The Government needs to stop taxing the spaces that colleges need - Bill Jones
Last year, my colleagues and I faced a choice. We could stretch our cash reserves to find room for more young people in Leeds or turn them away. We chose to make room. In a city with a growing teenage population and long waiting lists for courses, what else could we do? But reserves run out, so that cannot be the long-term plan.
A college place can lead to somewhere remarkable, which is the case for many of our students. One of which is Emily, who completed a health T Level and secured a trainee clinical support worker role in the operating theatres at St James’s University Hospital. I want more young people to have that chance.
That is why we are bringing Livingstone House, a former office building by Leeds Dock, into use as a health and social care campus. Government funding of £8m helped us secure it. We have begun bringing its first floors into use, and the longer-term plan could provide up to 1,500 additional places as more floors are fitted out. The remaining space still needs investment before students can use it.
Here is the unfair part. A school or academy can generally recover VAT on public education spending. A further education college generally cannot. Every time we buy the materials and services to turn a floor into teaching space, the same investment buys less than it would in a school down the road. Our separate £10.5m refurbishment at Park Lane incurred just over £2m in irrecoverable VAT. That money could have gone back into facilities and learning.
Across England, LSE Consulting puts the annual college VAT bill at around £200m. In Leeds, this creates a practical question: how quickly can we equip the next floor, recruit the specialist staff, and offer another young person a place?
Alan Milburn’s review of young people and work highlights the major funding gaps for providers. College funding largely follows the previous year’s enrollment, so colleges take the financial risk of growing before the money is made available. His interim report estimates that there are 32,000 students being taught without funding across England. Add a VAT bill to the cost of creating space for them, and you can see why the system struggles to expand where demand is greatest.
The Prime Minister wants every young person to have a work placement between 16 and 18 and an apprenticeship at 18. Across Yorkshire, the mayors, employers, and colleges are being asked to build those routes, linked to local jobs.
A mayor can identify the skills a region needs. Employers can offer placements. Neither can provide the classroom or training that young people need to progress their careers.
Five large college groups, including ours, have proposed a targeted VAT refund for eligible colleges on public education spending. It would be comparable to the arrangement academies already have. We would publish what the money recovered buys. The Chancellor could commit to reform at the October 28 Budget, with implementation by Budget 2027, or set a firm timetable to get there.
Emily’s path to St James’s began with a college place.
The next Emily may be left waiting for one. We have found the space to train more of them. Let’s make every pound spent on it count.
Bill Jones is the CEO of Luminate Education Group.