End of the road for franchising

May 28, 1999

With tough new constraints on the sale of distance courses, colleges must look to local provision to make up for the Pounds 6 million deficit that is forecast. Phil Baty reports

The further education college sector is suffering an identity crisis as it faces up to a fundamental policy U-turn on distance franchising.

Ministers have slammed the brakes on the former government's drive to encourage competitive, entrepreneurial growth through franchised courses. As a result, some once-lauded colleges face tens of thousands of pounds of cuts, and are going back to the drawing board to radically re-write their mission statements.

"We need a period of consistency and stability," said David Eade, principal of Barnsley College, one of the country's biggest franchisers. "On one hand, you have a House of Commons select committee saying that franchising can be really good; on the other, it is getting a really bad press, as if it is something terrible."

Franchising - where colleges collect public funding for courses which they sell, usually on the cheap, to outside bodies such as businesses and community groups - was once lauded as a pioneering way to widen access, to reach the disenfranchised and to engage employers in the often-neglected task of "up-skilling" their workforces. It was also a conveniently cheap way to expand the college sector while ministers continued to squeeze funding.

Franchising, however, is rapidly losing credibility. Its excesses - with colleges poaching students outside their catchment areas - do not sit happily alongside ministers' commitment to local accountability and high quality. Franchising has suffered a serious blow to its credibility after a series of scandals and damning quality inspection reports, which culminated last month in controversial revelations about the franchising activities of Halton and Bilston colleges.

In February, the Further Education Funding Council for England announced that the days of franchising free-for-alls were over. FEFC chief executive David Melville said that the big franchising colleges had no right to "a financial windfall".

Tough new rules were introduced: colleges seeking approval for franchising must now prove that courses will benefit the local community, widen access, reflect the true cost of courses and meet new external audit requirements. Where approved, franchising with anything other than a local community group, or a not-for-profit charitable body, will have its funding slashed by a third next year. It was time to rein in, said ministers.

"We are saying to colleges that, certainly, there should be no new distance franchising," said Geoff Davies, a director at the FEFC. "A number of colleges are withdrawing from distance franchising and redirecting their activity to local provision."

The full impact of the new measures is difficult to quantify. The FEFC is still calculating the financial impact for individual colleges, as part of new funding allocations to be announced later in the summer. For some, it may be difficult to bear.

About 20 per cent of college students are taught through franchised courses, but it is expected the new rules will only cost the sector around Pounds 6 million.

The cuts, though, will be highly concentrated. FEFC figures show that of the sector's 440 colleges, 16 were providing franchised courses in more than 300 different local authority districts and more than 70 provided in more than 100 districts. Meanwhile, more than two-thirds of the sector were providing courses in fewer than 50 local authority districts.

So the minority group of major providers will face potentially damaging cuts in cash terms. Halton College, before the full extent of its franchising disaster was made public, had already blamed the franchising policy U-turn for its plans to slash its staff by a third. More than 60 per cent of the Widnes college's work was franchising of the kind that is out of favour.

FEFC insists it will help ease the financial pain. "This is a carefully managed process," said Geoff Davies. "Clearly, colleges will have to think about withdrawing from distance franchising, but we are not saying you must pull out immediately. Where there are very major providers and a lot of discounting takes place, it is possible that the process will result in an increase in the average level of funding. The lost money will come back to them, but not straight away. And we expect an enhanced contribution from employers."

The impact on the way colleges deliver learning, however, will be huge. Some 20 per cent of further education students are taught through franchised arrangements.

Some fear that the new rules will alienate employers from ministers' planned lifelong learning revolution. David Eade, of Barnsley College, has a huge national franchising arrangement with the National Training Organisation of the security industry and several major security employers. (In 1997, Barnsley trained 13,000 security guards.) Although he accepts the new clamp-down on franchising and insists he can manage the cuts, he is concerned that they may push employers away from the training agenda. The biggest franchising colleges have national agreements with big employers to provide all their training needs throughout the country.

