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Colleges are independent self governing organisations but they have always relied heavily on government funding. The percentage of income from public sources typically exceeds 75% but the routes it takes to reach individual colleges are complicated and keep changing. There are some important starting points:

  • Courses free at the point of use: Colleges get funding to keep education and training free or low cost for young people (aged under 19) or for adults to overcome some form of disadvantage
  • National and formula-based: A national funding formula has been used for colleges for 25 years
  • Funding is a tool of policy: Government uses funding to influence behaviour (eg. Funding is uses to ensure colleges enrol right students on the right course at the lowest cost).
  • Education activity drives funding: Who students are and what they do, affects income
  • Data: Vast data collection systems make everything work.

There are several funding systems in further education and they differ from the systems used to fund schools and universities. This diagram summarises the amounts spent nationally on different funding lines to colleges.

The income on the left hand side of the diagram includes:
  • 16-to-18 education: The Education and Skills Funding Agency (ESFA) pays colleges based on the numbers of students they are expected to enroll using national funding rates adjusted by a weighted average calculation based on their characteristics. Colleges need to offer study programmes including A-levels. Students without GCSE in English or maths at grade 4 have to resit. National funding rates were between 2013 and 2019 but were increased by 4.7% in 2020-1
  • Adult education budget (AEB): ESFA uses a different formula for adults. About half of the adult education budget has been devolved since 2019-20. AEB is used to support courses at lower levels, including English and maths to Level 2, first full level 2 and first full level 3 up to age 23.
  • Apprenticeships: ESFA is manages funding for apprenticeships. Levy paying employers get an account and contract directly with approved providers at rates determined by a formula. Colleges and providers have an allocation for non-levy paying employers using the same formula.
  • Student loans: The student Loan Company administers tuition fees on behalf of HE and FE students

The 16-18 funding formula is summarised below:


Capital Funding

Find information on this within the capital projects section.