Sector Response to the Autumn Statement 2016

Chancellor Philip Hammond delivers his first and last Autumn Statement. During the Autumn Statement Mr Hammond vowed to make the country ‘match fit’ after Brexit. 

So what is the sector response to the Autumn Statement 2016?

The Association of Employment and Learning Providers (AELP):

AELP is pleased that according to today’s Autumn Statement , the forthcoming Industrial Strategy will include plans to build on the country’s skills base as part of the Chancellor’s drive to improve Britain’s productivity.

Key to this is the expansion of a high quality apprenticeship programme.  The announcement of the levy over 12 months ago has resulted in an increased commitment from large employers to offer more apprenticeship opportunities but uncertainty has surrounded the level of government funding that will be available for apprenticeships in non-levy paying smaller employers.   Currently SMEs provide more than half of the 905,000 apprenticeships in the country.

We are therefore disappointed that the government hasn’t given assurances today that a minimum fixed budget will be allocated to non-levy payers for the next 5 years irrespective of how much money is left for them in the levy pot.  We need to ensure that much needed apprenticeship places will be available to young people in towns and rural areas where large levy paying employers aren’t operating.  The Statement included a reduction in the expected levy yield of up to £200m by 2019-2020 compared to the £2.97bn estimate by the OBR in its policy costs for the 2015 Autumn Statement.  This gives us cause for concern about how much funding will be allocated overall.   It is also the second downgrade that we have seen in the OBR’s forecast figures since the levy was announced in July 2015.

There appears to be no new information on the future size of the Adult Education Budget for non-apprenticeship skills provision.  The budget includes funding of the Traineeship programme for 19 to 24 year olds, offering a progression route to an apprenticeship or sustainable employment while improving a young person’s numeracy and literacy skills.  The budget is being devolved to the city regions and LEPs including London, so AELP is calling for safeguards to protect Traineeship provision across England in areas where the local authorities may not regard the programme as a priority.

It must pay to work

The Chancellor’s partial reversal of previously proposed cuts to Universal Credit is to be welcomed.  Although a modest move, this should allow more people to stay in work to acquire skills to get a better paid position with their current employer or find a job paying a better salary elsewhere.

AELP CEO Mark Dawe said:

“Given the need before June to improve productivity and social mobility, the EU referendum result shouldn’t have been a consideration in protecting budgets for skills.  But there is no doubt that the likely ending of the free movement of labour has sharpened minds in addressing Britain’s post-Brexit employment challenges.  Today’s announcements have been relatively quiet on this front but we hope to see more in the Industrial Strategy.  The Strategy  should underline the difference that properly funded apprenticeships and other high quality training can make to the productivity agenda and training providers with links to over 340,000 employers are ready to play their part.” 

The Employment Related Services Association (ERSA): 

In response to today’s Autumn Statement, ERSA Chief Executive, Kirsty McHugh said:

“ERSA welcomes the Chancellor’s decision to reduce the Universal Credit taper rate as a definite move in the right direction.  However, getting UC right won’t be enough to move many jobseekers with the most complex needs into work. We’re therefore disappointed that the Chancellor has, so far, failed to reverse his predecessor’s misguided cuts to specialist employment support, which will see cuts of around 75% from April 2017. 

“We are pleased, however, to see the continued commitment to devolution with the announcement of the transfer of funds to Greater Manchester and London for employment support. Similarly, we welcome the devolution of the Adult Education Budget to London as an important step in driving more integrated place-based solutions. 

“We also welcome the Chancellor’s recognition of the increased economic uncertainty facing the UK and the scale of the productivity challenge.  Maintaining high quality employment services over this period will be essential to enable the government to react appropriately in the event of a future downturn, whilst helping to close the productivity gap between the UK and other areas.”

City and Guilds:

Chris Jones, Chief Executive of the City & Guilds Group, commented:  “The Government’s £23bn commitment to boosting productivity, and therefore to long-term investment in skills, is encouraging. There has been extensive change to skills policy over the past few years, and if we want the planned skills reforms to be successful, consistency is key. I hope this Autumn Statement, being without a whole new raft of policies around education and training, brings stability to the skills sector. Furthermore, the £13 million fund to support firms’ plans to improve management skills will help to bridge the productivity gap.”

Learning and Work Institute:

Tony Wilson, Director of Policy and Research, said:

“Today’s Autumn Statement confirmed the scale of the challenges that the government will face over the next few years – with borrowing forecast to be over £100 billion higher than was anticipated back in March. Given these headwinds, it is welcome that the government has focused on raising productivity and supporting lower income households. Learning & Work strongly agrees with the Chancellor that improving productivity is critical to raising living standards. However for many people, today’s announcements may feel like jam tomorrow.

Productivity and Skills

“We welcome the announcement of a further rise in the National Living Wage, to £7.50, and a rise in the Apprentices rate to £3.50. This will give a much-needed pay rise to over one million low paid workers. However it is essential that we also tackle the drivers of low pay and low productivity in our economy. So we regret the fact that the new £23 billion National Productivity Investment Fund does not recognise the importance of skills and training as a key part of solving the UK’s productivity problem and raising living standards. So we would like to see the Fund extended, to allow for targeted investment that could improve our skills infrastructure – including in-work support, basic and technical skills.”

