Library summary

For further information please contact the Library’s Further Education specialists, Sue Hubble (policy) and Paul Bolton (statistics).

Further education funding

Government funding for further education is prioritised towards courses which lead to employment, or improve basic English and maths skills. Courses which fall outside these areas have seen the biggest funding cuts as they move away from being funded partly by the government to being funded wholly by student fees. 

The Skills Funding Statement 2013-16 published in February 2014 gives a table of courses which are currently fully funded by the government; for adults over 19 these courses include English and maths qualifications up to level 2 and qualifications up to and including level 2 to help adults into work.  Also students aged 19-23 may be eligible for other additional fully funded courses such as a first level 3 qualification.  Under the previous government the statutory entitlement to free tuition was wider and adults between 19 and 25 were eligible for free tuition for a first full level 3 course.  Currently students on other courses may be eligible for co-funding in which case they make a contribution towards their fees, otherwise for all other courses students must pay full fees unless they are eligible for assistance due to their personal circumstances such as being on certain work related benefits.

The government provides support for students’ course fees in the form of 24+ advanced learning loans– these are available for eligible learners on level 3 and 4 courses.

Cuts in FE funding

The Skills Funding Statement 2013-16 showed that the adult skills budget fell from around £2,468 million in 2013/14 to £2,258 million in 2014/15 and is predicted to fall further to £2,004 million in 2015/16, this is a cut of more than £463m or 19 per cent over the period.  The funding statement makes the following comment on the reduction in funding:

The Adult Skills Budget (ASB), in line with most public spending, continues to be under pressure and budget levels are reducing. The 2010 Spending Round achieved a good outcome for the provision of adult skills but we still need to ensure that Government funding delivers value for money whilst giving individuals the skills they need to enter and progress in work. Eligibility rules for learners to be funded through the ASB are clear; these are based upon prior attainment of skills, age and status, which when combined with a Loans offer will ensure that skills provision is prioritised and focussed towards young adults and the unemployed (p16).

The spending on 24+ advanced learning loans will increase over the three years from £129,000 in 2013/14 to £498,000 in 2015/16.

Cuts in the Adult Skills Budget

The Adult Skills Budget (ASB) for 2015-16 was initially set at £2.0 billion; down from £2.3 billion in 2014-15. This was a cash cut of just over 11 per cent. However, within the ASB funding is an indicative amount to support apprenticeships. This funding has not been cut, so the non-apprenticeship ASB funding has been cut even further; around 19 per cent in cash terms. A further cut to the (non-apprenticeship) ASB was announced in July as part of the BIS contribution to savings announced in Summer Budget 2015. This cut of 3.9 per cent is around £50 million and takes the (non-apprenticeship) ASB to around 22 per cent below 2014-15 levels in cash terms or around 23 per cent in real terms. (Sources: Skills Funding Letter 2015 to 2016, BIS; Skills Funding Agency annual report and accounts, 2014 to 2015; Changes to funding allocations for 2015 to 2016, SFA)

It should be noted that the cut in the ASB (from 2013-14 onwards) is in part connected to the replacement of direct funding with loans for some learners.

The impact of cuts in the adult skills budget was raised in a PQ in June 2015:

Further Education: Finance: Written question – 7768

Frank Field on: 17 July 2015

To ask the Secretary of State for Business, Innovation and Skills, what assessment he has made of the effect of changes to the adult skills budget on the long-term financial stability of the further education sector.

Nick Boles on: 27 July 2015

The financial health of further education colleges is under constant review by the Skills Funding Agency based on self-assessment information from colleges and the publication of college accounts. Colleges with inadequate financial health are subject to intervention led by the FE Commissioner.

Across all our grant, loan and capital support for adult FE, we are making available over £3bn in 2015-16 and our funding mechanism is designed to allow providers the freedoms and flexibilities to decide how best to use their allocation to respond to local learner and employer demand. As autonomous organisations it is up to colleges to manage their own budgets.

Apprenticeships are our priority for skills and colleges have been encouraged to expand their apprenticeship offer. As government funding has reduced, many colleges have responded well by looking at generating other income streams and creating sustainable business models for the future. This entrepreneurial approach will help ensure sustainable future business models with less reliance on government funding.

