Chancellor commits to supporting over one million young people into training and apprenticeships while boosting innovation funding.

Chancellor Rachel Reeves today unveiled a transformative £1.2 billion annual investment in training and upskilling young people, promising that the Spending Review will provide funding for skills, including to ensure 1.3 million 16‑19 year‑olds can access high‑quality training opportunities.

Major Skills Funding Boost

The substantial commitment represents a significant boost for the further and higher education sector, with the Chancellor stating the investment will ensure young people’s “potential, their drive and their ambition is frustrated no longer.”

Record R&D and AI Investment Package

The skills funding announcement formed part of a broader innovation and education package that will see research and development funding elevated to a “record high” of over £22 billion per year by the end of the Spending Review period. Additionally, the government has allocated £2 billion specifically for its AI Action Plan, overseen by the Secretary of State for Science, Innovation and Technology (DSIT).

Speaking during the Spending Review announcement, Reeves emphasised the government’s commitment to “backing our innovators” while addressing the critical skills gap facing the UK economy. The Chancellor positioned the investment as central to unlocking young people’s potential and addressing long-standing challenges in skills provision.

Impact on FE and Training Providers

For FE and training providers, the £1.2 billion annual commitment signals a major opportunity to expand apprenticeship programs and vocational training pathways. The scale of the investment suggests the government recognises the crucial role of post-16 education in driving economic growth and addressing skills shortages across key industries.

Benefits for HE

The HE sector will also benefit significantly from the record R&D funding commitment, which exceeds £22 billion annually. This represents a substantial increase in research capacity and positions UK universities to compete more effectively on the global stage for talent and innovation projects.

AI Action Plan Funding

The AI Action Plan funding of £2 billion further reinforces the government’s commitment to emerging technologies, creating opportunities for both FE and HE institutions to develop cutting-edge programs and partnerships with industry.

Addressing Critical Skills Challenges

The announcements come at a critical time for the post-16 education sector, which has faced funding pressures and calls from Skills England for increased investment in skills training to meet employer demand. The commitment to supporting over one million young people into training and apprenticeships suggests a significant scaling up of current provision.

Further details on how the £1.2 billion annual investment will be distributed across different training pathways and institutions are expected to be released in the coming weeks as the government works with sector partners to implement the new funding arrangements.

Sector Reaction

University and College Union (UCU) general secretary Jo Grady said:

“While additional science and technology research funding is welcome, it is long overdue and will do little to avert the wider crisis in our universities.

This spending review is yet another missed opportunity to invest in further education and meet the country’s skills needs after years of funding cuts, job losses and falling pay. We need more investment so the sector can recruit and retain the staff needed to deliver on the government’s ambitions.

“Labour must invest properly in the public sector if it is to reap the rewards of renewal. Otherwise, it risks letting Reform’s politics of division in through the backdoor.”

Andy Insley, CFO of Advania UK, said:

“Productivity is now top of the agenda, and tech is central to that evolution. The shift to AI is happening, but it’s not instant. We often hear broad statements about technology driving efficiency, but those claims can feel vague and intangible. The introduction of AI agents is changing that by making the benefits much more concrete and visible.

We applaud more AI in the education sector. Early public sector AI usage was much more experimental and lacked clear use cases. The use of AI Agents changes everything. Typically projects start with a little app which solves one small problem. Once Government leadership teams see what is possible, adoption speeds up to private sector levels.”

Natalie Perera, Chief Executive of the Education Policy Institute, said: 

“Today’s announcement signals a significant cash increase in school funding. However, given that the overall budget is rising by £4.7bn in cash terms only by 2028-29, once inflation is considered, this increase leaves less flexibility for schools than they might have hoped.

“Although we will see some savings over the next three years as a result of falling pupil numbers, much of this funding has already been earmarked for existing commitments – such as the recent announcements of the teacher pay award, and the extended entitlement to free school meals. Moreover, the distribution of funds remains uncertain. With the current formula tied closely to pupil numbers, many schools in areas of falling pupil numbers may still see falls in overall budgets. The government must consider how funding is targeted, ensuring it reaches the schools and pupils who need it most.

“The most pressing challenge is the crisis in special educational needs and disabilities (SEND) provision and today’s settlement doesn’t appear to leave adequate funding to deliver the much-needed reforms in this area. Reforming SEND provision will require investing in highly trained support staff, adapted learning environments, and consistent, high-quality training for teachers across all schools. 

