Funded by the Nuffield Foundation
There are currently around 1.6 million people aged 16 to 18 in further education and training in England (see ‘Participation Headlines’ from ‘Participation in education, training and employment age 16 to 18’). These young people follow a variety of educational pathways that are publicly funded. Most 16–18 education takes place in school sixth forms or colleges, which together number over 2,800 institutions with approximately 2,400 school sixth forms (including academies). The funding that these institutions receive depends not only on the number of students but also on the types of courses they offer.
Of all areas of education spending, colleges and school sixth forms have faced the deepest cuts in the decade following 2010. This reflects a persistent historical trend: when overall spending increases, further education tends to receive smaller boosts, and when budgets are tightened, it often bears the brunt of the reductions. While there has been additional funding for the sector since 2019, including an additional £300 million announced in the Autumn Budget 2024, the increases have fallen short of reversing the substantial real-terms cuts experienced since 2010.
Spending per student over time
Figure 1 illustrates funding per student aged 16–18 in school sixth forms, further education colleges, and sixth-form colleges across academic years starting from 2013–14 (the earliest year available in the allocations data). For this graph and the analysis that follows, we focus on the funding allocated per student aged 16–18, rather than the actual expenditures on individual students. Actual spending can vary depending on how schools and colleges distribute their budgets across different stages of education.
Funding per student aged 16–18 has consistently been higher in further education colleges than in school sixth forms and sixth-form colleges. This is because further education college students are more likely to pursue vocational qualifications and often come from more disadvantaged backgrounds, both of which attract increased funding levels. In the 2024–25 academic year, projected funding per student in further education colleges is approximately £7,350, compared to £5,900 in school sixth forms and £5,500 in sixth-form colleges.
Between 2013–14 and 2019–20, real-terms funding cuts affected school sixth forms and sixth-form colleges similarly, with a decrease in the range of 16% to 18%. Further education colleges experienced smaller cuts of 8% over the same period. This difference is partly due to the higher prevalence of vocational qualifications in further education colleges, which have benefited from targeted funding initiatives such as the Capacity and Delivery Fund (CDF). Another factor is the decline in part-time study at further education colleges: the share of part-time students aged 16–18 dropped from 17% in 2013 to just 10% by the end of the decade. This shift has contributed to an increase in funding per student.
Since 2019, additional funding has been allocated to further education. Between 2019 and 2024, the previous government increased cash-terms funding by about £2.3 billion. However, rising student numbers and inflationary pressures mean that funding per student has not increased significantly beyond the levels in 2019–20. For the current academic year (2024–25), real-terms funding per student is about 1% higher in further education colleges and 2% higher in school sixth forms compared with 2019–20, while it is about 1% lower in sixth-form colleges. This means that funding for students in school sixth forms is 11% lower, and in sixth-form colleges 15% lower, than a decade ago. Whilst higher in absolute value than in school sixth forms and sixth-form colleges, further education college spending per student is also 5% lower than a decade ago.
Figure 2 provides a clearer picture of how per-student spending in school sixth forms and colleges has shifted over time, starting from 1989–90 for colleges (and from 2002–03 for school sixth forms) to the present, and projections to 2025–26. Due to data limitations, spending for further education and sixth-form colleges is combined into a category of ‘16–18 colleges’, and trends in expenditure are shown by financial year rather than by academic year.
Since the start of public spending cuts in the 2010–11 financial year, spending per student has declined across both types of institutions. Between 2010–11 and 2019–20, college spending per student dropped by 14%, while school sixth forms saw a much sharper decline of 28%. For colleges, this reduction brought per-student spending back to roughly the same level as in 2004–05. School sixth-form funding fell to its lowest point in the data series, which extends back to 2002.
Overall, spending per-student in 16–18 education across all institutions has increased by 4% in real terms between 2019–20 and 2024–25. Even with additional funding, levels will remain significantly below those of 2010–11. In 2024–25, funding for colleges, encompassing both further education and sixth-form institutions, is expected to be around 11% lower per student than it was in 2010–11, while spending in school sixth forms is projected to be 23% below 2010–11 levels. Thus, the increased funding from the last government only partially offsets the cuts of the previous decade.
