Autumn Budget 2017: our response

22 November 2017

In response to today’s budget announcements, Stephen Evans, Chief Executive of Learning and Work Institute said:

“The Budget forecasts are a sea of red with sharp downgrades to growth and productivity. We don’t have to just accept this, we can invest in improving skills and employment to boost growth. We need bold action to do this, and governments can’t solve all of our problems – it will require a shared national partnership.

“The measures on Universal Credit are welcome, meaning people will have less of a wait for their money. But they do nothing to reverse the £3bn cuts to Universal Credit or to end the freeze on working age benefits. So in many ways this is more of a ‘baby steps’ budget – with welcome initial funding for a new national retraining scheme, more support to colleges to implement technical education reforms, and the prospect of future flexibility for the Apprenticeship Levy. The amount expected to be raised by the Apprenticeship Levy has been downgraded by £100m in 2021-22. We think this shows the need to underpin the budget over the economic cycle, rather than letting it fall in a downturn.

“What we need overall is a clear roadmap – backed by investment – for how we will address our productivity crisis, support the nine million adults without basic literacy or numeracy, and deliver employment opportunity for all, particularly disabled people.”

New funding for National Retraining Scheme

The Budget announces initial funding for a new National Retraining Scheme, which was a Conservative Party Manifesto commitment in the 2017 general election. The initial funding will support development of retraining support in construction and digital skills, and a new partnership with the Confederation of British Industry and Trades Union Congress. £30 million will be available for development of digital skills distance courses.

Tony Wilson, Director of Policy and Research, said: “This is a welcome first step in delivering the government’s proposed new retraining scheme. As well as focusing on specific sectors where there are particular skills challenges – like digital and construction – we would also like to a see a clear focus on delivering support to those people and places that are most likely to lose out from economic and technical change. In particular, that means prioritising the nine million adults who lack basic literacy or numeracy skills, the three million who are out of work and want to work, and the many more in low paid and insecure work.

“The early focus on digital skills is particularly welcome. However, while we can see the rationale for wanting to emphasise online and distance learning, there is a range of evidence that many of those who would benefit most from digital skills are also the least able to access it. So the government’s ambitions here need to be matched by the right support to ensure access for those most in need, particularly through blended approaches.”

Universal Credit and welfare reform

The Budget announces that the usual waiting time for Universal Credit new claims will be reduced from six to five weeks, by abolishing the seven ‘waiting days’ that previously applied. This is being supplemented by improved access to ‘Advance’ payments to those that need it, so that in some cases these can be made within a week of claiming. These measures will have a combined cost of £185 million a year by the end of the forecast period (2022/23).

In addition, Budget confirms that the government will now no longer be capping social sector Housing Benefit in line with the relevant private-sector Local Housing Allowance rates. This will cost £320 million a year by the end of the forecast period.

Tony Wilson comments: “This is a welcome set of changes to Universal Credit. However at a cost of around £200 million a year it really is the least that the government could do. New claimants will still usually have to wait for five weeks before getting paid, and that’s assuming that there are no issues with their claim. So Christmas has literally come early, been and gone for new claimants – with those claiming tomorrow already too late to get paid before Christmas Day.

“Today’s announcements also do nothing to address the £3 billion annual cuts to financial support for low income working families that are built into Universal Credit. These mean that in many cases work barely pays, and that many more low income working families will find themselves and their children in poverty. Overall, today’s announcements don’t go nearly far enough.”

Apprenticeships and skills

The Budget includes £30 million of new funding for colleges to support the rollout of technical education reforms, confirms that government will continue to fund Unionlearn for at least a further two years, and announces £40 million of new investment in Further Education Centres of Excellence to support training of maths teachers.

There are no substantive new announcements on apprenticeships or the Levy, save for a commitment to “continue to work with employers on how the Apprenticeship Levy can be spent so that the levy works effectively and flexibly for industry, and supports productivity across the country.” This may set the scene for future announcements to broaden the scope of the Levy, for example to bring in pre- or non-apprenticeship training.

Fiona Aldridge, Assistant Director for Research and Development, said: “We welcome the chancellor’s commitment to ensuring that the Apprentice Levy delivers genuine improvements in skills and increased investment in economically valuable training. We know that where Levies work best, they act as a boost to business growth and deliver improved pay and career prospects for individuals. We would be concerned however, if flexibilities simply opened up opportunities for employers to re-badge existing training, creating dead-weight in the system.”

Employment measures

Save for around £8 million for new trials of support for those in low paid work, the Budget includes no new employment support measures. Tony Wilson said:

“Given the increasing economic headwinds set out in this Budget, and the government’s stated commitment to full employment and increasing employment opportunity for disabled people in particular, it is disappointing to see no new employment measures today. It is now over a year since the ‘Improving Lives’ Green Paper, and we need now to see clear plans for how progress will be made towards the ambition of having one million more disabled people in employment.

“At the same time, we continue to face funding cuts and fragmentation in the employment and skills landscape. The government has announced further devolution to a number of combined authorities, and today would have been a great opportunity to show how this could be used to deliver better integrated, locally responsive and modern employment and skills services.”

Maths

New incentives to support the uptake of maths learning to Level 3 will be useful in supporting the development of higher level technical and professional skills, as will the development of FE Centres of Excellence in maths teaching. However, with one in four adults having maths skills below Level 2, it is important to ensure that all adults – younger and older, in or out of work – are supported to develop good maths skills. This requires greater investment in progression routes to higher level maths, through basic skills courses under the Adult Education Budget and revised Functional Skills qualifications. The GCSE re-sits policy needs urgent reform to allow a greater focus on progression to Level 2 skills through alternative routes – the £8.5m for piloting approaches to improving GCSE outcomes should be re-invested into identifying what works across a wider range of qualifications and types of learning.

Economic outlook

The OBR has downgraded its outlook for productivity growth which feeds into the outlook for economic growth and living standards. Duncan Melville, Chief Economist said:

“The OBR has revised down its expectations for future productivity growth. As a consequence, economic growth is also expected to be lower by around half a percentage point each year through until 2021 now compared to its March 2017 projections. Half a percentage point a year may not sound much but it adds up, so overall this reduces output by 3% by 2022. This impact on output is in part offset by expected rises in average working hours. These have been rising in recent years possibly to offset the impact of slow growing / falling real earnings on living standards as the OBR themselves suggest. In addition, the OBR expect the unemployment rate to rise ‘as GDP growth slows a little further and the National Living Wage prices some workers out of employment.’ This is not a happy outlook for the UK”.