Widely anticipated severe cuts to FE funding have not materialised in chancellor George Osborne’s spending review.

Despite government departments being told to budget for cuts of between 25 and 40 per cent, Mr Osborne told MPs that the overall budget of the Department for Business, Innovation and Skills (Bis) was being reduced by just 17 per cent.

Mr Osborne revealed that the adult FE budget would be protected in cash terms for the next four years. He also announced that sixth-form colleges would be allowed to convert to academy status. The Sixth Form Colleges’ Association has long campaigned for this ability, as it will mean colleges that convert will no longer have to fork out for VAT, which currently costs them an average of £335,000 per year.

The chancellor also announced that the apprenticeship levy would be set at 0.5 per cent of a company’s payroll bill. However, he added that companies would be given a £15,000 allowance, meaning that only 2 per cent of businesses with a pay bill of less than £3 million would have to pay.

Student loans will also be extended to more FE learners to allow them to take qualifications to develop “higher skills”, Mr Osborne added.