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IFS - Big budget cuts and salaries well below those in schools: England’s colleges continue to be neglected
This report sets out the financial state of colleges in England since 2010 and analyses the key future challenges they face.
Financial pressures have drastically reshaped the further education landscape in England. Since 2010, the number of colleges has dropped from 348 to 218, mainly due to mergers prompted by financial strains. Even those colleges that remain have been forced to cut costs, reducing the range of courses offered and scaling back capital investment.
Total college income has fallen by a third in real terms since 2010, driven in part by cuts to public funding. Between 2010/11 and 2022/23, funding received by colleges for 16–19 education dropped by nearly a quarter, and adult skills funding was cut by more than half.
With the Autumn Budget approaching, the government faces a pivotal choice about the future of the college sector. New skills initiatives, such as the creation of Skills England, aim to boost growth, but they will fall short if colleges lack the capacity to deliver. An urgent review of funding is essential to ensure that colleges can manage rising demand and tackle the widening pay gap with schools.
A new report by IFS researchers analyses the financial state of colleges since 2010 and highlights the key future challenges faced by colleges. The analysis covers all colleges in England, including further education and sixth form colleges. In the 2023/24 academic year, these colleges collectively educated 1.6 million learners, including 925,000 adults and 661,000 students aged 16–18.
- The financial health of colleges worsened significantly in the early 2010s, with the share of institutions in deficit rising from 16% in 2010/11 to 54% by 2015/16. While there has been improvement in recent years, 37% of colleges were still in deficit in 2022/23.
- For many colleges, these deficits have been persistent. Among colleges reporting a deficit in 2022/23, 44% have been in this position for at least three consecutive years, often relying on borrowing and emergency funding to cover their financial shortfalls.
- Nearly half of college teachers leave the profession within three years of starting, partly due to the pay gap between college and school teachers. In 2023/24, the median salary for school teachers was around £44,000, compared with £38,000 for full-time college teachers – a difference of £5,500 or 15%.
- The pay gap between college and school teachers is set to widen to nearly £7,000 or 18% in 2024/25 – the largest gap on record. Unlike schools, colleges have received no additional funding for salary increases, meaning that any pay rises will need to come from existing budgets.
- The number of 16- and 17-year-olds in England is projected to grow by 110,000 (or 8%) between 2023 and 2028. Simply to maintain current per-pupil funding levels for 16–19 education in real terms, the government would need to increase total funding across colleges and school sixth forms by £400 million by 2028.
Imran Tahir, IFS research economist and an author of the report, said: ‘The government’s focus on economic growth and workforce skills is clear, but for these plans to work, colleges need the resources to be able to deliver the high-quality education that the economy needs. For over a decade, colleges have faced serious financial challenges – overall income has fallen by over a third in real terms since 2010. With the number of 16- and 17-year-olds growing and college teacher pay falling further behind school teacher pay, the need for a funding review is urgent. Colleges have long been overlooked, but the upcoming Budget will be a critical moment to decide whether to invest in their future or expect them to continue making cuts.’