DfE consolidated annual report and accounts: 2024 to 2025 (HTML version)

Question 1

1. Performance report

Accepted Answer

1.1 Secretary of State’s foreword

It is a privilege to present this year’s annual report and accounts.

This has been a year of change for the Department. Together with my ministerial team, I joined as Secretary of State back in early July last year. I said on that first sunny afternoon that it was the proudest day of my life, because I knew that this department has the power and the responsibility to improve the lives of millions of people.

Since that day we’ve got on with our mission to break down the barriers to opportunity across the country. The focus has firmly been on delivery, on making a difference for children, for parents and for every learner in the land.

That starts in the earliest years of life. Giving every child the best start in life is my number one priority. That’s where I know we can have the biggest impact on life chances. So I’m delighted that this year we’ve made big strides towards that goal. We’ve begun rolling out our school-based nurseries, we’ve delivered the largest ever uplift in the early years pupil premium and we’ve started our free breakfast club programme, funding 750 early adopter schools to test and learn ahead of national rollout.

We’re driving high and rising standards across all our schools so all our children can achieve and thrive. To get stuck schools moving forward we’ve introduced brand new regional improvement for standards and excellence (RISE) teams. These teams, made up of top experts, are now expanding into more than 200 schools to reach over 120,000 children. We’re also working to boost inclusion. In March 2025, I announced £740 million of investment to create 10,000 new places for pupils with special educational needs.

Our action spreads beyond schools too. We’ve launched Skills England to bring together the fractured skills landscape and boost the nation’s skills. New changes to apprenticeships will mean that every year up to 10,000 more apprentices can qualify and move into well-paid careers. For our universities, we’ve taken important decisions to put them on a firmer financial footing, so that they can continue to deliver excellence for generations to come.

We’ve worked closely with other departments this year too because that’s central to mission-based government. In particular, we’ve forged ahead with the Child Poverty Taskforce, which I co-chair with the Secretary of State for Work and Pensions. We’ve been listening to people with lived experience and gathering the views of experts, the private sector and civil society, as we have developed our long-term Child Poverty Strategy.

I’m so proud of what we’ve done so far to lift the life chances of this country’s children and young people. The achievements contained in the pages of this report really matter. They play out in classrooms, nurseries, children’s homes and lecture halls across the country.

So I want to say a huge thank you to the entire Department for all their hard work, passion and expertise – and for making me feel so welcome right from that first day. I’d also like to thank my fantastic ministerial team for their hard work and support over the last year.

But I know that this Department achieves nothing without our wonderful workforces, our teachers, our support staff, our children’s social workers, our early educators, our lecturers, our leaders and every last person connected to this Department’s mission. So I want to thank them too – for all they do, day in, day out, to make such a difference in the lives of so many. I am truly grateful.

Rt Hon Bridget Phillipson MP Secretary of State
11 July 2025

1.2 Permanent Secretary’s foreword

Over the last year we have acted decisively to deliver better life chances for all. I would like to thank our schools, colleges, nurseries and social work teams, employers up and down the country, as well as colleagues in the Department and across government for their dedication in rising to meet the challenge with us.

Economic growth is the number one mission of this government. We play a central role across this mission, co-leading the people pillar (see Our vision for more information on our missions and the associated pillars). Our programmes are critical for this mission, including driving essential skills solutions in close partnership with Skills England, as well as through childcare reform and entitlements that influence the labour market. Other work, such as our pipeline of construction projects across the education estate, bring improvements to education and create growth across the country.

The Department has lead responsibility for the opportunity mission, which reflects our key values of delivering better life chances for all and breaking the link between background and success.

In October we confirmed that our priority, as set out in the Plan for Change, is to achieve 75% of 5 year olds reaching a good level of development in the early years foundation stage assessment by 2028, and I am proud that delivery is well underway. We are on track to deliver the childcare entitlement rollout, with 480,000 active users of the working parent entitlement offer in May 2025. We have started the delivery process for new and expanded school-based nurseries and delivered the largest ever uplift in early years pupil premium, increasing rates by over 45%, to make sure the most disadvantaged children are accessing the high-quality early years education they need.

To set every child up to achieve and thrive, we have established RISE teams and are expanding from an initial 32 schools to more than 200 schools, reaching over 120,000 pupils. We’ve also started work on the universal RISE support that will give every school access to best practice on key areas like attendance. Pupils attended schools over 3 million more days this autumn and spring compared to last year, a really encouraging sign of progress. It is vital that we keep building on this to tackle the stubborn rise in absences since the pandemic and help every child to thrive in school. More widely, we have launched an independent expert-led curriculum and assessment review, and committed to new Ofsted report cards, providing a more detailed picture of school performance in the future. We’ve started our free breakfast club programme, funding 750 early adopter schools to test and learn ahead of a national rollout.

To create skills for opportunity and growth, we have established Skills England, announced the growth and skills levy and secured £40 million for shorter duration and foundation apprenticeships in key sectors. We have also announced £600 million worth of investment to train up to 60,000 learners in the construction industry and, as announced in the Get Britain Working White Paper, we have secured investment in 8 youth guarantee trailblazers. Meanwhile, we’ve seen apprenticeships completion rates markedly improve.

To improve family security, we have launched the Child Poverty Taskforce, chaired jointly by our Secretary of State and the Secretary of State for Work and Pensions, a great example of how we’re working in partnership across government to progress towards common goals. We’re also delivering children’s social care reform, including through key measures in the Children’s Wellbeing and Schools Bill, such as a single unique identifier to stop vulnerable children falling through the cracks in services.

Underpinning all of this we are working to ensure that the Department continues to evolve and become an ever more productive, agile and innovative department, so we can focus our effort and resources on what matters, giving children and learners the best life chances. Over the past year, we have reduced the size of the Department whilst simultaneously increasing employee engagement. We have simplified systems and processes and invested in learning and development. As part of this, our support for our own apprentices, who make up more than 5% of our workforce, has won us Investors in People’s ‘We invest in apprentices’ Platinum accreditation, Gold membership to ‘The 5% Club’ and made us a Top 100 apprentice employer.

As I look to the year ahead, I look forward to working with colleagues to progress the vital work of all the missions and deliver on the Plan for Change. I recognise the challenging fiscal environment we are operating in, which puts a premium on us thinking hard about how we deliver the best possible outcomes for what’s being invested in education, skills and care. I welcome the opportunity to explore ways to enhance our effectiveness and efficiency, placing greater emphasis on innovation and technology to transform the way we work across the system. This includes leveraging data and digital tools, such as AI, to improve outcomes both inside the Department and across the whole system. I am also enduringly grateful for the passion, commitment, innovation and dedication of colleagues across the Department, who make me proud every day.

Susan Acland-Hood
Permanent Secretary
11 July 2025

Question 2

2. Overview

Accepted Answer

This section provides an overview of the Department for Education’s (the Department’s) responsibilities for the 2024 to 2025 financial year, including our strategic outcomes, key risks, the sectors we serve and our performance against agreed targets.

Throughout this annual report and accounts (ARA) we use the following terminology:

Department, to mean the core department
Agencies, to mean our executive agencies, either individually or collectively
Non-departmental Public Bodies (NDPBs), to mean our non-departmental public bodies, whether individually or collectively
Group, to mean the single economic unit comprising the Department, Agencies and NDPBs, which is the focus of this ARA
the Department’s financial years to 31 March are written as ‘2024 to 2025 financial year’, whereas academic years are written as ‘2024 to 2025 academic year’, ending on 31 July (colleges) or 31 August (academy trusts)

2.1 Our operating model

We are responsible for children’s services and education, including early years, schools, further and higher education policy, apprenticeships and wider skills in England.

We work in partnership with:

childcare providers
local authorities, dioceses, academy trusts, further and higher education providers and children’s services organisations
professionals in the education, children’s services and health service sectors
Ofsted and Ofqual

How we are structured

The Department for Education is a ministerial department supported by a number of executive agencies and NDPBs which make up the financial reporting group reported on in this ARA. The non-ministerial departments we work with are excluded from this ARA because they are not part of the Departmental Group.

The Department’s strategic responsibilities and priorities are divided into 6 operational units each led by a director general. Each of the Department’s Agencies or NDPBs report their performance through one of these operational units. More information on our operational units and constituent bodies can be found in the Structure of the Departmental Group section.

2.2 Our vision

We are the department for opportunity. We work to deliver better life chances for all, breaking the link between background and success. We do this by protecting children and ensuring the delivery of higher standards of education, training and care. We create opportunities for children and learners to achieve and thrive today, so they have the freedom to succeed and flourish tomorrow, strengthening our society, powering our economy and enabling equality.

The Department leads the government’s mission to break down barriers to opportunity, as one of the government’s 5 published missions:

growing the economy
an NHS fit for the future
safer streets
opportunity for all
making Britain a clean energy superpower

The opportunity mission is the cornerstone of the government’s commitment to ensuring that every child, regardless of their background, has the chance to succeed. This mission is about breaking the link between a young person’s background and their future success. By working collaboratively across government and with partners across our sectors, we aim to build opportunity for all through 4 key pillars.

As well as leading on the opportunity mission, the Department also makes a significant contribution to the separate growth mission. Our contribution is to drive growth and investment, and support the labour market, where our skills, capital and childcare programmes are critical.

Opportunity mission

The opportunity mission is structured around 4 core pillars, each led by a named director general. These pillars represent the key areas of focus required to achieve the mission’s overarching objective.

Each pillar is supported by a dedicated pillar board, chaired by the relevant director general. These boards are responsible for driving delivery within their respective areas and ensuring progress against pillar-specific objectives.

A central team within the Strategy Group coordinates the overarching mission plan. This team supports the pillar boards, maintains the integrated delivery plan, and leads on prioritisation, innovation, cross-government engagement and investment planning.

Progress is overseen through a 2-tiered governance structure:

Ministerial-level governance is led by the Secretary of State, who convenes the opportunity mission board. This cabinet-level board brings together ministers from key contributing departments to debate priorities, agree investments and drive collective action across government.
Official-level governance is led by the Director General of Strategy Group, who serves as the Senior Responsible Officer (SRO) for the mission. He convenes an officials’ board ahead of each ministerial board meeting to coordinate cross-government collaboration and ensure alignment across the mission’s pillars.

Further information about our mission pillars is included in Performance analysis.

Growth mission

As well as leading on the opportunity mission, the Department plays a central role in the growth mission. The growth mission is underpinned by 7 pillars.

In partnership with the Department of Work and Pensions (DWP) and Department for Business and Trade (DBT), we are responsible for the people pillar, with the Skills Group Director General acting as the Department’s SRO.

Directors general from the Department, DBT and DWP are co-chairs of the people pillar of the growth mission. A growth mission board sets strategic direction of labour market policy, to:

support people into good, skilled work
drive productivity and progression
ensure there is a skilled workforce that supports the growth mission and the industrial strategy

The Department’s skills for opportunity and growth board brings together the SROs for the programmes and policies that support both the opportunity and growth missions, ensuring we have a single coherent approach to delivering our skills reforms.

2.3 Our performance at a glance

For each mission pillar we have identified the operational activities required to achieve them. Most activities have their own KPIs, which in turn build to support mission pillar outcome KPIs.

Some of the goals and KPIs cover desired outcomes to be achieved in the future, commonly across the life of this parliament and spending review. Additional performance reporting can be found in Annex A.

Pillar 1: Best start in life

Outcome KPI:

percentage of children reaching a ‘good level of development’ at age 5

Activity KPIs:

3,000 school-based nurseries
childcare entitlements
Family Hubs and Start for Life
early education standards and workforce

Pillar 2: Every child achieving and thriving

Outcome KPI:

attainment at the end of secondary school, and rates of school absence

Activity KPIs:

6,500 additional teachers (shared with pillar 3)
mental health support in schools
breakfast clubs
RISE teams
attendance
accountability
Special Educational Needs and Disability (SEND) and Alternative Provision (AP) reform

Pillar 3: Skills for opportunity and growth

Outcome KPI:

proportion of young people in education and employment with training, and number achieving higher level qualifications

Activity KPIs:

Skills England
growth and skills levy
youth guarantee
construction skills package
6,500 additional teachers (shared with pillar 2)

Pillar 4: Family security – keeping children safe and tackling child poverty

Outcome KPIs:

reduction in number of children living in relative poverty (after housing)
a measure of child safety

Activity KPIs:

Families First for Children
fostering recruitment and retention
single unique identifier
kinship

Question 3

3. The sectors we served

Accepted Answer

3.1 Funding

£6.2 billion early years childcare entitlements (prior year, £4.0 billion)
£58.5 billion core funding for schools, high needs and pupil premium (prior year, £57.0 billion)
£7.2 billion core funding for 16 to 19 provision (prior year, £6.8 billion)
£2.7 billion apprenticeships (prior year, £2.5 billion)
£1.5 billion adult education budget (prior year, £1.4 billion respectively)
£11.5 billion tuition fees to the higher education sector (prior year, £11.4 billion)

3.2 Sector metrics

37,275 pupils in 379 state-funded nurseries in January 2025 (prior year, 36,726 in 381 nurseries)
4.55 million pupils in 16,743 state-funded primary schools in January 2025 (prior year, 4.61 million in 16,764 schools)
3.67 million pupils in 3,456 state-funded secondary schools in January 2025 (prior year, 3.67 million in 3,452 schools)
pupils in schools – 5.3 million in academies and 3.2 million in local authority maintained schools at January 2025 (prior year, 5.1 million and 3.4 million respectively)
529,800 adult education and training in regulated participation (August 2024 to January 2025) (August 2023 to January 2024, 520,100)
79,000 achievements of which 28,100 were higher apprenticeships (level 4 or above) in 2024 to 2025 academic year (prior year, 73,600 and 23,200)
1.33 million funded 19 or above further education and skills participants at August 2024 to January 2025 (prior year, 1.31 million)
49,900 children subject to a protection plan at 31 March 2024 (prior year, 50,780)
83,630 children looked after at 31 March 2024 (prior year, 83,840)
399,460 children in need at 31 March 2024 (prior year, 403,090)
1.28 million pupils with SEN support and 483,000 EHC plans in 2024 to 2025 academic year (prior year, 1.24 million and 434,000 respectively)

3.3 Workforce data

215,600 teachers in state funded primary and nursery schools (full time equivalent) in November 2024 (prior year, 218,500)
219,000 teachers in state funded secondary schools (full time equivalent) in November 2024 (prior year, 217,600)
29,200 teachers in state funded special schools (full time equivalent) in November 2024 (prior year, 28,200)
985,800 workforce in state funded schools (full time equivalent) in November 2024 (prior year, 979,100)
80,500 teachers in the FE sector (headcount) in 2023 to 2024 (prior year, 81,900)
203,000 workforce in the FE sector (headcount) in 2023 to 2024 (prior year, 204,800)
103,387 registered social workers at November 2024 (prior year, 101,052)

Question 4

4. Where we spent taxpayers’ money

Accepted Answer

In this ARA, we report our spending through 2 financial frameworks a financial reporting framework and a budgeting framework. Both frameworks apply the accruals concept, covering cash and non-cash balances. Owing to the scale of our student loan and other Statement of Financial Position (SoFP) activities, we report budgetary outturn values not Statement of Comprehensive Net Expenditure (SoCNE) results. Table 16 provides a reconciliation between outturn (shown in Statement of Outturn against Parliamentary Supply (SOPS)) and net expenditure (seen in SoCNE).

More information on performance and budget types is provided in the financial review of the year. Annex A provides additional analysis of outturn by budget type and operational unit.

4.1 Outturn analysis

Table 1 presents a breakdown of Group outturn based on Estimate lines as a proxy to our strategic objectives, and links to SOPS notes S1 and S2.

Table 1: Analysis of current year spending (£134.8 billion outturn) across the Group’s strategic objectives (£billion)

Estimate line	Total
Higher education	42.6
Grants to local authority schools	39.7
Grants to academies	37.0
Further education	7.7
Other school funding	3.1
Apprenticeships	2.8
Families and children services	1.2
Support activities	0.7
Total	134.8

Table 2: Current year outturn split by resource and capital classifications by Estimate line (£billion)

Estimate line	Capital	Resource
Higher education	31.1	11.6
Grants to local authority schools	1.2	38.4
Grants to academies	1.2	35.8
Further education	1.0	6.8
Other school funding	1.9	1.1
Apprenticeships	0	2.8
Families and children services	0.1	1.2
Support activities	0	0.6
Total	36.5	98.3

In the previous figure, higher education outturn contains both non-student loan activities and student loans. Higher education’s disclosed capital outturn of £31.1 billion includes £30.9 billion generated by student loans (new loans less repayments). Higher education resource outturn of £11.6 billion includes £9.0 billion for student loans (predominantly fair value loss and write-offs).

Table 3: Movement of student loan carrying values for the current year (£billion)

Reconciliation step	Total
Opening carrying value	151.0
New loans advanced	20.7
Loan repayments	-4.8
Write-offs	-0.3
Fair value loss	-8.6
Closing carrying value	157.9

Further information about student loans can be found in note 14 and Annex C.

4.2 Outturn analysis by Group body

Table 4 presents this year’s total outturn analysed by Group body.

Table 4: Breakdown of current year Group outturn (£134.8 billion) across Group bodies (£million)

Group body	Total
Department	54,089
ESFA	78,677
OfS	1,591
Aggregator	-40
CCO	3
CITB	18
ECITB	2
IfATE	30
LocatED	9
Oak	27
SLC	313
STA	59
SWE	16
TRA	19
Total	134,813

Shortened names for Group bodies have been used in the figure above to save space. More detail is given in the later Structure of the Departmental Group section.

Annex E provides a breakdown of net expenditure and staff costs by Group body.

4.3 Summary of key risks and issues

Below are summaries of the key risks and issues managed by the Department during the year. More detail can be found in the key risks and issues section of the performance report.

Risk 1 – schools and further education workforce

Direction of risk assessment across the year: stable

There is a risk that schools and colleges are unable to recruit and retain sufficient quality teachers, impacting delivery of the government’s opportunity and growth missions.

Risk 2 – high needs cost pressures

Direction of risk assessment across the year: worsening

There is a risk that, despite substantial real terms increases in high needs funding, high needs cost pressures continue to increase which could result in some local authorities becoming insolvent, citing SEND pressure as a contributing factor.

Risk 3 – education estate

Direction of assessment risk across the year: stable

There is a risk of building or building element failure in the publicly funded estate resulting from structural safety issues.

Risk 4 – higher education financial failure

Direction of risk assessment across the year: risk escalated to be a key risk in-year

There is a risk that financial failure of a higher education provider impacts students, the sector and the economy.

Risk 5 – cyber security

Direction of risk assessment across the year: stable

There is a risk that a cyber attack or security breach could result in a loss of access to critical systems and services, and a loss of critical departmental data.

Question 5

5. Structure of the Departmental Group

Accepted Answer

The Department is led by the Secretary of State for Education who is responsible to Parliament for the performance of the Group as a whole.

Ministers look to the Department’s accounting officer, the Permanent Secretary, to delegate within the Group to deliver their decisions and to support them in policymaking and managing public funds.

Public sector bodies are classified based on the Department’s level of control over them. Executive agencies perform executive functions rather than providing policy advice. Other bodies in the Group, known as NDPBs, are separate legal entities but the Department typically sets their strategic framework. The Department usually appoints the Chair and non-executive board members of these bodies and is consulted on the appointment of their chief executive officers.

Group bodies are judged to be controlled by the Department and are included in the Departmental Group’s financial reporting boundary, thus consolidated into this ARA. The Office for National Statistics (ONS) has determined that the academy school and the further education sectors are controlled by the Department and should be included in this ARA. However, these sectors are excluded from this ARA for the reasons provided.

In addition to controlled bodies, the Department collaborates with other public bodies in the education and children’s social care (CSC) sectors. These bodies are not controlled by the Department and are not part of the Group, but they are described here for completeness.

5.1 Executive agencies

Executive agencies are distinct units that operate separately from a central government department, but they remain legally part of that department. They are created by administrative action, and their staff are civil servants employed by that department. This differs from NDPBs, which are legally separate entities with public servants as staff. Our executive agencies are:

Education and Skills Funding Agency (ESFA), which funded the education and training sectors, ensured proper use of public funds and provided financial support to education providers - the Agency closed on 31 March 2025, from 1 April 2025, all the Agency’s activities, assets and liabilities were transferred to the Department, further information is provided in the forward look
Standards and Testing Agency (STA), which oversees assessments for children up to the end of key stage 3 (although presently focusing on assessments from reception to the end of key stage 2) and manages the general qualifications planning service
Teaching Regulation Agency (TRA), which regulates the teaching profession, including misconduct hearings, and maintains the database of qualified teachers

5.2 Non-departmental public bodies

NDPBs play a role in national government processes but operate independently from ministers. They work within a strategic framework set by ministers and have various roles, including advisory and executive functions.

Executive NDPBs

Executive NDPBs carry out executive or regulatory functions at arm’s length from ministers. Our executive NDPBs are:

Children’s Commissioner’s Office (CCO), who promote and protect children’s rights, especially for the most vulnerable
Construction Industry Training Board (CITB), who support talent attraction and skills development in the construction industry
Engineering Construction Industry Training Board (ECITB), who work with employers and training providers to equip the engineering construction industry with necessary skills
Institute for Apprenticeships and Technical Education (IfATE), who developed and revised apprenticeships and technical qualifications, including T Levels and higher technical qualifications (IfATE closed on 1 June 2025. Further information is provided in the Forward look.)
Located Property Limited (LocatED), who select sites for new schools in England
Oak National Academy Limited (Oak), who support teachers with free high quality digital curriculum resources
Office for Students (OfS), who regulate higher education in England and disburse government funding to the sector
Social Work England (SWE), who regulate social workers in England and aim to raise standards through collaboration with the sector
Student Loans Company Limited (SLC), who administer loans and grants to students in the UK on behalf of the Department and devolved governments

Advisory NDPBs

Advisory NDPBs consist of external experts who advise ministers on specific policy areas. They provide independent specialist advice, are supported by a small secretariat from the sponsoring department and do not produce their own ARA. Our advisory NDPB is:

School Teachers’ Review Body (STRB), recommends pay, duties and working conditions for school teachers in England

Other bodies

Our other body is:

Aggregator Vehicle plc (Aggregator), provided market funding for new school buildings through our private finance initiative (PFI) transaction, although not formally an NDPB, it is classified by ONS as part of the central government economic sector and included in NDPB disclosures

5.3 Excluded sectors

Academy sector

Reclassified by ONS to the public sector in 2004, with the Department as the controlling body. Although initially consolidated, the academy sector has been excluded from the Group ARA since 2016 to 2017 financial year, with its own standalone sector annual reports and accounts (SARA) with a year end of 31 August.

The consolidation of the sector resulted in significant audit qualifications which we judged to be structural, limiting our ability to design a suitable alternative consolidation approach. In answer to this we secured Parliament’s agreement to remove the sector from the consolidation and consolidate the sector into SARA.

Following reclassification, each academy trust is considered to be an NDPB, albeit not consolidated into this ARA. At the year end there were 2,152 active academy trusts.

Further Education (FE) sector

Reclassified by ONS to the public sector in 2022, with the Department as the controlling body. The Department continues to work with HMT to determine the appropriate consolidation approach. The FE sector is excluded from this ARA for the reported years.

Following reclassification, each FE provider is considered to be an NDPB, albeit not consolidated into this ARA. At the year end there were 218 active providers.

5.4 Non-Group bodies

The Department also works with other education sector bodies that are not controlled by the Department or Secretary of State and are not part of the Group.

Non-ministerial departments

Independent government departments without their own ministers but accountable to Parliament through sponsoring ministers. Non-ministerial departments produce and publish their own ARAs and Estimates, and are:

Teachers’ Pension Scheme (England and Wales) (TPS), a statutory, unfunded multi-employer defined benefit occupational pension scheme for the teaching profession
Ofqual, who regulate qualifications, examinations and assessments in England
Ofsted, who inspect education and skills services and inspects services for children and young people

Other bodies

These are supported administratively by the Department but do not produce their own ARAs, and are:

Child Safeguarding Practice Review Panel, who commission reviews of serious child safeguarding cases to improve outcomes for children
Independent Review Mechanism, who review decisions made by adoption and fostering providers
Office of the Schools Adjudicator, who decide on objections and variations to school admission arrangements and other school related issues

5.5 Operational structure

Operational units

The Group organises its strategic responsibilities and priorities into 6 operational units. Each unit had the following responsibilities during the year.

Families Group

Director General Justin Russell

Families Group is responsible for giving children the best start in life in their early years, keeping children safe, including through local authority children’s services, for making schools calm, safe and supportive environments and improving attendance, and ensuring no child goes hungry in term time or school holidays.

It does this by maximising access to high-quality early education and childcare, investing in reform of children’s social care services, through policy and delivery responsibility for free school meals, breakfast clubs and school holiday food and activities programmes, and reducing school absence.

Schools Group

Director General Juliet Chua

Schools Group oversees policy and delivery in the school system, working to break down barriers to opportunity and raise standards in every school, so all children can achieve and thrive. It aims to support recruitment, retention and training of teachers and leaders, ensure high quality curriculum, qualifications and assessment, and works to build a high performing and collaborative school system.

Skills Group

Director General Julia Kinniburgh

Skills Group oversees the policy and delivery of post-16 education and skills. Skills are integral to all government missions, particularly growth and opportunity. Skills improve productivity and attract investment, and they enable individuals to thrive in their lives and at work. Skills Group aims to drive economic growth and opportunity for all by ensuring there is a strong post-16 education and skills system that delivers clear pathways for progression and into work for everyone regardless of their background, meets employers’ skills needs, and also supports the government’s other missions on clean energy, NHS and safer streets.

Regions Group

Director General John Edwards

Regions Group acts as the Department’s delivery arm for the government’s opportunity mission, supporting regional and local delivery of Best Start in Life, Achieving and Thriving, and Keeping Children Safe. It collaborates with the school, SEND and CSC sectors as regulator, commissioner, funder and partner to deliver. Through its RISE teams, Regions Group provides bespoke targeted support to eligible schools as well as bringing all schools together to share knowledge and innovate.

Strategy Group

Director General Tony Foot

Strategy Group sets shared direction and brings the Department together. It supports, challenges and enables the Department to look ahead – anticipating strategic opportunities, challenges and risks, look outwards – engaging with the public, our sectors and international partners, and join-up across families, schools and skills and with other government departments. It provides strategy, delivery, analysis, communications, policy, resilience and private office services across the Department. It also leads across government on the opportunity mission.

Operations and Infrastructure Group

Director General Jane Cunliffe

Operations and Infrastructure Group ensures the Department is modern, innovative and effective, supporting ambitious reforms. It helps ensure the Department upholds high standards, protects taxpayers’ money and ensures proper conduct. The unit also supports the education sector by building schools, providing digital and data services and delivering accurate funding.

Reporting in this ARA

The lowest level of financial information presented in this ARA is the sub-consolidation of the core Department and its Agencies (‘Department and Agencies’). The full consolidation (‘Group’) is the core Department and Agencies together with the NDPBs named in note 24.

Question 6

6. Financial review of the year

Accepted Answer

6.1 Introduction

This section explains:

the Group’s spending for the year within the budgetary framework (outturn)
different budgetary classifications
significant variances between outturn and control totals
5 year trend analysis of outturn
significant issues

6.2 Financial reporting frameworks

The Financial Statements and parts of the Remuneration and Staff Report are prepared under International Financial Reporting Standards (IFRSs) as adapted and interpreted by HM Treasury (HMT) for the public sector context, and published in the Government Financial Reporting Manual (FReM).

To support parliamentary accountability, we also report our activities in SOPS, prepared under HMT’s budgeting framework set out in Consolidated Budgeting Guidance (CBG). The budgeting framework aligns to the Estimate process, whereby Parliament authorises departmental funding.

6.3 Performance reporting

Our performance report focuses on outturn rather than actuals to align with Parliamentary reporting and to reflect the significant activities that are not reported through SoCNE. Table 16 links the performance report to the Financial Statements by reconciling total outturn to comprehensive net expenditure. We also provide additional analyses of outturn by operational unit and budget types in Annex A.

Performance terminology

We use the following terms consistently throughout this ARA:

actuals – activities reported under the accounting framework (financial statements)
net expenditure – total of actuals as reported in SoCNE
outturn – activities reported under the budgetary framework (SOPS and performance report)
budget cover – the value of expected spending authorised by Parliament through the Estimate process, also called voted totals
budget scoring – refers to which budget class spending is allocated to, for instance ‘this spending is scored to RDEL’ means the spending will be recorded as RDEL outturn

Budget classifications

Total managed expenditure (TME)

The total amount spent by the Group under the budgetary framework, split into Departmental Expenditure Limit and Annually Managed Expenditure, each with resource and capital sub-divisions.

Departmental Expenditure Limit (DEL)

Spending subject to limits set in a spending review, which departments may not exceed. DEL budgets are firm, planned annual budgets set for multi-year spending review periods, split into resource and capital budgets.

Annually Managed Expenditure (AME)

Spending subject to budgets set by HMT, often volatile or demand led, and split into resource and capital budgets. Most of the Group’s AME expenditure comes from student loans.

Resource budgets

Capture current expenditure (including depreciation, which is the current cost associated with non-current assets). Resource budgets are split between programme and administration budgets.

Capital budgets

Capture new investment and financial transactions. Capital budgets are wholly programme.

Programme budgets

Cover expenditure, including staff costs, on front-line services such as schools, colleges and social work.

Administration budgets

Comprise non-programme spending, which covers the running costs of the Group including non-front-line staff, buildings, depreciation and technology.

Resource DEL (RDEL)

Current expenditure split between programme and administrative expenditure. In accordance with CBG, part of the annual student loan fair value movement is reported under this budget type. More detail concerning student loan budgeting follows below and in note 14.5.

Capital DEL (CDEL)

Spending on assets and investment such as education provider buildings and facilities.

Resource AME (RAME)

Covers part of the student loan annual fair value movement, provisions and resource costs of levy funded bodies (CITB and ECITB).

Capital AME (CAME)

Covers student loan advances, repayments and capitalised interest, plus the capital cost of levy funded bodies.

Ringfenced budgets

An HMT stipulated restriction whereby budgets can only be spent on particular activities and underspends cannot be utilised for other activities. Restrictions can be specific, such as student loan fair value movements, or wider across transaction types such as depreciation and amortisation.

6.4 Outturn spend

In this section we report and explain our performance under the budgeting framework and explain the different budgets managed by the Department across the Group and their purposes. The balances presented are the outturn for the year, with values in brackets representing net income or gains.

Overspend

The Department has managed financial pressures during the year, including high demand for the rollout of expanded childcare support. As a result of this pressure the Department requested approval from the Chief Secretary to the Treasury to relax a number of policy ringfences within RDEL where there were other underspends to largely cover these overspends.

Following the relaxation of these policy ringfences the Department exceeded its RDEL excluding depreciation HMT limit by £590,000. The Department is taking steps to avoid exceeding such HMT limits in the future.

Table 5: Breakdown of current year’s TME (£billion)

Budget type	Value
AME	27.1
CAME	30.9
RAME	-3.8
DEL	107.7
CDEL	5.6
RDEL	102.1
RDEL is split between RDEL-Programme	101.6
And RDEL-Administration	0.5
Total	134.8

6.5 Estimate to outturn comparison

The TME limit for the year, set through the Estimate process, was £152.9 billion (prior year, £143.7 billion) against which the Group spent £134.8 billion (prior year, £121.9 billion). Table 6 shows the Group’s performance, for the last 2 years, against its control totals as agreed by parliament at Supplementary Estimates.

Table 6: Comparison of Estimate to outturn for the current and prior years (£million)

Budget type	2024 - 2025 Estimate	2024 - 2025 Outturn	2024 - 2025 Variance	2023 - 2024 Estimate	2023 - 2024 Outturn	2023 - 2024 Variance
DEL	118,390	107,724	10,666	111,394	94,264	17,130
Resource: Programme	112,096	101,575	10,521	104,051	87,097	16,954
Resource: Administration	577	547	30	563	530	33
Capital	5,717	5,602	115	6,780	6,637	143
AME	34,483	27,089	7,394	32,327	27,586	4,741
Resource	1,047	-3,818	4,865	-2,054	-3,327	1,273
Capital	33,436	30,907	2,529	34,381	30,913	3,468
TME	152,873	134,813	18,060	143,721	121,850	21,871
Analysed as non-student loan activities	95,162	94,961	201	88,724	88,345	379
Analysed as student loans	57,711	39,852	17,859	54,997	33,505	21,492

Table 6 summarises the detailed analysis of outturn to Estimate presented in the audited SOPS. SOPS is the primary element of parliamentary accountability by comparing actual performance (outturn) with expected activities (Estimate) authorised through the parliamentary voted totals (control totals) process.

The Group’s large underspend is due to student loans. The underspend arises from challenges in forecasting year end student loan valuation model inputs (such as Retail Price Index (RPI)) during the Supplementary Estimates process before the year end economic inputs for the valuation model are known. Large variances between Estimate and outturn are usually due to a cautious Estimate and do not indicate poor management of student loans or their accounting values.

At Supplementary Estimates, the Department secured an £18.9 billion increase (prior year, £20.7 billion increase) in authorised spending for the current financial year, following the Main Estimates at the start of the financial year. The increase primarily reflects the revised student finance forecasts and fair value movements, given the sensitivity of the loan book to macroeconomic conditions.

The main changes by budget category are:

RDEL – a £17.8 billion increase, which included £15.2 billion for student loan fair value movements (prior year, £18.6 billion increase which contained an £18.5 billion student loan increase), in addition we secured a £2.6 billion increase for non-student loan programme spend
RAME – a £4.0 billion increase, which covered £4.0 billion for the costs of unwinding the discount applied to value student loans (prior year, £2.4 billion increase, which allowed for a £2.3 billion discount unwind)
CDEL – a £378 million decrease, reflecting lower than planned spend owing to typical variability seen in capital forecasts and delivery each year
CAME – a £2.5 billion decrease, of which student loan changes amounted to £2.4 billion (prior year, £47 million, of which £55 million for student loans)
net cash requirement – a £2.1 billion increase, of which £1.9 billion covered the increased funding for schools

The changes at Supplementary Estimates represented our revised planned expenditure in this financial year. These changes are reflected in our published control totals, they are not outturn or actuals. The post-change values are presented in SOPS, and accompanying notes, as ‘Estimate’.

6.6 Student loans reporting

Calculating student loan valuations, for accounting (note 14) and Estimate claims is inherently difficult and differs to commercial loan portfolios. Unlike commercial mortgage books (which are similar in duration) the student loan portfolios do not have stable monthly contractual repayments allowing for easily modelled repayment profiles. Instead, student loan repayments are dependent upon individual borrower’s earnings and which loan plans they have, which makes repayments sensitive to economic conditions such as employment levels, RPI and salary growth. The year end values for these variables, which are required by the valuation models, are unknown during the Estimate claim process (Mains or Supplementary).

In addition, the very large size of the student loan portfolio (£265 billion face value, note 14.1) adds complexity. The student loan valuation models apply valuation inputs and assumptions to student loan face value balances to calculate the carrying values. Small changes in these inputs can cause significant variations in carrying values. Therefore, small differences between model inputs forecast at Supplementary Estimates and actual values at the year end can generate very large variances. See note 14.3 and Annex C for more explanation on valuation model input sensitivities, and note 8 records the annual movement in fair value.

Consequently, the Department is prudent when it prepares its Supplementary Estimates claim, requesting budget cover based on reasonable expectations rather than worst case scenarios.

To add further complexity to student loan outturn reporting (away from net loan advances), the performance of student loans scores to multiple budget categories even if in accounting terms there is just a single fair value movement. HMT requires further analysis of the fair value movement to support fiscal reporting as set out in CBG. Annex C has more details.

In general terms, the single accounting performance measure (fair value gain or loss) is split into the following budget categories:

RAME – the cost of unwinding the discount applied to future student loan repayments by one year
RAME – the impact of changes in the discount rate on the fair value of the existing stock of loans
RAME – the impact of changes in the discount rate on loans issued in year
RAME – differences in student loan outlay between models in the student loan pipeline arising from assumptions on when cashflows occur
RDEL – the remaining fair value movement

Note 14 provides further analysis of the student loan outturn split by net advances, the initial fair value gain or loss and the year end fair value gain or loss.

6.7 Variances discussion

Further explanation of large pre-virement variances of Estimate to outturn is included in the Trends in TME section. The variances discussed have been identified from SOPS notes S1.1 and S1.2 which are those variances over £1 billion or over 10% of Estimate value and over £250 million, across the different Estimate rows.

6.8 Trends in TME

The following table and figures present 5 year summaries of the Group’s outturn, by budget type. The table and figures are summarised versions of the tables presented in Annex D.

In recognition of the impact of student loans, the Group’s financial performance presented below is split between non-student loan activities and student loans. Student loans are judged to be the loans themselves and include loan advances, repayments and interest. Costs incurred by the team managing student loans, such as payroll and debt sale liabilities, are included in non-student loan activities.

Table 7: Outturn analysed across budget types for the last 5 financial years (£million)

DEL	2024 - 2025 Outturn	2023 - 2024 Outturn	2022 - 2023 Outturn	2021 - 2022 Outturn	2020 - 2021 Outturn
Administration	547	530	546	540	509
non-student loan activities	547	530	546	540	509
student loans	0	0	0	0	0
Programme	101,575	87,097	66,609	72,406	74,712
non-student loan activities	88,801	81,180	76,000	70,759	68,097
student loans	12,774	5,917	-9,391	1,647	6,615
Capital	5,602	6,637	5,948	4,798	4,830
non-student loan activities	5,602	6,637	5,948	4,798	4,830
student loans	0	0	0	0	0
Total DEL	107,724	94,264	73,103	77,744	80,051
non-student loan activities	94,950	88,347	82,494	76,097	73,436
student loans	12,774	5,917	-9,391	1,647	6,615
AME	2024 - 2025 Outturn	2023 - 2024 Outturn	2022 - 2023 Outturn	2021 - 2022 Outturn	2020 - 2021 Outturn
Resource	-3,818	-3,327	-14,314	-5,180	1,767
non-student loan activities	1	-9	84	12	-3
student loans	-3,819	-3,318	-14,398	-5,192	1,770
Capital	30,907	30,913	24,828	21,863	21,144
non-student loan activities	10	7	3	-4	-1
student loans	30,897	30,906	24,825	21,867	21,145
Total AME	27,089	27,586	10,514	16,683	22,911
non-student loan activities	11	-2	87	8	-4
student loans	27,078	27,588	10,427	16,675	22,915
TME	134,813	121,850	83,617	94,427	102,962
non-student loan activities	94,961	88,345	82,581	76,105	73,432
student loans	39,852	33,505	1,036	18,322	29,530

The following 2 tables present 5 year trend analysis split by non-student loan activities and student loans. The main movement in the Group’s annual TME across the 5 years has been movements in student loan performance, notably the fair value loss (or gain in the 2022 to 2023 financial year) which is reported in RAME and RDEL. Non-student loan activities have shown a steady year-on-year increase across the 5 years.

Table 8: TME for non-student loan activities analysed across budget types for the last 5 years (£billion)

Type of spend	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
RDEL-Programme	88.8	81.2	76.0	70.8	68.1
CDEL	5.6	6.7	5.9	4.8	4.8
RAME	0	0	0.1	0	0
CAME	0	0	0	0	0
RDEL-Administration	0.5	0.5	0.5	0.5	0.5
Total	94.9	88.4	82.5	76.1	73.5

Table 9: TME for student loans analysed across budget types for the last 5 years (£billion)

Type of spend	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
RDEL-Programme	12.8	5.9	-9.4	1.6	6.6
CDEL	0	0	0	0	0
RAME	-3.8	-3.3	-14.4	-5.2	1.8
CAME	30.9	30.9	24.8	21.9	21.1
RDEL-Administration	0	0	0	0	0
Total	39.9	33.5	1.0	18.3	29.5

Annex A provides additional analysis of performance analysed across business groups and budget types.

Resource DEL–Programme

Table 10 presents a comparison of Estimate to outturn for RDEL-Programme across the last 5 years. Outturn values are split between non-student loan activities (non-SL) and student loans (SL).

Table 10: RDEL–Programme Estimate to outturn comparison for the last 5 years (£billion)

Type of spend	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Estimate	112.1	104.1	75.2	80.5	83.7
Outturn	101.6	87.1	66.6	72.4	74.7
Outturn, non-SL activities	88.8	81.2	76.0	70.8	68.1
Outturn, SL	12.8	5.9	-9.4	1.6	6.6

RDEL-Programme’s Estimate for this financial year shows an increase of £8.0 billion compared to the prior year.

Total outturn uplift from last year (£14.5 billion) was broadly even across both activity types, non-student loan activities of £7.6 billion and student loans of £6.9 billion.

This year’s student loan outturn reflects the RDEL-Programme portion of the annual fair value loss. The non-student loan activity uplift was split across programmes with the national funding formula (NFF) and high needs funding increasing by £1.5 billion.

The increase in non-student loan outturn is driven by continued investment in Group priorities, including increases to the core schools and early years spending.

Note S1.1 details the overall RDEL underspend of £10.6 billion by Estimate lines which approximate operational areas. Almost all of the overall underspend, £10.5 billion (before and after virements), is held by the higher education (HE) Estimate line which is driven by student loan fair value losses and other valuation movements. The underspend arises from more favourable economic determinants (RPI and earnings) than those applied at Supplementary Estimates to determine student loans budget cover. Other smaller but notable variances were:

a £465 million overspend for further education, which represented 7% of Estimate value
a £427 million underspend (1% of Estimate) for grants to schools, which is mostly composed of national funding formula grants

Capital DEL

Table 11 presents a comparison of Estimate to outturn for CDEL across the last 5 years. Since there is no CDEL spend on student loans, the outturn represents non-student loan activities.

Table 11: CDEL Estimate to outturn comparison for the last 5 years (£billion)

Type of spend	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Estimate	5.7	6.8	6.3	5.3	5.4
Outturn	5.6	6.6	5.9	4.8	4.8

Most of our capital investment (in a budgetary context) is spent on the school estate, including creating new school places and maintaining buildings. It also funds major programmes to build new schools, rebuild or repair existing school buildings or colleges. Other investments in skills include funding for T Levels rollout and CSC policy.

The current year Estimate balance fell £1.1 billion to £5.7 billion to reflect lower forecast expenditure on school condition. The outturn fall of £1.0 billion from last year closely matched the Estimate movement.

There are no Estimate rows with variances large enough for further analysis.

Resource AME

Table 12 presents a comparison of Estimate to outturn for RAME across the last 5 years. Since there is no significant RAME spend on non-student loan activities, the outturn line represents student loans outturn.

Table 12: RAME Estimate to outturn comparison for the last 5 years (£billion)

Type of spend	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Estimate	1.0	-2.1	-10.4	0.6	3.1
Outturn	-3.8	-3.3	-14.3	-5.2	1.8

The current year increase in budget cover secured at Estimate, £3.1 billion, results from RPI returning to more normal levels which means a reduction in the gain to be expected from unwinding the discount.

The deep change in the 2022 to 2023 financial year was caused by the increase in RPI throughout that period from 1.5% in March 2021 to 13.5% in March 2023. The increase in RPI created a year end fair value gain (shown here as a large negative figure) rather than the more usual fair value loss. The return of RPI to its long-term trend has returned student loan performance to a fair value loss.

Outturn remains a net benefit (negative value above) due to not all the student loan fair value losses being scored to RAME. Some elements of the fair value loss are scored to RDEL. Note 14.5 and Annex C provide further analysis of student loan performance by budget types.

The Group reported an overall underspend of £4.9 billion which, with roundings, matches that found in the HE Estimate line, the other rows’ variances totalled a £33 million underspend. Student loans impact RAME through unwinding a year of discounting as the loan book is revalued 12 months on from the previous valuation. As student loans are discounted using the HMT rate of RPI-0.85% for cash flows up to 2030 and RPI+0.05% for cash flows thereafter, the student loans impact on RAME is highly dependent on RPI. The underspend arises from March 2025 RPI outturn (3.2%) being lower than the estimate applied at the Supplementary Estimates, because a decrease in RPI reduces the gain received from unwinding the discount on student loans.

Capital AME

Table 13 presents a comparison of Estimate to outturn for CAME across the last 5 years. There is no significant CAME spend on non-student loan activities, so the outturn line represents student loan outturn.

Table 13: CAME Estimate to outturn comparison for the last 5 years (£billion)

Type of spend	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Estimate	33.4	34.4	27.3	23.6	22.9
Outturn	30.9	30.9	24.8	21.9	21.1

The budget cover secured at Estimate decreased by £0.9 billion in the year, whereas outturn was unchanged from last year at £30.9 billion.

The main driver of CAME is the creation of new student loans through either loan advances or capitalised interest. Both of these balances are largely predictable based on expected student numbers and so do not have the same volatility as RDEL-Programme (driven by loan performance).

The underspend of £2.6 billion (predominately within the HE Estimate line) is a result of unused budget cover secured at Supplementary Estimates to cover the difficulties in forecasting student loan principal movements (loan advances, capitalised interest and loan repayments).

Resource DEL–Admin

Table 14 presents a comparison of Estimate to outturn for RDEL-Admin across the last 5 years. There is no RDEL-Admin spend on student loans.

Table 14: RDEL–Admin Estimate to outturn comparison for the last 5 years (£million)

Type of spend	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Estimate	577	563	570	555	528
Outturn	547	530	546	540	509

The budget covers the running costs of the Department, including functions such as HR, Finance, Commercial and IT. The above figure shows the Group has managed within its budget for this year.

6.9 Reconciliation of outturn to net expenditure

Table 15 shows a high level reconciliation of the Group’s activities between TME (SOPS) and net expenditure for the year (SoCNE). TME includes all budget reported spend, including values that are recognised in SoFP rather than SoCNE. The most significant element of the reconciliation is student loan movements. Note 14 and Annex C provide more information on student loans.

There are 2 types of reconciling items:

spend that is recognised in SoFP which needs to be removed from TME to align to SoCNE, including student loan net additions (the net of loan advances and repayments)
to partially remove activities that score to different budget types from both SoCNE and SoFP accounting entries to allow for the single recognition in SoCNE, which includes student loan capitalised interest that is reported in both SoCNE (part of fair value movement) and SoFP (asset values)

Table 15: Reconciliation of TME to comprehensive net expenditure for the current year (£billion)

Reconciling items	Value
TME outturn	134.8
Student loans – net additions	-15.8
Student loans – capitalised interest	-15.1
Other movements	-0.1
Comprehensive net expenditure	103.8

Net expenditure

Table 16 shows the Group’s net expenditure for the year analysed across the main expense types as presented in SoCNE. Resource policy funding has been further analysed across business groups.

The following figures then break down the 3 forward-facing business groups’ performance by significant programme component as set out in note 6.

Table 16: Breakdown of the Group’s current year net expenditure as per SoCNE (£103.8 billion) (£billion)

Spending lines	Value
Resource policy funding total	88.4
which can be split between Families Group	8.3
Schools Group	64.0
Skills Group	15.0
Other business groups	1.1
Capital policy funding	5.5
Student loan fair value loss	8.6
Staff costs	0.8
Other net costs	0.5
Comprehensive net expenditure	103.8

Table 17: Breakdown of Families Group’s resource policy funding (£8.3 billion) by major programme (£million)

Spending lines	Value
Childcare entitlements	6,226
Universal free school meals	678
Other spending	629
Children in care	373
Life Skills, Disadvantage and SEND	206
Children’s social care	153
Total	8,265

Table 18: Breakdown of Schools Group’s resource policy funding (£64.0 billion) by major programme (£billion)

Spending lines	Value
National funding formula	45.7
High needs funding	9.9
Pupil premium	2.9
Core funding	2.0
Teacher pay grant	2.0
Teachers’ pension employer contribution	1.2
High needs funding (16 to 19)	0.7
Other spending	0.6
Primary sport premium	0.3
School curriculum	0.2
Teacher supply	0.2
Total	64.0

Table 19: Breakdown of Skills Group’s resource policy funding (£15.0 billion) by major programme (£billion)

Spending lines	Value
Core funding (16 to 19)	7.2
Apprenticeships	2.7
Teaching grant	1.5
Adult education budget	1.5
Other spending	0.7
HE maintenance grants	0.7
Teachers’ pension employer contribution	0.3
Bursary funding	0.2
Construction industry training	0.2
Total	15.0

Question 7

7. Performance analysis

Accepted Answer

The performance analysis section of the ARA sets out the Group’s performance against its objectives in greater detail than in the performance overview.

7.1 Performance against the opportunity mission

To manage our mission pillars effectively, each outcome is broken down into specific sub-objectives or activities, assigned to designated senior management members. Relevant targets and KPIs are presented alongside activities.

We also align our strategic outcomes with the United Nations Sustainable Development Goals (UN SDGs), ensuring our efforts contribute to global sustainability targets.

UN Sustainable Development Goals

The government is committed to embedding sustainable development across policymaking, estate management and procurement processes to maximise positive impacts on the economy, society and the environment. This includes addressing climate change, protecting and enhancing the natural environment, fostering a green economy, and improving operational practices. Policies will incorporate rural proofing, climate change and environmental considerations. Departments must report on their environmental impact as part of broader sustainability reporting.

The UN SDGs (17 goals comprising 169 targets) adopted in 2015 as part of the UN’s 2030 Agenda for Sustainable Development aim to end poverty and promote global peace and prosperity. The government monitors and delivers the UN SDGs through departmental business plans.

We consider our activities across all of our pillars address the following UN SDGs:

SDG 1 – end poverty in all its forms everywhere
SDG 3 – ensure healthy lives and promote wellbeing for all at all ages
SDG 4 – ensure inclusive targets and equitable quality education and promote lifelong learning opportunities for all
SDG 8 – decent work and economic growth
SDG 10 – reduce inequality within and among countries

7.2 Pillar 1: Best start in life

Senior responsible officer: Justin Russell, DG Families Group

The early years of childhood, where families build strong relationships and children develop foundational skills, are crucial to supporting opportunity.

This pillar aims to significantly improve child development by age 5, driving up outcomes and reducing the disadvantage gap through:

creating the conditions for strong familial relationships and nurturing home experiences
early, appropriate and straightforward access to services, professionals and communities that provide the right support at the right time
high quality early education and childcare

Outcome KPI:

percentage of children reaching a ‘good level of development’ at age 5

Target:

75% of children reaching a ‘good level of development’ in the early years foundation stage profile

Year end performance:

2024 results: 67.7%

Data is not yet available for 2024 to 2025, it will be published in November 2025.

Activities

Improved access to early education

A key priority was the expansion of government-funded childcare entitlements. Since September 2024 eligible working parents have been entitled to 15 hours government-funded childcare per week for 38 weeks a year after their child turns 9 months old. This will be expanded to 30 hours per week for 38 weeks a year in September 2025.

School-based nurseries - phase 1 of the government’s commitment to create more nursery places in schools is underway. We expect to create up to 6,000 places in 2025 to 2026, of which up to 4,000 are planned to be available by September 2025. Phase 2 is in development following the allocation of £370 million for the spending review period.

Improved quality of teaching in early years settings and reception

This includes changes to qualifications and career development opportunities, focused interventions for mathematics and language, and additional support for settings and practitioners through stronger practice hubs and increasing the early years pupil premium. Teaching quality has been improved through:

workforce – the experience based level 3 route launched in March 2024 aims to help 19,000 educators develop their careers and meet staff-child ratios
Nuffield Early Language Intervention – continued support for 11,100 schools, through an evidence-based 20 week programme, which delivers significant progress in language skills for the children reached
mathematics champions - funding approved for up to 1,810 pre-school settings in 2025 to 2026 academic year, with evaluations indicating substantial progress in mathematics, especially for children eligible for early years pupil premium
stronger practice hubs – up to £6.1 million funding confirmed to expand the programme, aiming to increase settings in hub networks to 11,500 by March 2026, which produced positive interim evaluation findings, there is a commitment to double the number of hubs in the Best Start in Life Strategy
early years pupil premium – guidance published for local authorities, with rates increasing by over 45% from April 2025 to support disadvantaged children

Stronger and joined up family services

We continued to expand the Family Hubs and Start for Life provision, in partnership with DHSC, with over 500 Family Hubs now open across 88 local authorities. We have also been exploring how lessons from the Family Hub and Start for Life model can be used to deliver stronger services for families, improving access and support for disadvantaged families.

The services that have been made stronger and more joined up include:

Family Hubs and Start for Life - the Best Start in Life Strategy includes a commitment to a new Best Start Family Service and to extending coverage of Best Start Family Hubs to every local authority in England
maternity and neonatal care - DHSC ministers are reviewing short and long-term improvement, focusing on reducing inequalities, a programme to reduce avoidable infant brain injury will start a national rollout later this year, following successful development and pilot phases

3,000 school-based nurseries

Activity metric:

number of applications received from schools for phase 1 (641), confirmed list of projects to be funded in phase 1 (300)

Target:

300 nurseries to be funded in first phase of delivery

Year end performance:

In phase 1, there were 641 applications received from schools to open nurseries using surplus space, of which 24% was for new provision, with the remainder extending existing provision. Of these, 300 have been offered funding for 2025 to 2026 financial year (42% offering new provision) for a total cost of £37 million. All nurseries are expected to open by September 2026, with the first launching from September 2025.

Scoping for future phases is underway.

Childcare entitlements

Activity metric:

early years entitlement codes are unique reference numbers issued by HMRC to eligible working parents, the codes allow parents to access government-funded childcare for children over the age of 9 months and up to school age

Target:

450,000 active users of the entitlement

Year end performance:

The early years and childcare programme is being rolled out in phases. From:

April 2024, eligible working parents of 2 year olds have been able to access 15 hours per week of early education and childcare
September 2024 eligible working parents of children aged 9 months and above have been able to access 15 hours per week of early education and childcare
September 2025 eligible working parents of children aged 9 months and above will be able to access 30 hours per week of early education and childcare

The first 2 phases of delivery have been successful. The programme has seen strong demand for the offer with:

247,000 codes issued to parents and 96% of those codes validated in the summer term 2024
532,000 codes issued to parents and 95% of those codes validated in the autumn term 2024
544,000 codes issued to parents and 93% of those codes validated in the spring term 2025

This has been coupled with growth in the sector. Between financial years 2022 to 2023 and 2023 to 2024, the number of early years and childcare places has grown by approximately 44,000 and the number of staff working in early years has grown by approximately 20,000 staff.

