Listen to this story Members can listen to an AI-generated audio version of this article. 1.0x Audio narration uses an AI-generated voice. 0:00 0:00 Become a member to listen to this article Subscribe Colleges should be funded based on whether students move into jobs or further training rather than simply how many enrol, Alan Milburn has suggested in a landmark review of Britain’s growing NEET crisis. The former Labour health secretary said the post-16 system rewards “headcounts not outcomes”, incentivising colleges to prioritise recruitment and retention over sustained progression into work. His interim review, commissioned by ministers to investigate why one million young people are not in education, employment or training (NEET), argued the institutions designed to support young people into adulthood are “no longer fit for that purpose” and called for a “whole system reset”. The report estimated the annual economic cost of around one million NEET young people at £125 billion, which is more than Britain spends on education each year. Around one in eight 16 to 24 year olds are now classed as NEET. Only Romania records a worse youth NEET rate in Europe. Today’s publication from Milburn is an interim diagnostic report, with final recommendations expected later this year. Qualifications no longer enough Milburn said the evidence does not point to a single cause of the NEET crisis, but to a wider failure of the state to support young people into work. He argued that schools, colleges, the NHS, welfare agencies and employers operate in silos with no shared accountability for whether young people successfully make the transition into work. Four in ten NEET young people now hold qualifications at A Level standard or above, while 15 per cent have degrees. More than one in five hold a level 3 qualification. But employers are still “not absorbing them” into the labour market. “The first rungs on the old career ladder have weakened,” Milburn wrote, describing a jobs market in which entry-level work has become scarcer, recruitment less human and more automated, and employers increasingly reluctant to take risks on inexperienced applicants. He said the apprenticeship system, which “ought to be one of the main routes” to bring young people into work, has drifted away from young people “who need them most” – with starts for dropping by over 40 per cent after the apprenticeship levy was “captured” by employers upskilling existing workers rather than bringing in new ones. Six in ten NEET young people have never had a job, up from four in ten in 2005. The report also found that almost 60 per cent are now economically inactive, meaning they are not actively seeking work. Milburn rejected suggestions that younger generations are unwilling to work. Survey work conducted for the review found that 84 per cent of NEET young people wanted a job, education or training opportunity. ‘Post-16 cliff edge’ The review paints a bleak picture of an education system that “produces qualifications but does not guarantee transitions”. It described the post-16 skills landscape as not just “underfunded”, but “confused, fragmented and designed around institutional convenience rather than the needs of the young people navigating it”. Milburn identified a sharp “post-16 cliff edge” after the age of 18, when local authority tracking responsibilities through the raising the participation age policy largely fall away and no institution has responsibility for young people who disappear from education and work. “The system loses young people not because they vanish but because no one is looking,” the report said. The review also warned that further education has been “hollowed out” by a decade of real-terms cuts, while employer investment in training has declined and repeated policy changes have fragmented the skills system. Careers guidance is described as “a statutory duty without enforcement”, while work experience remains “haphazard”. Make colleges accountable for outcomes Milburn said colleges are operating within a funding system that actively discourages growth. College funding for 16 to 19 education is largely based on the previous year’s recruitment, meaning providers must often fund growth themselves before allocations catch up in later years. Funding is also reduced when students fail to complete courses, making learners at higher risk of dropping out “financially risky” for colleges seeking to expand provision. The report said these rules limit colleges’ ability to offer flexible, roll-on provision for young people who become NEET during the year. Milburn contrasted this with higher education, where student numbers are uncapped and funding follows demand. Labour market participation must be a “core objective” in both the school and college system, he argued. “Schools are measured by exam results, not by whether young people end up in work. Colleges are funded for enrolment, not for sustained destinations,” he wrote. “The education system knows who will struggle. It knows at age five. It knows again at age 11 and then at age 16 too. It has the data, the evidence and the research. It has had them for decades. “What it does not have is the architecture, the funding or the accountability to act on what it knows.” The report concluded that the education and skills system is “designed to produce qualifications rather than working adults”. “Until colleges are funded for outcomes not headcounts, until the post-16 cliff edge is bridged and the young people the system loses are the young people it works hardest to hold, the tail of failure will persist,” Milburn wrote. David Hughes, chief executive of the Association of Colleges, said colleges already help “thousands of young people into jobs” despite not being measured on employment outcomes. He added that colleges could do “even more” if funding allowed them to continue supporting students after they entered work. However, Hughes warned that using job outcomes as a funding metric was “fraught with difficulties” because labour markets vary significantly across the country. A spokesperson for the Sixth Form Colleges Association said the priority should instead be “getting the fundamentals right”. “That means raising the rate, providing more certainty on funding, slashing bureaucracy and providing colleges and schools with the autonomy they need to ensure that students receive the right level of support,” they said. Milburn: Funding outcomes is entirely possible Milburn launched his report at a London press conference today, where he told FE Week an outcomes-based funding system for colleges is both necessary and achievable despite major regional differences in labour markets. The former social mobility adviser acknowledged reforming education’s incentives, inspection and accountability framework would represent “quite a big change” – but argued it is overdue. “This is one of the things we really need to think about as we move into the next phase of this review,” he said. Milburn said members of his review team are “actively talking to mayors and local authorities” because “labour markets are local”, arguing decisions about skills provision must be shaped by those who understand local economic demand. “We know where the shortages are, where the deficits are, and unfortunately over recent years the funding and support simply hasn’t been there,” he said. He argued the current system places too little emphasis on destinations and long-term outcomes. “You get your five good GCSEs, the school gets a tick-in-the-box and passes Ofsted. But if 30 per cent of those young people end up NEET, is that really a good result? I’d say it’s a bad result. “We’ve got to change the incentive system, the inspection system and what schools and colleges are accountable for.” Milburn added: “We’ve got to find new mechanisms to put this right, I believe that’s entirely possible.”
