Spring Statement 2018: Sector Response

The Chancellor has presented his first Spring Statement to Parliament today (13 Mar). 

The Spring Statement gives people and businesses certainty and stability to plan for the future. Major tax or spending changes will now be made once a year at the Budget in the Autumn.

The Spring Statement:

• gives an update on the overall health of the economy and the Office for Budget Responsibility (OBR) forecasts
• gives an update on progress made since Autumn Budget 2017
• invites people and businesses to give views on changes the government is considering

The Chancellor’s Spring Statement, which included support for small and medium businesses, with an £80 million boost if they take on an apprentice.

This funding, part of the wider changes DfE are making to the apprenticeship system, will deliver more high quality training so that everyone can benefit from the opportunities apprenticeships bring.

DfE plan to bring all employers onto the apprenticeship service by April 2019, to help secure 3 million apprenticeship starts by 2020.

Sector Response

Apprenticeships and Skills Minister, Anne Milton, said:

“The £80m announced today will give a boost to delivering more high-quality apprenticeship training. The funding is part of the wider changes we are making to the apprenticeship system to increase both the quality and quantity of apprenticeships out there, so that everyone who wants to can benefit from the amazing opportunities apprenticeships bring.”

Responding to the £80million allocated to SME apprenticeships, David Willett, Corporate Director at The Open University, said:

“It’s essential that smaller businesses are able to reap the benefits of apprenticeships. Over half of SMEs have had to increase the salary on offer to recruit someone with the right skills, and a third are struggling to fill roles within their organisation. As we enter into a politically uncertain future, encouraging employers, whether large or small, to take up apprenticeships should be a priority for the UK. So today’s allocation within the Chancellor’s Spring Statement is a step towards a solution. 

“As apprenticeship standards were developed primarily with large organisations, they don’t always serve the needs of small businesses. SMEs often have an even greater need for agility and adaptability and therefore require workers to have broader skillsets. We’d like to see apprenticeships become more flexible, offering employers the opportunity to add additional ‘modules’ around ‘core’ apprenticeships to tailor training to better fit their requirements.”

Mark Dawe, Chief Executive, AELP said:

“On the £80m for apprenticeships, our early understanding is that this is growth money within the £650m funding already promised.  

“While any growth funding is very welcome, until the government remove the 10% employer contribution for under 24 apprentices and commit to an annual non-levy budget of £1bn, the apprenticeship starts are not even going to reach the level they were before the levy was introduced – let alone exceed them.”

Alan Woods OBE, CEO of VTCT, said:

“We welcome the Government’s announcement to support employers through an additional £50m of funding to support the T Level rollout, as the Government needs to work much more closely with employers from all sectors ahead of the impending launch date.

“SMEs are the heart and soul of the hair and beauty industry, and so VTCT welcomes the pledge of an additional investment of £80m. We urge the Government to ensure a portion of this funding is allocated to sectors such as health and beauty to enable those employers to be part of the apprenticeship revolution.”

Dr Mary Bousted, joint general secretary of the National Education Union, said:

“The Chancellor’s Spring Statement should have been used to announce urgent action to help schools and colleges with the funding problems they are facing now, but today’s Statement contained nothing to tackle the crisis in education funding caused by the Government’s real terms cuts.  Class sizes are increasing, but teachers and support staff are being driven out by attacks on their pay and intolerable workloads.  Schools and colleges are struggling to cope with the cuts and high needs funding is in crisis, threatening the support for children and young people with special educational needs and disabilities.

“It is impossible to tell whether the £500m for T-levels, first announced last year, or the £50m to help employers provide T-level students’ work placements will be sufficient to fund the number of people the Government expects to do them.  We acknowledge that small businesses need funding to help them take on apprenticeships, but when education funding is so stretched, it is wrong to fund work placements and apprenticeships from the education budget.

“In failing the five tests set by the National Education Union to ensure a high-quality education for all, the Government has once again failed our children and young people – including those with special educational needs and disabilities. The National Education Union, alongside other education unions, will continue its campaign to ensure that our children and young people get the investment that they deserve and our economy needs.”

Stephen Evans, Chief Executive, Learning and Work Institute, said: 

“The Chancellor’s Statement is a case of short-term gain, long-term pain. There is relatively good news over the public finances and growth in the short-term, but long-term pessimism abounds about our growth prospects and therefore public spending conditions will remain extremely tight. To coin a phrase, nothing has changed.

“To break out of this low growth future, we need to invest in high quality learning, skills and employment.

“The extra £80m to support SMEs to take on apprentices is welcome, but more fundamental changes are needed too. Alongside increased investment, we need new ways to engage adults in learning, a drive to improve literacy and numeracy among the nine million adults that lack these skills, and a bigger ambition to help more people with health problems and disabilities back to work.

