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The further education (FE) funding system in England is complex and has undergone a number of changes in recent years. Currently, FE providers are allocated funds from different sources depending on the type of courses they provide and on the age of their students. There is also capital funding available for upgrading the college estate. This briefing explains the different systems, examines recent funding announcements and trends, and considers some related issues facing the FE sector.

16-19 funding

In the 16-19 system, the Education and Skills Funding Agency (ESFA) funds FE colleges, schools, and independent learning providers in England to provide education for learners aged 16 to 19-years-old. In 2020/21, the total amount of ESFA funding for 16-19 learning was £6.1 billion. A national funding formula is used to calculate the allocation of funding that each provider receives each academic year. Several additional elements not part of the formula, including high needs funding and student support schemes, contribute to the total funding amount awarded to an institution.

19+ funding

The ESFA-funded Adult Education Budget (AEB) provides most of the public funding for non-apprenticeship, 19+ FE in England, including classroom-based courses and informal community learning. Alongside the AEB, there are several additional funding streams for adult learning, including the National Skills Fund, Advanced Learner Loans, traineeships, and apprenticeships. This briefing focuses on the funding of 19+ classroom-based learning and does not include information on work-based schemes such as traineeships and apprenticeships. 

Capital funding

Capital funding is used by FE providers to repair, upgrade, or expand their buildings, facilities, and equipment. The 2020 Budget committed £1.5 billion over five years for capital spending across all further education sites in England, including FE colleges and designated institutions, sixth-form colleges, Institutes of Technology, and T Level providers. The 2021 Comprehensive Spending Review said capital investment across the FE sector would be £2.8 billion between 2022-23 and 2024-25. This is total funding and will include some of the £1.5 billion figure announced in 2020.

Skills for Jobs White Paper

In January 2021, the Department for Education published a White Paper, Skills for jobs: lifelong learning for opportunity and growth, which contained proposals for reforming the FE sector, including the funding system. Proposals included moving to a multi-year funding regime, introducing a Lifelong Loan Entitlement equivalent to four years’ worth of post-18 education, and targeting capital funding at providers that can demonstrate an urgent need for increased capacity in coming years.

Some of the proposals were included in the Skills and Post-16 Education Bill, which was introduced in the House of Lords on 18 May 2021.

Funding trends

The FE sector has experienced a prolonged period of reduced funding. A report by the Institute for Fiscal Studies (IFS), Annual report on education spending in England, concluded in November 2020 that 16-19 funding had experienced the biggest drop in funding of any education sector:

Further education colleges and sixth forms have seen the largest falls in funding of any sector of the education system since 2010–11. Funding per student in further education and sixth-form colleges fell by 12% in real terms between 2010–11 and 2019–20, while funding per student in school sixth forms fell by 23%.

On 19+ funding, the report stated:

Spending on adult education is nearly two-thirds lower in real terms than in 2003–04 and about 50% lower than in 2009–10. This fall was mainly driven by the removal of public funding from some courses and a resultant drop in learner numbers.

Issues facing the sector

The IFS report highlighted several “significant resource challenges in the coming years” for the FE sector, including the loss of learning during the pandemic, the impact of past reductions in funding, and the Government’s upcoming reforms for the sector. Other areas of concern include the application of the college insolvency regime that came into effect in January 2019, the impact that Covid-19 has had on the sector, and the extra funding needed for reskilling and upskilling young people and adults for a post-Covid economy.

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