Openness, transparency and competition in FE college mergers

I don’t know exactly why St David’s Day has put me in mind of mergers this year. Perhaps it’s the link to Wales which has been the epicentre of so much merger-related activity over recent years. Or perhaps it’s because mergers and other alliances are picking up again as a theme particularly in the further education sector, so I’ve been thinking about them off and on for some time now.

In particular, I’ve been struck by the paucity of guidance and advice to college governors as to what to think about in deciding to merge and specifically in selecting a merger partner. In no way linked, I’m sure, to the haste with which action was taken to address the ONS’s classification of colleges as public sector, the new power of governing bodies to dissolve their corporations and transfer their assets and liabilities to prescribed bodies has not been accompanied by any particularly detailed guidance or circulars as to how they should go about making this highly significant, indeed terminal, decision. Perhaps that’s unsurprising: if the aim of the change was to remove state control of the dissolution process, it is arguably inappropriate to expect state bodies such as the Department or the funding agencies to stipulate how it should be done.

Does the absence of guidance mean that governing bodies are entirely unconstrained in how they go about exercising the power to dissolve? If that’s the case is it a bad thing? The Minister for Skills appears to be concerned that it might be, given his letter to Chairs of Governors in February, in which he called for more openness, transparency and competition in the decision to merge.

In my view, there are other areas of law that impose duties on colleges and their governors which could be relevant to deciding whether and if so with whom to merge. These include:

·         Charity law and the duty it imposes on trustees to act in the best interests of their charities. Without the open, transparent and competitive process to which the Minister referred, how can governors be sure that the partner they choose provides the best possible future and opportunities for their learners?

·         The public law constraints on exercising discretionary powers such as this, which imply obligations to exercise those powers following careful, rational and reasoned deliberation.  These obligations, again, may not be satisfied without openness and receptiveness to the range of options available to the college to deliver the best outcome for learners.

·         The obligations under the Financial Memorandum in terms of accountability for public funds and value for money, which presuppose a measured and balanced consideration of all the available options.

·         The single equality duty which requires decisions to minimise adverse impact and improve opportunities for disadvantaged learners from protected groups.

So despite the absence of specific guidance, there seem to be a range of legal obligations and duties that point in the direction of a transparent and a reasoned decision-making process. Even if there weren’t such obligations, one has to wonder why governing bodies would do anything else given that these are not commercial mergers where private interests make confidentiality and exclusivity required characteristics, but, rather, are decisions that determine the future of educational charities with substantial public assets, on which the cleansing spotlight of public accountability and scrutiny should surely fall.

Smita Jamdar
Partner and Head of Education
For and on behalf of SGH Martineau LLP
DD: 0800 763 1332
M:  07909 925946
F: 0800 763 1732
International DD: +44 870 763 1332

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