The March 2020 budget - issues for colleges (11 March 2020)

11 Mar 2020

Further education 

  • The Chancellor confirmed an allocation of £1.5 billion over 5 years to ensure that all further education college estates are in good condition (category B on a four point scale from A to D). The budget document says "This investment will ensure that colleges have cutting-edge facilities to train people for jobs in the industries of the future, and is part of the government’s plan to upgrade the nation’s infrastructure".
  • In addition to these funds, the budget confirmed £95 million for T-level capital, £120 million for institute of Technology and £387 million for the Local growth fund (some of which goes to skills capital). The ways in which government routes capital to colleges is quite confusing and is need of review because of the reluctance of the banks to match fund public investment. Hopefully the spending review wiill address this.
  • The Treasury also confirm the Conservative manifesto promise of a £2.5 billion National Skills Fund to improve the technical skills of adults across the country.  The budget document says that the government will consult widely in the srping on how to target the fund with the priority being to focus the money on "helping people get the skills they need for high paid rewarding jobs". There is a debate about whether this means focusing the funds on skills at level 3, 4 and 5 or whether to allow employers and individuals to make choices
  • Under the Barnett formula, the devolved administrations in the rest of the UK will get increase budgets on the back of these two announcements ("Barnett consequentials").
  • There is nothing substantive on apprenticeships. The government promises a review of how the levy works. The same promise was made in the last budget in November 2018 but, with a spending review underway, this are pressing issues to address
  • The Treasury promise that the amount of money spent via the Shared Prosperity Fund will match the money currently spent via EU structural/social funds but there will be a bigger focus on investnng in people

Coronavius

  • The budget comes at a time of national and international crisis because of the Coronavirus. The Chancellor said he would provide whatever resources the NHS need to deal with the virus including a £5 billion Covid-19 response fund.
  • ​​​​There is a series of measures to support people and businesses including statutory sick pay (SSP) being available from day 1 for those who have to self-isolate, extra funding to cover sickeness for small companies, changes to sick note rules relating to SSP, HMRC tolerance of slower tax payments (via the Time fo Pay scheme) and a Treasury guarantee to banks to encourage them to offer Coronavirus business interruption loans for small businesses. Details on gov.uk are here
  • The chancellor described the government's package for 2020-1 as being "temporary, time-limted and targeted".and  the combined impact of extra spending already announced and announced in the budget as being a £30 billion fiscal stimulus for society and the economy.

Economic forecast and fiscal targets

  • The official economic forecast from the Office of Budget Responsibility was completed before this week so does not take full account of the spread of Coronavirus and its economic consequences. OBR forecast steady growth, inflation rising slightly towards the 2% target and the national debt falling as a share of the economy by 2025. More importantly OBR provide support for the idea that public investment will boost productivity - something that the critics of austerity argued throughout the 2010s. 
  • For the first time, OBR have incorporated impact of Brexit and the government's free trade agreement plans into account. OBR calculate that potential output is around 2 per cent smaller now than it would have been in the absence of the referendum vote, largely reflecting lower inward migration and weaker productivity - thanks in particular to depressed business investment. Drawing on several external studies, tjhey assume that the move to an FTA will lower potential productivity and potential GDP by about 4 per cent over the long term 
  • The Conservative manifesto promised  a new set of fiscal rules. The Chancellor said that the plans in his budget meets these new rules but conceded that the limitations on the forecast. Nevertheless he said that the government has some headroom between now and 2022-3 to meet the first target implied by the rules. He promised consultation during 2020 on a new fiscal framework.
  • As part of these plans, public sector net investment will rise towards 3% of GDP which is higher than in recent decades. The money for college capital is part of this larger increase

Pay and tax

  • The Low Pay Commission will get a new remit instructing them to work towards a minimum wage set at 2/3rds of average wage by 2025 - about £10.50 an hour on current prices. This implies annual increases of around 5% a year for the next 5 years.
  • As promised in the manifesto, the national insurance threshold for employees will rise by £900 to £9,500, representing a £100 saving for 30 million people at a cost to the government of £3 billion. This is partly funded by the decision announced during the election to keep corporation tax at current levels and not to make a further cut in 2020.
  • There will be no increases to fuel duty and few of the tax rises that sometimes happen in post-election budgets. The budget documents include plans to raise the annual allowance pension taper from £110,000 to £200,000. This pension tas change is a response to pressure from NHS consultants whose unpredictable earnings have resulted in unexpected tax bills but the change will help principals and headteachers moving into the highest paid roles.
  • The government plans to remove VAT from e-books by the end of 2020. The estimated value of this tax cut is £200 million
  • The Immigration health charge will rise from £400 to £624  with children, students and those on the youth mobility scheme paying £470. The government's immigration plans involve the extension of this tax to new EU migrants from January 2021.

Public services and spending

  • There will be a West Yorkshire deal for the combined authority, including a new metro mayor. This will be the 10th area to get a devolution deal covering adult education, meaning that 2/3rds of AEB will be devolved by 2021-2. The West Yorkshire deal also includes a £12 million skills capital allocation and devolved Shared Prosperity Funding of £115 million.
  • There is an ambition to move 22,000 civil service jobs out of London.


Updated by Julian Gravatt at 5pm