most colleges the actual increase for this year is only in line with inflation and that over the full period to 2005–06 the increase in real resources per student is no more than 5 per cent. Looked at another way, subject to achievement of further demanding targets, most colleges will receive an extra 2.5 per cent in both 2004–05 and 2005–06. A small number will receive up to 3.5 per cent. for outstanding performance, while the least successful will receive inflation increases only. That is different from what they had been led to believe when the Secretary of State made that conference announcement.

Photo of David Kidney David Kidney Labour, Stafford

May I sound a warning about overachieving on targets? The principal of Stafford college has told me that after overachieving Government priority targets for 16 to 19-year-olds last year, the college has been asked to cut its spending this year to make up for it. When it protested that that would defeat the targets, it was asked whether it could find the savings in adult provision instead.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

I am grateful for that intervention, too. The funding arrangements seem to be in something of a mess, and the hon. Gentleman gives a good example of the matters that the Minister must address.

Photo of John Pugh John Pugh Shadow Spokesperson (Education)

My hon. Friend has spoken about the high expectations that further education colleges had in 2002. He will be aware that when we talked at that time about the brave new world confronting the colleges, sceptical noises were made, and largely on the Liberal Democrat Benches.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

I am grateful for a point well made.

Let us consider the difference between my analysis of the anticipated increases year on year, and the Government's oft-repeated headline figure of 19 per cent. The principal reasons for it are as follows. The first is the projected rise in student enrolments of about 11 per cent., which is good news in itself, provided that it is funded. I am talking about an extra 100,000 16 to 18-year-olds, 750,000 basic skills adult students—that incredibly important group must not be forgotten—and an unspecified number of other students, all of whose participation in college courses must be funded.

The second reason is employers' national insurance contributions and pension contribution changes, resulting in increased costs that colleges are required to absorb. That is the classic case of cash in and cash out, with no gain. The next issue is the enhanced premium for widening participation and area costs—amounting to some 1 per cent. of overall national rates—which benefit only a limited number of colleges. Moreover, to earn the extra 5 per cent., colleges have to meet, under agreements in the "Success for All" programme, improvement targets on enrolments, employer engagement, success rates and teacher qualifications, all of which incur costs of some kind for most colleges. The overall increase per student of 5 per cent. to 2005–06 also determines colleges' scope for addressing staff pay levels and other improvements.

In 2002–03, when Ministers first answered questions on those issues in the House, LSC funding rates for school sixth forms were 10.5 per cent. above those for FE colleges. However, the AOC believed that the true funding gap was somewhat higher, both because the real-terms guarantee meant that a significant minority of schools were funded above that level, and because local education authorities continued to meet some costs for schools outside those rates that colleges have to meet within the rates. Again, there is different treatment for the two sectors.

By May 2003, it looked as if the funding gap between FE colleges and school sixth forms for 2003–04 would reduce by some 5 per cent., on the basis of the rates announced by the LSC. However, it became clear that the overall funding gap was 10 per cent., on the basis of the 2003–04 budgets. The LSC agreed that figure in evidence to the Education and Skills Committee. At the sitting on 2 February 2004, Mark Haysom, the LSC chief executive, and his director of learning, Caroline Neville, admitted that the gap was about 10 per cent., although they thought that there had been a small narrowing of 1 per cent. in 2002–03. In response to questioning from Mr. Chaytor, they were equivocal about whether they thought that the Government had the political will that they had three years ago for convergence—the Minister may want to respond to that—and they were silent about their own capacity to ensure convergence in the future.

Astonishingly, it appears that by 2004–05, the gap will widen again, although it is not yet clear by how much. There appear to be three reasons for that, which are pretty well known to the Government. First, the LSC formula gives schools more than colleges for exactly the same courses. The LSC spent 7 per cent. more than its 2003–04 budget—£105 million—on school sixth forms, although the number of 16 to 18-year-olds in schools rose by only 2 per cent. At the same time, the LSC spent only 2 per cent. more than its 2003–04 budget on everything else, including colleges, which took in 7 per cent. more 16 to 18-year-olds.

Secondly, one third of schools receive more money than the formula says they should. Thirdly, the money given to colleges must go further—a crucial point to take into account when making a comparison. Colleges must pay VAT, corporate and legal costs, and the full cost of running their own buildings.

Paston college, in my constituency, estimates that VAT alone imposes an extra cost of £100 a year per full-time student. That extraordinary anomaly does not seem to be widely known. Peter Mayne, Paston's principal, also tells me that the compliance costs for a small college of 600 full-time students is a particularly heavy burden. The college faces large bills for internal and external audit work, as well as for the audit of the complex management information systems records. Compliance costs Paston college alone tens of thousands of pounds a year. Will the Minister look into the problem of the burden of audit work on small colleges, which is excessive, particularly when compared with that faced by sixth-form schools?

It is hard to see how the Minister for Lifelong Learning, Further and Higher Education can justify his response to the House last month on the issue. Lawrie Quinn asked him whether

"we need to give greater consideration to the inequalities between LEA sixth forms and stand-alone sixth forms".

The Minister replied:

"We are aware of those issues and, in this funding round, the funding gap between sixth forms and further education colleges has closed considerably."—[Hansard, 29 April 2004; Vol. 420, c. 990–991.]

From the evidence that I gave the Minister this afternoon, that does not appear to be the case.

What does a funding gap of 10 per cent., or possibly more, mean for the young people at general FE colleges, tertiary colleges and sixth-form colleges throughout the country? I shall give a couple of examples. Cadbury college in Birmingham attracts some 1,300 full-time, 16 to 19-year-old students who all follow advanced level programmes. As an inner-city college, 58 per cent. of its students are from ethnic minorities, and 65 per cent. of its students live in areas designated as socially or economically disadvantaged. Some 60 per cent. of its students receive an education maintenance allowance. David Igoe, the principal, says that current estimates, acknowledged by the Department for Education and Skills and by Ministers, put the funding gap between schools and colleges at around 10 per cent., as we heard, although the college believes that it is much higher. He says:

"The conservative figure of 10 per cent. would add £494,000 to the college's revenue budget. Put another way this is the extra amount a school would receive for the same students following identical programmes. This amount of money would enable the college to: . . . Employ a further 16 full-time fully-qualified teachers . . . Employ an additional 25+ support and technical staff . . . Increase departmental resource budgets by 400 per cent . . . Purchase up to 1,000 networked, internet ready PC workstations . . . However, the real benefit of this extra funding would be to give us the resource to really support the specific learning needs of our students. Not surprisingly many have language and literacy difficulties and would be significantly helped with individual and small group support. We have also found that many students do not have either the space or opportunity to study at home and the college has to provide study space and IT facilities which other students in schools and institutions with a more affluent intake can usually take for granted at home."

