north west finance director’s group
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North West Finance Director’s Group. Politics, funding, pensions and finance update 10 October 2014 Julian Gravatt, Assistant Chief Executive, AoC [email protected] @ JulianGravatt http://www.aoc.co.uk/term/funding-finance. Funding timetable. Autumn 2014 - PowerPoint PPT PresentationTRANSCRIPT
North West Finance Director’s Group
Politics, funding, pensions and finance update
10 October 2014
Julian Gravatt, Assistant Chief Executive, AoC
@JulianGravatt
http://www.aoc.co.uk/term/funding-finance
Funding timetable
Autumn 2014Party conferences, 21 September to 8 October 2014EFA Funding Letter, October 2014 (hopefully)AoC annual conference, 18 to 20 November 2014Autumn statement, 4 December 2014Skills Funding Statement, December 2014 (hopefully)
Spring & Summer 2015Budget, mid March 20152014-15 allocations, by end of March 2015Easter, 7 April 2015General election, 7 May 2015College finance conference, late May/early June 2015Spending review, June to October 2015 (hopefully)
Politics and funding
Before the election2015 election and shape of further govt uncertainDecisions on 2015-16 allocations made before the electionDepartmental budgets fixed up 31 March 2016Autumn statement may add or remove money“Devo Mancs” and “Northern Powerhouse”
After the electionPost-election 2015 spending review (budgets from 2016-17 onwards)Demography: More children now + more old people = post-16 squeezeCross-party agreement: closing deficit, cutting taxes & protecting NHSSpending likely to dip around 2018
Government plansBig ticket spending risesPensions, interest, NHS etcDeficit reduction via RDEL cuts
Unprotected departments9.1% of GDP (2013-14)7.8% of GDP (2015-16)5.4% of GDP (2018-19)Spending cuts c30-40% to comeLoans may be a safe haven
The bigger spending picture
x
The DFE budget after 2015
DFE’s cash crunch: too many schools, pupils & promises 2015 to 2020: 11-16 pupils +10%, 16-18s population -8%Pressure for devolution (councils, combined authorities or LEPs?)Core 16-18 funding system continues until a new one is in place
EFA 16-18 funding, 2015-16
Process16-18 funding letter due shortlySame systems (rates * lagged numbers * historic funding factors)ILR data vital (R15 in October, R04 in December)EFA will confirm allocations by March 2015
IssuesEFA needs to fund costs of study programmes (more FT students)If cuts are necessary, EFA has to cut rates, numbers or weightingsNew A-levels, new Tech Levels in 2015-16Various implementation issues (GCSE Maths/English, free meals, large programmes, sub-contracting etc)
BIS budget
BIS budget in 2015-16£14 bil Student Loans£13 bil DEL HEFCE + Grants + Science£8 bil
19+ FE/Skills budget £3.5 bil
Various contradictory options are in play1: Devolve skills & DWP budgets to local govt or LEPs2: Employer-routed funding for apprenticeships33: Expansion of FE loans to 19 year olds & Level 24: New earn-or-train options for under 21s on benefit5: New SFA funding approach
SFA funding, 2015-16
ProcessSkills funding statement due in December 2014SFA decisions needed on 2013-14 reconciliation & 2014-15 requestsDevolution may start to apply (councils or LEPs)Core SFA funding system continues until a new one is in place
IssuesBIS may need further cuts to SFA and/or HEFCE budget in 2015-16Apprenticeships continue to be the first priorityTrailblazers will be in their second year (well-funded in 2014-15)Traineeship funding approach may be revisedVarious implementation issues (ESOL, online learning, 24+ loans)
Pensions and budgets
Now By 2016
TPS employer 14.1% 16.48%
NI employer (approx)
10.4% 13.8%
Employer on-costs 26% 33%
Staff cost ratio 63% ?
Cost of employing a teacher to rise by 5% plus any payrise
TPS15 year recovery periodLower discount rateHigh pay growth assumption2015 reforms don’t save
enoughCosts Colleges 1% of income
National insuranceDWP simplifying state pensionRemoval of an NI relief£5 bil extra NI Costs Colleges 2% of income
Now By 2016
TPS members (avg) 9.6% 9.6%
NI employee (approx)
10.6% 12%
Pension income and pension tax
State pension
State pension
TPS or LGPS
TPS or LGPS
State pensionSPA rises to 67 by 2028New state pension in 2016No contracting out = higher NI
New public sector schemesCareer average entitlementNew accrual & indexationPost-reform service link to SPAPre-reform service protectionNew cost-sharing arrangementsLimited college choice
Tax limits on savingAnnual (AA) £40kLifetime (LTA) £1.25mil16* salary in DB schemePension reforms nowTax relief could change
Financial health
College financesDeficits in 2012-13 (48% operating deficits, 10% cash based
deficitOfsted-related spending + capital projects = short-term
deterioration Staff costs 60-65% of incomeRising costs & falling income
How Colleges need to respondUnderstand your position, your environment and your risksRelationships with SFA, EFA, Council, MP and your bankCashflow management, risk management & financial analysisGoverning bodies responsible for solvency & viability of collegeUse AoC’s ETF-funded governance support programmeThink about opportunities and what comes next
On a more positive note...
OpportunitiesColleges have friends and alliesEducation and skills matter both to the recovery & to societyGovernment will still be spending £70+ billion on education in 2020Income generation opportunities existQuality countsProductivity improvements from IT only partly realised in educationThere are some relatively simple things that can still be done
Two remindersAoC Winter Finance Conference, 9 December
http://www.aoc.co.uk/events/aoc-winter-finance-conference-leeds
Information on funding, accounting, CFDG etchttp://www.aoc.co.uk/term/funding-finance