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Importance of colleges recognised

25 November 2015

Today’s Autumn Statement is George Osborne’s third big fiscal statement in 2015 and like the previous two contained some surprises. As AoC's chief executive, Martin Doel has said, for colleges it has been a “huge relief”. Among other things, the Chancellor promised that the £4,000 16 and 17-year-old funding rate would be fixed for the next four years, that the £1.5 billion core adult skills participation budget will be maintained in cash terms and that sixth form colleges will be allowed to convert to become 16-19 academies and thus secure VAT refunds (worth about £300,000 per college). As expected, he announced that the apprenticeship levy will be set at 0.5% of payroll but, surprisingly, the Government will extend it to many more employers by applying a £3 million payroll threshold below which no money will be due. The apprenticeship levy is due to start in April 2017 and to raise £2.7 billion a year in 2017-18. It is possible that this income has slightly eased the pressure on the Department for Education (DfE) and the Department for Business, Innovation and Skills (BIS) budgets but we won’t know details for a few weeks or more. As usual HM Treasury has published hundreds of pages of documents today but not enough for us to know all the details. The spending settlement for DfE looks very tight because although the total revenue budget rises by 6.5% in cash terms over the next four years this may not be enough to cover rising pupil numbers, the costs of the national funding formula and the programmes that were saved from closure by their inclusion in the Conservative manifesto. It will be some time before we know what is happening in the DfE budget, but the Treasury has set out plans to cut its administration costs by 20%, to reduce the Education Support Grant that goes to schools and to make targeted savings in the 16-18 budget outside the base rate and from the falling 16-18 population (ie the Treasury anticipates savings where 17 year olds drop out of education). The settlement for BIS is similarly obscure while the system will become more complicated in the short-term because of the promises to devolve the adult skills budget to combined authorities. The Government will introduce a new employer board to oversee apprenticeships (and presumably the levy) while making savings in arms-length bodies to save another £100 million. It is unclear whether this includes an Education Funding Agency/Skills Funding Agency merger. Elsewhere in the BIS budget, there is further restructuring of the funding approach. Further education loans will become available for 19 to 23-year-olds to pay for Level 3 and 4 courses and will be extended to a wider range of higher level courses. Changing the interest rate used to calculate the loan subsidy cuts the reported cost to Government and helps underpin an extension of loans to nursing students and part-time higher education students. There are other detailed changes and announcements in the statement and the bigger picture is that in an environment of public spending cuts and incessant reform, there is some protection for post-16 budgets and a recognition that education, skills and colleges have an important role in the Government and national goals.