Figure 2 also includes projections for funding levels in 2025–26. Funding is expected to rise following the Autumn Budget 2024 where the government committed ‘an additional £300 million for further education in England’. While the precise allocation of this funding has not yet been confirmed, in Figure 2 we assume that it flows through the 16–19 budget.
This additional money builds on funding for 2025–26 previously announced last autumn in conjunction with the announcement of the Advanced British Standard (ABS). Despite the ABS being scrapped by the new government, funding has already been allocated for 2025–26 to increase advanced maths premium payments and to introduce a new core maths premium. The additional money allocated for 2025–26 is just enough to maintain funding per student at the same level in real terms as the previous year. Spending per student thus remains low in historical terms in both colleges and sixth forms.
Rising 16–18 population
The number of 16- to 18-year-olds in England has been increasing since 2017, a trend expected to persist in the coming years. Between 2018 and 2024, this age group grew by 230,000, which is a 13% increase. Projections suggest a further increase of 110,000 (5%) by 2028, when the population of 16- to 18-year-olds is anticipated to peak. Between 2018 and 2028, this would amount to a total increase of around 340,000 (18%). This significant growth is creating additional demands on further education providers who must accommodate the rising number of students.
The 2025 spending review will set funding levels for 2026–27 and 2027–28. Figure 3 outlines the potential implications of three scenarios for future spending on further education and sixth forms: (1) maintaining spending per student in real terms at current levels; (2) freezing the total further education budget in real terms; and (3) freezing spending per student in cash terms. For the purposes of this analysis, further education spending refers to the funding allocated to colleges and sixth forms for educating 16- to 18-year-olds.
The number of 16- to 18-year-olds is expected to grow by 5% between 2024 and 2028, or just over 1% per year. If participation rates remain unchanged, this would equate to an extra 60,000 students in colleges and sixth forms. This would mean that the government would have to increase real-terms funding to keep funding per student constant in real terms. To maintain spending per student at the 2025–26 levels in real terms (the first scenario), the government would need to increase total funding by almost £200 million in today’s prices by the end of the spending review period in 2027–28.
An alternative scenario is the government freezing the budget for further education at the current level in real terms, which is illustrated in the second scenario. Fixing the budget in real terms would result in spending per student falling by around 4% in real terms between 2025–26 and 2027–28. Overall, spending per student would be around 14% lower in real terms than in 2009–10.
Lastly, if the government chose to freeze spending per student in cash terms, this would result in a similar trajectory to freezing the total budget, as shown in the third scenario. In particular, spending per student would fall by 4% in real terms between 2025–25 and 2027–28, which would once again leave overall spending per student 14% lower in real terms than in 2009–10. Thus, the expected growth in student numbers means that providing no additional funding would lead to sharp cuts in per-student spending over the spending review period, and even maintaining existing per-student spending levels would require significant additional funding.
College finances and staff costs
The financial health of further education colleges has deteriorated since the early 2010s (Moura and Tahir, 2024). Figure 4 presents the distribution of deficits and surpluses among colleges in England (a key indicator of financial health). Based on this measure, the financial health of the college sector declined in the early 2010s. In 2010–11, only 16% of colleges (weighted by income) were operating in deficit. By 2015–16, this proportion had more than tripled, with 54% of institutions reporting deficits, and nearly one in five colleges showing deficits exceeding 5% of their income. Although there has been some improvement since 2017, 37% of colleges reported operating in deficit in 2022–23 (the latest year for which data are available). While a single year of deficit does not necessarily indicate financial distress, 44% of these colleges had been in deficit for at least three consecutive years.
The Education and Skills Funding Agency (ESFA) financial scores, which assess colleges based on their solvency and borrowing levels, provide another measure of financial health. According to this measure, nearly one in five colleges were rated as either ‘inadequate’ or ‘requiring improvement’ in 2022–23, meaning they face significant financial risks and limited capacity to respond to challenges. This highlights the challenging financial situation that many further education providers are currently facing.
