Education

What we know

The education sector has enjoyed a long period of investment with budgets over the past thirteen years doubling in real terms in some areas. Following the Spending Review announcements, it is clear that the Governments education strategy is to ring fence spending on the mandatory schools sector whilst expecting the further and higher education sectors to become more self reliant. This will require leaders in schools, colleges and universities to develop new skills and expertise as they respond to this new policy landscape and remain financially independent and sustainable.

Higher Education

The 40% reduction in the HE budget and the broad acceptance of the Browne report will have far reaching implications for the Universities sector. In a similar way to FE the Government is expecting HE providers to become more market driven and self-reliant. Organisations will be given greater powers to set their own fees and raise money, however the flip side to the opening of this market is the possibility that students may take their business elsewhere, that competition from the private sector and the international markets will increase and Universities will therefore experience corporate failure.

The current budget and Browne report proposals are likely to result in a radical re-think amongst University leaders. The number of Universities and courses are likely to fall as consumerism amongst students rises.

Further education

The reduction in the FE resource budget by 25% from £4.3billion to £3.2billion by 2015 and to remove funding for all level 2 and 3 qualifications for those over the age of 24 is clearly an attempt to rationalise and consolidate the curriculum and qualifications offered by FE providers so that the sector is much more focused on providing the skills necessary to the UK economy. I.e. being more demand led. This will be supported by increased funding to apprenticeships for adults which is to rise by £250million per annum by 2014-15.

The challenge to providers in this sector who have traditionally focused more heavily on their social responsibilities than their economic responsibilities will be to remain viable in the face of greater emphasis on self-reliance and learners as consumers.

Schools

The increase in schools spending and corresponding cut in the wider Departmental budget reflects a shift in the priorities of the DfE towards its core purpose of raising standards in core Education services. The real detail of the wider cuts will come in the business plan, but schools are clearly the government’s priority. The real challenge will be delivering the Free Schools and Academies reform which will accompany the extra spending, and Deloitte looks forward to supporting the Department and the schools to do this successfully.

The spending review represents a challenge to local authorities, to deliver services with smaller budgets. Part of this will be a shift toward becoming primarily a commissioner rather than a provider of services, which will involve building new strategic partnerships and adopting best practice in procurement and performance management.

Deloitte view

The announcement is more positive than expected for education and in particular for schools, where spending is up 0.1% in real terms per year, or nearly 10% in cash terms by end of the parliament.

The Spending Review marks a transformation in how Education is delivered. The decision to increase school spending and devolve decision making to teachers and Heads, while reducing funding for Local Authorities, transforms local and national government’s role from provider to commissioner of education.

Deloitte believes this transformation heralds an exciting new era for local and national government and particularly for schools. The Spending Review signals the need for a new kind of strategic partnership between Business, government and educators. Everybody who works with schools and government will have a responsibility to help them deliver these new roles effectively. Business should be willing to share best practice in cost cutting, benchmarking and performance management, and should play a key role in helping schools to use their new funding and autonomy to deliver better standards for all pupils.

Higher Education

Universities are vital to Britain. Their research capacity supports economic growth and innovation, and they are engines of social mobility. We note that the spending review has headlined a 40% reduction in funding for universities. The impact of this on some institutions, where reliance on government funding is significant, could be greater. This will create a significant challenge for their leadership teams to reduce costs while at the same time respond to increasing expectations from students. The ability of the sector to withstand this level of cuts will very much depend on the extent to which the recommendations set out last week in the Browne report are implemented. Balancing the books will require universities to replace lost funding with increases in direct charges as well as implementing new leaner ways of working. At Deloitte we are already supporting a number of our University clients to work through how they need to change and respond in an increasingly challenging fiscal landscape to achieve sustainable financial improvement.

Further Education

Today the SR has provided further clarification on the important role Government sees the further education sector playing in helping the UK economy return to sustainable growth. The move to focusing funding through a reinvigorated apprenticeship programme provides private training providers and colleges with a real opportunity to work collaboratively with business to address the UK skills gap. An increased expectation from Government on the value for money and the productivity of this sector, and the expectation that more courses will be funded directly by the learner will require FE providers to think differently about how they work together and with business. New models of delivery through the creation of federations and mutual structures will be necessary to achieve the economies of scale and the breadth of expertise needed to survive in an increasingly competitive market.

Schools

It is clear from the announcements on per pupil funding, and particularly on the pupil premium, that the Government prioritises closing the attainment gap between rich and poor children. This challenge applies to delivery reform as much to funding and looks forward to helping support the Free Schools and academies policy work in practice. This could occur particularly in areas such as procurement and financial management, where schools might not have as much expertise.

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