Family Hubs and Start for Life

Activity metric:

the 75 local authorities in the Family Hubs and Start for Life programme to deliver the programme’s minimum expectations by March 2025

Target:

100% of the 75 local authorities participating in the programme

Year end performance:

Family Hubs provide access to services to improve the health, education and wellbeing of babies, children and their families. Between 2022 and 2025, £300 million has been invested across 75 of the most deprived local authorities by the Department and DHSC to establish Family Hubs with integrated Start for Life services. The funding also provides support for parents within the home learning environment. An additional £12 million has supported 13 additional local authorities through the Family Hubs Transformation Fund. Over 500 Family Hubs are now open across 88 local authorities.

89% of participating local authorities have met the programme’s minimum expectations and we are working with the remainder to support them to meet expectations.

Early learning

Activity metric:

primary schools registered with Nuffield Early Language Intervention

Year end performance:

As of March 2025, a total of 11,164 English state primary schools had registered to deliver the programme, a slight increase from the previous year.

In July 2024, the number of children scoring below 85 (or well below average) in language development, having received the intervention, reduced by two-thirds benefiting over 7,000 children who would otherwise have required additional speech and language support.

Early in the 2024 to 2025 academic year the work has focused on the 222 schools with low engagement, through targeted communications and one-to-one support.

7.3 Pillar 2: Every child achieving and thriving

Senior responsible officer: Juliet Chua, DG Schools Group

Every child and young person, regardless of their background, must be able to achieve at school to develop the knowledge and skills they need for life. This means improving attainment across the board, particularly for disadvantaged children, as well as supporting children to thrive through positive environments at school, home and within their communities.

We will deliver this through:

driving up school standards and support, with high-quality expert teachers and leaders
improving attendance, health and wellbeing both in and out of school
addressing inequality and an inclusive approach to SEND
ensuring access to a broad and balanced curriculum with wider enrichment opportunities

Outcome KPIs

As set out in the government’s Plan for Change, impact will be measured through attainment at the end of secondary school.

Year end performance (2023 to 2024 academic year data) included:

an average attainment 8 score of 45.9 (a decrease of 0.4 points since the 2022 to 2023 academic year)
pupils achieving grades 5 or above in English and mathematics GCSE of 45.9% (increase of 0.6 percentage points since the 2022 to 2023 academic year)
disadvantaged pupils average attainment 8 score of 34.6
disadvantaged pupils achieving grades 5 or above in English and mathematics GCSE of 25.8%

Activities

Driving high and rising standards across every school is at the heart of our work to ensure every child can achieve and thrive. We are working to deliver this through excellent teaching and leadership, robust accountability and faster school improvement, and an inclusive system which removes barriers to learning.

6,500 additional teachers

Activity metric:

number of teachers in secondary schools, special schools and colleges

This activity also falls under pillar 3, skills for opportunity and growth.

Year end performance

We are delivering on our commitment to recruit an additional 6,500 new expert teachers over the course of this parliament, confirming mainstream secondary schools, specialist schools and colleges are in scope. Measures to deliver the pledge include a focus on getting more teachers into shortage subjects, supporting areas that face recruitment challenges and tackling retention issues.

Actions taken this year include:

accepting in full the STRB’s recommendations of a 5.5% pay award in the 2024 to 2025 academic year for teachers and leaders in maintained schools
announcing a £2.3 billion increase in core schools funding which provided an increase to per pupil spending in real terms (after using the Office of Budget Responsibility’s (OBR’s) October 2024 deflator)
announcing an additional £400 million for 16 to 19 education
investing over £700 million on recruitment and retention across schools and FE, including:
- announcing a £233 million financial incentives package (an increase of £37 million from the previous year), this includes bursaries worth £29,000 tax-free and scholarships worth £31,000 tax-free, to encourage talented trainees to key subjects such as mathematics, physics, chemistry and computing
- confirming increased retention incentives of up to £6,000 (post-tax) for eligible early career teachers in priority STEM (science, technology, engineering and mathematics) and technical subjects across schools and further education
- expanding the Get into Teaching recruitment campaign across university campuses in autumn 2024
taking steps to improve teachers’ workload and wellbeing, including opportunities for greater flexible working, such as allowing planning, preparation and assessment time to be undertaken remotely, additionally investing £2 million to support the development of an AI-powered lesson assistant to help reduce workload

We are already seeing positive signs that our investment is starting to deliver. The workforce has grown by 2,346 full time equivalents (FTE) between academic years 2023 to 2024 and 2024 to 2025, in secondary and special schools, the schools where they are needed most. This includes 1,435 more secondary school teachers and 911 more special and pupil referral unit teachers compared to last year.

Our future school teacher pipeline is also growing. As of the end of May 2025, there are 11% more trainees who have accepted offers to train in secondary subjects, including priority subjects such as physics, where we have seen a 43% increase in acceptances compared to last year.

Mental health support in schools

Activity metric:

coverage of children and young people, and coverage of schools by NHS-funded mental health support teams (MHSTs)

Target:

to reach MHST coverage of at least 50% of children and young people by 31 March 2025

Year end performance:

We met the in-year target for MHST coverage, with 5 million pupils and learners covered. This equates to 52% coverage of pupils in schools and learners in FE in England.

This year, 10,100 (41%) schools and colleges are supported by an MHST. Coverage of MHSTs at school or college level is lower than coverage at pupil and learner level due to variation in setting size and MHSTs currently working with larger education settings.

Delivery of MHST continues at pace, and assuming the average number of schools or colleges and pupils or learners per MHST remains constant, we estimate that coverage could increase to 62% of pupils and learners and 48% of schools and colleges by 31 March 2026.

Breakfast clubs

Year end performance:

We have begun delivering the government’s commitment to deliver universal free breakfast clubs, helping to improve pupil behaviour, attendance and attainment.

Key actions include:

legislating for the provision in the Children’s Wellbeing and Schools Bill, requiring every state-funded school with pupils on roll from reception to year 6 to offer a free breakfast club
tripling investment to over £30 million next year, providing:
- continued support to over 2,600 schools participating in the National Schools Breakfast Programme until March 2026
- funding and support from summer term 2025 for over 750 early adopter schools to provide breakfast clubs, including 30 minutes of free childcare, with over 3,300 schools applying for the scheme
publication of guidance and funding information in January 2025 to support the delivery of the early adopter scheme across 750 schools

This is the first phase of the rollout, with lessons from early adopter phase informing future delivery.

Regional improvement for standards and excellence teams

Year end performance:

We launched RISE teams in February 2025, who provide targeted interventions to eligible schools as well as a universal service to all schools.

Actions taken include:

confirmed an initial £20 million investment in teams and support
announced the 4 national priorities for the universal service, with delivery plans in development:
- attainment (with a focus on English and mathematics)
- inclusive mainstream
- reception year quality
- attendance
delivery of 100 attendance conversations with school responsible bodies during February and March 2025, in parallel, attendance conferences were held throughout March 2025 in each region, attended by over 2,200 delegates and generating positive feedback
work is underway to provide targeted interventions to an initial cohort of eligible schools, RISE advisors have engaged with most schools to consider specific improvement needs, with RISE teams beginning the work to match those needing support with a supporting organisation

Preparations for the April 2025 targeted intervention cohort are underway, covering at least 170 more schools. We will assess these schools through the 2025 summer term, match supporting organisations and develop improvement plans.

Attendance

Year end performance:

Work to tackle school absence has continued this year, building on our existing work to strengthen the attendance-system response.

We are seeing improvements in attendance nationally and across every sector. The 2023 to 2024 academic year data show overall absence and persistent absence both down from 2022 to 2023 academic year but a slight increase in severe absence. The primary sector is making steady gains with both overall and persistent absence. The secondary sector is seeing slower improvements.

Table 20: Overall absence, persistent absence, and severe absence

Category	Total (%)	Primary (%)	Secondary (%)
Overall absence 2023/24	7.1	5.5	8.9
Overall absence 2022/23	7.4	5.9	9.0
Overall absence 2021/22	7.6	6.3	9.0
Overall absence 2018/19	4.7	4.0	5.5
Persistent absence (>10%) 2023/24	20.0	14.6	25.6
Persistent absence (>10%) 2022/23	21.2	16.2	26.5
Persistent absence (>10%) 2021/22	22.5	17.7	27.7
Persistent absence (>10%) 2018/19	10.9	8.2	13.7
Severe absence (>50%) 2023/24	2.3	0.9	3.8
Severe absence (>50%) 2022/23	2.0	0.7	3.4
Severe absence (>50%) 2021/22	1.7	0.6	2.7

A pupil is identified as persistently absent if 10% or more of possible sessions are missed, and severely absent if 50% or more of possible sessions are missed. Overall absence is the total number of sessions missed due to absence for all pupils. A school day is split into separate morning and afternoon sessions.

Note the gaps in the data between academic years 2018 to 2019 and 2021 to 2022 due to COVID-19 disruption.

Actions taken include:

Our Working Together to Improve School Attendance guidance is now statutory, with mandatory daily attendance data submissions, through improvements in our data tools and provision to the sector, schools can now track attendance in a more granular way, enabling them to quickly intervene
hosted 9 regional conferences with a focus on practical strategies to improve attendance, sharing good practice and absence analysis
expanded the attendance mentor programme to reach 10,000 more persistently absent children and cover an additional 10 areas, reaching 15 local authorities and in total supporting 12,465 pupils

Further support includes the introduction of universal breakfast clubs and continued emphasis in the Ofsted reforms, including the new framework and annual checks.

Accountability

Year end performance:

We are advancing reforms to strengthen accountability, raising expectations and school inspection granularity. This has included delivering on the government’s manifesto commitments to abolish Ofsted single headline grades and introduce RISE teams.

Actions taken include:

announcing the removal of single headline grades from Ofsted’s school inspections from September 2024
publishing our consultation on school accountability reform, covering accountability principles, profiles, and a stronger approach to improvement through intervention for state schools across England, including proposals to establish RISE teams, in parallel, Ofsted published its consultation on inspections reform and report cards - these consultations closed at the end of April 2025

Subject to the consultation outcomes, reformed inspections and school report cards are expected to be introduced from November 2025.

SEND and AP reform

Year end performance:

Our ambition is that all children and young people with special educational needs or in AP receive the right high-quality support to succeed in their education and beyond. Our focus is on improving inclusivity and expertise in mainstream schools, as well as ensuring special schools meet complex needs.

Actions taken include:

committing funding to 17 local authorities for innovative short breaks for children and young people with SEND, improving health, education and wellbeing outcomes, the programme exceeded targets and showed improvements in outcomes and attendance, indicating participants are more likely to remain in mainstream settings, the Support for Families with Disabled Children programme supported over 65,000 families this year, awarding over 80,000 grants
implementing and tested reforms under the change programme, providing insights into good practice, informing our thinking about effective inclusive mainstream practice and understanding the challenges
delivery of early language support for every child in 9 pathfinder sites, one in each English region, covering 12 local authorities, with therapy support teams having helped 13,000 children so far and upskilled over 1,000 staff in delivering interventions
19 areas are embedding or implementing changes to their AP services in line with a range of support models and have also drawn on the learning from alternative provision specialist taskforces and support to set up their own taskforces

7.4 Pillar 3: Skills for opportunity and growth

Senior responsible officer: Julia Kinniburgh, DG Skills Group

Skills are essential to deliver the Plan for Change, driving economic growth, breaking down the barriers to opportunity and ensuring the supply of skilled workers to deliver the government’s missions. As young people move into adult life, they must have high-quality pathways through further and higher education with a clear line of sight to employment, including through technical training.

Our ambition for this pillar is to deliver a world-leading skills system to unleash growth and break down barriers to opportunity, underpinned by a national view of skills needs, high quality courses for all young people, a clear system for adults to retrain and a new social contract with employers. We will do this through:

increasing the quality and quantity of education and training that meets economic need
making better use of data to help learners and employees make more informed choices that boost their outcomes
driving up employer engagement in training

Outcome KPIs

Share of 16 to 17 year-olds participating in education and apprenticeships.

Year end performance:

89.0% (2024 data)

The rate increased slightly from 2023.

Skills shortage vacancies density

Year end performance:

36% skills shortage vacancies as share of all vacancies

New data for 2024 which will set baseline for future due to be released later in 2025.

Activities

We will deliver a skills system that enables every young person to follow the pathway that is right for them and creates a clear system for adults to retrain and upskill. Whether through high quality apprenticeships, or education or training in colleges or universities, skills give people the power to seize opportunity. We will do this by:

Skills England assessing national skills needs and bringing together partners in the system to address those needs
replacing the apprenticeships levy with a new growth and skills levy, which will offer greater flexibility to employers and learners through shorter apprenticeships, foundation apprenticeships and new short courses that support the industrial strategy
delivering the Youth Guarantee, starting with 8 trailblazer areas, to ensure support for 18 to 21 year olds to access education and employment with tailored and local interventions

Skills England

Activity metric:

establish Skills England (SE) as an executive agency and be operational by July 2025

Target:

Skills England fully established and operational by July 2025

Year end performance:

On 22 July 2024, the Prime Minister announced the creation of SE to build a highly trained workforce aligned with the national, regional and local skills needs and the industrial strategy.

The first SE report outlined the role of SE, key skills challenges it faced and an initial assessment of current and future needs in the economy. Over autumn 2024, Skills England built on this analysis with employer and stakeholder engagement.

SE initially operated in shadow form within the Department, with Richard Pennycook appointed as the interim Chair. The IfATE (Transfer of Functions etc) Bill, introduced to Parliament on 9 October 2024 and granted Royal Assent on 15 May 2025, enabled the transfer of functions and staff from IfATE to SE.

SE leadership was confirmed in February 2025:

Phil Smith CBE will serve as Chair
Sir David Bell as Vice-Chair
Sarah Maclean and Tessa Griffiths as joint Chief Executives

In May 2025, SE announced its other board appointments.

SE was formally established and made operational as an executive agency of the Department on 2 June 2025, and the Secretary of State confirmed SE’s priorities through publishing a letter to SE’s joint chief executives. This letter sets out that SE will identify skills gaps across the economy, including in priority sectors, and use this insight to drive improvements. SE will also work with the Department and across government to bring the skills system together so that people and employers can benefit from the training they need to succeed.

On 2 June 2025 SE published its second report which included the findings of analysis and engagement with sectors on the growth and skills offer, and skills needs assessments for 10 priority sectors.

The assessments identified recurring themes and similarities across each sector in relation to priority jobs, skills and training routes (with a particular focus on apprenticeships). Feedback supported the government’s introduction of shorter apprenticeships and foundation apprenticeships. The report then identified key gaps in the current apprenticeships and skills offer and potential ways to address them to secure the future workforce.

In the 2025 to 2026 financial year, SE will co-design new approaches with industry and regional partners to improve the skills of our workforce, collaborating with a wide range of interested parties across the skills system, including devolved government counterparts where appropriate. SE will continue to work proactively with strategic authorities and local leaders to help co-create solutions that respond to national priorities, skills gaps, and local labour market needs, and ensure we spread growth and opportunity to all of our regions.

Growth and skills offer

Activity metric:

initial rollout of new levy funded products for September 2025 following the conversion of the apprenticeship levy into the growth and skills levy

Target:

new products to be rolled out in Autumn 2025

Year end performance:

In September 2024, the government committed to introducing the growth and skills levy to replace the apprenticeships levy, offering greater flexibility to employers and learners and supporting the industrial strategy. In August 2025, foundation apprenticeships will be launched for young people in targeted sectors, as well as shorter duration apprenticeships (reducing the minimum duration of an apprenticeship to 8 months). These flexibilities will help more people learn new high quality skills at work and fuel innovation in businesses across the country.

In June 2025, as part of the government’s industrial strategy, we announced the introduction of short courses in England, funded through the growth and skills levy, in areas such as digital, artificial intelligence and engineering. These will support industrial strategy sectors such as in creative industries and advanced manufacturing from April 2026. We are working with SE to determine the courses which will be prioritised in the first wave of rollout and subsequent waves, and how those sit alongside apprenticeships and other training routes. We will work with SE to introduce these short courses and consider how to prioritise investment across the programme.

To support delivery, we are also simplifying systems and reducing bureaucracy. Since February 2025, English and mathematics level 2 qualifications are no longer required for apprentices aged 19 and over to complete their apprenticeship. Assessment reforms announced in the same month will also streamline processes by enabling flexibility, ensuring assessment is proportionate.

In February 2025, we launched the Your Apprenticeship app to support apprentices. This was designed with extensive input from learners and provides easier access to essential tools, resources, and support that apprentices need during their programme. We have also updated the apprenticeship service to enable providers to undertake administrative tasks on behalf of small employers, which has resulted in improved small and medium sized enterprise participation and satisfaction in the service.

Table 21: Number of apprenticeship starts, and number and rate of achievements on apprenticeships

Academic year	Number of starts on apprenticeships (standards and frameworks)	Number of achievements on apprenticeships (standards and frameworks)	Rate of achievements on apprenticeships (standards and frameworks)
2017 to 2018	375,800	276,200	67%
2018 to 2019	393,400	185,100	65%
2019 to 2020	322,530	146,900	58%
2020 to 2021	321,440	156,530	58%
2021 to 2022	349,190	137,220	53%
2022 to 2023	337,100	162,320	55%
2023 to 2024	339,580	178,220	61%

In 2023 to 2024, the apprenticeship achievement rate reached the highest level since the 2018 to 2019 academic year, with an increase of 5.9 percentage points compared to the 2022 to 2023 academic year, to over 60%.

Referenced data is available for apprenticeships. Apprenticeship achievement means an apprentice has completed their apprenticeship term and passed the end point assessment. Apprenticeship frameworks were the earlier iteration of apprenticeships. Apprenticeship standards were introduced in 2014 and are designed by employers. Since August 2020 all apprenticeship starts have been on standards not frameworks. Standards are more rigorous and difficult to achieve than the frameworks they replaced. The proportion of apprentices on standards has increased from 46% in the 2019 to 2020 academic year to 99% in the 2023 to 2024 academic year.

Youth Guarantee

Activity metric:

launch 8 trailblazers in spring 2025

Target:

launch to time

Year end performance:

The primary goal is to reduce the number of young people (aged 18 to 21) who are not in education, employment or training (NEET) by providing comprehensive support and opportunities.

Labour force survey estimates for England show 837,000 16 to 24 year olds (based on academic age) were NEET between October and December 2024, an increase of 103,600 since last year.

As outlined in the Get Britain Working White Paper, the Government is investing £45 million to launch a series of 8 place based youth guarantee trailblazers. Led by mayoral authorities, they will test new ways of supporting young people into employment or training, by enhancing and aligning existing programmes locally. Mayoral strategic authority proposals for the trailblazer plans were received in February 2025. Following review, the 8 authorities were issued with grant funding agreements in April 2025.

Developed with DWP, the youth guarantee will provide tailored support to eligible 18 to 21 year olds to ensure they can access training opportunities, an apprenticeship or employment support. It will also strengthen support for 16 to 17 year olds who are at risk of, or have disengaged from education and learning.

The trailblazers were officially launched on 23 May 2025 and have now begun delivery on their proposed plans. Each area will deliver interventions according to local need and specific cohorts of young people.

They will trial new approaches to bringing together existing and new services for those at risk of or who are currently not in employment education or training, (NEET). These include:

partnerships with local employers to prioritise jobs and learning opportunities for the Youth Guarantee cohort, creating a bank of opportunities
1 to 1 intensive support from specialist youth workers to support those who face multiple barriers or may be further away from accessing work and training
holistic support for those who are further away from being able to prioritise training and employment such as integrated mental health and housing support
new digital platforms so that pathways to education and training are clearer, more accessible and tailored to local priority sectors as well as more in-person hubs where young people can access support face to face
a focus on transition points for those leaving college and for those who may experience more than one transition point such as care leavers, those with SEND and those who have previously accessed alternative provision
a strong emphasis on careers advice, work placements and mentoring throughout school and college
coordination or services and referral pathways through better data and information sharing

The trailblazers represent the first phase of delivering the wider Youth Guarantee. We will use the lessons from the current trailblazer areas to inform what works to support 18 to 21 year olds gain meaningful education or employment.

6,500 additional teachers

Activity metric:

number of teachers in secondary schools, special schools and colleges

This activity also falls under pillar 2 – every child achieving and thriving, where information on performance is provided.

7.5 Pillar 4: Family security – keeping children safe and tackling child poverty

Senior responsible officers:

Justin Russell, DG Families Group (Keeping Children Safe)
Tony Foot, DG Strategy Group (Tackling Child Poverty)

Working across government, the pillar will remove the underlying barriers to opportunity that mean people struggle to have their most basic needs met. What happens in the home is a key driver of school experiences and attainment, and influences choices and outcomes post-16.

This pillar aims to improve outcomes for children by reducing the likelihood of emotional and physical harm and tackling child poverty. This will relieve pressure across the education and CSC system and enable children to learn and thrive.

Action on child poverty is being driven by the new cross government Ministerial Child Poverty Taskforce, co-chaired by the Secretary of State for Education and the Secretary of State for Work and Pensions.

Outcome KPIs

More children stay safely with families

Target:

a reduction in the number of children in care

Year end performance:

There were 76,250 children in care (non-unaccompanied asylum seeking (non-UAS) children) on 31 March 2024. Numbers of children in care have risen over the last decade but plateaued in recent years. There were 76,360 non-UAS children in care last year.

Proportion of children living in relative poverty (after housing)

Year end performance:

31% of children live in relative poverty (after housing).

Activities:

Under the previous government’s ‘Stable Homes, Built on Love’ strategy, we launched a series of CSC reforms, including launching:

Families First for Children (FFC) pathfinder
expanding the family finding, befriending and mentoring programmes
investing in training and support for kinship carers
a fostering recruitment and retention programme

Following the general election, we have committed to whole system reform of CSC as set out in Keeping children safe, helping families thrive, with over £300 million of new funding for next year, including additional funding to enable the national rollout of reforms that have been tested through the pathfinder areas.

We have set clear conditions on prevention funding, established the Families First Partnership programme to support local delivery of family help, multi-agency safeguarding and child protection teams, and family group decision making. We are also delivering an extensive and ambitious package of legislative reform through the Children’s Wellbeing and Schools Bill.

The Child Poverty Taskforce has been progressing work to publish a child poverty strategy later this year. The strategy will focus on 4 key themes:

increasing incomes
reducing essential costs
increasing financial resilience
better local support, focused especially on children’s early years

The strategy complements wider reform plans across UK government and devolved governments.

A rolling programme of meetings between the taskforce and experts support the strategy development process, including expert-led thematic sessions.

Families First for Children

Activity metric:

implement reform models to increase effective, preventative multi-agency support and protection services in 10 pathfinder areas by March 2025, to inform national rollout of reforms to family help, multi-agency child protection and family group decision making

Target:

reform models set up in 10 local authorities

Year end performance:

Reform models are being tested in 10 local authorities:

Dorset
Lewisham
Lincolnshire
Luton
Redbridge
Walsall
Warrington
Warwickshire
Wirral
Wolverhampton

Insights from the FFC pathfinder are shaping a national learning strategy to support national reform and transformation in the 2025 to 2026 academic year. This includes guidance documents and multi agency learning events, to raise awareness and encourage buy-in across local safeguarding partners, including police, health and education.

While it is too early to measure the impact of the programme, an independent evaluation is focused on implementation and process related insights, including workforce expectations. The first report will be published in summer 2025. Emerging views from discussions with the pathfinders highlight:

buy-in to the strategic direction of the programme across delivery teams and senior leaders, with a strong understanding of the pathfinder model
early, consistent communication from senior leads received positive feedback and is key to driving engagement
positive progress in multi-agency collaboration and data sharing, with multiple examples across police, health, schools and local authorities

A key learning from the programme is the need for clear guidance on roles, responsibilities, and time commitments, especially partners in police, health and education.

Fostering recruitment and retention

Activity metric:

expansion of the regionalisation of foster care recruitment to allow local authorities to collaborate, rather than compete, to recruit more foster care households

Target:

establish 10 regional foster care recruitment hubs covering 95 local authorities across England

Year end performance:

The 10 regional fostering recruitment and retention hubs have now been set up.

As part of the Chancellor’s transformation fund announced in the 2025 Spring Statement, an additional £25 million over 2 years (beginning in the 2026 to 2027 financial year) was allocated to continue foster care reforms. This is additional to the £15 million of fostering investment that was announced in the Autumn Budget to cover investment taking place in the 2025 to 2026 financial year.

Single unique identifier

Activity metric:

launch single unique identifier for children

Year end performance:

The Children’s Wellbeing and Schools Bill is on track to gain Royal Assent in autumn 2025, with procurement of pilot delivery partners on track for completion by end of the calendar year.

This year, we launched a multi-agency information sharing programme to deliver the manifesto commitment to prevent children and families falling through the cracks. A key component is introducing a single unique identifier for children, supported by several strands:

enhanced child protection information sharing service to reduce the burdens on local authorities when sharing social care information with health
a data standards programme to develop and standardise the ways for collecting, using and sharing data, this should help make sharing safeguarding data easier and reduce burdens for social workers and local authorities through improved automation and integration with AI tools
discovery work to shape the piloting of a single unique identifier, including the setting up with a local authority partner
Somerset’s local authority funded to build on their work for the data and digital solutions fund, in creating a suite of templates for safeguarding partners to use to implement data sharing arrangements (these are available on the local authority’s website)

Kinship

Activity metric:

deliver 4,000 training instances to kinship families

Year end performance:

In partnership with Kinship, we are delivering a national package of training and support accessible to all kinship carers across England. Between January 2024 and March 2025, over 4,300 training instances were delivered, exceeding our target of 4,000. The contract has been extended to March 2026 to continue this service.

In October 2024, we appointed the first National Kinship Care Ambassador, who advocates for kinship children and their families across government. They also work alongside local authorities to help them improve practice and aligning with national guidance. We published new statutory guidance, outlining the support and services local authorities should provide to kinship families, with legislation underway to make it mandatory to publish this offer in a clear, accessible way. In addition, the role of virtual school head was expanded to include championing the education, attendance and attainment of children in kinship care.

Through the Children’s Wellbeing and Schools Bill, we are mandating an offer of Family Group Decision Making for all families reaching pre-proceedings stage, and through the FFC programme, we are encouraging the greater use of family networks at an earlier stage.

The kinship allowance pilot is expected to enter delivery in autumn 2025.

7.6 Key risks and issues

Principal risks are those that, if materialised, would significantly impact our Departmental objectives. Each risk (or issue, if the risk has materialised) is owned by a director general, managed day to day in the relevant director’s area, and monitored through our corporate governance structure. Further information on our risk and issue management framework can be found in the accountability report.

Several risks identified in last year’s ARA (local authority financial challenges, social worker capacity and looked after children placement market failure) are now managed at a lower level following a reassessment of their risk ratings. While the risks are still present, they are no longer considered principal risks so cease to be disclosed here.

This year, 5 principal risks or issues are reported against 6 last year. Ratings for schools and further education workforce, education estates and cyber security remain stable and unchanged from March 2024. High needs cost pressures have worsened and materialised into an issue. The risk of higher education financial failure is a new principle risk, escalated to the top tier this year.

Table 22: Principal risks or issues managed during the year

Number	Risk	March 2024 rating	March 2025 rating	Direction
1	Schools and further education workforce	Major issue	Major issue	Stable
2	High needs cost pressures	Critical – Very likely	Major issue	Worsening
3	Education estate	Critical – Very likely	Critical – Very likely	Stable
4	Higher education financial failure	Escalated September 2024	Critical – Very likely	New in year
5	Cyber security	Critical – Likely	Critical – Likely	Stable

The trajectories of the principal risks follow.

Risk 1 – Schools and further education workforce

Business group owners

Schools Group and Skills Group.

Risk profile across the year

Stable.

Risk description

There is a risk that schools and colleges are unable to recruit and retain sufficient quality teachers, impacting delivery of the government’s opportunity and growth missions.

Causes

There is a wide range of factors affecting teacher recruitment and retention in schools and FE sectors, including competitiveness of salaries relative to other occupations, teacher workload and availability of flexible working. Recruitment and retention challenges are particularly acute in FE generally and in certain subjects (for example STEM) in both schools and FE.

Mitigating actions

We are committed to recruiting an additional 6,500 new expert teachers across secondary schools, further education settings and special schools over the course of this Parliament.

Following the September 2024 5.5% pay award for teachers and leaders in maintained schools, we are seeing positive signs that our programmes are making a difference in schools. There are 2,000 more secondary school teachers in training this year compared to last, and 2,500 more primary and secondary teachers are forecast to stay in teaching over the next 3 years. The June 2024 school workforce census shows an additional 2,300 teachers (full time equivalents) employed in state-funded secondary and special schools. In schools, a £233 million initial teacher training financial incentives package was announced for the 2025 to 2026 academic year recruitment cycle.

We are investing over £400 million more in 16 to 19 year old education for the financial year and have made approximately £50 million of this funding available to colleges for April to July 2025 to respond to current priorities, such as recruitment and retention. We continue to provide bursaries to prospective teachers to undertake high quality initial teacher education, and we are attracting and training industry experts to teach in FE through the Taking Teaching Further programme.

Across both schools and colleges, we are providing targeted retention incentives worth up to £6,000 after tax for early career teachers in shortage subjects, and we are expanding our marketing campaigns ‘Every Lesson Shapes a Life’ and ‘Share your Skills’ to attract new teachers. We are improving teacher workload and wellbeing through a range of resources.

Through the Improving Education Together partnership with employers and unions we are collaborating on ways to improve workforce retention. Together the key stakeholders propose, develop and implement policy to improve education, value education professions and boost opportunity for all.

Risk 2 – High needs cost pressures

Business group owner

Schools Group.

Risk profile across the year

Worsening.

Risk description

There is a risk that, despite substantial real terms increases in high needs funding, high needs cost pressures continue to increase which could result in some local authorities becoming insolvent, citing SEND pressure as a contributing factor.

Children, young people and their families continue to face a SEND system that does not meet their needs and for which cost pressures to the high needs budget increase further, contributing to local authorities’ financial issues. The government has announced some immediate measures to improve the SEND system as well as committed to broader reforms.

Causes

Funding pressures on SEND and AP continue to escalate and we recognise that local authorities will need support through the transition to a reformed SEND system. The government will commence a phased transition process which will include working with local authorities to manage their SEND system, including deficits, alongside an extension to the Statutory Override until the end of the 2027 to 2028 financial year. We will provide more detail by the end of the year, which includes a plan to support local authorities with both historic and accruing deficits.

Mitigating actions

Through the plan for change, the government is committed to improve the education and care systems to make sure that children, young people and their families receive high quality support through the SEND system, in both mainstream and specialist settings. These improvements aim to restore parents’ trust that their child will get the right support, and that it will improve their outcomes as a result. At the same time reforms aim to relieve pressure on local government finances.

The government has already announced measures to improve inclusivity in the education system. In addition to significantly increasing real terms funding for high needs we are working with local areas to make sure they are taking action now to deliver more financially sustainable services, based on lessons learned from the delivering better value programme and what works in SEND programme’s identification of effective practice.

Additionally, the change programme’s 32 local areas are testing and disseminating the learning from a range of inclusive mainstream programmes and practice models, for example the early language support for every child and partnership for inclusion of neurodivergence in schools, allowing children to receive the support they need quickly. This learning and practice alongside the insights and emerging lessons from the expert advisory group’s inclusion in practice initiative demonstrate that there are areas that are working towards management of any existing deficits while delivering effective services.

Risk 3 – Education estate

Business group owner

Operations and Infrastructure Group.

Risk profile across the year

Stable.

Risk description

There is a risk of building or building element failure in the publicly funded estate resulting from structural safety issues.

Causes

While general deterioration of building condition increases the risk of building failure, which can be exacerbated by climate change, of greatest concern are buildings constructed post-1945 that use materials or designs that are past their intended design life and could be subject to defects that increase the risk of failure. If buildings have not been carefully monitored and maintained by responsible bodies, the risk of structural failure increases.

Mitigating actions

There has not been a structural incident of which the Department is aware that has caused injury or harm to pupils or staff in the year. At the time of publication, there are no open schools or college buildings where we know of an imminent risk of harm.

The Department supported responsible bodies to put in place measures to mitigate the presence of reinforced autoclaved aerated concrete (RAAC) in school and college buildings. RAAC is being permanently removed either through grant funding to the responsible body or through the school rebuilding programme. We continue to provide funding, guidance and support to the sector for maintaining the estate in a safe and operational condition.

The Department is conducting research into structural risks in the post-war education estate. The objective is to establish the most prevalent building safety risks in the estate, so resources can be effectively targeted to mitigate the risk.

We continue to gather data and intelligence on the condition of the education estate, including through our Condition Data Collection 2 programme, which is due to conclude in 2026.

We have several programmes and communication channels so we are proactively aware of any serious condition issues in the estate and can quickly support responsible bodies to address them.

Risk 4 – Higher education financial failure

Business group owner

Skills Group.

Risk profile across the year

New as a principal risk this year.

Risk description

There is a risk that financial failure of a higher education provider impacts students, the sector and the economy.

Causes

Prior to this financial year tuition fees had fallen in real terms OfS has assessed that 45.2% of higher education institutions forecast a deficit in the 2024 to 2025 academic year.

Mitigating actions

The government announced in November 2024 that domestic tuition fees would rise by 3.1%, the first increase since 2017, to help put the sector on a more secure footing.

Through OfS, we are refocusing efforts on monitoring financial sustainability and have communicated clearly to the sector that many providers will need to take increasingly bold action to address the impact of challenges on their financial position in the short, medium and long term.

The Department will publish a plan for higher education reform later in 2025.

Risk 5 – Cyber security

Business group owner

Operations and Infrastructure Group.

Risk profile across the year

Stable.

Risk description

There is a risk that a cyber-attack or security breach could result in a loss of access to critical systems and services, and a loss of critical departmental data.

Causes

The overall operating environment remains hostile, with an increase in the frequency and sophistication of cyber-attacks targeting the government observed throughout the year. The prognosis is a continuing deterioration of the threat landscape. As a result, the threat to government remains substantial and a critical cyber event remains likely.

Mitigating actions

We have an agreed approach in the event of an attack and processes to ensure communication lines are consistent between all areas. We have tested this approach in simulations of cyber-attacks and will continue to conduct these exercises within immersive environments. We will continuously review responses arrangements and playbooks.

We have arrangements with other providers to enhance security in key periods and will continue to liaise with these providers to raise awareness and encourage contingency planning.

We will continue to conduct staff phishing awareness exercises, the results of which have been continuously strong. We will also harness other innovative methods to foster a cyber secure culture.

7.7 Fraud and error

Table 23: Performance in fraud and error prevention over the past 4 years (£million)

	2024 - 2025 (Q1 and Q2)	2023 - 2024 (full year)	2023 - 2024 (Q1 and Q2)	2022 - 2023	2021 - 2022
Detected error	13.8	72.3	36.4	39.1	47.2
Detected fraud	19.2	12.6	6.1	58.2	22.0
Recoveries fraud and error	16.5	66.8	27.5	17.0	47.3
Prevented fraud	50.8	104.1	3.1	51.6	19.7

In the table above we present updated values for the prior year, adding the final 2 quarters to the values disclosed last year. We work to Public Sector Fraud Authority’s (PSFA’s) reporting timeline which is lagged to the ARA reporting timetable. The final prior year figures were approved in December 2024.

The current year performance represents provisional data for the first 2 quarters only. The change to the definition of prevented fraud applicable from last year’s full year position means that there is less comparability between that data and earlier periods.

Detected error

Detected errors are where incorrect payments occur but excludes instances of error that were prevented after the point of detection. Errors reported here include where fraud cannot be determined or wrong or incorrect payments are made to recipients (such as overpayments).

Last year, 2 errors recorded were anomalous (including £13.6 million from the resolution of a long running investigation) and together totalled £25.5 million, bringing the detected error figures much closer together.

Detected fraud

Detected fraud are instances where payments were made, where we judged post-payment there was an intention to defraud. This category does not include instances of fraud that were prevented from payment after the point of detection since no payments were made.

Recoveries fraud and error

Recoveries predominantly relate to error rather than fraud and are typically a result of control failure or procedural lapse. Detected errors are usually quickly and easily recovered as our transactional counterparty base is broadly stable and in receipt of regular funding from which to recoup amounts due. Recovery values disclosed in table 23 are based on the date recovered not the date of the incorrect payment.

The sharp increase in recoveries for the 2023 to 2024 financial year was partially linked to the historic error loss investigation and other anomaly mentioned above and the recovery of those funds. Errors tend to be recovered quickly and the increase in detected error will drive increased recoveries though these may on occasion be recovered across financial years.

Prevented fraud

Last year, the Cabinet Office, with approval from PSFA’s prevention panel, updated the definition of ‘prevented fraud’. This new definition now includes both ‘prevented actuals’ (losses that would have occurred immediately) and ‘future loss preventions’ (losses that would have occurred within the next 12 months had action not been taken). This change is responsible for the uplift in prevention performance from both the 2022 to 2023 financial year and last year’s Q1 and Q2 values. The prior year’s Q1 and Q2 value for prevented fraud recalculated to match the current approach is £34.6 million.

Addressing fraud and error in higher education

In a March 2025 article for The Sunday Times, the Secretary of State addressed serious concerns regarding fraud and error in the higher education sector, particularly within franchised university provision. Organised abuse of the student finance system had been uncovered at a small number of providers. These cases exposed systemic weaknesses, including inadequate oversight of the expanded number of university partnerships with franchised bodies and financial instability within the sector.

To restore integrity and public confidence, the Secretary of State outlined a robust response. This includes collaboration with PSFA, empowering us to investigate fraud more effectively, and introducing legislation to strengthen OfS’s regulatory powers. These actions form part of the government’s wider Plan for Change, aimed at safeguarding public funds and driving up standards in higher education.

Estimation of errors

In addition to the counter fraud team, the Group also has a dedicated assurance team that address errors and provide assurance over the regularity of the Group’s spending. More details, including an annual assurance assessment, can be found in the regularity section of the accountability report. We have reviewed our significant spending activities and made estimations, including extrapolations, of possible errors. Significant activities are:

adult education budget
16 to 19 funding
apprenticeships training
student support
post-16 funding
academy and schools funding

Across these activities we have quantified potential errors at £369 million. A separate assessment for student loans quantified potential error in student loans at £327 million. This is separate to the £21 million of grant overpayments to students made in the year.

Our estimation of the error is different to the one reported by the external auditors in the Certificate and Report of the Comptroller and Auditor General, as the auditors perform their own calculation of the estimated error based on their audit work using different assumptions and judgements.

7.8 Strategic enablers

Workforce, skills and location

Our DfE behaviours (we are kind, we are direct, we simplify and we connect) provide the foundations and guiding framework for all our work to support and grow our workforce. Our DfE behaviours underpin the actions we are taking to build a department that is more agile, mission-focused and productive.

As a department, we have role modelled our DfE behaviours and worked together to provide a solid foundation to successfully deliver the opportunity mission, providing excellent services for children and learners.

To help us achieve our aims for our workforce, this year we launched our People Strategic Plan (PSP) for 2024 to 2027. We have ensured that the Department continues to be a great and supportive place to work, with high standards and accountability. Through the actions set out in the PSP, we continue to attract, develop and retain the very best talent and ensure the Department’s environment supports staff to perform at the highest standards. Ensuring our staff experience our organisation as a place, where they feel a sense of belonging, where they can thrive and be supported to perform at their best, remains a key priority for us. Being inclusive and developing brilliant leaders and managers are themes that run throughout our PSP.

Evolving as a more agile organisation is critical to achieving our strategic objectives to deliver the opportunity mission. This year, we have worked towards becoming a smaller, more efficient department, promoting agile ways of working to ensure we deliver our priorities. Through workforce planning, we have reduced in size by 4.7% whilst ensuring that we retain a skilled workforce through focusing recruitment on the specialist skills that we need.

Being a learning organisation that is high performing and skilled is a top priority for us. Our learning and development approach aligns with our strategic priorities. We introduced quarterly learning priorities, focusing on:

line management
change management
agility
innovation

In addition, we completed a leadership programme anchored in radical candour, to support our behaviours of being kind and direct, which 65% of senior civil servants have attended in-year. Our curriculum supports all staff to be successful in their roles. We also continued to be an exemplar apprenticeship employer, with 5.9% of our staff registered on an apprenticeship aligned to our priority skills at the end of the year.

We are developing our location strategy that will support us to deliver our places for growth commitments, enabling end-to-end careers in our offices. In addition, we have continued work to identify efficiencies through consolidating office space, releasing space to allow co-locating with other government departments.

We maintained effective talent and performance management, with the SCS Workforce Committee and local senior leadership teams holding regular career and talent discussions to identify critical roles and succession plans.

Innovation, technology and data

Our Digital, Data and Technology directorates provide a range of digital services, technology tools and platforms, and data services to the Department and support the sectors we serve. This year, we strengthened our strategy with our strategic framework, focusing on 5 key themes:

delivering digitally
the power of data
the right tech
user-centred innovation
capacity and capability

We have advanced priority projects under the strategic data transformation plan, including:

mapping the Department’s data estate for better efficiency
improving daily school attendance data for richer policy insights
delivering against our ambitions for artificial intelligence (AI) in education
developing an advanced analytics unit to boost productivity and explore automation opportunities

Progress has been made on the 3 year technology strategy with the One IT project, facilitating easier collaboration between government departments, while ensuring data security.

Assurance assessments over the past 2 years have shown a solid foundation for cyber security, with ongoing improvements. The direction of travel, however, is positive with assessors seeing improvements across a number of areas.

We work across government to deliver against priorities for AI, enabling access to safe and well evidenced AI and ‘EdTech’ products for better learning outcomes, including working with Department for Science, Innovation and Technology on a content store for AI in education.

The connect the classroom programme has successfully invested £215 million in 3,705 schools, benefitting over 2.5 million pupils, by upgrading wireless networks and closing the digital divide, supporting the opportunity mission.

We have made progress in implementing the government digital and data pay framework, successfully recruiting to specialist roles and reducing reliance on expensive contractors.

Delivery, evaluation and collaboration

Since the general election, the Department has led government’s opportunity mission, requiring collaboration across government and external partners. We established the opportunity mission board and an external reference group to guide and challenge ministerial decisions.

We have already made good progress against our plan for change milestone. We have extended the early years entitlement to 15 hours for children aged 9 months to 2 years old and begun an expansion of school based nurseries by opening the first funding round and confirming capital investment to areas where places are most in demand.

To tackle child poverty, we have set up the child poverty taskforce and extended the Household Support Fund to help struggling households through the winter. To support all children to achieve and thrive, we have ended single word Ofsted judgements, expanded attendance mentoring and delivered real time insight and benchmarking on attendance. We have named the 750 early adopter schools who will start providing free breakfast clubs next financial year.

To give young people opportunity as they move from education to work, we have:

established Skills England
secured investment in youth guarantee trailblazers
announced a new offer of shorter apprenticeships and reduced red tape to grow apprenticeship starts in years to come

We have strengthened project delivery capability, focusing on the major projects portfolio, which brings together projects and programmes that are either:

over £50 million
novel
contentious
repercussive
key mission initiatives

Our Major Projects Portfolio Office provides project management and best practice guidance, with internal audit and the Infrastructure and Projects Authority offering assurance.

Investment in the project delivery profession has improved outcomes, and we have increased our numbers of accredited project delivery colleagues, chartered project professionals and graduates from the government’s project leadership courses.

At local and regional levels, we have enhanced operational delivery by:

investing in our operational delivery profession
leveraging expertise through Regions Group’s networks with stakeholders
improving digital services for academy applications
publishing guidance on commissioning high-quality academy trusts
optimising expertise for improvement and intervention programmes across children’s services

We also commission evaluations to understand and enhance the effectiveness of our initiatives, such as attendance mentors, wraparound childcare, and expanded early years childcare entitlements.

7.9 Sustainability disclosures

This section, together with Annex B, presents the Department’s performance in relation to both the Taskforce on Climate-related Financial Disclosures (TCFD) and the Government Greening Commitments (GGC).

TCFD recommendations are structured around 4 themes (governance, strategy, risk management, and metrics and targets) that relate to core elements of how organisations operate.

The government has endorsed the TCFD framework and has mandated TCFD disclosures aligned to those applicable for large entities in the private sector. HMT has introduced guidance for the public sector to implement these disclosures, aiming to transform how organisations address climate change and its impacts. HMT’s TCFD guidance includes a 3 year implementation period.

TCFD adoption timeline

Phase 1

successfully adopted in financial year 2023 to 2024
high level overview
focus on governance and metrics and targets
compliance statement

Phase 2

adopted in the 2024 to 2025 financial year
qualitative disclosures, with existing quantitative disclosures
updates to prior year phase 1 disclosures
risk management disclosures

Phase 3

adopted in the 2025 to 2026 financial year
full compliance with all TCFD pillars
updates to previous disclosures
additional strategy disclosures
compliance statement

TCFD compliance statement

The Department has reported on climate-related financial disclosures consistent with HMT’s application guidance, which interprets and adapts the framework for the public sector.

Table 24 shows the TCFD disclosures the Department has included in the performance report, and an assessment of the extent to which they are compliant with phase 2 implementation plan:

not compliant
partially compliant
fully compliant

Table 24: TCFD compliance statement

Governance	Compliance status
Describe the Board’s oversight of climate-related risks and opportunities	Fully compliant
Describe management’s role in assessing and managing climate-related risks and opportunities	Fully compliant
Risk management	Compliance status
Describe the organisation’s processes for identifying and assessing climate-related risks and opportunities	Fully compliant
Describe the organisation’s processes for managing climate-related risks	Fully compliant
Describe how these processes are integrated into the organisation’s overall risk management	Fully compliant
Metrics and targets	Compliance status
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process	Fully compliant
Disclose scopes 1, 2 and 3 (where appropriate) greenhouse gas emissions and related risks	Fully compliant
Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets	Fully compliant

We consider that the Department’s top-tier risk to the education estate includes physical climate risk.

Performance against TCFD recommendations

Sustainability and climate change is a cross cutting theme in the Group and our work has wide reaching impacts. To clearly demonstrate the way in which we are complying with the recommendations, we use 3 distinct lenses.

Corporate body lens

Pertaining to the Group itself, predominantly driven by our office estate, including quantified GGC disclosures along with policy statements relating to the Group’s own activities.

Education sector strategy lens

Describing our policy aims and activities for the education and children’s services system (such as schools) whose activities are not included within the scope of our GGC return, but for which the Department retains policy responsibility.

Education estate lens

Pertaining to the carbon emissions and adaptation responsibilities from education buildings which are equivalent to around one-third of total public sector emissions. These activities are also not included within the scope of our GGC workings, but the Department retains policy responsibility.

Governance

The Board’s oversight of climate-related risks and opportunities

Following the general election, sustainability now sits within Minister Morgan’s portfolio.

Jack Boyer retained responsibility as non-executive board member responsible for sustainability and climate change.

Ministers, non-executive board members, directors general, the Chief Sustainability Officer (CSO) and the SRO attend relevant cross-government climate change and environment boards, including the new board for the government’s Make Britain a Clean Energy Superpower Mission.

The Group is not subject to an external board in relation to their approach to managing climate risk, setting climate related polices or risk mitigation strategies.

Lens: corporate body

There are proposals that climate-related risk will be tabled at Audit and Risk Committee (ARC) annually, with a deep dive undertaken of the context and progress made for sustainability strategy in the Department and its sectors.

Lens: education sector strategy

Minister Morgan has committed to publish a refreshed strategy, in order to emphasise the importance of education as an essential tool to mitigate and adapt to climate change. The refreshed strategy will support the policy aims of the opportunity mission and align with existing and emerging departmental and cross-government strategies.

Lens: education estate

ARC received an overview of a new long term plan which is being developed to deliver a vision for the education estate that supports brilliant education and care outcomes through an education estate that is:

safe
sustainable
suitable
sufficiently sized
resilient

This helps meet the Environmental Audit Committee’s (a committee external to the Group) 2023 recommendation that the Department publish a roadmap to align condition with sustainability planning and funding.

Lens: corporate body

In February 2025, we established a Corporate Sustainability Board to oversee the adoption of new GGC targets and support the embedding of sustainability across the Department and its estate.

The Department is committed to reviewing its corporate sustainability strategies in 2025, to ensure alignment with evolving regulations, including the expected introduction of new GGC targets in 2025.

This review will also ensure that we support, and provide direction to, our Agencies and NDPBs with respect to meeting the GGC targets.

Lens: education sector strategy

The CSO chairs the Sustainability and Climate Change Strategy Board, comprising directors who are responsible for the prioritisation of resources to support delivery of commitments and whose terms of reference make the link between the education sector strategy and the corporate strategy.

The SRO for sustainability and climate change chairs the Sustainability and Climate Change Portfolio Delivery Board, made up of deputy director sponsors responsible for delivering commitments of the strategy.

Both the CSO and SRO report to a director general acting as a sustainability champion.

Lens: education estate

A new Adaptation and Nature Recovery Programme Board has been established to develop and oversee the strategy for addressing the climate risk in respect of the education estate. Climate risk may impact on the delivery of education services or affect the health and safety of pupils and staff, and to respond to the requirement to protect the environment and promote nature recovery.

Risk management

Processes for identifying and assessing climate-related risks

Lens: corporate body

Following discussions at Performance and Risk Committee and ARC last year, the Department has worked across its operations and policy areas to embed the key concepts of physical and transitional climate risk, to identify how climate risk could exacerbate existing risks or introduce new ones.

Sustainability and climate change is a key component of the Department’s risk appetite statement, reflecting alignment with strategic objectives on building safety and standards, environmental targets and access to nature, teacher workload, funding, and building skills and capability.

The Government Property Agency (GPA), which delivers property and workplace solutions across government, is aligning its approach to climate change adaptation with the GGCs. In line with GGC requirements, GPA is supporting the development of an organisational climate change adaptation strategy that addresses risks across estates and operations.

Lens: education sector strategy

The Department has begun to raise awareness of physical and transition climate risk across its education sector facing operational units (Schools, Skills and Families Groups), providing training and support for risk owners to identify and assess risk.

Risk awareness is also increasing through the successful integration of the environmental principles duty into day-to-day operations, ensuring the environmental impact of new policies as well as changes to existing policies are considered.

Lens: education estate

The Department requires all new schools to assess future flood and heat risk in site selection and design. We have carried out an assessment for the existing education estate, which was a strategic commitment made in the third National Adaptation Pathway. The assessment has been published in the Climate Change Committee’s (a House of Commons select committee) Adaptation Progress Report 2025.

Processes for managing climate-related risks

Lens: corporate body

Risks encompass both physical and transition risks emanating from the estate, our corporate operations and financial management. There is also the aggregated risk posed by the education sector strategy and the education estate, where the risks can have implications for the Department’s operations and finances.

Identification and assessment of risks are underway. Management of risks at the individual level takes place as part of existing risk management processes. Processes are in development to understand and manage the aggregated risk to the Department, which may become the focus of future climate scenario analysis.

Lens: education sector strategy

Risks primarily relate to the successful delivery of the Sustainability and climate change strategy, with transition risks captured as part of this process. Mitigation plans are agreed with Departmental sponsors, responsible for the delivery of commitments.

Risk identification and assessment are ongoing, with management integrated into existing frameworks. The Sustainability and Climate Change Strategy Board is advancing efforts to understand and manage aggregated risks and has begun developing a portfolio-wide view.

In 2024, the board reviewed all top-tier and top portfolio risks and started to develop a process to improve our understanding of climate risk across the Department which will enhance our ability to make evidence-based disclosures and underpin the evidence base for climate scenarios.

Lens: education estate

A new strategy to manage physical climate risk to the education estate is being developed and overseen by the new adaptation and nature recovery programme board. The board will manage where climate may impact on the delivery of education services or affect the health and safety of pupils and staff, and respond to the requirement to protect the environment and promote nature recovery. This board has responsibility to develop an adaptation programme for the education estate, report on agreed key performance indicators and escalate risks and issues to senior governance.

Processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management

Lens: corporate body

This year the Department began work to establish sustainability and climate risk within existing risk management frameworks, systems and processes (as described in Managing our Risks). The Department’s systems are being updated to allow identification of risks where they are caused by, or where impact is made worse by, climate change.

We have introduced a specific section on sustainability into the annual assurance framework record, the self-assessment completed by directors which provides assurance over:

risk management
governance
financial acumen
project delivery
controls

It also highlights areas for improvement and support.

Lens: education sector strategy

A desktop review has been completed of all top tier and top portfolio risks, to develop a better understanding of climate risk across the Department which will enhance our ability to make evidence based disclosures.

Lens: education estate

We have worked through existing risk management frameworks, systems, processes and risk governance to update the Department’s top tier risk to the education estate to include physical climate risk and to consider the specific cause and mitigations. This may be considered a principal risk and, together with the climate change risk assessment analysis, would underpin the evidence base for climate scenarios of physical risk to the education estate in future ARAs.

Metrics and targets

Metrics used to assess climate-related risks and opportunities in line with its strategy and risk management process

Lens: corporate body

The Department seeks to comply with GGCs. This year is the last year of the current GGCs 5 year framework based on a financial year 2017 to 2018 baseline. A new framework is due to come into effect during next year based on a financial year 2025 to 2026 baseline.

Lens: education sector strategy

We have met the strategic commitment of the sustainability and climate change strategy to develop and publish a framework to evaluate the impacts of the strategy’s broader actions. Alongside which we have developed internal benefit indicators to assess progress towards achieving the benefits of the strategy. Those indicators continue to be monitored by the sustainability and climate change portfolio delivery board at frequent intervals throughout the year.

Work continues to refresh this strategy into next year, with due regard given to the metrics and targets necessary to measure success in future.

Lens: education estate

Schools are out of scope of GGC monitoring. Non-statutory guidance for academy trusts and further education colleges in each sector’s accounts direction requires that the sectors report against the streamlined energy and carbon reporting framework alongside their own ARAs. Where an academic institution meets the criteria, they will also need to comply with TCFD in their own financial reporting.

No new mandatory reporting is proposed within the sustainability and climate change strategy, but this decision will be kept under regular review and is subject to uptake and legislative reporting requirements in line with government’s net zero strategy.