Josh Thorne 28 May 2026 I’m not convinced that moving to an outcomes-only funding model for FE gets to the root of the issue. Outcomes matter — but the research is clear that outcomes-based funding alone has repeatedly failed to move the dial on credential attainment. Evidence from the US, where OBF models have been most extensively studied, shows that these models have had little to no effect on overall attainment without significant accompanying reforms. That should give us pause before treating funding redesign as the primary lever. The deeper problem is attribution. Colleges can invest heavily in high-quality education and preparation, but employment outcomes are shaped by factors well outside their control — local labour market conditions, employer hiring practices, and the availability of structured entry routes. Holding providers solely accountable for results that are genuinely co-produced with employers and the wider economy risks systematically penalising colleges in areas where progression opportunities are hardest to secure — typically the communities that need strong provision the most. What’s largely absent from this debate is a serious conversation about employer responsibility. In Singapore, the SkillsFuture model has built a genuine ecosystem of shared investment — with government, training institutions, and employers each playing a defined role. Notably, employers are expected to co-develop programmes, provide structured work-study opportunities, and invest in ongoing workforce development. That model has shown measurable results in employment stability and career progression. It isn’t perfectly transferable to the UK context — Singapore’s scale, governance model, and tripartite labour structures are distinct — but the principle is sound: skills development that stops at the classroom door is unlikely to produce sustained labour market outcomes. If we introduce outcomes-based funding without addressing the employer side of the equation, we risk creating a system that rewards colleges in high-opportunity labour markets and penalises those serving disadvantaged communities — not because of differences in teaching quality, but because of differences in local economic conditions. The shift needed is one of shared accountability: Colleges for the quality of education, preparation, and learner support Employers for meaningful entry routes, structured progression, and in-work development Government for the incentives, labour market infrastructure, and alignment that make the other two possible Redesigning the funding model without addressing the system it sits within doesn’t fix the problem — it relocates it.
Steve Hewitt 29 May 2026 Well that’s a significantly better argued and sourced post than I was going to make and which I agree with whole-heartedly!
R Singh 28 May 2026 The government has spent years making it increasingly expensive and bureaucratic for employers to take a chance on young people, particularly those without experience. Colleges have stepped in to fill that gap, often becoming the only realistic route into skills, qualifications and employment for many learners. Now the proposal seems to be to shift funding away from the training itself and tie it more heavily to employment outcomes — outcomes that are influenced by far more than just the quality of teaching. Local labour markets, employer confidence, transport, economic conditions, learner background and regional opportunity all play a major role. If colleges are expected to absorb more financial risk without the wider system changing, the likely outcome is obvious: tighter budgets, fewer staff, larger class sizes and increasing pressure to prioritise “safe” recruitment and outcomes over supporting those furthest from employment. That risks creating exactly the opposite of what the sector exists to do. Everyone wants strong progression into work. Colleges already measure themselves on it. But if government genuinely wants better employment outcomes for young people, it also has to look honestly at the barriers employers face in recruiting and developing entry-level talent, rather than placing ever more responsibility onto already stretched colleges.
Anon 29 May 2026 Colleges may think they effectively measure themselves on progression into work – but if that were the case it’s unlikely we’d have such acute workforce shortages in many occupations. There is a vast difference in an employment outcome for the learner and an employment outcome for an occupation or industry. Colleges and Ofsted set their focus too narrow, purely on the learner, and view any employment outcome as wholly positive. If you train 100k people for occupation X but they end up in occupation Y – you haven’t addressed the workforce shortage. Poorly conceived KPI’s are sometimes worse than no KPI’s, as they can breed false confidence. Having said that – I agree that outcome based funding is unlikely to work. The country’s thinkers need to break out of the austerity mindset. People aren’t a unit of cost, they are an investment. Ignore that and you get societal fragmentation, polarisation and ultimately unrest.