That is one reason why it is so important for this sector to receive proper equity funding.

Other colleges have also identified large class sizes and the shortage of funds to pay their staff what they deserve—a major result of this persistent underfunding. Do the Government still accept the need to address this funding gap? I would be grateful if the Minister would confirm that they do. In the Select Committee last month, Jonathan Shaw asked the Minister for School Standards about the funding gap. The Minister seemed to seek to defend the gap by arguing that differences in the terms and conditions of staff justified such a gap, although he added:

"I always look out for . . . the evidence that lots of colleges are losing staff into the school sector and when I have asked about that I have not seen figures suggesting that there is that sort of movement . . . I would be alarmed if colleges were saying they were unable to find the staff to deliver the curriculum that they need to."

It is time for the Minister to be alarmed, because colleges are expressing concern about staffing.

In reply to a parliamentary question from Chris Grayling, the Minister said that recorded losses of staff from colleges to schools had risen two and a half times in the two years from 2000 to 2002, to 540. Inevitably, general further education colleges also lose staff to industry. The principal of Easton college in Norfolk told me that it has difficulty with recruitment and retention of staff and mentioned the better terms and conditions in schools as a significant part of the problem.

Photo of David Drew David Drew Labour/Co-operative, Stroud

It is not just a matter of comparison between the sectors. In Stroud, there is a successful consortium in which three schools post-16 have joined with the local college; the college lecturers teach schoolchildren, and the schoolteachers instruct the college students. There is a stark differential in the rates of pay and conditions, so it is fair and proper that we do something about it. I completely support the hon. Gentleman's case.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

I am grateful. The local initiative to which the hon. Gentleman referred is an excellent example for others to follow.

I have concentrated so far on the revenue funding differences between schools and colleges, but there are serious problems for colleges in relation to their schools counterparts over capital funding. The Government's investment programme "Building Schools for the Future" is laudable, but it will widen the differential between schools and colleges. The Government will spend £5 billion on school buildings but less than £400 million on college buildings up to 2005–06, which is an extraordinary disparity when primary and secondary school rolls are static and 16 to 18-year-old rolls are rising. That is an astonishing mismatch in funding. Colleges must find 65 per cent. of any capital cost, which comes out of revenue funding, but schools are fully funded—100 per cent.—for capital costs. That is a serious issue for many colleges.

Paston college in my constituency has a wonderfully ambitious plan to provide new facilities for the college, but at present the chances of its getting the resources to fund them look slim. The lack of investment in college building will deny the majority of young people access to equipment and facilities that they will need to develop 21st century skills. There is also the question of capacity: many colleges are at capacity and need new buildings to manage the expansion in numbers that is required to meet Government targets. Sid Hughes, the principal of Newham sixth-form college in London, which is in one of the most deprived areas in the country said:

"'Whilst levels of funding to this inner-city sixth form college have in recent years reflected this government's target for raising levels of participation post-16 as well as recognising that there are particular costs associated with meeting this target with harder to reach students, the growing funding gap between schools and the college means that the potential contribution we could make to this challenging agenda is unlikely to be realised."

How depressing that is. Mr. Hughes continues:

"This is felt most keenly in the widely different levels of capital resources currently available to schools and colleges. No-one would wish to question schools' access to new funding, it is certainly desperately needed, but our college would wish to increase capacity both to extend 14–16 partnerships with our local schools and to increase progression opportunities post-16. Funding levels in the sector are quite simply inadequate to support this. There are many millions of pounds being allocated to school capital projects in this area, but the message the college receives when seeking funding to support growth is far from positive."

The Government are urging colleges towards expansion for 16 to 18-year-olds and pinning their funding on it, but they seem unwilling or unable to ensure the funding to enable those young people to enjoy equal facilities with their better-off school counterparts in terms of class sizes, access to equipment and books, or the buildings in which they receive their education. Does that not sit uncomfortably with the Government's plans for a guarantee for 16 to 18-year-olds, and how far is even that guarantee a reality?

The Government's perfectly laudable drive to raise 16 to 18-year-old participation steps up a gear with the education maintenance allowance programme this September, but many colleges do not know whether they will receive money to pay for extra students. College success in raising 16 to 18-year-old participation and achievement is under threat because of fixed Government budgets. As the Government have repeatedly warned, there is not enough money in the system to meet their targets, not even for priority groups. At least 50 colleges recruited additional 16 to 18-year-old students in 2002–03 and in 2003–04 on a promise of extra funding from the Learning and Skills Council, but most are still waiting for that payment. That is an extraordinary position for colleges that are trying to plan for the future. In some cases, they will not be paid for another 12 months.

In the academic year 2004–05, the funding restrictions will really bite and colleges will have to turn away 16-year-olds and young people already on apprenticeship courses because they will not be able to afford to teach them. That will all affect other courses in colleges and adult education. What happens to the opportunities available to those young people when they reach 19? The Learning and Skills Council appears unable even to make the books balance for 16 to 18-year olds and is therefore forced to cut funding for adults, many of whom have basic literacy and numeracy needs. The Government have acknowledged how important that work is, but it will be undone if they do not sort out the funding problem. Although the Government talk up their skills strategy, their quangos are forcing cuts in courses that develop skills. If the Government doubt that, they have only to listen to the representatives of 120 colleges who will come to the House tomorrow to speak to their MPs.

Since there is not enough in the LSC's budget to pay for the targets that the Government have imposed, colleges are being told by their local learning and skills councils that funding for any course outside certain narrow definitions is under threat. That includes even basic literacy courses for adults in the community; if they do not lead to a recognised qualification, they are not funded. In Norfolk, it is often taster-type courses, which do not lead to qualifications, that first hook an adult into returning to learning. The work done by colleges in Norfolk in helping microbusinesses to upskill also does not generally involve qualifications. That valuable work could all be lost.

If the lucky 16 to 18-year-olds who get a college place want to carry on studying to level 3, there will be cuts in those courses across the country. The Government's answer is to tell colleges to get more money from employers. At the same time as spending £38 million on relaunching modern apprenticeships in a desperate effort to persuade employers to engage with the training of young and older people the Government have this year lost 70,000 adult course places—the equivalent of the entire post-19 apprenticeship programme.