"Many big employers would rather deal with one or two colleges nationally," he said. "They want to deal with the specialist colleges, through franchising arrangements, for all their training needs nationally. Many of their local colleges can't provide what they want. It is like the NHS - you do not expect every hospital to have every specialism, so why would you expect every college to cater for everyone?" At a select committee meeting, Scottish and Newcastle Breweries, which has franchising arrangements worth Pounds 750,000 with colleges, notably Stafford College, warned that if it stopped getting money from the FEFC through Stafford College's franchise, it would consider cutting its training.

The FE21 group, representing franchising colleges, has pointed to economies of scale, and warned that potential students should not be forced into local colleges if their local college is poor.

The impact on the sector's entire mission will be worse, some fear. One college principal, who did not want to be named, said that the sector was baffled. He said: "There are some really difficult conflicts here. This local priorities initiative conflicts directly with many of the access initiatives being driven forward by the government. We are going back to the drawing board with conflicting messages."

Alarm bells warning that the franchising party would turn into a severe headache were already ringing as early as 1995. Less than a year after the then FEFC chief executive, Bill Stubbs, celebrated Handsworth College's huge but low-cost growth through its "outreach centres", his inspectors slammed the quality of the same college's long-distance franchised courses.

Handsworth, which expanded by a record 80 per cent in 1994 through franchising, was teaching more then 5,000 part-time students in living rooms, mosques and community centres from London to Bradford, and was hailed for pioneering access initiatives. Inspectors gave the provision the worst inspection grade possible.

Within a year, however, Handsworth had cleaned up its act and undergone a satisfactory re-inspection. Principal Chris Webb said he was proud to have pioneered a revolution that had given access to further education to thousands. So the franchising craze continued to gather momentum.

Concerns were raised again in 1995 when "phantom students" were discovered on Bourneville College's franchised courses. The college's "community network" collapsed following the discovery that 90 per cent of students on courses franchised to Muslim groups were not running. But these were dismissed as "one-offs".

The same year, Paul Mackney, now general secretary of lecturers union Natfhe, had warned: "There's a total obsession with student number targets. Pile 'em deep and teach 'em cheap because bums on seats brings in the lolly. The Bourneville experience also raises questions about all the other franchised classes that have been run. Can colleges really exercise control over non-employees miles away from the college?

"The Funding Council needs to be told that you can't run further education like Kentucky Fried Chicken."

But the FEFC was not about to interfere with the new post-incorporation entrepreneurial college sector. As Mr Stubbs said in 1994, the preferred stance of the FEFC is "a hands-off position whereby the council would not intrude into the internal management and organisation of colleges".

By November 1997, however, FEFC chief inspector Jim Donaldson was warning that franchising, unless properly managed, could be a "poor-quality service to students and trainees". But although his annual report that year identified much poor practice in franchising, he upheld the principle. "There are no inherent weaknesses," he said. Later that year, a Conservative government inquiry into franchising found: "It would be wrong to oppose the principle of franchising I It is inappropriate to limit the role of FE colleges to their local areas."

In summer 1998, before she became education minister, Margaret Hodge's report as chair of the House of Commons' education select committee endorsed the principle of franchising, highlighting its role in widening access. But she warned that "franchising should grow from colleges' primary tasks of introducing students to learning and helping them progress". She added: "The impetus to enter into franchising arrangements should be to further this task, rather than simply maximising income."

Later that year, the Labour government made clear it wanted new priorities: distance franchising had had its day. In a letter to the FEFC, Roger Dawe, director-general of further and higher education at the Department for Education and Employment, said that his ministers wanted colleges to go back to their communities.

He said: "The department is concerned to ensure that franchised arrangements should not normally operate well outside the college's areas - and if a college does extend its operations in this way, that should be after consultation with the local college or colleges concerned."

The FEFC moved swiftly into action. A "local priorities" initiative was established to ensure colleges concentrated on their own neighbourhoods. The worst offenders were to be "named and shamed" with the unprecedented publication of figures which would reveal the extent of colleges' distance franchising networks.

Ministers accept they have more thinking to do. Secretary of state David Blunkett said: "How do we gel the public/private operations without ending up with the franchising mess that has bedevilled the work of a couple of colleges, and without sweeping it all away?

"I am very mindful, because I have received recent representations on this matter, of undermining and wiping away partnerships that have been beneficial." This is one of the key dilemmas of his post-16 review.


