Education funding

Funding in Education

Higher Education (HE) and Further Education (FE), (which incudes most post-16 education and vocational training outside universities) are publicly funded through three main bodies:

* the Learning and Skills Council (LSC), which plans and funds most academic and vocational education and training for learners over the age of 16;
* the Higher Education Funding Council for England (HEFCE), which provides funding for universities and other HE institutions;
* the Student Loans Company, which helps students in higher education pay fees and meet living costs.

The Government also provides substantial funds for training its own staff - the Ministry of Defence and the National Health Service, for example, each spend approximately £4billion per year on staff training. Altogether employers (including the government) provide £33 billion of funding per annum, according to the National Employee Skills Survey; and individuals pay a substantial amount in fees.

Eligibility for Fnding
The formulae and eligibility for public funding are complex, but broadly take into account:

* the relative cost of provision;
* incentivisation;
* the differing needs of regions and learners;
* living costs.

Acting on the recommendations of the Leitch Report , the government is introducing a demand-led system of funding in FE, which will allocate money according to local and national demand for skills.

The LSC’s funding of further education takes into account four points, which it uses to help steer provision in the FE sector in the way it wants.

Eligibility: learners and college courses must comply with certain criteria to qualify for LSC funds. Under 16s are generally ineligible; adults must usually have a legal right to reside in the UK. Learning programmes funded by another body (eg HEFCE) are generally not eligible. Sector Skills Councils are increasingly looked to to determine which courses are eligible for LSC funding, based on their view of which best meet employers’ needs. Eligibility also increasingly depends on a programme being in one of the LSC’s priority categories, usually defined in terms of government targets.

Priorities: funding decisions are linked to a clear set of priorities and targets. Colleges’ development plans and budgets must reflect national and regional assessments of need to qualify for LSC funding. The Secretary of State specifies the LSC’s funds each year and states what it is expected to achieve with them. The LSC then issues its Annual Statement of Priorities, stating how it will allocate funds.

Allocations: the amount of money allocated to a FE college is decided by the local LSC office in consultation with the college, considering such issues as the quality of provision and compliance with LSC priorities. Colleges and other public providers are supported through grant-in-aid, rather than funded by contract. This means that colleges have some freedom to decide what to offer by assessing local needs; money is then provided for specific plans.

Rates: courses are funded at varying rates. The LSC works on the principle that the rates for different types of provision should reflect the relative costs of good-quality delivery. This year (2008) the LSC is introducing a simplified funding system. Volume of activity is measured by standard learner numbers (SLNs), calculated by dividing total ‘guided learning hours’ by 450; no learner counts as more than 1.75. Other factors, reflecting disadvantage, high-cost regions and resource-heavy courses, are combined in a single provider factor, individually calculated for each institution. A standard unit of resource - the National Funding Rate - is fixed each year. Most additional support costs are based on learners’ prior attainment.

The funding calculation formula is: Standard Learner Numbers x Provider Factor x National Funding Rate + Additional Support = Funding Allocation

Higher Education

Most public funding for Higher Education (HE) in England is provided through the Higher Education Funding Council for England (HEFCE) . As fees increase the student loan company is becoming equally important. As with the LSC, HEFCE’s funding of teaching considers student numbers, the course mix, types of student and institutional factors.

Some HE provision is funded directly by HEFCE; others receive funding indirectly from another HE institution, under a franchise arrangement.

In addition, universities In England and Northern Ireland can charge annual tuition fees of up to £3,000. Students may take out a loan from the Student Loans Company to cover the fees; the loan is repayable once the student’s postgraduate income exceeds £15,000. Repayments are collected at a minimum rate of nine per cent of earnings over £15,000 each year.

FE colleges are prohibited, under their conditions of funding, from charging fees to learners aged 16 to 19 and to certain groups of adults - mainly those on means-tested benefits and those on certain lower-level courses, such as basic skills. Each college can set its own fees, or choose not to charge any at all. The LSC reimburses colleges for the fees they is prohibited from charging, but not for those they choose not to charge.

The government is seeking to increase the proportion of learning costs covered by fees. It currently works on the assumption that a college will cover 37.5 per cent of its basic costs through fees; this is set to rise to 50 per cent by 2010.

Train to Gain and Learner Accounts

The Leitch Report proposed that by 2010 almost all adult funding would come via two mechanisms: Train to Gain for employer-supported learning and Learner Accounts for study or training undertaken individually. In time, Train to Gain would be the principal funding stream.

Train to Gain allows employers in England to access free training if their staff meet certain criteria (currently they must be studying for a first full level 2 qualification]. Regional Skills Brokers work with employers to assess which skills a business currently has and which it will need in the future. This system supports the LSC’s policy of encouraging demand-led provision.

Learner Accounts pilots began in September 2007. Full details of the accounts will not be finalised until next year.

The Entitlement Curriculum

‘Entitlement’ funding is provided only for full-time learners aged 16 to19. It pays for tutorial support, key skills and what are known as enrichment activities, such as sport and music. To qualify, a learner must be of the right age and on a full-time learning programme.

Learner Support Funds
Each college receives an allocation of funds from the LSC from which to provide financial support for individual learners. They cover childcare, transport and general hardship. More financial support mechanisms are being introduced, including Adult Learner Grants; Education Maintenance Allowances for 16 to 19 year-olds; and Care to Learn, which supports childcare for 16 to 19 year-olds.

Personal and Community Development Learning
Personal and Community Development Learning (PCDL) represents a small part of LSC’s funding - around £200 million per annum, to support non-accredited programmes, family learning and some traditional adult education. It is mainly distributed to local authorities, though some colleges receive PCDL funds directly.

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