Adult education class

Adult education and skills

Few areas of public policy have experienced as much change as adult education and skills.

Funded by the Nuffield Foundation

Since the turn of the millennium, there have been a number of major reforms, creating a post-18 education system that is often difficult for individuals and employers to navigate. In recent years, this change has continued with the introduction of two new skills programmes targeted at adults (Multiply and Skills Bootcamps), changes to apprenticeship regulation, and the upcoming launch of the Lifelong Learning Entitlement. The backdrop to these policy changes is a funding landscape that has seen significant real-terms declines since the early 2000s, as well as major reallocations of public funding between different forms of adult education.

Public spending generally falls into three categories:

  • classroom-based learning, including basic skills and qualifications at multiple levels;
  • subsidies for work-based learning, such as apprenticeships;
  • loans for further education courses, known as advanced learner loans.

In the remainder of this section, we set out how the public funding of adult education and skills has changed over time. We then consider each of the three areas of adult education in turn. Further analysis of adult education and training is also available in our recent Green Budget chapter on the topic.

Adult education spending over time

Figure 1 shows public spending on adult education and apprenticeships since the early 2000s up until the present day, as well as the projected level of spending in 2024–25. We show the overall level of public funding and break this down into the three spending categories: classroom-based learning; work-based learning; and the amount lent through advanced learner loans in each year.

Figure 1 - Public spending on adult education and skills (actual and projected for 2024–25)

Public spending on adult education and skills (actual and projected for 2024–25)

Note and source: The figure for 2024–25 is a projected spending level based on spending plans announced in the 2021 Spending Review. See source for figure 6.4 in Drayton et al. (2022). Amount lent through advanced learner loans from Student Loans Company. HM Treasury, GDP deflators, November 2023.

Total public spending on adult skills has decreased since the 2000s, with spending at around £4.4 billion in 2022–23 – a 30% drop from its peak of £6.3 billion in 2003–04 (adjusted for inflation). The trend is most pronounced in classroom-based learning, which has decreased by two-thirds since the early 2000s from £5.0 billion to £1.7 billion.

During the 2000s, part of the decline in classroom-based funding was diverted to work-based learning, so overall spending remained fairly stable. The introduction of Train to Gain pushed expenditure on work-based learning to a peak of £2.8 billion in 2009–10. Since the early 2010s, funding for work-based learning has consistently been around £2 billion in today’s prices, while classroom-based funding has continued to decline. Advanced learner loans were introduced in 2013–14, but they have consistently represented a small share of skills spending. Around £130 million was lent through advanced learner loans in 2022–23, which is 3% of the overall skills budget.

The government allocated an additional £900 million in day-to-day funding for adult education in 2024–25 relative to 2019–20 in the 2021 Spending Review (Drayton et al., 2022). As a result, total spending on adult skills is set to increase by 14% in real terms between 2019–20 and 2024–25. Part of the additional spending has already been realised: total spending on adult education increased by almost 7% in real terms between 2019–20 and 2022–23. As with spending on 16–18 education, planned increases in spending only reverse a fraction of past cuts: total skills spending in 2024–25 will still be 23% below 2009–10 levels. Spending on classroom-based adult education has fallen especially sharply, and will still be over 40% below 2009–10 levels even with the additional funding.

Public funding for classroom-based learning

The largest cuts to public spending have been to funding for classroom-based learning. There are two key drivers behind its long-term decline. The first is a decline in the number of adults taking classroom-based FE courses. Figure 2 shows the number of publicly funded classroom-based qualifications taken at different levels in England. In 2004–05, adults enrolled in nearly 5.5 million government-funded FE qualifications. By 2020–21, that number had dropped to 1.5 million, which marks a 72% decline relative to the peak. There has been a decline in qualifications taken at every level, but there was a particularly dramatic decline in the number of learners studying at the lowest levels (below Level 2) during the 2000s.

Figure 2 - Participation in classroom-based further education qualifications by adults (19+) in England

Participation in classroom-based further education qualifications by adults (19+) in England

Note: Level 2 corresponds to GCSE or equivalent. Skills for Life encompasses everyday literacy and numeracy courses. Level 3 corresponds to A-level or equivalent qualifications. Level 4+ corresponds to higher-level qualifications such as Higher National Certificates (HNCs) or Higher National Diplomas (HNDs).

Source: Learner numbers from 2002–03 to 2018–19 from figure 2.2 in Sibieta, Tahir and Waltmann (2021). Learner numbers for 2019–20, 2020–21 and 2021–22 calculated from Department for Education apprenticeship statistics and adult further education participation statistics.

