The Skills and Post-16 Education Act 2022 promised a new dawn for the UK's skills sector, with the government pledging to prioritise skills development and reshape the further education (FE) landscape. Two years on, however, the reality on the ground tells a different story. Despite a change in government, colleges continue to grapple with underfunded budgets, high inflation, and an uncertain future. While the Skills England Bill and the establishment of Skills England may herald new legislation and regulation, the financial challenges that have plagued the sector for years remain unresolved.
Years of neglect
The root of these issues lies in years of neglect. According to the Institute for Fiscal Studies (IFS) in its
2023 annual report on education spending, government expenditure on FE has fallen below 2010/11 levels. Even with the £1.6 billion boost announced during the 2021 Spending Review, college funding per student was still 10% below what it was more than a decade ago. This decline in investment has had a profound impact on the sector, leaving many colleges struggling to provide the quality education and training that students need.
The funding shortfall is not just a historical problem. The previous government’s announcements in July and October 2023, aimed at enabling colleges to afford higher staff pay rises and increasing funding rates for GCSE retakes, did little to alleviate the broader financial strain. These measures, while welcomed, were not new funding and have yet to be repeated by the new government.
Participation in post-16 education has been volatile over the past few years. After peaking in 2020, it dipped before rising again in autumn 2023. However, enrolments in T levels, a key component of the government’s skills strategy, fell short of their targets. Faced with an underspend, ministers redirected £185 million in 2023/24 and £285 million in 2024/25 towards increasing 16–18 funding rates. These were short-term measures that did not address the underlying issues. The promised increases in funding for 2024/25 have yet to be confirmed, leaving colleges in a state of limbo.
The impact of inflation and funding cuts
Inflation has only exacerbated the funding crisis. The 7% increase in required teaching hours for maths and English GCSE resits has further squeezed college budgets. While there have been some increases in funding for students on high-cost programmes, these have been offset by the loss of the 16–18 tuition fund, which is still desperately needed due to the learning gaps caused by the pandemic. Despite successive governments highlighting the importance of skills development, there has been no long-term increase in the share of public spending devoted to FE.
Adult education has fared even worse than funding for 16–18 year-olds over the past decade. While some programmes will see a 14% funding increase in 2024/25 due to changes in allocation methods, two-thirds of adult education funding is delegated to regions. This creates significant variability in the financial support available to providers. Furthermore, the allocation of adult learning funding based on guided learning hours could lead to decreases for some programmes, further complicating the already precarious situation.
Apprenticeships: A missed opportunity
Apprenticeship funding, a critical component of the government’s skills strategy, has also suffered under the previous administration. Since the introduction of the apprenticeship levy in 2017, the number of apprentices aged 19 and over has declined by about 16%. While higher and degree apprenticeships, funded by the levy, have tripled, the number of 16–18 apprenticeships has decreased during the same period. This is a worrying trend, given that apprenticeships were supposed to be a key driver of economic growth and skills development.
The previous government’s focus on higher and degree apprenticeships has done little to address the wider skills gap in the UK. According to government figures, vacancies due to a lack of skilled applicants increased by 14% during this period. This suggests that the apprenticeship system is not meeting the needs of employers or the broader economy. The new government must take action to reverse this trend and ensure that apprenticeship funding is used effectively to support skills development across all sectors.
Hoping for change: The role of the new government
As we look ahead to 2024/25, the financial outlook for FE and skills remains bleak. Pay increases for staff are set to consolidate, making it even harder for colleges to recruit and retain the talented educators they need. The sector had hoped that a new government would bring fresh ideas and a renewed commitment to investing in skills. However, the early signs are not encouraging.
To close the pay gap between school teachers and college lecturers, the new Labour government must make a substantial investment in FE. This includes extending the 16–18 tuition fund and reimbursing colleges for VAT, which has been a longstanding issue. Without this, colleges will continue to struggle to attract and retain the staff they need to deliver high-quality education and training.
The government must also do more to help young people transition into higher education, employment, or apprenticeships. This requires a concerted effort to increase employer engagement with post-16 education providers and raise employer expectations of the levy. The upcoming Autumn Budget provides a critical opportunity for the government to address the shortfalls in education funding and demonstrate its commitment to the skills agenda.
Investing in the future
FE and skills providers need more than just short-term fixes. They need clarity on long-term funding to make informed decisions about programme delivery for 2025/26 and beyond. Colleges play a vital role in creating an inclusive society and driving economic growth, but they cannot fulfil this role without adequate resources.
The time for empty promises is over. If the new government is serious about growing skills and strengthening the economy, it must make FE and skills an investment priority. Failure to do so would represent a significant missed opportunity to address the UK’s skills gap and build a more prosperous future for all.