Post-16 funding changes decoded: What the White Paper means for your budget
Following our overview of the Post-16 Education and Skills white paper, we're taking a deeper dive into the funding changes that will impact your budget and strategic planning.
12 November 2025
The Post-16 Education and Skills white paper doesn't just reform qualifications – it reshapes how education and training is funded. Understanding these changes is important for your financial planning and strategic decisions.
The funding principles
The government has set out clear expectations about who pays for what:
- Government funds: Universal education up to age 18 and support for individuals furthest from the labour market through the Adult Skills fund
- Employers fund: Education and training for their employees to increase workforce productivity
- Individuals invest: In their own upskilling through the Lifelong Learning Entitlement (4 years' worth of loan funding)
- Joint investment: Government and businesses co-invest in priority sectors identified in the Industrial Strategy
Immediate investment: 16-19 funding
The government is providing £1.2 billion of additional investment per year in skills by 2028-2029, enabling support for 1.3 million learners each year. For the 2025-26 academic year, the 16-19 budget had aready increased by £400 million. The government are planning on investing an additional £800 million in this budget in 2026-27.
Crucially, a 16-19 funding formula review will be undertaken to maximise impact, with particular attention to ensuring sufficient funding reaches critical subject areas linked to priority sectors. The aim is a revised formula in place for academic year 2027/28.
Capital investment: Building your future
We are receiving three forms of significant investment in FE capital funding:
- The new Skills Mission Fund: £200 million over the Spending Review period focusing on addressing skills shortages in priority sectors, including expanding Technical Excellence Colleges
- Capacity funding: £375 million over the Spending Review period to support post-16 capacity to accommodate additional individuals entering the system
- Estate maintenance: £1.7 billion from 2026-27 to 2029-30 to help colleges maintain estate condition, including an annual allocation rising in line with inflation
Additionally, the government will explore measures allowing colleges to secure loans from local or strategic authorities for estate improvements and innovation.
The Growth and Skills Levy
From April 2026, employers will be able to use the levy on short, flexible training courses called apprenticeship units in critical skills areas. The initial roll-out covers artificial intelligence, digital, and engineering, expanding over time to other critical skills needs.
Foundation apprenticeships are now available in priority areas including construction, engineering, health and adult social care, and digital, with employers receiving up to £3,000 per apprentice to contribute to extra support costs.
Adult Skills funding changes
The government's ambition is that public investment in adult skills will primarily flow through two channels: the Adult Skills Fund and the Growth and Skills Levy. Strategic Authorities will have a stronger role in the system. They will join up skills, work, health and transport interventions to tailor progression pathways to jobs that provide local growth.
Through the Integrated Settlement, Established Mayoral Strategic Authorities will have even greater flexibility in using funding to respond to local skills needs.
Sector skills packages
Significant targeted investment is being directed to priority sectors:
- Construction: £625 million to deliver an additional 60,000 construction workers
- Digital & AI: £187 million through the 'Techfirst' package
- Engineering: £182 million over four years, including £47 million for adult engineering skills
- Defence: £182 million including five new Defence Technical Excellence Colleges
Local areas will be a vital component in delivering these sectors skills packages and will facilitate their effective delivery.
The Lifelong Learning Entitlement
From September 2026, learners can apply for the Lifelong Learning Entitlement – 4 years' worth of tuition fee loan funding for higher level education or training. First courses will be taught from January 2027.
This introduces modular funding for the first time, initially focusing on key subjects for the economy informed by the Industrial Strategy. Maintenance loans will also increase in line with forecast inflation every academic year.
New targeted means-tested maintenance grants will be introduced by the end of this Parliament for students from lowest income households studying courses that support government missions and the Industrial Strategy, funded by a new International Student Levy.
Funding removals and transitions
As new qualifications roll out, existing 16-19 qualifications will lose public funding. Funding for qualifications 720 GLH and over in T Level areas will be removed in 2026 and 2027. However, qualifications with a GLH under 719, and new reform qualifications will remain available and be funded until V Levels are introduced.
For level 2, as completely reformed routes roll out, funding will be removed from existing qualifications in that route with no overlap period between old and new qualifications.
The government will release the new defunding list shortly, which will supersede the existing level 3 defunding list provided as part of the pause and review.
Employment support integration
Investment of £100 million over four years will expand Construction Skills Bootcamps, part of the wider £625 million construction skills investment. The Sector Based Work Academy Programme receives investment for 100,000 places this year.
Pathways to Work will guarantee specialist employment, health and skills support for disabled people and those with health conditions out of work and on benefits, backed by £1 billion a year by end of the decade.
What you need to do
- Review your 16-19 provision in light of the forthcoming funding formula review
-
Assess capital investment opportunities through the Skills Mission Fund
- Plan for qualification transitions understanding funding removal timelines
- Engage with your Strategic Authority about adult skills funding priorities
- Consider Technical Excellence College opportunities if you're in priority sectors
The funding landscape is changing significantly. Understanding these changes now will help you make strategic decisions about provision, partnerships, and investment in your facilities and staff.
We'll continue to monitor developments and provide updates as more detail emerges, particularly following the funding formula review and Spending Review announcements.
If you have questions, we’re here to help: customersupport@cityandguilds.com
Emma Leary, Director Awarding Organisation, Responsible Officer
Caroline Chessum, Product Director