Caveats for the new localism in further education – why the use of principal–agent solutions at the local level will not work

The post-incorporation Further Education (FE) sector has experienced a number of quasi-markets over the past twenty three years designed to incentivise college agents (managers and lecturers) to meet government objectives. To create such quasi-markets Principal-Agent (P-A) solutions have been introduced in the form of a series of funding incentives and inspection frameworks under the Conservative administration (1993- 1997), New Labour (1997-2010), the Coalition government (2010-2015) and currently under the new Conservative administration. This paper reviews the FE literature to assess the effectiveness of these P-A solutions as a means of improving students’ skills for employability, needs-based equity for disadvantaged students and the wider benefits of education. The conclusion is that such P-A solutions have been ineffective at realising these goals because distant government diktats are unable to accommodate local knowledge of communities and businesses, leading to the creation of incomplete contracts which limit professional values, intrinsic motivation and tacit knowledge in the production process. Centralised funding incentives and inspection frameworks have also led to gaming behaviours and impression management activity as a means of presenting colleges as auditable commodities. More particularly, P-A solutions have encouraged a performative culture where students are viewed as commodities (of financial and presentational value) to the detriment of both needs-based equity for disadvantaged learners and student employability. Significant caveats are provided in this paper for the current Conservative government to consider in its planned policy of improving skills for employability through localism and devolution in the FE sector. It suggests that if single-minded P-A solutions are used at the local level, through the continued use of funding and inspection targets and incentives, they will not improve skills for employability or needs-based equity for disadvantaged students, nor will they facilitate a regard for the wider benefits of education due to the creation of incomplete contracts. New forms of local governance and accountability will be required to facilitate more flexible Principal-Agent relations which accommodate decision-making, intrinsic motivation and professional values at the local level.