Anger over investigation into stalled college refurbishment

The skills secretary, John Denham, has been challenged by Conservatives to explain why it has taken three months to send in a troubleshooter to investigate the stalled college building programme.

The first group of colleges to learn that their construction plans were to be delayed were told in October, the same month that the chancellor Alistair Darling revealed he was bringing forward cash from next year’s budget to boost major public capital works.

The Learning and Skills Council (LSC), which funds up to 75% of college building projects, told the colleges it was delaying making final decisions on their plans until its December meeting. Council members were concerned in the worsening economic climate about the colleges’ ability to raise their share of the costs.

Denham announced yesterday that he was sending in the Audit Commission’s former chief executive Sir Andrew Foster to investigate the operation of the Building Colleges for the Future programme, which has so far spent £2.4bn of public money.

Just hours earlier the skills minister, Sion Simon, had publicly explained on BBC Radio 4’s Today programme that the blip was a question of demand outstripping supply.

The Conservatives’ shadow skills secretary, David Willetts, said: “It’s extraordinary that the Department for Innovation, Universities & Skills (Dius) should have known these things back in October but that only now, after the crisis appears in the media, do they get around to investigating it.

“Meanwhile I’ve had worried college principals and governors contacting me about their building programmes.

“Gordon Brown says that he wants to bring forward capital spending in the public sector, so it’s absurd that capital spending by FE colleges is being delayed.”

Liberal Democrat MPs tabled a Commons motion condemning the LSC’s decision to halt approval of further capital expenditure pending a review.

Denham said that the programme had been “a huge success to date and funded nearly 700 projects at 330 colleges.” It had been boosted by the recent decision to “accelerate £220m from future budgets to help beat the downturn,” he said. “But it’s right that we look at how the programme is working and Sir Andrew Foster is well placed to do that.”

But the LSC main council’s decision at its October meeting to delay decisions on a number of college applications was inevitable for a number of reasons, said one observer.

There had been a surge of applications from colleges anxious to get their projects approved before the abolition of the LSC in 2011, he said. And, over the five years that the programme had run, projects had become ever bigger.

“Some projects were in the region of £140m and £150m,” he said. Even with the LSC paying up to 75% or even more of these costs, colleges were left having to find considerable sums of money. Some of this money depended on land sales at a time when land values were plummeting. “Many of them were to be sold to developers for building houses, but who’s building houses now?”

There were also suddenly question marks over the solidity of even the biggest construction companies that colleges were bringing in as partners. With share prices of construction giants such as Taylor Wimpey collapsing, how could the council give the go-ahead for projects when no one could be sure that the builders would still be in business six months hence?

This, and the rising cost of lending from banks which had hitherto extended very favourable rates to colleges, amounted to a simple case of due care and diligence on the part of the quango, the source said.

“The government was giving colleges a proportion of the money to build. The question was: where was the rest of the money coming from?

“Nobody with common sense – the public finances being what they are – was going to throw money at this. The LSC is not an irresponsible body. One simply has to be very careful in the current situation that calculations made six months ago still hold.”

This version of events seemed to be confirmed by Sion Simon, who told the Today programme that there was a marked increase in the number of FE building projects seeking approval in the second half of 2008.

“And at the same time the economic downturn means that things like some land sales that deals might have depended on are in question, some people’s bank loans are in question and so on.”

Considerable alarm was expressed at the October meeting about the effect the delay would have on colleges.

“The assumption was that we would have a very quick response from Dius,” one observer said.

But the same month it emerged that the chancellor was going to bring forward cash from next year’s budget for public building projects.

One assumption growing around further education is that the situation confronting the LSC could not be allowed to overshadow that announcement.

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