Labour’s First Budget: A Reality Check for FE? | FE Soundbite Edition 770
Welcome to FE Soundbite Edition 770: 2nd October 2024. Labour’s First Budget: A Reality Check for FE?
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This is the weekly e-newsletter and e-journal by FE News: ISSN 2732-4095. We know life is busy, so here is a snapshot of the latest announcements and epic thought leadership articles, from sector influencers and cool thinkers across FE and Skills this week on FE News
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Gavin’s Reflective Perspective
Reflecting on the Budget
So we had the first Budget by Labour in 14 years and the first Budget by a female Chancellor in approx 800 years (what is that about)? Skills England had a mention, to tackle Economic Inactivity. So the picture for Skills England still isn’t clear, but becoming clearer with every mini.. and large announcement. There was also mention of £300M for Further Education, but not much detail.
2% Productivity Target – surely means more Skills and Training needs?
One thing that has been very much overlooked is that the Chancellor set a 2% productivity, efficiency and savings target for all Government departments to meet next year, by using technology more effectively and joining up services across government. So more use of Technology, but surely you need highly skilled people to be more productive… and to know how to use Technology more efficiently!
Truth is, this was a harsh budget for Employers
The biggest thing about the budget will be how employers will respond to the increases and ‘leaning’ on them from this budget. Employers will be taxed £25 Billion on National Insurance contributions alone more than pre-budget. Which is a lot to absorb and will no doubt have knock on implications. Increases in National Insurance, Wage increases, all at once in April. Will be hard to take from many employers, they are now forced to make really tough HR decisions.
Could this be an opportunity (it pitched right), for FE and Skills to come up with solutions to help with upskilling, reskilling and making the most of employers ‘Human Capital’… as that was a harsh budget if you are an employer. It could also have a massive knock on affect for numbers of people made redundant in the coming months, or reductions in the number of entry level roles being offered if Apprenticeship salaries (not even taking into account the additional NI contributions) are up 18%. This is probably a mid term opportunity, employers will be scrambling trying to work out their plans from now to April with the big increases in cost they will have to take on.
What could the additional taxation for employers mean for FE and Skills?
So mixed news, with increases in National Living Wage, Apprentices receive a 18% wage increase from April 2025 from £6.40 to £7.55 an hour (which was announced before the Budget). Great if you are an Apprentice, my fear is that it maybe too much of an increase for many employers. The rate for 18 to 20-year-olds to go up from £8.60 to £10 per hour from April 2025. Ironically there is an Youth Guarantee, Foundation Apprenticeship announcements, but this budget just made it harder for an employer, particularly SMEs to ‘take a chance’ on a young person for an entry level role. If they are paid pretty much the same as everyone else, surely employers will choose experienced people first? Surely there is a plan to adjust and help with this? … you’d hope!
National Insurance contributions from employers have increased to 15% on salaries above £5,000 from April 2025, up from 13.8% on salaries above £9,100, raising an additional £25bn a year for Treasury. Could this also have a wider impact for certain industries that were just keeping their head above water. Will employers or certain industries be looking at their headcounts and HR strategies.. staff really will be looked at as ‘Human Capital’ by some employers after this budget. I think some employers will have to look at getting the max out of their existing staff pool (eg train, upskill), but before that for many employers the reality is that many employers just had their head above water, and many will probably have to make redundancies and adjustments.
The Increase in Employer Taxation, will have short and long term implications
What about FE and Skills… many providers have been just keeping their heads above water… with the budget impact on employers, this could potentially reduce the number of Apprentices.. but let’s not forget ITPs, Colleges, AO’s are all employers as well, what does this potentially mean for FE and Skills?
AoC calculated that the National Insurance employer contribution increase will cost colleges around £50 Million per year. What will the cost the cost be or ITPs and Awarding Organisations?
I think we need to see how this will shake out and affect the wider sector. Especially if wage increases, National Insurance contributions affect us all as employers, and then potentially have less entry level Apprentices employed.. could all potentially have very negative affect on the FE and Skills sector.
There is £240M Get Britain Working and £300M for FE
There is a new £240 million ‘Get Britain Working’ package (and upcoming white paper) from the Chancellor to include work, skills and health support for disabled people and long-term sick (again mentioned before the budget)… but is this enough to counter the £25 Billion in additional taxation on businesses?
Positive news for FE and Skills is that there is an additional £300 Million for Further Education, £40m from the growth and skills levy, and £950m for skills capital funding.
Budget Winners = NHS and Schools
The NHS, received about £22.6 Billion in additional funding through the budget. Schools received £2.3 Billion, including £1 Billion for SEND.
£22.6 Billion to the NHS… is huge, the money given to FE and Skills is like the coffee budget! The Chancellor early on in the budget said about the 2% productivity and efficiency targets for Gov departments and joining up services across government. The NHS needs help, but also needs skills. Every Gov department does… every employer.
When people are relooking at their HR, their Human Capital is there an opportunity for FE and Skills?
When employers are having to seriously rethink their HR strategy. Is this an opportunity for FE and Skills? It took time to kick off the Levy, but when employers paid essentially a tax to pay for Apprenticeships it was a clear winner for FE and Skills. Does this budget create a new not so obvious opportunity with employers?
Inter-Gov Department working… is there again, an opportunity for FE and Skills to help upskill and reskill Civil servants to be more productive, to be more efficient and use technology effectively? Not heard much about people thinking of this 2% productivity angle… could this be where FE and Skills can help and grow?
Outside of the budget, a massive thank you to Turnitin…who are our first ever FE Soundbite Sponsor, we really appreciate it!
Epic Exclusives Thought Leadership Articles
Our Top 3 Thought Leadership Articles This Week
Firstly, Reactions to Chancellor’s Budget: Clarification versus Contemplation By Gareth John, Director at accountancy training provider First Intuition
Secondly, UK Skills Funding Needs a Long-Term Plan By Alex Glasner, Managing Director at Workpays
Finally, What the party conferences told us about the future of skills By Michael Lemin, Head of Policy at NCFE
This Week, We Have Also Had Some Other Epic Exclusives!
What is the Role of High-Quality Teaching in Delivering the Skills of Today and Tomorrow? By Professor Matt O’Leary, Faculty of Health, Education & Life Sciences at Birmingham City University
Why an apprenticeships reset will unlock a wealth of new opportunities By Dr Jacqueline Hall, Head of Apprenticeships and Skills at BAE Systems
Is Coding the Most Important Modern Language? By Andrew Otty, Codiplay
How AI Is Improving the Quality of Provision By Kerry Boffey, CEO – Fellowship of Inspection Nominees
Shaping the Future of Employment Services: Professional Standards as the Cornerstone for Success By Scott Parkin FIEP, Group Chief Executive, Institute of Employability Professionals (IEP)
What’s New in the World of FE?
Budget 2024 | Only £300m Invested in FE | Sector Reaction
Announcements
£240 million ‘Get Britain Working’ package By HM Treasury
National Living Wage will increase from £11.44 to £12.21 an hour from April 2025 By HM Treasury
New Education Committee members appointed By the House of Commons
Research
Students are using AI significantly less in their studies than educators think they are, according to Coursera research By Coursera Inc
FE + Skills Collective
Olly Newton discusses Bridging Policy and Pedgogy at the FE + Skills Collective
Voices
The Power of Imagination By Andy Sankey, Global Head of Creative Education RSL, Musician & Composer
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