“The government has made the right decision to increase funding for post-16 providers to meet the growth in student numbers, and to focus on areas where economic growth is most needed. However, it is disappointing that there has not also been a commitment to provide new and targeted funding for disadvantaged 16–19-year-olds. 

“It is also challenging to consider the impact of education funding, without clear commitments to also address child poverty. The Government must prioritise publishing a child poverty strategy and this should include funded commitments, including removing the two-child benefit cap, that will genuinely lift children out of poverty.” 

TUC General Secretary Paul Nowak said:

“After over a decade of Conservative chaos, rebuilding and repairing Britain was never going to be easy – but this Government is on the right track.

“The much-needed cash injection into the NHS and schools will be vital to help fix our public services after years of Conservative austerity, and an important boost for the workforce.

“Funding for key infrastructure like Sizewell C, transport and decent homes is how you secure good jobs and deliver industrial revival up and down the country.

“But after more than a decade of Tory neglect, investment in all public services will need to be sustained in the years ahead to deliver national renewal.

“And ministers must rethink welfare cuts which will hit many disabled workers and make it harder for them to access work.”

Neil Carberry, Recruitment and Employment Confederation (REC) Chief Executive, said:

“The government is correct when it says that only growth can right the fiscal balance and fund our public services. You can’t tax businesses into growth – especially when those firms need to be investing. Any spending commitments made today rest on the backs of the future success of British business.

“Today’s announcements get us halfway along the track. Investment in transport has a big effect, boosting workforce mobility, bridging skills gaps, and driving productivity. Commitments to long-term energy, technology and green investments matter because they give firms certainty to invest behind stable government plans. But we need to go further, addressing public service productivity and prioritising public spending and government action to those areas where it can make the biggest difference. The government’s commitment to planning reform is a great example of where bold action now, that is not watered down, would make a huge difference to future Chancellors.

“The missing piece of the puzzle in all this, is delivery. Despite talking about the need for a deep pool of talent, there was little on workforce today – yet we know this is the critical part of getting where we need to go without further tax rises. And not just on skills – where the prospect of apprenticeship levy reform is exciting but we await practical details. The upcoming Industrial Strategy is the opportunity to do this – dealing with workforce development as an economic essential, not only an employment rights issue. Across the country, REC members are helping build power stations, renovate our railways, drive British manufacturing and invest in our defence. Proper partnership with the sector to deliver a workforce strategy that meets the needs of the mid-21st Century will be essential.”

Zoë Billingham, Director of IPPR North said:

“Treasury’s old school spending style has for too long rigged decisions against our regions; today’s Spending Review starts to rewrite the rules.

“The introduction of place-based business cases and the clear recognition of where things are made and who makes them both matter. Doubling down on transport investment and extending bus fare caps are very welcome; pan northern rail will be the next frontier of investment in regional growth. Game changing housing investment will anchor this growth.

“Voters expect to see change, and one of the most tangible things they feel is the services councils deliver. Multi-year settlements and real terms spending increases for local authorities are a step in the right direction, ending annual cliff edge chaos.”

WEA Chief Executive, Simon Parkinson reacted to today’s Spending Review speech: 

“It was particularly galling that the only mention of lifelong learning in today’s Spending Review speech was as the set up for a joke. 

The additional investment in schools and 16–19-year-old training and education was welcome but lifelong learning does not stop at 19.  

By overlooking adult education in the Spending Review, Treasury has dashed opportunities for people to progress into work, improve their mental health and strengthen their communities.  

New research from the WEA, the UK’s biggest adult education charity, shows that adult learning has an impact on all these measures. But with no additional investment earmarked today, it will be those who most need support who will miss out.  

No funding for community-based Tailored Learning means that adults with low qualifications or in the most disadvantaged areas will be the ones left without courses. This impacts their life chances as well as holding back the Government’s plans to support people back into the workforce, tackle the mental health crisis and promote more cohesive communities. 

There have been a few rays of hope in recent weeks – such as the welcome inclusion of adult learning in the Plan for Neighbourhoods – but Treasury has not capitalised on these initial investments by setting out a vision for the future of adult learning and skills.  

There is one more chance for Government to get it right in the promised strategy for post-16 education and skills later in the year. We look to this to put genuine all-age lifelong learning at the heart of renewal and growth.” 

Rachel Harrison, GMB National Secretary, said:

“The public sector funding announced in today’s spending review looks enormously positive – a new chapter.