Tony Allen 29 May 2026 Two points: I note a reluctance by colleges to be paid on outcomes……I wonder why? That would make life a little too challenging perhaps! However the real problem is the cost of employing a young person. If you want to solve the NEET problem then you have to reduce the cost of emoyment. Here’s a radical solution. For 16-24 year olds: 1. Abolish all NI costs. 2. Subsidise wages on a decling scale from 16 -24. 3. Pay for this by halving benefit rates for this age group.
R Singh 29 May 2026 Tony, I think that rather misses the reality facing further education. Colleges are not reluctant to be challenged. FE is already one of the most scrutinised and performance-managed sectors in education. Funding, achievement rates, attendance, retention, progression, Ofsted, employer satisfaction and financial health are all monitored closely. The bigger issue is that colleges are increasingly being asked to solve labour market problems that they do not control. If outcomes-based funding is the answer, why is FE already struggling to attract and retain the very people needed to deliver those outcomes? Colleges have no pay parity with industry, making it difficult to recruit experienced professionals into teaching. FE lecturers are also typically paid around 10% less than school teachers despite facing many of the same challenges. The attrition rate for new FE teachers remains stubbornly high, suggesting there is already plenty of challenge in the system. The risk is that tying more funding to employment outcomes simply penalises colleges operating in areas with weaker labour markets or supporting learners furthest from employment. Faced with financial pressure, providers may be forced to focus recruitment on those most likely to progress quickly into work, rather than those who need the greatest support. I do agree with your second point. If government is serious about tackling youth unemployment and reducing NEET numbers, it needs to address the cost and risk of employing young people. Colleges can prepare learners for work, but they cannot create jobs or remove the barriers employers face when hiring.
anon 29 May 2026 It’s about time there was a level playing field across the post-16 sector. For years, Independent Training Providers have operated in a system where funding is heavily linked to learner achievement, progression and successful outcomes. If learners leave early or fail to achieve, there are direct financial consequences. Yet colleges continue to receive the majority of their funding based on participation, regardless of the eventual outcomes. If outcomes matter, then accountability for those outcomes should apply consistently across the sector. At the same time, perhaps we should also look at how providers are inspected. ITPs are often judged against criteria and expectations developed around a college environment, despite delivering predominantly employer-led, workplace-based learning. Nobody is asking for lower standards, but there should be greater recognition of the different operating models. If we’re serious about fairness, then funding, accountability and inspection should all reflect the realities of the provision being delivered, while holding every provider to the same high expectations for quality and learner success.
Andy Forbes 30 May 2026 An excellent report from Alan Milburn – a forensic dissection of an issue that’s been with us for years, though now much worse in scale. But let’s stay real. I’ve been Principal of four FE Colleges: the reality on the ground is that FECs are trying to balance conflicting demands on them. In my long experience schools, youth agencies, probation services etc are desperate to get less academically motivated young people onto skills courses, and colleges will do all they can to get them the qualification, driven by success rates targets. So if 100% pass, are they ready to go into a job? No, not very often. Because many of them lack essential employment skills – punctuality, communication, commitment – smoke weed, are on their phones all the time etc etc. The same applies to many of those who achieve Level3+ qualifications, even degrees. The focus should never be just on skills training for NEETs, but on character building, employability skills and motivation, which most employers see as just as important as technical skills. That requires highly skilled teachers and mentors, and enough funding to provide the extra hours of personalised support NEETs typically need to rebuild their confidence. This support should continue to be offered by providers in the first year of a new job, on a day release basis. Outcome funding is not the answer: extra funding for those at risk of being NEET most certainly is.
Karen Redhead 1 June 2026 “Back in the day”, the justification for the different rates of funding for 16 and 17 year olds and those young adults aged 18 and above, was that the latter had already benefitted from two years of state funded education and training. I’m not sure that was even true then and it certainly isn’t now. A young adult designated as NEET does not require less support than a well-qualified 16 year old school leaver – they require more. So the funding for 18-24 year olds needs to be re-examined. Whilst taking a trip down memory lane, I also remember being involved in a big NEET project, around the time of the September Guarantee and those wonderful 14-19 area-based groups. The research we undertook was to help us develop Risk Of NEET Indicators (affectionately dubbed RONI). It was sobering to realise that many of the young people who had indeed become NEET could have been predicted to become so BEFORE THEY WERE EVEN BORN. Not everything was as rose-tinted as my nostalgia might suggest, but parts of the system were then stripped out at the start of the coalition’s austerity measures. And anything that smacked of the former Labour government (including NEET, 14-19 Diplomas, September Guarantee, Connexions etc) was removed from the vocabulary. I do believe some good work was being done and of course there are consequences when resources are pulled. Regarding Outcomes Payments, I believe this was a fleeting reference in an otherwise extensive report. Outcomes payments don’t work in a sector that is strapped for cash. Nobody can afford to pay upfront costs that may or may not be recovered down the road.
