See the FEWEEK article 

Skills Minister Jacqui Smith has urged the Treasury to acknowledge the “real issue” of staff pay in FE and VAT ahead of next month’s autumn budget.

At a Labour Party conference fringe meeting, the new skills minister told delegates that she has made the case “strongly” of the issues around status and pay in FE and its “general ability” to the Treasury.

But while Smith (pictured second left) said she understood the issue of charging VAT to FE colleges as “one of the disadvantages” of 2022 public sector reclassification, she couldn’t speak further on the matter given the upcoming budget.

Chancellor Rachel Reeves is due to unveil the Autumn budget on October 30 and has already warned of “difficult decisions” on fiscal spending after discovering a £22 billion black hole in public finances.

The Association of Colleges recently warned that the government’s decision to snub colleges from public sector pay awards means it is highly unlikely there can be an above inflation salary bump of anything more than 2 per cent in 2024/25.

The Department for Education previously blamed the “very challenging fiscal context” and the fact that FE does not have its own pay review body for Reeve’s decision to find cash for school pay rises but not for colleges.

But Smith said today: “There is a real issue in FE, about status, about pay, about the general ability of FE, which is the most responsive bit in some ways in the whole education system, to be able to continue doing that.

“It’s a case that’s been made strongly to us by FE colleges and we have made it strongly to the Treasury. So we will wait and see whether or not that has fallen on good ears.”

FE colleges have long called for more favourable rules on VAT, and demanded exemption that would cost the government an estimated £200 million each year.

“I hear you on VAT,” Smith said. “That’s one of the disadvantages, of course, of bringing back of FE colleges into the public sector.”

After a slight pause she added: “That’s about as much as I can say at the moment, but not least because Rachel [Reeves] is up to speak soon and tell us how difficult things are.”

In the same Labour fringe, former education secretary Lord Blunkett said the Treasury is “pretty bad at releasing small amounts of money” which can “actually make an enormous difference”.

David Hughes, chief executive of the Association of Colleges, spoke a different Labour conference event today and urged “patience” from the sector and for a “united solution”.

“We don’t have to beat up [education secretary] Bridget Phillipson if they don’t deliver overnight the changes we need from government underfunding for 14 years,” he said.

“Give them [DfE ministers] the chance to make the case. Rachel Reeves is holding that purse very tight, let’s help her loosen that hold a bit.

“We have an incredibly strong case for more money. It will come true, it might take three years but it will happen.”