In order to address the significant financial pressures on institutions, a declining 16-19 population and the need to maintain very tight fiscal discipline in order to tackle the deficit, a major reform of post-16 education and training institutions is necessary. On 20 July the Departments for Education and Business, Innovation and Skills announced a programme of area-based reviews to review 16+ provision in every area. These reviews will provide an opportunity for institutions and localities to restructure their provision to ensure it is tailored to the changing context and designed to achieve maximum impact.

Cuts in funding for English for Speakers of Other Languages (ESOL) courses

Funding is also being withdrawn for ESOL plus mandated provision for the 2015/16. An estimated £45 million had been allocated to the programme of mandated learning, which is targeted at jobseekers’ allowance claimants identified as having poor spoken English skills that prevent them from finding work.[1]  Migrants Right Network have stated that these cuts could affect 16,000 individuals.[2]

National Audit Office report on the FE sector July 2015

On 20 July 2015 the National Audit Office (NAO) published a report on the financial position of the FE sector – Overseeing financial sustainability in the further education sector.  The report said that financial health of the FE college sector has been declining since 2010/11 and in 2013/14, the sector was in deficit for the first time.[3]  The report further said:

The decline in the financial health of the sector has been quicker than indicated by colleges’ plans, and current forecasts suggest that the number of colleges under strain is set to rise rapidly.[4]

David Hughes, chief executive of the National Institute of Adult Continuing Education, referred to the NAO report in commenting on the FE funding cuts:

The 3.9 per cent cut comes after multi-year cuts which have greatly reduced chances for people to learn.

The cuts are also the first of potentially three to FE colleges, with 16-19 and higher education still unclear. These further cuts come on the same day as the NAO report which set out the very real financial challenges colleges are facing, and of course this only increases the pressure.

The further cut to the ASB, in the form of £45m taken out of Esol funding is extremely disappointing, given that it will hit people who are working hard to gain the language skills they need to participate in work and in our society.[5]

Impact on provision of courses

The Association of Colleges has said that up to 190,000 adult education places could be lost in 2015-16[6], with courses in the health, public services and care sectors expected to be hit hardest with the loss of 40,000 course places.[7]

16-19 Funding

16-19 funding covers students aged 16-19 years of age in school sixth forms, sixth form colleges and FE colleges.

There have been various issues around the funding of this age group in recent years:

  • The change to funding per student rather than per qualification in 2013/14 reduced funding to some providers – transitional protection was put in place and ended in 2014/15
  • Funding for students in England aged 16-18 is currently £4,000 per head and funding for 18-19 year olds is £3,300 per head.  In comparison funding for students in key stage 4 is at least £6,372 per head and for higher education students is up to £9,000 per head.
  • English and maths education compulsory for over 16s without those qualifications – no extra funding to cover this
  • Issues around the payment of VAT by sixth form colleges

Detailed information on funding for 16-19 education is rather complicated. Further education funding through the Education Funding Agency (EFA) for 16-19 year olds was £3.57 billion in 2012-13 and £3.73 billion in 2013-14.  Neither the Department for Education’s accounts nor the EFA’s business plan gives comparable figures for later years.  

The EFA business plan gives a total of £4.21 billion funding for 16-19 FE in 2014-15, but does not include any comparable earlier years and the coverage of the total includes some spending outside the 2012-13 and 2013-14 totals given above.

The total allocation from the EFA to individual providers (other than schools) was £3.90 billion in 2013/14 and £3.87 billion in 2014/15. Both figures include bursary funding and the 2014-15 total includes one-off start-up funding for free meals. (Sources: EFA annual report and accounts 2013 to 2014; 16 to 19 funding allocations, EFA; EFA business plan: 2014 to 2015)

Further information on 16-19 funding is available in a document, Submission from the Association of Colleges: 5 June 2015 Budget Funding cuts.

Funding cuts

A report by the Institute of Fiscal studies, Schools Spending, in March 2015, showed that funding in 16-19 education fell by nearly 14 per cent over the last parliament. 

A survey by the Sixth Form Colleges Association in August 2015 showed that 72 per cent of colleges had dropped courses as a result of funding cuts.

In the July 2015 Spending Review the government pledged to protect education spending on schools, but this does not include post-16 funding. The government said in answer to a PQ on July 13 2015 that decisions on expenditure beyond 2015/16 would be made as part of the November Spending Review.

