Will economic turmoil result in new spending cuts for college?
19th June 2019
Economically the new year started with stories of falling stock markets (both in China and the US) and a falling oil price (now down to $30). The Chancellor of the Exchequer, George Osborne, stoked some fears by talking about higher interest rates. He made this reference in a speech in Cardiff in which he said that the interest rates reached an ultra-low point to support the economic recovery. He described higher rates – when these happen – as a sign of economic health. If the fortunes of the UK economy do change, then this obviously raises questions about the robustness of the public spending plans announced in the Autumn Statement. Cuts were less than had been indicated by the Treasury back in July 2015 partly because of higher growth assumptions and a £27 billion accounting windfall which was dependent on technical assumptions about how much tax revenue can be raised. The Head of the Office of Budget Responsibility, Robert Chote, was asked about this in a session in the Scottish Parliament. His reply was that the £27 billion “we apparently found down the back of the sofa is not as much as it sounds” and that “what the sofa gives, the sofa can easily take away”. HM Treasury generally presents revised tax and spending plans at each “fiscal event”, i.e. the budget in March and the Autumn Statement in November. It is highly unlikely that there will be big revisions to the recently announced spending plans unless there is a cataclysmic event (on the scale of the 2008 banking crisis) and, even then, public spending plans might well continue in the short-term to support a recovery. A more likely scenario if tax revenue falls a little short of the higher 2015 forecasts is another round of tax changes, perhaps focused on removing pension tax relief for higher earners. The point at which public spending plans are rewritten is not likely to come until there is another spending review. The earliest point where this is likely to happen is 2017 and even then would only amend budgets for 2018-19 and beyond. A Brexit vote in the EU referendum might force spending changes and whether it does or not, any decisions on post-16 education spending will take the figures now set out in funding letters as their starting point. The point to leave with is that post-16 funding policy and funding is now fixed for the next couple of years. There are all sorts of threats in the long-term but the best advice for college leaders is to make good use of the opportunities where they present themselves.