The summer economic update, what's in it for colleges (10 July 2020 update)

10 Jul 2020

What happened ?

The Chancellor, Rishi Sunak, made a statement to Parliament on Wednesday 8 July listing a number of tax and spending measures to boost employment. The full document - A Plan for Jobs - has some interesting details.

These presentation slides summarise the key points 

What wasn't in his announcement

This wasn't a budget or mini-budget. There was no Office for Budget Responsibility (OBR) forecast. The Chancellor said there will be an Autumn budget and spending review in the autumn, which will the point where 2021-2 budgets are confirmed.

The government's current plan (A Plan for Jobs)

The context for the Plan for Jobs is the crash in the economy since the March shutdown, a large number of fiscal measures taken in and since the 11 March 2020 budget and the government's aim to restart economic activity. The Chancellor announced a package of measures estimated to cost £30 billion which will bring the total tax and spending support in 2020-1 to £159 billion, plus another £122 billion in loans and tax deferrals. Estimates vary on the amount being pledged by the government but it adds up to about 9% of GDP and will contribute to the largest annual budget deficit since the middle of the second world war.

The focus is very much on jobs - with skills as a bit of an add-on. The main aim is to minimise the rise in unemployment by providing a short term stimulus to activity and by introducing measures to help employers retain staff. Work is still needed on a Plan for Skills but, right now, government's focus is short-term.  There may be a need for a furher fiscal stimulus in the Autumn budget but public spending plans for 2021-2 won’t be set until then.

The package this week includes:

  • a major job retention bonus of £1,000 paid for each employee taken back off furlough and in work at a minimum pay level for 3 months. This could cost more than £9 billion but only if all furloughed workers go back to work.
  • four short-term eye-catching announcements estimated to cost £10 billion (a 5% VAT rate in hospitality, a stamp duty cut, a green homes grant and an “eat out to help out” scheme).
  • a number of other measures including an employment and training package for the 16-to-24 age group (estimated as costing £3.7 billion


The plan for young people and adults aged 16-to-24

There are several big 16-to-24-year-old measures as part of a plan for those in the 16 to 24-year-old age group. 

  • Young adult unemployed: The Kickstart scheme which will involve the government paying the wages (at minimum wage levels) of 16 to 24-year-olds who are on Universal Credit. Not many under 21 are eligible and Treasury say the scheme will be targeted on those “deemed” (by their Jobcentre) to be at high risk of long-term unemployment. This will be closely managed as part of unemployment reduction measures with employer registrations planned to open in August 2020. Funding will be conditional on firms showing the job is new. The employer will also be expected to provide training (but there are no details yet on this). The Treasury budget assumption is £2.1 billion based on 300,000 people being supported at an average cost of £6,500 but the Chancellor said there will be no cap on the number of places.
  • Traineeship incentives: Employers will be paid £1,000 per trainee taken on as part of a plan to treble the number of traineeships from 10,000 to 30,000 at an estimated cost of £100 million. Funding for traineeship places is split between 16-18 and adult education budgets. The traineeship rate is due to rise by £400 and ESFA are due to write to providers with information next week
  • 18 and 18 year old offer: There is a new plan (not previously announced) to spend £101 million to support 18 and 19-year-olds in further education to take “high value” courses at Level 2 or 3 in a number of sectors. AoC has been arguing for action to help this age group for months but this plan has nothing for living costs and does not extend above Level 3. 
  • Apprenticeship incentives: Employers will be paid £2,000 for each new apprentice aged under 25 and £1,500 for those aged over 25. This scheme builds on the existing employer payment for 16-18 year old apprentices, so comes to £3,000 for them. We understand that this might be from August to the end of January next year.
  • DWP programmes: The Treasury are also allocating £1 billion to the Department for Work and Pensions to double the number of work coaches, to double the Work and Health programme budget (from £100 million to £200 million) and to increase the “intensive support” offered to jobseekers. 

Even though the measures for 16 to 24-year-olds are small in the grand scheme of things, there are some significant extra sums coming into our system in the next eight months. The government intention is to:

  • Create a package which builds on existing arrangements to speed implementation
  • Provide a range of offers so that nobody falls through the cracks
  • Layer the incentives so that those in most need get the most

Implications for the work that colleges do

There are opportunities for colleges but also three challengesL

  • DWP’s focus is jobs not retraining.
  • There may not be enough to encourage employers to keep or create training places
  • The 18/19 year offer is small and may be complicated

The government is acting in several of the areas suggested in AoC's Rebuild plan but not all of them. There was very little in the statement on adult education or training for those over the age of 25 and there is still no action to assist colleges to support 16 year olds to catch up on lost learning. Some obvious actions for colleges are: 

  • Work closely with their Jobcentres to ensure traineeship referrals, involvement in sector based work academies, supporting kickstart.
  • Work quickly to offer 18 and 19 year olds an extra year at Levels 2 and 3.
  • Contact all of their employers about the apprenticeship  and traineeship incentives.
  • Continue with their existing plans to educate and train young people using existing programmes.