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Funding Challenges in FE and How to Address Them

24/07/2023 minute read OneAdvanced PR

“Staying on Course in Turbulent Times”

The education sector is no stranger to turbulent times. The continuing impact of the pandemic, rising rates of inflation and the soaring cost of living crisis combine with the aftermath of Brexit, an ongoing war in Ukraine and a charged UK industrial relations situation, to create a highly dynamic environment for all providers.

Many learning providers survived the Covid-19 pandemic using technology to transform their methods of online and blended delivery, and progress reviews. It may be argued the pandemic accelerated changes that were already underway, as learning providers were seeking ways to increase learner engagement, reduce costs and drive greater efficiencies using new technology. One additional demand on resources has been the need to support learners and staff with health and wellbeing issues, as levels of anxiety, stress and mental health problems proliferated during and since the pandemic. Learning providers have had to bear this on-going draw on resources and invest in services and support to develop the resilience needed by their learners and staff.

Regulatory Changes
The Skills and Post-16 Education Act (2022) represents a significant change in regulation in further education (FE) the skills sector, and many learning provider organisations are still working their way through the impacts. For example, the Accountability Agreements for FE and adult education providers mean that they have to focus on meeting the skills needs of a wide range of learners. One move that is being broadly welcomed is the introduction of multi-year funding allocations that will help providers with longer-term planning and budgeting, enabling more secure investment strategies.

The rollout of Local Skills Improvement Plans (LSIPs) is now underway across all 38 LEP areas, following the initial eight ‘trailblazer’ pilots. This employer-led model will have impact on funding and accountabilities in the entire FE and skills sector with a focus on provision of skills training in response to local and employer needs.

So far, devolution is proving to be a double-edged sword. On the positive side it has brought greater flexibility to help deliver skills training in response to local needs, giving providers more discretion around investment. It has however also highlighted inconsistencies in demand and provision and made things particularly difficult for national providers who are providing adult skills learning in multiple locations around the UK. For example, due to the flexibilities and discretions between devolved authorities, it is possible that either the rates of funding for the same training delivered in different parts of the country or the conditions for eligibility of learners to fully funded learning can vary.

With relevant government ministers in post since October 2022, they are still getting to grips with a number of partially implemented policies, as well as the commitments of the November and March Budget statements. The former brought a commitment of another £2.3 billion to schools with no increase for colleges or other skills providers. The latter budget included some additional funding for capital, and for the programmes such as skills bootcamps and sector-based work academies, all of which were welcome but still do not address the need to raise the funding rates for adult learners. At the same time, the new Office for National Statistics (ONS) reclassification for FE colleges, subjecting them to new requirements around financial controls and management. Each change to legislation and responsibility has an impact on management resources, reporting and available funding for the FE and skills sector.

Digital Strategies
Digital solutions are important for helping organisations optimise the available funding. For example:

  • Providers can continue to develop and invest in digital solutions than help them review all aspects of the learner journey, from engagement to progression and final assessment. This technology enhances the learner experience, helping keep them engaged to the very end of their course.
  • Focus on business improvement techniques, applying them to all processes in order to optimise efficiency and enhance delivery and outcomes. Digital tools can drive this, with higher productivity giving all staff the opportunity to focus more on their important day-to-day purpose and less on repetitive, time-consuming tasks.
  • Teaching digital skills is an important focus in the curriculum, but some learning provider organisations are not investing enough in training their own staff to use and make the most of these powerful techniques.
  • Employ more robust procurement procedures, for example, with awarding organisations to ensure best return on investment.
  • Continue investment in new technologies as part of digital transformation for more innovative and engaging interactions with learners, staff, employers, and all stakeholders. For example, technologies like artificial intelligence (AI), virtual reality (VR) and augmented reality (AR) can have significantly positive impacts on learner attraction and onboarding, teaching and learning, careers guidance, and post-course feedback.
  • Data also provides valuable insights into what works and what doesn’t, for more informed planning, forecasting, and budgeting.

Provision Strategies
Using digital tools can certainly help providers make the most of the funding they have, but there will be a fundamental need to rebase provision in the future, and reengineer the way that courses are delivered and supported accordingly.

  • Some providers may choose to focus on the 16-18 year-old study programmes that are likely to be the most stable and reliable funding stream.
  • Another strategy for FE and skills providers might be to focus on the full-funded entitlements in the Adult Education Budget (AEB) and for low-waged learners, ensuring that courses such as first full Level 2 and 3, and English, maths and digital functional skills, will make up the highest proportion of their allocation.
  • Among those providing apprenticeship training, many are already reducing the number of standards they offer. While this strategy responds to priorities and increased funding as set out by the government, for example, skills shortages in industries such as construction, it does also narrow choice and potentially restricts the opportunities and outcomes for learners. There may also be wider implications of driving greater provision of courses that address current and anticipated needs to the detriment of some other popular ones not prioritised in this way.

What’s next?
In actual cash terms, there has been a real terms reduction in funding for adult classroom learning which has been reflected in the decline in adult participation and the loss of 1 million adult learners since 2010. This reduction in participation is worrying considering that many adults still lack the numeracy, communication and digital skills required for the world of work and beyond.

Beyond addressing unemployment, FE budgets must be available to fund additional training and upskilling for individuals already in work. There remains a significant disparity between the numbers of employable people with low basic skills and the high rate of unfilled job vacancies. Adult skills funding must be increased to attract more people back into education, with provision of evening classes and other solutions that allow them to stay in work and earning a wage, while developing skills for a future career in a skills shortage sectors, such as adult social care and the construction trades.

Funding reforms must also not fall into the trap of concentrating on Level 3 and above, to the detriment of Level 2 and below. These are the foundation level skills that many learners require to succeed in the workplace or as a basis for further study through the higher levels. This will help to ensure that education funding is truly fit for purpose and reflects the needs of every single learner, employee, and potential employees in the community.


For more insights into some of the challenges facing FE colleges and skills providers in England, check out our Funding Fundamentals Content Hub, with a collection of webinars dedicated to funding within Education.