What is the precise position with regard to the apparent funding gap, which my hon. Friend Mr. Laws mentioned, between the money available to the LSC and what colleges are able to deliver? What was the outcome of Friday's meeting to discuss that issue? What is the gap? What cuts in planned programmes do colleges face? If the Minister does nothing else today, will he at least clarify that position to end the uncertainty for colleges in the sector? Such uncertainty makes it impossible for colleges to plan ahead.

This is an important time for the Government's credibility in providing "education, education, education" for all 16 to 18-year-olds, and not just for the minority in schools. The injustice for the 800,000 young people still losing out must be sorted out. That is the challenge for the Minister today.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

May I make a strong request to Members who wish to participate? At least seven Members wish to speak and we have only half an hour before I should start the winding-up speeches. If Members limit their remarks to about four minutes, all will get in. If they do not, there is nothing that I can do about it.

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

I shall do my best to limit myself to four minutes.

I congratulate Norman Lamb on securing the debate, which is timely, in view of the lobby of Parliament tomorrow afternoon. Many colleges of further education will be represented, and Mr. Graham Moore from Stoke-on-Trent college will be here. Many MPs, including those of us in north Staffordshire, work closely with colleges to make sure that priority is given to this most important sector of education.

I welcome the fact that the Under-Secretary of State for Education and Skills, Mr. Twigg is here to respond to the debate. He is familiar with the problems that we face in north Staffordshire, and we should impress on him that we want to be constructive critics and to welcome all that the Government are doing in further education. I have just come from chairing a meeting of the all-party regeneration group, attended by his fellow Minister with responsibility for education and skills. We looked at how the Government, if they are to deliver on their regeneration agenda and invest in new hospital building and new housing, must invest in construction skills. Given the number of people leaving education at 17, it is also important to invest in the skills of our young people.

I wish to flag up one issue in my four minutes—capital investment in colleges. I am delighted that the Government have chosen Stoke-on-Trent as one of the areas where we will have investment in our secondary schools under the "fit for the future" programme. That means that from part of the money available nationally, every single secondary school in Stoke-on-Trent will either be replaced and rebuilt or completely refurbished and brought up to standard. We have campaigned and lobbied Ministers on that, and it is absolutely critical. It involves 14 schools in all and will bring enormous benefits to 11 to 16-year-olds. It allows £125 million for redevelopment and refurbishment, and it has come not a moment too soon. However, we should look at the effects. I know that we are never satisfied; indeed, I think that it is the job of MPs never to be satisfied, but it will provide a stark comparison with the situation in our further education colleges.

On the current spending available through the Learning and Skills Council, we cannot match the initiative in secondary education in Stoke-on-Trent with similar investment in the fabric of college buildings. We will clearly work closely with our local learning and skills council in Stoke-on-Trent to ensure that we get the best possible facilities. We have just secured £5 million for a new college annexe, which will be based on construction skills, in Burslem. We have worked hard for that.

The Government are aware that colleges are not funded as well as schools, and the burden of borrowing and repaying for capital projects will not be undertaken lightly. Capital investment should not come at the expense of staff salaries. We need the forthcoming spending round settlement to go right across the board, not just for further education colleges in Stoke-on-Trent or north Staffordshire or elsewhere in the country. We need a fair and sensible allocation of capital and revenue funding, and that has to be passed to the learning and skills councils. Without that, I am concerned that the Government's aspiration for the post-16 age group will falter. I am grateful for the opportunity to raise my concern about capital funding in the wider context of the debate.

Photo of Francis Maude Francis Maude Conservative, Horsham

I am grateful for the chance briefly to contribute to this timely and important debate. As you know, Mr. Deputy Speaker, I must leave at 3 o'clock for a parliamentary engagement elsewhere in the building, and I mean no discourtesy to the House and hope that I shall be forgiven for leaving. My particular concern is with sixth-form colleges. The debate is, perfectly properly, about FE and sixth-form colleges in general, but I am concerned about the particular problems of sixth-form colleges, to which attention should be drawn. If I refer to my parochial concern with Horsham, it is to illustrate the broader problem, which I suspect is widespread.

The college of Richard Collyer in Horsham is a sixth-form college that was originally a boys' grammar school of great historic antiquity. It provides an outstanding 16-to-19 education for 2,000 students. It benefits, perhaps unusually, in terms of capital spending, from the support of the Mercers' Company. Richard Collyer, the founder of the college in the 16th century, was a mercer, and the Mercers' Company continues to support it magnificently, recently contributing £500,000 to a new learning resource centre. In terms of capital spending, it has a generous outside benefactor, and I appreciate that not all sixth-form colleges have that. Owing to its current resources—I stress that none of the three comprehensive schools in Horsham town has a sixth form so that the only place for students to go at the age of 16 is the Richard Collyer college—it does an exceptional job, and has an enviable record of academic achievement.

It has been repeatedly stated—indeed, it will be a constant theme—that the average gap in spending per student in the further education sector is about 10 per cent. That gap is hard to measure because the formulae are so hideously complicated and variable, but it seems to be broadly true that the principal of Collyers, Michael Marchant, has around 10 per cent. less to spend per student than he would if he were head of an all-the-way-through school with a sixth form. The sixth-form students there receive less—of course, money is not everything—than their friends and relations at the Weald school in Billingshurst six miles down the road, where the sixth form is part of the school. That is not the end of the world but it is an institutionalised problem from which towns such as Horsham, whose only 16-to-19 education is provided by a sixth-form college, suffer. That problem must be addressed, and I hope that the Minister will be able to give us some encouragement.

I differentiate between FE colleges and sixth-form colleges because FE colleges tend to be larger, so they tend to benefit from greater economies of scale. They also have greater ability to generate additional income through charging fees: there is greater flexibility, including provision of different types of course, such as those for mature students, which fall outside the ordinary state system. Many FE colleges have, to a greater or lesser extent, an ability to increase their revenues through charging fees.

If one reads carefully the Government's proposals on higher education, one sees that the bulk of their much vaunted expansion has nothing to do with expansion of the university sector: most of the proposed expansion is to be delivered through two-year foundation degrees in FE colleges. Colleges can look forward to that expansion and an enhancement of their critical mass and the revenue stream available. For all those reasons, sixth-form colleges are uniquely disadvantaged. As one of nature's Treasury Ministers, I do not believe that increasing public spending is the answer to all problems, but sixth-form colleges suffer from unique disadvantage, which needs urgently to be addressed.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My speech will be short because much of what I want to say has been said by other hon. Members, particularly by Norman Lamb, who covered the ground thoroughly in his fine speech. I have the good fortune to represent a constituency with two of the best colleges in the country, one of which, Barnfield college, was the first to be given beacon status, and both of which received a grade 1 in their inspections and are extraordinarily good. I must declare a non-pecuniary interest. For the past 15 years, I have been a member of and am now the vice-chair of governors at the wonderful Luton sixth-form college, which my children attended.

