What will ‘Rewiring the State’ mean for England’s skills system?

Last week the Cabinet Office released a statement about the Government’s intentions for ‘Rewiring the State’.

The Government’s argument is that Whitehall controls too many separate funding streams and services. Education, adult skills, employment support, health, transport and economic development are consequently commissioned through different institutions, with different boundaries and objectives. Rewiring is intended to put more of these responsibilities under the strategic direction of elected mayors.

The fact that this has been announced directly by the Cabinet Office is, in itself, revealing. It signals the ‘whole-of-Government’ scope for decentralisation with the plan by-passing single departments to drive structural changes across HM Treasury and Whitehall ministries.

For longstanding ‘localists’ the statement has been enthusiastically received. Local and regional figures have welcomed the breadth of its ambition for public service integration and fundamental shifts in power. There have, however, been warnings and concerns from some quarters. The Institute for Fiscal Studies (IFS) highlighted some of the funding tensions that may occur from proposed fiscal devolution. While some education and sector leaders have warned that a rushed 2028 devolution deadline could increase the risk of regional inequalities with uneven opportunities depending on geography.

The important qualification is that the Cabinet statement set out an intended direction. It is not yet a complete funding framework. A dedicated white paper will be published this autumn alongside the Budget.

What “rewiring” means for education and skills

“Rewiring the state” amounts to a change in who governs education and skills, how services are joined together and, increasingly, who controls the money. Some elements - particularly the devolution of adult skills funding - are already operating. Others, including mayoral control of 16–19 budgets and the replacement of grants with shares of local income tax, still require detailed design and implementation. But for post-16 education, the statement indicates a move away from a predominantly national, programme-led system towards one shaped around regional economies and labour markets.

In principle this means:

• “Devolution by default”: ministers will be expected to justify why a function should remain national.

• Mayoral control of the budgets supporting technical and vocational education for 16–19-year-olds.

• Regionally shaped technical and vocational pathways beginning at 14, including work experience.

• Devolution of employment support, allowing it to be integrated with skills, health and youth services.

• Greater pooling of funding for preventative interventions, subject to national standards.

• A stronger relationship between skills provision, local growth plans, inward investment and regional sector clusters.

• Potential transfer of functions and resources currently held by government departments and arm’s-length bodies.

The particularly significant development is the commitment to give mayors control of the budget for technical and vocational provision for 16–19-year-olds. Until now, devolution has largely concentrated on adult skills. The statement therefore crosses an important boundary: it potentially gives regional government influence over the shape of mainstream post-16 provision, rather than merely a role in adult retraining.

This does not necessarily mean that every 16–19 funding decision will be made by a mayor. National entitlements, qualification regulation, safeguarding and minimum standards are likely to remain national. The crucial questions - still unanswered - are whether mayors will control the whole 16–19 allocation, only technical and vocational elements, or a commissioning margin within a nationally determined formula.

What fiscal devolution will mean for funding

The Government has announced that, from 2028, central grants to mayoral strategic authorities will begin to be replaced by a share of locally generated income-tax receipts. This will sit alongside greater retention of business rates. Authorities will also gain access to an overnight visitor levy and potentially a share of increases in land value resulting from development.

The intention is not simply to provide another source of revenue. It is to change the incentives facing regional government:

A mayor who invests successfully in skills, employment, transport and economic development should eventually benefit from the resulting growth in earnings, employment and tax receipts.

This could support longer-term investment. Under the current system, a mayor may fund training but much of the financial return - higher income-tax receipts and lower benefit expenditure - flows back to the Treasury. Retaining a share of that return could create a stronger local incentive to invest in human capital.

But three distinctions are important.

First, this is initially described as a fiscally neutral transfer, not an automatic increase in total funding. Places will gain flexibility and potentially share in future growth, but they will not necessarily receive more money at the starting point.

Second, the income-tax share appears to fund strategic authorities generally. It has not yet been identified as a ring-fenced education or skills tax. Skills will therefore compete with transport, housing, employment support, innovation and other regional priorities.

Third, greater reliance on locally generated tax revenue creates an equalisation problem. Regions with high employment rates, high salaries and strong tax bases have much greater revenue-raising capacity than areas with low productivity and extensive skills needs. The Government has acknowledged the need to reconcile growth incentives with fairness between places but has not yet set out the formula. Without strong equalisation, fiscal devolution could reinforce rather than reduce spatial inequalities.