Overall GGC performance

Table 25 presents the Group’s performance against the 6 overall GGC performance criteria, against the 2017 to 2018 financial year baselines:

Table 25: High level summary of current GGC performance

GGC measure	2024 - 2025 performance	Target	Measure achieved
Reduce overall greenhouse gas emissions	58% reduction	56% reduction	Yes
Reduce direct greenhouse gas emissions	67% reduction	36% reduction	Yes
Reduce the overall amount of waste generated	48% reduction	15% reduction	Yes
Increase the proportion of waste which is recycled	74% increase	70% increase	Yes
Reduce water consumption	49% reduction	8% reduction	Yes
Reduce the amount of waste going to landfill compared to overall waste	0% waste to landfill	<5% of overall waste	Yes

Annex B provides more detail of our performance, as well as performance trends against the baselines for the last 5 years. The rest of the Group’s sustainability reporting can also be found in Annex B.

Lenses: education sector strategy and education estate

The education and CSC sectors remain out of scope for the GGCs. However, the Department continues to acknowledge the impact climate change has, and will have, on these sectors. The Department also recognises the contribution it can make to help create a sustainable future through education, developing the skills needed for a green economy, supporting our sectors to reach net zero targets and furthering our work in sustainable development in our school building programmes.

Targets to manage climate-related risks and opportunities, and performance against targets

Lens: corporate body

The Department has a target to enhance biodiversity by 10% across its office estate in collaboration with our landlord, GPA. We are employing a scientific methodology to survey designated land for biodiversity development, both pre- and post-intervention, to measure the effectiveness of our efforts. In line with this target, the Department is currently implementing a successful nature recovery pilot at our Coventry office. This initiative has significantly contributed to promoting biodiversity and sustainable practices within our office grounds, aligning with our dedication to environmental stewardship.

Lens: education sector strategy

We have met the strategic commitment of our sustainability and climate change strategy to develop and publish a framework to evaluate the impacts of the broader actions set out within the strategy. We have also developed internal benefits indicators to assess progress towards achieving the benefits of the strategy. Those indicators continue to be monitored by the sustainability and climate change portfolio delivery board at frequent intervals throughout the year.

Work continues to refresh this strategy into next year, with due regard given to the metrics and targets necessary to measure success in future.

Lens: education estate

Education settings are not required to provide any data on their energy use or greenhouse gas emissions under GGC. This decision will be kept under regular review and subject to legislative reporting requirements in line with government’s net zero strategy.

7.10 Forward look

Transfers of function

On 1 April 2025, the Department completed the transfer of ESFA activities, assets and liabilities to the core Department following ESFA’s closure on 31 March 2025. This transfer followed up on the earlier transfer to the Department of ESFA’s Schools Financial Support and Oversight (SFSO) activities in October 2024.

On 1 June 2025, the activities, assets and liabilities of IfATE were transferred to the Secretary of State, following the formal closure of IfATE. This transfer was part of the transformation of the skills environment with the launch of Skills England, the Department’s new executive agency. As part of the reformation of the Group’s skills offer, IfATE’s previous activities have been transferred to either the Department or SE via the Secretary of State.

Note 25.2 has more details on the assets and liabilities transferred.

7.11 Going concern status

The Group is expected to continue as a going concern for the foreseeable future and is not aware of any information or events, either during this financial year or following the year end, which may affect this status.

Budgets for central government departments are collectively agreed in spending review exercises overseen by HMT. Spending Review 2025 set departmental budgets out to the end of 2028 to 2029. The spending review settlement will be confirmed by a vote in Parliament for Supply and Appropriation Acts. There is no reason to believe that this process will not continue after the year end. It has accordingly been considered appropriate to adopt a going concern basis for the preparation of these financial statements.

Susan Acland-Hood
Accounting Officer
11 July 2025

Question 8

8. Accountability Report

Accepted Answer

The Accountability Report sets out how we meet the key accountability requirements to Parliament. It is broken down into 3 areas:

corporate governance report, which also includes the governance statement, provides an overview of the Group’s leadership and our risk management approach
remuneration and staff report which details remuneration and staff expenses and policies
parliamentary accountability and audit report which contains SOPS, associated notes and audit certificate

8.1 Corporate governance report

The purpose of the corporate governance report is to explain the composition and organisation of the Department’s governance structures, and show they support the achievement of the Department’s objectives.

8.2 Directors’ report

Ministers and the Board

Membership of committees and attendance is provided in Department’s governance structure.

Education ministerial team at 31 March 2025

Rt Hon Bridget Phillipson MP

Secretary of State for Education (from 5 July 2024)

Overall responsibility for the Department for Education and chairs the Board.

Rt Hon Baroness Smith

Minister of State for Skills (from 5 July 2024)

Responsible for:

Minister for the Board
Group bodies: CITB, ECITB, IfATE, OfS and SLC
technical qualifications (including T Levels) and higher technical education (levels 4 and 5)
adult education, including basic skills and combined authority devolution
careers advice and support for young people who are NEET
apprenticeships, including the growth and skills levy
Technical Excellence Colleges
Local Skills Improvement Plans
governance, intervention and accountability of FE colleges
funding for education and training, provision and outcomes for 16 to 19 year olds
FE funding, financial stability and workforce
access to HE, participation and lifelong learning, the student experience, and student finance
international education

Catherine McKinnell MP

Minister of State for School Standards (from 8 July 2024)

Responsible for:

Group bodies: ESFA, STA, TRA, Oak and STRB
school improvement, intervention and inspection (including links with Ofsted)
qualifications (including links with Ofqual)
initial teacher training and incentives
teacher retention including the early career framework
school leadership, teacher pay and pensions, and school support staff
core school funding
curriculum and assessment, including the curriculum and assessment review and creative education
SEND and high needs, and AP
school governance
admissions
faith schools
school uniform
access to sport, arts and music in education, working with other departments
pupil premium

Janet Daby MP

Parliamentary Under Secretary of State for Children and Families (from 9 July 2024)

Responsible for:

Group bodies: CCO and SWE
CSC
children in care and children in need
looked-after children
child protection
adoption
kinship care and foster care
care leavers
CSC workforce
unaccompanied asylum-seeking children
local authority improvement
Family Hubs
families support and parenting

Stephen Morgan MP

Parliamentary Under Secretary of State for Early Education (from 9 July 2024)

Responsible for:

Group bodies: LocatED
early years education including children with SEND
childcare and the home learning environment
early years workforce
early communication skills and early intervention
school food, including free school meals and breakfast clubs
independent schools
maintenance and improvement of the education estate
environmental sustainability in the education sectors
school attendance
mental health support in schools
safeguarding, online safety and prevention of serious violence in schools and post-16 settings
counter extremism in schools and post-16 settings
behaviour, preventing bullying and exclusions in schools
use of data, digital technology and AI in education
use of research, science and evidence within the Department

Women and equalities ministerial team at 31 March 2025

Rt Hon Bridget Phillipson MP

Minister for Women and Equalities (from 8 July 2024)

Responsible for:

promoting equality of opportunity for everyone, and reducing negative disparities
strategic oversight of government’s equality policy, for women, ethnicity and LGBT (lesbian, gay, bisexual, transgender)
sponsorship of the Social Mobility Commission and Equality and Human Rights Commission
overview of the overarching equalities legislative framework, including the Equality Act

Rt Hon Baroness Smith

Minister of State for Women and Equalities (from 4 March 2025)

Responsible for:

Group bodies: none
lead policy responsibility for gender equality and women’s rights
sponsorship of the Equality and Human Rights Commission and Social Mobility Commission
UK equality framework (including the Equality Act)
equality data and analysis
socio-economic opportunity
race and ethnicity policy
Employment Rights Bill (Department for Business and Trade lead)

Rt Hon Sir Stephen Timms MP

Parliamentary Under Secretary of State for Equalities (from 8 July 2024)

Responsible for:

Group bodies: none

Seema Malhotra MP

Parliamentary Under Secretary of State for Equalities (from 8 October 2024)

Responsible for:

Group bodies: none
race and ethnicity elements in equality legislation
race and ethnicity policy

Dame Nia Griffith MP

Parliamentary Under Secretary of State for Equalities (from 8 October 2024)

Responsible for:

Group bodies: none
LGBT+ legislation including conversion practices
LGBT+ policy

Our management

Executive members

Susan Acland-Hood

Permanent Secretary
Accounting Officer

Appointment: September 2020

Justin Russell

Director General, Families Group

Appointment: October 2023

Juliet Chua

Director General, Schools Group

Appointment: May 2023

Julia Kinniburgh

Director General, Skills Group

Appointment: December 2022

Tony Foot

Director General, Strategy Group

Appointment: March 2023

John Edwards

Director General, Regions Group

Appointment: June 2022
Resignation: 22 June 2025

Jane Cunliffe

Chief Operating Officer
Director General, Operations and Infrastructure Group

Appointment: November 2022

Non-executive members

Sir Kevan Collins

Lead Non-executive Board Member

Appointment: 10 July 2024 as a non-executive board member11 February 2025 appointed to Lead Non-executive Board Member role

Sir Peter Bazalgette

Appointment: May 2022

Jack Boyer

Appointment: May 2022
Resignation: 31 May 2025

Stuart McMinnies

Appointment: May 2022

Margaret Casely-Hayford

Appointment: 1 March 2025

Steve Crocker

Appointment: 1 March 2025

Naomi Eisenstadt

Appointment: 1 March 2025

Rebecca George

Appointment: 1 March 2025

Changes in the reporting year

The following changes in board level appointments occurred during the year:

Rt Hon Gillian Keegan MP to 4 July 2024, Secretary of State for Education
Rt Hon Damian Hinds MP to 4 July 2024, Minister of State for Schools
Luke Hall MP to 4 July 2024, Minister of State for Skills, Apprenticeships and Higher Education
Baroness Barran to 4 July 2024, Parliamentary Under Secretary of State for the School System and Student Finance
David Johnston MP to 4 July 2024, Parliamentary Under Secretary of State for Children, Families and Wellbeing
Rt Hon Bridget Phillipson MP, Secretary of State for Education (from 5 July 2024) and Minister for Women and Equalities (from 8 July 2024)
Rt Hon Baroness Smith from 5 July 2024, Minister of State for Skills
Catherine McKinnell MP from 8 July 2024, Minister of State for School Standards
Rt Hon Anneliese Dodds MP from 8 July 2024 to 28 February 2025, Minister for Women and Equalities
Rt Hon Sir Stephen Timms MP from 8 July 2024, Parliamentary Under Secretary of State for Equalities
Janet Daby MP from 9 July 2024, Parliamentary Under Secretary of State for Children and Families
Stephen Morgan MP from 9 July 2024, Parliamentary Under Secretary of State for Early Education
Sir Kevan Collins from 10 July 2024, Non-executive Board Member, and Lead Non-executive Board Member from 11 February 2025
Seema Malhotra MP from 8 October 2024, Parliamentary Under Secretary of State for Equalities
Dame Nia Griffith MP from 8 October 2024, Parliamentary Under Secretary of State for Equalities
Richard Pennycook to 10 February 2025, Non-executive Board Member
Toby Peyton-Jones to 28 February 2025, Non-executive Board Member
Margaret Casely-Hayford from 1 March 2025, Non-executive Board Member
Steve Crocker from 1 March 2025, Non-executive Board Member
Naomi Eisenstadt from 1 March 2025, Non-executive Board Member
Rebecca George from 1 March 2025, Non-executive Board Member
Rt Hon Baroness Smith from 4 March 2025, Minister for Women and Equalities

Changes after the reporting year

The following changes in board-level appointments occurred after the year end but prior to the authorisation of this ARA:

Jack Boyer to 31 May 2025, Non-executive Board Member
John Edwards to 22 June 2025, Director General, Regions Group
Claire Burton from 16 June 2025, Interim Director General, Regions Group

8.3 Registers of interests

The Department maintains a register of interests to ensure that potential conflicts of interest can be identified. Executive and non-executive board-level members are required to declare details of company directorships, and other significant interests, on appointment to the Board and on an annual basis. The Department publishes the register annually alongside the ARA.

Details of directorships and other significant interests held by ministers are set out in the Register of Members’ Interests for MPs, and the Register of Lords’ Interests.

8.4 Data management

There were 5 personal data breaches this year (prior year, 8) which were deemed to be reportable to the Information Commissioner’s Office (ICO). Further detail on data security and compliance can be found in Annex A.

Table 26: Number of data management incidents for the last 5 years

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Number of incidents	5	8	2	7	4

8.5 Group spending

Remuneration paid to auditors for non-audit work

The Comptroller and Auditor General conducted the audit of the Group and its component entities, except for Aggregator, which was audited by Mazars LLP. No non-audit fees were paid to auditors in either of the years reported.

Political donations and sponsorship

The Department did not make any political donations during the year (prior year, £nil).

Research spending

Table 27: Research spending for the last 5 years (£million)

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Department	27.8	27.3	29.3	19.9	13.5
Agencies	0.1	0.1	0	0.1	0
NDPBs	1.3	1.1	0.3	0.3	0.3
Total	29.2	28.5	29.6	20.3	13.8
Of which: central research	16.7	16.2	21.1	7.0	3.8
Of which: policy units and policy evaluation research	12.5	12.3	8.5	13.3	10.0

Strategy Group holds and manages the central research budget that funds the majority of our social and economic research, including evaluation. This work shapes and influences policy delivery around early years education, schools, further and higher education and social care. High quality evidence and robust evaluation enable policies to be better targeted and help ensure value for money.

Research expenditure is marginally higher than last year. While the general election and associated activity delayed some research projects, our major longitudinal surveys and official statistics collections proceeded as expected. The change in expenditure mainly reflects natural project variation across years.

A robust research governance and approvals process is in place to ensure alignment with the government’s developing priorities. Strategic tools (such as omnibus surveys) are used in place of multiple smaller research projects, we continue to build in-house research capacity to further save on external commissioning costs.

Further details on our research activity and our research publications are available.

8.6 Financial instruments and exposure to risk

As the cash requirements of the Group are met from the Consolidated Fund, through the parliamentary Supply process, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body of a similar size. However, the Group is exposed to some level of risk generated by the Department’s student loan portfolio, which is classified as a financial instrument. Further information on the risks associated with financial instruments are set out at note 12.

8.7 Board’s declaration

So far as I am aware, there is no relevant information of which the external auditors are unaware. The Board members and I have taken all appropriate steps to become aware of any relevant audit information, and to establish that the external auditors are suitably informed.

8.8 Statement of Accounting Officer’s responsibilities

Under the Government Resources and Accounts Act 2000 (the GRAA), HMT has directed the Department for Education to prepare, for each financial year, consolidated resource accounts detailing the resources acquired, held or disposed of, and the use of resources, during the year by the Department (inclusive of its executive agencies) and its sponsored non-departmental public bodies designated by order made under the GRAA by Statutory Instrument 2024 no 295 (together known as the ‘Departmental Group’, consisting of the Department and sponsored bodies listed at note 24 to the accounts). The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the Department and the Departmental Group and of the income and expenditure, Statement of Financial Position and cash flows of the Departmental Group for the financial year.

In preparing the accounts, the Accounting Officer of the Department is required to comply with the requirements of the Government Financial Reporting Manual and in particular to:

observe the Accounts Direction issued by HMT, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis
ensure that the Department has in place appropriate and reliable systems and procedures to carry out the consolidation process
make judgements and estimates on a reasonable basis, including those judgements involved in consolidating the accounting information provided by non-departmental public bodies
state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts
prepare the accounts on a going concern basis
confirm that the annual report and accounts as a whole is fair, balanced and understandable and take personal responsibility for the annual report and accounts and the judgements required for determining that it is fair, balanced and understandable

HMT has appointed the Permanent Head of the Department as Accounting Officer of the Department for Education.

The Accounting Officer of the Department has also appointed the chief executives of its sponsored non-departmental public bodies as accounting officers of those bodies. The Accounting Officer of the Department is responsible for ensuring that appropriate systems and controls are in place to ensure that any grants that the Department makes to its sponsored bodies are applied for the purposes intended, and that such expenditure and the other income and expenditure of the sponsored bodies are properly accounted for, for the purposes of consolidation within the resource accounts. Under their terms of appointment, the accounting officers of the sponsored bodies are accountable for the use, including the regularity and propriety, of the grants received and the other income and expenditure of the sponsored bodies.

The responsibilities of an accounting officer, including responsibility for the propriety and regularity of the public finances for which the accounting officer is answerable, for keeping proper records and for safeguarding the assets of the department or non-departmental public body for which the accounting officer is responsible, are set out in Managing Public Money published by HMT.

As the Accounting Officer, I have taken all the steps that I ought to have taken to make myself aware of any relevant audit information and to establish that the Department for Education’s auditors are aware of that information. So far as I am aware, there is no relevant audit information of which the auditors are unaware.

I confirm that the ARA as a whole is fair, balanced and understandable. I take personal responsibility for the ARA and the judgements required for determining that they are fair, balanced and understandable.

Question 9

9. Governance statement

Accepted Answer

This governance statement sets out our governance, risk management and internal control framework and the assurances I have received, as Principal Accounting Officer, and our compliance with HMT’s ‘Corporate governance in central government departments: code of good practice’. The activities covered by the statement operated in the year and up to the date of approval of this ARA.

More detail on the control system is given in the Accounting Officer System Statement. Details for individual Agencies and NDPBs are contained in the governance statements of their respective ARAs.

9.1 Lead Non-executive Board Member’s foreword

Note from Sir Kevan Collins

As the current Lead Non-executive Board Member, I would like to extend my heartfelt thanks to Richard Pennycook for his exceptional leadership and dedication during his 7-year tenure. Richard’s contributions have been invaluable in steering the Department towards achieving its goals, and his commitment to and impact on the education and skills sectors has been truly commendable. We wish him all the best in his future endeavours.

Richard kindly agreed to draft this foreword since his time in the role covered the first 11 months of the year before I took up the role. I agree with Richard’s views here and fully support the work of the Department and its non-executive board members.

Foreword from Richard Pennycook CBE

The year has been a period of significant change and continued dedication within the Department. Our colleagues have worked tirelessly to improve educational and life outcomes for children, young people and adults across England, breaking down barriers to opportunity.

In July 2024, we welcomed a new Secretary of State and ministerial team, which brought about changes in our Board’s leadership. The Rt Hon Bridget Phillipson MP took on the role of Board Chair and Rt Hon Baroness Smith became the Minister for the Board. I extend my thanks to the previous Secretary of State, Rt Hon Gillian Keegan MP, and ministerial team.

It was during the transition period in July 2024 that officials demonstrated their commitment to public service and ability to be impartial as they supported the new ministerial team to settle into the Department. Their preparation and dedication allowed the Secretary of State and her team to be well-equipped to start work quickly and seamlessly on new governmental priorities for our children, young people and all learners.

The new government outlined a series of milestones to be reached by the end of this Parliament in their Plan for Change. Our Secretary of State leads on the opportunity mission, Breaking down the barriers to opportunity. The Department contributes to all the government’s missions. We have a critical connection to growth; and we contribute to health, safer streets and energy.

Throughout this reporting period, the Board has remained focused on its strategic and operational leadership responsibilities. We have provided advice and challenge on various topics, including strategy, risk management and performance reporting. The Board’s discussions have been aligned with the Departmental Group structure and mission pillars, ensuring that our efforts have been directed towards achieving our key objectives.

Key activities this year included:

with the formation of a new government, the Board scrutinised the 100 day and 500-day plans forming the basis of the Department’s strategy, receiving regular updates on the delivery plans for the government missions and the pillars underpinning these, with a particular focus on the opportunity mission and the pillars owned by the Department, additionally, the Board reviewed the departmental risk register and accepted the risk appetite statement
utilisation of a dashboard to review our performance against delivery metrics and discussed the progress of the Children’s Wellbeing and Schools Bill and the Department’s research and development priorities
the Board endorsed the skills strategy, discussed early years reform and considered the scale of ambition on school attendance, and also reviewed the RISE initiative and its impact on long-term strategy
financial updates were a regular feature of our meetings, where we discussed budgetary responses, financial pressures and opportunities for efficiencies, we also planned for the spending reviews in 2024 and 2025
an evaluation of the Board’s effectiveness was initiated but not completed due to changes in membership, however, non-executive board members continued to provide independent support, advice and challenge across various departmental groups and missions

This year, we also saw changes in our non-executive board members. Sir Kevan Collins joined in July 2024, then Rebecca George, Margaret Casely-Hayford, Steve Crocker and Naomi Eisenstadt came into post in March 2025, bringing valuable sector expertise and diverse perspectives. I extend my gratitude to Toby Peyton-Jones for his contributions during his tenure which ended in February 2025. We were pleased to appoint Sir Kevan Collins as the new Lead Non-executive Board Member in February 2025, following my departure. The Board met 5 times throughout this year, with active participation from all members. My thanks go to my fellow non-executive board members, the Secretaries of State, junior ministers and the executive Leadership Team for their dedication and hard work.

The Board has also overseen the functions of ESFA being moved into the Department to ensure more joined up delivery, bringing benefits to the individuals and organisations we support, as well as to the taxpayer. Similarly, in June 2025 the functions of IfATE transferred between the Department and the newly formed Skills England executive agency, a key government manifesto commitment which will act as a vehicle for driving growth and opportunity.

In July 2024, I assumed the role of Interim Chair of the shadow Skills England to provide guidance and strategic leadership to the organisation as it found its feet. Forming a shadow Skills England quickly after the general election allowed the Department to implement new government initiatives for the skills agenda whilst the agency was created. I commend officials’ dedicated response to the delivery of this prime ministerial priority and look forward to witnessing the work of Skills England once it is fully established under its new permanent Chair, Phil Smith.

As we look ahead, I am confident that the Department will continue to make significant strides in achieving its goals, supported by the strong governance and leadership structures we have in place. We will ensure that the Department achieves the ambitious goals set out in the government’s Plan for Change through leading on the opportunity mission and its contributions to the other missions.

Sir Kevan Collins
Lead Non-executive Board Member
11 July 2025

9.2 How we are structured

The Department for Education is a ministerial department supported by 14 public bodies (Agencies and NDPBs) listed in note 24. Together they form this financial reporting group.

Agencies are well-defined business units of the Department that carry out executive functions. They focus on delivering specific outputs within a framework of accountability to ministers.

NDPBs play a role in the processes of national government but are not a government department or part of one, they operate at varying degrees of independence from ministers. NDPBs have different roles, including those that advise ministers and others, which carry out executive or regulatory functions, within a strategic framework set by ministers.

As the Permanent Secretary and Accounting Officer for the Group, I am responsible for reviewing the effectiveness of the Group’s systems of internal control. This review is informed by the senior management team (including accounting officers for Agencies and NDPBs, who have responsibility for the development and maintenance of their own internal control frameworks), ARC’s oversight of the control framework, the Government Internal Audit Agency and comments from the National Audit Office in its management letter and other reports.

I require each director and deputy director to complete an annual assurance return covering risk management, the operation of related controls in their areas of responsibility and their use of resources allocated to them. The next annual return cycle is after this ARA is published so I rely on exception reports to cover the period from the year end to the publication date of this ARA.

My Leadership Team and I receive regular reports on the stewardship of risks which contribute to assurance that Group funds are spent for the purposes as voted by Parliament, within the rules of financial propriety and regularity, and with due regard for value for money. The main findings are summarised in this statement.

During the year, ARC regularly reviewed management of issues and near misses, and provided guidance on matters of risk and assurance. It scrutinised the Group’s internal audit plan, findings from reports and progress with follow-up actions. ARC also regularly reviewed recommendations from the Public Accounts Committee, NAO value for money reports and arrangements for managing incidents of fraud, error and debt.

Other sources of assurance include accounting officers of our Agencies and NDPBs, local authority chief finance officers (via section 151 returns of the Local Government Finance Act 1972), individual academy trust accounting officers and Ofsted. These accounting officers report either directly to me, or to me via ESFA, on the probity and appropriateness of the use of Group funding allocated to them.

The Board and its sub-committees receive management information to monitor Group performance. This includes financial and workforce data, indicators of progress against the Department’s priorities and information on risk. The senior executive team, with challenge from other board members, continually monitor the quality of the information to ensure evidence based decision making.

9.3 Department’s governance structure

The following content covering the Department’s governance arrangements is for this year, unless otherwise stated. Ministerial changes are reflected. Board effectiveness evaluations are usually completed in July after a financial year. However, during the year, a review of the prior year board’s effectiveness was partially completed and halted due to the general election and subsequent new ministerial team and Board Chair. The partial review provided an opportunity to reflect on the skills and experience mix of the Board membership and shape the non-executive board member recruitment process to bring greater diversity of thought and sector experience to the Board. We expect that the review of the Board’s 2024 to 2025 financial year effectiveness will be light-touch to reflect the further substantial changes in non-executive board members that occurred towards the end of the financial year.

In July 2024, the Department welcomed a new Secretary of State and ministerial team, thus acquiring a new Board Chair and Minister for the Board. In addition, in July 2024 the Department appointed a new non-executive board member and a further 4 new non-executive board members in March 2025.

The Department’s Lead Non-executive Board Member, Richard Pennycook, stepped down from his role in February 2025 and Sir Kevan Collins took up the role following a recruitment process. Toby Peyton-Jones’ tenure as a non-executive board member ended in February 2025.

The Leadership Team remained the same throughout the reporting period.

Committee attendance data is presented after the separate committee performance reports. In the following commentary we have made a distinction in meeting attendees between members and observers. Observers are not members of the committees but are asked to attend to support discussions. Named members are in addition to the Chair. Individuals named, including Chairs, are those in post at the year end.

Board

Role

The Board provides the collective strategic and operational leadership of the Department, providing advice and challenge on strategy, operations and deliverability of policy.

The Board achieves this by drawing on the commercial, operational and political expertise of its members in addition to their experience of the Department’s operational sectors.

Chair: Rt Hon Bridget Phillipson MP, Secretary of State

Members:

Minister for the Board
Permanent Secretary
Chief Operating Officer
Director General, Strategy Group
Non-executive Board Members

Observers: All other ministers and directors general have a standing invitation to attend

Meetings in the year: 5

Main activities

Discussions focused on:

Strategy and mission pillars

The Board was presented with progress reviews of delivery achievements against the plan for the first 100 days following the general election and scrutinised the 500-day plan, which formed the basis of the Department’s strategy.

An overview of performance according to the Secretary of State’s priorities, until July 2024.

Post-election, the Board received regular updates on the delivery plans for the government missions and the pillars underpinning these. There was particular focus on the opportunity mission (which we lead on) and growth mission (where we support HMT who lead) and its mission pillars where the Department leads the government’s activities. In addition, the Department also contributes to all other government missions.

The Board reviewed, challenged and supported delivery plans for 3 of the opportunity mission pillars and the growth mission pillar of Skills for Opportunity and Growth.

The Board was presented with an update on the progress of the Children’s Wellbeing and Schools Bill, key measures and next steps.

The Board reviewed and subsequently endorsed the skills strategy and its link to the government’s growth mission. The Board discussed the importance of a coherent skills system and its constituent parts.

Board members reviewed the departmental risk register, including top-tier risks and mitigations. The Board reviewed and accepted the risk appetite statement, and in September 2024 the Board reviewed the key risks and enablers relating to strategy.

Board members discussed and appraised 5 research and development priorities for the Department following internal and cross-departmental engagement. This included consultation with mission pillar leads and the Department’s Science Advisory Council to form the priorities.

Spotlight on delivery

Between April and July 2024, the Board discussed challenges and opportunities faced in 2 regions (Plymouth and Bradford). The Board noted the advantages of place-based working and the importance of strategic approaches to tackling challenges that were tailored to the regional and local needs.

Board members were provided with an update on early years reform and the scope to deliver this across the sector. Board members discussed recruitment of workforce to the childcare sector and the potential benefits of the reforms to the sector.

Board members considered the scale of ambition on school attendance, noting that the work on improving school attendance would contribute towards the Every Child Achieving and Thriving Pillar.

Officials highlighted the work of the RISE teams and the Department’s intended outcomes. The Board discussed the universal and targeted interventions of RISE as part of the longer-term strategy.

Finance

An overview of the Group’s budget in response to each budgetary statement from HMT and the Group’s in-year financial position was considered by the Board at each quarter. The Board discussed opportunities for efficiencies and the financial pressures experienced across the sectors supported and within the Group. In addition, the Board regularly discussed phase 1 and phase 2 of the spending review.

Non-executive board members

Non-executive board members participated in a number of meetings outside of the Board. Non-executive board members continue to be aligned with the Department’s 6 operational units and the mission pillars to offer independent support, advice and challenge.

Managing conflicts of interest

At the beginning of every board meeting, all members are asked to declare any new potential conflicts of interests. The current register of interests has been published separately to this ARA. All non-executive board member interests are gathered twice-yearly, in line with Cabinet Office guidance. The process is duplicated in the Board’s sub-committees.

We publish further information from board meetings.

Leadership Team

Role

The forum enables day to day executive leadership and management on behalf of the Board, focusing on departmental management, transformation and performance.

Chair: Susan Acland-Hood, Permanent Secretary and Accounting Officer

Members: Directors General
Chief Executive of ESFA

Observers: Director of Strategy and Delivery
Director of Human Resources
Chief Scientific Advisor

Meetings in year: 10

Main activities

Discussions focused on:

finance – reviewing the organisation’s financial health, alongside business planning and spending review preparation, in addition, workforce affordability was regularly considered
performance, delivery and risk – updates from the Performance and Risk Committee which considered cross-cutting departmental challenges and risks and highlights on performance and delivery, following the change in government, the committee was provided with detailed analysis of the Department’s performance against the Mission metrics (especially the opportunity mission)
people leadership – updates from the People Committee on a range of issues including the PSP, staff survey responses, workforce planning and line-management responsibilities
legislation – planned bids for legislation ahead of advice going to ministers and monitored progress and priorities
organisational changes – updates on the progress on the establishment of Skills England as an executive agency and the creation of RISE teams

Audit and Risk Committee (ARC)

Role

ARC supports the Board by providing independent scrutiny and challenge of the Department’s governance, risk management, and internal controls and assurances. ARC advises the Permanent Secretary on the adequacy and effectiveness of these arrangements and the Department’s ARAs. The Chair provides an annual report to the Permanent Secretary and Board.

Chair: Stuart McMinnies, Non-executive Board Member

Members: 4 independent members

Meetings in the year: 6

Observers: GIAA (internal audit)
NAO (external audit)
Permanent Secretary (as Accounting Officer)
Chief Operating Officer
Director of Operational Finance
Director of Strategic Finance

Main activities

Discussions focused on:

internal audit – reviewed GIAA’s audit plans, recommendations and outcomes, including programme delivery and planning for the next financial year
ARA oversight – approved plans for producing the Group ARA and SARA, and supported local boards discharging responsibilities for STA, TRA and TPS, monitored external audit process via updates from the Department and NAO, the committee reviewed the ARAs ahead of their laying and received regular updates on the audit and risk activity of the Group’s key components SLC and ESFA
risk management – evaluated risk management effectiveness including a review of mitigations and contingencies and the risk appetite statement, the Department’s risk profile was discussed at each meeting, near misses and unexpected issues and the top-tier risk report on a quarterly basis and NDPBs 6-monthly risk report
key issues – reviewed reports on key issues such as the fraud strategy, the student loan book forecast, ESFA’s closure, sub-committee assurances and cyber security
in-depth discussions – workshops held prior to ARC meetings covered a range of pertinent issues including whistleblowing updates, establishing Skills England, TPS administrator transfer, sustainability strategy, FE financial reporting, policies and procedures and benefit tracking
NDPB ARC chairs meeting – met to discuss key issues for the Departmental Group

Nominations Committee

Role

The committee is an advisory committee of the Board, providing assurance and input to key decisions and processes. Its purpose is to scrutinise our:

strategies and plans for talent management
executive and non-executive succession planning
capability building
board appointments
public appointments
senior performance management
incentives and rewards

It advises on whether our senior people related processes are effective in helping the organisation to achieve its goals.

Chair: Lead Non-executive Board Member, Sir Kevan Collins

Members: Non-executive Board Members
Permanent Secretary
Director of Human Resources

Meetings in year: 3

Main activities

Discussion focused on:

regular updates on public appointments, including those within our Agencies and NDPBs
updates on whistleblowing incidents including social media policies and the awareness amongst staff on how to report issues of concern
the results of both the Pulse and People Surveys, including matters relating to staff retention, hybrid working, recruitment strategy and the overall engagement score
training available for our SCS staff, secondment opportunities available, the proportion of staff attending development courses and the standardised objectives of SCS members
the approach to SCS performance management, the potential to share good practice from the private sector and SCS progression methods
updates on the status of ESFA’s closure and integration into the Department, the launch of Skills England and closure of IfATE
the management of director general succession planning, our existing talent programme and the extent to which succession plans were utilised

Attendance records

The following tables present member attendance at meetings throughout the year. Not all members were in post throughout the year. To improve transparency, we have provided attendance values as well as the number of meetings available to members to attend. Where individuals are not members of a committee ’NM’ has been presented which means ‘non-member’. In the following tables no absence is recorded where committee members have deputised staff to cover for them.

Chairs

Board	Leadership Team	Audit and Risk Committee	Nominations Committee
Secretary of State	Susan Acland-Hood	Stuart McMinnies	Lead Non-executive Board Member

Ministers

	Board	Leadership Team	Audit and Risk Committee	Nominations Committee
Rt Hon Gillian Keegan MP	1 out of 1	NM	NM	NM
Rt Hon Bridget Phillipson MP	4 out of 4	NM	NM	NM
Baroness Barran	Nil out of 1	NM	NM	NM
Baroness Smith	3 out of 4	NM	NM	NM

Non-executive board members and independent ARC members

Non-executive board members	Board	Leadership Team	Audit and Risk Committee	Nominations Committee
Richard Pennycook	5 out of 5	NM	NM	3 out of 3
Sir Kevan Collins	4 out of 4	NM	NM	2 out of 2
Toby Peyton-Jones	5 out of 5	NM	NM	2 out of 3
Stuart McMinnies	5 out of 5	NM	6 out of 6	3 out of 3
Sir Peter Bazalgette	5 out of 5	NM	NM	2 out of 3
Jack Boyer	5 out of 5	NM	NM	3 out of 3
Margaret Casely-Hayford	nil out of nil	NM	NM	nil out of nil
Steve Crocker	nil out of nil	NM	NM	nil out of nil
Naomi Eisenstadt	nil out of nil	NM	NM	nil out of nil
Rebecca George	nil out of nil	NM	NM	nil out of nil

Independent ARC members	Board	Leadership Team	Audit and Risk Committee	Nominations Committee
Charlotte Moar	NM	NM	6 out of 6	NM
Alastair Murray	NM	NM	6 out of 6	NM
Emir Faisal	NM	NM	6 out of 6	NM
Harjit Sandhu	NM	NM	6 out of 6	NM

Senior officials

	Board	Leadership Team	Audit and Risk Committee	Nominations Committee
Susan Acland-Hood (Permanent Secretary)	5 out of 5	10 out of 10	NM	3 out of 4
Justin Russell (DG, Families Group)	NM	9 out of 10	NM	NM
Juliet Chua (DG, Schools Group)	NM	10 out of 10	NM	NM
Julia Kinniburgh (DG, Skills Group)	NM	10 out of 10	NM	NM
John Edwards (DG, Regions Group)	NM	10 out of 10	NM	NM
Tony Foot (DG, Strategy Group)	5 out of 5	8 out of 10	NM	NM
Jane Cunliffe (COO and DG, OIG)	5 out of 5	10 out of 10	NM	NM
David Withey (Chief Executive of ESFA)	NM	8 out of 9	NM	NM
Naomi Schweitzer (Director of HR)	NM	NM	NM	3 out of 4

9.4 Managing our risks

To help ensure we achieve our priorities, we manage risks at all levels in the organisation. Risk management is integrated into the way we work, from operational decision making, to project delivery, through to the management of strategic risks reflected in our principal risk reporting.

Risk and issue management framework

Our risk and issue management approach seeks to devolve accountability to those best placed to effectively manage risks at the right level.

Our Chief Risk Officer and corporate risk team act as the central point for advice and guidance on risk management. The team is responsible for the effective implementation of the Department’s risk management framework and co-ordinates our principal, or top-tier, risk reporting. This is the route by which the most significant risks are escalated to the Department’s Board and committees. The team also support setting the Department’s risk appetite which is agreed by the Board.

Alongside this, the central risk team is responsible for collating and reporting on near misses and unexpected issues, ensuring measures are introduced to reduce the likelihood of issues reoccurring.

Risk assurance

Performance and Risk Committee

Top tier risks, near misses and unexpected issues are tabled and discussed at the Performance and Risk Committee (PRC) as part of the second line assurance. Additional risk assurance activity is carried out by the central risk team on the committee’s behalf.

Audit and Risk Committee

To ensure that our risk management processes and policies are fit for purpose, and that the risks captured are appropriate, ARC continually reviews these across the Department.

Assurance framework record

The Department has completed an annual assessment of its assurance arrangements through the assurance framework record. The self-assessment, completed by directors, provides assurance across key areas including risk management, governance, financial acumen, project delivery and controls. It also identifies opportunities for improvement and areas requiring additional support. The framework record has 4 assurance levels from the worst, Unsatisfactory, through Limited and Moderate, to the best Substantial.

This year, we refined our approach to fully align with the Department’s risk management framework. We expanded the scope by including more business areas and disaggregating previously combined areas to provide greater detail.

We continued to incorporate subject matter expert assurance ratings at both Departmental and team levels. These ratings served as a benchmark against which directors’ responses were evaluated. Subject matter experts also provided detailed feedback and challenge questions on the director returns, which informed validation meetings. 2 of these meetings were attended by non-executive board members, who contributed further insights and challenge.

Results from this year’s process showed a high level of confidence across the strands with most ratings being Substantial or Moderate. The number of Substantial ratings has increased across most areas in comparison to last year. The highest level of confidence from directors was across the commercial and finance strands with most directors rating themselves as Substantial.

These findings are incorporated into individual group-level reports to provide targeted feedback and support continuous improvement.

Assurance compliance framework

The Department has developed an assurance compliance framework based on HMT’s assurance framework guidance, which will be fully embedded next year. The purpose of the framework is to ensure that the Department is meeting its corporate obligations effectively, with reference to the 3 lines of defence model.

The Department’s risk management framework and assurance framework record aligns with HMT’s framework, referencing government functional standards. This will provide a comprehensive view of assurance activities, helping leaders evaluate these against specific risks and compliance needs.

Internal audit

Our internal auditors regularly review our risk management approach and the application of risk management processes in operational teams, projects and programmes, and other settings.

Compliance to the Orange Book

We have assessed our risk management approach against the UK government’s Orange Book. The assessment confirmed that the Department applies the main principles for risk management in government. We comply with the requirement that management is an essential part of governance and leadership, and is fundamental to how the Department is directed, managed and controlled at all levels. Risk management was confirmed to be an integral part of all our activity to support decision making in achieving objectives. We ensure that risk management is collaborative and informed by the best available information and expertise.

We also comply with the requirement to structure our risk management processes to include:

risk identification and assessment to determine and prioritise how the risks should be managed
the selection, design and implementation of risk treatment options that support achievement of intended outcomes and manage risks to an acceptable level
the design and operation of integrated, insightful and informative risk monitoring
timely, accurate and useful risk reporting to enhance the quality of decision making, to support management and oversight bodies in meeting their responsibilities

However, we recognise that our risk management can be continually improved through learning and experience.

Risk capability improvements

Risk capability improvements this year include:

embedded mission led risk reporting, including managing risks at mission pillar board level and where appropriate escalation to the opportunity mission and other mission boards
reviewed and improved our top-tier risk reporting, including upgrading our digital reporting tool for principal and portfolio level risks
funded learning and development qualifications aligned with the government risk function’s risk management skills and capability framework
risk appetite statement refreshed to align to the new mission focused government priorities
continued focus on improving risk management capability and maturity across the Group, including NDPBs
strengthened second line assurance of top-tier risks to support better risk management of these (using a combination of desktop and peer reviews)

Other sources of assurance

Counter fraud and error

The Department collaborates with PSFA and other government bodies to reduce public sector fraud. We follow the GovS 013: Counter Fraud functional standard, regularly evaluating our performance against it.

The counter fraud team provides guidance and co-ordinates activity, overseen by a Board member every 2 months. Each of the Department’s Agencies and NDPBs has its own counter fraud team that share best practice during regular meetings.

The Department and its bodies follow a risk-based approach to ensure resources and time are focused on the highest risk areas. Fraud risk assessments are in place across each business area and are supported centrally by accredited counter fraud professionals. Assessments are completed for all major new spending initiatives, including high-risk and politically sensitive schemes, allowing the Department to develop control measures to prevent fraud and error.

The counter fraud team maintains a cycle of follow-ups against fraud risk assessments to ensure they remain ‘live’ documents and issues are addressed promptly to mitigate identified risks.

We routinely conduct fraud risk assessments across our spend areas, in line with PSFA guidelines. The Department has significant fraud risk due to the volume of funding it processes, particularly in the higher education, early years and school estate areas, in line with areas of significant spend. In response to these risks, the Department continues to reassess and undertake various mitigation activities to bring them in line with our risk appetite.

The Department engages GIAA to undertake a rolling review of payment controls and participates in Cabinet Office’s National Fraud Initiative to detect anomalous payments that might represent fraud or error.

Upon receiving a fraud allegation, our response plan is activated, and upon conclusion, a written report is provided detailing the case and any recommendations. Instances of fraud and error are reported to both PSFA quarterly and to ARC annually through updates. All material fraud and error are reported to PSFA, which publishes its findings, with the latest being the Cross-government Fraud Landscape Report 2021 to 2022.

The closure of ESFA and the transfer of its functions to the Department will ensure a fully joined-up regulatory environment and a more cohesive approach to fraud and the service we offer to our delivery sectors. This change will strengthen our counter fraud efforts, positioning the Department at the forefront of counter fraud efforts across government, and leveraging our combined capabilities where they can have most impact. Next year, the merged counter fraud team aims to deliver an ambitious plan to understand, acknowledge, prevent and pursue fraud and error, promoting awareness to protect public resources across the education sector.

NDPB risk management

Each of the Department’s NDPBs has its own governance structure with embedded risk management processes. This allows them to identify and manage their own risks. The NDPBs work in partnership with the Department, which supports their efforts and helps manage risks jointly. Each NDPB maintains a risk register that is visible to the Department.

Visibility of risk across the Group is essential for:

identifying system-wide risks
enabling joint efforts between NDPBs and the Department to minimise shared risks through appropriate mitigating actions
identifying new areas of risk
discovering new ways to mitigate similar risks

NDPB risks are escalated to the Department via the PRC, alerting them when assistance is needed and providing assurance that risks are being managed effectively, thus protecting the Group. Additionally, risks can be escalated through the network of NDPB ARC chairs led by the Departmental ARC chair.

Government Internal Audit Agency (GIAA)

The GIAA provides the internal audit service for the Department. The internal audit plan is set at the beginning of the financial year, informed by several considerations including the Department’s strategic objectives, its top-tier risks and organisational changes. It is reviewed by ARC, agreed with the Permanent Secretary and revisited during the year to reflect changing circumstances.

For this financial year, the Group Chief Internal Auditor (GCIA) provided a Moderate opinion, which states that some improvements are required to enhance the adequacy and effectiveness of the framework of governance, risk management and control.

The distribution of ratings for individual audit reports is consistent with the previous year, and in the judgment of the GCIA, the Department has maintained an adequate system of governance, risk management and internal control. The report identifies 5 themes for exploration:

governance and risk management
plan for growth and opportunity mission
fraud, error and value for money
policy and programme delivery
corporate services

The GCIA found governance and risk management to be adequate and effective, and that the Department has maintained an appropriate balance between managing risks and conducting operations. However, the Department continues to manage several critical issues and risks assessed as ‘critical/very likely’ or ‘likely’.

GIAA issued 3 limited and no unsatisfactory assurance internal audit reports for the 2024 to 2025 financial year, as well as an unsatisfactory report relating to the 2023 to 2024 financial year. ARC reviews all unsatisfactory and limited rated reports during the meeting for that period. ARC also receives progress reports at each meeting, including updates on completed and outstanding actions arising from recommendations.

Table 28: Unsatisfactory and limited assurance rated reports

Unsatisfactory assurance
Constructed Schools Commercial Controls (2023-24 audit programme)
Limited assurance
Teachers’ Pension Scheme Transition Programme
Higher Education Operational Assurance
Benefits Management

I have accepted the overall moderate assessment, officials have either implemented or are working to implement the suggested improvements from GIAA’s work.

National Audit Office

The National Audit Office (NAO) is the UK’s independent public spending watchdog. It supports Parliament in holding government to account and helping improve public services by undertaking statutory financial audit and publishing reports evaluating government spending. The NAO is independent of government and the civil service and is overseen by the Public Accounts Commission (a Parliamentary committee of MPs).

Audited bodies should respond to recommendations in the NAO’s published reports, which are published as a searchable recommendations tracker.

In addition to value for money reports, the NAO also provides management letters following the completion of statutory financial audits. These letters highlight areas for improvement in controls and processes, which management review, agree upon and act to address.

NAO published the following reports where the Department was the main audited body up to the publication of this ARA. Other reports relating to the Department have been published separately.

Preparations to extend early years entitlements for working parents in England
(published on 24 April 2024)
Improving educational outcomes for disadvantaged children
(published on 23 July 2024)
Support for children and young people with special educational needs
(published on 24 October 2024)
Investigation into introducing T Levels
(published on 28 March 2025)
Teacher workforce: secondary and further education
(published on 30 April 2025)

As well as the above reports, NAO also published the following report where the Department was a witness and the Home Office was the lead department, which lead to a Public Accounts Committee inquiry:

Tackling violence against women and girls
(published on 31 January 2025)

Public Accounts Committee

The committee evaluates the value for money of government projects, programmes and service delivery. Utilising the work of the NAO, the committee holds public evidence sessions with government officials, focused on public spending and scrutinising the implementation of government policy. Subsequently, the committee produces its own reports. Audited bodies are required to respond to the committee’s recommendations which are published in a Treasury minute.

Recent hearings, committee reports and government responses to the recommendations (where the Department is not the lead department this is noted):

Investigation into student loans issued to those studying at franchised higher education providers
Inquiry hearing held – 26 February 2024
Inquiry report published – 24 April 2024
Government response published – 5 September 2024
Preparations to extend childcare entitlements for working parents in England
Inquiry hearing held – 8 May 2024
Inquiry report published – no report was published due to the general election being called. Instead, the then chair of the committee wrote to the Permanent Secretary on 24 May 2024, outlining the committee’s conclusions and recommendations following the hearing.
Government response published – the Permanent Secretary responded to the new chair on 25 November 2024.
Support for children and young people with special educational needs
Inquiry hearing held – 18 November 2024
Inquiry report published – 15 January 2025
Government response published – 3 April 2025
Improving educational outcomes for disadvantaged children
Inquiry hearing held – 13 January 2025
Inquiry report published – 7 March 2025
Government response published – 15 May 2025
Tackling violence against women and girls
Departmental role: witness, lead department: Home Office Inquiry hearing held – 17 March 2025
Inquiry report published – 16 May 2025
Government response published – unpublished

2 inquiries were underway but had not yet had hearings by the year end:

Introducing T Levels
Inquiry hearing held – 24 April 2025
Increasing teacher numbers: Secondary and further education
Inquiry hearing held – 19 May 2025

9.5 Regularity

Background

Regularity is the concept that departmental spending is compliant with relevant legislation and spending authorisation delegated from Parliament. Public funds must be used in accordance with the intentions of the grantor, and ultimately parliament. Regularity reporting is a key element of parliamentary accountability, with departments reporting against authorised spending totals as set out in SOPS. The Comptroller and Auditor General’s certificate contains 2 opinions, one on the financial statements and another on regularity.

The Group operates under a range of statutes, primarily the Education Act 2002, Local Government Act 2003 and Children and Families Act 2014. As well as specific statutes, the Supply and Appropriations Act set out the Department’s purpose and on what we are allowed to spend by defining our ‘ambit’. We must demonstrate that public funds have been used for the appropriate purposes.

Whilst statutes provide the legal framework for grant payments, grants also have specific terms and conditions, including permitted uses and in some cases timeframes. Breaching these conditions constitutes irregular expenditure, falling outside parliamentary authority. The Accounting Officer System Statement details how the system operates with local framework requirements.

The Group operates a risk-based approach to regularity, assessing risks associated with specific funding streams reviewing compliance throughout the life grant cycle. This leads to an assurance programme with assurance approaches tailored to the grant’s risk. The main source of assurance reviews was ESFA, which oversaw the largest of the Group’s grant payments.

Policy funding

Policy funding covers both grants and contractual payments to third parties delivering public services. In the Department, policy funding payments are typically awarded to academies, colleges, universities and student funding bodies, voluntary, community and social enterprise sectors, local authorities and other central government departments.

Grants are classified as either capital or resource and may be formulaic, based on pre-defined calculations, or non-formulaic, often awarded through competitive or criteria-based processes. Grants have regularity risk arising from the accuracy of the calculation of formulaic funding streams.

The Group aims to follow the GovS 015: Grants functional standard in the awarding and management of grants. This includes ensuring that every grant:

has a designated senior responsible officer
aligns with the Department’s remit and objectives
is covered by legislation
delivers the intended outcomes

The Department also engages in Cabinet Office’s independent, cross-government complex grants advice panel, which provides expert advice on high profile or manifesto-related grants.

The Group’s grant management processes encompass (with robust controls to safeguard public funds):

strategic planning
programme design
monitoring
fraud prevention
resource allocation

Cabinet Office requirements

Continuing improvement assessment framework

The assessment framework is designed to drive continuous improvement to our grant management processes, by helping assess compliance against the functional standards. The return is validated by GIAA ahead of submission to Cabinet Office.

The most recent return submitted (covering the last financial year) showed a significant improvement in compliance from the previous return, moving from good to better, and the Department is embedding recommendations from the process.

Assurance requirements and arrangements

Assurance requirements vary based on the funding type, both in their legal form (grant or contract), whether they are formulaic or general, or ring-fenced or non-ringfenced. Note 6 provides more details over policy funding.

Grant agreements include provisions to secure annual regularity assurance. For academic year grants which span 2 of our financial years (for example schools from September to August, further education from August to July) independent assurance is required for both years. For lower risk programmes, lagged assurance at the end of the academic year may be appropriate.

The Department maintains a grant register and data repository, aligned with the Government Grant Information System. The register stores data and documents which demonstrate and assure the grants’ regularity including:

financial information
business cases
approvals
grant offer letters
sampling
reconciliations
annual certifications

An improvement to the register this year has been the inclusion of award-level data which allows a clearer reconciliation within the grant scheme.

The register forms the basis of the Department’s risk rating and internal assurance for core grants, allowing a risk rating and subsequent sampling processes.

The Department also employs alternative assurance arrangements such as enhanced monitoring, and sampling and pre-certification validation. Funding audits verify key inputs, like pupil census data, which underpin core funding allocations and pupil premium entitlements. The Group recovers funds where irregular spend is identified.

The Department’s grants centre of excellence supports senior officers responsible and grant managers with expert training and guidance to ensure adherence with requirements and best practice. A key development this year has been the launch of a new more user-friendly intranet site aligned with Cabinet Office’s 6 stage grant life cycle. The approach to the guidance has also been reviewed by GIAA and received a substantial rating.

Capital funding

For formulaic grants, assurance is received on a predominantly lagged basis. In addition to the work undertaken above, this is through:

self-declaration of section 151 returns for local authorities
the school condition allocation capital spend survey
confirming processes are being followed and comply with allocation models, including high needs, school condition allocations and devolved formula capital

For general grants, additional work includes:

review of condition improvement fund site visits, ensuring appropriate procedures are in place
checking claims made have independent supporting evidence before payment

Overspend

As noted in the financial review of the year the Department exceeded its RDEL excluding depreciation HMT limit by £590,000. The Department is taking steps to tighten its financial processes.

Assurance outcomes

Policy funding

A key assurance risk continues to be grants paid to local authorities. This year there have been 2 main considerations, the historical delays in local authorities publishing their audited ARAs and the expansion of the early years childcare programme, which forms part of the dedicated schools grant and is paid directly to local authorities.

To tackle the backlog of unaudited local authority ARAs, the Ministry of Housing, Communities and Local Government amended the Accounts and Audit Regulations 2015 requiring local authorities to publish audited ARAs for all years up to and including the 2022 to 2023 financial year by 13 December 2024, and for the 2023 to 2024 financial year by the end of February 2025. Whilst the majority of local authorities have met these deadlines, it has led to a number of ARAs with disclaimed audit opinions, where the auditors have been unable to complete sufficient work to provide a full opinion. At the time of our assurance report, of the 153 expected sets of ARAs, 41% had unqualified opinions, 47% had a disclaimed opinion, 3% had a qualified opinion and 9% remained outstanding. For those local authorities assessed as presenting an increased risk due to their ARA position and other identified control weaknesses, we sought additional assurances by reviewing and assessing other audit evidence.

The significant expansion of the early years childcare programme, with the introduction of new age groups of young children, new childcare entitlement criteria for working parents and significantly increased funding, has led us to consider this to be an area of potential risk. In response to this risk, we have significantly increased our assurance work in this area focusing on local authorities’ control arrangements over early years provision and carrying out additional testing through our funding audit work.

We concluded that, considering both areas of assurance activity, funds allocated to local authorities had been used for the purposes intended.

In arriving at its overall assurance opinion, ESFA considered the value of funding and its assurance opinions for each funding stream and provider type. Of the 3 possible opinions (substantial, moderate, or restricted), ESFA’s Head of Assurance concluded an overall substantial assurance opinion for grant funded activity and that, in all material respects, providers had applied funds for the purposes intended by Parliament.

Other providers

The Department identified serious historic issues at Ecctis, the supplier who manages the UK National Information Centre (UK ENIC) service for the Department, as part of preparations to re-procure the service. UK ENIC is the official agency for the recognition and comparison of international qualifications and skills.

We took immediate steps to ensure the issues were comprehensively addressed and in line with its contractual obligations to provide UK ENIC services, Ecctis paid £13.6 million to address all surpluses that had not been reinvested back into the UK ENIC service since 2014. These funds were passed to the Exchequer. The Department has reviewed and strengthened contract management arrangements to oversee delivery of the service and also decided to make statutory provision for charging for UK ENIC services.