This decline means that colleges and other education providers receive less funding, because funding is allocated on the basis of the number of courses provided. The decline in participation in classroom-based learning has resulted from the withdrawal of public funding for low-level qualifications in the 2000s, a large and deliberate shift from classroom-based to apprenticeship training, and the introduction of tighter eligibility criteria for funding entitlements in the 2010s.

The merit of this decline in participation depends in part on the returns to these qualifications. There is a high degree of variation in the value of different FE qualifications for learners. Yet evidence shows that many low-level classroom-based courses offer comparatively low returns in the labour market (Tahir, 2023). When considering future changes to public funding, the variation in returns to qualifications means that any funding needs to be well targeted: it matters how the money is spent, as well as how much is spent.

The second driver of the decline in public funding is the large real-terms reduction in funding rates for classroom-based courses. These funding rates determine how much education providers receive per course taught; since 2013–14, funding rates for many courses have not changed in cash terms (Sibieta, Tahir and Waltmann, 2021).

Since 2013–14, the Skills Funding Agency (now the Education and Skills Funding Agency) has set funding levels using the following formula:

Funding received for teaching a learner 
             = Funding rate × Disadvantage uplift × Area cost uplift

The level of funding received depends on the funding rate – which in turn depends on the type of qualification(s) taken by the learner (the number of taught hours and subject area) – a disadvantage uplift which is based on local area deprivation measures, and an area cost uplift to reflect higher salary costs in certain areas.

The key component in determining funding levels is the funding rate. This has been fixed in cash terms for many programmes since 2013–14. Figure 3 illustrates how funding rates for a selection of classroom-based courses have changed in real terms over the past decade. The government increased the funding rate for GCSE English and maths in 2015–16, but since then providers have received a fixed fee of £811 for teaching this course. The funding rates for ‘functional skills’ courses have not changed in cash terms in the last decade. This means that, in real terms, education providers are receiving 22% less than they did in 2015–16 for teaching an adult learner a GCSE in English or maths, while the funding rates for ‘functional skills’ courses have fallen by 24% in real terms in the last ten years.

Figure 3 - Programme funding rates for selected classroom-based courses

Programme funding rates for selected classroom-based courses

Source: Programme funding rates obtained from Education and Skills Funding Agency’s Adult Education Budget (AEB): funding rates and formula. HM Treasury, GDP deflators, November 2023.

The government announced in March 2023 that it will apply a 2.2% increase to the final earnings for all AEB formula-funded provision in the 2022–23 and 2023–24 academic years. However, the cash-terms freeze in programme funding rates over the past decade is unlikely to represent good policy. Funding rates have been eroded in an unpredictable and arbitrary way, and over time become detached from the resource needs of education providers. Ultimately, this is important because it determines the quality of education received by learners.

Public funding for apprenticeships

Employers receive public subsidies to cover the cost of apprenticeship training. Since 2017, these subsidies have been nominally funded through the apprenticeship levy. Under the levy, large employers with a total pay bill in excess of £3 million pay 0.5% of their pay bill above that level as an apprenticeship levy. This is transferred into a digital account and topped up by 10% of public funding, which can be used to pay for the costs of apprenticeship training. There is also a generous system of public funding for non-levy-paying firms, who only have to pay 5% of the costs of apprenticeship training.

Despite appearances, the apprenticeship levy is not a hypothecated tax, where the revenue collected goes directly into a separate fund dedicated solely to apprenticeships. Instead, the Treasury sets an Apprenticeship Budget in England at each spending review. While the system has demand-led elements, the government has control mechanisms such as anticipated revenue calculations and caps on funding bands for apprenticeships. The devolved governments of Scotland, Wales and Northern Ireland receive a corresponding amount via the Barnett formula.

The level of allocated funding can be, and has been, different from the amount of money raised through the apprenticeship levy. Figure 4 shows the revenue generated by the apprenticeship levy, the funds allocated to England’s Apprenticeship Budget and the amounts allocated to the devolved nations, as well as the actual expenditure from England’s Apprenticeship Budget.

Figure 4 - Funds raised by, allocated and spent from the apprenticeship levy

Funds raised by, allocated and spent from the apprenticeship levy

Source: Figure 9.9 in Tahir (2023).

The nominal amounts raised by the levy have grown over time, particularly in the last two years, driven by increases in companies’ pay bills due to wage inflation. In the early years of the levy, the amount allocated exceeded the amount raised. However, this has been reversed in the last two years, with almost £290 million more raised than allocated in 2021–22, rising to £550 million in the most recent year. Since the apprenticeship levy was introduced in 2017, it has raised £580 million more than has been allocated across the UK.

It is also important to differentiate between the funds allocated in England (through the Apprenticeship Budget) and actual expenditure. The former represents the government’s allocated budget for apprenticeship training, while the latter reflects the real uptake and utilisation by employers. In the first four years of the levy, 75–80% of the Apprenticeship Budget in England was spent each year. The gap has narrowed in recent years, with 96% of the budget being spent in the last financial year.

