Reactions to Chancellor’s Budget: Clarification versus Contemplation

Despite a new government with new Missions, I have a very familiar feeling.

Searching through yet another detailed Budget document (all 170 pages of it) trying to identify the tangible implications for the skills sector, specifically for apprenticeships, and in particular for independent training providers. It feels like trying to grab a handful of mist.

There were a scattering of mentions of Skills England and it’s role “to ensure we have the highly-trained workforce needed to deliver economic growth” and “addressing skills challenges, which are holding back growth across the country”.

It is reassuring that there is a recognition that solving skills gaps are critical to achieving the Government’s number one Mission: economic growth.

There was a similar trailing of the Growth and Skills Levy, including the much-used but so-far undefined ambition that it will be ‘flexible’.

So, some positive sentiments. But as for detail, it was pretty slim pickings.

Clarification – So, what do we know?

We know that employment costs will rise.

Like the vast majority of employers, independent training providers will suffer a higher cost burden, driven particularly by significant increases in the minimum wage and in employer’s National Insurance. The increase in the rate of NI was perhaps expected, but the gasp-inducing halving of the threshold at which it is paid was one of the main ‘shockers’ of the Chancellors speech. This will cause a disproportionate increase in the costs of employing staff when funding rates for delivering skills via programmes such as apprenticeships are still in hibernation.

We know that apprentices in some sectors will earn more.

The 18% increase in the apprentice minimum wage is likely to help to attract aspiring learners into apprenticeships but may have the unintended consequence of reducing the number of employers willing to offer apprenticeship opportunities. It is clearly important that supply and demand for apprenticeship opportunities are balanced, and we will see the impact of this in the next year or two.

We know that big numbers are being invested.

The Chancellor’s mantra for building long-term foundations was “invest, invest, invest!”. Clean energy, the NHS, housing, potholes even.

In the overall Education budget, we saw billions of pounds go to schools, £950 million for skills capital and £300 million allocated to Further Education. Whilst it is not clear how some of this money will be deployed, they are numbers that should have an impact. 

We know that a big number is not being invested in adult skills.

By contrast to other areas, the £40 million set aside to take steps to ‘transform’ the Growth and Skills Levy seems like a rounding error. Whilst it states that “this will help to deliver on the commitment to launch shorter and foundation apprenticeships in key sectors” I am not sure how much ‘transforming’ you get for £40 million these days. A higher amount is allocated to the National Archives.

And the proviso that shorter duration apprenticeships will be for ‘key sectors’ adds uncertainty to one of the few glimmers of concrete information that I could find about the skills sector. In the accountancy sector we have seen relatively limited uptake of Level 2 apprenticeships since the levy was introduced. The main reason for this is that the Gateway Rule of ‘a year and a day on programme’ is prohibitively and unnecessarily long at that level. The ability to deliver Level 2 over a shorter duration would dramatically increase the appeal of these programmes to both learners and employers, and this in turn could be transformational in helping young people build the employability skills they desperately need.

Contemplation – Is no news good news?

The positive spin that I can put on this is that it meant no hasty decisions have been made, particularly in areas like the review of the future of Level 7 apprenticeships. I have already heard that providers of Level 7 programmes have discontinued provision even though we do not know what may or may not happen yet.

I have been told by several people that there is “no done deal” and the lack of specifics in the Budget would seem to support that the Government are still in ‘listening mode’. In fact, the Budget document states that “the reformed levy will be developed in partnership with employers, providers, and learners. Skills England will take the time to consult with a wide range of partners to ensure that levy-funded training meets the needs of employers, providers, and learners, and secures good value for money.”

Perhaps there is still hope for more positive changes.

By Gareth John, Director at accountancy training provider First Intuition