One of my first speeches in the House was about raising the profile of sixth-form colleges, which were not properly appreciated by the Government or the Department for Education and Skills. There used to be separate offices, on different sides of the building, looking after school sixth forms and sixth-form colleges, but they should have been considered together, because things were being done for school sixth forms while sixth-form colleges were forgotten. Fortunately, the situation is better now. There is no doubt that the Government's recognition of sixth-form colleges has improved since then, when I described them as the jewel in our educational crown. That is still true. The performance of sixth-form colleges is astonishingly good. To use another metaphor, they are geese that lay golden eggs. We should nurture and support them to the best of our ability.

A general settlement of 5 per cent. for schools and sixth-form colleges would do nothing to reduce the differential between them. We must address that differential not by cutting schools' budgets, but by raising sixth-form college budgets. A general settlement across sixth-form and FE colleges would also present a problem, because a higher proportion of sixth-form college costs go on staff and they do not have external sources of income. Again, they lose out in that situation; they must be considered separately to ensure that they get the right resources.

My next point is about capital development. Luton sixth-form college is magnificent, but it needs a lot of capital development. We need to modernise it, but we are in danger of doing a cheap job, rather than the right job, because we get only 35 per cent. funding instead of 100 per cent. Changing that alone would make a material difference to Luton sixth-form college, and to many others. We would have the right buildings in which to educate our young people, rather than buildings that will just about do. We would no longer have to do the best we can with inadequate sums.

I wholeheartedly agree with the hon. Member for North Norfolk that serious points need to be addressed. I hope that the Government will address them, and will ensure that sixth-form colleges are given the resources that they need to do the job.

Photo of Julian Lewis Julian Lewis Shadow Minister (Defence)

Mr. Hopkins has stolen my metaphor—I was going to describe Brockenhurst college as a jewel in the educational crown of the New Forest, but that is not incompatible with what he said about the outstanding college in his constituency.

Normally, when Brockenhurst college contacts me, it is to report some good news or an outstanding success. Occasionally, it does so to invite me to participate in an event or, at general election time, in some sort of quasi-parliamentary debate with aspiring parliamentarians. Today, however, the principal of the college, Mike Snell, who is not unduly alarmist, told me that a major crisis in further education funding is felt to be building up in Hampshire, and that its 22 FE colleges are in for a rough time next year. He has calculated the amount that Brockenhurst college gets is £3,400 per year per sixth-former. As far as he has been able to work out—he stands firmly by these figures—most schools get at least £300 to £400 more than that per pupil per year, and schools with smaller sixth forms could get as much as £700 to £800 a year more.

It is said that all good speeches should make a single point. My point is that the difference is unfair. Will the Minister consider trying to provide similar funding per pupil per annum for sixth formers doing similar courses, whether they are in colleges of further education, sixth form colleges, or school sixth forms?

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Three hon. Members are attempting to catch my eye. I shall be able to call all of them if they restrict their remarks to five minutes each.

Photo of Annette Brooke Annette Brooke Shadow Spokesperson (Home Affairs)

I congratulate my hon. Friend Norman Lamb on his comprehensive introduction. Given the time constraint, I shall concentrate on my local college.

My hon. Friend Mr. Laws mentioned the problems faced by the south-west, which have ramifications for Bournemouth, Dorset and Poole, where a shortfall of some £10 million in the next financial year is anticipated. There is deep concern about the impact on all courses at Bournemouth and Poole college, a large college with 27,000 students, 350 of whom are international students.

Despite the general prosperity of the area, almost a quarter of the local population has been identified as having poor literacy and numeracy skills. The problem is that it seems that the students who will suffer because of cuts will be in the group defined as "other". Funding supports programmes that respond to the needs of business. If an employer does not want or is unable to send an employee for a national vocational or similar qualification, colleges use the "other" funding to support flexible and customised qualifications, such as open college network modules. Those are very effective, but the cuts to funding will mean that choices have to be made. The students who miss out could be those aged over 19 who cannot afford to pay. How are we to determine who will be cut out of the loop because there is not enough money? Surely such considerations are contrary to the Government's education strategy.

Others who might suffer are those whom the Government have identified as being able to get a level 2 qualification but who have not previously acquired a level 2 or equivalent qualification. My local college expects that such people will constitute a priority group, funded by charging or excluding other over-19s who are assumed already to have a level 2 or level 3 qualification. It is a difficult problem. How are we to meet the needs of adults without level 2 qualifications? The local skills council has indicated that no additional learning support funding is likely to be available. People who have not been in education for some time make up the very group that needs help and support, yet that is where the cuts will really bite.

The contribution by employers towards further education costs is variable. The Construction Industry Training Board, for example, has a model scheme and works closely with further education bodies, but many groups do not pay a levy or contribute to training costs. Business needs investment in higher-level skills, but in Dorset, Bournemouth and Poole, the majority of employers are micro, small or medium-sized businesses. It is unrealistic to expect them to pay for training or to contribute towards filling the funding gap.

The Government will have to solve the problem; FE courses must be available to all who need them and wish to enhance their skill profiles. Relevant, quality courses are essential to local and national economic development. I hope that the Minister will have more than kind words for the FE sector, and that he will make and adhere to firm commitments—with a time scale attached—about future funding.

Photo of David Chaytor David Chaytor Labour, Bury North

In the past seven years, the Government have brought more stability to the further education sector, invested more in it, made more improvements to its physical infrastructure and more greatly enhanced the educational opportunities that it offers than any Government in the preceding 70 years. The 19 per cent. real-terms increase given to FE in the current spending period is vastly more than anything given in the period 1979 to 1987. It is also vastly more than anything that would have been allocated to FE through the Liberal Democrats' former policy of raising income tax by 1p, and anything that would be allocated under their current policy of increasing the top rate of income tax to 50 per cent.

Having set the record straight on that score, I note that two outstanding colleges in my constituency—Bury college and the Holy Cross sixth-form college—have benefited enormously in both revenue and capital terms from the Government's financial allocations in the past seven years. However, the continuing funding gap between colleges and schools cannot be ignored any longer. Introducing the debate, Norman Lamb referred to a question that I asked during a meeting of the Education and Skills Committee, in which I pressed Ministers for a time scale. At this week's meeting of the Committee, the chairman of the Learning and Skills Council admitted that the funding gap was between 10 per cent. and 12 per cent., which might even reflect a slight widening of the gap in the last year or two. It critical that the Government set a time scale for closing that gap as part of their strategy for 14-to-19 education and training.

