Budget 2024: What the chancellor announced for FE and skills

Additional funding committed to further education and apprenticeships as national insurance and minimum wages rise

Additional funding committed to further education and apprenticeships as national insurance and minimum wages rise

Chancellor Rachel Reeves delivered Labour’s first budget in almost 15 years this afternoon.

Here’s what was announced for FE and skills.

£300m for FE – but for what?

The headline funding announcement was a £300 million additional cash investment for further education.

But Treasury documents fail to say exactly what this funding is to be spent on or whether it will just be colleges that receive a slice of it.

Unions have been quick to say the funding should be used by colleges to match the 5.5 per cent school teacher pay rise for their staff, following this summer’s snub.

The Department for Education said colleges have “freedom to use the funding in the way that best suits their needs, and the government does not set their pay and conditions”.

It hasn’t however said how the £300 million will be distributed. The last additional cash injection for colleges was controversially funded through the 16 to 19 funding formula – meaning colleges with big adult provision missed out.

Colleges to get help with national insurance hike…

Reeves announced that an increase in employers’ national insurance contributions of 1.2 percentage points from April 2025 would raise around £25 billion as part of around £40 billion in tax increases.

Such a rise would likely cost colleges around £50 million a year, according to the Association of Colleges.

The Treasury has told FE Week that the Department for Education will get some extra money to help schools and colleges towards these costs.

However, the amount it will get and whether costs will be fully funded won’t be revealed until the spring.

…But private providers will be hit 

Reeves also reduced the level at which employers start to pay national insurance (NIC) from £9,100 per year to £5,000 per year until 2028. Personal finance expert Martin Lewis estimated this will cost employers who pay it an added £615 per employee per year.

The chancellor also increased the employment allowance to £10,500 and removed the £100,000 employment allowance eligibility threshold for small businesses.

Ben Rowland, CEO of the Association of Employment and Learning Providers (AELP), said the NIC announcements were the biggest area of concern to small employers.

He said his membership body is “currently modelling this so we can work out how different-sized providers will be impacted”.

Minimum wage boosts

The budget announced an 18 per cent apprentice minimum wage rise to £7.55 an hour and national minimum wage increases for 18-20-year-olds by £1.40 to £10 an hour, effective from April 2025.

Reeves also confirmed a 6.7 per cent boost to the national living wage from £11.44 to £12.21 an hour. The AoC expects this will be an added £50 million cost to colleges.

Whilst the apprentice wage increase will “ease the burden” on their cost of living, the rise has sparked concern from sector leaders who have warned it might put off small businesses from taking on apprentices.

Apprentify’s director of education Dale Walker said: “Workers deserve to be paid the fair rate for the job but without adequate support for businesses this might make SMEs hesitant to hire apprentices.”

While businesses do not pay NIC on apprentices aged under 25, Stephen Evans, CEO of Learning and Work Institute, told FE Week today’s changes could still impact apprentices starting out in their career after completing education.

“Most apprentices are paid more than the legal minimum wage, though the rises in employer national insurance contributions are likely to lead to lower pay rises for them in future years,” he said.

England’s largest apprenticeship provider Lifetime Training said the changes to employer NIC threshold, the minimum wage rises and the strengthening of employment rights will cause “continuing instability” to employers it works with in the care, retail and hospitality sector.

CEO David Smith said: “We have to be realistic about the impact this is likely to have on recruitment and investment in the skills agenda.

“The pressure will also be felt within the ITP sector, facing the same pressures as our partners and compounded by no increases in course pricing.”

£40m for shorter and foundation apprenticeships

Treasury’s documents also show the government will invest £40 million to help deliver new foundation and shorter apprenticeships in “key sectors” as part of initial steps towards a reformed growth and skills levy, set to replace the apprenticeship levy.

Both initiatives were first announced at Labour party conference in September.

It’s not clear whether the £40 million will come from the current apprenticeships budget or is new funding.

