ESFA to close in March 2025

The government’s education funding agency will be closed down next year, the education secretary has announced.

The Education and Skills Funding Agency will be “integrated into the core Department for Education” by the end of March 2025.

The move will happen over two stages and give education providers a “single point of contact for financial management and support”, government said.

The ESFA is currently an executive agency of the Department.

Schools financial support and oversight functions will transfer from October 1 and be brought together with the regions group, nine areas overseen by regional directors.

“This will provide a single seamless voice to schools and ensure that financial improvement is central to school improvement,” education secretary Bridget Phillipson said today.

Funding and assurance functions will be centralised on March 31 when the ESFA will close.

“Moving the agency functions back into the department will bring benefits to the individuals and organisations we support as well as to the taxpayer,” Phillipson added. “It will enable a single, joined-up approach to funding and regulation to improve accountability.

“We will be working closely with our staff, unions, stakeholders across the education sector to finalise and deliver our plans for closing the agency.”

Move will result in ‘some efficiencies’

Set up in 2017, the ESFA is responsible for delivering and assuring £75 billion of funding for 25,000 education settings – making it one of the biggest funding operations in government.

As of July, 736 staff worked at ESFA. 

DfE expects 95 per cent of ESFA staff to be retained. All staff will be able to stay within the wider department, if they choose.

Despite “not being the driving factor”, the move will result in “some efficiencies”, they added.

However the department would only say: “We can’t give an exact figure at this point, but it’s a small cost saving.”

The agency had already had a huge restructure after a review by Sir David Bell in 2022. The body was stripped of wide-ranging policy functions and lost half its staff.

ESFA is the second education-related quango to get the axe under the new Labour government. The Institute of Apprenticeships and Technical Education is expected to close by April with some functions transferred to Skills England, which is currently being set up.

A source close to the ESFA told FE Week that the agency’s closure was not a “surprise” but warned how “professional” funding and audit functions can “become problematic” and “less independent” if staff get “too close to the department’s policy making machine”.

They said: “ESFA as an arm’s-length body also created independence from the accounting officer and ministers. When difficult and unpopular funding decisions were made it was always helpful for a minister or permanent secretary to say, ‘well, my arms body is responsible for that, it’s not my business’. That was always why big departments liked having their funding functions external to them as a department. That arm’s-length protection will now be lost.”

‘A fully joined up regulatory environment’

ESFA chief executive David Withey said moving the agency’s functions into the DfE will “help ensure a fully joined up regulatory environment, and a more cohesive approach to the service we offer to colleges, schools and independent training providers”.

He added: “I am proud of the achievements of the ESFA – delivering timely and accurate funding, positive support to providers in financial stress and strong assurance to taxpayers on how their funding is used. That has been driven by the quality of our people, and I am really confident that our strong performance will continue as part of the department.”

The announcement has been welcomed by Ben Rowland, chief executive of the Association of Employment and Learning Providers, who said bringing operational funding and compliance closer to policy and strategy “should be a positive move”.

He added: “This change is also an opportunity to remove regulatory duplication, an increasing concern for AELP’s members. That said, this is not a fundamental change, and audit and compliance should continue as normal.”

Specialist college body Natspec said combining SEND policy and high-needs funding officials “can only be a good thing”.

Natspec chief executive Clare Howard said the ESFA closure “creates an opportunity for a more cohesive discussion about reform of the high needs funding system, improvements to the market entry system for specialist colleges, and appropriate levels of audit for specialist providers.”

David Hughes, chief executive of the Association of Colleges, said: “The work of the ESFA is often under-estimated and taken for granted; on the whole payments to colleges go very smoothly and this is testament to the hard work the ESFA staff do day in, day out. I’m sure that will continue after this structural change.”

He added: “I am broadly supportive of this decision by the Department for Education, and I hope that these changes bring efficiencies and can allow for a simpler funding system for colleges. As public sector institutions, colleges are forced to spend too much of their time dealing with multiple funding lines, rules and regulations which get in the way of effective learning and skills. Strong work has already begun to simplify this system, and that must continue through these changes.”