College leaders have warned millions of pounds must now be diverted to fund thousands of extra learners after ministers “betrayed” the sector with a real-terms funding cut.
The Department for Education this week confirmed the national funding rate for 16 and 17-year-old learners would rise only 0.5 per cent in academic year 2026-27, from £5,105 to £5,133.
The move broke a pledge made in October’s post-16 education white paper which said there was “significant investment” available to maintain “real terms per-pupil funding in the next academic year to respond to the demographic increase in 16 to 19-year-olds”.
Principals told FE Week they could be forced to re-evaluate course provision for high-needs students, facilities expansion and staff pay awards to find money for unfunded learners.
Sudden increases in student numbers are financially risky for colleges due to the DfE’s “lagged” funding model, which allocates cash based on the previous year’s enrolments. When numbers surge, colleges must absorb the cost unless there is in-year growth funding.
No growth funding was announced this week, and in previous years it was limited due to affordability issues.
‘Betrayal’
The government’s recent £800 million cash injection will be swallowed up by the estimated 20,000 extra 16 to 18-year-olds who entered colleges in autumn, according to the Association of Colleges (AoC).
The AoC said there are around 32,000 learners currently at college who are unfunded.
The white paper pledged an annual £1.2 billion of additional investment in skills by 2028-29 to recruit FE teachers and “respond” to the demographic increase.
Julian Gravatt, AoC deputy chief executive, said: “The DfE calculation that there will be a 1.6 per cent [average per-student] increase shows that this promise hasn’t been kept, and right now, there is a lack of information on the overall budget.”
University and College Union general secretary Jo Grady said the rate increase amounted to a “betrayal”.
“Just six months ago, in his keynote speech to Labour conference, the prime minister pledged that improving further education would be the “defining mission” of his government and promised to inject hundreds of millions more into the sector,” she said.
Bill Jones, chief executive of Luminate Education Group, said the news was “disappointing to say the least”, adding that colleges were expecting a rise of around 2.5 per cent “given previous promises that ministers made of real-terms increases per pupil”.
Real-terms drop
This week’s announcement marks the lowest increase since funding rates were frozen in 2021-22. Last year, the DfE applied a 5.4 per cent above-inflation rise to the rate.
Imran Tahir, senior research economist at the Institute for Fiscal Studies, explained the marginal uplift would result in a real-terms funding decrease for colleges’ 16-to-19 income.
Analysis by the IFS found real-terms funding per student aged from 16 to 18 fell by 14 per cent in colleges between 2010-11 and 2019-20.
Increased funding in the last six years has only partially reversed earlier cuts, and per-student funding in 2025-26 remains around 8 per cent lower than in 2010-11 in real terms.
Tahir added: “It’s difficult to know definitively what’s going to happen to funding rates next year. In previous years there have been top-ups later in the year that have changed the picture for 16-to-18 funding.”
The IFS had previously called for an extra £150 million by 2028 just to maintain per-student spending in real terms.
No top-ups expected
Guidance documents published this week did not specify details of any additional funding to support significant enrolment increases.
The DfE expects to notify 16-to-19 providers of their in-year top-up payments to accommodate this year’s estimated 20,000 extra 16-18 students by the end of this month.
College chiefs told FE Week they were drawing up budgets on the assumption they won’t see any in-year growth funding.
Tony Lewin, executive principal of one of the country’s largest college groups, NCG, said due to funding lagging by one year, it would constantly be playing catch-up.
“We know next year will be the same again and again. It’s a sunk cost. You’re not able to recover that in the short term,” he said.
“We’ve still got a lot of ground to make up to get back to where we were just before austerity around 2009.”
He claimed NCG had over 500 unfunded learners in its colleges, representing a £3.6 million shortfall.
Lewin has funded learners using money that would have otherwise been invested in facilities and resources.
NCG also faces staff-related pressures from the 30 to 50 per cent premium of hiring agency staff due to struggles in recruiting permanent employees.
In the East Midlands, student numbers at Nottingham College have grown by a third in four years to over 8,000 students this year, but 1,300 students are unfunded, incurring a cost of £10 million.
“We have not been paid anywhere near the full amount in-year,” said Andy Comyn, chief financial officer at Nottingham College.
The college was paid for half of its extra learners in 2022-23 and the following year, but this dropped to one third for the next two years.
Nottingham College CEO Janet Smith said: “Not only have we had to address that deficit ourselves from within the rest of the budget, but it also positions FE very unfairly compared with HE and schools, both of which are fully-funded for their growth.
“It’s another example of FE being disadvantaged relative to other parts of the education sector.”
Smith told FE Week the shortfall was squeezing its headroom for staff pay awards.
“We would like to pay our staff more and we can’t.”
Meanwhile, Jones was optimistic that a “guaranteed and generous” in-year top-up was on its way.
“I would be cautious of expressing too much anger about this week’s announcement because of that optimism I have that the £800 million will be distributed in a slightly different way. We need to wait to see the full picture,” he said.
However, Luminate fears it could have costs of around £2.4 million from unfunded learners, creating difficulties with cash flow.
“It feels like all of our funding streams are under pressure,” Jones added.
Pressures on high-demand courses
Matthew Butcher, vice principal of commercial, skills and partnerships at New College Swindon, said his big worry was the knock-on effect of pressures to non-core subjects.
“If we have a lot of students that need to retake GCSEs, then that puts pressure on our English and maths teaching, which then knocks-on into adult English and maths capacity,” he explained.
Butcher added the college will feel the “biggest pinch” to accommodate around 200 unfunded learners with high needs but without EHCPs, which carries high operational costs.
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