Policy reforms, such as the introduction of the apprenticeship levy, affect the incentives and capacity of employers to provide apprenticeships, and therefore the number of people taking them. There are four levels of apprenticeships in England:

  • intermediate apprenticeships – equivalent to National Qualifications Framework (NQF) Level 2 (itself equivalent to five A*–C grades at GCSE);
  • advanced apprenticeships – equivalent to NQF Level 3 or two A–E grades at A level;
  • higher apprenticeships – equivalent to at least a Level 4 qualification (such as an HNC);
  • degree-level apprenticeships – equivalent to an undergraduate degree.

Figure 5 shows how apprenticeship participation in England at each level has changed over time, with higher and degree-level apprenticeships aggregated together.

Figure 5 - Participation in apprenticeships by adults (19+) in England

Participation in apprenticeships by adults (19+) in England

Source: Apprenticeship numbers from 2002–03 to 2018–19 are from figure 2.2 in Sibieta, Tahir and Waltmann (2021). Apprenticeship numbers for 2019–20, 2020–21 and 2021–22 are calculated from Department for Education apprenticeship statistics.

In the early 2000s, the total number of adult apprentices hovered around 200,000. There was a gradual increase in apprentice numbers from 2007–08 and then a sharp acceleration towards the end of the decade. The total number of apprentices in England more than doubled in two years between 2009–10 and 2011–12 from 300,000 to just over 600,000. This was almost entirely driven by individuals enrolled in the disbanded Train to Gain programme being migrated onto apprenticeships (Belfield, Farquharson and Sibieta, 2018). Between 2012–13 and 2016–17, there were consistently around 700,000 apprentices each year.Since the introduction of the apprenticeship levy in 2017, the number of apprentices has declined. This cannot be solely attributed to the apprenticeship levy as other regulatory changes coincided with the introduction of the levy. However, between 2016–17 and 2021–22, the total number of apprentices fell by 16%. The overall fall in apprentices has largely been driven by a fall in intermediate apprenticeships; the number of higher or degree apprenticeships has tripled since 2016–17.

In summary, the government currently provides generous subsidies to employers to cover the cost of apprenticeship training, funded through the apprenticeship levy. Yet the amount raised through the levy exceeds the amount allocated to funding work-placed training. Since the introduction of the levy, there has also been an overall decline in the number of apprenticeships, which has mainly been driven by a fall in intermediate apprenticeships. The overall impact of this change in apprenticeship composition is unclear. The increase in the number of adults taking higher-level apprenticeships could be a positive trend. However, the reduction in intermediate apprentices may represent a decline in the opportunities for low-skilled adults.

Further education loans

The government currently provides access to loans for further education courses through advanced learner loans (ALLs). These represent a tiny fraction of public outlay on student loans: in 2022–23, the amount lent through ALLs (£124 million) was less than 1% of the amount lent through HE loans (£19.9 billion). However, the system of further education loans is set to be reformed through the introduction of the new Lifelong Learning Entitlement (LLE).

From 2025, the LLE is scheduled to replace the two existing systems of publicly funded student loans – HE student finance and ALLs. The LLE will provide individuals with financial support for four years of post-18 education up to the age of 60, which is the equivalent of £37,000 in current fees. This loan support can be used to finance short courses, modules or full courses at Levels 4 to 6.

The LLE is best thought of as a package of three reforms to the existing post-18 loan system. First, it will unify the two existing post-18 loans systems, with learners studying FE courses being offered maintenance loans like their counterparts studying at university. Second, the LLE will introduce ‘modular funding’, which will allow learners to access loans for specific modules and short courses rather than just entire courses. Third, the LLE will remove existing restrictions on accessing loan funding known as ‘equivalent and lower qualification’ rules.

Taken together, these reforms should enhance the support available to FE learners and make the existing student loans system more flexible. However, there are a number of important design details still to be confirmed. One of the main areas of uncertainty is which courses will be eligible for the LLE. The government has announced that the LLE will be available for all courses currently funded through HE student finance, but qualifications currently funded through ALLs will only be eligible if there is ‘clear learner demand and employer endorsement’ (Department for Education, 2023). This decision is still being consulted on, but it is critical to the LLE’s impact on the FE sector. The government is also yet to publish a full analysis of the likely impact of the LLE.

The continued uncertainty around the LLE is creating problems for the education sector, and could potentially cause institutions to hesitate in developing or adapting programmes in alignment with the LLE. Given that the LLE is due to be rolled out in the near future, it is essential that the government provides clarity as soon as possible.

Related content