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Budget predictions and budget requests from AoC

19 June 2019

The Chancellor of the Exchequer, George Osborne, has already revealed some of the decisions that he will formally announce in Wednesday's budget. He has indicated some further spending cuts and said that these will reduce total expenditure by 0.5% in 2019-20 (compared to plans announced in November 2015). This represents a cut of about £3.5 billion which is almost 5% of the budgets of unprotected government departments. He has said that the government will not be embarking on a major overhaul of pension tax relief. He has suggested changes to personal independence payments (for those with disabilities) and income tax thresholds that will reduce or add to the cost of the government budget. The budget itself is likely to be shorter and more technical than normal because of the politics of the EU referendum - this article explains why. We won't know the impact of these and other decisions until the announcement is made and there is time to run through the details. Nevertheless it seems likely there will be a slight reversal of the public spending plans announced in the autumn statement. The 2015 spending review cuts were smaller than expected partly because of higher growth assumptions and a £27 billion improvemnt in forecasts 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 revises tax and spending plans at each “fiscal event”, i.e. the budget in March and the Autumn Statement in November. The revisions to spending plans this timemay be significant but it is quite possible that they will be scheduled for the last two years of the current budget period (2018-19 and 2019-20). The government's key target is to eliminate the deficit by 2019-20. George Osborne has the option to do this by asking departments to spend the next two years coming up with plans to make further spending cuts for the years ahead. It is not automatic that there will be cuts now. There are other likely announcements in the budget statement the Chancellor may announce further devolution deals (perhaps for the Solent area and for parts of East Anglia) there may be more information on the apprenticeship levy. AoC's budget submission (available here Martin Doel to Susan Acland Hood 11 Feb 2016.pdf Martin Doel to Susan Acland Hood 11 Feb 2016.pdf (PDF,1.91 MB) )made a number of technical suggestions for possible action by the Treasury: Public spending allocations should not be changed because a degree of stability is needed to enact reform There are some big transition and implementation issues around the apprenticeship levy and system. For more on the levy see this article and briefing Governmnent needs to deal with the reality that some colleges are under financial pressure and consider action on its own payment timing There are three different VAT issues (the 16-18 anomalies, the merger problem, and apprenticeships). It would be helpful to make some minor reforms to Teacher Pension Scheme rules. There is a need to improve education regulation. Once the budget is out, DFE, SFA and HEFCE will be able to release the 2016-17 funding allocations that they are currently holding. As is normal, departments are now allowed to publish financial information in the days running up to the budget. Allocations for bursaries, apprenticeships, adult education and HE teaching funding are currently held up. BIS is also likely to say more about the detailed workings of the apprenticeship levy and funding system but probably not until April 2016. We will post more information on the budget in this area of the AoC website on Wednesday 16 March and will be running a college budget and funding webinar on Thursday 17 March at 3pm to 3.45pm. Registration for the webinar can be made here