“GMB will always welcome extra cash for the NHS, while fresh money for the police, prisons and probation is something we’ve long called for, along with funding for school buildings and mental health provision in education.

“But, as ever, the proof will be in the pudding as to whether this is enough money  – and if it ends up in the right places.”

Paul Whiteman, general secretary at school leaders’ union NAHT, said:

“The news that the education budget appears to have been at least protected is welcome, particularly in light of other spending decisions being announced today. Education ministers have clearly made a strong case for protecting school spending in the context of a difficult overall spending review and should be congratulated for that.

“That being said, this is not a time for celebration, and it is clear that school budgets will remain under considerable pressure for some time to come. In light of ever-increasing costs, we are already seeing signs of schools having to make cutbacks, including to staff numbers. We also know that some of the increase in funding will be absorbed by the increased free school meal costs schools will be facing after last week’s announcement.

“There is no escaping the fact that despite the funding announced in this statement, schools will be operating in a challenging financial climate for some years to come. The demands being placed on schools are constantly increasing and are expected to increase further, with the government wanting to see more pupils with special educational needs (SEND) educated in mainstream classrooms.

“As part of the welcome schools white paper due this autumn, we urge ministers to put forward a clear plan and set of proposals for the future of SEND provision in this country, and stand ready to work with the government on the details.

“It is positive that the Chancellor recognised that many school buildings are unfit for purpose after years of under-funding under previous governments, and the increases in capital funding announced today are welcome. However, it is clear that much more investment is going to be needed to restore the school estate to at least a satisfactory condition after years of neglect under previous governments, with the National Audit Office estimating the cost at an eye-watering £13.8bn.”

David Hughes CBE, Chief Executive, Association of Colleges said:  

“It is good to see post-16 education and skills feature in this Spending Review, with clear areas of investment that we asked for in our submission earlier this year. We made the case that investment in skills, through colleges, is central to achieving economic growth and breaking down barriers to opportunity as well as delivering across the government’s missions.

“It is therefore positive that HM Treasury has recognised the growing numbers of young people we estimate will be in post-16 education over the next few years with an increase of £1.2 billion to the 16-18 budget. However, the 65,000 extra 16-18 places will only just keep up with population growth, so the budget may not be sufficient if the improving participation we have seen in recent years continues. 

“We need to know more to have a balanced view of this Spending Review, with little information at this stage on adult skills or plans for growth in other sectors to match the construction plan. This month’s industrial strategy and the forthcoming skills plan may address the issue and there is mention of a skills workforce plan for defence. We would like to see workforce plans for skills in all of the priority sectors, including health. The announcement sets out increased investment in employment support, but at this stage it is unclear how much of this will support skills development for young people who are not in education, employment or training and for adults who are on benefits or inactive.

“College leaders will be relieved that there are no more obvious cuts to adult spending, but will be disappointed that their biggest challenge of low pay for college staff will not be helped by these announcements. College pay lags a long way behind schools and industry, hampering colleges from being able to deliver on the government’s missions. 

“The Spending Review announcements are high-level, so I look forward to understanding more of the details in the coming days. More than anything else, we hope that this will allow the Department for Education to make longer-term plans for further education and skills in the coming months. I would like to see early discussion about how DfE plans to achieve its 5% savings and efficiencies target, in order to dampen fears that colleges might be facing any further cuts in the coming years.”

Daniel Kebede, general secretary of the National Education Union, said: 

“It is a constructive decision by the Secretary of State to appoint Christine Gilbert as the new Chair of Ofsted.   

“Her independent learning review highlighted that meaningful and genuine change to how Ofsted operates is required to address the acute stress that school inspection causes.  

“It is a significant step that Christine Gilbert has been appointed Chair, given the damning report that she produced about Ofsted’s defensiveness and intransigence.  

“If Ofsted produces its final plan in September but ploughs ahead to start inspections under the new system from November, this will drive a sense of panic.  

“Martyn Oliver needs to slow down and be transparent about what the consultation has shown.  

“Imposing a new model on the profession and failing to offer adequate time to digest what is now required, is simply unfair. With teacher and leader retention still at such challenging levels, this is reckless.    

“The NEU is calling for a delay to school inspection reforms until September 2026 and proper consultation to get change right.” 

Julia Harnden, Deputy Director of Policy at the Association of School and College Leaders, said:

“We welcome the small real-terms increase in the core schools budget that has been announced today. However, schools are already having to make significant cuts and the spending review announcements will not change that situation in the short-term and won’t be enough to reverse this situation in the longer term either.