Adult skills provide an indication of how the new model may operate. In 2026–27, mayoral strategic authorities receive the core Adult Skills Fund, Free Courses for Jobs and Skills Bootcamps through non-ring-fenced Section 31 transfers. Cambridgeshire and Peterborough, for example, has an academic-year allocation of approximately £14.56 million. Authorities have greater freedom to combine these streams, although funding remains subject to assurance and accountability arrangements. Adult Skills Fund devolved allocations for 2026–27

The likely trajectory is therefore:

Present model	Emerging model
Separate national programmes	Larger regional funding envelopes
Detailed programme ring-fences	More local flexibility
Provider funding driven principally by national rules	Funding increasingly shaped by regional priorities
Short commissioning cycles	Potential for longer-term regional investment
Accountability to several departments and agencies	Stronger accountability to the mayor and local accounting officer
Spending treated primarily as programme expenditure	Greater emphasis on investment and measurable economic returns

Impact on universities

Universities are unlikely to become locally controlled institutions. Tuition-fee policy, student finance, degree-awarding powers, research assessment and the main national research funding system will remain principally national.

Their regional role will nevertheless become more important. Universities will increasingly be expected to participate in regional skills and growth systems by:

• developing higher technical, modular and professional provision aligned with local clusters;

• supporting technical pathways from FE into Levels 4–6;

• providing labour-market intelligence and evaluation;

• working with mayors on innovation districts, inward investment and business support;

• contributing to locally designed youth, employment and lifelong-learning pathways;

• aligning some later-stage innovation and knowledge-exchange activity with mayoral priorities.

For universities, the opportunity is to become indispensable regional institutions rather than simply national providers located in a region. Those with strong employer relationships, flexible provision and clear civic missions should gain influence and potentially funding.

The risk is fragmentation. A university recruiting across several regions could face different priorities, commissioning rules and reporting requirements in each. There is also a danger that fiscal devolution favours provision offering a visible short-term employment or tax return, while subjects, basic research and broader civic activities with longer-term benefits become harder to support.

Impact on FE colleges

FE colleges are likely to experience the most substantial change. They will be central to the new locally tailored technical route, but they will also be more directly exposed to mayoral priorities and commissioning decisions.

Potential benefits include:

• more stable relationships with regional government;

• provision planned around actual local investment and employer demand;

• better coordination of adult skills, 16–19 education, employment support and capital investment;

• greater scope to develop sector specialisms and Technical Excellence Colleges;

• stronger progression routes from age 14 through Levels 2–5;

• the possibility of multi-year funding rather than repeated short-term competitions.

But colleges may lose some institutional discretion if mayors acquire strong powers to determine the volume, location and occupational focus of provision. A tension could arise between serving the whole community - including essential skills, inclusion and second-chance education - and concentrating resources on sectors expected to generate economic growth.

Local competition may also intensify. Mayors may seek to rationalise duplicated provision, designate lead institutions or direct capital towards a smaller number of specialist centres. That could strengthen the system strategically while creating winners and losers institutionally.

Impact on independent training providers

Independent training providers could benefit from more flexible, locally commissioned provision, especially in specialist, employer-facing and rapid-response training. Their ability to adapt quickly could make them valuable partners in Skills Bootcamps, apprenticeships, employment programmes and modular retraining.

However, they face several risks:

• more variable commissioning and funding rules between regions;

• a shift towards larger, integrated contracts that smaller providers cannot bid for alone;

• greater dependence on subcontracting through colleges or regional prime contractors;

• short commissioning timescales despite the rhetoric of long-term funding;

• political preference for locally anchored public institutions;

• increased expectations around outcome data, employment progression and local economic impact.

The test will be whether mayors create genuine provider ecosystems or simply replace national procurement with regional procurement. If the latter occurs, the system will have changed its geography without changing its underlying structure.

Overall assessment

The core change is from provider-led delivery within national funding silos to place-led planning across education, skills, employment and economic development. Funding will increasingly follow regional strategies rather than stand-alone national programmes.

That could produce a more coherent system: a mayor could align new investment, transport, careers advice, FE capacity, university expertise, adult retraining and employment support around a regional sector such as life sciences, advanced manufacturing or clean energy. This is the strongest case for rewiring.

But devolution does not resolve the underlying adequacy of skills funding. Greater freedom to allocate an insufficient budget is not the same as greater investment. Nor should fiscal devolution make basic educational entitlement dependent on the strength of a local tax base.

The success of the reforms will therefore depend on five things:

1. A transparent national funding floor and strong fiscal equalisation.

2. Clarity about precisely which 16–19 budgets and decisions will be devolved.

3. Multi-year settlements that allow providers to invest in staff and facilities.

4. Regional governance in which universities, colleges, independent providers and employers help shape strategy rather than merely respond to tenders.

5. Protection for essential, inclusive and foundational education alongside provision linked directly to growth sectors.

Properly designed, rewiring could turn education and skills into part of a coherent place-based economic and social system. Poorly designed, it could replace national fragmentation with a patchwork of regional systems and transfer financial risk to places and providers without transferring sufficient resources.