This Think Further post could have been written about any one of our sector’s funding matters that make no sense. From area cost uplifts that bear no relevance to operating costs, to the numerous separate allocations that restrict local responsiveness. But one of the most irksome issues that leaves a £5million-shaped hole in my budget each year (almost 5% of our total budget), is that of VAT in further education colleges.
This is a known issue. The Association of Colleges and institutions around the country did a great job raising its profile last year. There was strong representation at a Westminster Hall debate in May 2023 and lots of associated lobbying.
Easy though it may be to be distracted by the recent announcement of a rise in our core funding, it’s important that we don’t lose sight of the VAT issue. And here is why it’s such a big deal to individual colleges, as well as the wider sector.
The fact that colleges are not part of the VAT refund scheme has always been unfair – but is even more nonsensical since we officially joined the public sector in November 2022. There has been a changing narrative: the Treasury spent 27 years saying that our EU membership prevented it, and then the last few years saying that colleges couldn’t join, actually, as they were officially part of the private sector.