Students in adjacent institutions pursue the same course, yet are funded at different rates, while teachers in adjacent institutions teach the same course, yet are paid at different rates. Quite apart from those injustices, however, my district and that of Mr. Maude, who spoke about the college for 11 to 16-year-olds in Horsham, are among those that some years ago sensibly and intelligently reorganised their education systems so that 11-to-16 schools fed into colleges. The districts thereby delivered one of the most coherent existing models for 14-to-19 education, yet those very districts are penalised: not only do they lose out through a lower rate of FE funding, but the sons and daughters of our constituents do not benefit from an enhanced rate for sixth-form colleges. That anomaly must end.

There is a discrepancy in the revenue funding planned for schools and colleges. Perhaps there are reasons for that, but I am less concerned about that discrepancy than about the lack of co-ordination between the investment in colleges and investment in schools. When thinking about a 14-to-19 phase in education, it is ludicrous to separate capital investment for schools from capital investment for colleges. The process must be coherent. Ministers in the Department for Education and Skills might have heard this message before, but I fear that although we are setting in train the admirable process of rebuilding every secondary school in the country, we are not doing so as part of the necessary reorganisation of 16-to-19 education. I repeat to my hon. Friend the Minister that we should take our foot off the accelerator in the "Building Schools for the Future" programme. We should see the process in the context of the reorganisation that the Learning and Skills Council is trying to achieve through its area inspections, and, more importantly, the strategic area review. It is important that we receive the maximum benefit from the record level of capital investment in schools and colleges that we are planning.

Finally, there is an overwhelming case for enhanced funding for FE in the next spending review. Any college principal who in the weeks leading up to the spending review decision did not claim that there was a sense of imminent crisis would not be doing their job properly. We take that as read and we understand the context. However, the issue encompasses not only getting an extra 10 per cent. into FE funding, but the necessary structural reorganisation.

Dr. Lewis gave some interesting figures about enhanced funding for sixth-form colleges generally, particularly small ones. In England today there are far too many small sixth-form colleges delivering inadequate provision and achieving poorer results than larger sixth forms and colleges. They are not equipped to deliver the broad and balanced curriculum for which the Tomlinson report argues. Let us look again at what the LSCs are doing and apply a little more pressure on them to take urgent action about structural reorganisation.

We should also give every encouragement to Mike Tomlinson and his committee to get the new curriculum in place as quickly as possible. The new, broader, more balanced, enhanced curriculum, which combines vocational and academic elements, will deliver the 14-to-19 structure that we need. It will force small, inadequate six forms to see the writing on the wall and to realise that they have to collaborate—that they cannot survive as independent institutions. That will be one of the most important means by which we close the gap between school and college funding.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

When I introduced a debate on this topic about 18 months ago, there were five of us in the Chamber: three party spokesmen and two others. I do not know whether my hon. Friend Norman Lamb has greater drawing power than I do, or whether we have become more aware of the subject, probably because of the lobby tomorrow.

Richmond upon Thames college in my constituency comes fairly near the top of most conventional league tables for academic and vocational results, both absolutely and in value-added terms. It is a remarkably comprehensive institution where some of the most high-flying sixth formers in the country, who go on to Oxbridge, mix with children from very deprived areas of south-west London, who are doing vocational courses. A remarkable ethos has grown around that remarkable mix.

The college has its problems, some of which have been hinted at. The buildings are dilapidated and totally out of date. There is a serious problem with staff morale, and the staff age structure is wrong—many are over 50. These days we are used to the idea of picket lines and staff demoralisation over pay and conditions. The college principal has written me a rather complex and daunting five-page note on his financial problems.

I should like to make three brief points of substance. The first relates to differences in the salaries of college lecturers and of teachers teaching the same subjects in the same way in schools. That is a serious problem for the morale of college lecturers, which manifests itself in some serious practical ways. For example, the LEA in my borough has hit on the good idea of taking behaviourally disturbed schoolchildren aged 14 and above seriously, and putting them on vocational courses at the college in the hope that it can do something with them. It does, but the college lecturers are paid several thousand pounds a year less than the schoolteachers who failed to deal with those kids. They probably would not be admitted to the school because they are not sufficiently qualified.

The problem has more invidious effects. The LEA has hit on the idea of having sixth forms within schools as well as within the college. The college will provide sixth-form courses on a franchise. College lecturers will go into schools to teach A-levels for several thousand pounds a year less than schoolteachers teaching GCSEs receive. Those are the kind of anomalies that have arisen out of the disparity in pay. The Government have promised to address the problem but last year's 3.5 per cent. pay award goes nowhere near to narrowing that gap and resolving the associated anomalies.

My second point relates to capital funding. The point has been made several times already, but I should like to underline the numbers. My hon. Friend the Member for North Norfolk drew a distinction between the £5 billion for schools and the £400 million for colleges. My local college has put in a bid for £70 million. It is hoping to raise half of that amount through selling off land; nevertheless, on its own, it is putting in a bid for 10 per cent. of the total national budget. Obviously that is not realistic when dozens of other colleges are also bidding. There is a major rationing problem on the capital side. I do not know what the Government's answer is.

My third and final point leads on directly from what Mr. Chaytor said a few moments ago about Tomlinson. The Government's agenda of promoting continuity from 14 to 19 is clearly attractive to many in the secondary and further education sectors, but colleges are asking what preparations are being made to the system to support such a change. They have seen little evidence of any preparation: there is something called the increased flexibility programme, but little else. Will the Minister give us some indication of how the Tomlinson process will feed through into the college sector?

Photo of Mr David Rendel Mr David Rendel Shadow Minister (Higher Education), Education & Skills

I, too, thank my hon. Friend Norman Lamb. I congratulate him on raising the issue and on the excellent way in which he dealt with it. Everyone appreciated the excellence of his speech. The lack of response to the debate initiated by my hon. Friend Dr. Cable last year may not have been due to my hon. Friend the Member for North Norfolk, but that could certainly be the case in future, given his excellent speech on the issue today.

It is nice to have a well attended debate on this important subject, and other hon. Members would have liked to be here. My hon. Friend Mr. Keetch has had many representations from his constituency and would certainly have been with us had it not been for a prior engagement.