Student loans

Assurance on the regularity of student loan payments is primarily received via GIAA’s testing.

Improvements in year

In response to GIAA’s recommendation to move towards quarterly testing, in the prior year we successfully moved to a model whereby SLC collaborate with GIAA to deliver the exercise which enabled SLC to enact plans to complete more regular testing. This has allowed SLC to identify and resolve issues promptly in year.

Outcomes

The number of cases in the sample that could have created a payment error has decreased from 44 to 28, decreasing the extrapolated error to £327 million (prior year, £405 million). However, because of the uncertainty surrounding the central estimate, it is not possible to determine whether the true error rate has increased, decreased or stayed the same.

Sector delivery contracts

We have incorporated into our policy funding note spend on contracts which deliver benefits to the education and children’s services sectors outside the Group. These are contracts with a supplier to provide goods or services that are delivered directly to schools, pupils or other recipients across the 2 sectors. These contracts are awarded using our standard procurement processes and commercial governance arrangements. We have considered how our regularity assurance arrangements should apply to these cases.

This year we reviewed the application of our assurance processes for sector delivery contracts. Through that process, the evidence required to demonstrate regularity for some expenditure was insufficient. This did however remain below the Department’s threshold for further investigation. We have commissioned GIAA to audit spend authorisation in this area and they will report early next year.

9.6 Management of outside interests and business appointments

Identifying and managing conflicts of interest

The Civil Service management code sets out the standard of propriety for civil servants. It states that ‘civil servants must not misuse their official position or information acquired in the course of their official duties to further their private interests or those of others’.

Civil servants

The Department provides guidance to staff to support their assessment of a conflict of interest, whether this is actual, potential or perceived. It is the responsibility of the individual to declare all interests that could be relevant to their role and to discuss the interest with their line manager, this information is held de-centralised across the organisation. We are working on a centralised solution for next year.

In addition, senior civil servants must adhere to the declaration and management of outside interests policy. The Department published the prior year’s information in line with Cabinet Office requirements and information relating to this financial year will be published in due course.

Special advisers

In line with the current declaration of interest policy for special advisers, all special advisers have declared any relevant interests or confirmed they do not consider they have any relevant interests. The Permanent Secretary has considered these returns and the following interests are set out in public:

Table 29: Declarable interests held by special advisers in the year

Full name	Details of interest
Rosemary Roche (from 11 July 2024)	Her father (Professor Patrick Roche) is the interim Principal of Hertford College, University of Oxford
Tim Waters (from 5 July 2024)	Mr Waters’ partner is the acting Head of Member Liaison at UNISON

Ministers

The Ministerial Code sets out the standards of conduct expected of ministers and how they discharge their duties. Under the terms of the code, ministers must ensure that no conflict arises, or could reasonably be perceived to arise, between their public duties and their private interests, financial or otherwise.

Ministers are required to provide a list of all interests which might give rise to a conflict, which is published twice yearly. There is also guidance for staff involved in procurement exercises for high-profile, strategic contracts to review the register and put required mitigations in place.

Business appointments

In compliance with business appointment rules (BARs), the Department is transparent in the advice given to individual applications for senior staff including special advisers. To improve transparency the Department publishes advice regarding specific business appointments for staff in SCS roles.

Individuals should discuss with their manager all offers of intended appointments or employment as early as possible and before any commitment or announcement is made. Both should then check the BARs to see if the potential future appointment or employment needs approval, completing the business appointment application form if necessary. The application may be approved unconditionally, approved with conditions or rejected.

While BARs apply to all staff, applications covering senior civil servants must be published. Any applications from someone who is a director or above are considered by either the relevant director general, the Permanent Secretary or the external Advisory Committee on Business Appointments depending on the applicant’s grade. In broad terms, SCS1 refers to deputy directors, SCS2 to directors and SCS3 to directors general.

Table 30: Business appointment rules analysis for the year

	SCS1 (or equivalent)	SCS2 (or equivalent)	SCS3 (or equivalent)	Special advisers
Number of SCS exits from the Civil Service	6	5	0	0
Number of BAR appointments submitted to the Department over the year	0	2	0	0
Number of BAR applications approved by the Department over the year	0	2	0	0
Number of BAR applications where conditions were set by the Department over the year (by grade)	0	2	0	0
Number of applications that were found to be unsuitable for the applicant to take up by the Department over the year	0	0	0	0
Number of breaches of the rules in the preceding year	0	0	0	0

9.7 Corporate governance code

The Department has complied with HMT and Cabinet Office’s ‘Corporate Governance for Central Government Departments: code of good practice (2017)’.

During the year, the Department held 5 board meetings, one under the Rt Hon Gillian Keegan MP and 4 under the Rt Hon Bridget Phillipson MP, ensuring sufficient reporting of the Department’s activities.

To manage any conflicts of interest, the Department maintains a register of board member interests. Board members are required to declare any potential conflicts that arise. Where a potential conflict is identified, board members are not involved in discussions or decisions on the matter in question. The code of good practice states that a formal evaluation of the Board’s performance should take place annually. Evaluations occur after the end of a given financial year, usually in July. This year the evaluation of the 2023 to 2024 financial year, which was proposed for July 2024, was cancelled due to the significant changes in Board membership. The evaluation of this financial year’s performance, slated for July 2025, will be a light touch evaluation of the Board and ARC due to substantial changes to Board membership.

The Board and its committees consider management information covering a variety of disciplines. This information includes financial data and information on the Department’s strategy for and delivery of the opportunity mission. Additionally, the Board considered the Department’s contribution to the government’s other missions and mission pillars, including the Skills for Opportunity and Growth Pillar as part of the growth mission. In addition, the departmental risk appetite statement was accepted as part of the Board’s duties, and top tier risks were regularly reviewed by ARC and the Board. Board members have noted and acknowledged the improved provision of data and materials that they review in and out of board meetings, particularly with regards to data provided on the government Missions and mission pillars to which the Department contributes. This has enabled the Board and its relevant sub-committees to hold officials to account in the delivery of the government’s priorities.

9.8 Conclusion

I have considered the evidence provided regarding the production of the Governance Statement and the independent advice and assurance provided by ARC. I conclude that the Department has satisfactory governance and risk management systems in place with effective plans to ensure continuous improvement.

Susan Acland-Hood
Accounting Officer
11 July 2025

Question 10

10. Remuneration and staff report

Accepted Answer

10.1 Overview

The remuneration and staff report sets out the Department’s remuneration policy for board-level members (including all directors general). It details how policy has been implemented, sets out the amounts awarded to board-level members and, where relevant, the link between performance and pension.

10.2 Remuneration report: part A (unaudited)

Ministers’ and other board members remuneration policy

Ministers’ remuneration is set by the Ministerial and Other Salaries Act 1975 (as amended by the Ministerial and Other Salaries Order 1996) and the Ministerial and Other Pensions and Salaries Act 1991.

Performance management and reward policy for members of the SCS is managed within a central framework set by Cabinet Office. It allows for annual performance-related base pay and non-consolidated performance awards, agreed centrally each year following Senior Salaries Review Body (SSRB) recommendations.

SCS pay is decided by the Senior Civil Service Remuneration Committee, chaired by the Permanent Secretary and comprising members of the Leadership Team. The committee makes decisions within the limits and delegated authorities set by the government in response to the annual report of the SSRB, who publish additional information.

Summary and explanation of policy on duration of contracts, notice periods and termination payments

The Permanent Secretary is appointed by the Prime Minister on the recommendation of the Head of the Home Civil Service and with the agreement of the ministerial head of the Department. The Permanent Secretary’s pay is set by the Prime Minister on the recommendation of the Permanent Secretaries Remuneration Committee, a sub-committee of the SSRB.

Members of the Leadership Team are appointed by the Permanent Secretary with the agreement of the Prime Minister and the external Civil Service Senior Leadership Committee where appropriate.

All board members’ contractual terms comply with the requirements set centrally for the SCS by Cabinet Office, and the exact terms offered reflect the requirement of the post. The principles governing recruitment to, and departure from, the Civil Service, including details of compensation for early termination, are set out in the Civil Service management code.

In line with the Constitutional Reform and Governance Act 2010 and the Model Contract for Special Advisers, a special adviser’s appointment automatically ends when their appointing minister leaves office. Special advisers are not entitled to a notice period but receive contractual termination benefits to compensate for this.

Termination benefits are based on length of service and capped at 6 months’ salary. If a special adviser returns to work for the government following the receipt of a severance payment, the payment is required to be repaid less a deduction in lieu of wages for the period until their return. Termination costs for special advisers are reported in Cabinet Office’s ARA.

Service contracts

The Constitutional Reform and Governance Act 2010 requires Civil Service appointments to be made on merit on the basis of fair and open competition. The recruitment principles published by the Civil Service Commission specify the circumstances when appointments may be made otherwise.

Unless otherwise stated below, the officials covered by this report hold appointments which are open-ended. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme.

10.3 Remuneration report: part B (audited)

Remuneration (including salary) and pension entitlements

The following sections provide details of the remuneration and pension interests of the ministers and most senior management (that is board members and directors general) of the Department.

Where members joined or left the Board during the year, annualised remuneration is presented in brackets alongside the in-year value. Where ministers changed roles during the year, and subsequently left before the year end, annualised disclosures are based on their final role.

Ministers

2024 to 2025 financial year

Secretaries of State	Salary £	Severance payment £	Pension benefit to nearest £1,000	Total to nearest £1,000	Annualised value if applicable £
Rt Hon Gillian Keegan MP, to 4 July 2024	17,784	16,876	4,000	39,000	67,505
Rt Hon Bridget Phillipson MP, from 5 July 2024	49,721	0	13,000	62,000	67,505
Ministers of State	Salary £	Severance payment £	Pension benefit to nearest £1,000	Total to nearest £1,000	Annualised value if applicable £
Rt Hon Damian Hinds MP, to 4 July 2024	8,346	7,920	2,000	18,000	31,680
Luke Hall MP, to 4 July 2024	8,346	7,920	2,000	18,000	31,680
Rt Hon Baroness Smith, from 5 July 2024	86,804	0	15,000	102,000	117,851
Catherine McKinnell MP, from 8 July 2024	23,164	0	6,000	29,000	31,680
Rt Hon Anneliese Dodds MP, from 8 July 2024 to 28 February 2025	0	0	0	0	0
Parliamentary Under Secretaries of State	Salary £	Severance payment £	Pension benefit to nearest £1,000	Total to nearest £1,000	Annualised value if applicable £
Baroness Barran, to 4 July 2024	0	0	0	0	0
David Johnston MP, to 4 July 2024	5,895	5,593	1,000	13,000	22,375
Janet Daby MP, from 9 July 2024	16,300	0	4,000	21,000	22,375
Stephen Morgan MP, from 9 July 2024	16,300	0	4,000	21,000	22,375
Rt Hon Sir Stephen Timms MP, from 8 July 2024	0	0	0	0	0
Dame Nia Griffith MP, from 8 October 2024	0	0	0	0	0
Seema Malhotra MP, from 8 October 2024	0	0	0	0	0

In respect of ministers in the House of Commons, departments bear only the cost of the additional ministerial remuneration, the salary for their services as an MP £91,346 (from 1 April 2024) and various allowances to which they are entitled are borne centrally. However, the arrangement for ministers in the House of Lords is different in that they do not receive a salary but rather an additional remuneration, which cannot be quantified separately from their ministerial salaries. This total remuneration, as well as the allowances to which they are entitled, is paid by the Department and is therefore shown in full in the figures above.

Remuneration for the following ministers was paid by the departments named where they hold other ministerial roles, further details can be found in the relevant department’s published ARA:

Rt Hon Anneliese Dodds MP – Foreign, Commonwealth and Development Office
Rt Hon Sir Stephen Timms MP – Department for Work and Pensions
Dame Nia Griffith MP – Wales Office
Seema Malhotra MP – Home Office

Salary costs reported for ministers reflect the pay received for their period of appointment as a department minister. Where ministers move departments in month, the originating department will pay the full month’s salary.

Baroness Barran did not receive remuneration for her position for either year presented here.

No benefits-in-kind were paid to ministers during the year (prior year, £nil).

2023 to 2024 financial year

Secretary of State	Salary £	Severance payment £	Pension benefit to the nearest £1,000	Total to the nearest £1,000	Annualised value if applicable £
Rt Hon Gillian Keegan MP	67,505	0	18,000	86,000	N/A
Ministers of State	Salary £	Severance payment £	Pension benefit to the nearest £1,000	Total to the nearest £1,000	Annualised value if applicable £
Rt Hon Nick Gibb MP, to 13 November 2023	19,536	7,920	5,000	32,000	31,680
Rt Hon Robert Halfon MP, to 26 March 2024	31,254	7,920	9,000	48,000	31,680
Rt Hon Damian Hinds MP, from 23 November 2023	12,144	0	3,000	15,000	31,680
Luke Hall MP, from 26 March 2024	426	0	0	0	31,680
Parliamentary Under Secretaries of State	Salary £	Severance payment £	Pension benefit to the nearest £1,000	Total to the nearest £1,000	Annualised value if applicable £
Baroness Barran	0	0	0	0	N/A
Claire Coutinho MP, to 30 August 2023	9,323	0	2,000	12,000	22,375
David Johnston MP, from 31 August 2023	13,112	0	3,000	16,000	22,375

Officials

2024 to 2025 financial year

Permanent Secretary	Salary £thousand	Benefits-in-kind to nearest £hundred	Pension benefit to nearest £thousand	Total £thousand
Susan Acland-Hood	180-185	0	137	320-325
Directors General	Salary £thousand	Benefits-in-kind to nearest £100	Pension benefit to nearest £1,000	Total £thousand
Justin Russell	150-155	2,000	80	235-240
Juliet Chua	155-160	0	85	240-245
Julia Kinniburgh	155-160	0	103	255-260
John Edwards	165-170	6,600	61	230-235
Tony Foot	140-145	0	82	220-225
Jane Cunliffe	145-150	0	84	230-235

Accrued pension benefits included in this table for any individual affected by the public service pensions remedy have been calculated based on their inclusion in the legacy scheme for the period between 1 April 2015 and 31 March 2022, following the McCloud judgment. The public service pensions remedy applies to individuals that were members, or eligible to be members, of a public service pension scheme on 31 March 2012 and were members of a public service pension scheme between 1 April 2015 and 31 March 2022. The basis for the calculation reflects the legal position that impacted members have been rolled back into the relevant legacy scheme for the remedy period and that this will apply unless the member actively exercises their entitlement on retirement to decide instead to receive benefits calculated under the terms of the alpha scheme for the period from 1 April 2015 to 31 March 2022.

No bonuses were awarded to the Department’s SCS, including the Leadership Team, this year due to affordability concerns when looked at alongside wider remuneration decisions across the Department.

2023 to 2024 financial year

Permanent Secretary	Salary £thousand	Bonus payment £thousand	Benefits-in-kind to nearest £hundred	Pension benefit to nearest £thousand	Total £thousand	Annualised value if applicable £thousand
Susan Acland-Hood	170-175	0	0	108	280-285	N/A
Directors General	Salary £thousand	Bonus payment £thousand	Benefits-in-kind to nearest £100	Pension benefit to nearest £1,000	Total £thousand	Annualised value if applicable £thousand
Indra Morris, to 1 June 2023	30-35	0	0	0	30-35	140-145
Graham Archer, from 31 May 2023 to 1 October 2023	40-45	0	0	102	140-145	120-125
Justin Russell, from 2 October 2023	70-75	0-5	0	109	185-190	140-145
Caroline Pusey, to 21 May 2023	10-15	0	0	24	35-40	85-90
Heather McNaughton, to 21 May 2023	10-15	0	0	21	35-40	85-90
Juliet Chua, from 22 May 2023	125-130	10-15	0	51	190-195	135-140
Julia Kinniburgh	145-150	5-10	300	90	245-250	N/A
John Edwards	160-165	10-15	13,500	58	245-250	N/A
Tony Foot	130-135	5-10	0	165	305-310	N/A
Jane Cunliffe	140-145	5-10	0	197	345-350	N/A

The table above has been restated to include pension benefit values which were unavailable at the time last year’s ARA was published. The omission of the values was caused by a delay in their issue by the pension scheme administrator due to complexity of reflecting the effects of the public service pensions remedy in the values.

Salary

‘Salary’ includes:

gross salary
overtime
reserved rights to London weighting or London allowances
recruitment and retention allowances
private office allowances
any other allowance to the extent that it is subject to UK taxation

This report is based on accrued payments made by the Department and thus recorded in these accounts.

Benefits-in-kind

The monetary value of benefits-in-kind covers any benefits provided by the Department and treated by HM Revenue and Customs (HMRC) as a taxable emolument. Both directors general who received benefits-in-kind did so to cover the cost of multi-site working, as permitted by the Civil Service management code. No non-executive board members received benefits-in-kind in the year (prior year, nil).

Bonuses

Bonuses are based on performance levels attained and are made as part of the appraisal process. Bonuses relate to the performance in the year in which they become payable to the individual.

Pensions

The value of pension benefits accrued during the year is calculated as (the real increase in pension multiplied by 20) plus (the real increase in any lump sum) less (the contributions made by the individual). The real increases exclude increases due to inflation or any increase or decreases due to a transfer of pension rights.

The pension benefits of any members affected by the public service pensions remedy which were reported in the 2022 to 2023 financial year based on alpha membership for the period between 1 April 2015 and 31 March 2022 have been reported since the 2023 to 2024 financial year based on Principal Civil Service Pension Scheme (PCSPS) membership for the same period.

Pay multiples

Reporting bodies are required to disclose the relationship between the remuneration of the highest-paid director in their organisation and the 25th percentile, the median and the 75th percentile remuneration of the organisation’s workforce. The disclosures here cover staff at the Department and its Agencies.

The banded remuneration of the highest-paid director in the Department in the year was £180,000 to £185,000 (prior year, £185,000 to £190,000). This was 4.0 times (prior year, 4.3) the median remuneration of the workforce, which was £46,192 (prior year, £43,825).

In the current year, no employees (prior year, nil) received remuneration in excess of the highest-paid director. Remuneration ranged from £22,000 to £185,000 (prior year, £23,000 to £190,000).

Total remuneration includes salary, non-consolidated performance-related pay, and benefits-in-kind. It does not include severance payments, employer pension contributions and the cash equivalent transfer value of pensions.

Table 31: Pay multiples

Reporting range	2024 - 2025 salary and allowances	2024 - 2025 total pay and benefits	2023 - 2024 salary and allowances	2023 - 2024 total pay and benefits
Band of highest paid director (£thousand)	180-185	180-185	160-165	185-190
Range (£thousand)	22-185	22-185	23-165	23-190
Upper quartile (75%)	57,222	58,122	54,971	55,764
Median (50%)	45,492	46,192	43,325	43,825
Lower quartile (25%)	37,718	38,168	35,914	35,921
Reporting range	Ratio 2024 - 2025 salary and allowances	Ratio 2024 - 2025 total pay and benefits	Ratio 2023 - 2024 salary and allowances	Ratio 2023 - 2024 total pay and benefits
Upper quartile (75%)	3.2:1	3.1:1	3.0:1	3.4:1
Median (50%)	4.0:1	4.0:1	3.8:1	4.3:1
Lower quartile (25%)	4.8:1	4.8:1	4.5:1	5.2:1

Table 32: Percentage change in the total salary and bonuses of the highest paid director and the staff average (% change)

Values	2024 - 2025 highest paid director	2024 - 2025 staff average	2023 - 2024 highest paid director	2023 - 2024 staff average
Salary and allowances	12.3%	5.2%	14.0%	4.6%
Bonuses	-100.0%	29.7%	-28.6%	-64.0%

There has been a change in the identity of the highest paid director between this year and last year. The 2 individuals receive remuneration with different profiles across the separate elements of total remuneration. This change can be seen in the table above, whilst the highest paid director’s total pay and benefits has fallen slightly across the 2 years, salary and allowances has increased.

The difference in the highest paid director’s remuneration profile has driven the movements in the quartile values and ratios, and the percentage changes reported in table 31 and table 32. There have been no significant changes to staffing levels or remuneration policies in the year. The lack of senior staff bonuses this year has driven the total reduction in the change in bonus percentage.

Non-executive fees (£)

Individual	2024 - 2025 fees	2024 - 2025 annualised value (if applicable)	2023 - 2024 fees	2023 - 2024 annualised value (if applicable)
Richard Pennycook, to 10 February 2025	17,217	20,000	20,000	N/A
Toby Peyton-Jones, to 28 February 2025	13,750	15,000	15,000	N/A
Stuart McMinnies	15,000	N/A	15,000	N/A
Sir Peter Bazalgette	15,000	N/A	15,000	N/A
Jack Boyer	15,000	N/A	15,000	N/A
Sir Kevan Collins, from 10 July 2024	11,766	20,000	N/A	N/A
Margaret Casely-Hayford, from 1 March 2025	1,250	15,000	N/A	N/A
Steve Crocker, from 1 March 2025	1,250	15,000	N/A	N/A
Naomi Eisenstadt, from 1 March 2025	1,250	15,000	N/A	N/A
Rebecca George, from 1 March 2025	1,250	15,000	N/A	N/A
Suzy Levy, from 31 May 2022 to 13 April 2023	N/A	N/A	1,846	15,000

Where non-executive members joined or left the Board during the year, annualised remuneration is presented in brackets. The annualised value for Sir Kevan Collins is calculated applying his fees for the Lead Non-executive Board Member role he was in-post for at year end.

Pension benefits

Ministers (£thousand)

Secretaries of State	Accrued pension at age 65 as at 31 March 2025	Real increase in pension at age 65	CETV at 31 March 2025	CETV at 31 March 2024	Real increase in CETV
Rt Hon Gillian Keegan MP	0-5	0-2.5	60	54	3
Rt Hon Bridget Phillipson MP	0-5	0-2.5	12	0	6
Ministers of State	Accrued pension at age 65 as at 31 March 2025	Real increase in pension at age 65	CETV at 31 March 2025	CETV at 31 March 2024	Real increase in CETV
Rt Hon Damian Hinds MP	5-10	0-2.5	102	100	1
Luke Hall MP	0-5	0-2.5	15	13	1
Rt Hon Baroness Smith	0-5	0-2.5	20	0	13
Catherine McKinnell MP	0-5	0-2.5	6	0	4
Rt Hon Anneliese Dodds MP	0	0	0	0	0
Parliamentary Under Secretaries of State	Accrued pension at age 65 as at 31 March 2025	Real increase in pension at age 65	CETV at 31 March 2025	CETV at 31 March 2024	Real increase in CETV
Baroness Barran	0	0	0	0	0
David Johnston MP	0-5	0-2.5	4	3	1
Janet Daby MP	0-5	0-2.5	5	0	3
Stephen Morgan MP	0-5	0-2.5	4	0	2
Rt Hon Sir Stephen Timms MP	0	0	0	0	0
Dame Nia Griffith MP	0	0	0	0	0
Seema Malhotra MP	0	0	0	0	0

The 2025 cash equivalent transfer value (CETV) values presented above are as at the date ministers left the Department or year end. The 2024 CETV balances presented have been restated following a change in methodology used by the actuaries to calculate pension benefits.

Pension benefits for ministers are provided by the Parliamentary Contributory Pension Fund (PCPF). The scheme is made under statute, and the rules are set out in the Ministers’ Pension Scheme 2015.

Those ministers who are Members of Parliament may also accrue an MP’s pension under the PCPF (details of which are not included in this report).

Benefits for ministers are payable from state pension age under the 2015 scheme. Pensions are re-valued annually in line with pensions increase legislation both before and after retirement. The contribution rate from May 2015 is 11.1% and the accrual rate is 1.775% of pensionable earnings.

The figure shown for pension value includes the total pension payable to the member under both the pre- and post-2015 ministerial pension schemes.

Cash equivalent transfer value

This is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the pension benefits, they have accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued because of their total ministerial service, not just their current appointment as a minister. CETVs are calculated in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from lifetime allowance tax which may be due when pension benefits are taken.

The real increase in the value of the CETV

This is the element of the increase in accrued pension funded by the Exchequer. It excludes increases due to inflation and contributions paid by the minister. It is worked out using common market valuation factors for the start and end of the period.

Officials

Table 33: 2024 to 2025 financial year (£thousand)

Permanent Secretary	Accrued pension at age 65 as at 31 March 2025	Real increase in pension at age 65	CETV at 31 March 2025	CETV at 31 March 2024 (Restated)	Real increase in CETV
Susan Acland-Hood	80-85	7.5-10	1,473	1,307	103
Directors General	Accrued pension at age 65 as at 31 March 2025	Real increase in pension at age 65	CETV at 31 March 2025	CETV at 31 March 2024 (Restated)	Real increase in CETV
Justin Russell	50-55	2.5-5	1,108	989	70
Juliet Chua	40-45 plus a lump sum of 95-100	2.5-5 plus a lump sum of 2.5-5	856	753	62
Julia Kinniburgh	70-75 plus a lump sum of 40-45	5-7.5 plus a lump sum of 0-2.5	1,395	1,294	67
John Edwards	25-30	2.5-5	440	357	42
Tony Foot	45-50 plus a lump sum of 110-115	2.5-5 plus a lump sum of 2.5-5	886	791	55
Jane Cunliffe	45-50	2.5-5	852	757	56

Accrued pension benefits included in this table for any individual affected by the public service pensions remedy have been calculated based on their inclusion in the legacy scheme for the period between 1 April 2015 and 31 March 2022, following the McCloud judgment. The public service pensions remedy applies to individuals that were members, or eligible to be members, of a public service pension scheme on 31 March 2012 and were members of a public service pension scheme between 1 April 2015 and 31 March 2022. The basis for the calculation reflects the legal position that impacted members have been rolled back into the relevant legacy scheme for the remedy period and that this will apply unless the member actively exercises their entitlement on retirement to decide instead to receive benefits calculated under the terms of the alpha scheme for the period from 1 April 2015 to 31 March 2022.

Table 34: 2023 to 2024 financial year (£thousand)

Permanent Secretary	Accrued pension at age 65 as at 31 March 2024	Real increase in pension at age 65	CETV at 31 March 2024	CETV at 31 March 2023	Real increase in CETV
Susan Acland-Hood	70-75	5-7.5	1,307	1,122	76
Directors General	Accrued pension at age 65 as at 31 March 2024	Real increase in pension at age 65	CETV at 31 March 2024	CETV at 31 March 2023	Real increase in CETV
Indra Morris	0	0	0	0	0
Graham Archer	60-65 plus a lump sum of 170-175	2.5-5 plus a lump sum of 10-12.5	1,526	1,389	108
Justin Russell	45-50	5-7.5	989	856	101
Caroline Pusey	25-30 plus a lump sum of 75-80	0-2.5 plus a lump sum of 0-2.5	573	545	20
Heather McNaughton	20-25 plus a lump sum of 60-65	0-2.5 plus a lump sum of 0-2.5	484	460	18
Juliet Chua	35-40 plus a lump sum of 90-95	2.5-5 plus a lump sum of 0-2.5	753	663	33
Julia Kinniburgh	60-65 plus a lump sum of 40-45	2.5-5 plus a lump sum of 0-2.5	1,247	1,119	21
John Edwards	20-25	2.5-5	357	274	40
Tony Foot	40-45 plus a lump sum of 105-110	7.5-10 plus a lump sum of 12.5-15	791	601	129
Jane Cunliffe	40-45	10-12.5	757	544	157

The table above was not included in last year’s ARA, the values were unavailable at the time last year’s ARA was published. The omission of the values was caused by a delay in their issue by the pension scheme administrator due to complexity of reflecting the effects of the public service pensions remedy in the values.

Cash equivalent transfer value

A CETV is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.

The figures include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost.

CETVs are worked out in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from lifetime allowance tax which may be due when pension benefits are taken.

Real increase in CETV

This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

Civil Service pensions

Pension benefits are provided through the Civil Service pension arrangements. Before 1 April 2015, the only scheme was the PCSPS, which is divided into a few different sections, classic, premium, and classic plus provide benefits on a final salary basis, whilst nuvos provides benefits on a career average basis. From 1 April 2015 a new pension scheme for civil servants was introduced, the Civil Servants and Others Pension Scheme (CSOPS) or alpha, which provides benefits on a career average basis. All newly appointed civil servants, and the majority of those already in service, joined the new scheme.

The PCSPS and alpha are unfunded statutory schemes. Employees and employers make contributions (employee contributions range between 4.6% and 8.05%, depending on salary). The balance of the cost of benefits in payment is met by monies voted by Parliament each year. Pensions in payment are increased annually in line with the pensions increase legislation. Instead of the defined benefit arrangements, employees may opt for a defined contribution pension with an employer contribution, the partnership pension account.

In alpha, pension builds up at a rate of 2.32% of pensionable earnings each year, and the total amount accrued is adjusted annually in line with a rate set by HMT. Members may opt to give up (commute) pension for a lump sum up to the limits set by the Finance Act 2004. All members who switched to alpha from the PCSPS had their PCSPS benefits ‘banked’, with those with earlier benefits in one of the final salary sections of the PCSPS having those benefits based on their final salary when they leave alpha.

The accrued pensions shown in this report are the pension the member is entitled to receive when they reach normal pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over normal pension age. Normal pension age is 60 for members of classic, premium, and classic plus, 65 for members of nuvos, and the higher of 65 or state pension age for members of alpha. The pension figures in this report show pension earned in PCSPS or alpha – as appropriate. Where a member has benefits in both the PCSPS and alpha, the figures show the combined value of their benefits in the 2 schemes but note that the constituent parts of that pension may be payable from different ages.

When the government introduced new public service pension schemes in 2015, there were transitional arrangements which treated existing scheme members differently based on their age. Older members of the PCSPS remained in that scheme, rather than moving to alpha. In 2018, the Court of Appeal found that the transitional arrangements in the public service pension schemes unlawfully discriminated against younger members (the “McCloud judgment”).

As a result, steps are being taken to remedy those 2015 reforms, making the pension scheme provisions fair to all members. The public service pensions remedy is made up of 2 parts. The first part closed the PCSPS on 31 March 2022, with all active members becoming members of alpha from 1 April 2022. The second part removes the age discrimination for the remedy period, between 1 April 2015 and 31 March 2022, by moving the membership of eligible members during this period back into the PCSPS on 1 October 2023.

The accrued pension benefits, CETV and single total figure of remuneration reported for any individual affected by the public service pensions remedy have been calculated based on their inclusion in the PCSPS for the period between 1 April 2015 and 31 March 2022, following the McCloud judgment. The public service pensions remedy applies to individuals that were members, or eligible to be members, of a public service pension scheme on 31 March 2012 and were members of a public service pension scheme between 1 April 2015 and 31 March 2022. The basis for the calculation reflects the legal position that impacted members have been rolled back into the PCSPS for the remedy period and that this will apply unless the member actively exercises their entitlement on retirement to decide instead to receive benefits calculated under the terms of the alpha scheme for the period from 1 April 2015 to 31 March 2022.

The partnership pension account is an occupational defined contribution pension arrangement which is part of the Legal & General master trust. The employer makes a basic contribution of between 8% and 14.75% (depending on the age of the member). The employee does not have to contribute but, where they do make contributions, the employer will match these up to a limit of 3% of pensionable salary (in addition to the employer’s basic contribution). Employers also contribute a further 0.5% of pensionable salary to cover the cost of centrally provided risk benefit cover (death in service and ill health retirement).

Further details about the Civil Service pension arrangements can be found at www.civilservicepensionscheme.org.uk.

Payments to past directors

No payments have been made to former directors of the Department in the current financial year (prior year, £nil).

10.3 Staff report: part A (audited)

Staff costs (£thousand)

	2024 - 2025 Permanently employed staff	2024 - 2025 Other	2024 - 2025 Ministers	2024 - 2025 Total	2023 - 2024 Total
Wages and staff costs	592,660	36,552	206	629,418	618,911
Social security costs	68,951	0	26	68,977	68,536
Pensions costs	151,288	0	23	151,311	136,654
Sub-total	812,899	36,552	255	849,706	824,101
Less:	2024 - 2025 Permanently employed staff	2024 - 2025 Other	2024 - 2025 Ministers	2024 - 2025 Total	2023 - 2024 Total
recoveries in respect of outward secondments	-951	0	0	-951	-633
capitalised staff costs	-34,211	0	0	-34,211	-30,158
Total	777,737	36,552	255	814,544	793,310
Of which:	2024 - 2025 Other	2024 - 2025 Ministers	2024 - 25 Total	2023 - 24 Total
Department	441,366	31,965	255	473,586	457,646
Agencies	51,154	335	0	51,489	59,128
NDPBs	285,217	4,252	0	289,469	276,536
Total	777,737	36,552	255	815,544	793,310

Staff costs disclosed above include costs of staff involved in asset creation (operational, education sector or intangibles) or programmes classified to capital budgets. As such staff costs are included in the asset’s carrying value or included in the capital grant-in-kind expense. A deduction is then made to remove these costs to calculate the staff costs per SoCNE.

Average numbers of persons employed

The monthly average number of full-time equivalent persons employed during the year is shown in the table below.

	2024 - 2025 Permanently employed staff	2024 - 2025 Other	2024 - 2025 Ministers	2024 - 2025 Total	2023 - 2024 Total
Department	6,840	230	5	7,075	6,991
Agencies	833	4	0	837	935
NDPBs	5,229	188	0	5,417	5,457
Total	12,902	422	5	13,329	13,383

As well as the staff disclosed above, the Department had 4 special advisers (prior year, 4). Since special adviser staff costs are borne by Cabinet Office so their costs are not included in the table, their staff numbers are removed from the second table to be consistent.

A disaggregation across Group reporting bodies of staff costs and numbers for permanently employed and other staff are presented in Annex E.

Pension schemes

The Group operates a range of pension schemes for its employees depending upon their role. Details of the Group’s pension schemes are described further below.

Civil Service pensions

The PCSPS and the Civil Servant and Other Pension Scheme (CSOPS), known as alpha, are unfunded multi-employer defined benefit schemes, but the Department is unable to identify its share of the underlying assets and liabilities. The scheme actuary valued the PCSPS as at 31 March 2020. You can find details in the resource accounts of the Cabinet Office: Civil Superannuation.

For this financial year, Department and Agencies employers’ contributions of £109.5 million (prior year, £99.5 million) were payable to the CSOPS at 28.97% of pensionable earnings. It is estimated that employer contributions for the next financial year will be £106.4 million (current year, £106.9 million).

The scheme actuary reviews employer contributions usually every 4 years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during the financial year to be paid when the member retires and not the benefits paid during this period to existing pensioners.

Partnership pension accounts

Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. In this financial year, Department and Agencies employers’ contributions of £547,000 (prior year, £559,000) were paid to one or more of the panel of 3 appointed stakeholder pension providers.

Employer contributions are age-related and range from 8% to 14.75%. Employers also match employee contributions up to 3% of pensionable earnings. In addition, Department and Agencies employer contributions of £19,000 (prior year, £19,000), 0.5% of pensionable pay, were payable to the CSOPS to cover the cost of the future provision of lump sum benefits on death in service or ill health retirement of these employees.

Contributions due to the partnership pension providers at the year end were £74,000 (prior year, £70,000). Contributions prepaid at that date were £nil (prior year, £nil).

Reporting of Civil Service and other compensation schemes

Numbers and costs are based on estimated values of exit packages, and expected number of agreed departures are based on the best information available to management at the time of preparing the accounts.

Table 35: Department and Agencies (number)

	2024 - 2025 Compulsory redundancy	2024 - 2025 Other agreed exits	2024 - 2025 Total	2023 - 2024 Compulsory redundancy	2023 - 2024 Other agreed exits	2023 - 2024 Total
<10,001	0	3	3	0	0	0
£10,001-£25,000	0	0	0	0	4	4
£25,001-£50,000	0	1	1	0	10	10
£50,001-£100,000	0	3	3	0	-2	-2
£100,001-£150,000	0	1	1	0	1	1
£150,001-£200,000	0	1	1	0	0	0
Total number of exit packages	0	9	9	0	13	13
Total costs (£thousand)	0	609	609	0	711	711

Table 36: Group (number)

	2024 - 2025 Compulsory redundancy	2024 - 2025 Other agreed exits	2024 - 2025 Total	2023 - 2024 Compulsory redundancy	2023 - 2024 Other agreed exits	2023 - 2024 Total
<£10,001	0	8	8	0	6	6
£10,001-£25,000	0	11	11	0	10	10
£25,001-£50,000	0	10	10	0	12	12
£50,001-£100,000	0	27	27	0	0	0
£100,001-£150,000	0	6	6	0	0	0
£150,001-£200,000	0	2	2	0	2	2
Total number of exit packages	0	64	64	0	30	30
Total costs (£thousand)	0	3,900	3,900	0	1,265	1,265

Redundancy and other departure costs have been paid in accordance with the provisions of the Civil Service Compensation Scheme, a statutory scheme made under the Superannuation Act 1972. Exit costs are accounted for in full in the year of departure.

Where the Group has agreed early retirements, with agreed employer-funded top-up for early access to pensions, the employer top-up costs are met by the Group alongside compensation for loss of office. Payments comprise either a lump sum payment for loss of office or, in cases where early retirement with agreed employer-funded top-up for early access to pensions, the employer top-up costs are met by the Group alongside compensation for loss of office. The total cost to the Group will therefore be higher than the amounts received by individuals.

The exit costs for staff in Agencies are borne and managed centrally by the Department. Information on departure costs and numbers for each Agency are also reported in the individual Agency’s ARA to aid transparency.

Ill-health retirement

Ill-health retirement costs are met by the pension scheme and are not included in the table. 5 people (prior year, 2 people) retired early on ill-health grounds, the total additional accrued pension liabilities for the year amounted to £60,000 (prior year, £7,000).

10.5 Staff report: part B (unaudited)

Workforce reporting

The following tables cover permanent staff as at 31 March 2025, based on headcount. The disclosures have been calculated using data received from the Department, Agencies and NDPBs. For non-civil servants employed in NDPBs, local grades have been mapped to Civil Service staff grades.

Table 37: Department and Agencies (number)

	2024 - 2025 Male	2024 - 2025 Female	2023 - 2024 Male	2023 - 2024 Female
Permanent Secretary	0	1	0	1
Directors General	3	3	3	3
Directors	14	31	16	32
Deputy Directors	85	121	88	114
Non-SCS	3,009	4,648	3,139	4,865
Total	3,111	4,804	3,246	5,015

Table 38: Group (number)

	2024 - 2025 Male	2024 - 2025 Female	2023 - 2024 Male	2023 - 2024 Female
Permanent Secretary	0	1	0	1
Directors General	5	3	5	3
Directors	29	44	32	47
Deputy Directors	155	168	151	160
Non-SCS	5,319	7,608	5,479	7,705
Total	5,508	7,824	5,667	7,916

Number of senior civil servants by salary band

Salary ranges in the following table represent basic salary and allowances but exclude bonuses.

Table 39: Number of senior civil servants by salary band for the Department and Agencies (number)

Salary range	2025	2024
<£60,001	16	20
£60,001 – £65,000	6	6
£65,001 – £70,000	9	7
£70,001 – £75,000	9	23
£75,001 – £80,000	22	43
£80,001 – £85,000	50	75
£85,001 – £90,000	72	15
£90,001 – £95,000	12	4
£95,001 – £100,000	6	16
£100,001 – £105,000	12	19
£105,001 – £110,000	19	12
£110,001 – £115,000	12	1
£115,001 – £120,000	2	2
£120,001 – £125,000	1	3
£125,001 – £130,000	1	0
£130,001 – £135,000	0	2
£135,001 – £140,000	0	2
£140,001 – £145,000	2	2
£145,001 – £150,000	1	3
£150,001 – £155,000	1	1
£155,001 – £160,000	4	0
£160,001 – £165,000	0	0
£165,001 – £170,000	0	0
£170,001 – £175,000	0	1
£175,001 – £180,000	0	0
£180,001 – £185,000	1	0
Total	258	257

Workforce diversity information

The following figures present workforce information across the Group or Department and Agencies consolidation levels as indicated. The data has been compiled from year end headcount values not FTE, so will differ from the average FTE values disclosed in part A.

Table 40: Gender across the Group for the last 5 years

Gender	2025	2024	2023	2022	2021
Male	41%	42%	42%	42%	42%
Female	59%	58%	58%	58%	58%

Table 41: Non-SCS gender across the Group for the current year

Non-SCS staff grades	Male	Female
Grade 6	48%	52%
Grade 7	43%	57%
Senior Executive Officer	39%	61%
Higher Executive Officer	37%	663%
Executive Officer	39%	61%
Executive Assistant	42%	58%
Administrative Assistant	44%	56%

Addressing under-representation

The diversity and inclusion strategy introduced specific targets for the representation of ethnic minority and disabled staff in the SCS for the first time. The targets, which have been agreed with Cabinet Office, are 12% and 15% for disabled and ethnic minority staff respectively by 2025.

Table 42: SCS gender across Department and Agencies for the last 5 years

SCS gender	2025	2024	2023	2022	2021
Male	39%	42%	42%	45%	45%
Female	61%	58%	58%	55%	55%

Table 43: SCS ethnicity across Department and Agencies for the last 5 years

SCS ethnicity	2025	2024	2023	2022	2021
White	86%	87%	88%	89%	90%
BAME	14%	13%	12%	11%	10%

Table 44: SCS disability across Department and Agencies for the last 5 years

SCS disability	2025	2024	2023	2022	2021
Disabled	11%	13%	13%	8%	9%
Target	12%	12%	12%	12%	12%

Table 45: SCS sexual orientation across Department and Agencies for the last 5 years

SCS sexual orientation	2025	2024	2023	2022	2021
LGBT	7%	7%	7%	7%	7%
Target	13%	13%	13%	13%	13%

Analysis of staff policies and statistics

Recruitment practice

The Department seeks to ensure that it is compliant with the Civil Service Commissioner’s recruitment principles, focusing on merit-based hiring through fair and open competition. The Department’s approach to recruitment reflects its commitment to become a more inclusive employer, reflecting the society we serve. We aim to achieve this by building core recruitment capability through training and guidance to managers, and ensuring consistent application of the Civil Service success profiles framework. The Department has improved its internal recruitment services offer to ensure a more responsive flexible resource model supporting managers in the recruitment process.

Sickness absence

Table 46 presents the average number of working days lost due to sickness across the Department and Agencies over the past 5 years.

Table 46: Staff absence over the last 5 years

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Days lost per FTE	6.0	5.3	5.4	5.6	4.7

The Department’s average of 6.0 days lost per full-time equivalent in the year is favourable compared to the Civil Service average of 7.8 days for the year ending 31 March 2024, which is the most recent data available.

Staff turnover

Table 47 shows the percentage of staff who left the Department and its Agencies during the year, compared to the Civil Service average.

Table 47: Staff turnover over the last 5 years

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Civil Service turnover	5%	8%	5%	5%	5%
Departmental turnover	8%	13%	11%	11%	8%

Departmental turnover includes employees leaving for other government departments as well as those exiting the civil service entirely. The majority of leavers transfer to other government departments, which accounts for the differences in the reported figures.

Both Civil Service and Departmental turnover rates have decreased since the previous year. This reduction follows a voluntary exit scheme that concluded on 31 May 2023, resulting in approximately 350 employees leaving the Department, which had increased the turnover rate for that year.

Commitment to improving diversity

The Department remains committed to fostering a diverse and inclusive workforce and cultivating a workplace environment that not only reflects the diversity of the communities it serves but also harnesses the strengths that such diversity brings. This is evidenced by:

increasing representation to 20.4% of staff from a minority ethnic background (prior year, 20.2%), with continued efforts to ensure proportional representation across all levels
maintaining a strong proportion of women at 60.6% (prior year, 60%), with an ongoing focus on gender balance at all levels
staff identifying as disabled at 15.1%, the Department’s highest position on record (prior year, 13.8%), with targeted efforts to improve accessibility, workplace adjustments, and career progression opportunities
the proportion of staff identifying as lesbian, gay, bisexual or other (LGBO) continued to grow at 8.6% (prior year, 7.8%), reinforcing the Department’s commitment to LGBTQ+ inclusion
we achieved our SCS workforce representation targets, with 13.0% for staff from an ethnic minority and 12.3% for disability

The Department further consolidated delivery of its diversity and inclusion strategy commitments with emphasis on:

leadership development programmes to support senior leaders to actively champion diversity and inclusion, and foster a culture where all employees feel valued, heard and supported
strengthening recruitment practices to attract a diverse talent pool, including targeted recruitment and retention initiatives
regularly assessing people-related policies to ensure they are inclusive and equitable, addressing potential biases that may hinder diversity
offering training, resources and opportunities tailored for line managers but also to staff at all levels to promote understanding and engagement with diversity and inclusion principles

The Department continues to measure progress against external standards and organisations as demonstrated in its social mobility work, evaluating and identifying key areas for improvement to enable equitable opportunities for individuals from diverse socioeconomic backgrounds. This year, the Department was again included in the top 75 UK employers as announced by the Social Mobility Employer Index.

Staff policies for disabled persons

The Department has a range of policies in place to support people with a disability.

The Department guarantees an interview to candidates under the disability confident scheme if they meet the minimum role requirements, even if the pass mark is raised due to high application volumes.

In the recruitment process, if a person with disabilities is put at a substantial disadvantage compared to a non-disabled person, we make reasonable adjustments to our processes. In the application process the candidate can complete the assistance required section of their application form to tell us what changes or help they might require. We now also add a reasonable adjustment guide to our vacancy notices to provide candidates with more information on the support we can provide.

HR policies

The Department’s policies include:

attendance management – managers may, where deemed appropriate, adjust trigger points for formal action to accommodate higher absence levels due to a disability or long-term health condition
disability leave – enables line managers to grant employees with a disability reasonable time off work for rehabilitation, assessments, treatment, or while waiting for reasonable adjustments
performance management – all employees and their managers discuss and agree objectives and development needs at the start of the year, with monthly performance check-ins
workplace adjustments– guidance and training are provided for open conversations about disabilities and health conditions, including non-visible conditions, these conversations help find the right solution to support an individual to perform their role, the policy also covers workplace adjustments and how these can be arranged

Development and talent approaches

The Department adopts the following approaches:

reserving places on a cross-government development programme for disabled employees, where all learning is quality assured to ensure accessibility
offers a talent management programme, which aims to support and accelerate the development and capability of high potential Grade 6 and Grade 7s with disabilities
an established programme for disabled staff that aims to support the development and opportunities for participants, including addressing any personal development needs and potential barriers

Gender pay gap reporting

As of March 2024, the Department’s median gender pay gap was 8.2% (prior year, 4.1%), compared to a Civil Service figure of 8.5%.

Our analysis indicates that the over-representation of females in more junior grades significantly contributes to the gap. In 2024, while both the median male and female salaries were within the same pay band (SEO), a higher proportion of women were in the EA to HEO grades. This results in the overall female median salary being closer to the middle of the SEO distribution, whereas the median male salary is closer to the top end of the SEO distribution. The value for March 2025 is not available at the time of publication and will be included in next year’s ARA.

Table 48: March 2024 staff grade breakdown by gender (Department and Agencies)

Gender pay gap	Male	Female
SCS	3%	3%
Grade 6	14%	9%
Grade 7	28%	26%
Senior Executive Officer	27%	29%
Higher Executive Officer	18%	21%
Executive Officer	8%	10%
Executive Assistant	1%	1%

Engagement with employees

The annual Civil Service People Survey looks at civil servants’ attitudes to and experience of working in government departments. Every year, a Civil Service benchmark report is published along with a summary of departmental scores. The Department conducts a full People Survey annually, across the Department and its Agencies.

Table 49: Response rates and engagement indices for the Civil Service People Survey for the last 5 years

	2024	2023	2022	2021	2020
Response rate	84%	85%	88%	90%	91%
Engagement index	64%	63%	61%	69%	69%
Civil Service-wide response rate	61%	65%	77%	75%	80%
Civil Service-wide engagement index	64%	65%	65%	66%	66%

The employee engagement index is a measure derived from 5 specific survey questions, showing the average level of staff engagement across the Department and its Agencies.

The information from the survey is used to support development of the Department’s plans to improve our levels of employee engagement.

We have actively engaged employees through a department-wide discussion on our behaviours and in response to findings from the People and Pulse Surveys. This feedback shaped our PSP.

The current PSP launched in September 2024 and outlines our strategic priorities for our people, addressing both the challenges and opportunities facing our workforce. It ensures a balance between individual employee experience and organisational needs, providing clear aims and actions to help us deliver across its 4 themes:

a diverse and inclusive workplace experience
a learning organisation that is high performing and skilled
evolving as a more agile organisation
building capability with inclusive leadership and management

Next year, we will continue to embed the aims outlined in the PSP. In response to the latest People Survey results, we have refined our yearly action plan to address colleague feedback, ensuring continuous improvement and meaningful change.

Consultancy and temporary staff

Consultants are hired to work on projects in a number of specific situations:

where the Group does not have the required skill sets
where the requirement falls outside the core business of civil servants
where an external, independent perspective is required

When used appropriately, consultancy can be a cost effective and efficient way of getting the temporary and skilled external input that the Group needs.

We are committed to the consistent application of Cabinet Office’s controls on consultancy and other spending. The Cabinet Office’s definition of consultancy is ‘the provision to management of objective advice relating to strategy, structure, management or operations of an organisation’. Such advice will be provided outside the business as usual environment when in-house skills are not available and will be time-limited. Consultancy often includes the identification of options with recommendations, or assistance with the implementation of solutions but typically not the delivery of business as usual activity.

For the Department and its Agencies, spend on consultancy requires completion of a business case which is signed off by a senior civil servant. Consultancy engagements below £10,000 are cleared by the relevant deputy director with budget or delivery responsibility. Engagements between £10,000 and £20,000 are scrutinised and reviewed centrally by Finance and Commercial teams and cleared by the deputy director with budget or delivery responsibility. In addition, such cases are reviewed in light of the efficiency controls within the Department’s commercial governance process. For engagements over £20,000, the same process as for £10,000 to £20,000 engagements is followed but with additional scrutiny and clearance by the minister with policy responsibility.

Table 50: Group consultancy expenditure for the last 5 years (£million)

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Department	6.6	5.3	5.0	6.6	7.2
Agencies	1.1	1.6	0.4	0.6	0.7
NDPBs	2.5	3.2	1.2	0.5	0.8
Total	10.2	10.1	6.6	7.7	8.7

This expertise was mainly used to support change programmes across the Group and specialist research contracted out to third parties.

The Group has contracts for the engagement of staff and specialist contractors to cover short-term requirements such as covering unexpected absences, short-term peaks in workload, short-term projects or a permanent vacancy until the vacancy can be filled. In recent years, where possible, these vacancies have been covered using existing employees, reducing the Group’s expenditure on consultancy. Use of contingent labour is also subject to the efficiency controls process and requires ministerial approval for recruitment to SCS equivalent grades, and director general approval for grades below this.

Table 51: Group contingent labour expenditure for the last 5 years (£million)

	2024 - 2025	2023 - 2024 (Restated)	2022 - 2023	2021 - 2022	2020 - 2021
Department	32.2	28.0	21.5	26.3	20.9
Agencies	0.3	0.6	0	0.4	0.7
NDPBs	4.3	4.3	0	4.5	10.9
Total	36.8	32.9	21.5	31.2	32.5

The prior year’s numbers have been restated following the identification of an error in the calculation. The correction this year applies a consistent approach across all 5 years. The total disclosed last year was £22.2 million, of which £17.4 million was disclosed as being Departmental activities.

Review of tax arrangements of public sector appointees

As part of the Review of the tax arrangements of public sector appointees published by the Chief Secretary to the Treasury on 23 May 2012, departments were directed to publish information pertaining to the number of off-payroll engagements at a cost of over £58,200 that were in place on, or after, 31 January 2012, and any off-payroll engagements of board members, or senior officials with significant financial responsibility, during this financial year. The following tables set out this information.

Table 52: Highly paid off-payroll worker engagements as at 31 March 2025, earning £245 per day or greater

	Department	Agencies	NDPBs	Group
Number of existing engagements as at 31 March 2025	84	6	56	146
of which the number that have existed for:	Department	Agencies	NDPBs	Group
less than one year at time of reporting	27	2	46	75
between one and 2 years at time of reporting	26	0	8	34
between 2 and 3 years at time of reporting	20	3	1	24
between 3 and 4 years at time of reporting	10	-	0	10
4 or more years at time of reporting	1	1	1	3

Table 53: All highly paid off-payroll workers engaged at any point during the year ended 31 March 2025, earning £245 per day or greater

	Department	Agencies	NDPBs	Group
Number of temporary off-payroll workers engaged during the year ended 31 March 2025	122	7	84	213
of which:	Department	Agencies	NDPBs	Group
not subject to off-payroll legislation	0	0	69	69
subject to off-payroll legislation and determined as in-scope of IR35	113	6	5	124
subject to off-payroll legislation and determined as out-of-scope of IR35	9	1	10	20
Number of engagements reassessed for compliance or assurance purposes during the year	0	0	0	0
of which: number of engagements that saw a change to IR35 status following review	0	0	0	0

Table 54: For any off-payroll engagements of board members, or senior officials with significant financial responsibility, between 1 April 2024 and 31 March 2025

	Department	Agencies	NDPBs	Group
Number of off-payroll engagements of board members or senior officials with significant financial responsibility, during the financial year	0	0	1	1
Total number of individuals on and off-payroll that have been deemed “board members or senior officials with significant financial responsibility” during the financial year. This figure should include both on- and off-payroll engagements	31	16	123	170

Trade union facility time

The Trade Union (Facility Time Publication Requirements) Regulations 2017 requires relevant public sector organisations to report on trade union facility time in their organisations.

Table 55: Relevant union officials – Department and Agencies

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Number of employees	37	35	31	24	22
Full-time equivalent employee numbers	7,598	7,969	7,862	8,169	7,511

The full-time equivalent employee numbers are those as at 31 March 2025 for the Department and Agencies. These numbers are different to those disclosed in the Staff Report: part A for the Department and Agencies within the average number of persons employed table, which reports the monthly average number of staff over the full year, as opposed to the number of staff in employment at the end of the year.