Paul Mackney, general secretary, Natfhe.

"I don't think college managers woke up one day and thought that franchising was a great way to pull off a scam. Most were simply trying to get resources for their colleges. But it just got out of control. The new rules on franchising are an improvement, but the main point is that the quality of the courses, the terms and conditions, and the qualifications of the lecturers should be the same as for courses carried out back at the college. The government's review of lifelong learning could provide new ways of planning partnerships between colleges and other partners."

Dave Croll, principal, Derby Tertiary College.

"We decided not to go down the franchising route. We do a large amount of national training, in partnership largely with the hospitality industry, but we deliver it direct, not through franchise. Our staff actually deliver the training, and we do not pay companies - they pay us. When it is based off-campus, we have sophisticated supported distance- learning technology. I think this is the ideal model. It is important to keep full control over the quality of the provision."

Ruth Silver, principal, Lewisham College "We had some criticisms of the FEFC's policy under the past government and welcome the recent changes. We have already supported good-quality franchising as an effective way to widen participation."

Christine Megson, principal, Stafford College.

"Despite the high-profile examples in which distance franchising has not worked, we are concerned that we do not undermine and wipe out franchise partnerships that are working well. We have a national partnership with Scottish and Newcastle Breweries that has allowed 17,000 employees/students to gain National Vocational Qualifications. It is a valuable part of the widening participation agenda. We are reaching out and giving people a taste for learning. Colleges have to recognise that, of course, there is a local agenda, but they must also ensure they preserve, and build on, what there is nationally."

The FE21 Group (representing franchisers).

"It is not a question of either nationa, or regional or local: all types of partnerships are essential if the FE sector is to serve the UK population effectively."

Case study - Bilston Community College, Wolverhampton

Bilston is to be the first college to be forcibly closed, following a complete loss of control of its franchised provision.

Lecturers' union Natfhe had long warned that Bilston had become "a juggernaut out of control".

A special inquiry report earlier this year, by the former Further Education Funding Council chief inspector, Terry Melia, found that in its drive to widen participation, Bilston had "relied increasingly on collaborative arrangements".

Bilston had cashed in on the demand-led element funding to become the fastest-growing college. In 1997-98, the college claimed to have 51,000 students, and more than half of its provision was through collaborative arrangements.

The Melia report said: "The all-embracing nature of the college's mission has led to the irony that, having expanded its provision of learning opportunities to all parts of the country and beyond, the college neglected the quality of the provision on its own doorstep."

In 1997, Natfhe wrote to the Education Secretary, David Blunkett, with a series of questions about Bilston's extensive franchising: "When an inspection (of franchised provision) is carried out, does the inspector check the names and addresses of students against those listed on the register?

"Have any of the students in community-based classes been asked what they have learnt? Can any form of community activity be 'written up' as a class worthy of FEFC funding? Is it appropriate to pay external organisations for tuition without specifying some of their employment responsibilities?" Among the community groups with whom Bilston was working was a church that practised exorcisms in sessions billed as "religious studies", and "family learning" groups, in which "students" signed Bilston registers, but were never involved in any course as such.

Natfhe had to wait a long time for answers to its questions - it was accused of libel, and Mr Blunkett said he could do little to intervene in the college's affairs.

* Case study - Halton College, Widnes

Halton College has to pay back Pounds 6.4 million of public money it falsely claimed for courses it could barely illustrate had even taken place and for students who were not eligible for funding.

Halton cashed in on growth funding and increased its turnover by 50 per cent since 1992.

Its much-celebrated "off-site work-based training", much of it franchised, represented almost 70 per cent of funded units in 1997-98.

An investigation by the National Audit office and the Further Education Funding Council found that of the Pounds 6.4 million wrongly claimed, Pounds 250,000 was claimed for students who were not eligible for funding, Pounds 200,000 was claimed for courses that should have attracted lower rates of funding.

In addition, Pounds 900,000 was overclaimed for franchised courses that had been incorrectly classified as direct provision, which attracts more funding.

Halton had claimed money for 81 students on franchised courses based in Scotland, who are not eligible for funds from the English funding council.

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