Autumn Statement 2016
Philip Hammond’s Autumn statement admitted that the fallout from even a good Brexit would blow a £59bn hole in public finance. Its conclusions therefore are based on a number of assumptions that may be subject to change, including the invoking of Article 50 and our exit from the EU taking place as planned, and slightly tighter immigration but not at the level envisioned by the Government. Immigration is important as it boosts GDP and tax revenue, and if it slows significantly this will affect government finances (for example, the current growth in employment forecast by OBR is mainly a result of net immigration).
The Statement and associated Office of Budget Responsibility (OBR) Economic and Fiscal Outlook contained precious little about education and skills, being more focussed on infrastructure. It also marked the last ever Autumn statement - future years will have a Spring statement to announce changes, with an Autumn budget to implement them. However, there were a couple of items of interest for adult learning and FE:
· Ring-fenced spending: The ring-fencing for certain departments remains, but although some have more money for capital expenditure, there is nothing extra for resources e.g. grant funds for education. Add to this the fact that inflation is starting to rise, and any cash-protection for post-16 learning will start to erode.
· European funds: No mention was made in either the Statement or the OBR report of what will happen when EU funds (such as ESF) disappear. There is more money for research to compensate for this aspect of reduced funding, but adult learning could suffer a much bigger impact from Brexit from a combination of frozen spending and nothing to replace lost ESF and other European project funding.
· Devolution and adult learning: Adult learning and the Work & Health Programme are likely to be part of most devolution deals (the Statement confirmed AEB devolution to London and Greater Manchester in 2019) but one worry is that there is no commitment to keeping this funding ring-fenced for adult education. Therefore, local devolved administrations will not have any obligation to spend the devolved funds on adult learning, except for some national entitlements such as Level 2. The decision about London also ignores calls from organisations such as the AoC to delay devolution as there is so much uncertainty and so few details about how it will work in practice (even more relevant now following revelations about alleged LEP dodgy dealings - see “News in Brief” for more details on that).
· Local Growth Fund: Local Growth Fund allocations of £1.8 billion to Local Enterprise Partnerships (LEPs) will be made, although there are no more details as yet. The £23 billion allocated for the National Productivity Investment Fund (NPIF) has nothing for education outside research and development spending. The rest will go on transport, housing and digital connectivity.
· Apprenticeships: Hammond again revised down the estimates of what the apprenticeship levy would raise to approximately £2.8 billion. This is of concern as lower economic growth leads to lower employer wage bills, including the estimated 19,150 expected to pay the UK Apprenticeship Levy. As Scotland, Wales and Northern Ireland now have their income from the levy fixed and guaranteed for the first three years, this means that any reduction in funds in the levy (e.g. from a further downgrade in economic performance and tax receipts) will have to be absorbed by England. It could also mean very little left for non-levy payers who currently provide more than half of the 905,000 apprenticeships.
· Another concern around Apprenticeships is the increasing trend to provide them at higher levels. This could impact on the targets if organisations use their levy to pay for fewer more expensive apprenticeships at management levels. This is especially the case with big public sector organisations who will be paying the levy but have little traditional use for apprenticeships. If they too start using their funds for higher levels, this has implications for non-levy payers and the government target.
· National Minimum Wage: The national minimum wage will rise from £7.20 an hour to £7.50 in April 2017. The NMW for Apprentices is also set to rise to £3.50 (from £3.40).
Read the 264-page Office for Budget Responsibility’s report underpinning the Statement