Of those who have spoken, only Mr. Chaytor is apparently fully satisfied with the level of further education funding. All is well in his world; it is the best of all possible worlds. However, some of us find that there are difficulties with the level of education funding—even under this Labour Government, of which the hon. Gentleman is so proud. I certainly look forward to seeing how representatives of the Association of Colleges respond to his remarks tomorrow.

Those taking part in the debate might well be forgiven their sense of déjà vu, because we have been here before; we had a similar debate in Westminster Hall almost exactly a year ago, on 14 May 2003, when we debated FE funding. That debate, too, was initiated by a Liberal Democrat, which indicates, as does the presence of many of my hon. Friends today, how seriously my party takes the issue.

I had the chance to speak during that debate and, among other things, I said:

"For a very long time, FE colleges have been the Cinderella service of our education and skills system: under-recognised, undervalued, and underfunded."—[Hansard, Westminster Hall, 14 May 2003; Vol. 405, c. 114WH.]

Sadly, that did not have much effect, and my comments still hold true today. The failure to address that issue is perhaps all the more striking when we consider just how important it is. We are talking about a crucial gateway opportunity; it is crucial to achieving the Government's "Widening participation" agenda and to wider strategies aimed at tackling social exclusion and skills shortages—in short, to social justice and our country's economic future.

FE colleges are the golden thread that links provision for 14 to 16-year-olds, 16 to 19-year-olds, higher education—they account for 12 per cent.—and adult learning. The FE sector has twice as many students as higher education, and two thirds of them study part-time, but the Government's Higher Education Bill contained nothing for part-time students and failed to acknowledge the contribution of FE colleges. We must have a lobby to champion the sector, and it must be equal to that which has championed the cause of HE.

It is to the Government's credit that funding for HE has increased in recent years, but that must be set in context. We are playing catch-up after many years of underinvestment. Between 1993–94 and 1998–99, real-terms funding per student in FE fell year on year. Overall, it fell by 15 per cent., from £4,030 to £3,420, at 2002–03 prices. Despite increases in subsequent years, unit funding remains below 1993–94 levels.

Meanwhile, student numbers in the FE sector are expanding, and the large increase in overall funding masks the fact that funding per student is growing at a far less impressive rate. Numbers are expected to increase still further, which will increase the funding pressure. Even if existing participation rates are maintained, the rising population of 16 to 19-year-olds will increase the numbers of 16-year-olds in schools and colleges by 52,000, or 4.5 per cent., by 2008.

Like our schools, colleges have had to face extra costs, such as rising national insurance and pension contributions and rising pay for teaching staff. Overall, therefore, colleges continue to face severe funding shortfalls and uncertainty. According to the Association of Colleges, a significant number of colleges are now being forced to cut staff.

In the limited time available, I want to press the Minister on two key issues. The first, which has been mentioned, is the discrepancy in the funding of schools and colleges. Surely, we should apply the principle of activity funding. An activity that is carried out at a college or a school should be funded at the same level.

The Government expect colleges to shoulder the main burden of responsibility for the increased participation of 16 to 18-year-olds, but the college sector receives less funding than school sixth forms. According to the Association of Colleges' spending review submission, the total funding gap between the two sectors for the same work is 10 per cent. Yet in the age group that we are discussing, more than 700,000 are studying in colleges compared with 400,000 in schools. Moreover, college intakes include a larger proportion of young people from less well-off, lower-attainment backgrounds, a point made forcefully by my hon. Friend the Member for North Norfolk.

According to the Government's youth cohort study, 65 per cent. of 16-year-olds who stay at school have eight or more GCSEs at grades A to C, compared to only 33 per cent. of those who enrol in the college sector. Nineteen per cent. of 16-year-olds in school come from unskilled manual backgrounds, compared to 38 per cent. in the college sector. Where is the sense of justice in maintaining such a funding discrepancy?

During the passage of the Learning and Skills Act 2000, the Government promised to converge funding upwards; when does the Minister expect that convergence to take place? There is a strong case for a streamlined funding system, rather than a system of separate bureaucracies, with local education authorities, regional learning and skills councils, the regional development agencies and the HEFC all serving different parts of the system.

Another vital issue is the bureaucratic and regulatory burdens being shouldered by the college sector. New money has come with strings attached, as it so often seems to whenever it is provided by this Labour Government. The Prime Minister and the Secretary of State talked about trusting the front line as a key principle of public sector reform. Yet they also push what the Secretary of State described as

"a new system of targets and performance management" for colleges with resources linked to performance contracts. There is even a target to reduce bureaucracy; only new Labour could introduce a centrally imposed target with the aim of reducing bureaucracy.

A further concern is the huge number of separate funding streams through which colleges receive their finances. A typical college has about 30 different sources of funds; far too much money is stuck into specific pots, all of which require separate applications. Sometime soon, I suspect that somebody in one of the colleges will create a further education course in how to apply for money to run FE courses.

The work of the LSC's bureaucracy taskforce made it clear that there is significant scope to reduce the bureaucratic and regulatory burden on colleges, with the potential to release significant resources for the front line. Two quotes from the taskforce report in November 2002 illustrate the point; first:

"The FE sector is full to overflowing with regulation and administration . . . Over-regulation and excessive administrative burden distract and pre-occupy colleges so that the learner and learning can at times seem like incidentals rather than the heart of further education."

Secondly:

"The key message from colleges in the regional seminars held by the Task Force was their sense that bureaucracy derived from mistrust. A new relationship must be built around trust and transparency rather than monitoring, supervision and multiple review overlays."

I hope that the Minister will use the debate to explain what progress has been made in implementing the recommendations of the bureaucracy taskforce in this important report.

Six years after the groundbreaking report "Learning Works", the Government are still reluctant to recognise the importance of the FE sector, and there is a lack of clarity and of joined-up thinking. Why is there a discrepancy in funding between schools and FE colleges? Why are part-time students not given the same support as full-time students? Where is the joined-up thinking on the relationship between schools, colleges and the workplace in respect of the curriculum framework? Will there be sufficient resources to ensure that staff pay agreements are implemented? The list could go on.

The persistence of the concerns shows that the Government still undervalue FE, which should be the learning powerhouse of society and the economy. Let us hope that in another year's time we are not lamenting the same failure to recognise how vital these issues are.

Photo of Mark Simmonds Mark Simmonds Shadow Minister (Education)

I add my congratulations to those that have been offered to Norman Lamb on securing the debate. His contribution was an excellent analysis of the disparity between the Government's message and delivery on the ground. I thought that his speech was clear and well researched.