Richard 1 June 2026 Most of our work in FE is socialisation and general education even for students in specific courses. Few of the hair and beauty students ended up in that sector. But the courses engaged them and they developed as people, academically and matured. An outcomes basis will choke funding and cause FE colleges to go to wall. That will make mass unemployment and detrimental effects explode. There are no jobs, so it’s messing with the wrong part of the sausage factory. There are millions of jobs that need doing from care, health, education, construction, transport, insulation fitting, etc better to enable young people to get a useful job they can develop themselves in still further. Many will switch industries a few times in their twenties anyway until they find their niche. Young adults 19-24 and middle age returners and especially women need a few years of college to get out of the house and into careers. Supporting them unlocks whole families. Not rocket science. We need funds to support more intake not caps turning students away, government needs a job creation scheme. The main issue is a results focused system has made courses boring and tied us in knots teaching. We could do more with some creative license. Access courses were great for this. Lewisham college did some really innovative work years ago to map Access to 14-19 as an alternative to A-level. It was a brilliant move and was much better to prepare students to study at university or go into work. Apprenticeships sound great but who has ever met a student that did one and got anywhere. It’s mostly just a cash cow and headline grabber. Compulsory maths is a nightmare with most failing and courses not fit for purpose. Fe teacher, teach maths to young and adults.
Iain Elliott 1 June 2026 I have some empathy with FE Colleges on this one!- we are an ITP that delivers apprenticeship so its absolutely in our interest to get kids into jobs. HETA is a job broker as well as a training organisation. This just smacks of central government passing another problem down the line that they’ve caused. The only way you can get performance related funding into FE is if you pay them more money so they can set up bigger employer engagement/job brokerage teams-its really expensive to get people into jobs. Government needs more intelligent and pragmatic solutions. They talk about this massive welfare bill for NEETs so why not use what would go into welfare to pay for the young persons salaries? Increase the incentive payments, give tax breaks etc….. Because the Civil Service would come up with loads of reasons not to do it. We’re here because; They made it more expensive to recruit a young person. Political ideology and plain dogma have been a cause of this problem. Employers are getting screwed on costs inc energy, NICS etc. The irony is that here in Humberside, our forward labour market forecasts for engineering and manufacturing vacancies is eye watering. As a provider we are over subscribed with applications and like other parts of the North, our region has a load of NEET’s. It’s a perfect storm for skills that with the right enabling, could be sorted for long term benefit.
anoni 2 June 2026 Outcomes are already very important to colleges but they aren’t solely responsible for them. Local labour markets, economic conditions and learner background are all important factors. A funding system using outcomes as a basis will fund economically thriving areas more than deprived areas. It will similarly better fund providers focused on level 3 and above provision, those students are more employable and more likely to go to university. A sixth form colleges outcomes simply aren’t comparable to a general FE college (having worked at both). If you were to base a system on reducing NEETs you likely need the inverse of the proposal. Better fund colleges (or areas though economic development) with a high number of NEET’s. Provide funding to support 18-24 year olds into employment. Why are government measures always a stick for not performing rather than a carrot to boos performance. Consecutive governments seem to have no clue how tight FE funding is or what restrictions they have put in place hampering our ability to upskill young people and work with them dynamically. The current 16-18 classroom funding system of planned hours has become convoluted as the government saves a penny at the cost of a pound. Here are some of the limitations to the funding: We must provide 580+ timetabled (effectively actual) hours to receive full funding for a student on an individual basis. This doesn’t allow us to reduce hours on a student in need of little support and increase it for those that do. It also makes it difficult to evidence more ad-hoc support put in place that doesn’t fit a weekly timetable. The exam period usually in the second year of provision is in May and June reducing available teaching weeks for provision. This further pressures provision time when funding is annual. It also doesn’t appreciate we have to pay the teachers anyway. 18-19 year olds receive reduced funding because they MAY have had funding already. How that helps them out of NEET I have no idea. There is no incentive to recruit older students that may already be NEET even 17 year olds on a two year course will get reduced funding in year 2. 19-23 year olds can only receive free classroom based funding if they don’t already have a “full” level 3, regardless of relevancy or it actually being what others see as a full level 3. Apprenticeships are available but not always appropriate. Again not helping NEET. Also I find this hilarious: “He argued that schools, colleges, the NHS, welfare agencies and employers operate in silos with no shared accountability for whether young people successfully make the transition into work.” So we are going to blame FE and cut their funding if they aren’t performing to the new KPI of the day.