The autumn 2018 budget - some of the details for colleges

29 Oct 2018

The Autumn budget does not address the big challenges ahead. Here is AoC's statement on the overall issues. The detailed skills announcements in the budget are as follows:

  • the co-investment rate for smaller, non-levy paying employers will be cut from 10% to 5%. This will take effect in April 2019 for new starts and is expected to save employers £60 million a year in a full year (a total of £240 million over 5 years). In addition the Treasury have confirmed the decision to allow levy paying employers to transfer 25% of their funds to their supply chains (costed at a total of £450 million over 5 years). There is  £5 million grant to the Institute for Apprenticeships to identify gaps in the training provider market and to develop new standards. There will also be a Treasury/DfE review of longer-term plans for apprenticeships (Page 61 of the Treasury's Autumn budget book).

  • there is an extra £100 million funding for a second phase of the National Retraining Scheme (page 61)

  • there will be three new skills pilots costing a total of £20 million in Greater Manchester covering digital skills gaps, the self-employed and young people not in education employment or training (Page 61).

  • the government will not extend tax relief for workplace related training because the recent consultation suggests that it would be more effective to use spending measures than tax relief to stimulate this activity (page 42)

  • the government will amend VAT law to ensure that OfS-registered private higher education providers in the Approved (fee cap) category continue to be able to charge fees without VAT. A recent court case put this into doubt. This measure does not affect the bigger injustices relating to VAT in 16-to-18 education (the HE announcement is on Page 5).

The economy, public spending and tax

  • the government's deficit will be £11 billion less than fo‎recast in 2018-19. This is despite the fact that economic growth since 2016 has been lower than was forecast before the referendum (Pages 9 to 22)

  • outline plans for the 2019 spending review‎ involve an increase in the total Revenue Departmental Expenditure Limit of 1.2% a year in real terms between 2020 and 2025 (Page 25)

  • more than half of these fund have already been allocated to the NHS. The £35 billion rise in the NHS England budget accounts for 60% of the departmental spending increase (Page 25 also)

  • the Treasury has confirmed the cut in the discount rate used to value public sector pensions from CPI+3% to CPI+2.4%. This will increase annual costs for public service employers but the costs and funding are not currently factored into spending plans. Some of the rise in departmental spending after 2020 will be absorbed in higher pension costs (about £1 billion a year in education spending, of which £160 million will be spent by colleges). The Treasury has provided £4.7 billion for additional costs in 2019-2020 (Page 32)

  • there were several tax raising measures include a new 2% Digital Services Tax and the extension of the regime for the taxation off-payroll working to larger private companies. These offset some tax cutting measures including a rise in the income tax personal allowance in April 2019,  freezes in fuel and alcohol duties and business rate reductions of up to 33% for retail properties

  • there were some short-term spending measures including allocations of funding for no-deal contingency planning, mental health, social care, the police, village halls and potholes‎. The Treasury is allocating £400 million in 2018-9 on a formula basis to primary schools (£10,000 per school) and secondary schools (£50,000 per school)

  • the National Productivity Investment Fund (a capital budget to support the industrial strategy) will now be £38 billion over the 7 year period 2017-8 to 2023-4. This fund is currently earmarked for transport, housing, research and broadband expansion but not for education and skills (Paragraph 54)

  • the national minimum wage will rise by 4.9% in April 2019 from £7.83 an hour to £8.21 an hour. Other rates will also rise above inflation. The apprenticeship rate will rise by 5.4% to £3.90 per hour (Page 79)

  •  there will be no change to the VAT registration threshold (£85,000) until April 2022 (Page 50)