What we are debating is essential to the educational establishment, and there is cross-party support for that view. We need to work together to ensure that the further education sector does what it is supposed to do. I was delighted when I saw the debate on the Order Paper, because the ages of 16 to 19 are a critical stage of students' education. They make fundamentally important decisions at that time about the direction of their education.

Schools, sixth-form colleges and FE colleges all have a central role to play in providing disparate curriculums—helping pupils either through the current A-level system into higher education or into the vocational sector through foundation degrees or other routes and, it is to be hoped, ultimately into HE. Like most other hon. Members who have spoken today, I want to talk about the FE sector, although if time allows I should like to make a few comments about particular sixth-form colleges later.

Why must we get the FE sector right? The reason is the economy and the skills gap, a gap that appears to be widening. It is vital to our economy that education for 16 to 19-year-olds should improve and that sufficient resources should be allocated to it. Employers have lamented the lack of skilled workers. According to a recent survey of the Institute of Directors, only 53 per cent. of the UK work force have level 2 qualifications—five or more GCSEs at grades A to C, or equivalent qualifications. In Germany the figure is 82 per cent. and in France it is 71 per cent.

If Britain is to remain competitive and a leading economic power, the skills gap in the British work force must be dealt with. Thirty-seven per cent. of employers have encountered skills shortages in the process of recruiting, and 41 per cent. have claimed that existing employees lack the necessary skills for their current role.

Employers are happy to contribute to job training and to pay for that, but they do not think that it is necessary for them to pay for basic education that should have been provided in schools and colleges. There is clearly a dislocation between the education and business sectors and the Government have failed to engage with business to secure sufficient private sector funding in FE. The sector skills councils that the Government established are at best patchy throughout the country.

The economy has restructured in recent years and the FE sector has had to look elsewhere for clients. However, only £44 million of £8 billion in FE funding came from business in 2002. Colleges are encouraged to rely on Government bodies—specifically the Learning and Skills Council—for their funding. One leading principal commented that

"our financial strategy is to maximise LSC income. The LSC is the only game in town".

The Government should be considering ways to encourage the FE sector to engage with business. At present, non-public sector groups are regarded with great suspicion.

The LSC is not perfect. Comments from a variety of sources suggest that both at national and local levels it is bureaucratic, lacks understanding and has large overhead costs, although I understand that the relatively new chief executive intends to deal with that. The predecessor of the LSC had about £3 billion to distribute, and in the process spent £15 million on administrative overheads. The current council distributes between £7 billion and £8 billion, and £230 million to £250 million of that goes on administrative costs.

I understand that a tremendous battle is currently taking place in the Government, between Education Ministers and the Office of the Deputy Prime Minister. The ODPM wants to abolish the national LSC and put the funding directly into the regional development agencies. I should be interested to learn whether the Minister has anything to say about that. Has his boss, the Secretary of State for Education and Skills, won the battle, or has the Deputy Prime Minister won it?

Mr. Chaytor made his usual impassioned plea for the FE sector. I did not agree with everything that he said about supporting the Government, but he made a good point about the Tomlinson report. The Minister needs to deal with that today. If Tomlinson is to be implemented—if vocational education is to be extended to 14-year-olds, certainly to a greater extent than it is at present and not just part time, but full time—how will the different rates of funding be allocated to the same educational establishment that may provide a vocational qualification that stretches over two years, with the first part done before the age of 16 and the second part after 16? If the current structures stay in place, there will be an enormous disparity of funding, and the post-16 part will be far more poorly funded.

There are particular problems in the FE sector that the Government need to address. Some have been highlighted today, including the complexity of funding and the disparity of funding streams, of which there are up to 30. Mr. Rendel referred to that. Business involvement is being sidelined, and there are staff shortages and retention issues. There are high pupil drop-out rates, particularly for those doing the qualifications that the Government have introduced.

Ms Walley highlighted building maintenance, and I believe that there should be significant capital improvements along the lines of those that have taken place in schools. There is also increasing Government bureaucracy, through not just the LSC but other systems introduced by the Government. On average, colleges have apparently had to employ seven to nine additional administrative staff to deal with the bureaucracy caused by the LSC and other Government projects.

The current lack of money in FE hinders collaboration between 14-to-16 education and the FE sector, although I was delighted that my FE college in Boston recently won a national award for encouraging collaboration between the FE sector and schools. At least 50 colleges recruited additional 16 to 18-year-old students in 2002–03 on a promise of extra funding from the LSC. Most are still waiting for payment, and in some cases colleges will not be paid for another 12 months. Drop-out rates for 16 to 18-year-olds are high, and colleges are often left out of pocket because when a student leaves, they lose the funding. Colleges have had to put in place investment to recruit staff to teach students who then drop out.

It is clear that one essential Government role and priority in the FE sector is the provision of basic skills and level 2 courses. Those courses are essential for people trying to escape socio-economic deprivation, but many are under threat. I am sure that the Minister does not enjoy seeing headlines such as, "Cash dries up for illiterate adults", and we must ensure that such events do not happen in real life.

The Association of Colleges informs us that 70,000 courses for adults are under threat as the Government prioritise 16 to 19-year-old education at the expense of adult learning, and I am sure that we all have examples of that from our constituencies. I received a letter only yesterday about a teacher who had been to the local learning and skills council to find out about courses for September, only to be told that funding for classes such as yoga, t'ai chi, dance, art and keep fit was to be withdrawn. She asks why that should be the case while the LSC is working with the health sector to encourage people to keep fit, healthy and therefore out of hospitals. There is a problem in that.

Many adults are being turned away from literacy and numeracy classes as cash dries up, and colleges are being told to cut level 2 courses that are not on the Government's narrowly prescribed approved list. Many basic courses are seen as a drain on budgets as they do not contribute to level 2 targets. There are higher priorities, so they are facing the axe. Despite the tenacity and effort of those who work in the FE sector, those are all problems, which the Government need to address.

This is not a one-way street: there are problems that the colleges need to address. The recent comments by Mark Haysom, the new chief executive of the LSC, who claimed that more than 200 colleges are underperforming and funded at too high a level, need to be addressed by the individual colleges. Furthermore, the recent reports by Ofsted's adult learning inspectorate left no doubt that there was room for improvement in FE teaching.

Many issues need to be addressed, but the Government must ensure that funding goes directly to the colleges to enable them to do their job and provide the education that is so badly needed in our communities throughout the country.