Table 56: Percentage of time spent on facility time – Department and Agencies (number of employees)

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
% of time	Number of employees	Number of employees	Number of employees	Number of employees	Number of employees
0%	2	3	4	7	9
1-50%	35	32	27	17	13
51-99%	0	0	0	0	0
100%	0	0	0	0	0

Table 57: Percentage of pay bill spent on facility time – Department and Agencies

Item	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Total cost of facility time	£96,423	£61,653	£43,219	£41,347	£44,273
Total pay bill (£m)	£547	£546	£501	£483	£446
% of the total pay bill against facility time	0.018%	0.011%	0.009%	0.01%	0.01%

The Department and Agencies pay bill disclosed is larger than that disclosed earlier in the staff report because this balance includes capitalised staff costs.

Paid trade union activities

The percentage of hours spent by employees who were relevant union officials during the relevant period on paid trade union activities was nil (prior year, nil).

Question 11

11. Parliamentary accountability and audit report

Accepted Answer

11.1 Overview

In addition to the primary statements prepared under IFRS, FReM requires the Department to prepare a SOPS and supporting notes.

SOPS and related notes are subject to audit, as detailed in the Certificate and Report of the Comptroller and Auditor General to the House of Commons.

SOPS is a key accountability statement that shows, in detail, how an entity has spent against their Supply Estimate. Supply is the monetary provision (for resource and capital purposes) and cash (drawn primarily from the Consolidated Fund), that Parliament gives statutory authority for entities to utilise. The Estimate details Supply and is voted on by Parliament at the start of the financial year.

Should an entity exceed the limits set by their Supply Estimate, called control limits, their accounts will receive a qualified opinion.

The format of SOPS mirrors the Supply Estimate, published on GOV.UK, to enable comparability between what Parliament approves and the final outturn. SOPS contains a summary table, detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn will not exactly tie to cash spent) and administration.

The supporting notes detail the following: Outturn by Estimate line, providing a more detailed breakdown (note S1), a reconciliation of outturn to net operating expenditure in SoCNE, to tie SOPS to the financial statements (note S2), a reconciliation of outturn to net cash requirement (note S3), and an analysis of income payable to the Consolidated Fund (note S4).

SOPS and the Estimate are compiled against the budgeting framework, which is similar to but different to, International Financial Reporting Standards. An understanding of the budgeting framework and an explanation of key terms is provided in the financial review of the year of the performance report. Further information on the Public Spending Framework and the reasons why budgeting rules are different to IFRS can also be found in chapter 1 of the Consolidated Budgeting Guidance.

SOPS provides a detailed view of financial performance, in a form that is voted on and recognised by Parliament. The financial review of the year provides a summarised discussion of outturn against Estimate and functions as an introduction to SOPS disclosures.

11.2 Statement of Outturn against Parliamentary Supply (audited)

For the year ended 31 March 2025

Summary table, 2024 to 2025 (£thousand)

Departmental Expenditure Limit	Note	Outturn: voted	Outturn: non-voted	Outturn: Total	Estimate: voted	Estimate: non-voted	Estimate: total	Outturn vs Estimate, saving (excess): voted	Outturn vs Estimate, saving (excess): total	Prior year Outturn total 2023-2024
Resource	S1.1	102,121,619	0	102,121,619	112,672,556	0	112,672,556	10,550,937	10,550,937	87,627,139
Capital	S1.2	5,602,518	0	5,602,518	5,717,138	0	5,717,138	114,620	114,620	6,636,478
Total	-	107,724,137	0	107,724,137	118,389,694	0	118,389,694	10,665,557	10,665,557	94,263,617
Annually Managed Expenditure	Note	Outturn: voted	Outturn: non-voted	Outturn: Total	Estimate: voted	Estimate: non-voted	Estimate: total	Outturn vs Estimate, saving (excess): voted	Outturn vs Estimate, saving (excess): total	Prior year Outturn total 2023-2024
Resource	S1.1	-3,817,564	0	-3,817,564	1,047,929	0	1,047,929	4,865,493	4,865,493	-3,327,057
Capital	S1.2	30,906,634	0	30,906,634	33,435,646	0	33,435,646	2,529,012	2,529,012	30,912,958
Total	-	27,089,070	0	27,089,070	34,483,575	0	34,483,575	7,394,505	7,394,505	27,585,901
Total Budget	Note	Outturn: voted	Outturn: non-voted	Outturn: Total	Estimate: voted	Estimate: non-voted	Estimate: total	Outturn vs Estimate, saving (excess): voted	Outturn vs Estimate, saving (excess): total	Prior year Outturn total 2023 - 2024
Resource	S1.1	98,304,055	0	98,304,055	113,720,485	0	113,720,485	15,416,430	15,416,430	84,300,082
Capital	S1.2	36,509,152	0	36,509,152	39,152,784	0	39,152,784	2,643,632	2,643,632	37,549,436
Total Budget Expenditure	-	134,813,207	0	134,813,207	152,873,269	0	152,873,269	18,060,062	18,060,062	121,849,518

Refer to the Supply Estimates guidance manual for detail on the control totals voted by Parliament.

Net cash requirement 2024 to 2025 (£thousand)

Item	Note	Outturn	Estimate	Outturn vs Estimate, saving (excess)	Prior year Outturn total 2023 - 2024
Net cash requirement	S3	111,112,933	113,440,302	2,327,369	103,637,145

Administration costs 2024 to 2025 (£thousand)

Type of spend	Note	Outturn	Estimate	Outturn vs Estimate, saving/ (excess)	Prior year Outturn total 2023 - 2024
Administrative costs	S1.1	546,736	576,641	29,905	529,617

Although not a separate voted limit, any breach of the administration budget will also result in an excess vote.

Explanation of variances between Estimate and outturn are given in the commentary on significant variances between Estimate and outturn in the financial review of the year.

The notes form part of this Statement of Outturn against Parliamentary Supply.

11.3 Notes to the Statement of Outturn against Parliamentary Supply

S1. Outturn detail, by Estimate line

S1.1 Analysis of resource outturn by Estimate line (£thousand)

Spending in Departmental expenditure limit: voted expenditure	Resource Outturn administration: gross	Resource Outturn administration: income	Resource Outturn administration: net	Resource Outturn programme: gross	Resource Outturn programme: income	Resource Outturn programme: net	Resource Outturn programme: total	Estimate programme: total	Estimate programme: virements	Estimate programme: total inc. virements	Outturn vs Estimate, saving (excess)	Prior year Outturn total, 2023 - 2024
A Activities to Support all Functions	450,672	-16,273	434,399	224,298	-126,577	97,721	532,120	559,765	4,944	564,709	32,589	509,944
B Other School Funding (Department)	0	0	0	1,169,132	-60,351	1,108,781	1,108,781	1,180,763	-62,440	1,118,323	9,542	901,684
C Other School Funding (ALB) (net)	6,652	0	6,652	6,602	0	6,602	13,254	12,417	1,481	13,898	644	7,565
D Families and Children Services (Department)	0	0	0	1,146,411	-150	1,146,261	1,146,261	1,187,033	-40,622	1,146,411	150	746,842
E Families and Children Services (ALB) (net)	3,803	0	3,803	11,645	0	11,645	15,448	16,647	0	16,647	1,199	18,785
F Standards and Testing Agency	2,888	0	2,888	47,085	0	47,085	49,973	53,997	5	54,002	4,029	47,517
G Teaching Regulation Agency	245	0	245	16,524	0	16,524	16,769	14,256	2,568	16,824	55	14,030
H Education and Skills Funding Agency	43,675	-20	43,655	-621	-455	-1,076	42,579	38,818	3,940	42,758	179	89,135
I Apprenticeships	0	0	0	2,781,327	0	2,781,327	2,781,327	2,729,853	51,474	2,781,327	0	2,512,281
J Grants to LA – Schools and Early Years	0	0	0	38,412,212	-1,810	38,410,402	38,410,402	38,837,586	-403,709	38,433,877	23,475	35,599,721
K Grants to Academies	0	0	0	35,812,501	-1,534	35,810,967	35,810,967	35,781,025	29,942	35,810,967	0	32,662,390
L Higher Education	0	0	0	13,700,993	-33,107	13,667,886	13,667,886	24,142,357	-40,090	24,102,267	10,434,381	6,709,804
M Further Education	0	0	0	6,792,873	12,368	6,780,505	6,780,505	6,315,203	465,302	6,780,505	0	6,067,053
N Higher Education (ALB) (net)	45,992	0	45,992	1,670,608	0	1,670,608	1,716,600	1,772,572	-12,795	1,759,777	43,177	1,711,618
O Further Education (ALB) (net)	9,102	0	9,102	19,645	0	19,645	28,747	30,264	0	30,264	1,517	28,770
Total spending in DEL	563,029	-16,293	546,736	101,811,235	-236,352	101,574,883	102,121,619	112,672,556	0	112,672,556	10,550,937	87,627,139
Spending in annually managed expenditure: voted expenditure	Resource Outturn administration: gross	Resource Outturn administration: income	Resource Outturn administration: net	Resource Outturn programme: gross	Resource Outturn programme: income	Resource Outturn programme: net	Resource Outturn programme: total	Estimate programme: total	Estimate programme: virements	Estimate programme: total inc. virements	Outturn vs Estimate, saving (excess)	Prior year Outturn total, 2023 - 2024
P Activities to Support all Functions	0	0	0	47,838	0	47,838	47,838	5,856	41,982	47,838	0	1,809
Activities to Support all Functions (ALB)	0	0	0	1,204	0	1,204	1,204	0	1,204	1,204	0	283
Q Executive Agencies	0	0	0	-5,520	0	-5,520	-5,520	300	0	300	5,820	-7,000
R Higher Education	0	0	0	11,131,864	-14,961,340	-3,829,476	-3,829,476	1,001,374	0	1,001,374	4,830,850	-3,320,133
S Further Education	0	0	0	63,109	-103,021	-39,912	-39,912	21,053	-44,603	-23,550	16,362	-19,736
T Higher Education (ALB) (net)	0	0	0	2,617	0	2,617	2,617	1,200	1,417	2,617	0	1,016
U Further Education (ALB) (net)	0	0	0	5,685	0	5,685	5,685	18,146	0	18,146	12,461	16,704
Total spending in AME	0	0	0	11,246,797	-15,064,361	-3,817,564	-3,817,564	1,047,929	0	1,047,929	4,865,493	-3,327,057
Total Resource	563,029	-16,293	546,736	113,058,032	-15,300,713	97,757,319	98,304,055	113,720,485	0	113,720,485	15,416,430	84,300,082

The Department has not exceeded any Parliamentary expenditure limits, as reflected in the SOPS and note S1. In the year, the Department did exceed the non-ringfence RDEL total set by HMT by £590,000.

S1.2 Analysis of capital outturn by Estimate line (£thousand)

Type of spend (Capital)	Outturn: Gross	Outturn: Income	Outturn: Net total	Estimate: Total	Estimate: Virements	Estimate: Total inc. virements	Outturn vs Estimate, saving (excess)	Prior year Outturn total, 2023 - 2024
A Activities to Support all Functions	90,897	-8,600	82,297	177,323	-70,360	106,963	24,666	167,783
B Other School Funding (Department)	2,340,275	-391,539	1,948,736	1,752,347	251,193	2,003,540	54,804	1,702,377
C Other School Funding (ALB) (net)	-18,411	0	-18,411	-8,848	0	-8,848	9,563	-25,312
D Families and Children Services (Department)	57,596	-17	57,579	68,255	0	68,255	10,676	140,586
E Families and Children Services (ALB) (net)	2,022	0	2,022	2,222	0	2,222	200	2,209
F Standards and Testing Agency	5,871	0	5,871	7,764	0	7,764	1,893	4,027
G Teaching Regulation Agency	0	0	0	918	0	918	918	0
H Education and Skills Funding Agency	12,814	-20,213	-7,399	-6,506	0	-6,506	893	9,972
I Apprenticeships	5,573	0	5,573	8,383	0	8,383	2,810	4,499
J Grants to LA – Schools and Early Years	1,247,204	-4,957	1,242,247	1,191,028	51,219	1,242,247	0	2,481,093
K Grants to Academies	1,190,706	-23,666	1,167,040	1,326,528	-154,307	1,172,221	5,181	1,114,706
L Higher Education	26,427	-9,854	16,573	16,546	27	16,573	0	25,430
M Further Education	932,706	-15,190	917,516	978,493	-59,911	918,582	1,066	772,972
N Higher Education (ALB) (net)	181,903	0	181,903	200,807	-17,861	182,946	1,043	236,559
O Further Education (ALB) (net)	971	0	971	1,878	0	1,878	907	-423
Total spending in DEL	6,076,554	-474,036	5,602,518	5,717,138	0	5,717,138	114,620	6,636,478
P Activities to Support all Functions	1,341	0	1,341	3,209	0	3,209	1,868	3,309
Q Executive Agencies	-243	0	-243	0	0	0	243	-178
R Higher Education	35,621,210	-4,767,810	30,853,400	33,315,516	-2,477	33,313,039	2,459,639	30,788,733
S Further Education	105,474	-62,122	43,352	78,421	0	78,421	35,069	117,556
T Higher Education (ALB) (net)	2,477	0	2,477	0	2,477	2,477	0	110
U Further Education (ALB) (net)	6,307	0	6,307	38,500	0	38,500	32,193	3,428
Total spending in AME	35,736,566	-4,829,932	30,906,634	33,435,646	0	33,435,646	2,529,012	30,912,958
Total Capital	41,813,120	-5,303,968	36,509,152	39,152,784	0	39,152,784	2,643,632	37,549,436

The total Estimate columns include virements. Virements are the reallocation of provision in the Estimate that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HMT). Further information on virements is provided in the Supply Estimates Guidance Manual.

The outturn vs Estimate column is based on the total including virements. The Estimate total before virements values have been included so that readers can agree the Estimate values disclosed back to the Estimate laid before Parliament.

S1.3 Explanation of pre-virement variances

We have provided explanations for large pre-virement variances above in the financial review of the year. Large variances have been defined as over £1 billion or over 10% of Estimate value and over £250 million, across the different budget types.

S1.4 Background to Estimate

Below we reconcile Estimate lines to Group activities and bodies.

Estimate Line	Title	Budget explanation
A	Activities to Support all Functions	Budget set to support delivery of all functions and cannot be allocated to a specific Estimate line. This includes corporate services and the running of the Department.
B	Other School Funding (Department)	Budget set for funding provided by the Department directly to the education system, rather than being distributed via grants to local authorities or academy trusts. For example, some expenditure on National Tutoring Programme and teacher training is included in this Estimate line.
C	Other School Funding (ALB) (net)	Budget set for LocatED, Aggregator and Oak.
D	Families and Children Services (Department)	Budget set for expenditure by the Department directly on social care and work to tackle disadvantage. For example, expenditure on tackling child poverty is included in this Estimate line.
E	Families and Children Services (ALB) (net)	Budget set for SWE and CCO.
F	Standards and Testing Agency	Budget line for STA.
G	Teaching Regulation Agency	Budget line for TRA.
H	Education and Skills Funding Agency	Budget line for ESFA.
I	Apprenticeships	Budget set for delivering apprenticeships.
J	Grants to LA Schools and Early Years	Budget set for grants paid to local authority schools for everyday running costs and capital expenditure.
K	Grants to Academies	Budget set for grants paid to academy trusts for everyday running costs and capital expenditure of their academies.
L	Higher Education	Budget set for expenditure on higher education, including student loans.
M	Further Education	Budget set for expenditure on further education and adult education.
N	Higher Education (ALB) (net)	Budgets set for SLC and OfS.
O	Further Education (ALB) (net)	Budget set for IfATE.
P	Activities to Support all Functions	Budget set for provision expenses.
Q	Executive Agencies	Budget set for provision expenses for ESFA.
R	Higher Education	Budget relates to the AME costs of student loans in higher education.
S	Further Education	Budget relates to the AME costs of student loans in further education.
T	Higher Education (ALB) (net)	AME budget set for SLC.
U	Further Education (ALB) (net)	Predominantly budget set for CITB and ECITB.

S.2 Reconciliation of outturn to net operating expenditure (£thousand)

Item	Reference	Outturn total	Prior year Outturn total 2023 - 2024
Total resource outturn	S1.1	98,304,055	84,300,082
Add: capital grant expense	6.3	5,505,983	6,151,200
other expenditure scored to the capital budget	-	19,670	16,165
other adjustments	-	0	3,207
Total	-	5,525,653	6,170,572
Less: income payable to the Consolidated Fund	S4	-40	-14,141
capital grant income	-	-55,047	-78,671
other adjustments	-	-1,901	0
Total	-	-56,988	-92,812
Net operating expenditure in SoCNE	SoCNE	103,772,720	90,377,842

As noted in the introduction to SOPS, outturn and the Estimate are compiled against the budgeting framework, which is similar to but different from IFRS. Therefore, this reconciliation bridges the resource outturn to net operating expenditure, linking SOPS to the financial statements.

For example, capital policy funding (income or expenditure) is budgeted for as CDEL so is not included within resource outturn but is accounted for as grant expenditure (or income) in SoCNE. Therefore, capital expenditure functions as a reconciling item between resource and SoCNE’s net operating expenditure. See note 6.3 for more detail on our capital policy funding activities. The reconciling item ‘Other expenditure scored to the capital budget’ relates to research and development activities that are scored to capital budgets, so excluded from resource outturn, but accounted for as costs in SoCNE. The capital grant income reconciling item refers to capital contributions received from other government departments in support of school building programmes.

S3. Reconciliation of net resource outturn to net cash requirement (£thousand)

Item	Reference	Outturn total	Estimate	Outturn vs Estimate, saving (excess)
Total resource outturn	S1.1	98,304,055	113,720,485	15,416,430
Total capital outturn	S1.2	36,509,152	39,152,784	2,643,632
Accruals to cash adjustments	Reference	Outturn total	Estimate	Outturn vs Estimate, saving (excess)
Of which:	Reference	Outturn total	Estimate	Outturn vs Estimate, saving (excess)
Adjustment for NDPBs	Reference	Outturn total	Estimate	Outturn vs Estimate, saving (excess)
Remove voted resource and capital	-	-1,958,821	-2,084,305	-125,484
Add cash grant-in-aid		1,940,804	2,033,440	92,636
Adjustments to remove non-cash items	Reference	Outturn total	Estimate	Outturn vs Estimate, saving (excess)
Depreciation, amortisation and impairment	7.2	-119,902	41,362,229	-41,242,327
Student loan book fair value loss	-	-24,019,078	0	24,019,078
New provisions and adjustments to previous provisions	-	-158,396	-160,232	-1,836
Other non-cash adjustments	-	25,771	1,973,241	1,947,470
Adjustments to reflect movements in working balances	Reference	Outturn total	Estimate	Outturn vs Estimate, saving (excess)
Movements in receivables	SoCF	243,742	0	-243,742
Movements in payables	SoCF	120,829	0	-120,829
Movements in lease liabilities	-	31,567	0	-31,567
Use of provisions	-	168,609	167,118	-1,491
Use of financial guarantees	-	24,601	0	-24,601
Total	-	-23,700,274	-39,432,967	-15,732,693
Net cash requirement	-	111,112,933	113,440,302	2,327,369

As noted in the introduction to SOPS, outturn and the Estimate are compiled against the budgeting framework not on a cash basis. Therefore, this reconciliation bridges the resource and capital outturn to the net cash requirement.

S4. Amounts of income to the Consolidated Fund

S4.1 Analysis of income payable to the Consolidated Fund (£thousand)

In addition to income retained by the Group, the following income is payable to the Consolidated Fund (cash receipts being shown in italics).

Item	Outturn total, accruals	Outturn total, cash basis	Prior year, 2023 - 2024, accruals	Prior year, 2023 - 2024 cash basis
Income outside the Ambit of the Estimate	40	40	14,141	14,141
Excess cash surrenderable to the Consolidated Fund	0	0	0	0
Total amount payable to the Consolidated Fund	40	40	14,141	14,141

11.4 Parliamentary accountability disclosures (audited)

As custodians of taxpayers’ funds, we have a duty to Parliament to ensure the regularity and propriety of our activities and expenditure. We manage public funds in accordance with the principles outlined in Managing public money.

Our accounting officer is responsible for ensuring that we operate with regularity, efficiency, economy, effectiveness and prudence in the administration of public resources to secure value for money. These responsibilities, which include the propriety and regularity of public finances, are detailed in Managing public money.

To fulfil these responsibilities and ensure we do not breach our control totals, we have implemented the following measures:

formal delegation of budgets
detailed monitoring of expenditure
monthly management reporting against control totals

Additionally, we use the 3 lines of defence model as part of our risk management framework, which is detailed in our Governance Statement.

This year, we did not breach any of our parliamentary control totals. Further details are provided in the Statement of Outturn against Parliamentary Supply.

The disclosures pertain to the bodies identified in note 24 and do not include the academy and FE sectors.

Public sector losses and special payments

A1 Losses statement

The total of all losses that have been recognised this year is as follows.

Number of cases

Item	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Cash losses	417	424	1,492	1,525
Fruitless payments and constructive losses	120	216	348	595
Claims waived or abandoned	61,908	61,908	54,787	54,787
Store losses	318	318	1	1
Total number of cases	62,763	62,866	56,628	56,908
Analysed across:	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
non-student loan activities	1,030	1,133	1,932	2,212
student loans	61,733	61,733	54,696	54,696

Value of cases (£thousand)

Item	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Cash losses	7,928	7,932	3,300	3,313
Fruitless payments and constructive losses	1,966	2,146	6,011	6,067
Claims waived or abandoned	23,964	23,964	36,595	36,595
Store losses	839	839	433	433
Total value of cases	34,697	34,881	46,339	46,408
Analysed across:	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
non-student loan activities	24,653	24,837	35,661	35,730
student loans	10,044	10,044	10,678	10,678

A1.1 Cash losses over £300,000

Counterparty	Reporting body	£thousand
Corporate failure: Vocational Skills Solutions Ltd	ESFA	633
Other: Lambeth College	ESFA	510
Other: Pendle Primary Academy	ESFA	333

Corporate failure

The company became insolvent preventing collection of overpaid grants.

Other

In certain limited circumstances the Department may choose to write-off grant overpayments arising from other reasons. In all situations, the Department has taken a view that seeking recovery of funds would not be value for money or could imperil continued education provision.

A1.2 Fruitless payments and constructive losses over £300,000

Counterparty	Reporting body	£thousand
European Commission	Department	663
Manning Gottlieb OMD	Department	393

European Commission

This loss arose from the expiration of the 2014-2020 Erasmus+ contract preventing recovery of funds.

Manning Gottlieb OMD

Cost of media campaigns cancelled during the pre-election period.

A1.3 Claims waived or abandoned over £300,000

Counterparty	Reporting body	£thousand
Student loans:	Reporting body	£thousand
Write-off of student loan employer deductions	Department	6,808
Rebrokerage debt forgiveness:	Reporting body	£thousand
Weymouth College	ESFA	1,622
UTC Warrington	Department	825
The Seckford Foundation Free Schools Trust	ESFA	755
The Queensmill Trust	ESFA	726
Bright Futures Educational Trust	ESFA	369
Aquinas Church of England Education Trust Ltd	Department	301
Apprenticeship provider corporate failures:	Reporting body	£thousand
Vista Training Solutions	Department	2,200
ARC Academy UK Ltd	Department	2,016
Apex Management Consultants Ltd	Department	890
Insight Development & Consultancy Ltd	Department	491
People and Business Development Ltd	Department	431
Hair and Beauty Industry Training Ltd	Department	363
Other:	Reporting body	£thousand
Medway Council	ESFA	3,004

Student loans

Student loan losses are disclosed here because the Department receives HMT approval for the losses at an aggregate level. Each specific loss is below the £300,000 disclosure threshold.

HMRC collects student loan repayments from borrowers on behalf of the Department collected by employers through the tax system. During the year, £6.8 million (prior year, £7.5 million) was written-off in respect of student loan repayments which have been collected by the employer from the borrower but were uncollectable by HMRC, normally because of employer insolvency. The number of cases relating to these losses is 61,414 (prior year, 48,183).

Re-brokerage debt forgiveness

Balances owed by academies and colleges may in some circumstances be waived to facilitate the re-brokerage of the academy or college to a more sustainable academy trust or college corporation.

Apprenticeship provider failures

Overpayments of grants can occur when payments to education providers exceed the final funding eligible for that period. The debts arise mainly where providers have overstated funding claims for delivery during a contract, for example where a learner started but did not complete. This results in the funding claim subsequently being reduced or corrected during reconciliation or following an audit. As such, the monies the providers received exceeded the amount which they were entitled to at the end of the contract.

The Department seeks to reclaim all such monies but in some cases the provider has failed. In such circumstances the debts are written-off.

Other

In certain limited circumstances the Department may choose to write-off grant overpayments arising from other reasons. In all situations, the Department has taken a view that seeking recovery of funds would not be value for money or could imperil continued education provision.

A1.4 Store losses over £300,000

There were no individual store losses over the threshold for additional reporting.

A2 Special payments (number and £thousands)

Number of items	2024 - 2025 Department & Agencies	2024 - 2025 Group number	2023 - 2024 Department & Agencies	2023 - 2024 Group
Student loans	0	1,540	0	1,518
Special severance payments	4	23	0	2
Other	200	200	50	51
Total number of cases	204	1,763	50	1,571
Value of items	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Student loans	0	127	0	166
Special severance payments	76	1,299	0	115
Other	1,396	1,396	3,223	3,231
Total value of special payments	1,472	2,822	3,223	3,512

Student loans

The high volume of Group losses disclosed above is due to the large number of student loan losses reported by SLC. No single case was above the threshold for additional disclosure below.

Special severance payments

Severance payments are paid under certain circumstances to employees, contractors and others outside of normal statutory or contractual requirements, when leaving employment in the public service, whether they resign, are dismissed, or reach an agreed termination of contract.

For the current year, we made 23 payments totalling £1,299,000 (prior year, 2 payments totalling £115,000) in respect of severance cases. The highest payment was £142,186 (prior year, £95,000), the lowest payment was £4,568 (prior year, £20,000) and the median payment was £55,924 (prior year, £nil).

A2.1 Special payments over £300,000

Counterparty	Reporting body	£thousand
Skanska	Department	533

This payment was final settlement for work completed by Skanska under a school construction contract that was terminated by the Department.

A3 Student loans written-off in the year (£million)

Due to:	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
death	252.6	252.6	54.6	54.6
access to higher education	39.8	39.8	53.9	53.9
age	13.5	13.5	9.4	9.4
disability	3.3	3.3	2.6	2.6
bankruptcy, on completion of individual arrangement or other	0.4	0.4	0.1	0.1
Total	309.6	309.6	120.6	120.6

The increase in cancellations due to death relates to a new data sharing process whereby HMRC share confirmation with us more quickly than in the past, which means the processing backlog is now up to date.

A4 Gifts

The total of all gifts and hospitality that have been paid out this year are as follows (number and £thousand):

Item	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Total number of cases	0	26	8	54
Total value of gifts	0	1	1	3

There were no gifts over the additional reporting threshold of £300,000.

Remote contingent liabilities

In addition to contingent liabilities reported within the meaning of International Accounting Standards (IAS) 37 Provisions, Contingent Liabilities and Contingent Assets (IAS 37) (see note 22), the Group also reports liabilities for which the likelihood of a transfer of economic benefit in settlement is too remote to meet the accounting standard’s definition of a contingent liability.

Quantifiable

The Group has entered into the following quantifiable remote contingent liabilities by offering guarantees, indemnities or by giving letters of comfort. In accordance with parliamentary reporting requirements, we are obliged to disclose these although none of these are contingent liabilities under the meaning of IAS 37 since the likelihood of a transfer of economic benefit in settlement is judged to be too remote.

One remote contingent liability has been reported to Parliament by departmental minute:

LGPS guarantee for FE providers – unquantifiable

Table 58: Reconciliation of remote contingent liabilities included in the Supply Estimate to the accounts (£thousand)

Operational activities	Supply Estimate	Amount disclosed in ARA	Variance (Estimate less ARA value)
Sanctuary Buildings property insurance	100,000	100,000	0
St Paul’s Place property insurance	100,000	40,000	60,000
Curriculum body asset transfer	10,000	10,000	0
Pension guarantor to Universities Superannuation Scheme	4,000	4,000	0
Data sharing agreements	3,000	3,000	0
Contract early termination	1,954	1,954	0
Junior ISA exposure	1,717	1,701	16
Free school principal designates	345	564	-219
Legal cases	125	296	-171
Potential litigation	0	47,000	-47,000
Sub-total	221,141	208,515	12,626
Education estate activities	Supply Estimate	Amount disclosed in ARA	Variance (Estimate less ARA value)
Academy PFI contracts	9,250,000	10,178,000	-928,000
Indemnities relating to 27 s278 (highways) agreements with local authorities to support school development works	246,432	256,432	-10,000
Indemnity to the landlord for academy site leases rentals	12,500	12,500	0
Indemnity in relation to s38 (highways) with the NHS to support school development works	10,000	10,000	0
Indemnity in relation to s184 (highways) with a local authority to support school development	10,000	10,000	0
Indemnities in relation to s104 (sewage works) with local authorities to support school development	10,000	10,000	0
Coal Authority permit for school builds	10,000	20,000	-10,000
Indemnities with county councils to support school developments	10,049	20,049	-10,000
Tenant default agreements	2,901	2,901	0
Relocation costs for the National College for Digital Skills	225	0	225
Indemnity in respect of commercial free school lease	110	110	0
Sub-total	9,562,217	10,519,992	-957,775
Total	9,783,358	10,728,507	-945,149

Summary of significant exposures

Operational activities

Property insurance

The Department has agreed with contractors to cover losses incurred if a catastrophic event occurred during the development of 2 of our properties (Sanctuary Buildings and St Paul’s Place). The cover has been provided in accordance with Managing public money’s view that government departments should not incur excessive insurance costs, but bear risks themselves where possible for value for money.

Education estate activities

Academy-sector PFI contracts

The contingent liability arises from support the Department may provide local authorities for their PFI arrangements. These contingent liabilities are the result of the Group, acting as an agent to the Secretary of State, agreeing to provide an indemnity to local authorities for potential costs on buildings they own but manage through existing PFI arrangements. The properties are used by academies.

This type of indemnity is considered low risk and is only a feature of the academy programme in very specific circumstances.

Local authority indemnities

Acting as developer and arising from planning decisions, the Department has provided uncapped indemnities to local authorities (acting as competent sewage or highways authorities) in relation to education provider building projects. Indemnities arise under different statutes:

section 278 of the Highways Act 1980 (highways infrastructure), 28 cases ranging from £127,000 to £11 million with one case being agreed after Supplementary Estimates was produced
section 184 of the Highways Act 1980 (highways infrastructure), one case
section 104 of the Water Industry Act 1991 (sewers), one case which was identified after Supplementary Estimates was prepared
section 38 of the Highways Act 1980 (highways infrastructure), one case

Unquantifiable

Table 59: Reconciliation of remote contingent liabilities included in the Supply Estimate to the accounts

Operational activities	Included in Supply Estimate	Included in ARA
Guarantees to Local Government Pension Scheme to meet the pension deficit if an academy or a college closes.	Yes	Financial statements (IAS 37)
Statutory indemnity in relation to the Office of the Schools Adjudicator outlined in paragraph 7 of schedule 5 to the Schools Standards Framework Act 1998.	Yes	Financial statements (IAS 37)
The Department contracts with lead suppliers for the delivery of the early career framework and national professional qualification. The Department used model government clauses on indemnity limits and since the introduction of the revised data protection legislation under the general data protection regulation it has been standard practice to include unlimited liability relating to data protection fines.	Yes	Remote
As a result of entering into a PFI arrangement for the building of schools there are a number of contracts in place which have clauses that could give rise to liability for the Department.	Yes	Remote
The sale of student loans necessitated warranties and indemnities to secure interest and obtain value for money from investors.	Yes	Remote
An indemnity in place with a software supplier, which protects the supplier in respect of any litigation raised against it relating to the provision of services by them.	Yes	Remote
Contingent liability to the Civil Service Pension Scheme for the incremental costs of uprating accrued benefits by the Consumer Prices Index (CPI), if a decision is taken in future to uprate benefits in the scheme by less than CPI.	Yes	Remote
Litigation	Yes	Remote
Education estate activities	Included in Supply Estimate	Included in ARA
A basic asset protection agreement with a public sector company for development works at education providers.	Yes	Remote
Uncapped indemnity related to a section 185 (sewage works) agreement entered into as part of education provider site developments.	Yes	Remote
The permanent site for an academy was subject to entering an unlimited indemnity with Canal and Rivers Trust to allow the drainage connection.	Yes	Remote
As a result of entering into contracts on site purchases, the Department are subject to a number of overage clauses. These are considered to be remote as they relate to changes in contractual arrangements.	Yes	Remote
Uncapped indemnity related to section 104 of the Water Industry Act 1991 (sewage), entered into to support education provider site developments.	Yes	Remote
Uncapped indemnity related to section 38 of the Highways Act agreements entered into to support education provider site developments.	Yes	Remote
Indemnities provided to local authority landlords for potential costs in not performing its obligations under various building contracts and leases to which the Department is a counterparty.	Yes	Remote
Uncapped indemnity, relating to 24 agreements for schools and colleges in respect of section 278 (highways infrastructure) of the Highways Act 1980 that supports education provider site developments.	Yes	Remote
Coal Authority permit – the permit is required to undertake ground investigation surveys as part of the delivery of education provider projects, 42 agreements in place.	Yes	Remote

Cost allocations and charges

As a public sector information holder, the Group was compliant with HMT’s issued guidance on cost allocation and charging for information services in this financial year.

Cabinet Office functional standards (unaudited)

Cabinet Office’s functional standards exist to create a coherent, effective and mutually understood way of doing business within government organisations. These standards are mandated for use across central government.

The Department has assigned heads of function who are responsible for implementing the standard in their respective areas. Progress on the Department’s compliance with standards is regularly monitored across all functions. Most functional areas have completed ‘continuous improvement assessment frameworks’, with some assessments being validated by external parties with suitable expertise.

Of the thirteen functional areas operational in the Department, 5 have been assessed as meeting all mandatory elements and the most important advisory elements, in these functional areas. The 8 remaining areas have been assessed as ‘in development’. Plans are in place to ensure full compliance in these areas on the condition that doing so achieves value for money for the Department.

Susan Acland-Hood
Accounting Officer
11 July 2025

Question 12

12. Financial statements

Accepted Answer

12.1 Consolidated statement of comprehensive net expenditure

For the year ended 31 March 2025 (£million)

	Note	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Income	4	-291	-672	-310	-634
Total income	-	-291	-672	-310	-634
Staff costs	5	525	815	517	793
Policy funding: resource	6	88,634	88,318	81,059	80,673
Policy funding: capital	6	5,340	5,506	5,970	6,152
Purchase of goods and services	7.1	272	474	275	466
Depreciation amortisation and other non-cash charges	7.2	284	347	231	296
Total operating expenditure	-	95,055	95,460	88,052	88,380
Net operating expenditure	-	94,764	94,788	87,742	87,746
Finance income	-	-15	-34	3	22
Finance expense	-	55	74	50	72
Other losses or (gains)	8	8,945	8,945	2,582	2,582
Net expenditure for the year	-	103,749	103,773	90,371	90,378
Other comprehensive expenditure	Note	2024 - 2025 Department & Agencies	2024 - 2025 Group	Department & Agencies	2023 - 2024 Group
Items that will not be reclassified to net operating expenditure:	Note	2024 - 2025 Department & Agencies	2024 - 2025 Group	Department & Agencies	2023 - 2024 Group
net gain on revaluation of property, plant and equipment, right-of-use assets and intangible assets	-	0	2	0	-2
actuarial (gain) or loss on defined benefit pension scheme	-	0	-9	0	1
Total other comprehensive expenditure	-	0	-7	0	-1
Comprehensive net expenditure for the year	-	103,749	103,766	90,371	90,377

All income and expenditure reported in the statement of comprehensive net expenditure are derived from continuing operations.

The notes form part of these accounts.

12.2 Consolidated statement of financial position

As at 31 March 2025 (£million)

Non-current assets	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Operational assets	9	233	304	251	317
Education sector assets	10	739	739	820	820
Intangible assets	-	295	384	270	352
Student loans	14	152,380	152,380	146,749	146,749
Other loans	15	330	741	246	680
Investments	-	76	76	68	68
Receivables	16.2	44	41	42	42
Total non-current assets	-	154,097	154,665	148,446	149,028
Current assets	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Assets held for sale	-	44	44	20	20
Student loans	14	5,486	5,486	4,233	4,233
Other loans	15	45	84	45	85
Receivables	16.1	686	723	444	474
Cash and cash equivalents	17	502	636	892	1,056
Total current assets	-	6,763	6,973	5,634	5,868
Total assets	-	160,860	161,638	154,080	154,896
Current liabilities	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Payables	18	-2,509	-2,626	-2,938	-3,036
Lease liabilities	20	-11	-13	-19	-19
Provisions	-	-60	-87	-69	-75
Financial guarantees	-	-8	-8	-25	-25
Total current liabilities	-	-2,588	-2,734	-3,051	-3,155
Total assets less current liabilities	-	158,272	158,904	151,029	151,741
Non-current liabilities	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Payables	19	-780	-1,206	-862	-1,314
Lease liabilities	20	-155	-184	-178	-210
Provisions	-	-220	-224	-220	-255
Financial guarantees	-	-4	-4	-14	-14
Retirement benefit obligations	-	0	-12	0	-20
Total non-current liabilities	-	-1,159	-1,630	-1,274	-1,813
Assets less liabilities	-	157,113	157,184	149,755	149,928
Taxpayers’ equity	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
General fund	-	157,113	157,184	149,748	149,818
Revaluation reserve	-	0	3	7	9
Charitable fund	-	0	87	0	101
Total taxpayers’ equity	-	157,113	157,274	149,755	149,928

Susan Acland-Hood
Accounting Officer
11 July 2025

The notes form part of these accounts.

12.3 Consolidated statement of cash flows

For the year ended 31 March 2025 (£million)

Cash flows from operating activities	Note	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Net expenditure for the year	SoCNE	-103,749	-103,773	-90,371	-90,378
Adjustments for non-cash transactions:	Note	Department & Agencies	2024 - 2025 Group	Department & Agencies	2023 - 2024 Group
student loan fair value loss	8	8,638	8,638	2,469	2,469
other gains or losses (excluding student loan fair value loss)	8	307	307	113	113
de-recognition of education sector assets through leasing	10	265	265	135	135
depreciation, impairment and other non-cash charges	7.2	284	347	231	296
other adjustments	-	-18	-4	-13	-18
(Increase) or decrease in receivables	-	-256	-278	362	371
(Decrease) or increase in payables	-	-497	-504	191	175
less movements in payables relating to items not passing through net operating costs	-	407	431	-184	-160
Utilisation of provisions	-	-169	-209	-147	-167
Utilisation of financial guarantees	-	-25	-25	-34	-34
Finance income	-	-15	-34	-3	-22
Finance expense	-	55	74	50	72
Net cash outflow from operating activities	-	-94,773	-94,765	-87,201	-87,148
Cash flows from investing activities	Note	Department & Agencies	2024 - 2025 Group	Department & Agencies	2023 - 2024 Group
Finance income	-	3	22	3	22
Purchase and development of:	Note	Department & Agencies	2024 - 2025 Group	Department & Agencies	2023 - 2024 Group
operational assets	-	-25	-45	-85	-121
education sector assets	-	-251	-251	-323	-323
intangible assets	-	-101	-134	-89	-124
Proceeds on disposal of assets	-	7	7	2	13
Net (draw down) or repayment of:	Note	Department & Agencies	2024 - 2025 Group	Department & Agencies	2023 - 2024 Group
student loans	14	-15,832	-15,832	-15,768	-15,768
PF2 loan assets	-	0	39	0	40
academy sector loans	-	15	15	9	9
FE sector loans	-	-71	-71	-103	-103
Net cash outflow from investing activities	-	-16,255	-16,250	-16,354	-16,355
Cash flows from financing activities	Note	Department & Agencies	2024 - 2025 Group	Department & Agencies	2023 - 2024 Group
Finance expense	-	0	-18	-2	-24
Consolidated Fund Supply	SoCTE	110,737	110,737	103,822	103,822
PF2 loan liabilities repaid	-	0	-23	0	-24
Capital element of PF2 notional lease	-	-16	-16	-16	-16
Capital element of lease payments	-	-25	-25	-12	-15
Interest element of PF2 notional lease	-	-47	-47	-48	-48
Interest element of lease payments	-	-7	-9	-2	-4
Repayment of long-term investment	-	10	10	11	11
Net cash inflow from financing activities	-	110,652	110,609	103,753	103,702
Net increase/(decrease) in cash and cash equivalents before adjustment for receipts and payments to the Consolidated Fund	-	-376	-406	198	199
Payments of amounts due to the Consolidated Fund	-	-14	-14	0	0
Net increase/(decrease) in cash and cash equivalents after adjustment for receipts and payments to the Consolidated Fund	17	-390	-420	198	199
Cash and cash equivalents at the beginning of the year net of overdrafts	-	892	1,056	694	857
Cash and cash equivalents at the end of the year net of overdrafts	-	502	636	892	1,056

The adjustments for non-cash transactions are predominately made up of other gains and losses (note 8, here split between student loan fair value losses and other gains and losses), de-recognition of education sector assets under leases recognised as capital grants-in-kind (note 10) and depreciation, amortisation and other non-cash charges (note 7.2).

The notes form part of these accounts.

12.4 Consolidated statement of changes in taxpayers’ equity

For the year ended 31 March 2025 (£million)

	Note	General fund	Revaluation reserve	Charitable reserve	Taxpayers’ equity
Balance at 31 March 2023	-	136,554	7	120	136,681
Net parliamentary funding:	Note	General fund	Revaluation reserve	Charitable reserve	Taxpayers’ equity
drawn down	-	103,822	0	0	103,822
deemed	-	693	0	0	693
Supply payable adjustment	-	-878	0	0	-878
CFERs payable to the Consolidated Fund	-	-14	0	0	-14
Comprehensive expenditure for the year	-	-90,360	2	-19	-90,377
Non-cash adjustments	Note	General fund	Revaluation reserve	Charitable reserve	Taxpayers’ equity
Auditor’s remuneration	7.3	1	0	0	1
Movement in reserves	Note	General fund	Revaluation reserve	Charitable reserve	Taxpayers’ equity
Other fund movements	-	0	0	0	0
Balance at 31 March 2024	-	149,818	9	101	149,928
Net parliamentary funding:	Note	General fund	Revaluation reserve	Charitable reserve	Taxpayers’ equity
drawn down	-	110,737	0	0	110,737
deemed	-	878	0	0	878
Supply payable adjustment	-	-502	0	0	-502
CFERs payable to the Consolidated Fund	-	0	0	0	0
Comprehensive expenditure for the year	-	-103,751	-2	-13	-103,766
Non-cash adjustments	Note	General fund	Revaluation reserve	Charitable reserve	Taxpayers’ equity
Auditor’s remuneration	7.3	1	0	0	1
Movement in reserves	Note	General fund	Revaluation reserve	Charitable reserve	Taxpayers’ equity
Other fund movements	-	3	-4	-1	-2
Balance at 31 March 2025	-	157,184	3	87	157,274

The general fund represents total assets less liabilities, to the extent that the total is not represented by other reserves and financing items for the Department and its Agencies and NDPBs.

The revaluation reserve reflects the unrealised element of the cumulative balance of the revaluation adjustments to operational assets (see note 9), education sector assets (note 10) and intangible assets.

The charitable reserve represents total assets less liabilities related to the Group’s training boards less unrealised revaluation adjustments to operational assets (see note 9) and intangible assets.

The notes form part of these accounts.

12.5 Department and Agencies statement of changes in taxpayers’ equity

For the year ended 31 March 2025 (£million)

-	Note	General fund	Revaluation reserve	Taxpayers’ equity
Balance at 31 March 2023	-	136,494	7	136,501
Net parliamentary funding:	Note	General fund	Revaluation reserve	Taxpayers’ equity
drawn down	-	103,822	0	103,822
deemed	-	693	0	693
Supply payable adjustment	-	-878	0	-878
CFERs payable to the Consolidated Fund	-	-14	0	-14
Comprehensive expenditure for the year	-	-90,371	0	-90,371
Non-cash adjustments	Note	General fund	Revaluation reserve	Taxpayers’ equity
Auditor’s remuneration	7.3	1	0	1
Movement in reserves	Note	General fund	Revaluation reserve	Taxpayers’ equity
Other fund movements	-	1	0	1
Balance at 31 March 2024	-	149,748	7	149,755
Net parliamentary funding:	Note	General fund	Revaluation reserve	Taxpayers’ equity
drawn down	-	110,737	0	110,737
deemed	-	878	0	878
Supply payable adjustment	-	-502	0	-502
CFERs payable to the Consolidated Fund	-	0	0	0
Comprehensive expenditure for the year	-	-103,749	0	-103,749
Non-cash adjustments	Note	General fund	Revaluation reserve	Taxpayers’ equity
Auditor’s remuneration	7.3	1	0	1
Movement in reserves	Note	General fund	Revaluation reserve	Taxpayers’ equity
Other fund movements	-	0	-7	-7
Balance at 31 March 2025	-	157,113	0	157,113

The general fund represents total assets less liabilities, to the extent that the total is not represented by other reserves and financing items for the Department and its Agencies.

The revaluation reserve reflects the unrealised element of the cumulative balance of the revaluation adjustments to operational assets (see note 9), education sector assets (note 10) and intangible assets.

The notes form part of these accounts.

12.6 Notes to the accounts

1. Accounting policies

These accounts have been prepared in accordance with the FReM issued by HMT, as set out in a statutory accounts direction issued pursuant to section 5(2) of the Government Resources and Accounts Act 2000 (GRAA).

FReM applies International Financial Reporting Standards (IFRSs) as adapted or interpreted for the public sector context. Where FReM permits a choice of accounting policy, the Group selects the policy which is judged to be most appropriate to the particular circumstances of the Group for the purpose of giving a true and fair view.

The policies adopted by the Group for this year are detailed below and have been applied consistently in dealing with items considered material in relation to the accounts.

In addition to the primary statements prepared under IFRS, FReM requires the Department to prepare an additional primary statement. SOPS and supporting notes show outturn against Supply Estimate in terms of the Group’s net resource requirement and the net cash requirement.

1.1 Accounting convention

These accounts have been prepared under the historical cost convention, modified for the revaluation of property, plant and equipment (PPE), intangible assets, investment properties, student loans, investments and certain financial instruments.

1.2 Going concern

This ARA is prepared on a going concern basis. The Department is Supply financed and thus draws the majority of its funding from the Consolidated Fund. Parliament has demonstrated its commitment to fund the Department (and its bodies) for the foreseeable future.

1.3 Critical accounting judgements and key sources of estimation uncertainty

The preparation of these accounts requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenditure. These assessments and underlying assumptions are based on historic and other factors, are reviewed regularly and are considered reasonable.

1.3.1 Accounting for capital expenditure and education sector assets

Given the scale of the Group’s programmes to improve the condition of education sites, accounting for capital expenditure is complex. It involves judgements about which costs to capitalise as PPE and right-of-use assets (RoU assets), and when to de-recognise education sector assets.

Capitalisation of expenditure is reviewed monthly and at year end to determine the appropriate direct costs to capitalise for each identified asset, in line with IAS 16 Property, Plant and Equipment (IAS 16) and IFRS 16 Leases (IFRS 16). Assets are initially recognised at cost.

1.3.2 Student loans – accounting classification

The Group has determined that these loans have and exhibit properties that give rise to them being financial instruments and accounts for them as such under IFRS 9 Financial Instruments (IFRS 9) as adapted and interpreted by FReM. The key test for classifying student loans (fair value or amortised cost) under IFRS 9 is the solely payments of principal and interest test (SPPI test).

The Group reviewed the repayment terms of student loans against IFRS 9’s SPPI test and concluded that the repayment cash flows depend on the borrower’s income. Additionally, student loans are written-off in certain situations, such as death or inability to work. Therefore, the Group has judged that the cash flows are not simply payments of principal and interest and thus student loans have been classified as fair value through profit or loss (FVTPL).

The split between current and non-current student loans is based on our expectation of the timing of repayments. Repayments forecast within the next 12 months comprise current student loans and the remainder of the student loan book valuation is non-current.

1.3.3 Student loans – initial fair value

When student loans are issued, they are recognised at fair value. There is a difference between the amount advanced to students (transaction value) and the initial fair value of the loans due to the implied sector subsidy within student loans and actual repayment performance. Our valuation technique uses data from unobservable markets (see note 14), making these financial instruments a level 3 classification under IFRS 13 Fair Value Measurement (IFRS 13).

FReM’s adaption number 5 to IFRS 9 applies where reporting bodies have the situation described above (namely unobservable inputs applied to value Level 3 assets). Adaption number 5 requires the new financial asset to be initially valued at fair value, with the fair value gain or loss recognised in profit or loss.

Fair value gains and losses, both on origination and annual revaluations, are recognised within net operating expenditure (see note 8).

1.3.4 Student loans – discount rate

FReM’s interpretation number 4 of IFRS 9 mandates that where future cash flows are discounted to measure fair value, the Group use the higher of the financial instrument’s intrinsic rate or HMT’s current discount rates. The discount rates provided by HMT are based on an analysis of real yields on UK index linked Gilts and are specifically appropriate to central government. We test for an instrument’s intrinsic rate by setting the initial fair value loss on issuance to 0%.

The discount rates applied are as follows:

HMT directed rate: undergraduate Plans 1, 2 and 5 loans, and postgraduate Plan 3 doctoral loans
intrinsic rate: postgraduate Plan 3 master’s loans

1.3.5 Student loans – modelling risk

The carrying value of loans is calculated using repayment forecasting models that predict borrowers’ likely lifetime earnings based on demographic data of higher and further education students, and from this their loan repayments. Different models are used for the different loan types (undergraduate Plans 1, 2 and 5 loans, and postgraduate Plan 3 loans). The separate models rely on complex sets of assumptions, particularly regarding the trajectory of borrowers’ earnings across the different loan types.

Although long-term, the models incorporate the latest OBR short and long-term forecasts for RPI, base rates and earnings growth. The valuation of the student loan book is uncertain due to its dependence on macroeconomic conditions and estimated earnings of graduates over the next 30 to 40 years, among other assumptions, for a large number of borrowers.

There is limited historic actual repayment data for Plan 3 loans, as the first intake was in 2016. Plan 5 loans started in August 2023, so no historic data is available since these loans have not yet reached any statutory repayment points. Therefore, we have used suitable available information as key inputs for the valuations, which results in a higher degree of uncertainty. As more relevant and reliable data becomes available in the coming years for these plans, this data will be incorporated into the pipeline thereby reducing this level of uncertainty.

The assumptions used in the repayment models are reviewed annually, and the amounts provided reflect the year end estimate. Note 14.3 provides quantitative disclosures on the impact of assumption variations and detailed narratives on the different assumptions used. Further information on the undergraduate model assumptions is available on the Department’s website.

1.3.6 Revenue recognition through performance obligations

IFRS 15 Revenue from Contracts with Customers (IFRS 15) requires revenue to be recognised when the reporting entity has fulfilled performance obligations specified in its contracts with customers.

Management has applied judgement in 2 main areas:

identifying performance obligations across IFRS 15 income streams
assessing how these obligations have been satisfied, either at a point in time or over a period of time

Each income stream was reviewed separately to identify the obligations and how they were satisfied. Please see note 1.9 for more information on revenue recognition.

1.3.7 Leases – treatment of peppercorn leases

Management reviewed the large number of leases with nil consideration entered into by the Department to support the academy and FE sectors as both landlord and tenant. Management consider that the agreements provide a degree of control over specified assets with the Department having no practical ability to substitute assets. Therefore, these peppercorn leases are considered within the scope of the standard.

1.3.8 Leases – short-term leases

FReM requires all departments to adopt the exemption where neither a RoU asset nor a finance liability is recognised for leases of less than 12 months duration (short-term leases). Consequently, rentals for all short-term leases are expensed as incurred.

1.3.9 Leases – low value assets

FReM requires departments to apply the exemption to retain an expense treatment for lease costs of assets classified as low value. Low value is not based on a monetary threshold but rather an assessment of the asset’s inherent value to the reporting body. The standard excludes motor vehicles from this exemption.

Management judges that leased office equipment to be low value, as these assets are ancillary to the Group’s operations, are consumable and generic. All office equipment leases have been classified as low value.

1.3.10 Leases – discount rate

The Department has taken advantage of the FReM interpretation and applied the discount rate provided by HMT to calculate the initial values for leases. The rate is provided annually for leases entered into based on a calendar year.

1.3.11 Leases – classification of outbound leases

When freehold or leasehold assets (referred to as parent assets in this ARA) are leased out to third parties, IFRS 16 requires an assessment of the nature of the outbound lease. The assessment is based on the transfer of risks and rewards of ownership between the Department and its tenant. If the lease is judged to transfer the majority of risks and rewards, it is classified as a finance lease, otherwise it is considered to be an operating lease.

For finance leases, the parent asset, to the extent covered by the outbound lease, is de-recognised once control is deemed to have passed to the tenant. Control is considered to pass once the lease has been signed with the tenant, or in the case of providers, when a licence to occupy the site lawfully has been signed prior to signing the final long-term lease. When a de-recognised parent asset is leased out under a commercial finance lease, a lease receivable is recognised for future lease receipts.

For operating leases, the parent asset, to the extent covered by the outbound lease, is reclassified as investment property. Under FReM’s adoption of IAS 40 Investment Properties such assets are held at fair value and not depreciated.

1.4 Basis of consolidation

1.4.1 Approach

These accounts present the consolidation of the Department, executive agencies and other bodies within the departmental accounting boundary as defined by FReM, forming the Group. Transactions between entities included in the consolidation are eliminated to present the Group’s financial performance and financial position as a single economic entity.

The Department is authorised to consolidate its Agencies and NDPBs under the GRAA. A department’s designation order specifies the bodies that are required to be included within a department’s consolidated accounts, as all such bodies are considered public bodies.

As permitted by IFRS 10 Consolidated Financial Statements, the results and financial position of the following NDPBs have been consolidated as of 31 December 2024, which is within 3 months of the Group’s year end:

Aggregator Vehicle Plc
Engineering Construction Industry Training Board

Academy trusts have been excluded from the consolidation since the 2016 to 2017 financial year following their removal from the Department’s accounting boundary into their own standalone ARA. The Department publishes the academy sector ARA (SARA) separately.

