The Great Divide: Decoding the Budget's £590 Million Upswing vs. Adult Skills Cuts

Date | 28th November 2025

The latest round of government announcements has painted a contrasting picture for the Further Education (FE) sector. While the 16-18 provision received a much-needed injection of funding, the adult skills budget faced notable reductions. For college leaders and finance teams, understanding the specific details of these shifts is vital for strategic planning in the years ahead.

1. A Substantial £590 Million Boost for 16-18 Funding

The most positive news for the 16-18 sector is the confirmed £590 million year-on-year increase to the budget compared to the 2024-25 financial year. This significant uplift is composed of two main elements: increased money to cover rising student numbers and a dedicated portion (£190 million) to help fund the recommended 4% teacher pay award.

This investment is directly reflected in the core 16-19 funding rate, which rises to £5,105 for the 2025-26 academic year. This 5.4% increase is above current inflation forecasts and represents a notable effort to stabilise the finances of providers serving this cohort. The Association of Colleges (AoC) notes this is a 27.6% increase over the last five years, reversing some of the long-term real-terms cuts the sector experienced earlier in the last decade. It’s a clear policy signal that the government is prioritising investment in the 16-18 cohort to address demographic increases and skills needs.

2. Adult Skills Face Cash Cuts

In stark contrast to the 16-18 uplift, the overall adult skills budget is set for a 3% cut in cash terms for the 2025-26 academic year compared to 2024-25. This means that, despite the increased focus on technical skills and retraining, the available funding for adult provision will be lower in cash terms than it was ten years ago.

The reduction applies to the DfE-managed adult skills funding, which makes up about one-third of the total budget (the rest is devolved). While the DfE has allocated an extra £20 million for Free Courses for Jobs (FCJ) to support the construction sector and confirmed the removal of the National Insurance grant from March 2026, the overall reduction signals sustained pressure on colleges’ non-16-18 income streams. Leaders must be prepared to manage the resource allocation trade-offs between a growing, better-funded 16-18 cohort and a tightening adult provision budget.

3. Apprenticeship Levy Changes to Drive Spending

The Autumn Budget also confirmed significant tweaks to the Apprenticeship Levy, which will be reformed into a 'Growth and Skills Levy' from April 2026. This is designed to ease pressure on the strained apprenticeship budget, which was recently overspent.

Key changes include removing a 10% government top-up for levy payers, halving the time employers have to use their levy funds from 24 months to 12 months, and reducing the co-investment rate for large businesses that exhaust their funds. These measures are clearly aimed at encouraging large employers to spend their levy contributions more quickly and reducing the amount of unspent money that currently reverts to the Treasury. While the move to fully fund apprenticeships for under-25s in small and medium-sized businesses (SMEs) is a welcome positive, the overall effect is a 'squeeze' that will require colleges to work even more closely with employers to ensure timely starts and completions.

The overarching theme this week is one of prioritised investment in the 16-18 learner, balanced against fiscal restraints in other areas of the FE landscape.