Funding

A guide to the high needs funding system

High needs funding

The high needs funding system was introduced in 2013/14, a year prior to the Act. A high needs student is defined as a young person who requires additional support costing over £6,000.

There is a close but not 100% correlation between those students with EHC plans and those who attract high needs funding.
Almost all students – about 3,000 – in specialist colleges fall into the high needs group.

Funding components

The high needs funding system has the following components:

  • Element 1 is the basic funding formula.
  • Element 2 is £6,000 of support
  • Element 3 is additional (top up) funding to pay for further support costs.

E1 and E2 are paid directly to colleges by the EFA, each using a different data set to determine numbers; colleges will therefore have different E1 and E2 allocations. These two elements are called place funding, not linked to individual students. E3 is paid by the local authority agreeing the placement with the college.

Negotiating fees

report prepared for Natspec by acl consulting makes some suggestions for good practice that Natspec member colleges might adopt when negotiating student placements with local authority commissioners.

Natspec Funding Report

Read the report.


Report on good practice.

The main purpose of the report is to set out a systematic approach to programme pricing that should help ensure the fees charged to local authority commissioners by colleges are sufficient to cover their reasonable operating costs, including the significant fixed costs (management and other central staff, premises, utilities, etc.) that do not directly relate to an individual student’s programme.

The report does not recommend particular fee levels, or specify funding approaches, such as banding. There is no (implicit or explicit) recommendation that fees may be or should be increased from levels previously set. Instead, the suggestions in the report are a useful check for Natspec colleges that their proposed fees do indeed match their college’s costs, in time to make any adjustments, either increases or decreases, which may be necessary.

Funding resources

The Education Funding Agency publishes an operational guide each year which describes how the funding system works:

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