Photo of Stephen Twigg Stephen Twigg Parliamentary Under-Secretary (Department for Education and Skills)

I join other Members in congratulating Norman Lamb on securing the debate. The good attendance by all three main parties demonstrates the strong cross-party commitment to the further education sector. As the hon. Gentleman said, it is timely that the debate is taking place on the day before the lobby of Parliament and the meetings organised by the Association of Colleges.

In my 10 minutes, I shall focus on the three main issues that emerged during the debate. The first is the funding gap between FE and schools for the 16-to-19 age group. The second issue is capital and, in particular, the connection to the 14-to-19 age group and the Tomlinson report. Finally, if time allows, I shall deal with some of the issues relating to bureaucracy, on which Mr. Rendel focused. I acknowledge the apologies from Mr. Laws and Mr. Maude, who were unable to stay for the end of the debate, despite speaking earlier on. I understand the reasons for that.

It is good that we have this opportunity to recognise the important achievements of the FE sector. As the hon. Member for North Norfolk rightly said in his opening remarks, and with his focus on 16 to 19-year-olds, young people who go to FE colleges at 16 are far more likely to come from some of our most deprived and disadvantaged communities and families. It is correct to place the debate in that context.

Also underlying the debate is the focus that we have sought to place on increasing participation in education and training among 16 to 19-year-olds. If we consider international comparisons, we see that, as a country, we are doing reasonably well in many respects in primary, secondary and higher education. However, we continue to languish towards the bottom of the international league tables for the numbers who leave education at 16 and, in particular, 17. I have no doubt that FE, along with school sixth forms, has a central role to play if we are to rise from that position and give opportunities to far more young people.

We are pleased that, in the recent Budget, my right hon. Friend the Chancellor of the Exchequer was able to set out the overall settlement for education, unlike for other Departments, so that we can start the process of planning for the forthcoming spending review period. The overall financial position is much tighter in this spending review than it was in the previous one, but the extra for education will represent an increase of about £7 billion a year by the end of the spending review period compared with the current year.

Hon. Members will be disappointed but not surprised that I cannot say today what the overall settlement will be for FE. The Department is still working through the detail, but we hope to be able to make further announcements before the summer recess in July, and we welcome the opportunity that this debate provides to listen to views on the pressures and the priorities from hon. Members on both sides of the Chamber.

As has been said, the 2002 spending review gave a significant boost to spending in FE, with an increase of more than £1 billion in the FE sector in the three years to 2005–06. The need for that is demonstrable and was set out in this debate. The extra investment has enabled us to launch the "Success for All" strategy, which is aimed at raising standards, ensuring high quality and focusing on reform in the best interests of the FE sector. Critically, part of the strategy is to direct additional resources into high-quality learning.

Let us consider the academic year that is about to finish—2003–04. The core funding rates per qualification in school sixth forms have increased by 3 per cent., whereas the rate for FE and sixth-form colleges has increased by the larger amount of 4.5 per cent. Our expenditure plans for next year will see that continue. However, hon. Members are right that, if we compare like with like—if we compare the funding rate for an A-level in a school with that in an FE or sixth-form college—we see that for 2002–03, there was about a 10 per cent. gap—£734 for schools, and £663 for FE colleges. I understand that it narrowed in 2003–04, the year that is just finishing—the figure is 9 per cent., and we expect it to narrow to 8 per cent. in 2004–05 and to 7 per cent. in 2005–06. We are now dealing with the following spending review period.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

There seems to be some dispute about the figures. None the less, would the Minister confirm whether the Government are still committed to closing the funding gap absolutely in order to achieve equity between the two sectors; and will he say what time scale will be needed to achieve that objective?

Photo of Stephen Twigg Stephen Twigg Parliamentary Under-Secretary (Department for Education and Skills)

I have to disappoint the hon. Gentleman about the time scale. I was coming to that next, because it was raised by a number of Members, and I can understand why. I am not able to set out a time scale, and I acknowledge that the funding gap remains a challenge. I might make myself popular among hon. Members in Westminster Hall by doing so, but I would not want to return to the Department having given such a commitment without licence to do so.

In the three minutes that remain, I shall briefly refer to the various questions asked about the critical matter of capital investment. As several hon. Members said, it relates to the work of the Tomlinson inquiry and reform of education for 14 to 19-year-olds. We have seen a significant improvement in the amount of money going into college buildings. A figure of £400 million has been cited. That is the amount going through the LSC into capital funding.

Prior to Labour coming to power, no funding was earmarked for capital investment in FE. In 2002–03, the figure was £231 million; next year, it will be £400 million. It is a significant boost. However, hon. Members are right to say that that contrasts with the capital investment programme that will clearly benefit school sixth forms. I accept the hidden compliment on the Government's extra investment in schools, but I accept also that we want consistency and synergy between the programmes for schools and for colleges.

As part of the Building Schools for the Future programme, we want synergy between the investment that it brings to our secondary schools, and therefore to school sixth forms, and the opportunity for additional investment in the 16-to-19 facilities provided by FE colleges and sixth-form colleges. It is important that we take that work forward. A number of hon. Members have made that point, but it was powerfully made by my hon. Friend Mr. Chaytor.

If we are to have consistency, and if we are to be in a position to meet the challenges of 14-to-19 education successfully in all parts of the country, it makes no sense to say that we should have an investment programme for one part of the system but not for another. We will be working closely with the local LSCs and local education authorities. I give one example from my work as the Minister with responsibilities for London schools of a London authority that is likely to be in an early phase of the programme. We are currently considering how to ensure additional sixth-form college provision can take advantage of Building Schools for the Future funding. There are other possibilities, and work is continuing.

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

Is the Minister prepared to have similar talks in north Staffordshire?

Photo of Stephen Twigg Stephen Twigg Parliamentary Under-Secretary (Department for Education and Skills)

I am happy to give that commitment. I am sure that my hon. Friend who has responsibility for that area will not mind if I give a commitment to take that forward in discussion with colleagues from Staffordshire and other parts of the country.

I apologise that I shall not have the chance to address the important questions about bureaucracy and funding streams that were made by several hon. Members, and particularly by the hon. Member for Newbury. However, I undertake to write to the hon. Gentleman and to those other hon. Members whose comments I have not been able to answer. It is evident from our debate that there is a strong cross-party commitment to FE, particularly its role in education for 16 to 19-year olds, and I hope that the Department can take it forward.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

I congratulate the Minister on his reply and I thank the House for an excellent debate. Westminster Hall is taking off; it is better attended than the Chamber itself.

Sitting suspended for a Division in the House.