“This additional funding does not include colleges and sixth forms and we are particularly worried about the financial sustainability of this vital sector. We look forward to seeing the government’s strategy for post-16 education and skills later in the year. This sector is terribly underfunded and this must be addressed if sixth forms and colleges are to play a central role in this strategy.

“The capital funding commitment is welcome as far as it goes, but it will not be enough to make significant inroads into the huge backlog of repairs and maintenance across the school and college estate because of many years of underfunding.

“There is also a major challenge in terms of reforming the SEND system to ensure it is sustainable in the future and delivers the support that children and young people need. The government will need to ensure there is sufficient funding in place to deliver these reforms.

“We recognise that the national finances are tight but this spending review doesn’t go nearly far enough and we really need the government to treat education as a vital strategic investment.”

John Barneby, CEO of Oasis Community Learning, said:

“At Oasis, we witness every day how community-led, wraparound support can change lives. We are really pleased to see the Government reflect this in their commitment to further investment in core school budgets and local communities. We now encourage them to ensure our most vulnerable young people will reap the benefits of this impending support.

“If we truly want to ‘renew Britain’, we must fully invest in every member of the next generation. Right now, schools and communities are being stretched to breaking point— grappling with the growing SEND crisis and deep-rooted causes of child poverty.

“We urge the Government to consider this when further equipping our schools and empowering our communities. Only then can we ensure that every child has the opportunity to thrive.”

Dr Joe Marshall, Chief Executive of NCUB said:

“We welcome the Government’s ongoing recognition that research and innovation are at the heart of sustainable economic growth. The headline commitment to an £86 billion R&D budget over four years is critical. Our analysis shows that every £1 invested in research leverages an additional £4 from business in the long term — generating profound economic, social, and cultural benefits for the UK.

“The Spending Review shapes not only the scale of funding for research, innovation, and skills but also its strategic direction. We applaud the pledge to extend R&D impact across the whole UK — notably through the new Local Innovation Partnerships Fund in England and reforms following the Green Book Review. The guidance for developing Local Growth Plans in England rightly references the critical importance of involving local businesses, higher education providers and bodies such as UKRI.”

“The allocation of the £86 billion research budget reveals important priorities. The substantial increase in defence-related R&D spending — rising from £1.7 billion in 2025/26 to £2.4 billion in 2028/29 — signals a shift in the research landscape that will have significant implications for the kinds of projects funded.”

“While the commitment to R&D funding is welcome, it is vital that key risks within the research and innovation system are addressed. UK universities play an indispensable and multifaceted role but continue to face severe funding pressures. The Chancellor’s acknowledgement that our universities are a national asset was encouraging, yet proper, sustained investment is essential to enable universities to drive UK innovation and progress forward.”

Stephen Evans, Chief Executive at Learning and Work Institute (L&W), said:

“We welcome confirmation of previously announced rises in employment support for disabled people, which can make a real difference. We’re also pleased to see the Chancellor highlight the importance of skills, and to see funding of extra 16-19 places to meet demographic demand. Yet there doesn’t appear to be much, if any, extra funding for adults to improve their skills. Whereas we know that when adults learn, our society and economy thrive.

“The Chancellor faces tough economic and fiscal conditions and is right to prioritise. That raises the importance of broader action to raise employer investment in training, and to better join up programmes so they have a bigger impact. 80% of our 2035 workforce have already left compulsory education, and skills funding in England has been cut by £1 billion since 2010. Details on the Growth and Skills Levy, and any plans to help employers reverse the 26% fall in their spending on training since 2005, will also need to wait for a skills strategy later this year.”

Professor Karen Stanton, Vice-Chancellor, University of the Arts London (UAL), said:

“Whilst we welcome the Government’s previous commitments to the creative industries alongside today’s recognition of the vital role universities play in research and development, at University of the Arts London we have long called for an education system that truly recognises the value of creativity. Creativity isn’t a ‘nice to have.’ It’s fundamental to the UK’s global success, to training the workforce of the future and to ensuring that everyone, no matter their background, can experience the joy and opportunity it brings.

Without meaningful investment in creative skills and a recognition of the growth-driving potential of creative research and development, the government risks undermining the very ambitions it has set out for the forthcoming industrial strategy.