The FE sector has been excluded from this consolidated ARA under a derogation to consolidate issued by HMT. The Department continues to work with HMT and Parliament to determine the consolidation approach for the sector, whether into the Group, into a standalone ARA, or another approach.

1.5 Adoption of FReM amendments

There have been no significant amendments to FReM for this reporting year.

1.6 Early adoption

The Group has not early adopted any accounting standards in this reporting year.

1.7 IFRSs in issue but not yet effective

To comply with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the Group must disclose where it has not applied a new IFRS that has been issued but is not yet effective. The Group reviewed such IFRSs, to assess their impact on its accounting policies and treatment.

1.7.1 IFRS 17 Insurance Contracts

IFRS 17: Insurance Contracts (IFRS 17) replaces IFRS 4: Insurance Contracts and is to be included in the FReM for mandatory implementation from the 2025 to 2026 financial year. It establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of this standard.

IFRS 17 requires insurance contracts, including reinsurance contracts, to be recognised on SoFP as the total of the fulfilment cashflows and the contractual service margin. The fulfilment cashflows consist of the present value of future cash flows calculated using best estimate assumptions with an explicit risk adjustment for non-financial risk. The risk adjustment is released to SoCNE as risk expires. The contractual service margin is the unearned profit on insurance contracts and is released to SoCNE over the insurance contract period as insurance services are provided. Where an insurance contract is onerous, it will have no margin, and the onerous element of the insurance contract will be recognised immediately in SoCNE.

The Group already adopts IFRS 4 insurance accounting for its risk protection arrangement (RPA) for schools and academies. However, RPA activities are immaterial to the Group’s financial reporting, so IFRS 17 is not expected to have a material impact to Group reporting.

1.7.2 IFRS 18 Presentation and Disclosure in Financial Statements

Issued on 9 April 2024, with an effective date for the private sector of reporting periods beginning on or after 1 January 2027. The standard has not yet been adopted by FReM, so there is no effective date for central government bodies.

The standard sets requirements for the presentation and disclosure of information in financial statements to ensure they provide relevant information that faithfully represents an entity’s assets, liabilities, equity, income and expenses.

Until the standard is adopted into FReM with adaptations and interpretations for the public sector context decided, the Department cannot assess its impact on reporting.

1.7.3 IFRS 19 Subsidiaries without Public Accountability: Disclosures

Issued on 9 May 2024, with an effective date for the private sector of reporting periods beginning on or after 1 January 2027. The standard has not yet been adopted by FReM, so there is no effective date for central government bodies.

This standard addresses how subsidiaries of IFRS-applying entities present their own IFRS-compliant financial statements. The Department is not a subsidiary of a parent company, so this standard is not expected to significantly impact our reporting. However, the full impact cannot be determined until the standard is adopted into FReM with public sector context adaptations and interpretations.

1.7.4 Non-investment asset valuations

In December 2023 HMT released an exposure draft on potential changes to make to valuing and accounting for non-investment assets (for example, PPE and intangible assets). The following changes to the valuation and accounting of non-investment assets is to be included in the 2025 to 2026 financial year FReM for mandatory implementation.

References to assets being held for their ‘service potential’ and the terms ‘specialised/non-specialised’ assets are being removed from the FReM. Non-investment assets are instead described as assets held for their ‘operational capacity’. This change has no impact on the valuation basis of non-investment assets, which remains existing use value.

An adaptation to IAS 16 will be introduced to withdraw the requirement to revalue an asset where its fair value materially differs from its carrying value. Assets are now valued using one of the following processes:

a quinquennial revaluation supplemented by annual indexation
a rolling programme of valuations over a 5-year cycle, with annual indexation applied to assets during the 4 intervening years
for non-property assets only, appropriate indices
in rare circumstances where an index is not available, a quinquennial revaluation supplemented by a desktop revaluation in year 3

The option to measure intangible assets using the revaluation model is withdrawn. The carrying values of intangible assets at 31 March 2025 will be considered the historical cost at 1 April 2025.

We have yet to quantify the impact of the change.

1.7.5 Social benefits

The 2025 to 2026 financial year FReM will include new guidance on accounting for social benefits. The 2025 to 2026 financial year FReM will define social benefits as ‘current transfers received by households (including individuals) intended to provide for the needs that arise from certain events or circumstances, for example, sickness, unemployment, retirement, housing, education, or family circumstances’.

We have yet to quantify the impact of the change.

1.8 Segmental reporting

In accordance with IFRS 8 Operating Segments (IFRS 8), the Group has considered the need to analyse its income and expenditure by operating segments. The Group has assessed that all operations fall within the same geographical location and regulatory environment as envisaged by IFRS 8.

Since segmental information for total assets and liabilities is not regularly reported to the chief operating decision-maker, and in compliance with FReM, it has not been included in these accounts.

1.9 Income

Group income is authorised in the Supply Estimate (such as general administration receipts and income from other departments) and may include income to the Consolidated Fund that HMT has agreed should be retained by the Group and treated as operating income.

Income is stated net of recoverable VAT where applicable.

The Group receives the following income streams and accounts for them as follows:

1.9.1 Revenue from contracts (IFRS 15)

Revenue is recognised once the Group has completed performance obligations. The nature of the obligations differs between contract types.

Levy income

Levy income is collected from construction and engineering sector employers under statute by CITB and ECITB based on an annual assessment period. Payment of the levies does not create additional rights for construction sector employers from the Group.

Since there are no additional rights for employers, the satisfaction of levy performance obligations is judged to occur at a point in time rather than over the levy period. Consequently, levy income is fully recognised immediately upon raising the annual assessments.

If there are doubts about the collectability of levy income due to ageing, past experience, or other known factors, an impairment allowance is recognised.

The Group does not recognise apprenticeship levy income, which is collected and accounted for by HMRC as tax.

Registration fees

Annual registration fees are collected from social care professionals by SWE and higher education providers by OfS. Both Group bodies are authorised to retain such income to offset against their expenditure, with OfS up to an annually approved limit. Amounts received by OfS above their annual limit are passed to the Exchequer.

Unlike levy income, registration fee satisfaction is judged to occur over the registration year. Social care practitioners benefit from registration over time by being able to operate in the sector. HE providers consume the benefit through continued operation as an authorised provider who is able to offer student loans. Therefore, registration fee revenue is deferred and recognised evenly across the year.

If there are doubts about the collectability of registration fees due to ageing, past experience, or other known factors, an impairment allowance is recognised.

Capital contributions

The Group has standardised the specifications for new school buildings. In some cases, the Group agrees with a school’s responsible body (such as a local authority, academy trust or foundation body) to exceed these standards. In such cases a capital contribution is then agreed with the responsible body to fund the upgrade.

The Group considers the completion of the additional design specification as indivisible from the overall school construction programme. Therefore, the performance obligation is satisfied continuously over the course of the build phase.

Capital contributions are initially deferred and recognised evenly over the construction phase.

Sales of goods and services

The Group sells goods and services such as tests and training. Performance obligations for these transactions are the completion of training or despatch of goods. There is no significant timing difference between the satisfaction of performance obligations and receipt of income. Revenue recognition is immediate.

Master servicer fees

The Group has retained the servicer function for the portfolios of student loans sold under the previous policy to sell student loans. Although both sold portfolios have separate servicer fee agreements, they are similar in structure.

For both agreements, the Group has identified 2 separate performance obligations:

completion of day-to-day servicing of loans, which extends for 12 months beyond each annual servicing period ending on 31 March
payment of loan repayments to each loan sale counterparty in July of the year following each servicing year ending in March

Management considers the first performance obligation to be satisfied on an ongoing basis, as the customer benefits from the actions as they are completed. Revenue from normal servicing activities is deferred over each 2-year cycle. The second obligation is settled at a point in time, when cash is moved, so revenue for these activities is recognised in July when received.

1.9.2 Grant income (IAS 20)

The Group receives grant income from other government bodies, accounted for under IAS 20 through the non-deferral option. The income relates to programmes jointly funded by the Group and other departments or governments.

Grant income is matched to the expenditure profile for each project. Income not matched to expenditure at the end of the financial year is transferred to deferred income. If expenditure exceeds income, an accrual may be made for the balance of the income.

1.9.3 Risk protection arrangement (IFRS 4)

The Group operates an alternative to commercial insurance for the academy sector and local authority-maintained schools. Income is recognised for claim cover years.

1.10 Grant financing and grant-in-aid

Funding to the Department’s Agencies and NDPBs through financing and grant-in-aid payments is reported on a cash basis in the period in which payments are made. Grant financing and grant-in-aid as well as any intra-group grants between the consolidated bodies, are eliminated within the Group.

1.11 Policy funding

1.11.1 Policy funding expense

Expenditure to support the Group’s policy aims is delivered in 2 main ways:

grant funding payable under legislation, such as NFF payments funding local authority-maintained schools and academies
other funding, such as contractual payments to providers, for example apprenticeship training providers

Recognition of the entitlement to grant or other funding varies according to the individual programme.

Grant funding

Most grants made by the Group are recorded as expenditure in the period in which the allocation or claim is paid, as the grant funding cannot be directly related to activity in a specific period and is not designed to be, in line with legislation. The allocations or claims are deemed the only appropriate and measurable activity that truly creates an entitlement for the recipient.

Accruals accounting is adopted where timing gaps are known between entitlement and payment, or where entitlements can be quantified with a degree of certainty in a given year. In such cases, the grant expense is accrued in SoCNE and shown as a liability in SoFP.

Contractual funding

Accruals accounting is adopted for contractual funding due to the higher degree of certainty of the Group’s obligations. Additionally, contractual funding is generally provided based on post-activity claims made by the end user to the agency providing a measure of certainty of outcome.

1.11.2 Policy funding recoveries

Policy funding may result in overfunding or unspent amounts. The Group does not recognise a prepayment if the end user has not spent the funding due to timing or delays. However, if recoveries of overfunding or unspent amounts cross a year end, a receivable will be recognised.

Grants and other funding may generate overfunding or unspent amounts described below. Where recoveries of overfunding or unspent amounts cross a year end a receivable will be recognised to reflect the unrecovered amount. The Group does not recognise a prepayment if the end user has not spent the grant due to timing or delays.

Overfunding

Overfunding can occur when the payment profile, established before the final grant obligation is known, is larger than the final obligation. This results in accelerated funding before the grant obligation is finalised.

The Group seeks to recover overfunding by reprofiling future funding payments to align total payments with the final funding obligation. If overfunding is identified early in the funding period, recovery will occur within the same programme period. If identified later, recovery will occur in the next grant cycle. This approach is suitable for annual funding payments, such as general annual grant funding for academies.

Unspent amounts

Sometimes recipients cannot use time bound funding as intended, leaving funds unspent within the stipulated timescale. If the Group decides to recover these unspent amounts, a claim will be made to the recipient. This approach is more common for single funding payments where there are no future payments to reprofile as described above.

1.12 Leases

1.12.1 Lessee accounting

Right-of-use assets

The Group recognises a right-of-use asset (RoU asset) and lease liability (if a commercial lease) at the commencement date. The RoU asset is initially measured at cost, which includes the initial value of the lease liability adjusted for initial direct costs, prepayments or incentives, and costs related to restoration at the end of the lease. For peppercorn leases of provider development sites, the initial value is based on the depreciated replacement cost of the land element of the leased asset.

RoU assets are subsequently measured at either fair value or current value in existing use, in line with PPE assets. The cost measurement model in IFRS 16 is used as an appropriate proxy for current value in existing use or fair value for most leases, except for those which meet one of the following:

are longer-term leases with no provisions to update lease payments for market conditions or have a significant period between updates
have underlying assets whose fair value or current value in existing use is likely to fluctuate significantly due to market price changes

Operational RoU assets are depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the RoU asset or the end of the lease term. The estimated useful lives of RoU assets are determined similarly to those of property, plant, and equipment assets. The Group applies IAS 36 Impairment of Assets to determine if the RoU asset is impaired and to account for any identified impairment loss.

Lease liabilities

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or if that cannot be readily determined, the rate provided by HMT. The applicable HMT discount rates for leases entered into during the specified calendar years were:

2022 and earlier – 0.95%
2023 – 3.51%
2024 – 4.72%
2025 – 4.81%

The lease payment is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease payments due to a change in the index or rate, a change in the Group’s estimates of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension, or termination option.

Lease payments included in the measurement of the lease liability comprise:

fixed payments, including in-substance fixed payments
variable lease payments that depend on an index or a rate, initially measured using the index rate at the commencement date

When the lease liability is re-measured, a corresponding adjustment is made to the RoU asset or recorded in SoCNE if the carrying amount of the RoU asset is £nil.

1.12.2 Lessor accounting

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance or operating lease. This classification is based on whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If it does, then the lease is a finance lease, if not, it is an operating lease.

When the Group is an intermediate lessor, it accounts for its interest in the head lease and the sub-lease separately. If a head lease is a short-term lease to which the Group applies the exemption above, then the sub-lease is classified as an operating lease.

Where the outbound lease is classified as a finance lease, the parent asset is de-recognised from SoFP as a capital grant-in-kind.

The Group recognises receipts outbound leases classified as operating leases as income on a straight-line basis over the lease term.

1.13 Property, plant and equipment

The minimum level of capitalisation for expenditure on PPE ranges between £500 and £10,000 across the Group. For IT equipment and furniture, all items recorded as capital expenditure are capitalised, and if they fall below the capitalisation threshold, they are grouped together and recorded as bulk assets. The asset value on capitalisation is measured at cost plus all direct costs, such as installation, attributable to bringing them into working condition.

Land and buildings are initially measured at cost and are restated to current value (depreciated replacement cost) using external professional valuations in accordance with the FReM adaptation of IAS 16 every 5 years, and in the intervening years using appropriate indices supplied by the Valuation Office. The Group has stated other PPE at existing use value using appropriate indices published by ONS. Some assets are of short life and low value and have used depreciated historical cost as a proxy for fair value.

The Group measures the value of freehold assets under construction (AuC) at cost plus direct costs directly attributable to bringing the assets into working condition in line with IAS 16. Direct costs include all costs associated with purchasing the land and property and bringing the assets into use, and a fair proportion of the Group’s internal costs. Additional funds to complete development are recognised as capital grants-in-kind.

1.14 Education sector assets

One of the Group’s purposes is to fund the acquisition of premises or sites for use by education providers. The Group also funds all necessary construction works and associated professional services to bring these premises or sites into use. Development sites, whether freehold (note 1.13) or leasehold (note 1.12), are recognised by the Group as AuC (freehold or leasehold) until the site is complete and leased to a provider or third-party. The post-lease accounting treatment for completed sites follows the lessor policy outlined in note 1.12.2.

In some cases, circumstances may prevent the AuC from being opened as a provider, or previously operational sites may be closed and returned to Group control. These assets will be recognised and treated under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (commonly termed ‘assets held for sale’ (AHfS)). Any difference between carrying value and fair value would be recognised as an in-year impairment and the asset would be presented separately.

1.15 Depreciation

Depreciation is provided at rates calculated to write-off the valuation of owned or leased buildings and other PPE by equal instalments over their estimated useful lives. Land, AuC and investment properties are not depreciated.

Asset lives are in the following ranges:

property – up to 60 years, or the lease term (whichever is shorter)
other asset types – 3 to 20 years, or the lease term (whichever is shorter)

1.16 Financial instruments

The Group applies IFRS 7 Financial Instruments: Disclosures, IAS 32 Financial Instruments: Presentation and IFRS 9. Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.

1.16.1 Financial assets

Financial assets include cash and cash equivalents, trade and other receivables and loans. The Group determines the classification of its financial assets at initial recognition. Financial assets are initially recognised at fair value, typically the transaction price plus, for financial assets not at FVTPL, directly attributable costs. The Group does not hold derivative financial instruments.

The subsequent measurement of financial assets depends on their classification.

Amortised cost

Financial assets classified as amortised cost include:

trade and other receivables – which have fixed or determinable payments, do not carry any interest and are not quoted on an active market
non-student loans – which comprise loans judged to have passed the SPPI test, are not traded on any active market and are expected to be held until maturity
cash and cash equivalents – which include cash in hand and on demand deposits

If there are restrictions on the Group’s ability to access cash, such as being held in escrow with a solicitor pending a property transaction, these restrictions are disclosed separately in the notes to the accounts. However, in accordance with IAS 7 Statement of Cash Flows, the Group continues to present these balances as cash in SoFP and Statement of Cash Flows (SoCF).

The above asset types are subsequently recognised at amortised cost using the effective interest method. Carrying values are based on initial fair value adjusted for interest charges and repayments. Appropriate impairment allowances for estimated irrecoverable amounts are recognised in SoCNE based on expected losses for a particular asset, or group of assets. The impairment allowance is measured as the difference between the asset’s carrying amount and the estimated future recoverable amount.

Fair value through profit or loss

Financial assets carried at FVTPL include student loans and investments.

Student loans

Student loans are classified to FVTPL because management considers the loans to fail the solely payments of principal and interest test due to their terms and conditions.

Student loans incur an immediate fair value loss due to the difference between the initial fair value and the transaction price at issue. Such fair value losses are deferred to SoFP since student loans are classified as level 3 per IFRS 13’s hierarchy. Deferred balances are then expensed as part of the loans’ first year end fair value re-assessment.

More information about the measurement techniques used to determine the fair value of student loans is provided in note 14.

Investments

The Group holds quoted investments recognised at fair value, calculated as the closing bid price at the year end. Movements in fair value are recognised in profit and loss.

Additionally, the Group holds a retention note issued by the body that acquired student loans sold in December 2018. The asset is held to fulfil regulatory requirements and cannot be sold over the life of the securitised student loans. In accordance with IFRS 9, the note is designated as FVTPL due to the underlying pool of financial assets (student loans) being designated as FVTPL.

The above asset types are subsequently measured at fair value, with annual movements in fair value recognised in profit and loss. Fair value movements are recognised as gains or losses in note 8.

1.16.2 Financial liabilities

Financial liabilities are measured at amortised cost and include trade and other payables, and loans. The Group does not have complex derivative financial instruments. Financial guarantees are designated as FVTPL on inception. The Group determines the classification of its financial liabilities at initial recognition.

Trade and other payables

Excluding non-contractual accruals, are generally not interest bearing and are stated at their face value on initial recognition. Subsequently, they are measured at amortised cost.

Loan liabilities

The Group holds both interest-bearing and non-interest-bearing loans. These loans are stated at their face value on initial recognition. Subsequently, interest-bearing loans are measured at amortised cost, which includes all direct costs associated with the loans.

Financial guarantees

Financial guarantees are initially recognised at fair value on the date the guarantee is given, in accordance with IFRS 9. Subsequent measurement is at the higher of:

the amount of the equivalent IFRS 9 expected credit loss allowance
the amount initially recognised less the cumulative effect of income recognised

1.17 Contingent liabilities

Where the time value of money is material, contingent liabilities required to be disclosed under IAS 37 are stated at discounted amounts, with the amount reported to Parliament noted separately. Remote contingent liabilities not required to be disclosed by IAS 37 are disclosed in the Parliamentary Accountability Report and stated at the amounts reported to Parliament.

1.18 Value added tax

Most of the Group’s activities are outside the scope of VAT. Generally, output tax does not apply, or where it does, input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of PPE and intangible assets. Where output tax is charged or input tax is recoverable, the amounts are stated net of VAT.

1.19 Service concession arrangements

Under a service concession arrangement, a government entity contracts with the private sector to construct, operate and maintain public sector infrastructure, allowing the private sector to deliver services directly or indirectly to the public. However, the government entity retains control, or regulates, the services provided (including access fees) and controls significant residual interest in the infrastructure at the completion of the arrangement.

The Group has adopted IFRIC 12 Service Concession Arrangements (IFRIC 12), as interpreted by the FReM, acting as the grantor to account for the 46 schools the private sector will construct and then operate for the Group under the Private Finance 2 (PF2) scheme over a 25-year period. The transaction was part of the wider Priority Schools Building Programme (PSBP) that addressed condition issues across the school estate. Within these accounts the transaction is referred to as PF2.

The assets constructed under PF2 are not recognised by the Group. According to the Group’s asset recognition approach for PSBP assets, the Group does not recognise school assets constructed under PSBP (including PF2). The Group does not judge any economic benefit to flow to the Group from the PSBP assets during and after construction. Instead, the Group recognised the value of the assets during construction as capital grants-in-kind.

Applying IFRIC 12 results in the Group recognising the financing liability arising from constructing the assets. This financing liability is repaid over the term of the service concession arrangement through the unitary charges settled by the Group.

Interest on the financing liability and expenditure on services provided under the service concession arrangement are recognised in SoCNE as they accrue. Unitary charges are apportioned between 3 elements:

an element to pay for services
an element to pay interest on the liability
an element to repay the financing liability

2. Transfers of function

The Department has completed 2 transfers of function during the year, one external to the Group and one internal.

2.1 External transfer

On 1 April 2024, responsibility for the supporting families programme transferred from the Ministry of Housing, Communities and Local Government to the Department.

FReM stipulates that cross-departmental machinery of government changes are accounted for as a transfer of function, through the transfer by merger treatment. This accounting treatment requires that the receiving body accounts for the transferred function from the start of the financial year the transfer occurred in, which in this case aligns to the transfer date of 1 April 2024. In addition, comparatives should be restated to include historic activities of the function transferred.

However, the Department judges the transfer to be immaterial to the Group’s reporting with no identifiable assets or liabilities transferring to the Department on 1 April 2024. There has no impact of the Group’s reporting for this year or last.

2.2 Internal transfer

On 11 September 2024, the Secretary of State announced, through a written ministerial statement, the closure of ESFA on 31 March 2025 which resulted in 2 transfers of function between ESFA and the Department. On 1 October 2024, the Schools Financial Support and Oversight function transferred between ESFA and the Department. The only significant asset that transferred was an academy sector loan book valued at £15.9 million at transfer. The transfer occurred within the Department & Agencies sub-consolidation reporting level. Therefore, there is no visible effect of the Group’s reporting in this ARA.

The rest of ESFA’s activities, assets and liabilities transferred on 1 April 2025 which will be accounted for next year. Note 25.2 presents an analysis of the assets and liabilities transferred on 1 April 2025.

In accordance with FReM, 1 October 2024 transfer of function within a departmental group has been accounted for as a transfer by absorption by both the Department and ESFA. Asset values have not been restated to fair value and have been accounted for on a prospective basis from the date of transfer, there has been no restatement of comparatives. ESFA recognised a net expense on transfer of its net assets, whereas the Department recognised a gain on transfer from the transfer. Both of these values were equal and opposite and eliminated on consolidation.

3. Segmental reporting

Information on operating activities, financial results, forecasts and plans is presented to and reviewed by the Leadership Team.

The majority of the lines of operation fall within the same geographical location and regulatory environment. Segmental analysis of the Group’s assets and liabilities is not reviewed by management and consequently is not provided here.

Note 3.1 presents performance analysed by business segment which reconciles back to note S1; which matches how the Leadership Team manage Group performance. Gross expenditure and income are based on the budgetary framework set out in CBG. Note 3.2 provides a reconciliation to the net expenditure for the year presented in SoCNE.

3.1 Segmental analysis of total outturn per SOPS (£million)

Business group	2024 - 2025 Gross expenditure	2024 - 2025 Income	2024 - 2025 Net expenditure	2023 - 2024 Gross expenditure	2023 - 2024 Income	2023 - 2024 Net expenditure
Families Group	8,423	0	8,423	5,784	0	5,784
Schools Group	65,395	-372	65,023	66,534	-263	66,271
Skills Group	76,089	-19,946	56,143	68,078	-19,600	48,478
Regions Group	277	-2	275	250	0	250
Strategy Group	197	-9	188	163	-11	152
Operations and Infrastructure Group	5,053	-292	4,761	1,076	-161	915
Total	155,434	-20,621	134,813	141,885	-20,035	121,850

Additional analysis of segmental budgetary performance can be found in Annex A. Details about policy spending by business group by programme are provided in note 6.

The increase in Families Group outturn is predominantly due to the expansion of childcare entitlements. The increase in Skills Group outturn is predominantly due to the increase in the student loan fair value loss as shown in note 8. The increase in OIG outturn is mainly due to the transfer of responsibility, and so reporting, of mainstream school conditions programmes from Schools Group. Overall, the transfer of the capital programmes from Schools Group has been broadly compensated by increases in overall schools funding, specially the teachers’ pension employer contribution grant.

3.2. Reconciliation between operating segments (per outturn) and SoCNE net expenditure

3.2.1. 2024 to 2025 (£million)

Business group	Net expenditure per segmental analysis	Reconciling item: Income and gains	Reconciling items: Expenditure	Net expenditure per SoCNE
Families Group	8,423	0	-2	8,421
Schools Group	65,023	312	-298	65,037
Skills Group	56,143	4,845	-35,792	25,196
Regions Group	275	0	-7	268
Strategy Group	188	0	-5	183
Operations and Infrastructure Group	4,761	136	-229	4,668
Total	134,813	5,293	-36,333	103,773

3.2.2 2023 to 2024 (£million)

Business group	Net expenditure per segmental analysis	Reconciling items: Income and gains	Reconciling items: Expenditure	Net expenditure per SoCNE
Families Group	5,784	0	-2	5,782
Schools Group	66,271	204	-379	66,096
Skills Group	48,478	4,419	-35,422	17,475
Regions Group	250	0	-7	243
Strategy Group	152	0	-3	149
Operations and Infrastructure Group	915	13	-295	633
Total	121,850	4,636	-36,108	90,378

3.2.3 Reconciling items

Reconciling items are transactions which are correctly included in budgetary outturn but do not result in SoCNE entries. Transactions are primarily annual movements in non-current assets (loans, PPE, RoU assets and intangible assets).

Schools Group includes (see note 10):

of the £312 million income and gains, £265 million is education sector assets de-recognised through outbound leases
of the £298 million expenditure, £241 million is additions of education sector assets

Skills Group includes in relation to student loans (see note 14):

almost all of the £4.8 billion income and gains reconciling item is student loan repayments
almost all of the £35.8 billion expenditure reconciling item is £20.7 billion student loan advances and £15.1 billion capitalised loan interest (accounted for as part of the annual fair value movement)

4. Income

4.1 Revenue analysis (£million)

Income from contracts	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Levy income	0	267	0	227
Fees and charges	40	85	43	86
Sale of goods and services	5	66	5	52
Capital contributions	39	39	43	43
Other income	3	9	44	50
Grant income	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Funds from other government departments	78	79	73	74
Other income	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
RPA income	125	125	101	101
Rental income	1	2	1	1
Total	291	672	310	634

Funds from other government departments relate mainly to income from Department of Health and Social Care for jointly managed projects.

4.2 Revenue streams

4.2.1 Levy income

Levy income is raised by the Group’s training boards from employers in the construction and engineering sectors. Employers’ levy charges are assessed by applying the statutory levy rate to employers’ annual salary bills. Both levies are used by the training boards to fund training in their specific sectors. Employers who are assessed for either levy do not receive additional rights to training; training is open to all sector employers irrespective of levy charges.

4.2.2 Registration fees

Annual registration fees are raised from social care professionals and higher education providers to allow them to perform their duties in their respective fields. Practitioners are required to register with the Group’s regulators (SWE) each year to receive authorisation to practice. Under the Higher Education and Research Act 2017, HE providers are required to register with their regulator (OfS) if they wish to:

access public grant funding (such as funding to support teaching) or student support funding (such as enabling students at a provider to access student finance)
apply to the Home Office for a student sponsor licence to recruit international students, or to maintain an existing licence
apply for degree awarding powers in order to award their own degrees or university title

4.2.3 Sales of goods and services

Revenue arises from the sale of training materials to third parties and the supply of health and safety tests. In both areas the Group assesses the completion of performance obligations to be the supply of either goods or tests (mostly online). Both areas have no significant delay between satisfaction of obligations and recovery of fees. Therefore, income is not deferred but recognised immediately.

4.2.4 Capital contributions

The Group is investing into the education sector estate through its rebuilding programmes for schools and colleges. The Group applies standard design specifications to projects to drive value for money and efficiency. However, responsible bodies are able to amend the standard design specifications at their own cost. Once revised designs have been agreed and costed the Group will raise an invoice to recover the additional funds.

The Group considers that the performance obligation is met during construction of the education sector buildings, the customer consumes the benefit as their asset is constructed. Consequently, income received from responsible bodies is deferred to SoFP and revenue is recognised evenly over the construction period.

4.2.5 Risk protection arrangement fees

Fees received from schools (academies and local authority-maintained schools) through membership of the risk protection arrangement are accounted for through IFRS 4. Fees are recognised evenly over the cover period of September to August.

5. Staff costs

Disclosures relating to staff numbers and costs are detailed within the Staff Report: part A.

6. Policy funding

6.1 Summary (£million)

	2024	2023	2022	2021	2020
Response rate	84%	85%	88%	90%	91%
Engagement index	64%	63%	61%	69%	69%
Civil Service-wide response rate	61%	65%	77%	75%	80%
Civil Service-wide engagement index	64%	65%	65%	66%	66%

In the following tables, all programmes of less than £150 million value have been aggregated together as ‘Other spending’ for each operational unit.

During the year responsibility for some programmes moved business groups without any change in spend. Programmes which moved are marked “*”, and more information is provided in note 6.3.

During the year the teachers’ pension employer contribution grant for both schools and colleges increased sufficiently to be shown on its own line in the following table. We have moved the prior year balances from other spending in both Schools Group and Skills Group sections, and presented them on their own line in the table.

6.2 Resource funding

6.2.1 Values (£million)

Families Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Early years childcare entitlements	6,226	6,226	3,966	3,966
Free meals (direct grants)	678	678	663	663
Children in care	373	373	111	111
Life Skills, Disadvantaged and SEND	206	206	271	271
Children’s social care	153	153	138	138
Other spending	528	528	270	270
Support costs	96	101	120	130
Schools Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
National funding formula	45,657	45,657	44,622	44,622
High needs funding	9,889	9,889	9,459	9,459
Pupil premium	2,935	2,935	2,866	2,866
Teacher pay grant	1,984	1,984	534	534
Teachers’ pension employer contribution grant (schools)	1,219	1,219	146	146
High needs funding (16 to 19)	701	701	697	697
Primary sport premium	323	323	325	325
Core funding	286	286	807	807
Teacher supply	242	242	199	199
School curriculum	227	227	185	185
PFI revenue grant*	0	0	753	753
Other spending	245	245	275	275
Support costs	285	286	270	270
Skills Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Core funding (16 to 19)	7,248	7,248	6,839	6,839
Apprenticeships	2,711	2,720	2,460	2,460
Teaching grant	48	1,460	48	1,464
Adult education budget	1,455	1,455	1,359	1,359
HE student support grants	722	722	663	663
Teachers’ pension employer contribution grant (colleges)	301	301	146	146
Bursary funding	222	222	222	222
Construction industry training	0	186	0	148
Other spending	474	478	253	256
Support costs	208	216	150	156
Regions Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Other spending	134	134	129	129
Support costs	10	10	23	23
Strategy Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Other spending	102	102	83	83
Support costs	7	7	-6	-6
Operations and Infrastructure Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
PFI revenue grant*	752	752	0	0
Other spending	10	10	27	27
Support costs	36	36	17	17
Grant-in-aid	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Grant-in-aid	1,941	0	1,969	0
Total	88,634	88,318	81,059	80,673

6.2.2 Significant funding streams

National funding formula

NFF is used to allocate funding to mainstream, state-funded schools. The majority of funding that goes through the schools NFF is ‘pupil-led’. This funding is calculated based on the number of pupils in the school and their characteristics. All schools get a basic amount for each pupil (with different amounts for different ages), and extra funding for pupils with additional needs.

Schools also receive ‘school-led’ funding, based on the characteristics of the school itself. This includes a lump sum for every school, and extra funding for schools with certain characteristics, such as a school that operates across more than one site, or a school that is small and remote.

The school-level allocations are added up to create a total allocation for each local authority. Authorities then set their own local formulae, based on the same factors in the NFF, but with more up-to-date pupil characteristics, to distribute their total allocation between all the schools in their area. Schools receive their funding based on their authority’s formula. This means that while the NFF determines how much money each local authority area receives, it is the authorities’ own formulae that determine how much each of the schools in the area finally receives.

NFF payments are processed slightly differently to the 2 different school sectors: dedicated schools grant payments directly to local authorities who then distribute funds to their maintained schools, and general annual grant payments directly to academy trusts to support their academies.

High needs funding

This funding supports provision for children and young people with SEND from their early years to age 25.

Pupil premium

Extra funding for state-funded schools and early years providers to help them improve the attainment of their disadvantaged pupils.

Early years childcare entitlements

The significant increase in the early years entitlements spend in the 2024 to 2025 financial year reflects the rollout of the new entitlements:

from April 2024, the 15 hour entitlement for eligible working parents of 2 year olds
from September 2024, 15 hour entitlement for eligible working parents of 9 month to 2 year olds

Local authorities have been funded for these 2 entitlements streams in the 2024 to 2025 financial year as well as the 6 existing funding streams which form part of the early years block of their overall dedicated schools grant funding. The existing funding streams are:

15 hour entitlement for disadvantaged 2 year olds
universal 15 hour entitlement for all 3 and 4 year olds
additional 15 hour entitlement for eligible working parents of 3 and 4 year olds
early years pupil premium
disability access fund
maintained nursery school supplementary funding

Core 16 to 19 funding

Funding for the provision of study programmes for young people. Providers can work through a wide range of establishment types including colleges, sixth forms in schools and academies, special schools, special academies, independent training providers, special post-16 institutions and some HE providers and also via local authorities.

Apprenticeships

Funding that supports the delivery of the apprenticeships programme for young people and adults.

Adult education budget

Funding that aims to engage and provide the skills and learning adults need to progress into work or equip them for an apprenticeship or other learning.

Teachers’ pension employer contribution grant

In March 2024, we announced an over £1.1 billion of additional funding available in the 2024 to 2025 financial year for a range of providers:

mainstream schools
high needs settings
local authorities with centrally employed teachers
early years
16 to 19 education and further education settings

This funding increase is in response to the outcome of the TPS valuation, based upon 2020 data, we published in October 2023. The outcome confirmed a need to increase the employer contribution rate by 5% to 28.6%, from 1 April 2024 to ensure that the scheme continues to meet present and future obligations. HMT committed to provide additional funding to cover the increase for employers centrally funded by the Department for the 2024 to 2025 financial year.

6.3 Capital funding

During the year, responsibility for a number of programmes related to the education estate moved from Schools Group to OIG to streamline delivery. The majority of the movements were in capital programmes, there was one resource programme affected. The change in responsibility, and so reporting, had no impact on the management of the programmes or how the value of the spending has been calculated. To maintain consistency with last year’s ARA, the comparatives have not been re-presented. In the following tables, programmes which have moved are marked with “*”.

6.3.1 Values (£million)

Families Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Children in care	5	5	100	100
Other spending	53	53	41	41
Schools Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
School condition allocations*	0	0	1,795	1,795
High needs funding*	0	0	954	954
Free schools	615	615	910	910
Basic needs schools capital*	0	0	746	746
School capital improvement*	288	288	395	395
Other spending	64	64	90	90
Skills Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
College condition improvement	541	541	320	320
Other spending	273	437	333	512
Regions Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Other spending	56	56	37	37
Strategy Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Other spending	0	0	1	1
Operations and Infrastructure Group	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
School condition allocations*	1,794	1,794	0	0
School capital improvement*	948	950	173	176
High needs funding*	305	305	0	0
Basic needs schools capital*	195	195	0	0
RAAC	156	156	55	55
Other spending	47	47	20	20
Total	5,340	5,506	5,970	6,152

6.3.2 Significant funding streams

School condition allocations

Spending covers a group of separate allocations all aimed at improving the condition of the school estate across different school sectors. Schools and those responsible for school buildings are eligible for specific funding streams depending on their size and type. Local authorities, larger multi academy trusts and larger voluntary aided school bodies receive funding directly to invest across their schools. Smaller academy trusts, voluntary aided bodies and sixth-form colleges are instead able to bid for condition improvement funding.

School condition funding programmes include:

condition improvement fund, an annual bidding round for eligible academies, sixth-form colleges and voluntary aided schools to apply for capital funding for specific projects
school condition allocations, funds paid to eligible bodies responsible for maintaining school buildings to spend on projects that meet their own priorities
devolved formula capital, allocated for individual schools and other eligible institutions to spend on capital projects that meet their own priorities

High needs funding

This supports provision for children and young people with SEND from their early years to age 25, enabling both providers to meet their statutory duties under the Children and Families Act 2014.

Free schools

These grants include both the value of the sites leased to academy trusts and spending on development sites which are not recognised as Group assets. Programme spending for sites recognised as education sector assets is recognised as asset additions and is not expensed.

Basic needs schools capital

This supports the statutory duty to provide sufficient school places that sits with local authorities. We provide authorities with funding for every place that is needed in their area, based on their own data on pupil number forecasts.

College condition improvement

The Group provides funds to ensure college condition improvement through:

the further education capital transformation programme to upgrade and transform, and significantly reduce the proportion of the college estate not fit for purpose or in unsatisfactory condition
the T Levels capital fund to support eligible further education providers offering T Levels

Skills Group other spending

Includes the T Levels capital fund and Institutes of Technology (collaborations between FE providers, HE providers and employers) to deliver higher technical education that gives employers the skilled workforce they need.

7. Operating expenditure

7.1 Purchase of goods and services (£million)

Costs	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
IT and telecommunications costs	93	224	119	231
Advertising and publicity	51	56	48	51
Other professional fees	26	49	28	60
Research and development costs	28	29	27	29
Release of accrued rent	0	0	-17	-17
Other expenditure	74	116	70	112
Total	272	474	275	466

7.2 Depreciation, amortisation and other non-cash charges (£million)

Non-cash charges	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Depreciation	28	37	29	40
Amortisation	74	95	28	54
Impairment	16	19	2	3
Provisions: net movement	160	190	155	182
Other expenditure	6	6	17	17
Total	284	347	231	296

Included in other expenditure are audit fees, presented in more detail as follows.

7.3 Audit fees (£thousand)

Group audit	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Non-cash	1,296	1,296	1,195	1,195
Cash – NAO	0	1,096	0	885
Cash – non-NAO	0	41	0	40
SARA audit	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Cash – NAO	575	575	550	550

Non-cash audit fees for the Department and Agencies are included in note 7.2 as other expenditure. Non-cash audit fees are charged by NAO but are not paid. The audit fees are recognised as an expense but also as a credit to reserves in both Statements of Changes in Taxpayers’ Equity. Cash audit fees for NDPB audit costs are included within other professional fees in note 7.1.

The Department is responsible for preparing SARA which is then audited by NAO. As SARA is an amalgamation of operational academy trusts it does not bear central costs itself. Consequently, NAO’s fee for auditing SARA is recognised in this ARA not SARA.

8. Other losses or (gains) (£million)

Valuation movements of assets held at FVTPL	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Student loans	8,638	8,638	2,469	2,469
Investments	-18	-18	-22	-22
On de-recognition	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Write-off of student loans	310	310	121	121
Write-off of non-student loans	4	4	6	6
Other losses	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Losses on student loans	7	7	8	8
Lease modifications	4	4	0	0
Total	8,945	8,945	2,582	2,582

Student loans and investments (including the retention note) presented above are required to be classified as FVTPL by IFRS 9, none were unilaterally designated at initial recognition.

Annual valuation movements presented in this note relate to gains and losses recognised when remeasuring the fair value of financial assets classified as FVTPL. The student loan annual fair value movements are the net balances between:

£23.7 billion of unrealised losses (prior year, £17.9 billion unrealised losses)
£15.1 billion of capitalised interest gains (prior year, £15.1 billion gains)

9. Operational assets

The Group has organised its owned PPE and leased RoU asset disclosures based on the Group’s usage rather than by the relevant financial reporting standard. This split between operational and education sector assets reflects the differing risk exposures presented by the different activities.

This note presents information concerning assets we use to support our operational activities, primarily office blocks. Note 10 presents information about our activities supporting educational provider operations. Both notes contain both owned (under IAS 16) and leased (under IFRS 16) assets.

The operational property asset class includes freehold and leasehold sites, as well as leasehold improvements on leased sites. AuC primarily consists of property-based assets such as property improvements midway through completion for our office estate. Other PPE represents all other asset classes (such as motor vehicles, plant and machinery, and fixtures and fittings) not included in the other 2 classes presented.

The Group operates from multiple sites, all but 3 of which are leased. The Group’s surveyors revalue land and buildings in accordance with the Royal Institute of Chartered Surveyors’ appraisal and valuation manual. The owned properties, Bircham Newton, Erith, and Inchinnan, were most recently valued on 31 March 2025 by Montagu Evans LLP.

9.1 2025

9.1.1 Valuation movements (£million)

Cost or valuation	Operational property	AuC	Other assets	Total
At 1 April 2024	270	72	85	427
Additions	17	23	12	52
Disposals	-23	0	-5	-28
Revaluations	2	0	1	3
Reclassifications	63	-67	4	0
Lease modifications	-16	0	0	-16
At 31 March 2025	313	28	97	438
Depreciation	Operational property	AuC	Other assets	Total
At 1 April 2024	-46	0	-64	-110
Charged in year	-27	0	-10	-37
Eliminated on disposal	11	0	5	16
Revaluations	-5	0	-1	-6
Lease modifications	3	0	0	3
At 31 March 2025	-64	0	-70	-134
Carrying value at 31 March 2025	249	28	27	304

9.1.2 Carrying values by holding route and reporting body (£million)

Analysis of carrying value by control route	Operational property	AuC	Other assets	Total
Owned	71	28	27	126
Leased	178	0	0	178
Total	249	28	27	304
Analysis of carrying value by Group body	Operational property	AuC	Other assets	Total
Department	192	28	13	233
Agencies	0	0	0	0
NDPBs	57	0	14	71
Total	249	28	27	304

9.2 2024

9.2.1 Valuation movements (£million)

Cost or valuation	Operational property	AuC	Other assets	Total
At 1 April 2023	226	30	79	335
Additions	65	48	8	121
Disposals	-8	0	-4	-12
Revaluations	1	0	2	3
Reclassifications	6	-6	0	0
Lease modifications	20	0	0	-20
At 31 March 2024	270	72	85	427
Depreciation	Operational property	AuC	Other assets	Total
At 1 April 2023	-54	0	-57	-111
Charged in year	-30	0	-10	-40
Eliminated on disposal	5	0	4	9
Revaluations	0	0	-1	-1
Lease modifications	33	0	-	33
At 31 March 2024	-46	0	-64	-110
Carrying value at 31 March 2024	224	72	21	317

9.2.2 Carrying values by holding route and reporting body (£million)

Analysis of carrying value by control route	Operational property	AuC	Other assets	Total
Owned	33	72	21	126
Leased	191	0	0	191
Total	224	72	21	317
Analysis of carrying value by Group body	Operational property	AuC	Other assets	Total
Department	172	70	9	251
Agencies	0	0	0	0
NDPBs	52	2	12	66
Total	224	72	21	317

9.3 Leasing activities

9.3.1 2025 (number)

Leases for which IFRS 16 was adopted in full	Operational property	AuC	Other assets	Total
Opening volume at 1 April 2024	29	0	76	105
New leases entered into	6	0	59	65
Existing leases expired	-10	0	-16	-26
Closing volume at 31 March 2025	25	0	119	144
Leases to which either the short-term or low value exemption was applied	Operational property	AuC	Other assets	Total
Opening volume at 1 April 2024	1	0	7	8
New leases entered into	0	0	1	1
Existing leases expired	-1	0	-6	-7
Closing volume at 31 March 2025	0	0	2	2
Total volume of leases at 31 March 2025	25	0	121	146
Analysis of volumes by Group body	Operational property	AuC	Other assets	Total
Department	14	0	0	14
Agencies	0	0	0	0
NDPBs	11	0	121	132
Total	25	0	121	146

9.3.2 2024 (number)

Leases for which IFRS 16 was adopted in full	Operational property	AuC	Other assets	Total
Opening volume at 1 April 2023	37	0	98	135
New leases entered into	4	0	0	4
Existing leases expired	-8	0	-19	-27
Existing leases surrendered	-4	0	-3	-7
Closing volume at 31 March 2024	29	0	76	105
Leases to which either the short-term or low value exemption was applied	Operational property	AuC	Other assets	Total
Opening volume at 1 April 2023	9	0	89	98
New leases entered into	0	0	0	0
Existing leases expired	-8	0	-82	-90
Closing volume at 31 March 2024	1	0	7	8
Total volume of leases at 31 March 2024	30	0	83	113
Analysis of volumes by Group body	Operational property	AuC	Other assets	Total
Department	20	0	0	20
Agencies	0	0	0	0
NDPBs	10	0	83	93
Total	30	0	83	113

The majority of the other assets leases are for motor vehicles.

10. Education sector assets

10.1 Background

The Department supports the academy and FE sectors in identifying and developing sites for occupation by academy trusts or colleges to deliver educational provision. The Department acquires these sites, develops them and then leases them to providers on generally 125-year peppercorn leases. The Department has acquired sites through both freehold and leasehold tenure, with some leasehold sites held on long (greater than 99 years) and very long (greater than 150 years) leases. As a result, the Department acts as both a lessee (for inbound leases and asset creation) and lessor (for outbound leases and asset de-recognition).

All education sector assets are held and reported by the Department.

A small volume of shorter-term commercial leases has been entered into to support provider operations. These leases, which typically last from 5 to 25 years, are separate from leases included in the short-term exemption. They provide temporary accommodation to operational providers whilst their permanent site is developed or for sitting tenants on mixed-use sites.

The majority of outbound leases have been assessed as being finance leases since the long-term, peppercorn nature of the lease transfers significantly all the risks and rewards of ownership of the leased assets to the lessees (mainly academy trusts). This approach mirrors the lease recognition approach the Department has adopted for preparing SARA with the lessee position of the academy trusts. The classification of the outbound lease as a finance lease results in the de-recognition of the previously recognised parent asset whether owned or leased.

In some instances where the initial parent asset acquisition was on a very long lease (greater than 250 years) the 125-year outbound lease does not transfer the majority of risks and rewards of ownership of the leased parent asset due to the difference in lease durations. In such situations the parent asset is retained and reclassified to a leasehold investment property.

10.1.1 Assets under construction

Sites are initially recognised at cost as AuC (both freehold or leasehold) until they are completed and leased to the education provider for use through an outbound lease. The classification of the outbound lease informs the subsequent accounting treatment for the parent AuC.

When the outbound lease is classified as a finance lease the AuC parent asset is de-recognised as a capital grant-in-kind. Where the outbound lease is judged to be an operating lease, the asset is reclassified to investment property but remains within the educational sector asset caption.

In the event of an education provider failure, we may step in to acquire the site to maintain education provision or to allow for a repurpose in the education sectors we support. Newly recognised assets are classified as AuC since they are non-operational.

10.1.2 Investment properties

Investment properties can include both education providers and third-party accommodation.

On a limited number of occasions, to secure suitable premises where availability is limited, the Department has acquired mixed-use sites which include both an education provision site and third-party accommodation. Where appropriate, the Department has put in place a managed disposal process to oversee the sale or lease of the third-party accommodation to secure value for the taxpayer. However, in some instances third-party accommodation is not suitable for disposal.

Where the outbound lease to the third-party is judged to be an operating lease the parent asset is reclassified from AuC to the investment property asset class. Investment property assets are not depreciated but are fair valued each year. Where the outbound lease is judged to be a finance lease the parent asset is de-recognised.

10.2 2025

10.2.1 Values (£million)

Cost or valuation	Freehold AuC	Freehold investment property	Leasehold AuC	Leasehold investment property	Total
At 1 April 2024	367	101	252	100	820
Additions	16	0	11	32	59
In-year development	156	0	67	0	223
Disposals	0	-5	-22	-31	-58
De-recognition through leases to providers or third parties	-177	0	-88	0	-265
Reclassifications across asset classes	-16	5	1	10	0
Reclassifications to AHfS	0	-30	0	0	-30
Lease modifications	0	0	-2	-8	-10
At 31 March 2025	346	71	219	103	739
Carrying value at 31 March 2025	346	71	219	103	739

No depreciation is charged on AuC and investment properties. All education sector assets are held by the Department.

10.2.2 Volumes (number)

Movements in asset numbers	Freehold AuC	Freehold investment property	Leasehold AuC	Leasehold investment property	Total
Assets recognised at 1 April 2024	37	23	23	30	113
New assets recognised in year	20	3	6	3	32
Assets re-recognised in year	2	1	0	0	3
Reclassification across asset classes	-2	2	-3	3	0
Reclassified to AHfS	-2	-2	0	0	-4
Assets de-recognised in year	-28	0	-7	-1	-36
Assets disposed of	-3	-4	-3	-2	-12
Assets recognised at 31 March 2025	24	23	16	33	96
Add-back: assets de-recognised in year	28	0	7	1	36
Add-back: assets de-recognised in prior years	127	2	38	0	167
Total assets held at 31 March 2025	179	25	61	34	299
Assets disposed of whilst de-recognised	6	1	4	0	11

This table, and the equivalent table for last year, present an analysis of our education sector assets across the 4 named asset classes. The analysis reconciles the opening number of assets recognised on our SoFP with the closing volume based on our acquisition and outbound leasing activities. The volume of assets recognised at a given year end drives the asset values presented in the associated ‘Values’ tables and SoFP.

As well as analysing the in-year movement in asset volumes, the table also calculates the Group’s total asset base in the education sector by adding back the number of assets held by the Group but de-recognised from the SoFP. In accordance with IFRS 16, assets (both freehold and leasehold) are de-recognised from SoFP when we have completed an outbound lease with a third party, and the lease is judged to be a finance lease.

A small number of de-recognised assets are disposed of whilst de-recognised, and so are not reclassified to assets held for sale prior to the sale, because the Group does not regain control over the asset prior to the sale to trigger re-recognition as an asset held for sale.

10.3 2024

10.3.1 Values (£million)

Cost or valuation	Freehold AuC	Freehold investment property	Leasehold AuC	Leasehold investment property	Total
At 1 April 2023	398	62	115	36	611
Additions	0	0	46	0	46
In-year development	196	5	121	1	323
Disposals	-6	0	-2	0	-8
De-recognition through leases to providers or third parties	-135	0	-7	0	-142
Reclassifications across asset classes	-86	34	-11	63	0
Reclassifications to AHfS	0	0	-14	0	-14
Lease modifications	0	0	4	0	4
At 31 March 2024	367	101	252	100	820
Carrying value at 31 March 2024	367	101	252	100	820

No depreciation is charged on AuC and investment properties. All education sector assets are held by the Department.

10.3.2 Volumes (number)

Movements in asset numbers	Freehold AuC	Freehold investment property	Leasehold AuC	Leasehold investment property	Total
Assets recognised at 1 April 2023	42	23	27	23	115
New assets recognised in year	11	0	6	1	18
Reclassification across asset classes	-4	4	-6	6	0
Reclassified to AHfS	-2	-1	-2	0	-5
Assets de-recognised in year	-10	-3	-1	0	-14
Assets disposed of	0	0	-1	0	-1
Assets recognised at 31 March 2024	37	23	23	30	113
Add-back: assets de-recognised in year	10	3	1	0	14
Add-back: assets de-recognised in prior year	15	0	7	0	22
Add-back: assets de-recognised pre-adoption of IFRS 16	111	0	34	0	145
Total assets held at 31 March 2024	173	26	65	30	294

10.4 Leasing activities

10.4.1 Volume of leases (number)

Movements	2025 Lessee (inbound)	2025 Lessor (outbound)	2024 Lessee (inbound)	2024 Lessor (outbound)
Leases active at 1 April	87	262	82	248
New leases entered into in year	6	49	6	26
Expired in year	0	-6	0	-8
Surrendered in year	-6	-6	-1	-4
Leases active at 31 March	87	299	87	262

The table presents the volume of the Department’s leasing activities across both years to support educational sector provision.

10.4.2 Analysis of lessor positions

2025 (number)

Movements	Finance leases, provider sites	Finance leases, third-party sites	Operating leases, provider sites	Operating leases, third-party sites	Total
Active at 1 April 2024	154	51	25	32	262
Reclassified in year	-1	1	0	0	0
New leases in year	28	8	6	7	49
Expired in year	-3	0	-2	-1	-6
Surrendered in year	-4	-1	0	-1	-6
Active at 31 March 2025	174	59	29	37	299
Analysed by tenure	Finance leases, provider sites	Finance leases, third-party sites	Operating leases, provider sites	Operating leases, third-party sites	Total
Freehold parent asset	131	48	9	21	209
Leasehold parent asset	37	11	20	16	84
Mixed tenure parent asset	6	0	0	0	6
Total	174	59	29	37	299

2024 (number)

	Finance lease, provider sites	Finance leases, third-party sites	Operating leases, provider sites	Operating leases, third-party sites	Total
Active at 1 April 2023	144	50	19	35	248
New leases in year	11	3	9	3	26
Expired in year	0	-1	-2	-5	-8
Surrendered in year	-1	-1	-1	-1	-4
Active at 31 March 2024	154	51	25	32	262
Analysed by tenure	Finance lease, provider sites	Finance leases, third-party sites	Operating leases, provider sites	Operating leases, third-party sites	Total
Freehold parent asset	117	41	7	18	183
Leasehold parent asset	31	10	17	14	72
Mixed tenure parent asset	6	0	1	0	7
Total	154	51	25	32	262

11. Financial instruments

11.1. Financial assets (£million)

Fair value through profit or loss	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Student loans	14	157,866	157,866	150,982	150,982
Investments	-	76	76	68	68
Amortised cost	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Other loans	15	375	825	291	765
Receivables	16	672	698	391	411
Cash at bank	17	502	636	892	1,056
Total	-	159,491	160,101	152,624	153,282

11.2 Financial liabilities (£million)

Liability types – amortised cost	Note	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Payables	18 and 19	1,627	1,702	1,690	1,742
Lease liabilities	20	166	197	197	229
PF2 imputed lease liabilities	18 and 19	551	551	567	567
PF2 loan liabilities	18 and 19	0	455	0	478
Financial guarantees	-	12	12	39	39
Total	-	2,356	2,917	2,493	3,055

11.3 Fair value (£million)

Fair value level - Level 1 (quoted market price)	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
None	0	0	0	0
Level 2 (other observable inputs)	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
None	0	0	0	0
Level 3 (non-observable inputs)	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Student loans	157,866	157,866	150,982	150,982
Investments	76	76	68	68
Total	157,942	157,942	151,050	151,050

To provide an indication about the nature of the inputs used in determining fair value, financial instruments are classified into 3 levels as prescribed by accounting standards.

