Colleges' debts rise fourfold in five years

Debt levels in further education have quadrupled in the past five years, a financial analysis of the sector reveals.

Noble's Further Education Financial Yearbook, to be published next week, shows that the sector's total debt was Pounds 228 million in 1998, compared with just Pounds 51 million in 1994. Total debt rose by Pounds 40 million in the previous year, from Pounds 188 million in 1997.

The analysis, by Noble's Financial Publishing and sponsored by The THES, shows that debt is increasing as a percentage of colleges' total income. Debt represents 7.6 per cent of a typical general further education college's total income, compared with 5.8 per cent last year.

The sector's total income, at Pounds 4.172 billion in 1998, increased by just Pounds 20 million from Pounds 4.151 billion in 1997.

But the analysis of 441 colleges' accounts shows that colleges are becoming less reliant on the funding council. Cash from the Further Education Funding Council made up 71.8 per cent of the sector's total income, Pounds 2.995 billion, compared with 73.8 per cent in 1997. The sector's investments are paying just slightly more dividends, earning Pounds 41.9 million in 1998 - 1 per cent of total income, compared with 0.7 per cent last year.

Income from education contracts increased from 7.3 per cent of total income in 1997 to 7.5 per cent of income last year - Pounds 314 million. And income from tuition fees rose to Pounds 369 million.

Tim Noble, Noble Group chief executive, said the yearbook could help colleges better manage finances. He said there are "huge variations", for example, between colleges' staffing budgets.

Spending on staff last year was Pounds 2.5 billion - 63 per cent of a total expenditure of Pounds 4.1 billion. But between colleges, spending on staff varied from 33 per cent of total expenditure to 83 per cent. Within staff budgets, spending on academic staff varied from 45 per cent to 90 per cent. Some colleges spent more than 30 per cent of staffing budgets on administration.

"By comparing a college's performance against its peers, variations can be picked up for closer examination," Mr Noble said.