In common with the rest of the education sector, further education providers have grappled with rising costs for key inputs such as staff salaries and energy in recent years. Staff costs represent the largest expenditure category, accounting for approximately 70% of total expenditure in England’s further education colleges (Moura and Tahir, 2024), so further increases in staff costs will particularly affect the finances of the sector. In the coming years, pressures to increase staff salaries are likely to intensify, particularly in light of ongoing pay disputes and strike action across the sector (see FE Week, ‘Sixth form college teachers add 4 more days of strike action’).
College staff have experienced significant real-terms pay cuts since 2010. There have been especially sharp declines in recent years due to high levels of inflation. The median salary for school teachers is currently around £44,000, and for college teachers around £38,000. The gap in median salary between school and college teachers is now around £5,500 or 15% (Moura and Tahir, 2024). The existing pay gap is set to widen during 2024–25, with school teachers set to receive a 5.5% pay rise this academic year while the Association of Colleges has recommended a 2.5% increase or £750 – whichever is higher – for college staff this academic year (see ‘AoC pay recommendation 2024/25’). As a result, the forecast salary gap in the 2024–25 academic year is set to increase to almost £7,000 or 18% – the largest gap on record. Unlike for schools, no additional government funding has been made available to fund salary increases for college teachers, which means that any pay increase will have to be funded from existing college budgets.
It is within this context that the Autumn Budget 2024 introduced two key changes to employer taxes, which will directly affect the finances of further education providers. First, employers’ NICs will increase by 1.2 percentage points starting in April 2025, as part of a broader package of tax increases. While there is expected to be additional funding to cover these costs at the national level, the details have not been confirmed. Second, the threshold at which employers begin paying NICs will be reduced from £9,100 to £5,000 per employee until 2028. This change is likely to increase financial pressures for private providers and small training organisations, which may face additional challenges in managing staff costs.
Qualification reform
A persistent challenge for the further education sector is ongoing uncertainty surrounding the post-16 qualification landscape. After age 16, young people can choose from a wide range of qualifications and courses. In 2023, 45% of 16- to 17-year-olds were enrolled in A/AS levels, making these the most common qualifications at this stage. This has remained consistent for decades, with A/AS level participation ranging between 43% and 47% in every year. Beyond A levels, the picture becomes more complex. Around 19% of students currently take other level 3 qualifications, such as BTECs, and 15% study level 2 qualifications, often retaking their GCSEs. Additionally, 6% of young people engage in apprenticeships or other forms of training, although this figure has declined significantly, nearly halving since 2004.
Over the past two decades, England’s post-16 qualification system has experienced frequent reforms, including changes to funding and financing, as governments have sought to increase participation and steer young people towards particular qualifications. Among the most significant recent changes is the introduction of T levels in 2020, which are designed to provide a technical alternative to the traditional A level pathway. To encourage uptake, the previous government announced plans to withdraw funding from technical qualifications that overlap with T levels from August 2024. This policy would have affected funding for approximately 134 qualifications, affecting around 40,000 enrolments among 16- to 19-year-olds – representing 2% of all level 3 enrolments and 6% of non-A level enrolments at this level.
The current government has recently revised its approach to level 3 qualification reform, allowing 70% of qualifications previously earmarked for defunding to remain funded (see FE Week, ‘Revealed: Level 3 quals saved from the chop… for now’). The reduction in the number of qualifications removed from funding is likely to be pragmatic, as there is still debate about the merits of T levels. The uptake of T levels remains limited – around 20,000 students or 1.5% of all students currently take T levels. There are also practical challenges with T levels, such as the feasibility of providing the required industry placements. Before deciding whether to withdraw funding from a wider range of level 3 qualifications in the future, the government needs to address these issues to ensure that T levels can become a viable alternative on a wider scale.
The government has also recently announced that the ABS will not be going ahead (see ‘Public Spending: Inheritance’, Volume 752: debated on Monday 29 July 2024). The ABS was proposed as a new baccalaureate-style qualification for 16- to 18-year-olds that would replace A levels and T levels in a decade’s time. The ABS promised increased tuition time and additional opportunities, but it would likely have caused significant disruption and required substantial funding to deliver. Its cancellation reflects the continual cycle of qualification reforms, which often result in significant changes to the system that prevent stability and make planning immensely difficult for further education providers.