Labor must free capital funding from its stranglehold

Like many colleges, one of our strategic goals is to provide physical and digital facilities suitable for learning now and in the future. Unfortunately, the sector is being prevented from achieving this necessary target, not least by the ongoing borrowing ban.

Of course great training Maybe happen anywhere. But overcrowding, dilapidation, outdated facilities and resources that do not meet the requirements of a modern curriculum make learning difficult. They also lead to disrespect, a general feeling of not being cared for and damage to reputation.

Halesowen College is nearing the end of an ambitious estate management strategy. We have opened a new campus (funded entirely from reserves), reconfigured several aspects of our existing complex to accommodate T levels and updated the curriculum, and are in the process of renovating another campus with some funding support from Transformation. Fund.

Rising inflation has strained budgets for these projects, and reserves are limited. Meanwhile, demographic trends continue to show an increase in the number of 16-year-olds wanting to go to college.

Like us, many colleges are overcrowded and have waiting lists for places on certain courses. They need to build additional facilities or renovate existing estates.

The £950 million in capital announced in the Budget is welcome, but the truth is that most of this will go towards projects that are already underway. In short, it will not meet the needs of the sector.

But every other path to capital value financing is blocked by insurmountable barriers. Those colleges that have accumulated reserves have long since sold off the family silver, capital financing options are currently lacking, and obtaining loans is a challenge. ultras virus (outside the legal authority of colleges).

This makes absolutely no sense. Borrowing can be expensive, but skillfully proposed and negotiated commercial loans can generate good returns. When the sector was previously part of the public sector, commercial borrowing was permitted and colleges were held accountable for value for money.

Every path is blocked by insurmountable obstacles

There is also the option of government borrowing, so this blanket blanket ban on borrowing seems short-sighted. This is all the more difficult to explain when resources are so scarce.

In the absence of this solution, it is certainly time to turn to the private sector for affordable measures. If the reason for banning commercial borrowing is the leakage of money from the government treasury, then this will not help. In fact, it may have the opposite effect.

Colleges may not have the millions required to buy new facilities, but there is a genuine commitment and expectation that we will solve the growing NEET problem and reduce the number of applicants from 16 to 24.

Implementing this strategy will only further increase the need for additional space, even if an effective hybrid delivery style exists.

Faced with the increasing complexity of the conundrum of balancing required property development with acceptable levels of liquidity and earnings before interest, taxes, depreciation and amortization (EBITDA), leasing will become an increasingly inevitable option.

A college may not have access to, say, £5 million for a capital project, but may be able to fund rent of £250,000 a year. However, the simplest calculations will show that the costs of a loan are much more modest than for rent.

The latter inevitably puts pressure on the revenue budget, fills the private sector’s rent nest with public money, and leaves the college without a corresponding asset on its balance sheet.

No college wants to go into Needs Improvement mode for the sake of financial health, but they also don’t want to jeopardize their education. The Treasury’s “management of public money” is commendable. However, the stranglehold of capital is contrary to the Nolan Principles.

Colleges cannot provide excellent leadership without resources. Lack of investment will undoubtedly prevent our sector from developing the skills and talent needed to drive growth and opportunity.

Our ambition, vision and success must not be stifled by failure to implement the turnaround plans that underpin our strategic objectives. Unlocking borrowing would be a lifeline for many and allow more of our public money to serve the public interest.