Further education funding in England

The further education funding system in England is complex and has undergone a number of changes in recent years, with more reforms to adult education funding planned.

Currently, further education 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 provides some background information on the financial sustainability of the further education sector, its recent reclassification into the public sector, and the impact the Covid-19 pandemic has had. It then goes on to explain the different funding systems and examine recent funding announcements and trends.

16-19 funding

In the 16-19 system, the Education and Skills Funding Agency (ESFA) funds further education colleges, schools, and independent learning providers in England to provide education for learners aged 16 to 19-years-old. In 2022/23, the total amount of ESFA funding for 16-19 learning was £7.2 billion.

A national funding formula is used to calculate the allocation of funding that each provider receives each academic year. Several additional elements that are 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 majority of public funding for non-apprenticeship, 19+ further education in England is currently provided by the Education and Skills Funding Agency (ESFA) through the Adult Education Budget (AEB). Around 60% of the AEB is devolved to nine mayoral combined authorities and the Greater London Authority.

There are additional streams of funding for classroom-based adult education, which include:

• The National Skills Fund, which was announced in 2020 to help adults to train and gain skills to improve their job prospects. It currently funds Skills Bootcamps and the government’s Free courses for jobs
• The UK Shared Prosperity Fund, which was created to replace EU structural funds and is currently funding the numeracy programme Multiply.
• Advanced Learner Loans / Higher Education Student Finance, which fund certain level 3 to 5 qualifications. From 2025, this funding will be replaced by the Lifelong Loan Entitlement.

The government has recently consulted on changes to adult education funding, including the introduction of a single Skills Fund (which would include funding for AEB provision and the free courses for jobs offer), a single Development Fund, a new set of funding rates for adult skills, and a greater focus on outcomes for ESFA funded non-qualification provision.

Capital funding

Capital funding is used by further education providers to repair, upgrade, or expand their buildings, facilities, and equipment. The Autumn Budget and Spending Review 2021 committed £2.8 billion of capital investment across the further education sector between 2022-23 and 2024‑25. This is for capital spending across all further education sites in England, including colleges and designated institutions, sixth-form colleges, Institutes of Technology, and T Level providers.

Funding trends

The further education sector has experienced a prolonged period of reduced funding. The Institute for Fiscal Studies latest Annual report on education spending in England, concluded in December 2022 that 16-19 funding had experienced the biggest drop in funding of any education sector and contrasted its long-term funding with growth in primary and secondary schools:

Colleges and sixth forms have seen a long-term decline in spending per student relative to schools. Further education spending per student aged 16–18 in 2022–23 was £6,800, which is lower than spending per pupil in secondary schools and only 11–12% greater than in primary schools having been more than two times greater in the early 1990s.

Further education colleges and sixth forms are in a particularly difficult position at present. They saw larger cuts than other areas of education after 2010 and there was no extra funding announced in the 2022 Autumn Statement to help colleges and sixth forms cope with larger-than-expected cost increases.

The report said that extra funding announced in the 2019 and 2021 spending reviews would result in real increases in funding per student up to 2024-25. However, these only partially reverse earlier cuts and increasing numbers of 16-18 year olds up to 2030 would put further pressure on finances after 2024 when departmental spending plans had been scaled back.

Source: IFS, Further education and skills (2 August 2022)

On 19+ funding, the report said:

In the 2021 Spending Review, the government chose to allocate an extra £900 million in funding for adult education and apprenticeships in 2024–25 compared with 2019–20. As a result, total spending on adult skills is set to increase by 22% between 2019– 20 and 2024–25. However, as with spending on 16–18 education, this only reverses a fraction of past cuts: total adult skills spending in 2024–25 will still be 22% below 2009–10 levels. Spending on classroom-based adult education has fallen especially sharply, and will still be 40% below 2009–10 levels even with the additional funding.

A previous year’s report commented on longer term trends:

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.

Source: IFS, Further education and skills (2 August 2022)