National adult education budget underspends totalled almost £300 million over the last four years, figures show.
The repeated underspends in non-devolved contracts account for between 7 and 16 per cent of the total budget available each year.
The highest underspend was recorded in 2021-22 when £115 million was left over, according to a response to a Parliamentary question this week.
For the past two academic years underspends hit £80 million and £43 million respectively.
Of an overall budget of £2.6 billion between 2020 and 2024, the underspend totalled £292 million.
Alex Ford, chief executive of CT Skills, one of 55 independent training providers that won a procured AEB contract in the government’s latest tender, said underspends were fuelled by learner behaviour and demand that had “changed dramatically” since the pandemic.
He added: “Employment levels surged and learners increasingly wanted to work and learn more flexibly.
“Colleges and training providers have had to adapt delivery models to meet the demand for more flexible, modularised learning which draws down less funding than long, intensive programmes in classrooms.”
The Department for Education declined to comment on reasons behind the underspend or reveal where the funding ended up going. FE Week understands underspends are usually returned to the Treasury.
A longstanding problem
Julian Gravatt, deputy chief executive at the Association of Colleges, said “complexity and underfunding” of adult education budgets had been a longstanding problem that contributed to underspends in the 2010s.
Covid-related closures resulted in a shift to online learning, but also led to significant underspends in 2019-20 and 2020-21, he added.
No figures were released that broke down the underspend by colleges and independent training providers (ITPs).
In 2023-24 ITPs accounted for only £75 million of the adult skills fund, which was allocated to 55 providers across non-devolved areas of England. The rest is grant funded to colleges.
Complete figures are not available for devolved authorities such as the Greater London Authority or the Greater Manchester Combined Authority, which have controlled their portion of the budget since 2019.
‘Hugely disappointed’
Brenda McLeish, chief executive officer of Learning Curve Group which is taking the DfE to court over rejected bids for the 2023-24 adult education budget contract, said she was “hugely disappointed” to see the “massive” underspend.
She told FE Week: “Trusted providers delivering outstanding provision have lost out to providers who aren’t delivering.”
McLeish added she was “puzzled” by the DfE’s decision to recontract procured allocations for a second year recently “at the same quantum with the same contractors that under-delivered in previous years”.
She said colleges had “historically struggled to spend their full allocation and worked with strategic partners through subcontracting to utilise this” but the government’s 25 per cent cap on subcontracting had “restricted this and exacerbated the underspend situation”.
Skills consultant Aidan Relf said: “I’ve always struggled to come to terms with the sector complaining about the halving of the adult budget over the last 14 years when it regularly hasn’t been able to spend what it has been allocated, and that goes for the devolved budgets as well.
“My understanding is that the Treasury struggles with it too.
“The way future funding is allocated across England requires fundamental reform and this includes a return for individual learning accounts as the Blunkett skills commission advocated two years ago.”
“I’ve always struggled to come to terms with the sector complaining about the halving of the adult budget over the last 14 years when it regularly hasn’t been able to spend what it has been allocated, and that goes for the devolved budgets as well”.
Nice quote which neatly glosses over how easy it is to design race to the bottom systems that structurally prevent overspends. It’s not dissimilar to the concept of ‘kettling’!
For example, screw down funding (via a single activity matrix) with rates that don’t increase with inflation. Result: once your rooms reach capacity and you can’t physically cram any more bums on seats or heads in books, that space reaches a maximum funding capacity. The only way to ‘earn’ more funding is more rooms or fewer learning hours (i.e. increase costs or degrade learning programmes).
The goal of preventing budget overspends can be achieved in many ways, with the pruning of a funding uplift here, a simplified rule there or a little ILR tweak to frustrate trend measurement. Throw in a bit of devolution of budgets for obscurity and hey presto, finger pointing time.
The FE sector has arguably only survived on the goodwill of the workforce, by cutting staffing costs (see Schools / FE pay gaps) and the increasing prevalence of zero hour contracts.
As for individual learning accounts. If they are in any way loan funded, then we shouldn’t forgot how that structurally bakes in increases in wealth inequalities, whereby the more disadvantaged pay a disproportionately higher ‘aspiration tax’.
This is a complex issue and there were several causes of underspends in recent years including Covid related closures (particularly in 2019/20 and 2020/1), new subcontracting rules (from 2020/1 onwards), the carve-up of budgets to implement devolution (started in 2019/20), funding rates that didn’t change with inflation for years (which made some courses non viable) and a system with audit driven clawback but no funding for over performance at year end. DfE analysed the flaws with the adult funding system in the 2021 Skills for Jobs white paper and has made various changes (new funding rates, funding for over delivery, changes to allocations based on activity) which will help spend the available budget (which is getting smaller each year in real terms) effectively. There’s a further project involving 8 colleges (Project S) which is testing out further changes. And, as devolution deals continue, responsibility for running the adult funding system will increasingly be shared by DFE with Mayoral Combiner Authorities who already control two-thirds of a diminishing budget