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Autumn statement: little change, longer term action needed

23 November 2016

The biggest news for colleges in the Autumn Statement from Chancellor of the Exchequer, Rt Hon Philip Hammond MP, is that departmental spending plans announced last year remain in place. Treasury statements in 2015 introduced the apprenticeship levy, protected billions of pounds spent on sixth form and adult education (in cash terms) and set the scene for a major programme of skills devolution. These plans all remain in place. There are, however, some items in the small print that deserve attention. First of all, the Chancellor reiterated the need for departments to find £3.5 billion savings by 2019-20. This target was set by his predecessor, George Osborne, in the March budget. Over the next 12 months, the Chief Secretary of the Treasury, David Gauke, will run an efficiency review to find these savings so that they can be announced in next year's Autumn (Budget) Statement. Think of this as a mini-spending review The second catch relates to inflation. We have got used to low inflation in last three years but things are changing a little and not just because of Brexit. The official forecast is that inflation on the Consumer Price Index (CPI) will rise to 2.5% in 2018. Over the next three years inflation will erode the value of the cash protection given to post-16 education. £4,000 now will be worth less than £3,700 at the end of the decade. Finally this is effectively a provisional statement which may yet be undermined as a result of events. The Office of Budget Responsibility (OBR) describes their forecasts as having a high degree of uncertainty because they cannot predict the deal that the UK Government will get in leaving the European Union (EU). Although growth is quite healthy now (and inflation and unemployment both at historic lows), OBR reckons the UK economy will be 2.4% smaller in 2020 than they predicted a few months ago. This comes on top of a 1.5% downgrade for 2020 in the March 2016 budget. Together these revisions wreck the Conservative manifesto plan to deliver a surplus by 2020. Instead the Chancellor now plans continuing austerity to secure a surplus by 2022. It's anyone's guess whether this particular forecast will be right. This year's Autumn Statement runs to just 69 pages which is half the length of the George Osborne's last budget. There are some interesting points in the details. There was little on devolution but the Chancellor confirmed that the Adult Education Budget will be devolved to Greater London. Significantly this will happen in 2019-20 which is later than the other nine deals with skills devolution. The Treasury makes no comment on those other deals, some of which unravelled as soon as they were announced. The Treasury also confirm there will be Local Growth Fund allocations of £1.8 billion to Local Enterprise Partnerships (LEPs) but do not give details. Disappointingly the £23 billion allocated for the National Productivity Investment Fund (NPIF) has nothing for education outside research and development spending. The Chancellor has found funds for housing and transport (a Milton Keynes bypass) but nothing from this pot for skills. He has, though reserved £200 million over the next four years for grammar schools in England. Tax and benefit announcements were also fairly sparse and largely a continuation of existing plans. The promise that there will be no further welfare policy savings in the next four years is designed to help those who are just about managing but may add to pressure on public services. As expected the national minimum wage will rise from £7.20 an hour to £7.50 in April 2017. The apprenticeship rate will go up 10p to £3.50 an hour. The main tax raising measures relate to tackling disguised remuneration. There will be limits on salary sacrifice arrangements and further work to limit avoidance via self employment. All in all it is probably good news that there are no new initiatives or whizzy schemes. There is enough change and reform in further education for us not to need something more right now. We do, though, need a more determined effort from the Government to tackle education and skills issues and this will require more than just a few new schools. The issues we raised in our Autumn Statement submission remain. We will raise them again in the New Year. Julian Gravatt is the Assistant Chief Executive of the Association of Colleges What's next Autum Statement webinar (30 minutes) Thursday 24 November 2016 at 12pm. Register here AoC Winter Finance Conference (all day) in London Thursday 8 December 2016. Details here AoC Winter Finance Conference (all day) in Leeds Tuesday 13 December 2016. Details here Next Budget (March 2017) followed by a new cycle with an Autumn Budget Statement (Autumn 2017) followed by a short spring statement (March 2018)