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The money was cut as the enrolments were not as high as the Government was expecting.
At his pre-Budget speech today, Robertson said he had directed all ministers to cut 1 per cent of their spending in areas that were deemed the lowest priority.
"Out of this, we have identified just over $1 billion worth of spending over the forecast period that is no longer a priority or where the funding allocated is no longer needed."
One area of this underspend, Robertson said, was on the fees-free policy where enrolments have not meeting the Government's forecasts.
The $197 million has been reallocated to implementing reform of the vocational education section – an area that Education Minister Chris Hipkins is in the process of working through.
Robertson said this was an area where many have indicated they want reforms.
"And so do we.
"Put at its most simple, we need to value apprenticeships, trades and workplace training more.
"We need it to be higher quality, more accessible, more coordinated, and more relevant to businesses and regions."
Although the proposals are still being finalised, Robertson said the reprioritisation he has announced is an "initial indication of our commitment to making this work".
He said the issue that many businesses raise with him is the need for more skilled stall.
"For New Zealand to become a more production nation, it is vital for us to get this right – these reforms are an important step in that direction."