The law currently states that apprenticeships must be a minimum duration of 12 months. The policy was introduced in 2012 but some have complained the requirement is too arbitrary as apprentices can become qualified in a shorter timeframe.

It is not yet clear how much shorter the government plans to make apprenticeship duration.

New foundation apprenticeships are expected to offer training to young people who are not ready to start at level two or three.

Labour teased plans to introduce a scheme similar to traineeships, scrapped by the previous government due to low take up, in June.

FE Week understands that unlike traineeships, foundation apprenticeships will be a paid job. 

No further detail has been released on how the £40 million announced today will be spent.

More capital cash

Reeves also announced she would hand the DfE £6.7 billion in capital funding next year, a “19 per cent real-terms increase” on this year. 

Of this, £950 million will be for “skills capital, including £300 million of new funding to support colleges to maintain, improve and ensure suitability of their estate”.  

UKSPF gets ‘reduced’ lifeline

The UK Shared Prosperity Fund will be budgeted “at a reduced level” of £900 million next year.

UKSPF is a flagship Conservative post-Brexit policy that replaced European Union funding for social projects and employment schemes that was supposed to reach £1.5 billion by 2025-26.

But the Chancellor’s budget today said £900 million for next year will be a “transitional arrangement” to cover existing skills and business support schemes reliant on the fund in advance of “wider funding reforms”.

The government faced increasingly vocal concerns about the budget “cliff edge” schemes faced from March 2025, which threatened to derail many projects that had only recently been set up.

Henry Foulkes, policy and public affairs lead at the Employment Related Services Association said they are “pleased” to see the scheme continue, which will hopefully prevent “job losses and organisations closing down” in the employment sector.

UKSPF was designed to gradually increase in size between its launch in 2022 and 2025.

But complexity, cash delivery delays and rule changes have impacted many of the schemes it funds, according to metro mayors and a government evaluation.

LLE delayed again

The Lifelong Learning Entitlement (LLE) has been delayed again (full story here).

Today’s budget pushed back the student application window and course start dates by 12 months but did not explain why.

Students now won’t be able to apply for an LLE student loan until September 2026 for courses starting in January 2027.

This is the second time the government has delayed its introduction. 

£240m to ‘Get Britain Working

The government will soon publish a white paper setting out how it will spend £240 million on getting 2.8 million people back into work, partly by better signposting them to skills programmes.

The ‘Get Britain Working’ white paper will outline ways to tackle long-term sickness, support young people who are ‘not in education, employment, or training’ (NEET), and help people to develop their careers.

£240 million funding will be divvied out to mayoral combined authorities to “streamline” local services and 8 ‘trailblazer’ areas across England and Wales to test out early interventions of ill health.

Extra cash will be also given to existing programmes to create eight youth guarantee trailblazer areas which aim to support young people at risk of becoming NEET.

Devolution

From March next year, two ‘trailblazer’ combined authorities, West Midlands (WMCA) and Greater Manchester (GMCA), will be given a consolidated “single flexible pot” of funding to spend on their local priorities.

Devolved mayors say this will unlock more funding and extra flexibilities for their local skills provision.

In line with a ‘deeper devolution deal’ agreed with the government in 2023, WMCA and GMCA will have the first “integrated settlements” in 2025-26.

But due to its “unique devolution arrangement”, the Greater London Authority will fall behind the two trailblazers and only has a government commitment to “explore” how the capital could follow with equal flexibility in 2026-27.

Despite this, London Mayor Sadiq Khan called the budget “historic” and praised the government for “working with us here in the capital, not against us”.

Several other combined authorities are also set to follow the trailblazers with their own single settlement from 2026-27: Liverpool City Region, North East, West Yorkshire and South Yorkshire.

The West Midlands believes the deeper devolution deal will equal “hundreds of millions of pounds” more for the region.

The mayoral combined authority will have to agree a “streamlined, overarching, single” accountability framework with the government that includes specific targets for five “pillars” including skills and net zero, and local growth and place.

This will mean the government should treat it as a “single government department” with certainty over funding agreed at each spending review.

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