“We’re pleased to be working on Careers Learning pilots in five areas of England with the Department for Education to trial new ways to engage people in learning.

“The Chancellor kept his statement deliberately short – forecast heavy, policy light. But the Government must seize the historic opportunity to invest in learning, skills and employment.”

Brian Palmer, tax policy adviser, AAT (Association of Accounting Technicians), said:

“While the apprenticeship levy is beginning to bear fruit, with nearly one in two small businesses telling AAT they have already accessed available funds, Government has recognised that greater small business enthusiasm for apprenticeships will help them reach their three million starts target by 2020. The promise of £80 million from the Education Secretary will undoubtedly help with this, and we hope small businesses will be encouraged by this funding opportunity.

“This skills initiative supports the fact that all employers are, from April 2018, being given extra incentives to tackle Britain’s productivity problem. This is through a £50 million grant to help employers roll out placements for T levels, which aim to transform technical education in the UK, and mentioned by the Chancellor in today’s speech.

“High-quality technical qualifications are an excellent tool of improving social mobility and open up career paths to many thousands of young people, and the additional £500 million for T levels in post-16 education, also underlines Government’s commitment to making the scheme work as an even more credible alternative to higher education.”

Dr Coorous Mohtadi, Senior Academic Technical Specialist, MathWorks, said:

“This time last year, Hammond unveiled his plan to increase investment in STEM subject research by £300m, as well as the introduction of new ‘T-Levels’, and technical students’ training hours being increased by more than 50%.

“Today, it was promising to hear that the Chancellor continues to be dedicated to this cause and from next month £50 million will be available for the roll-out of T-levels.

“This is particularly important as the skills gap remains one of the most significant issues affecting British businesses, particularly with Brexit on the horizon.

“However, the questions remains, ‘how can we ensure that existing investment directly translates into the narrowing of the STEM skills gap?’.

“Education methods, such as project based learning, are key for teaching young people relevant skills that will be directly transferable and relevant for the jobs the country’s future economy requires.

“In addition, with public sector spending at breaking point it is critical that the government makes sure return on investment is kept front of mind by enforcing best practice teaching methods, whilst simultaneously safeguarding the future of the British workforce and industry.”

Petra Wilton, director of strategy for the Chartered Management Institute – the professional body for managers and leaders, said:

“The Chancellor’s £80m helping hand for small businesses access the Apprenticeship Levy is brilliant news enabling more people to benefit from apprenticeships, and will be music to the ears of employers and learners. According to our research, 81% of bosses want access to the digital apprenticeships service to be extended to small businesses to drive up apprenticeship numbers. The majority also back Levy funding to be spent on apprenticeships for all ages.

“Many large employers are now identifying key higher level skills gaps in management, digital and engineering, and as a result the fastest growing new degree apprenticeships are across these areas. Small businesses, the engines of the UK economy, now have the same opportunity to develop their staff.

“While there is positive news for the economy, productivity remains stubbornly flat. Clearly, the government can no longer afford to ignore the OECD and the Bank of England’s advice that quality management and leadership is the number-one driver of productivity. And while the Industrial Strategy is a step in the right direction, we await more detail from the Chancellor on how it will work to close the management skills gap.”

Su Johal from SAAF Education, a financial management and business support provider for the education sector, said: 

“What we didn’t see in this year’s Spring Statement was consideration towards the growing funding crisis in the education sector, and the impact it is having on the UK’s future generations and society as a whole. 

“There will be an influx of non-recurring funding for the next two years, but this isn’t enough. The funding cuts are leading to staff shortages which results in strained teaching environments for pupils. 

“We’d like to see positive steps towards how the government budget is being spent in relation to education, as now is the time to make a change.”

Angela Middleton, Chairman and Founder of MiddletonMurray, said:

“Today’s announcement that £80million will be used to help SMEs recruit, train and skill apprentices is a welcome step in the right direction.

“Right now, the UK is facing a serious productivity problem and I see apprenticeships as the key to unlocking our productive potential because of their focus on talent, skills and training.

“Last April saw the introduction of the Apprenticeship Levy – a positive and important measure – and I support the government in its delivery of three million apprenticeships by 2020.

“The Levy’s shortfall is its focus on big businesses – those with a paybill of over £3million – and not the SMEs that make up such a huge and vital part of our economy.

“The spring statement commitment is a great first step – but there is much more to be done in this space.”

Peter Finegold, Head of Education Policy at the Institution of Mechanical Engineers, said:

“We welcome the Chancellor’s proposed release of £80m for small businesses so that they can fully participate in the Government’s target of 3 million apprenticeships. Positive perception of the apprenticeships ‘brand’ amongst young people, their parents and teachers is heavily reliant on ensuring all apprenticeships are of high quality, are for an extended duration and develop transferable skills alongside specialist competences. Engineering apprenticeships are a perfect exemplar of this approach. 

