Learning and Work Institute respond to Chancellor's 2016 Budget

on 16 Mar 2016

Chancellor delivers his 2016 budget

Responding to measures outlined by the Chancellor in today’s Budget, David Hughes, Chief Executive of Learning and Work Institute said:

"I am delighted that the Chancellor has recognised that the digital revolution, changing work practices and longer lives require a renewed effort to promote lifelong learning.  We will work with Government to help them support learning at all levels from basic skills to PhDs which enhance people's life chances and support higher employment and productivity. We want to help review the gaps in lifetime learning, including for flexible and part-time study – ensuring support is there when people need it most.

"With lifetime learning in mind, the Budget’s flagship policy of a new Lifetime ISA should be extended to allow individuals to save and invest in their future skills needs.  We are keen to work with Government to develop lifetime learning accounts which could help put people in charge of their own learning and careers support, with employers and the state investing alongside the individual.

"The Budget reaffirms the government’s commitment both to achieving full employment and to halving the disability employment gap, which we wholeheartedly support. However, on current forecasts, the Government will continue to fall significantly short on both objectives.  It is worrying that the Budget did not announce any new spending measures on employment despite signs that the labour market is cooling."   

 

Summary of Today’s Measures

‘Lifetime’ Learning from basic skills to PhDs

We were pleased to see a whole section of today’s Budget document geared towards “lifetime” learning (see section 3.19), evidence that the Chancellor has heeded our call for more support to reflect the demographic, work, and digital changes that impact on people’s life chances.   Direct government support will be available to adults wishing to study at any qualification level, from basic skills right the way up to PhD level, and loans will be introduced in this Parliament for level 3 to 6 training in further education, part-time second degrees in STEM, and postgraduate taught master’s courses.  We are keen to work with them to support learning at all levels to help enhance people's life chances and support higher employment and productivity.

The Budget also confirmed that Government will review will also review the gaps in support for lifetime learning. We want to assist with this process, especially in ensuring there is provision for flexible and part-time study –so support is there when people need it most.

Apprenticeships

Surprisingly little focus in the Budget on Apprenticeships, beyond confirmation that as of April 2017, employers will receive a 10% top-up to their monthly levy contributions and this will be available for them to spend on apprenticeship training through their digital account. The new measure comes in addition to the £15,000 allowance previously announced for levy payers. The Treasury also re-iterated today that the levy “will be set at a rate of 0.5 per cent of an employer’s paybill and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment”,.

Full Employment and Welfare Reform

The Budget reaffirms the government’s commitment both to achieving full employment and to halving the disability employment gap, which we wholeheartedly support. However, on current forecasts, the Government will continue to fall significantly short on both objectives.  It is worrying that the Budget did not announce any new spending measures on employment despite signs that the labour market is cooling.   

There is no room for complacency, even with the current 5% unemployment rate there are over 2 .25 million people who've been on out of work benefits for 2 years or more and 1.6 million who've been on them for 5 years.  We need more active policies so that we can sustain an unemployment rate below 5% without igniting inflationary pressures.

On welfare reform, the Budget announced a further tightening of access to Personal Independence Payment (PIP), forecast to save £1.3 billion a year by the end of this Parliament.  These further cuts in disability benefits fly in the face of ambitions to increase employment of disabled people and questions have been raised about their viability to achieve a saving.  Indeed, the Office for Budget Responsibility confirmed that spending on disability benefits is now forecast to be over £2 billion higher this year than was expected three years ago, bringing the savings announced today into serious doubt.

The Budget confirmed that the additional £330 million investment in disability employment support announced at the Summer Budget will be focused on peer and specialist support particularly for young disabled people and those with mental health conditions.  

National Living Wage and National Minimum Wage

In line with the recommendations of the Low Pay Commission (LPC), the Budget papers announce that the Government will set the main rate of the National Minimum Wage (NMW) at £6.95 from October 2016. The Government has also accepted the LPC’s recommendations for the youth and apprentice rates of the NMW. The new mandatory National Living Wage, announced in last year’s Summer Budget, will come into effect on 1 April 2016 and will be set at set at £7.20 an hour for workers aged 25 and above.

Economic and Labour Market Outlook

  • Today’s GDP forecasts proposed growth of between 2% to 2.25% between now and 2020 - which is low by historic standards. OBR continue their pattern of assuming average earnings growth will rise back to early 2000s levels, despite no evidence to support this.
  • The earnings and productivity growth assumptions are based on the OBR's expectation of a return to "normality". Pre-crisis - these would have been very reasonable assumptions for the long run. Now, given the experience since the crisis, it is reasonable to question whether lower wage and productivity growth will be sustained.
  • Unemployment is expected to be close to its minimum now, with rises forecast for most of the period through to 2021. Unemployment rate (now 5.1) going down later this year to 4.9 before rising steadily to 5.4% at end of forecast period in 2021.
  • Employment rate (16+ rather than working age) expected to fall through the forecast period from 60.3% now to 59.8% in 2021.
  • Claimant unemployment expected to bottom out at 740,000 in Q4 2016 and Q1 2017 before rising to 870,000 at the end of the forecast period. OBR forecasts provide no evidence whatsoever for cuts in employment support.