New spending#

Industry skills boards #

• $3 million opex

This initiative aligns funding with strategic activities. It provides time-limited and targeted funding in 2026 to support industry skills boards’ (ISBs) strategic workforce analysis and planning function during their initial establishment via reprioritisation of forecast underspends resulting from limited uptake of the Apprenticeship Boost payment from Vote Social Development in 2025/26.

Youth Guarantee#

• $86.908 million opex

This initiative provides funding in a tagged contingency to fund an additional 1,000 Youth Guarantee places on an ongoing basis from 1 July 2026. 

As part of funding reprioritised from the end of the Fees Free scheme to expand fees free Vocational Education provision, this funding will support more learners aged 16 to 24 to access foundation education.

Ngarimu VC and 28th (Māori) Battalion Memorial Scholarships Fund#

• $0.4 million opex

This initiative delivers 5 additional scholarships from the Ngarimu VC & 28th (Māori) Battalion Memorial Fund, increasing the annual number of awards to 14.

Cost pressures#

Funding additional demand in 2026 and 2027#

• $284.021 million opex

This initiative provides funding to enable the Tertiary Education Commission (TEC) to fund 99% of forecast tertiary education and training volume at Levels 3 to 10, over 2 calendar years. The initiative also includes funding for the TEC’s balance sheet mechanism and for formula-based equity funding. 

This will ensure the system can respond to expected demand, in line with Government’s focus on providing learners with skills for employability and productivity and reducing the number of young people who are under- or unemployed.

Increases to foundation education subsidies#

• $24.356 million opex

This initiative provides funding for a 2% increase to tertiary education tuition and training subsidies for foundation education provision.

 This increase in funding, as part of a package reprioritised from the end of the Fees Free scheme to expand fees free vocational education provision, will support providers of foundation education to address ongoing cost pressures and maintain the quality of delivery.

Increased tuition fees#

• $35.593 million operating funding (Vote Revenue)

This initiative provides funding to enable Tertiary Education Organisations to increase tuition and training fees charged to learners by up to 6% in 2027 to support providers to address ongoing costs and maintain the quality of tertiary education delivery. 

This incurs Crown expenditure through the final-year Fees Free policy in Vote Revenue and the Student Loan Scheme. Flow-on impacts on Student Loans lending that is expected to be repaid in Vote Revenue and Vote Social Development are managed outside Budget allowances.

Reprioritisation#

Apprenticeship boost #

• $3 million in reprioritised operating funding (Vote Social Development)

This initiative reprioritises funding from Vote Social Development that will likely not be required to fund Apprenticeship Boost for employers of eligible existing and incoming apprentices in 2025/26. A portion of forecast underspends will be retained to allow the Ministry of Social Development to respond to a possible increase in uptake ahead of the end of the financial year.

International PhDs#

This initiative reprioritises operating funding from limiting growth in funded international PhD students to provide time-limited funding to support the Ministry of Education to conduct a review of the tertiary education funding system.

Savings#

Baseline savings#

• $37.596 million opex savings

This savings initiative delivers on the baseline reduction target for Vote Tertiary Education. The savings are delivered from reductions in departmental funding for the Ministry of Education and agency funding for the Tertiary Education Commission from 2026/27, and savings from reductions to the Tertiary Tuition and Training Multi-Category Appropriation from 1 January 2028.

Ending the final-year Fees-Free scheme#

• $1,032.939 million in operating savings (Vote Revenue)

This initiative generates savings by ending the final-year Fees Free scheme to provide additional funding for fees free Vocational Education provision at secondary and foundation education levels. 

The final-year Fees Free scheme will close at the end of 2026 and eligible learners who completed a qualification in 2026 will have 12 months following completion to claim their fees, up to 31 December 2027. 

Funding is provided to support the Tertiary Education Commission and the Ministry of Social Development to meet costs involved with ending the scheme. Savings from ending the scheme are generated in Vote Revenue and reflect the average annual forecast cost of the scheme over a 10-year period, accounting for a material increase of the cost in outyears.