Further education reviews

The government has announced a review of post-16 education and training providers, which seeks to address ‘the significant financial pressures on institutions’:

major reform of post-16 education and training institutions is now necessary, in a way which also addresses the significant financial pressures on institutions including a declining 16-19 population and the need to maintain very tight fiscal discipline in order to tackle the deficit.

We will need to move towards fewer, often larger, more resilient and efficient providers.[8]

1]Esol funding cuts will have ‘devastating’ impact on thousands of learners, charity warns”, Times Educational Supplement, 22 July 2015

[2] Migrants’ Rights Network “New ESOL funding reductions will see 16,000 places cut”, 12 August 2015

[3] NAO Overseeing financial sustainability in the further education sector, HC 270 July 2015 Executive Summary p6

[4] ibid

[5]SFA confirms further 3.9 per cent ASB cut as in-year departmental savings bite” FE Week, 21 July 2015

[6]How will funding cuts impact on the future of adult education”, FE Week, 28 April 2015

[7]Government could ‘decimate’ adult education by 2020, AoC warns”, FE Week, 25 March 2015[

[8] HM Government, Reviewing post-16 education and training institutions

Parliamentary questions

Topical Questions

Asked by: Mr Gordon Marsden

Further education has already been weakened by five years of Government funding cuts, so why are Ministers having hasty, half-cocked area reviews that threaten forced course and college closures? Figures released by the Library today suggest that the Chancellor is demanding at least £1.6 billion in FE cuts, and a new Green Paper proposes free-for-all providers that would threaten colleges’ higher education teaching. Are Ministers doing anything to stop FE being the spending review’s whipping boy?

Answered by: Sajid Javid

We have discussed this issue previously. As I have said, we want an even stronger FE sector that provides even more opportunities across the country, and local area reviews are essential for that. We need to understand local needs much more carefully, and local reviews will achieve that. We will then be able to offer more opportunities.

10 Nov 2015 | Oral questions – Supplementary | 602 c217

Further Education: Finance

Asked by: Onwurah, Chi

To ask the Secretary of State for Education, what assessment she has made of the effect of annual funding cycles on the ability of further education and sixth form colleges to undertake financial planning; what discussions she has had with Cabinet colleagues on that matter; what plans the Government has to change those funding cycles to reflect Government spending review cycles; and if she will make a statement.

Answering member: Mr Sam Gyimah

16-19 funding is that it is based on the level of recruitment institutions delivered in the previous year. That means institutions’ funding keeps pace with changing student numbers with the minimum delay. The Government has no plans to change the 16-19 funding system.

09 Nov 2015 | Written questions | 14932

Post-16 Education

Asked by: Mr Gordon Marsden

In the last Parliament, the Government cut education funding for 16 to 19-year-olds hardest of all. Today, we learn that funding allocations for colleges and schools for the 16-to-19 sector are down over £100 million so far compared with last year. The Government have given them further instability with the flawed series of area FE reviews, jeopardising colleges and their students. With this record, does the Minister have any guarantees for the spending review to secure viability for the 16-to-19 sector?

Answered by: Nick Boles

We might want to look over the channel to see what happens to an education sector when the Government are not getting a grip on spending and on ensuring a strong economy. In Portugal, schools have been closed and teachers laid off. In Greece, teachers have faced a 30% cut in their salaries. We are ensuring a strong sector that is able to educate young people for a life of work.

26 Oct 2015 | Oral questions – Supplementary | 601 c9

Further Education: Finance

Asked by: Hayes, Helen

To ask the Secretary of State for Education, what assessment she has made of the effect of recent changes in 16-19 funding on the (a) breadth and (b) viability of post-16 education.

Answering member: Nick Boles

All 16-19 institutions are funded for, on average, 600 teaching hours per year per full-time student. This supports a significant programme of study: for example, three A Levels and one AS Level or a Level 3 BTEC Extended Diploma, plus around 150 hours of enrichment or tutorial activity across each two-year course.

We do understand the financial challenges facing the sector. That is why we are launching a national programme of area reviews. The reviews will help ensure we have strong, efficient institutions that can deliver high-quality routes to employment, to ensure institutional stability and to make best use of public resources.

26 Oct 2015 | Written questions | Answered | House of Commons | 901786


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