Financial health of sixth form colleges holds up with belt-tightening

An initial review of the newly published spreadsheet of sixth form college accounts for 2011/12 suggests a sector bracing itself for the storm ahead. Its financial health is bearing up in spite of a funding squeeze. The sector is managing this by reducing its pay bill relative to income.

The median average operating surplus for sixth form colleges has risen to 2.9% of income from 2.8% in the previous two years. Masked by this average there appears to some polarisation – the weak colleges getting weaker and the stronger more than holding their own.  The median operating deficit for the poorest quartile worsened from 0.2% to 0.6%. Meanwhile the median operating surplus for the financially strongest quartile improved from 7.2% to 7.7%.

In 2009/10 staff costs as percentage of income (including contract tuition services) stood at 70.4% for the sixth form college sector. Then in 2010/11 it reduced to 68.8%. By 2011/12 it had fallen to 67.3%. This is well below the regularly quoted benchmark of a pay:income ratio of 70%.

The reduction in the pay:income ratio is partly from pay restraint: pay freezes restrain pay costs even though many staff derive some benefit from increments. In 2011/12 the average pay costs per staff full-time equivalents (FTE) rose by only 1%.

Moreover, the total staff count for the sixth form college sector (as measured by FTEs) reduced by 3%. In 2011/12 the staff count was15,301 – down from 15,766 in the previous year. Part of this reduction was at a cost of £5.4m in staff restructuring costs.

Last week the unions in the higher education sector rejected a 0.5% offer from the employers' side. Maintaining industrial peace in the sixth form sector may be increasingly difficult. This will doubtless complicate the challenge of the funding squeeze.