Valuation techniques with significant non-observable inputs (level 3): if one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for student loans. The retention note is also classified to level 3 since its underlying pool of securities (student loans) is classified as level 3.

There were no transfers between the different levels of the fair value hierarchy.

12. Financial risk

12.1 Financial risk management

As the cash requirements of the Group are met through the Estimate process, the Group is not exposed to the degree of financial risk faced by similar sized business entities. Consequently, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body.

The Group has limited powers to borrow or invest surplus funds. Financial assets and liabilities are generated by day-to-day operational activities and are not held to change the risks facing the Group in undertaking its activities.

The risks associated with the Department’s PFI transaction, PF2, are described in note 13.

12.1.1 Credit risk

Credit risk is the risk that a service user or counterparty to a financial instrument will fail to pay amounts due causing financial loss to the Group and arises principally from cash and outstanding debt. The Group’s exposure to credit risk can be split into 2 broad sources:

arising from loans originated by the Group (predominantly student loans and PF2 loans)
the funding of education providers

The Group’s student loans retain credit risk since, as per government policy, no mitigating checks on potential borrowers are performed prior to loan origination. More information pertaining to student loan risk profile is provided in note 14.4.

The Group has a credit (receivables) policy for education providers that ensures consistent processes are in place throughout the Group to measure and control credit risk. Commercial and charitable education providers for the Group are subjected to quality and financial status reviews to mitigate the risk of non-payment of debts as a result of insolvency.

12.1.2 Liquidity risk

The Group’s net revenue resource and capital requirements are financed by resources voted annually by Parliament. See note 19.2 for a maturity analysis.

In addition, the majority of the Group’s education sector leases are peppercorn leases with no liquidity exposure. Operational asset leases are covered by Supply funding.

Consequently, the Group is not exposed to significant residual liquidity risk.

12.1.3 Interest rate risk

The Group’s financial instruments carry nil, variable or fixed rates of interest.

The interest rate applicable for student loans depends on macroeconomic conditions and will vary across a loan’s lifespan. Plan 3 and Plan 5 interest rates applied for any academic year are generally based on the RPI of the previous March. The Plan 1 interest rate is capped at the lower of RPI and the Bank of England base rate plus 1%. The Plan 2 interest rate varies from RPI to RPI plus 3%, depending on income.

The amount of Plan 1 interest repayable is therefore subject to fluctuations in the base rate and RPI. The probability of the Department recovering the face value of loans issued is increased when the Bank of England base rate is low and the rate of inflation is comparatively high, because the base rate cap comes into operation for these loans. The impact of the interest rate risk for student loans issued under the Plan 1 scheme is factored into the carrying value as the student loan repayment model calculates the impact of interest rate on expected future cash flows. There is inherent risk in forecasting the amount of interest payable and if England experiences base rates that are lower than RPI the future cash flows will be impaired further. Similarly, the amount of Plan 2 interest repayable is sensitive to earnings forecasts and the inherent risk is baked into the carrying value modelling. Additional information about student loans is provided in note 14 and Annex C.

Consequently, the Department does not consider the Group is exposed to significant residual interest rate risk.

12.1.4 Market risk

Investments

The Group is exposed to market risk through its small investment portfolio held by its 2 industry training boards. The majority of the Group’s investment portfolio comprises investment funds or unit trusts managed by professional money managers.

The Department considers that the use of third-party professional managers mitigates against significant residual market risk.

Student loans

The other main risks resulting from a downward movement in the economy relate to the potential increase in borrowers’ unemployment impacting on their ability to repay student loans. Student loans are also impacted due to the potential resultant negative impact on graduate earnings growth, which lengthens the period before loans are in repayment and extends the repayment period. This may impact the carrying value in the accounts. It can also lead to an increase in write-offs as it increases the likelihood that some graduates may not repay their loans in full by the end of the loan period. Quantified sensitivity analysis disclosures are given in note 14.4.

13. PF2 transaction

13.1. Transaction summary

The Group has entered into agreements for 5 regional batches of schools with different consortia to build school buildings and maintain them for 25 years. These schemes are PFI arrangements, with the initial construction financing for each of the batches raised by Aggregator. To complete the transaction, the Group both took out and issued loans to allow funds to flow to the consortia building the schools. The Department will then repay the financing through unitary charge payments to the consortia over the operational life of the transactions.

In summary, the PF2 transactions are:

external investor funding was raised by Aggregator (loan liabilities of the Group)
onward loans are made by Aggregator to each of the 5 regional consortia (loan assets of the Group)
the consortia undertook their school building construction projects, with assets controlled by the future school’s responsible bodies
adopting the Group’s asset recognition accounting policy, the school assets were not recognised by the Group, they are recognised by the responsible body that operates each site as a school
an imputed lease liability was recognised in respect of future unitary charges payable to the consortia to cover the construction value of the schools
the unitary charges paid by the Department, for the use of the schools, are used by the consortia to repay their loans from the Aggregator, which in turn uses the funds to settle its loan liabilities with the external investors

13.2 Finance risks

The PF2 transaction is structured so that unitary charge fees input into the bottom of the structure flow up through the Aggregator’s onward loans to repay the loans from the external investors. The terms of the 2 sets of loans have been designed to work with the expected lifetime unitary charges so that they provide sufficient funds to repay both sets of loans, leaving minimal funds left in the Aggregator at the end of the transaction’s 25 year lifespan.

Credit risk

All funds available to repay both sets of loans are originally sourced from the Department’s unity charge payments. In addition, the Aggregator benefits from a security package including charges over project cashflows. Consequently, we do not believe we are exposed to significant residual credit risk.

Liquidity risk

Both sets of loans reported by the Group are designed to mirror each other with the Group’s loan asset designed to recover sufficient funds to service the loan liabilities. As such we do not consider the Group is exposed to significant residual liquidity risk.

Interest rate risk

The Group’s PF2 loan liabilities have fixed interest rates set as part of the wider PF2 launch negotiations. Rates were set to be supported from the unitary charges through the loan asset interest rates to pass adequate funds up to the Aggregator to repay the loan liabilities. Consequently, we do not consider we are exposed to significant interest rate risk.

Market risk

None of the PF2 financial instruments are listed. If consortia PFI contractors, or one of its sub-contractors, were to fail there are mechanisms available to the Aggregator to replace the failed entity to maintain that consortia’s activities. Consequently, we do not consider we have significant residual market risk.

14. Student loans

Loans for students in higher education and further education are originated and recognised by the Group. Student loans can be split into different repayment plans depending upon which education sector the borrowers are members of and when the loans were taken out. Depending on circumstances it is possible for borrowers to have loans across different plans. The plans are as follows:

Plan 1 loans – loans taken out for undergraduate courses that started before 1 September 2012
Plan 2 loans – loans taken out for new undergraduate courses that started on or after 1 September 2012 until 31 August 2023, including advanced learner loans
Plan 3 loans – loans for postgraduate master’s courses starting on or after 1 August 2016 and postgraduate doctoral courses starting on or after 1 August 2018
Plan 5 loans – loans taken out for new undergraduate courses that started on or after 1 August 2023, including advanced learner loans

Plan 2 will continue to be a live plan until existing borrowers who started their undergraduate courses on Plan 2 finish their courses.

Plan 4 loans are issued solely by Student Awards Agency Scotland so do not form part of the Group’s activities.

Features of student loans, such as repayment thresholds and interest rates can be found online. Annex C presents background information about student loans and extends the following disclosures across the sub-portfolios.

Postgraduate (Plan 3) student loans are valued via a separate modelling pipeline compared to undergraduate student loans (Plans 1, 2 and 5). This is because postgraduate data compatible with the newer pipeline used for undergraduate student loans is not yet available.

14.1 Values (£million)

Loan movements	2025 carrying value	2025 face value	2024 carrying value	2024 face value
Balance at 1 April	150,982	234,048	137,804	203,263
New loans issued	20,662	20,662	20,174	20,174
Interest charged	0	15,065	0	15,138
Repayments	-4,830	-4,830	-4,406	-4,406
Write-offs	-310	-310	-121	-121
Fair value gain or (loss)	-8,638	0	-2,469	0
Balance at 31 March	157,866	264,635	150,982	234,048
Analysed across plans	2025 carrying value	2025 face value	2024 carrying value	2024 face value
Plan 1	11,557	27,830	13,164	28,054
Plan 2	128,886	215,810	127,791	196,438
Plan 3	6,147	6,612	6,252	5,823
Plan 5	11,276	14,383	3,775	3,733
Total	157,866	264,635	150,982	234,048
Disclosed as	2025 carrying value	2025 face value	2024 carrying value	2024 face value
Current assets	5,486	-	4,233	-
Non-current assets	152,380	-	146,749	-
Total	157,866	-	150,982	-

Under IFRS 9, student loans are recognised at fair value. In determining the fair value of student loans, the Department discounts all future cash flows, including the interest that is expected to be received. As a result, a single fair value movement is recognised in SoCNE.

Fair value movements are excluded from the face value of student loans. The closing face value is made up of the opening face value plus additions and interest, less repayments and write-offs.

14.2 Fair value gain or (loss) analysis

14.2.1 Analysis (£million)

Movements	2025	2024	Movement improvement or (worsening)
Overall annual fair value gain or (loss) – calculated	-8,638	-2,469	-6,169
which can be disaggregated into the following drivers:	-	-	-
initial fair value loss on loan origination	-6,122	-5,766	-356
annual revaluation fair value loss:	-	-	-
write-offs	310	121	189
impact of changes in assumptions and modelling	-386	-900	514
operational costs	-59	-124	65
discount rate change	280	-2,074	2,354
unwinding of the discount	4,002	5,428	-1,426
residual fair value movement	-6,663	846	-7,509

The total fair value gain or (loss) movement (covering both the initial and year end elements) is calculated through modelling as described elsewhere as a single value per plan from known model inputs.

Difference in initial fair value and amount advanced to students for new loans

As described in note 1.3.3 we judge that FReM adaption number 5 to IFRS 9 applies to student loans. The initial fair value movement is expensed in SoCNE together with the annual fair value movement in note 8.

The movement (£356 million worsening) from last year (prior year, £270 million worsening) is driven by an increase in loan outlay and an increase in the HMT discount rate by 0.20% from (1.05%) to (0.85%) (prior year, 0.25% increase from (1.3%) to (1.05%)) for cashflows before February 2023 and by 0.10% thereafter (prior year, 0.15%). Increasing the discounting applied to future repayments of student loans means valuing them less, and hence an increase in the difference between student loans and the fair value of those loans on issuance.

Modelling differences

The modelling differences shown above can be broken down into 2 sub-sets:

differences due to changes in cashflow assumptions (£168 million gain, prior year, £253 million gain): these relate to small differences in assumptions about when cashflows occur between models within the student finance modelling pipelines
other differences (£554 million loss, prior year, £1,153 million loss): these relate to factors other than cashflow timing differences within the different models

Operational costs

In accordance with IFRS 9, the fair value calculation includes an estimation of the operational costs of servicing the loan books. We adopt this approach because we consider that a purchaser would assess its own prospective costs as part of their valuation approach. We use our own operational costs as an approximation of the prospective purchaser’s operations. Operational costs are the costs associated with the collection of student loans throughout the life of the loan. The movement in the discounted cashflow calculation is a component of the fair value movement.

The favourable movement of £65 million (prior year, £456 million improvement) from last year relates to updated forecasts for RPI and the HMT-mandated Public Expenditure System (PES) rate. Each year operational costs are calculated and adjusted using the discount rate (calculated as RPI+PES rate for the full term of the loan). The discount rate (relative to RPI) has increased compared to the rate in place for last year, meaning less value is being placed on future operational costs. RPI forecasts also have increased since last year. These favourable movements are partially offset by an overall increase in operational costs of 6% when compared to last year.

Discount rate change

The closing carrying value of student loans reflects an increase of £280 million (prior year, £2,074 million reduction) from the impact of the change in the discount rate applied in the year end valuation.

Unwinding the discount

This fair value movement arises from removing one year’s worth of discounting from the year end valuation of student loans. This year’s gain of £4.0 billion is £1.4 billion lower than that reported last year (prior year, £5.4 billion gain, £9.0 billion worsening) due to the year end RPI forecast, 3.45%, being lower than last year’s 4.84%. Decreased discounting means less gain from unwinding the discount.

Write-offs

The movement here relates to the value of student loans which have been written-off in a year. The breakdown by plan type can be seen in Annex C.

Residual fair value movement

This is the element of the annual fair value movement remaining after the identified drivers have been disaggregated. It represents the pure revaluation element of the annual fair value movement and reflects changes in determinants such as the earnings outlook, which is more pessimistic than in the prior year.

14.3 Valuation modelling

14.3.1 Assurance over the carrying value

Each year movements in student loan carrying values are explained in full and the updated modelling is subject to management scrutiny prior to approval and recognition to the accounts.

14.3.2 Impact of changes in assumptions and modelling

The key macroeconomic assumptions that affect the value of the student loan books are earnings growth, RPI inflation (all plans), and the Bank of England base rate (Plan 1 only). These macroeconomic assumptions are based on OBR forecasts as they are considered the most reliable and span the length of time required for consideration for student loan repayments. Other assumptions, for example, that future graduate earnings will mimic the available data on historical graduate earnings cannot be easily verified.

The applicable current HMT discount rates (applied to Plans 1, 2 and 5) are RPI-0.85% and RPI+0.05% (prior year, RPI-1.05% and RPI-0.05%) for cash flows out to February 2030 and post-February 2030 respectively. The intrinsic rate for Plan 3, also discounted relative to RPI, has changed from 1.87% to 1.78%.

Note 1.3.4 describes our approach to choosing the discount rates applied to each plan’s modelled future repayments to calculate plan-level fair values.

The following sections discuss the impacts on the current year end carrying fair values as a result of changes in modelling, assumptions and other variables that impact the valuation, and also detail sensitivity analysis on the valuation.

14.4 Sensitivity analysis

The analysis below shows the changes in carrying value from changes in variables that can significantly affect the fair value of student loans, including unobservable inputs used in the fair value measurement. The analysis covers factors flexed individually and in combination. The combined analysis is not attempting to create future economic scenarios or forecasts, we have presented the combined analysis to illustrate the potential interplay between specific factors.

Factors are split between those that are external to the Department, which include the discount rate set by HMT and macroeconomic factors, and internal factors such as policy decisions that the Department can influence.

The HMT discount rate and earnings forecasts are expected to change annually and have a significant impact on the carrying value of student loans. Both these external factors have therefore been flexed together. RPI, a further external factor, has been considered in isolation and so has the repayment threshold, an internal factor.

The carrying values used in the sensitivity analysis do not include the limited impact of including operational costs. The sensitivity analysis workings are completed prior to the inclusion of operational costs for the IFRS 9 carrying values used in note 14.1 Annex C presents the overall sensitivities disclosed, analysed by plan.

14.4.1 RPI (£million)

	2025	2024
Year end carrying value	157,866	150,982
Impact on carrying values from	-	-
An increase of RPI by 1%	-22,636	-22,744
A decrease of RPI by 1%	27,779	27,235
An increase of RPI by 2%	-45,177	-44,294
A decrease of RPI by 2%	52,633	53,004

An increase in RPI leads to:

a higher discount rate, which will lower the carrying value of loan books
increased interest on borrowers’ balances in the following year for Plans 2, 3 and 5 loans
increased interest for Plan 1 loans, unless RPI is higher than the base rate +1%, in which case RPI does not determine the interest rate
increased repayment threshold for Plan 1 loans, which results in lower repayments

The outturn for March 2025 RPI is 3.3% and is forecast to increase to 4.2% next year before increasing marginally throughout the remainder of the forecast period (prior year, 7.5% and was forecast to fall to 2.2% in the 2025 to 2026 financial year). Long-term is considered to be 30 years for these purposes. The table shows the impact of a 1% or 2% change to each RPI forecast in each of the forecast cash flow years. An increase in RPI reduces the valuation of the loan book, and a decrease in RPI increases the valuation. The amounts are significant due to the impact that RPI has on the discount rate, as explained above and as seen last year, changes to the discount rate can have a significant impact on the carrying value of the loan book.

The percentage movements are not against the year end RPI value. The plus/minus margins are against the OBR’s central forecast of RPI which was used in the year end valuation modelling across the full 30 or 40-year life of the loans.

14.4.2 Loan repayment threshold (£million)

	2025	2024
Year end carrying value	157,866	150,982
Impact on carrying values from	-	-
An increase of the threshold by £1,000	-1,497	-2,219
A decrease of the threshold by £1,000	5,864	5,550

The repayment threshold determines the earnings level above which borrowers repay their student loans.

Repayment thresholds are specific to plans and are revised individually, with:

Plan 1 current year’s threshold £24,990, uprated each year in line with RPI
Plan 2 current year’s threshold £27,295, frozen up to the 2025 to 2026 financial year and then uprated by RPI
Plan 3 current year’s threshold £21,000, remains frozen
Plan 5 current year’s threshold £25,000, frozen until 2027 to 2028 after which it will increase by RPI

The table shows that increasing the repayment threshold decreases the carrying value of the loan book, because this reduces the repayments made by borrowers. Reducing the rate increases the carrying value.

14.4.3 Multiple factors (£million)

	2025	2024
Year end carrying value	157,866	150,982
Impact on carrying values from	-	-
Scenario 1	10,645	9,326
Scenario 2	-9,055	-9,365
Scenario 3	13,702	12,730
Scenario 4	-6,449	-6,479

The table illustrates the effect of varying more than one model input. The 4 situations are as follows:

scenario 1 – discount rate increased by 0.2%, earnings up by 1%
scenario 2 – discount rate increased by 0.2%, earnings down by 1%
scenario 3 – discount rate decreased by 0.2%, earnings up by 1%
scenario 4 – discount rate decreased by 0.2%, earnings down by 1%

The sensitivity analysis presented here is to give awareness of what would happen to the Department’s financial position should certain conditions change. An increase in earnings in isolation would increase the valuation of the loan book, because it means more repayments will be received. An increase in the discount rate in isolation means expected future repayments are valued less, leading to a decrease in the fair value of student loans. The 4 scenarios presented above show the impact of changes in both, because both are updated annually.

Discount rate

The HMT discount rate is used to calculate the remeasurements on student loans for Plans 1, 2 and 5. Plan 3 uses its intrinsic rate. More information has been given in notes 1.3.4 and 14.3.2. The HMT rate is the long-term cost of government borrowing. The current year amendment was an increase of 0.20% to 2030 and 0.05% thereafter (prior year, 0.25% increase and 0.15% respectively). This is something that is determined by HMT, and over which the Department has no control.

In accordance with IFRS 9, the Group accounts for the student loan book as FVTPL. Therefore, there may be an expectation from readers that the Group will be applying a market discount rate as per IFRS 13. Per IFRS 13, the fair value considers the most advantageous market for an orderly transaction to take place. However, the rate used in these accounts is prescribed by FReM’s interpretation of IFRS 9 and is therefore the rate as promulgated by HMT annually to all government departments. Discount rate sensitivities have been considered in scenarios with earnings forecasts, as these are considered to be the factors most likely to change year-on-year.

A sensitivity of 0.2% in each direction has therefore been considered here, 0.2% being in line with recent updates, and so yielding realistic scenarios.

Earnings growth

Earnings growth in the last 4 years has increased to between 4% to 7% after a period of lower growth at around 2% to 3% previously. It is forecast to be below 4% next year, and between 2% to 3% thereafter.

Higher earnings growth leads to:

increased repayments for all loan books, as repayments are linked to earnings
increased interest applied to students’ loan accounts, and therefore due for repayment for Plan 2 loans, as the variable element of the interest rate is linked to the borrower’s earnings

The OBR outturn for this financial year earnings growth is 4.7% and is forecast to be below 3.7% next year before stabilising between 2% to 3 % in the long-term, considered to be the next thirty years (prior year, 6.9%, forecast to be below 3.1% to 2028 and then stabilise to 3% to 4% over the long-term).

An increase in earnings growth increases the valuation of the loan book as a result of the increased repayments arising from the growth. Earnings sensitivities have been considered in scenarios with the HMT discount rate, as these are considered to be the factors most likely to change year-on-year. The scenarios have considered short-term movements of 1% in each direction which is based on the likely volatility in earnings forecasts, and only short-term (to 2030) has been considered because our understanding is that the OBR is unlikely to change long-term earnings forecasts.

14.5 Budgetary performance (outturn)

The following table provides an analysis of the budgetary outturn of student loans. As well as the overall outturn, the fair value gain or loss is also analysed across its 2 elements:

the initial transaction fair value movement (reflecting the proportion of loan outlay we expect not to recover when loans are issued)
the year end re-assessment (which captures movements between issue and year end)

The budgetary analysis supports the Department’s fiscal reporting to HMT. Positive numbers are costs or losses, whereas negative numbers are benefits or gains.

Summary analysis (£million)

Outturn by budget class	2025	2024
CAME	30,897	30,906
RAME	-3,825	-3,325
RDEL	12,773	5,915
Total	39,845	33,496
Outturn by activities	2025	2024
Net lending	31,207	31,027
Fair value (gain) or loss on loan origination	6,122	5,766
Annual fair value (gain) or loss	2,516	-3,297
Total outturn	39,845	33,496

Further analysis (£million)

Outturn movement	2025	2024
Net lending	2025	2024
CAME:	2025	2024
Loan advances	20,662	20,174
Repayments	-4,830	-4,406
Capitalised interest	15,065	15,138
Write-offs	310	121
Total	31,207	31,027
Fair value (gain) or loss on loan origination	2025	2024
RDEL:	2025	2024
Impact of policy changes	17	8
Residual fair value change	5,480	5,476
RAME:	2025	2024
Impact of discount rate change	625	282
Sub-total	6,122	5,766
Annual fair value (gain) or loss	2025	2024
RDEL:	2025	2024
Modelling differences	554	1,153
Operational costs movement	59	124
Residual fair value change	6,663	-846
RAME:	2025	2024
Unwinding the discount	-4,002	-5,428
Impact of discount rate change	-280	2,074
Modelling differences	-168	-253
CAME:	2025	2024
Write-offs	-310	-121
Sub-total	2,516	-3,297
Total fair value (gain) or loss	8,638	2,469

15.Other loans

15.1 Current loans (£million)

Loan types	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
PF2 loan assets	0	39	0	40
FE sector loans	20	20	19	19
Academy sector loans	25	25	26	26
Other loans	0	0	0	0
Total	45	84	45	85

15.2 Non-current loans (£million)

Loan types	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
PF2 loan assets	0	410	0	431
FE sector loans	237	237	153	153
Academy sector loans	90	90	93	93
Other loans	3	4	0	3
Total	330	741	246	680

15.3 Loan types

15.3.1 PF2 loan assets

These are loans made within the structure of the Group’s PF2 transaction between the Group and the transaction’s 5 regional consortia. Each consortium has a single loan repayable in 6-monthly instalments from 31 March 2017 ending on 28 December 2041 which matches the service concession period. The loans bear interest at fixed rates, with the weighted average fixed interest rate of 3.56% (prior year, 3.56%).

15.3.2 FE sector loans

Loans to the FE sector representing both exceptional financial support and restructuring facility loans provided to colleges to safeguard learner provision. These loans provided to colleges have varying terms based on the individual merits of each college’s situation.

15.3.3 Academy sector loans

Loans issued to academy trusts comprise the following types:

deficit funding loans, to assist with academy trusts’ deficit funding at conversion with their ex-local authority, with loan repayments collected as a deduction against the academy trusts’ grant payments over the loan term
estate condition loans, to allow academy trusts to address estate condition issues
voluntary aided capital project loans, issued to voluntary aided schools for capital projects under Schedule 3 of the Schools Standards and Framework Act 1998

16. Receivables

16.1 Amounts falling due within one year (£million)

Receivable type	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Trade receivables	9	38	16	31
VAT receivables	18	13	45	40
Other receivables – student loans	466	466	214	214
Other receivables – other	153	150	119	124
Prepayments	13	27	13	26
Accrued income	27	29	37	39
Total	686	723	444	474

Trade receivables are presented after applying impairment allowances of £46 million (Department and Agencies) and £207 million (Group) (prior year, £47 million and £190 million respectively). The majority of the impairment charges arise in CITB and ECITB against their levy charges.

Other receivables – student loans refers to funds from borrowers recovered by HMRC through the PAYE system and yet to be passed across to the Group.

16.2 Amounts falling due after more than one year (£million)

Receivable type	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Other receivables – student loans	42	42	40	40
Other receivables – other	2	-1	2	2
Total	44	41	42	42

Other receivables – student loans relate to student loan grant overpayments owed to the Group. The receivables balance represents funds advanced to borrowers who were eligible for student support, but whose circumstances subsequently changed post-advance. The balances are cumulative, and the Department attempts to recover them. The closing net position is made up of an impairment provision of £404 million (prior year, £390 million) applied against gross overpayments of £446 million (prior year, £436 million).

17. Cash and cash equivalents

17.1 Analysis (£million)

Movements	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Balance at 1 April	892	1,056	694	857
Net change in cash and cash equivalent balances	-390	-420	198	199
Balances at 31 March	502	636	892	1,056
The following balances are held as cash at bank and in hand	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Government Banking Service	489	519	850	882
Commercial banks	0	104	0	132
Cash held by third parties on behalf of the Group	13	13	42	42
Balance at 31 March	502	636	892	1,056

Third parties holding cash for the Group include solicitors as part of land transactions, managing agents for rentals and RPA’s corporate services provider to support claim payments. Cash held by third parties is held short-term to support the underlying transactions.

17.2 Reconciliation of liabilities arising from financing activities

17.2.1 2025 (£million)

Liabilities	2024	Cash flows	Non-cash changes: acquisition	Non-cash changes: other	2025
Supply	878	-376	0	0	502
PF2 imputed lease liabilities	567	-16	0	0	551
PF2 loan liabilities	478	-23	0	0	455
Lease liabilities	229	-26	3	-9	197
Total liabilities from financing activities	2,152	-441	3	-9	1,705

17.2.2 2024 (£million)

Liabilities	2023	Cash flows	Non-cash changes: acquisition	Non-cash changes: other	2024
Supply	694	184	0	0	878
PF2 imputed lease liabilities	583	-16	0	0	567
PF2 loan liabilities	502	-24	0	0	478
Lease liabilities	166	-15	27	51	229
Total liabilities from financing activities	1,945	129	27	51	2,152

18. Current payables (£million)

Payable type	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Tax and social security payables	11	16	12	18
Trade payables	38	43	36	44
Other payables	584	603	607	612
Accruals	1,331	1,382	1,345	1,383
Deferred income	27	37	30	44
Amounts issued from the Consolidation Fund for Supply but not spent at year end	502	502	878	878
PF2 imputed lease liability	16	16	16	16
PF2 loan liabilities	0	27	0	27
Consolidated Fund extra receipts due to be paid to the Consolidated Fund: received	0	0	14	14
Total	2,509	2,626	2,938	3,036

19. Non-current payables

19.1 Analysis (£million)

Payable type	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
PF2 imputed lease liability	535	535	551	551
PF2 loan liabilities	0	428	0	451
Other payables	242	240	308	309
Deferred income	3	3	3	3
Total	780	1,206	862	1,314

PF2 loan liabilities include senior debt owed to 2 third parties and subordinated debt provided by a party related to the Aggregator that is not part of the Group.

PF2 senior debt relates to 5 bank notes and 5 bond subscriptions. The borrowing facilities are for a total value of £563.3 million (prior year, £563.3 million) and as at 31 December 2024 £406.0 million (prior year, £428.0 million) has been drawn down. Loan issue costs related to the bank borrowings have been deducted from the gross proceeds and an effective interest is used to calculate finance costs. There was £12.1 million (prior year, £12.3 million) of accrued interest and an unamortised effective interest adjustment of £5.2 million debit (prior year, £5.5 million debit) as at the company’s year end of 31 December 2024.

The loans are repayable in 6-monthly instalments commencing on 31 March 2018, ending on 31 March 2042. Interest is charged on amounts drawn under the facilities based on a fixed rate; the weighted average fixed rate is 3.56% (prior year, 3.56%).

As at 31 December 2024, £2.5 million interest has been accrued on the subordinated debt of £38.9 million (prior year, £2.6 million and £39.9 million respectively).

19.2 Maturity analysis (£million)

	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Not later than one year	16	43	16	43
Later than one year and not later than 5 years	76	183	73	178
Later than 5 years	459	780	478	824
Total	551	1,006	567	1,045

The maturity analysis covers the Group’s financial liabilities with defined multi-year maturities: PF2 loan liabilities and PFI lease liabilities.

20. Lease liabilities

The following tables provide additional analysis of the overall lease liability position for both operational and education sector leased assets. To align to the asset disclosures, liabilities have been split between those incurred from leasing operational assets and those incurred from education sector assets. The disparity between the education sector assets’ carrying value and the associated lease liability value is caused by the preponderance of peppercorn leases in our education sector activities. Peppercorn leases produce assets but no liabilities.

20.1 Analysis (£million)

	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Balance as at 1 April	197	229	152	166
Additions	10	11	0	23
Interest	7	9	2	3
Repayments	-32	-34	-14	-19
Modification adjustments	-16	-18	57	56
Closing balance as at 31 March	166	197	197	229
Disclosed as	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Amounts due within one year	11	13	19	19
Amounts due after more than one year	155	184	178	210
Total	166	197	197	229
Allocation across activity types	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Operational assets	125	156	160	192
Education sector assets	41	41	37	37
Total	166	197	197	229

20.2 Maturity analysis (£million)

	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Not later than one year	16	20	20	23
Later than one year and not later than 5 years	49	65	83	98
Later than 5 years	101	112	94	108
Total	166	197	197	229
Expected receipts from sub-leases	2	2	4	4

21. Commitments

21.1 Capital commitments

Contracted and approved commitments at 31 March not otherwise included in these financial statements (£million):

Asset type	2025 Group	2024 Department & Agencies	2024 Group
Property, plant and equipment	0	0	0
Intangible assets	1	6	9
Total	1	6	9

21.2 Lease commitments

Total future minimum lease payments under leases are given in the following tables for both of the reporting years covered by this ARA.

21.2.1 2025 (£million)

Leases for which IFRS 16 applies in full	Operational assets	Education sector assets	Total
Not later than one year	18	2	20
Later than one year and not later than 5 years	58	7	65
Later than 5 years	140	137	277
Sub-total	216	146	362
Less future interest charges	-60	-105	-165
Present value of obligations	156	41	197
Presented as	Operational assets	Education sector assets	Total
Payables: amounts due within one year	12	1	13
Payables: amounts due after more than one year	144	40	184
Total	156	41	197
Analysed across reporting levels	Operational assets	Education sector assets	Total
Department	125	41	166
Agencies	0	0	0
NDPBs	31	0	31
Total	156	41	197
Expected receipts from sub-leases	0	2	2

21.2.2 2024 (£million)

Leases for which IFRS 16 applies in full	Operational assets	Education sector assets	Total
Not later than one year	22	2	24
Later than one year and not later than 5 years	96	2	98
Later than 5 years	91	38	129
Sub-total	209	42	251
Less future interest charges	-17	-5	-22
Present value of obligations	192	37	229
Presented as	Operational assets	Education sector assets	Total
Payables: amounts due within one year	17	2	19
Payables: amounts due after more than one year	175	35	210
Total	192	37	229
Analysed across reporting levels	Operational assets	Education sector assets	Total
Department	160	37	197
Agencies	0	0	0
NDPBs	32	0	32
Total	192	37	229
Expected receipts from sub-leases	2	2	4

21.3 PFI commitments (£million)

	2025	2024
Minimum lease payments	-	-
Due within one year	61	61
Due later than one year and not later than 5 years	238	239
Due later than 5 years	722	781
Sub-total	1,021	1,081
Less interest element	-467	-501
Present value	554	580
Service elements due in future periods	-	-
Due within one year	9	8
Due later than one year and not later than 5 years	46	43
Due later than 5 years	196	208
Total	251	259
Total commitments	805	839

Under the terms of the Department’s PF2 agreement (the Group’s only PFI transaction), the Group is committed to pay unitary service charges regarding each batch for the 25-year operational period of the schools constructed under the financing transaction. The disclosures are applicable to both Department & Agencies and Group reporting levels.

21.4 Policy funding commitments

21.4.1 Resource programmes (£million)

	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Not later than one year	5,155	5,669	4,761	5,429
Later than one year and not later than 5 years	4,831	4,838	4,171	4,181
Later than 5 years	2,639	2,640	3,923	3,923
Total	12,625	13,147	12,855	13,533

Commitments include those for grants to local authorities and voluntary aided schools to support them with their private finance initiative costs (£6.7 billion, prior year, £7.4 billion).

The Group has commitments (£3.5 billion, prior year, £3.3 billion) to apprenticeship training providers for English apprentices who are already enrolled on training courses as at the year end. The Group’s commitments cover the remainder of the courses but will only crystallise when the apprenticeship training has taken place.

21.4.2 Capital programmes (£million)

	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Free schools	311	311	480	480
School rebuilding programme	1,015	1,015	600	600
FE transformation	367	367	109	109
Strategic school improvement	7	7	0	0
Total	1,700	1,700	1,189	1,189

Commitments for capital programmes are due to close within 2 years of the year end.

The majority of capital commitments relate to school and college projects managed by the Group and will not generate assets recognised on the Group’s SoFP under the relevant accounting policies. Capital commitments do not include the cost of contract workers engaged in the delivery of the programmes.

21.5 Other financial commitments (£million)

	2025 Department & Agencies	2025 Group	2024 Department & Agencies	2024 Group
Not later than one year	191	201	339	350
Later than one year and not later than 5 years	184	186	303	305
Later than 5 years	29	29	6	6
Total	404	416	648	661

The Group has entered into non-cancellable contracts (which are not leases, PFI contracts or other service concession arrangements), which include but are not limited to the previous student loan debt sale, technical adviser fees for school development sites and marking key stage tests.

No commitments are included here in respect of student loans, as loan repayments only become due when student attendance is confirmed at the start of each term.

22. Contingent liabilities

Below we identify contingent liabilities recognised under IAS 37. More remote contingent liabilities are disclosed earlier in Remote contingent liabilities.

22.1 Quantifiable

The Group holds no quantifiable contingent liabilities as described by IAS 37 (prior year, 2). The 2 contingent liabilities reported last year were resolved in the year without crystallising.

22.2 Unquantifiable

Guarantee to the Local Government Pension Scheme

A guarantee to the separate scheme funds to meet pension deficits if an academy trust or further education college closes without scheme members transferring to another LGPS member employer. The Department considers the guarantees to be unquantifiable due to the extent of the academy and college sectors and the uncertainty over whether a provider will fail without being able to transfer staff to the successor provider.

The guarantees are unlimited, but the Department has agreed with HMT that we can pay out up to £20 million in any given year before requiring additional HMT approval. During the year, the Department settled £799,000 (prior year, £96,000) under the guarantees.

Adjudication

Under paragraph 7 of schedule 5 of the Schools Standards Framework Act 1998, the Secretary of State has a statutory duty to indemnify any adjudicator against any reasonable cost and expense reasonably incurred by him in connection with any decision taken in pursuit of his statutory duty. Adjudicator decisions can be challenged through judicial review. It is not possible to quantify this.

The Department is the parent of the Agencies and sponsor of the NDPBs shown in note 24. These bodies are regarded as related parties with which the Department has had various material transactions during the year. These are mainly financing to the Agencies and payments for grant-in-aid to the NDPBs. All such transactions have been eliminated during the preparation of these consolidated accounts.

In addition, the Group has had a number of transactions with other government departments, other central government bodies and local authorities. Most of these transactions have been with GPA (as landlord) and local authorities. We also make pension contributions into public sector pension schemes.

As well as the disclosures in the Remuneration and Staff Report, the following relationships are also considered as related parties and have therefore been disclosed in line with the accounting standard. Transactions are classified as related party transactions if they occurred during the period the individual held the board-level appointment.

Disclosures are split between those individuals who were board members as at the year end, and those whose term as a board-level member ended during the year. The following are related party transaction disclosures for those board-level individuals in post at year end:

Jack Boyer is the Chair of Trustees at the University of Bristol and his wife is chair of trustees at SafeLives
Sir Peter Bazalgette is the Chair of Council at the Royal College of Art and a non-executive director of BusinessLDN
Juliet Chua is a trustee at Whitehall and Industry Group
Sir Kevan Collins is a non-executive director and Naomi Eisenstadt is a director at The Education Endowment Foundation
Julia Kinniburgh is a governor at St Bede’s School, Redhill
Rt Hon Baroness Smith is a director at Jacqui Smith Advisory Ltd
Steve Crocker is a trustee at the National Children’s Bureau and director at Steve Crocker Consulting Ltd

Related party disclosures for those board-level individuals who were no longer appointed as at the year end are also given. The dates that individuals ceased to be appointed and so ceased to be included in related party disclosures, can be found in the Accountability Report.

Rt Hon Gillian Keegan’s spouse is a non-executive director at Centerprise International Holdings Limited
Toby Peyton-Jones’ brother is chair at Computing at Schools

The following table shows the value of material related party transactions entered into during the year and the closing amounts due to or from the counterparty. Where individuals left the Group in the year, the balances disclosed are as at their leaving date. Spending disclosed for academy trusts include all transactions which occurred with their relevant academies. Spending with education bodies is predominantly formulaic policy funding under the terms of the relevant funding streams available to education providers.

Apart from the related party transaction disclosures outlined, no minister, board member, key manager or other related parties have undertaken any material transactions with the Group during the year.

Education sector organisations	2024 - 2025 Net payments /(receipts)	2024 - 2025 Receivable /(payable)	2023 - 2024 Net payments /(receipts)	2023 - 2024 Receivable /(payable)
The Education Endowment Foundation	47,083	0	0	0
University of Bristol	39,614	11	38,891	11
Royal College of Art	4,619	0	5,149	0
St Bede’s School Redhill	41	0	0	0
The US-UK Fulbright Commission	0	0	1,260	0

Non-government organisations	2024 - 2025 Net payments /(receipts)	2024 - 2025 Receivable /(payable)	2023 - 2024 Net payments /(receipts)
National Children’s Bureau	2,909	0	0
BusinessLDN	376	0	0
Centerprise International Holdings Limited	234	-4	60
Computing at Schools	227	0	0
SafeLives	169	0	0
Jacqui Smith Advisory Ltd	21	0	0
Whitehall and Industry Group	16	-4	14
Steve Crocker Consultancy Ltd	14	0	0
Yonder Consulting Group	0	0	562
Ardent Hire Solutions	0	0	-87

24. Entities within the Group

24.1 Closing position

The entities within the boundary during this reporting year comprise Supply financed Agencies, and those entities listed in the designation and amendment orders presented to Parliament. A dis-aggregation across reporting bodies of operating income, operating expenditure and net expenditure for the year is presented in Annex E. There were no movements in Group bodies during the year.

The Executive agencies are:

Education and Skills Funding Agency
Standards and Testing Agency
Teaching Regulation Agency

The executive NDPBs are:

Children’s Commissioner’s Office
Construction Industry Training Board
Engineering Construction Industry Training Board
Institute for Apprenticeships and Technical Education
Located Property Limited
Oak National Academy Limited
Office for Students
Social Work England
Student Loans Company Limited

The advisory NDPBs are:

School Teachers’ Review Body

Others are:

Aggregator Vehicle Plc

The ARAs of Aggregator Vehicle Plc, Oak National Academy Limited, Located Property Limited and Student Loans Company Limited are available on Companies House. The School Teachers’ Review Body does not produce its own ARA.

25. Events after the reporting period

25.1 Student loan valuation

The valuation of student loans is complex and reliant upon forecasts of economic factors both near-term and longer-term over the life of the loans. Economic uncertainty has continued since the year end with economic measures deteriorating.

Management judges the change in economic values post-year end to be a non-adjusting event because the conditions causing the changes occurred after the year end. Therefore, no adjustment has been paid to the carrying values of student loans in this ARA. Whilst the Department has not quantified the potential impact of the changes close to authorisation of these accounts, the size of the student loans portfolio means it could be material.

25.2 1. Movements in Group bodies after the year end

On 31 March 2025 ESFA closed and its activities, assets and liabilities were integrated into the core Department from 1 April 2025. On 1 June 2025 IfATE closed, and its activities, assets and liabilities transferred either to the Department or the Department’s new executive agency Skills England.

The assets and liabilities transferred for both closures are shown (£thousand).

Non-current assets	ESFA to the Department	IfATE to Skills England	IfATE to the Department	Total
Intangible assets	37,151	2,997	0	40,148
Loans	238,180	0	0	238,180
Receivables	1,703	0	0	1,703
Total non-current assets	277,034	2,997	0	280,031
Current assets	ESFA to the Department	IfATE to Skills England	IfATE to the Department	Total
Loans	21,062	0	0	21,062
Receivables	131,720	113	0	131,833
Cash and cash equivalents	617	1,266	0	1,883
Total current assets	153,399	1,379	0	154,778
Current liabilities	ESFA to the Department	IfATE to Skills England	IfATE to the Department	Total
Payables	-545,951	-2,316	-712	-548,979
Provisions	0	-288	0	-288
Total current liabilities	-545,951	-2,604	-712	-549,267
Net assets or liabilities transferred	-115,518	1,772	-712	-114,458
Net loss or gain recognised in SoCNE	115,518	-1,772	712	114,458

25.3 Authorisation

These accounts were authorised for issue by Susan Acland-Hood (Accounting Officer) on the date they were certified by the Comptroller and Auditor General. There have not been any significant post year end events that have required disclosure in the accounts.

Question 13

13. Annexes

Accepted Answer

Annex A - Additional performance reporting

Additional performance analysis

The following figures present the last 4 years’ TME analysed across budget types and business groups for the Group as a whole, and then for each business group by budget type. Performance for 4 years has been provided to align to the lifespan of the current business groups, allowing for consistency of disclosure. In the figures, positive numbers represent net expenses or losses, whereas negative numbers represent net income or gains.

Departmental Group

Table 60: Outturn by budget class for the last 4 years (£billion)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	101.6	87.1	66.6	72.4
CDEL	5.6	6.6	5.9	4.8
RAME	-3.8	-3.3	-14.3	-5.2
CAME	30.9	30.9	24.8	21.9
RDEL-Administration	0.5	0.5	0.5	0.5
Total	134.8	121.9	83.6	94.4

Table 61: Outturn by operational unit for the last 4 years (£billion)

Business segment	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
Families Group	8.4	5.8	5.0	4.8
Schools Group	65.0	66.3	62.5	57.4
Skills Group	56.1	48.5	15.2	31.4
Regions Group	0.3	0.3	0.2	0.1
Strategy Group	0.2	0.2	0.2	0.1
Operations and Infrastructure Group	4.8	0.9	0.5	0.6
Total	134.8	121.9	83.6	94.4

Families Group

Table 62: Analysis of Families Group outturn by budget class for the last 4 years (£billion)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	8.3	5.6	5.0	4.8
CDEL	0.1	0.1	0	0
RAME	0	0	0	0
CAME	0	0	0	0
RDEL-Administration	0	0.1	0	0
Total	8.4	5.8	5.0	4.8

The large increase in RDEL-Programme spend in the year was due to the expansion of early years support.

No significant assets or liabilities are managed by this business group.

Schools Group

Table 63: Analysis of Schools Group outturn by budget class for the last 4 years (£billion)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	64.0	61.2	57.2	53.2
CDEL	0.9	5.0	5.1	4.1
RAME	0	0	0	0
CAME	0	0	0	0
RDEL-Administration	0.1	0.1	0.1	0.1
Total	65.0	66.3	62.5	57.4

During the year, responsibility for capital grants for schools and academies (included in CDEL above) moved to OIG.

Table 64: Significant assets and liabilities managed by Schools Group at the last 4 year ends (£million)

SoFP caption	Specific item	2025	2024	2023	2022
Education sector assets	AuC and investment property assets	323	776	611	0
Intangible assets	Intangible assets	121	120	0	0
Other loans	PF2 loan assets	449	471	493	0
Other loans	Academy sector loans	21	119	125	134
Payables	PF2 imputed lease liabilities	0	-567	-583	-598
Payables	PF2 loan liabilities	-455	-478	-502	0
Provisions	Early departure provisions	-87	-99	-108	-114

Skills Group

Table 65: Analysis of Skills Group outturn by budget class for the last 4 years (£billion)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	28.0	19.9	4.1	14.2
CDEL	1.0	0.9	0.6	0.4
RAME	-3.9	-3.3	-14.4	-5.2
CAME	30.9	30.9	24.8	21.9
RDEL-Administration	0.1	0.1	0.1	0.1
Total	56.1	48.5	15.2	31.4

Table 66: Analysis of non-student loan activity outturn by budget class for the last 4 years (£billion)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	15.1	13.9	13.4	12.5
CDEL	1.0	0.9	0.6	0.4
RAME	0	0	0	0
CAME	0	0	0	0
RDEL-Administration	0.1	0.1	0.1	0.1
Total	16.2	15.0	14.2	13.0

Table 67: Analysis of student loans outturn by budget class for the last 4 years (£billion)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	12.8	5.9	-9.4	1.6
CDEL	0	0	0	0
RAME	-3.7	-3.3	-14.4	-5.2
CAME	30.9	30.9	24.8	22.0
RDEL-Administration	0	0	0	0
Total	39.9	33.5	1.0	18.4

Table 68: Significant assets and liabilities managed by Skills Group at the last 4 year ends (£million)

SoFP caption	Specific item	2025	2024	2023	2022
Student loans	Student loan book	157,866	150,982	137,804	97,942
Receivables	Student loan receivables	466	268	537	314
Provisions	Inherited staff liabilities	-79	-93	-110	-130

Regions Group

Table 69: Analysis of Regions Group outturn by budget class for the last 4 years (£million)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	194	189	145	44
CDEL	61	44	44	58
RAME	0	0	0	0
CAME	0	0	0	0
RDEL-Administration	20	17	17	7
Total	275	250	206	109

No significant assets or liabilities are managed by this operational unit.

Strategy Group

Table 70: Analysis of Strategy Group outturn by budget class for the last 4 years (£million)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	128	94	124	78
CDEL	12	11	9	7
RAME	0	0	0	0
CAME	0	0	0	0
RDEL-Administration	48	47	52	52
Total	188	152	185	137

No significant assets or liabilities are managed by this business group.

Operations and Infrastructure Group (OIG)

Table 71: Analysis of OIG outturn by budget class for the last 4 years (£billion)

Budget type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
RDEL-Programme	0.9	0.2	0.1	0.2
CDEL	3.5	0.5	0.1	0.2
RAME	0	0	0	0
CAME	0	0	0	0
RDEL-Administration	0.3	0.2	0.3	0.3
Total	4.8	0.9	0.5	0.6

During the year responsibility for mainstream CDEL spending was transferred from Schools Group to OIG. There has been no change in how the spending is allocated or calculated, it is just a reporting change.

Table 72: Significant assets and liabilities managed by OIG at the last 4 year ends (£million)

SoFP caption	Specific item	2025
Education sector assets	AuC and investment property assets	416
Intangible assets	Intangible assets	120
Other loans	FE sector loans	257
Other loans	Academy sector loans	94
Payables	PF2 imputed lease liabilities	-551

Charities Act reporting

Section 70 of the Charities Act 2006 sets out the powers for ministers to give financial assistance to charitable, benevolent, or philanthropic institutions, and requires that payments made under this power are reported. The spending disclosed does not represent the total amount of grant funding to these sectors, as many other grants have been paid out under alternative legislation.

US-UK Fulbright Commission

The commission, funded by the UK and US governments, offers scholarships to British or American students seeking a postgraduate or research post in the other country. Grants totalling £1.6 million (prior year, £1.3 million) were made to support the work of the commission.

Non-financial matters

Social matters

The Department has continued to deliver its 2022 to 2026 diversity and inclusion strategy. To embed inclusivity, the Department has integrated the annual action plan into a new PSP. This reflects our dedication to creating an inclusive environment where everyone has the opportunity to thrive.

Employees are encouraged to volunteer for social causes at both local and national levels. Additionally, we offer opportunities for individuals from diverse backgrounds to participate. Our diversity and inclusion networks are crucial in creating an inclusive workplace.

Respect for human rights

The Department values human rights. Equality and diversity are central components of our activities and societal objectives. This includes compliance with obligations established by the Equality Act 2010, and the subsequent amendments found in the Worker Protection (Amendment of Equality Act 2010) Act 2023 in the context of employment, in which:

people’s ability to succeed is not limited by prejudice or discrimination
there is respect for and protection of each individual’s human rights
there is respect for the dignity and worth of each individual
each individual has an equal opportunity to participate in society
there is mutual respect between groups based on understanding and valuing diversity, and on shared respect for equality and human rights

Modern slavery

The Department remains committed to tackling modern slavery, applying processes to identify, mitigate and manage the risk across its supply chains and setting high standards to raise awareness among staff.

This year, the Department exceeded all 8 performance targets and has set more ambitious targets for next year’s performance measures.

The Chief Commercial Officer is the Department’s anti-slavery advocate, providing senior-level oversight on progress, and collaboration across government to share best practice.

Cabinet Office guidance is fully embedded in commercial processes and the relevant instructions for bidders are built into medium and high-risk procurements. Commercial staff involved in commercial activity continue to undertake annual Chartered Institute of Procurement and Supply ethical training and modern slavery e-learning, ensuring a proportionate, risk-based approach throughout procurement.

Anti-corruption and bribery matters

The Department maintains a zero-tolerance stance on bribery and corruption and is committed to upholding the highest standards of honesty and integrity. All employees complete mandatory training on the Civil Service Code principles, with emphasis on their responsibilities under the Bribery Act 2010.

The Department’s standards of behaviour policy outlines expectations for conduct and behaviour, including bribery, fraud and theft. In addition, a dedicated anti-bribery and corruption policy aligns with the GovS 013 Counter Fraud functional standard.

Better regulation

The Department is committed to the principles of better regulation, ensuring we fulfil our responsibilities to safeguard children and young people, ensure they have a good education, and enforce standards. We do this through internal scrutiny of policy initiatives to ensure that regulations which impact business and civil society are both proportionate and are introduced only where there is a clear case for doing so. Stakeholders in these sectors include childminders, nurseries, independent schools, higher education providers and FE colleges.

The Department has continued to promote effective policy making through robust assessment of evidence and proportionate impact assessments.

Post-implementation reviews

The Department published the following post-implementation review:

Independent Educational Provision in England (Provision of Information) and Non-Maintained Special Schools (England) and Independent School Standards (Amendment) Regulations 2018

Alternatives to regulation

The Department wants to ensure that all regulations are fair and effective. Complying with regulation costs businesses time and money, and red tape can make running businesses unnecessarily difficult. The Department’s policy to delivery provides a framework for improving policymaking. Understanding the purpose of the policy, the role of government, the evidence base, and the creativity and deliverability of the policy are the approaches used by policy makers to consider alternative approaches, tools and methods.

Fire, health and safety

The Department is committed to safeguarding the health, safety and wellbeing of staff, contractors and all others who are affected by its activities, in compliance with the Health and Safety at Work etc. Act 1974.

We recognise that effective fire, health and safety management enhances business performance, supports strategic objectives and promotes staff wellbeing. Proportionate health and safety risk management is key to preventing harm and ensuring efficient service delivery.

Over the past year we have strengthened our safety culture by introducing an enhanced display screen equipment process. We have invested in training by providing the Institution of Occupational Safety and Health’s safety for executives and directors and continued our first aid and fire warden training programme.

We also implemented a new health and safety online system to support legal compliance and are continuously refining our policies and guidance to ensure clarity and support for staff.

Table 73: Accident and incident volumes for the last 5 years (number)

Category	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Total employee accidents or incidents	16	14	18	1	4
Total non-employee, member of public, or detainee accidents and incidents	1	0	0	2	22
Total near misses	10	8	3	4	1
Total injuries, deaths, and dangerous occurrences	0	0	0	0	0
Total	27	22	21	7	27

The statistics indicate an increase in reported accidents, incidents and near misses compared to the previous year. We actively use this data to review our policies, with the rise in near-miss reporting helping to improve our safety culture and prevent future accidents.

Personal data breaches

All government departments are required to report personal data breaches to the ICO that occurred during the financial year, in accordance with the standard disclosure format issued by Cabinet Office. The disclosures outlined cover the Department and its Agencies since the Department’s Office of Data Protection Officer (ODPO) is responsible for data reporting for all 4 bodies.

A ‘personal data breach’ is defined as a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of or access to personal data transmitted, stored or otherwise processed. Personal data breaches are required by law to be reported to the ICO within 72 hours of discovery where there is a likely risk to data subjects. The 5 personal data breaches formally notified to the ICO this year are summarised below.

Table 74: Summary of personal data breaches reported to the ICO for the last 4 years (number)

Incident type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
Data emailed to incorrect recipient	2	2	0	1
Data posted or faxed to incorrect recipient	0	1	0	1
Loss or theft of paperwork or data left in insecure location	0	1	0	0
Other non-cyber incidents	0	1	0	0
Personal data incorrectly shared	3	2	0	0
Data of wrong data subject shown in client portal	0	1	0	0
Lost or theft of device containing personal data	0	0	1	0
Ransomware	0	0	1	0
Processing personal data on a non-departmental device	0	0	0	1
Other	0	0	0	4
Total	5	8	2	7
Number of data subjects potentially affected	84,532	20	54,858	1,648

Other data breaches

Table 75 summarises the total number of personal data breaches reported this year. Incidents which do not fall within the criteria for reporting to the ICO, but are recorded centrally within the Department, are included. Incidents deemed to be a near-miss, or those not involving personal data, are not included.