We look forward to the publication of the industrial strategy, the creative industries sector growth plan and the post-16 education and skills strategy, which we hope will contain further details about the Government’s plans to properly support the creative industries and the skills pipeline.”

Ann Watson, CEO of Skills Charity Enginuity, said:

“Today’s Spending Review sends a welcome signal of government support for the UK’s priority industrial sectors, with significant investment announced for clean energy, defence and transport. This increase in capital investment will help create demand across the UK’s industrial supply chains, providing SMEs with a confidence boost to realise the Government’s ambitious economic and decarbonisation goals. With fiscal parameters now in place, the crucial next step is a comprehensive Industrial Strategy that provides clarity, detail and meaningful policies to set a concrete vision for the future of UK industry.

“Enginuity is also pleased to see the Chancellor acknowledge that achieving growth requires investment in skills, with an injection of £1.2 billion of additional investment per year by 2028-29 into the skills system. Its impact will depend on allocation and execution and will no doubt hinge on further details due to be announced in the forthcoming post-16 strategy”. 

Petra Wilton, Policy Director at the Chartered Management Institute (CMI), Said:

“The Spending Review’s inclusion of dedicated funding for the upskilling of the UK’s young people through apprenticeships recognises the needs of employers to have access to a pool of new talent, while also improving the life chances of young workers regardless of where they live. 

“Part of that upskilling will also need to include a pathway for those early in their working lives to progress, including the chance to gain management and leadership skills. Firms that invest in their future leaders benefit from both improved productivity and better retention rates.  Our research tells us that trained managers are more likely to pay it forward, invest in their teams and create a culture of continuous improvement. We look forward to hearing more about the Government’s plans for upskilling workers at every age and stage of their working lives in the coming months.

“The construction sector is a great example – many workers in the industry take on line management duties within the first two years on the job – new investment in their management skills right from the very start will make a measurable difference in what their teams can deliver.

“The Chancellor’s plans to inject significant new funding into the UK’s AI adoption across both public and private sectors is especially welcome. We also know that reaping the rewards of new technologies will require skilled and innovative leadership at every level and we look forward to supporting this initiative.”

Ben Rowland, CEO at the AELP, said:

“While it is too early to tell what the exact ramifications of the Comprehensive Spending Review are for skills, I am concerned at how little skills has been mentioned given it is fundamental to growth and getting people into secure jobs. I welcome the extra funding to support increased numbers of 16-19 year old FE students, but we need clarity about medium term apprenticeship funding and adult skills funding. While more detail will undoubtably follow in the coming days, all eyes will now be on the government’s post-16 strategy to make sure the money invested in skills is spent well”

Petra Wilton, Policy Director at the Chartered Management Institute (CMI), said:

“The Spending Review’s inclusion of dedicated funding for the upskilling of the UK’s young people through apprenticeships recognises the needs of employers to have access to a pool of new talent, while also improving the life chances of young workers regardless of where they live. 

“Part of that upskilling will also need to include a pathway for those early in their working lives  to progress, including the chance to gain management and leadership skills. Firms that invest in their future leaders benefit from both improved productivity and better retention rates.  Our research tells us that trained managers are more likely to pay it forward, invest in their teams and create a culture of continuous improvement. We look forward to hearing more about the Government’s plans for upskilling workers at every age and stage of their working lives in the coming months.

“The construction sector is a great example – many workers in the industry take on line management duties within the first two years on the job – new investment in their management skills right from the very start will make a measurable difference in what their teams can deliver.

“The Chancellor’s plans to inject significant new funding into the UK’s AI adoption across both public and private sectors is especially welcome. We also know that reaping the rewards of new technologies will require skilled and innovative leadership at every level and we look forward to supporting this initiative.”

Alison Morris, Director of Policy, Skills Federation, said:

“We welcome the investment in sectors in the Spending Review including in AI, creative industries and the substantial investment in nuclear which includes the commitment for an additional 1,500 apprentices. To fully realise the benefits of this investment, it is essential to prioritise the development of a robust talent pipeline, ensuring we have the skilled workforce needed to deliver infrastructure projects, harness the potential of AI, and drive innovation across sectors.

“A well-funded, fit-for-purpose skills system is critical to achieving these goals. We welcome the announcement of additional funding for post 16 education and training and look forward to further details on how and where this investment will be deployed to best respond to the needs of industry. We would urge government to ensure that this includes a focus on upskilling and retraining the existing workforce, as well as supporting young people into the labour market.”