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Is FE an easy cut?

18 March 2015

There is a lot in today’s Budget about tax but nothing of substance on public spending to add to what we already know. The Chancellor said that a Conservative-led Government must stick to existing public spending plans. This would help bring the budget into surplus by 2018. He calculated that this would involve £12 billion in additional cuts to departmental spending between 2016 and 2019, beyond what is already built into the forecasts from low inflation and low unemployment. This does not sound like a particularly big sum but the Government has already made all the ‘easy’ savings through cutting administration and by increasing fees and charges (for example rail fare or university fees). A large share of public spending is now formally protected from further cuts or is in the ‘too-difficult-to-cut’ box. The published ringfences protect £150 billion spent on the NHS, schools and international aid as well as £130 billion spent on pensioners. The too-difficult-to-cut box definitely includes defence and effectively covers Scotland, Wales and Northern Ireland as a result of the Barnett Formula and future coalition politics. This leaves about £70 billion in public spending, the largest shares of which are allocated to local government, the police and post-16 education. Extracting £12 billion in savings from these areas implies no money for any pay rises combined with a choice between council tax rises, further job losses in the police or post-16 cuts – the budgets currently spent on science, skills, student grants and sixth forms. When it comes down to it, a Conservative-led Government may take a slightly different path. A Labour-led Government certainly will, but will face its own spending pressures. Today’s budget announcement removes one of the three legs from Labour’s £6,000 fee plan. The Party had planned to spend £600 million from cutting pension tax reliefs to reduce higher education fees. The Chancellor today diverted the money to help cut tax on savings. Future spending cuts will come on those already made to post-16 education. We learnt last month that the 2015-16 academic year budget for adult further education will be 24% less than this year’s budget. The Skills Funding Agency’s allocations were due on Tuesday and are now due later this week. We have lost one million adult learning places in the last five years - we’ll lose many more from this cut. The UK’s excellent employment record has been supported by the publicly funded further education system in recent years. This prop may not be available in future. Julian Gravatt is the Assistant Chief Executive of the Association of Colleges. For further information on the budget see our note. AoC’s Spring Finance and Funding conference will provide a further analysis of the budget, future public spending and financial challenges for colleges.