Table 75: Personal data breaches for the last 4 years (number)

Incident type	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022
Alteration of personal data	1	1	0	0
Data or email sent to incorrect recipient	117	95	73	86
Data of wrong ‘data subject’ shown or provided	6	28	23	0
Data posted or faxed to incorrect recipient	6	3	11	20
Failure to redact or use the blind copy function	12	26	34	32
Incorrect disposal of paperwork	0	1	0	0
Insecure sharing or storage of personal data	16	8	22	16
Loss or theft of device containing personal data	0	0	3	0
Loss or theft of paperwork or data left in insecure location	5	6	4	1
Other non-cyber incident	23	22	27	33
Personal data incorrectly shared	75	32	19	11
Personal data retained for too long	1	0	2	0
Unauthorised access	1	3	6	0
Cyber	1	5	7	0
Verbal disclosure of personal data	0	0	0	6
Total	264	230	231	205

This year, over a third of the reported incidents involved personal data being emailed to incorrect recipients. Other incidents included the failure to use the blind copy function or adequately redact personal information. Additionally, there has been an increase in the incorrect sharing of personal data throughout the year.

The ODPO provided training and guidance to limit or reduce the number of breaches. Additional controls will be put in place next year, which should further reduce the number of breaches. Where incidents occurred, advice and guidance is provided to prevent recurrence.

The information contained in the table above relates to personal data security for the Department and its Agencies only. The Department’s Agencies and NDPBs also report personal data related incidents in their own ARAs as required.

Departmental correspondence

Government departments have a 95% target for answering correspondence within 20 working days. The Department has set itself a target of replying to 95% of ‘treat official’ correspondence within 15 working days and ministerial correspondence within 18 working days.

Whilst there was a small decrease (from 82% to 79%) in the treat official correspondence answered within the Department’s internal deadline of 15 days, the percentage responded to within 20 days increased for a fourth successive year to 92%. The percentage of ministerial correspondence answered improved for a second year against both measures (77% within 18 days and 81% within 20 days).

Freedom of information requests have a deadline of 20 working days as governed by ICO. The Department answered 86% of these requests on time, an increase of 11% from the previous year.

Although we did not meet our targets this year, we have implemented actions to address performance, including the automated logging of correspondence and investigating areas which can be supported by technology in future.

Table 76: Treat official correspondence for the last 5 years

Internal 15-day deadline	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Number	20,559	18,264	21,463	22,977	30,904
Deadline met	79%	82%	69%	51%	51%

20-day deadline	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Deadline met	92%	91%	80%	64%	61%

Table 77: Ministerial correspondence for the last 5 years

Internal 18-day deadline	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Number	8,031	7,637	9,795	10,014	28,298
Deadline met	77%	74%	53%	71%	24%

20-day deadline	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Deadline met	81%	78%	58%	74%	39%

Table 78: Freedom of information requests for the last 5 years

20-day deadline	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Number	2,820	2,835	2,281	2,237	2,330
Deadline met	86%	75%	79%	73%	78%

Communications, publicity and advertising

This year, the Department reshaped its communications to support the new government’s mission-led approach, as outlined in its Plan for Change. In support of the opportunity mission, communications activity focused on joined-up national campaigns and engagement to support delivery across the 4 mission pillars.

The Department’s communications team has continued to play an important role in helping to build trust in government and as a lever for change, in line with the Government Communication Service’s core objectives:

changing attitudes and behaviour of parents, pupils and students, adult learners, employers and teachers – and the future workforce in schools, colleges and childcare
delivering effective service to the public and meeting the Department’s responsibilities as a department of state
protecting and improving the Department’s reputation, including crisis response
explaining our policies through media and social content
informing and engaging our staff

Most communication activity is delivered ‘in-house’ at no additional cost, as part of cross-government campaigns or at low cost by supporting and co-ordinating partners’ activity.

Table 79: Communications Directorate’s staffing and spend for the last 5 years

	2024 - 2025	2023 - 2024	2022 - 2023	2021 - 2022	2020 - 2021
Number of staff	67	73	75	75	83
Spend on activity (£thousand)	309	507	332	288	1,422

Complaints

Complaints policy

The Department publishes its complaints procedure policy and guidance, including how to complain about a school and how the complaint will be handled.

While the current policy remains unchanged, a review has been completed with updates set to be implemented next year.

Complaints to the Parliamentary Ombudsman

The Parliamentary and Health Service Ombudsman considers complaints about a service provided by the department or an organisation acting on their behalf, providing that the body falls within its jurisdiction and that the complaint has been referred by an MP. Cases relating to local authorities and state-funded schools (where most of our services are delivered to the public) are normally outside the Ombudsman’s jurisdiction.

Table 80 presents extracts from published Ombudsman reports, with the latest available data being 2023 to 2024. The years included in the table refer to the financial years the Ombudsman reports on. As complaints may be resolved in a different year than when first raised, the number of complaints accepted for review may not align with the total investigation outcomes.

Table 80: Complaints reported by the Ombudsman (number)

	2023 - 2024	2022 - 2023	2021 - 2022
Complaints received	249	211	212
Complaints accepted for investigation	2	5	5
Detailed investigations reported on by Ombudsman:	2023 - 2024	2022 - 2023	2021 - 2022
upheld in full	3	2	1
upheld in part	1	2	2
not upheld	0	0	1
Ombudsman recommendations:	2023 - 2024	2022 - 2023	2021 - 2022
complied with	2	2	5
not complied with	0	0	0

Effectiveness of whistleblowing arrangements

The Department has stringent whistleblowing processes and procedures in place and is in the process of reviewing and updating the policy to simplify the process, to ensure feedback is sought from those who raise concerns and clarify roles.

The Department has a dedicated whistleblowing mailbox to monitor and progress cases promptly. In addition, there are 6 nominated officers who are available to offer impartial advice and support.

This year 12 whistleblowing cases were raised, an increase of 8 cases from the previous year, due to increased communications and awareness. 4 cases remain under investigation.

Annex B - Sustainability reporting

Background

The Group has 3 separate exposures to climate change and sustainability:

the activities of our corporate estate and operational policy, monitored via the GGCs
our policy responsibility for the education and CSC sectors
our policy responsibility for the education estate, out of scope for GGCs

A refreshed corporate sustainability strategy in 2025 will ensure the Department continues to successfully comply with our obligations as well as being clear on how the Department’s staff can support us, so that sustainability is embedded in everything we do.

We recognise the contribution we can make to help create a sustainable future through education, developing the skills needed for a green economy, supporting our sectors reach net zero targets and furthering our work in sustainable development in our school building programmes.

We aspire to lead our organisation and our sectors towards a more sustainable future, as well as being active contributors to cross-government priority outcomes, strategies and programmes. Plans are in development with a vision of supporting brilliant education and care outcomes through an education estate that is safe, sustainable, suitable and sufficiently sized.

Scope of disclosures

This year’s disclosures have been prepared in accordance with HMT’s TCFD implementation guidance phase 2, FReM and the Sustainability Reporting Guidance 2024 to 2025.

As required by the reporting guidance, the detailed data in this annex refers to the corporate body GGC responsibilities and the data includes all Group bodies (see note 24). No exemptions were identified during the year, all Group bodies are in-scope for GGC disclosures. Accordingly, some public bodies in education sectors (for example Ofsted, Ofqual, schools and colleges) are excluded from these GGC disclosures since they are not part of the Department’s financial reporting group covered by this ARA.

In accordance with the guidance, all disclosures are for this financial year unless otherwise noted. Departures from this reporting period are explained. The Department is unable to report data from locations where property owners are not obliged to provide it, and some data will be estimated.

The data shows the position for this year against a 2017 to 2018 baseline, using data available up to March 2025. Our sustainability performance data is audited internally by Department for Environment, Food and Rural Affairs (Defra) environmental analysts.

The Group has been unable to collect, and apportion across Group bodies, financial information for the sustainability disclosures for the year. The Group continues to work with the third party suppliers who manage the Group’s sustainability activities with the aim to provide the disclosures for next year’s ARA.

Greening government commitments

The Department is committed to a number of targets including the mandatory GGCs for reducing:

energy
water
paper
travel emissions
waste management

These targets were updated in the 2021 to 2022 financial year and the current reporting period represents the final year of the current GGC framework, with a new framework due to come into effect during next year.

The Department has been set the following environmental sustainability targets based on the baseline:

greenhouse gas emissions, achieve a 56% reduction in total emissions (scopes 1 to 3) and a 36% reduction in direct emissions (scope 1)
water consumption, reduce overall water usage by more than 8%
waste management, send less than 5% of waste to landfill and ensure at least 70% is recycled

Scope

The data below shows the Group’s present position for this year against the baseline (unless otherwise stated).

Governance and data validation

We undertake a stringent monitoring regime in relation to GGC performance management, working closely with GPA as property asset managers, and our Agencies and NDPBs. This is supplemented by periodic audits conducted by GIAA, reported to the Accounting Officer via the Department’s finance function. Internal and cross-governance arrangements are also in place for the phases of development and delivery of initiatives set out within the Department’s sustainability and climate change strategy. These are regularly reviewed by GIAA.

In addition to the internal governance process, external audits are also undertaken to assure processes and systems including methodologies for recording, analysing, and verifying data, as well as the calculations for quarterly GGC returns. These external validation audits are carried out by Defra’s internal GGC audit team.

The majority of this report has been compiled using accurately measured data, verified through internal controls. This includes checking samples of automatically generated meter-reading data with manual meter reads. Where complete data sets have not been available, (for example through lack of detail or due to landlord service charges), internal benchmark figures have been applied based on known parameters and data sets.

The overall responsibility for sustainability sits with the Department. Internal data validation checks have been carried out by the Department. In order to report the greenhouse gas emissions associated with data such as distance travelled, litres of fuel used, or tonnes of waste disposed has been converted into carbon emissions. The greenhouse gas conversion factors used in this report can be found in the government environmental impact reporting requirements for business.

The Department reports greenhouse gas emissions in line with the GGCs and uses Department for Energy Security and Net Zero’s carbon conversion factors. These methodologies align with the greenhouse gas protocol principles. The GGC reporting boundary includes all departmental operations as defined by the GGC framework. There have been no changes to the basis of reporting this year.

Summary GGC performance

The following figures present summaries of performance against the GGC quantitative targets which largely relate to office estate-based activities (the first target also includes scope 3 business travel emissions). The years between financial years 2017 to 2018 and 2022 to 2023 are not part of the current target. Performance indicators for these years relate to the previous GGC targets. Annual performance is measured against the baseline year and is not a cumulative measure.

Table 81: Reduce overall greenhouse gas emissions (tCO2e) by 56% and direct emissions (tCO2e) by 36%

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2017 - 2018 baseline
Overall performance	-58%	-43%	-43%	-48%	-
Overall – target	-56%	-56%	-56%	-56%	-56%
Direct performance	-67%	-8%	-4%	13%	-
Direct - target	-36%	-36%	-36%	-36%	-36%

Table 82: Reduce the overall amount to waste generated by 15% (tonnes)

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2017 - 2018 baseline
Performance	-48%	-35%	-36%	-41%	-
Target	-15%	-15%	-15%	-15%	-15%

Table 83: Increase the proportion of waste which is recycled to at least 70% of overall waste (tonnes)

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2017 - 2018 baseline
Performance	74%	78%	74%	72%	-
Target	70%	70%	70%	70%	70%

Table 84: Reduce water consumption (m3) by at least 8%

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2017 - 2018 baseline
Performance	-49%	-54%	-60%	-45%	-
Target	-8%	-8%	-8%	-8%	-8%

Table 85: Reduce the amount of waste (tonnes) going to landfill to less than 5% of overall waste

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2017 - 2018 baseline
Performance	0%	0%	3%	6%	-
Target	5%	5%	5%	5%	5%

Achievement against target

This year, the Group has:

decreased its total in-scope gross greenhouse gas emissions (total emissions, scope 1, 2 and 3) by 58% since the baseline year, against a target reduction of 56%
decreased its scope 1 gross greenhouse gas emissions by 67% since the baseline year, against a target reduction of 36%

Table 86: Non-financial indicators (tCO2e)

Total gross emissions	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Scope 1	561	1,559	1,602	1,917	2,043	1,702
Scope 2	2,220	2,900	3,142	3,316	3,460	6,132
Scope 3	1,967	2,049	1,725	1,125	461	3,602
Total	4,748	6,508	6,469	6,358	5,964	11,436

Emission scopes

The emission scopes can be explained as:

Scope 1 (direct greenhouse gas emissions) – these occur from sources owned or controlled by an organisation – for example emissions as a result of combustion in boilers owned or controlled by the organisation and emissions from organisation-owned fleet vehicles
Scope 2 (energy indirect emissions) – these are emissions a body makes indirectly as a result of electricity consumed which is supplied by another party – such as a landlord, for example electricity supply in rented buildings also includes other purchased indirect emission sources such as heat, steam and cooling
Scope 3 (other indirect greenhouse gas emissions) – all other emissions which occur as a consequence of activity, but which are not owned or controlled by the accounting entity, this is primarily business travel emissions

Group operational activities

Table 87: Non-financial indicators (KWh)

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Electricity: non-renewable	10,345,174	13,391,092	14,612,000	13,989,000	13,708,000	16,708,000
Electricity: renewable	81,998	38,267	904,000	903,000	615,000	283,000
Gas	2,842,440	8,327,908	8,575,000	10,318,000	11,080,000	8,993,000
Gas oil	0	0	0	0	0	2,000
Steam	344,480	660,298	829,000	899,000	702,000	802,000
Diesel	0	0	0	0	0	13,000
Total	13,614,092	22,417,565	24,920,000	26,109,000	26,105,000	26,801,000

The current year’s reduction in renewable electricity is due to changes in procured energy suppliers under the Crown Commercial Service contracts. The reduction in gas is due to the decarbonisation of assets across the Group portfolio.

Minimising waste and promoting resource efficiency

Table 88: Non-financial indicators (tonnes)

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Hazardous waste	0	0	0	0	0	0
Non-hazardous waste:	-	-	-	-	-	-
landfill	0	0	13	23	5	146
reused or recycled	245	382	347	311	231	444
composted	32	17	21	18	33	8
ICT waste: reused	0	0	0	0	0	0
ICT waste: recycled	unknown	Unknown	unknown	29	3	13
Waste incinerated with energy from waste	98	75	86	79	62	127
Total	375	474	467	460	334	738

The volume of waste has decreased by 48% against a targeted reduction of 15% compared to the baseline year. Zero waste was sent to landfill, surpassing the target of sending less than 5% of waste to landfill. Furthermore, 74% of waste was recycled, exceeding the target of recycling over 70% of total waste.

Water consumption

Table 89: Non-financial indicators

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Total water consumption (m3)	36,200	32,772	28,277	22,674	57,324	71,154
Reduction in usage against baseline	49%	54%	60%	68%	19%	N/A

The Group has decreased water use by 49% against a targeted reduction of 8% compared to the baseline year.

Paper usage

Table 90: Non-financial indicators

	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Reams	5,312	7,138	11,816	12,385	12,369	27,250
Reduction in usage against baseline	81%	74%	57%	55%	55%	N/A

The Group has decreased paper use by 81% against a targeted reduction of 50% compared to the baseline year.

Travel

Table 91: Non-financial indicators (thousand of Km and tCO2e)

Distance travelled	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Domestic flights	304	246	430	19	N/A	N/A
International flights: short haul	279	189	46	14	N/A	N/A
International flights: long haul	695	1,021	430	14	N/A	N/A
Trains	19,938	23,665	11,899	N/A	N/A	N/A
Car fleet	0	0	0	0	0	0
Total	21,216	25,121	12,805	47	N/A	N/A
Emissions	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Domestic flights	49	40	56	7	1	130
International flights: short haul	30	20	0	7	N/A	N/A
International flights: long haul	64	166	66	0	N/A	N/A
Trains	707	838	426	N/A	N/A	N/A
Car fleet	0	0	0	0	0	0
Total	850	1,064	548	14	1	130

The Group does not operate a vehicle fleet. Greenhouse gas emissions (tCO2e) figures for last year have been restated.

Table 92: Non-financial indicators (thousands of Km)

Airline cabin class	2024 - 2025 actual performance	2023 - 2024 actual performance	2022 - 2023 actual performance	2021 - 2022 actual performance	2020 - 2021 actual performance	2017 - 2018 baseline
Economy class	N/A	979	391	27	N/A	N/A
Premium economy class	N/A	42	19	0	N/A	N/A
Business class	N/A	189	56	0	N/A	N/A
First class	N/A	0	10	0	N/A	N/A
Total	N/A	1,210	476	27	N/A	N/A

Distance data was only collected from 2021 to 2022. The Group’s policy on air travel is to restrict it to instances where overall there is value for money compared to other forms of travel when the full cost of travel and subsistence is assessed.

During this year, the structure and content of the Group’s travel data underwent changes. Consequently, it is not currently possible to dis-aggregate travel mileage by travel class for that year as presented in the table above. Efforts are underway to refine our data collection and reporting processes, with the objective of providing travel mileage breakdowns by class next year.

Consumer single use plastics

Due to data collect challenges within the supply chain, the Group is unable to disclose single use plastic data for this reporting period. However, restrictions introduced in September 2023 by Defra have eliminated procurement of single use plastics within the catering industry.

ICT waste

The Department continues to leverage technology to reduce its environmental impact. Enhancements to video-conferencing facilities, adoption of softphones and video calling, and effective hybrid working have reduced travel needs. A review of cloud hosted services is underway, seeking to reduce both expenditure and associated carbon emissions.

ICT waste is managed through contracts ensuring reuse or recycling, with zero landfill disposal. In the education sector, sustainable ICT solutions will be integrated into new build schools as standard via sustainable procurement, design, implementation and management.

The Department also submits an annual return on the sustainable technology advice and reporting to Defra, supporting government efforts to track ICT carbon emissions and demonstrate progress towards embedding best practice into business operations.

Mitigating and adapting to climate change

To address climate change impacts, GPA has commissioned a climate risk assessment of the Department’s office estate. The findings will guide the prioritisation of mitigation and adaptation measures and inform a comprehensive climate risk register. As a GPA tenant, the Department will be consulted on outcomes and will support the implementation of recommended actions.

In alignment with the GGC, the Department is working towards the following headline and sub-targets.

Headline target

Reduce overall greenhouse gas emissions and direct emissions from the estate and operations, using a 2017 to 2018 financial year baseline as defined by the Department for Energy Security and Net Zero.

Sub-targets

Government fleet commitment, the Department does not operate a car fleet, therefore, this target is not applicable.

Business travel, the Department is committed to reducing emissions from domestic business flights by at least 30% from the 2017 to 2018 financial year baseline. While international business travel has been baselined, specific reduction targets are not yet in place. These will be introduced in the forthcoming GGC framework for 2025 to 2030.

Biodiversity reporting

In addition to the sustainability reporting outlined here, the Department contributes to Defra’s central sustainability reporting. All public authorities are required to consider action they can take to conserve and enhance biodiversity and then take that action.

In partnership with GPA, we are developing a nature recovery plan for the Department’s office estate. The plan focuses on enhancing biodiversity through landscape adaptations, including pollinator friendly plants, green walls and habitats for insect and birds.

Accounting for shared, offset, renewable and sequestered carbon

The Department does not engage in the purchase or utilisation of carbon credits across its office estate.

Reuse schemes

The Department’s office estate does not currently operate a formal office furniture reuse scheme. However, where possible, furniture items are reused or refurbished as part of project renovations and office fit-outs, in line with sustainability best practices.

Indirect water use

The Department has assessed its operations and supply chains in line with the sustainability reporting requirements outlined in FReM. Based on this assessment, we do not directly engage in activities that involve significant use of embedded or indirect water.

The Department’s core functions are primarily office-based and focused on policy development, funding allocation and oversight of educational institutions. The Department does not operate manufacturing, agricultural or industrial processes that typically involve high levels of embedded water use.

While we procure goods and services that may have embedded water impacts (for example, IT equipment and office supplies), these are considered minimal and not material to the Department’s overall environmental footprint. We continue to work to ensure that sustainability considerations, including water stewardship, are embedded in supplier engagement and contract management processes.

Sustainable construction

All schools and colleges constructed under our control (termed centrally delivered) follow the Department’s detailed specification which includes performance standards on environmental performance and energy.

The Department has been successfully delivering good quality, economic and efficient schools for 12 years focusing on simple easy to manage facilities with low running costs. Since 2021, all of the Department’s delivered schools are designed to be net zero carbon in operation.

As part of our strategy for sustainability and climate change, the Department is committed to net zero carbon in operation for all centrally delivered programmes including the school rebuilding and free school programmes. Projects will be designed to be resilient to climate change under a 2°C global warming scenario and future proofed to a 4°C scenario.

Additionally, we are piloting a range of projects to test initiatives such as access to nature, ultra-low carbon construction and wider use of green infrastructure to improve biodiversity. We have developed the UK’s first ‘biophilic’ primary school, which supports school users to connect with nature through the built environment. The project will act as a real time lesson in improving health and wellbeing. Working in partnership with Derby University, we will gather evidence on how this impacts the health and wellbeing and sustainable literacy of children and young people.

Sustainable procurement

Our commercial teams integrate social and environmental sustainability into their operations, including tendering and contractual requirements, where appropriate. At a strategic level, commercial activity has a SCS sponsor on the Corporate Sustainability Board to coordinate activities relating to sustainability and procurement.

Business cases must consider the environmental impacts of their proposal. The type of environmental assessment required differs depending on the expected impacts. All business cases in scope of the legally binding environmental principles duty require completion of an environmental principles assessment. We consider it is best practice to include an assessment even if the policy is out of scope, for legal audit purposes. Only business cases that identify “significant environmental impacts” are required to undertake a fuller environmental appraisal. The supporting guidance states the “purpose of the economic dimension of the business case is to identify the proposal that delivers best public value to society, including wider social and environmental effects”.

Our contracts require suppliers to meet the Government Buying Standards on sustainability. In addition, and where relevant, we apply Cabinet Office guidance on ‘Taking account of carbon reduction plans in the procurement of major government contracts’. We also meet the requirements of Cabinet Office procurement policy on ‘Taking account of social value in the award of contracts’, including fighting climate change to contracts, where applicable. Furthermore, in line with policy on Carbon Reduction Contract Schedule, where relevant, we add a schedule to our contracts which support contract specific decarbonisation objectives.

Commercial staff undertake the Chartered Institute of Procurement and Supply’s ethics e-learning, which includes environmental procurement. During the year, 98% of commercial delivery staff undertook this training exceeding the target of 90%.

More broadly, sustainability is part of the Department’s assessment and validation criteria for suppliers on procurement frameworks within the get help buying for schools service, to support sustainable purchasing of products and services in schools. We also support schools to purchase from procurement frameworks that offer sustainable goods and services via this service, although schools still retain full autonomy in their contracting decisions.

Sustainable procurement of food and catering services

GPA holds full ownership of onsite office catering contracts, ensuring food is locally sourced and in season, where possible. Catering partners buy food from farming systems that minimise harm to the environment, such as produce certified by LEAF (Linking Environment and Farming), the Soil Association or Marine Stewardship Council. Fairly traded and ethically sourced products are also available.

The amount of animal-based food is being reduced, and caterers ensure that meat, dairy products and eggs purchased are produced to high environmental and animal welfare standards. Palm oil use is also being minimised.

More broadly, we will encourage and support education settings to gather data and take action on food waste and to share their evidence-based best practice for sustainable waste prevention and management. We will also work with Defra and the Waste and Resources Action Programme to share resources for schools and children that support food waste prevention.

Annex C - Student loans

This annex contains breakdowns of the overall student loan disclosures from note 14 analysed across the different loan portfolios.

Student loan plans

The Department’s student loans are split into different repayment plans depending upon which education sector the borrowers were members of. The plans are as follows:

Plan 1 loans – loans taken out for undergraduate courses that started before 1 September 2012
Plan 2 loans – loans taken out for new undergraduate courses that started on or after 1 September 2012 until 31 August 2023, including advanced learner loans
Plan 3 loans – loans for postgraduate master’s courses starting on or after 1 August 2016 and postgraduate doctoral courses starting on or after 1 August 2018
Plan 5 loans – loans taken out for new undergraduate courses that started on or after 1 August 2023, including advanced learner loans

Plan 2 will continue to be a live plan until existing borrowers who started their undergraduate courses on Plan 2 finish their courses.

Plan 4 loans are issued by Student Awards Agency Scotland so do not form part of the Group’s activities.

Student loan cash flows

Student loan cash flows and accounting are complex, involving multiple public sector bodies. To improve understanding, the following overview shows the cash flows generated by loan origination (cash flows 1 and 2) and loan repayment (cash flows 3 and 4) of student loans between the Department (loan owner), SLC (loan administrator), HMRC (repayment collector), students and HE providers.

The Department (as student loan originator and owner) provides funds to SLC to disburse to borrowers and higher education providers.

SLC creates student loan assets in 2 ways:

SLC transfers funds directly to higher education providers on behalf of students to cover their tuition fees
SLC passes across student support payments to students

After graduation, graduates repay their loans through one of the following routes:

directly to SLC, usually at the end of their loan or if residing overseas
indirectly through HMRC via their UK employer’s PAYE or personal self-assessment process

SLC and HMRC send repayments back to the Department to repay the student loans.

SLC administers student loans on behalf of the Department, distributing tuition fees to HE providers (on behalf of borrowers) and student support loans directly to borrowers. SLC also administers student loan portfolios for the devolved administrations in Scotland, Wales and Northern Ireland. Student loans originated by the devolved administrations, which are administered by SLC are not included in this ARA, they are owned and recognised by the respective administrations.

Repayments are primarily collected by HMRC through the PAYE (via employers) and self-assessment (individuals) tax system. These repayments are then passed on to the Department. SLC also collects voluntary repayments from borrowers, including those living overseas. Acting as loan servicer, SLC forwards the direct repayments to the Department and updates borrowers’ loan accounts with the latest information on repayments collected by HMRC or directly by SLC itself.

Student loan spending control

The treatment described here does not affect how student loans are accounted for, annual fair value movements continue to be fully recognised as a gain or loss in SoCNE in the year to which they relate. The spending control, agreed with HMT, operates through the application of a ‘management charge’ if fair value losses exceed limits agreed with HMT. When levied, the management charge does not represent additional costs to the Department. Instead, the charge changes which budget types the fair value loss is scored to.

The Department and HMT have agreed separate thresholds applicable to the initial fair value loss on loan origination and the annual fair value movement for existing loans. The initial fair value loss exceeded the spending control threshold in the 2020 to 2021 and 2021 to 2022 financial years which resulted in the management charge being levied in those years.

Under the agreement, fair value losses in excess of the agreed thresholds are recognised in RAME instead of ringfenced RDEL. Following the initial RDEL-RAME switch, the value is unwound over thirty years through non-ringfenced RDEL, starting the year after the switch. This process has no net effect on the Department’s reported outturn in any given year since the balances sum to zero, though there are effects on the separate RAME and RDEL outturn balances.

Carrying values of student loans

The following tables provide additional analysis of the headline movements in carrying value shown in note 14.1 across the different loan plans.

2025 (£million)

Loan movements	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Balance at 1 April 2024	13,164	127,791	6,252	3,775	150,982
New loans issued	0	9,671	757	10,234	20,662
Repayments	-1,477	-2,870	-441	-42	-4,830
Write-offs	-103	-200	-6	-1	-310
Fair value gain or (loss)	-27	-5,506	-415	-2,690	-8,638
Balance at 31 March 2025	11,557	128,886	6,147	11,276	157,866
Disclosed as	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Current assets	1,384	3,472	580	50	5,486
Non-current assets	10,173	125,414	5,567	11,226	152,380
Total	11,557	128,886	6,147	11,276	157,866

2024 (£million)

Loan movements	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Balance at 1 April 2023	14,662	118,158	4,984	0	137,804
New loans issued	0	15,769	742	3,663	20,174
Repayments	-1,745	-2,285	-363	-13	-4,406
Write-offs	-31	-88	-2	0	-121
Fair value gain or (loss)	278	-3,763	891	125	-2,469
Balance at 31 March 2024	13,164	127,791	6,252	3,775	150,982
Disclosed as	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Current assets	1,756	2,105	372	0	4,233
Non-current assets	11,408	125,686	5,880	3,775	146,749
Total	13,164	127,791	6,252	3,775	150,982

Table 93: Current year student loan carrying value movements (£billion)

Loan movements	Value
Opening carrying value	151.0
New loans advanced	20.7
Loan repayments	-4.8
Write-offs	-0.3
Fair value loss	-8.6
Closing carrying value	157.9

Face values of student loans

The following tables provide additional analysis of the headline movements in face value shown in note 14.1 across the different loan plans.

2025 (£million)

Loan movements	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Balance at 1 April 2024	28,054	196,438	5,823	3,733	234,048
New loans issued	0	9,671	757	10,234	20,662
Interest charged	1,356	12,771	479	459	15,065
Repayments	-1,477	-2,870	-441	-42	-4,830
Write-offs	-103	-200	-6	-1	-310
Balance at 31 March 2025	27,830	215,810	6,612	14,383	264,635

2024 (£million)

Loan movements	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Balance at 1 April 2023	28,203	170,017	5,043	0	203,263
New loans issued	0	15,769	742	3,663	20,174
Interest charged	1,627	13,025	403	83	15,138
Repayments	-1,745	-2,285	-363	-13	-4,406
Write-offs	-31	-88	-2	0	-121
Balance at 31 March 2024	28,054	196,438	5,823	3,733	234,048

Table 94: Current year student loan face value movements (£billion)

Loan movements	Value
Opening face value	234.0
New loans advanced	20.7
Interest charged	15.1
Loan repayments	-4.8
Write-offs	-0.3
Closing face value	264.6

Comparison of carrying value to face value

Table 95 compares the face value of student loans (which equates to what borrowers see) against their carrying value in the ARA, split into the 4 loan books, over the last 9 years. Note 14 and this annex provide reconciliations between face and carrying values. The figure illustrates the closed nature of the Plan 1 loan book, which is now in run-off, and the active status of the Plans 3 and 5 which are still advancing loans. Plan 2 has now closed but will continue to issue a small volume of new loans to existing Plan 2 borrowers. Plan 2’s carrying and face values will start to fall in the near future as it moves fully into run-off.

Table 95: Comparison of carrying values to face values (£billion)

	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025
Carrying value – total	56.9	61.3	60.6	67.9	69.2	77.4	98.0	137.8	151.0	157.9
Carrying value – Plan 1	33.7	29.7	26.3	22.8	19.6	18.4	15.1	14.7	13.2	11.6
Carrying value – Plan 2	23.2	31.6	34.4	43.5	47.3	55.8	78.8	118.2	127.8	128.9
Carrying value – Plan 3	N/A	N/A	N/A	1.6	2.4	3.2	4.1	5.0	6.3	6.1
Carrying value – Plan 5	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	3.8	16.7
Face value – total	75.8	88.8	101.0	115.8	120.3	141.8	178.6	203.3	234.0	264.6
Face value – Plan 1	44.5	42.8	37.9	33.2	33.8	34.2	29.3	28.2	28.1	27.8
Face value – Plan 2	31.3	46.0	63.1	80.9	84.7	105.0	145.0	170.0	196.4	215.8
Face value – Plan 3	N/A	N/A	N/A	1.7	1.8	2.6	4.3	5.0	5.8	6.6
Face value – Plan 5	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	3.7	14.4

Fair value movements

The following tables analyse the headline fair value changes shown in note 14.2 across the different loan plans. The sign convention for losses and gains is consistent with the previous section, losses are positive numbers and gains are negative.

2025 (£million)

	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Overall annual fair value gain or (loss) – calculated	27	-5,506	-415	-2,690	-8,638
Which can be disaggregated into the following main drivers:	-	-	-	-	-
Initial fair value loss on loan origination	0	-3,110	-14	-2,998	-6,122
Annual revaluation fair value loss:	-	-	-	-	-
write-offs	103	200	6	1	310
impact of changes in assumptions and modelling	0	450	147	-983	-386
operational costs	11	-25	-1	-44	-59
discount rate change	23	241	10	6	280
unwinding of the discount	296	3,231	289	186	4,002
residual fair value movement	-460	-6,493	-852	1,142	-6,663

2024 (£million)

	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Overall annual fair value gain or (loss) – calculated	278	-3,763	891	125	-2,469
Which can be disaggregated into the following main drivers:	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Initial fair value loss on loan origination	0	-4,688	-14	-1,064	-5,766
Annual revaluation fair value loss:	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
write-offs	31	88	2	0	121
impact of changes in assumptions and modelling	0	-423	124	-601	-900
operational costs	19	-126	-4	-13	-124
discount rate change	-203	-1,795	-76	0	-2,074
unwinding of the discount	485	4,525	349	69	5,428
residual fair value movement	-54	-1,344	510	1,734	846

Sensitivity analysis

The tables provide additional analysis of the headline sensitivities shown in note 14.4 across the different plans.

Multiple factors

The following tables illustrate the effect of varying more than a single valuation model input. The 4 situations are as follows:

scenario 1 – discount rate increased by 0.2%, earnings up by 1%
scenario 2 – discount rate increased by 0.2%, earnings down by 1%
scenario 3 – discount rate decreased by 0.2%, earnings up by 1%
scenario 4 – discount rate decreased by 0.2%, earnings down by 1%

2025 (£million)

Impacts	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Year end carrying value	11,557	128,886	6,147	11,276	157,866
Impact on carrying value from:	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Scenario 1	757	8,574	991	323	10,645
Scenario 2	-644	-8,907	978	-482	-9,055
Scenario 3	937	11,088	1,100	577	13,702
Scenario 4	-493	-6,788	1,088	-256	-6,449

2024 (£million)

Impacts	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Year end carrying value	13,164	127,791	6,252	3,775	150,982
Impact on carrying value from:	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Scenario 1	802	8,034	399	91	9,326
Scenario 2	-662	-8,893	367	-177	-9,365
Scenario 3	1,034	10,970	522	204	12,730
Scenario 4	-500	-6,394	491	-76	-6,479

Single factors

RPI

2025 (£million)

Impacts	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Value applied in year end valuation	3.45%	3.45%	3.45%	3.45%	-

	Plan 1 loans £m	Plan 2 loans £m	Plan 3 loans £m	Plan 5 loans £m	Total £m
Year end carrying value	11,557	128,886	6,147	11,276	157,866
Impact on carrying value from: an increase in RPI by 1%	-867	-21,037	914	-1,646	-22,636
Impact on carrying value from: a decrease in RPI by 1%	1,167	24,013	1,157	1,442	27,779
Impact on carrying value from: an increase in RPI by 2%	-1,856	-40,654	779	-3,446	-45,177
Impact on carrying value from: a decrease in RPI by 2%	2,238	46,653	1,264	2,478	52,633

2024 (£million)

Impacts	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Value applied in year end valuation	4.3%	4.3%	4.3%	4.3%	-

	Plan 1 loans £m	Plan 2 loans £m	Plan 3 loans £m	Plan 5 loans £m	Total £m
Year end carrying value	13,164	127,791	6,252	3,775	150,982
Impact on carrying value from: an increase in RPI by 1%	-1,021	-21,374	264	-613	-22,744
Impact on carrying value from: a decrease in RPI by 1%	1,357	24,692	622	564	27,235
Impact on carrying value from: an increase in RPI by 2%	-2,131	-40,981	79	-1,261	-44,294
Impact on carrying value from: a decrease in RPI by 2%	2,594	48,615	793	1,002	53,004

Loan repayment threshold

2025 (£million)

Impacts	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Value applied in year end valuation	24,990	27,295	21,000	25,000	-
Year end carrying value	11,557	128,886	6,147	11,276	157,866
Impact on carrying value from: an increase in the threshold by £1,000	-223	-2,202	1,039	-111	-1,497
Impact on carrying value from: a decrease in the threshold by £1,000	471	4,131	1,038	224	5,864

2024 (£million)

Impacts	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Value applied in year end valuation	24,990	27,295	21,000	25,000	-
Year end carrying value	13,164	127,791	6,252	3,775	150,982
Impact on carrying value from: an increase in the threshold by £1,000	-275	-2,327	420	-37	-2,219
Impact on carrying value from: a decrease in the threshold by £1,000	612	4,405	465	68	5,550

Budgetary performance (outturn)

The following tables provide an analysis of the current year budgetary outturn for student loans across the different plans and budget categories. Positive numbers represent costs or losses, whereas negative numbers indicate benefits or gains. The tables begin with the total outturn reported for student loans broken down by activity type and then by budget class. Follow-on tables then provide further analysis of each activity type by budget class.

2025

Summary values (£million)

Outturn by activity type	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Net lending	-18	19,772	801	10,652	31,207
Fair value (gain) or loss on loan origination	0	3,110	14	2,998	6,122
Annual fair value (gain) or loss	27	2,396	401	-308	2,516
Total	9	25,278	1,216	13,342	39,845
Outturn by budget class	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
CAME	-121	19,572	795	10,651	30,897
RAME	-319	-3,256	-316	66	-3,825
RDEL	449	8,962	737	2,625	12,773
Total	9	25,278	1,216	13,342	39,845

Further analysis (£million)

Net lending (CAME)	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Loan advances	0	9,671	757	10,234	20,662
Repayments	-1,477	-2,870	-441	-42	-4,830
Capitalised interest	1,356	12,771	479	459	15,065
Write-offs	103	200	6	1	310
Total	-18	19,772	801	10,652	31,207
Fair value (gain) or loss on loan origination	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
RDEL: Impact of policy changes	0	3	0	14	17
RDEL: Residual value change	0	2,820	12	2,648	5,480
RAME: Impact of discount rate change	0	287	2	336	625
Sub-total	0	3,110	14	2,998	6,122
Annual fair value (gain) or loss	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
RDEL: Modelling differences	0	-379	-128	1,061	554
RDEL: Operational costs movement	-11	25	1	44	59
RDEL: Residual value change	460	6,493	852	-1,142	6,663
RAME: Unwinding the discount	-296	-3,231	-289	-186	-4,002
RAME: Impact of discount rate change	-23	-241	-10	-6	-280
RAME: Modelling differences	0	-71	-19	-78	-168
CAME: Write-offs	-103	-200	-6	-1	-310
Sub-total	27	2,396	401	-308	2,516
Total fair value (gain) or loss	27	5,506	415	2,690	8,638

2024

Summary values (£million)

Outturn by activity type	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Net lending	-87	26,597	784	3,733	31,027
Fair value (gain) or loss on loan origination	0	4,688	14	1,064	5,766
Annual fair value (gain) or loss	-278	-925	-905	-1,189	-3,297
Total	-365	30,360	-107	3,608	33,496
Outturn by budget class	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
CAME	-118	26,509	782	3,733	30,906
RAME	-282	-2,678	-307	-58	-3,325
RDEL	35	6,529	-582	-67	5,915
Total	-365	30,360	-107	3,608	33,496

Further analysis (£million)

Net lending (CAME)	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
Loan advances	0	15,769	742	3,663	20,174
Repayments	-1,745	-2,285	-363	-13	-4,406
Capitalised interest	1,627	13,025	403	83	15,138
Write-offs	31	88	2	0	121
Total	-87	26,597	784	3,733	31,027
Fair value (gain) or loss on loan origination	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
RDEL: Impact of policy changes	0	5	0	3	8
RDEL: Residual value change	0	4,462	13	1,001	5,476
RAME: Impact of discount rate change	0	221	1	60	282
Sub-total	0	4,688	14	1,064	5,766
Annual fair value (gain) or loss	Plan 1 loans	Plan 2 loans	Plan 3 loans	Plan 5 loans	Total
RDEL: Modelling differences	0	592	-89	650	1,153
RDEL: Operational costs movement	-19	126	4	13	124
RDEL: Residual value change	54	1,344	-510	-1,734	-846
RAME: Unwinding the discount	-485	-4,525	-349	-69	-5,428
RAME: Impact of discount rate change	203	1,795	76	0	2,074
RAME: Modelling differences	0	-169	-35	-49	-253
CAME: Write-offs	-31	-88	-2	0	-121
Sub-total	-278	-925	-905	-1,189	-3,297
Total fair value (gain) or loss	-278	3,763	-891	-125	2,469

Annex D - Regulatory reporting

The core tables represent expenditure for resource and capital, set for each year in the spending review process (amended to incorporate transfers of functions to other government departments as they have arisen). These tables are not reported on the same basis as the ﬁnancial statements disclosures, with differing categories and headings based on the Department’s Estimate allocation of activities and budgeting not financial reporting terms. The core tables are produced automatically from the HMT system (Online System for Central Accounting and Reporting (OSCAR)), which is used by all central government departments to record their spending and plans. At 31 March 2025, OSCAR reﬂects the position agreed at the 2024 Budget. This does not match the outturn in previous years’ ﬁnancial statements, and some spending may also appear on different lines, this may frequently result in restatement of the previous years’ core table ﬁgures.

Table 1: Total Departmental Group spending

Summary (£million)

Budget	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
Resource DEL	75,220	72,946	67,155	87,627	102,122	100,620
Resource AME	1,768	-5,180	-14,314	-3,327	-3,818	-4,038
Total resource	76,988	67,766	52,841	84,300	98,304	96,582
Capital DEL	4,830	4,798	5,948	6,636	5,602	6,776
Capital AME	21,144	21,863	24,828	30,913	30,907	29,751
Total capital	25,974	26,661	30,776	37,549	36,509	36,527
Total Departmental spending	102,962	94,427	83,617	121,849	134,813	133,109
Of which: total DEL	80,050	77,744	73,103	94,263	107,724	107,396
Of which: total AME	22,912	16,683	10,514	27,586	27,089	25,713

Total Departmental Group spending is the sum of resource spending and capital expenditure less depreciation. Similarly, total DEL is the sum of the resource DEL budget and capital DEL budget less depreciation, and total AME is the sum of resource AME spending and capital AME expenditure less depreciation in AME.

Resource spending (£million)

Resource DEL	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
A Activities to support all functions	437	496	532	510	532	669
B Other school funding (Department)	1,050	851	1,034	902	1,109	1,275
C Other school funding (ALB) (net)	2	2	3	8	13	13
D Families and children services (Department)	908	411	509	747	1,146	770
E Families and children services (ALB) (net)	10	12	16	19	15	17
F Standards and Testing Agency	22	25	44	47	50	56
G Teaching Regulation Agency	7	8	10	14	17	14
H Education and Skills Funding Agency	137	123	74	89	43	0
I Apprenticeships	1,863	2,455	2,464	2,512	2,781	3,075
J Grants to LA schools and early years	31,469	32,101	33,906	35,600	38,410	44,303
K Grants to academies	25,252	27,177	29,581	32,662	35,811	36,062
L Higher Education	7,247	2,331	-8,623	6,710	13,668	6,194
M Further Education	5,196	5,319	5,923	6,067	6,781	6,490
N Higher Education (ALB) (net)	1,599	1,612	1,654	1,711	1,717	1,653
O Further Education (ALB) (net)	21	23	28	29	29	29
Total resource DEL	75,220	72,946	67,155	87,627	102,122	100,620
Of which:	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
staff costs	606	659	727	746	759	629
purchase of goods and services	614	868	1,003	1,152	1,211	938
income from sale of goods and services	-139	-82	-82	-85	-84	-2
current grants to central government (net)	25,854	27,540	29,928	38,645	42,187	43,078
current grants to local government (net)	32,127	32,595	34,767	36,418	39,784	40,704
current grants to persons and non-profit bodies (net)	9,272	9,724	10,180	4,785	5,443	4,528
current grants abroad (net)	-108	-104	-100	0	0	0
rentals	16	25	5	0	-7	0
depreciation	64	75	91	92	131	5,491
impairment	-8	0	0	0	2	0
student loan impairment	6,614	1,647	-9,390	5,908	12,774	0
interest payable to private sector	53	48	42	39	39	0
take up of provisions	124	0	7	2	0	0
profit or loss on disposal of assets	5	0	58	8	11	0
other resource	126	-49	-81	-83	-128	5,254
Resource AME	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
P Activities to support all functions (Department)	46	15	35	2	47	6
P Activities to support all functions (ALB)	0	0	0	0	1	0
Q Executive Agencies	1	-15	14	-7	-6	0
R Higher Education	1,778	-5,170	-14,277	-3,320	-3,829	-4,061
S Further Education	-4	-42	-78	-20	-40	-2
T Higher Education (ALB) (net)	-2	1	1	1	3	1
U Further Education (ALB) (net)	-51	31	-9	17	6	18
Total resource AME	1,768	-5,180	-14,314	-3,327	-3,818	-4,038
Of which:	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
staff costs	48	39	44	52	60	57
purchase of goods and services	9	24	30	22	44	74
income from sales of goods and services	0	0	0	0	0	-52
current grants to central government (net)	-4	0	0	0	0	0
current grants to persons and non-profit bodies (net)	97	101	66	148	186	173
rentals	1	1	1	1	1	0
depreciation	1	1	1	1	1	8,723
impairment	49	-1,727	-5,457	9,694	11,054	0
student loan impairment	1,771	1,427	-177	2,356	176	0
levies, licences and regulatory fee income	-220	-137	-196	-227	-267	0
fees and charges	-1	-1	-1	-1	-1	0
take up of provisions	17	-47	6	36	-33	120
release of provisions	0	0	0	0	0	-127
unwinding of discount on provisions	-2	-3	-12	2	5	0
interest payable to private sector (net)	-3	-4,862	-8,652	-15,137	-15,065	0
profit or loss on disposal of assets (net)	2	0	0	0	0	0
other resource	3	4	33	-274	21	-13,006
Total resource	76,988	67,766	52,841	84,300	98,304	96,582

Capital spending (£million)

Capital DEL	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
A Activities to support all functions	33	58	119	167	79	121
B Other school funding (Department)	2,122	1,430	1,190	1,702	1,949	2,337
C Other school funding (ALB) (net)	-30	-29	-33	-25	-18	-25
D Families and children services (Department)	3	3	19	141	58	99
E Families and children services (ALB) (net)	2	2	3	2	2	3
F Standards and Testing Agency	2	1	4	4	6	7
H Education and Skills Funding Agency	9	4	7	10	-7	0
I Apprenticeships	2	5	4	4	6	10
J Grants to LA schools and early years	1,126	1,888	2,695	2,481	1,242	1,851
K Grants to academies	1,041	1,032	1,334	1,115	1,167	1,342
L Higher Education	13	41	30	25	17	14
M Further Education	307	211	449	773	918	900
N Higher Education (ALB) (net)	199	151	125	237	182	115
O Further Education (ALB) (net)	1	1	2	0	1	2
Total capital DEL	4,830	4,798	5,948	6,636	5,602	6,776
Of which:	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
staff costs	3	4	4	7	8	7
purchase of goods and services	2	7	11	9	11	16
capital support for central government (net)	3,062	2,405	2,397	3,123	3,931	4,407
capital support for local government (net)	1,292	1,998	2,648	2,623	1,289	2,173
capital grants to persons and non-profit bodies (net)	606	404	707	368	237	77
capital grants to private sector companies (net)	114	18	11	-7	19	-164
purchase of assets	-222	35	232	471	95	222
income from sales of assets	0	0	0	0	0	-322
net lending to the private sector and abroad	-42	-50	-46	-40	-39	-40
other capital	15	-23	-16	82	51	400
Capital AME	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
P Activities to support all functions (Department)	0	0	2	3	3	2
R Higher Education	20,942	21,708	24,680	30,789	30,853	29,726
S Further Education	203	159	145	118	43	0
T Higher Education (ALB) (net)	0	0	0	0	2	0
U Further Education (ALB) (net)	-1	-4	1	3	6	23
Total capital AME	21,144	21,863	24,828	30,913	30,907	29,751
Of which:	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
purchase of assets	-1	-1	2	7	5	23
net lending to the private sector and abroad	21,146	21,867	24,824	30,905	30,897	29,726
take up of provision	0	0	0	0	4	2
other capital	-1	-3	2	1	1	0
Total capital	25,974	26,661	30,776	37,549	36,509	36,527

Depreciation in the table above also includes amortisation, non-financial instrument impairment and revaluation. Pension schemes report under IAS 19, the pension figures include cash payments and contributions received, as well as certain non-cash items.

Total departmental staff costs within the table differs from those published elsewhere in this ARA, because staff costs include early departure costs and lump sum payments that have been presented elsewhere in the Accountability Report.

Total departmental revenue and capital costs within the table differ from those published elsewhere in this ARA due to differences in compilation methodology between these core tables and this ARA.

Total departmental provisions within the table differ from those published elsewhere in this ARA, because the balances in the table include costs arising from an NDPB pension scheme, which have been presented differently elsewhere in this ARA.

Table 2: Administration costs (£million)

Resource DEL	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
A Activities to support all functions	370	396	429	407	434	531
C Other school funding (ALB) (net)	1	2	3	6	7	7
E Families and children services (ALB) (net)	2	2	2	4	4	4
F Standards and Testing Agency	2	2	3	3	3	3
H Education and Skills Funding Agency	75	72	47	49	44	0
N Higher Education (ALB) (net)	48	56	51	50	46	50
O Further Education (ALB) (net)	11	10	11	11	9	8
Total administration budget	509	540	546	530	547	603
Of which:	2020 - 2021 Outturn	2021 - 2022 Outturn	2022 - 2023 Outturn	2023 - 2024 Outturn	2024 - 2025 Outturn	2025 - 2026 Plans
staff costs	386	414	426	426	432	473
purchase of goods and services	125	119	118	106	106	116
income from sales of goods and services	-1	-3	-3	-43	-48	-2
rentals	14	23	11	7	-1	0
depreciation	35	33	48	51	49	71
other resource	-50	-46	-54	-17	9	-55

Annex E - Analysed performance reporting (£million)

Body	Total operating income	Total operating expenditure	Other expenditure	Net expenditure for the year (including financing)	Number of permanently employed staff	Permanently employed staff costs	Number of other employees	Other staff costs
Department	-291	14,444	8,974	23,127	6,845	442	230	32

Executive agencies	Total operating expenditure	Other expenditure	Net expenditure for the year (including financing)	Number of permanently employed staff	Permanently employed staff costs	Number of other employees
Education and Skills Funding Agency	78,602	7	78,609	600	38	4
Standards and Testing Agency	53	0	53	132	8	1
Teaching Regulation Agency	19	0	19	93	5	6

Non-departmental public bodies	Total operating income	Total operating expenditure	Other expenditure	Net expenditure for the year (including financing)	Number of permanently employed staff	Permanently employed staff costs	Number of other employees	Other staff costs
Aggregator Vehicle Plc	0	0	-1	-1	0	0	0	0
Children’s Commissioner’s Office*	0	3	0	3	25	2	4	0
Construction Industry Training Board*	-298	308	0	10	830	50	56	3
Engineering Construction Industry Training Board	-37	41	-1	3	102	7	1	0
Institute for Apprenticeships and Technical Education*	0	29	0	29	280	23	5	0
Located Property Limited*	0	9	0	9	54	5	2	0
Oak National Academy*	0	16	0	16	92	8	95	1
Office for Students*	-34	1,624	0	1,590	473	35	12	1
Student Loans Company Limited*	-2	293	2	293	3,146	144	3	0
Social Work England*	-10	23	0	13	227	11	10	0
Group	-672	95,464	8,981	103,773	12,899	778	429	37

The balances show current year Group activities disaggregated across Group bodies based on their published ARAs. Where intra-Group activities occur, these balances have been eliminated between the individual bodies involved. Consequently, the balances disclosed here may differ from those presented in each body’s own ARA.

Group bodies marked with an asterisk in the table have not yet finalised their ARAs at the date this Group ARA was published. In such instances draft numbers are included for those bodies. Management does not consider the use and disclosure of unaudited balances in these limited circumstances to have a material impact on reported Group performance or balances.

Resource spending	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Families Group	8,260	8,265	5,539	5,549
Schools Group	63,993	63,994	61,138	61,138
Skills Group	13,389	15,008	12,140	13,713
Regions Group	144	144	152	152
Strategy Group	109	109	77	77
Operations and Infrastructure Group	798	798	44	44
Grant-in-aid	1,941	0	1,969	0
Sub-total	88,634	88,318	81,059	80,673
Capital spending	2024 - 2025 Department & Agencies	2024 - 2025 Group	2023 - 2024 Department & Agencies	2023 - 2024 Group
Families Group	58	58	141	141
Schools Group	967	967	4,890	4,890
Skills Group	814	978	653	832
Regions Group	56	56	37	37
Strategy Group	0	0	1	1
Operations and Infrastructure Group	3,445	3,447	248	251
Sub-total	5,340	5,506	5,970	6,152
Total	93,974	93,824	87,029	86,825

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Applies to England

1. Performance report

1.1 Secretary of State’s foreword

1.2 Permanent Secretary’s foreword

2. Overview

2.1 Our operating model

How we are structured

2.2 Our vision

Opportunity mission

Growth mission

2.3 Our performance at a glance

Pillar 1: Best start in life

Pillar 2: Every child achieving and thriving

Pillar 3: Skills for opportunity and growth

Pillar 4: Family security – keeping children safe and tackling child poverty

3. The sectors we served

3.1 Funding

3.2 Sector metrics

3.3 Workforce data

4. Where we spent taxpayers’ money

4.1 Outturn analysis

4.2 Outturn analysis by Group body

4.3 Summary of key risks and issues

5. Structure of the Departmental Group

5.1 Executive agencies

5.2 Non-departmental public bodies

Executive NDPBs

Advisory NDPBs

Other bodies

5.3 Excluded sectors

Academy sector

Further Education (FE) sector

5.4 Non-Group bodies

Non-ministerial departments

Other bodies

5.5 Operational structure

Operational units

Families Group

Schools Group

Skills Group

Regions Group

Strategy Group

Operations and Infrastructure Group

Reporting in this ARA

6. Financial review of the year

6.1 Introduction

6.2 Financial reporting frameworks

6.3 Performance reporting

Performance terminology

Budget classifications

6.4 Outturn spend

Overspend

6.5 Estimate to outturn comparison

6.6 Student loans reporting

6.7 Variances discussion

6.8 Trends in TME

Resource DEL–Programme

Capital DEL

Resource AME

Capital AME

Resource DEL–Admin

6.9 Reconciliation of outturn to net expenditure

Net expenditure

7. Performance analysis

7.1 Performance against the opportunity mission

UN Sustainable Development Goals

7.2 Pillar 1: Best start in life

Activities

7.3 Pillar 2: Every child achieving and thriving

Outcome KPIs

7.4 Pillar 3: Skills for opportunity and growth

7.5 Pillar 4: Family security – keeping children safe and tackling child poverty

7.6 Key risks and issues

Risk 1 – Schools and further education workforce

Risk 2 – High needs cost pressures

Risk 3 – Education estate

Risk 4 – Higher education financial failure

Risk 5 – Cyber security

7.7 Fraud and error