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The UK Department for Education has announced a last-minute cut in funding to pay for additional students at further education colleges in England this year, in another sign of looming budget squeezes across Whitehall.
Colleges will now receive only two-thirds of a top-up payment to their budgets that had been promised by the government at the start of the academic year in August, leaving principals to face tough financial choices in an already cash-strapped sector.
Elaine Bowker, principal of City of Liverpool College, said she was originally expecting to receive £2.7mn in extra funding to account for an additional 800 students the college took on for the 2024-25 academic year.
However, following an update to the original funding formula published last August, Bowker said she now expected to receive about £1.8mn, leaving a shortfall of £900,000 that would have to be accounted for by savings in other parts of the college.
In the update, the government said the “unprecedented” growth in student numbers at FE colleges was “significantly above” what had been envisaged in the budget set aside for top-ups. It added: “We will provide approximately two-thirds of the funding expected based on arrangements published in August 2024.”
The announcement said the original funding formula had always depended on affordability, and invited FE colleges with concerns over the impact of the changes to call the department’s “customer help centre”.
Bowker warned that one effect was likely to be a hiring freeze and an inability to fully fund pay awards, increasing the risk of industrial action by staff who are already paid £9,000 less than the average secondary school teacher.
“If I don’t get the promised funding in full, I probably can’t make a pay award, because I don’t want to breach my bank covenants,” she said, adding that unions for college lecturers had already issued a warning on such awards.
The amount of funding each FE college receives is calculated based on the number of students that attended the previous academic year, meaning that a sharp uptick in numbers can leave FE principals needing additional “in-year” funding to pay for the additional students.
Colleges across England are also facing increasing demand as a result of a “demographic bulge” of 18-year-olds. Bowker added that she had been forced to turn away “several hundred students” this year because of a lack of places.
Bowker said the lateness of the government’s announcement was “deeply disappointing” and made it increasingly difficult for colleges to plan.
“It’s impossible to take on that volume of additional students based on a promise of funding they made in August which they now renege on. All the risk sits with the colleges,” she said.
David Alexander, the principal of Gateshead College in north-east England, which took on 400 more students than expected this year, said a two-thirds settlement would leave the college with £350,000 less than anticipated and undermined future confidence in recruitment.
“We have already taken on those additional 400 learners, we have hired the necessary teaching and support staff and we did that on the basis that the government was going to follow through on its stated intentions from August,” he added.
The Association of Colleges, which represents technical colleges in England, warned that the government’s decisions would undermine the confidence of college heads to recruit for the next academic year.
AOC chief executive David Hughes warned that with an extra 25,000 young people expected to be looking to start college in September, the decision would increase the chances that colleges would not take the risk of providing additional places.
“We share the concerns raised by principals that, without in-year funding, colleges will have to turn many students away,” he said.
Hughes added that proper funding of FE college places was essential for the government to deliver on its manifesto pledges to build 1.5mn homes, retrofit homes to reach net zero and expand the NHS workforce.
“The spending review will be critical for all of these priorities, and college leaders will be hoping that the Treasury recognises the return on investment that comes from skills,” he added.
The government announced a £300mn boost to college funding in last October’s Budget. However, the Institute for Fiscal Studies calculated that the increase would amount to a real-terms freeze in funding per student because of inflation and higher student numbers.
College funding per student is about 11 per cent lower in real terms than in 2010 and school sixth-form funding per student about 23 per cent lower, the IFS said.
The Department for Education said the government would be spending a total of £400mn more on 16-19 education in the 2025-26 academic year, including an additional one-off grant to help with workforce retention and recruitment, in order to “break down barriers to opportunity and support our mission to grow the economy”.
Data visualisation by Amy Borrett