Welfare Reform

“Half of FE learners come from the poorest fifth of the population, so the reduction of the Universal Credit ‘taper rate’, allowing claimants to keep more of their earnings, will benefit those combining study with work. Nonetheless, this reinstates just one tenth of the huge cuts to Universal Credit announced at last year’s Budget – which will take £5.4 billion a year from low income households by the end of this Parliament, compared with the current system. And with inflation and living costs expected to increase in the new year, the sector needs to remain alert to the additional financial pressures on learners.”

The Association of Colleges (AoC) comments:

Adult Education Devolution 

David Hughes, Chief Executive of the Association of Colleges, said: “The Chancellor today confirmed that the Adult Education Budget will be devolved to Greater London in 2019-20. There are clear potential benefits if this leads to greater flexibility for colleges to meet local employer, community and student needs, but there is a lack of detail currently about how it will work in practice. 

“We will continue to recommend that the Department for Education and the Department for Communities and Local Government (DCLG) publish a Skills Devolution Green Paper to help clarify responsibilities and priorities and encourage debate about the potential benefits and risks. It is important for colleges to be given the flexibilities to deliver the learning that London and Londoners want and need but there are too many unknowns about how this will work for us to be confident of that outcome. ”

Apprentices Minimum Wage 

In response to the announcement of the increase in the apprentice minimum wage, David Hughes, Chief Executive of the Association of Colleges, said: “The increase in the apprentice minimum wage is a very modest one and will not address some of the access issues which we would like to see addressed. Many people will not be able to access an apprenticeship at that wage due to prohibitive travel costs, for instance; others such as care leavers will struggle to live independently on those wages.

“When the apprenticeship levy is introduced next year, we would like to see more investment to ensure in access and quality to ensure that every apprentice has the best possible start to their career.

“The Government is keen to improve the reputation of the apprenticeship programme and further education colleges can help to achieve this through the education and training they provide for apprentices and employers.”

Chartered Management Institute (CMI) comments: 

Ann Francke, CEO at CMI (Chartered Management Institute) “In his autumn statement today, Chancellor Philip Hammond offered a package of welcome support for what are now described as the “JAMs” – those who are “just about managing”, striving just above the breadline in a challenging climate of austerity.

“But it’s not just individuals who are just about managing. The current productivity deficit in the UK – 21% below the rest of the G7 – is testament that the UK is itself is just about managing too – and not doing so very successfully.

“CMI’s research into this productivity gap conclusively shows that the key way to get out of this particular jam is to invest in better leadership and management practice to create a more skilled and talented workforce. A recent report from IIP calculated that poor people management is costing the UK £84bn per year, and bad management is the number one cause of business failure and the biggest preventer of SME growth.

“Our businesses are overloaded with accidental managers – employees who are highly competent technically in their job – e.g. IT or Finance, then promoted into a management role, but given no formal training. We currently have 3 million UK managers not delivering to their full capability and CMI research shows 43% of managers are rated as ineffective by their teams.

“The good news is that this can be addressed. We’ve seen that organisations that introduce effective leadership and management behaviours increase their productivity by 32%. Better trained managers and leaders also create cultures of trust between leaders and managers through their behaviours. In high-growth businesses, 68% of managers have high trust levels.

“CMI welcomes the Chancellor’s ongoing commitment to investing in employer-led Higher Apprenticeships to address our skills shortage and his commitment to the skills Levy, which provides an essential investment fund boost to help British business invest in creating productive and successful leaders and managers.

“But it’s still not enough. We need 2 million more new managers by 2024 to compete in the post-Brexit business world, which means as well as addressing better practices in our businesses now, we need to embed leadership skills into our education system now for the next generation too.

“For too long, in the words of the White Queen in Alice Through the Looking Glass, the UK has worried about “jam tomorrow and jam yesterday … but never jam today”. We need urgent action from the Government and UK businesses to invest in leadership and management skills now, to boost productivity at the individual, organisational and macroeconomic level – else this is a jam that we’ll all be perennially stuck in.”  

RSM:

Stephanie Mason, head of further education at RSM, said: “Local Enterprise Partnerships (LEPs) across the UK have been given a boost in today’s Autumn Statement with the announcement of £1.8bn national investment, including £556m going to Local Enterprise Partnerships in the North of England; £392m to the Midlands; £151m East of England; £492m to LEPs in London and South East, and £191m to the South West.

“The statement also noted the continued progress of devolution in the West Midlands and London. In London, the adult education budget will be devolved entirely thus presumably removing the Skills Funding Agency from the allocation and strategy process.

“The alignment of employee and employers National Insurance contributions and the increase in the national living wage to £7.50 will hit universities, academies, and particularly colleges and schools, hard due to ongoing pressures on budgets.

“The increase in employment costs more generally may affect employer spending on training and apprenticeships, which could pose a risk to the education sector. With the Government’s commitment to the forthcoming Apprenticeship levy which will come into force in April 2017 – so it will be interesting to see what impact the collective changes will have on recruitment of apprentices.

“There was a real focus on the high-skill economy including digital, construction, infrastructure, science and technology. Whilst there are challenges and risks, there is also an opportunity for all education providers to align to meet these economic priorities through delivery of apprenticeships, including higher apprentices, and through working with businesses to secure the highly skilled workers to deliver the outcomes.”