“We support the Chancellor’s £500m commitment to the introduction of T-levels, with a specific commitment of £50m to prepare work placements – since this is a major hurdle to be overcome if the proposed scheme is to succeed. But there is still a good deal of work to be done in changing perceptions in our schools that would allow technical training to be viewed as equivalent to academic study – especially among teachers. The Institution of Mechanical Engineers’ STEM Insight teachers in industry programme, led by STEM Learning, provides teachers with professionally life-changing exposure to how employers value their skilled expert technicians.”  

Di Mabe, Client Services Director of leading Microsoft recruitment partner, Curo Talent, said:

“I welcome Philip Hammond’s embrace of technological change, as we build a Britain fit for the future. However, there should be an awareness of how businesses will source the right people from the technology talent pool based on current culture and trends. The demand of IT skills has led to many experienced people moving from permanent employment into the freelance market, which needs to be accounted for in future tax plans. 

“This demand, particularly on new technologies, will always outstrip supply in this fast-moving sector. The Chancellor highlighted that one new technology start-up is established in the UK every hour. While IT start-ups may have the confidence to hire permanent staff they will invariably need support from experienced freelancers especially in the initial stages of developing and launching a new product.

“The introduction of T-levels may go some way in bridging the skills gap through quality technical education, but it will take time for 16-year olds to gain real world experience and filter into the workplace. It will not guarantee businesses a surplus of technical talent. I believe businesses will need to change their attitude to recruitment, accepting the freelance culture and offering more flexible working. Businesses should be hiring on the basis of skills, not commuting distance, even if this does mean allowing their IT staff to work remotely.

“With £50 million available to organisations to take on T-level placements, I urge businesses to make the most of this opportunity to secure home grown talent and provide the best in real world experiences.

“I also believe the recruitment sector can do more by offering better advice to young candidates on the in-demand technologies, and widening the pool of talent by driving diversity and addressing gender imbalance in technology roles through schemes such as the Tech Talent Charter. At Curo, we’re doing our part. Between visiting local primary schools, helping teenagers with their CVs and inviting children to a space launch, we’re ensuring young people are enthusiastic about tech, which may mean more of them opt for the T-level route in years to come.”

The Employment Related Services Association (ERSA) said:

“ERSA welcomes today’s announcement in the Spring Statement that the Treasury will consult on extending current tax relief to support self-employed people and employees when they fund their own training.

“ERSA believes training should be available to all those self-employed people who want to access such support.

“Self-employment has risen exponentially in recent years and now accounts for around 14.9% of the total UK workforce. It can be an invaluable route into the labour market for jobseekers who require flexibility, such as carers or people with fluctuating health conditions. 

“ERSA has pressed the government to provide better skills and training support for self-employed people and remove the punitive Minimum Income Floor (MIF) in Universal Credit. The consultation announced today is a step in the right direction to improve training support for self-employed people.”

Dr Jenifer Baxter, Head of Engineering at the Institution of Mechanical Engineers, said:

“It is good to hear that the Government is continuing to emphasise the close connection between the practices of industries and our natural environment. Using the tax systems to incentivise ‘greener’ behaviours in industry is a good start and we welcome the upcoming consultations on red diesel, vehicle excise duty, and plastics.

“Connecting the whole supply chain of the plastics industry is a diverse and complex issue. The management of plastics used in consumer packaging and local authority recycling collections is currently disjointed. It is important to ensure that when materials are produced they can be recycled effectively; this means creating consistent material supply chains from our wastes. The fragmented non-standardised approach to recycling in the UK is holding us back from developing these material supply chains. The Government must work closely with both industry and our local authorities to reduce the number of plastics used in household products and ensure that consistent collections across the UK build new markets for the reprocessing of waste materials and their use in new products.

“Further to this, it is important to ensure that some plastics, used in industries like healthcare, automotive, and pharmaceutical are recognised as vital materials and these plastics must not be confused with those that we find in single use items, our household wastes and littering our environment.”

“We also welcome the announcement that new homes will be built across the UK. These new homes must be resilient, as our future climate is changing and our energy and transport systems are evolving. New homes must enable residents to take the opportunities that these new systems could offer, from smart distributed energy, prosuming (householders that produce and consume energy), electric vehicle charging, natural/hydrogen gas appliances and in-house systems that support the elderly are all possibilities. If homes are not built with our future in mind, then new householders will have to pay to retrofit their own houses.” 

A spokesperson for the Association of Colleges, said:

“The financial outlook for colleges has deteriorated in the last six months despite the funds made available for education in the Autumn statement and despite the growing understanding that skills matter for our country’s future success.”

The AoC raised the following key points regarding college finances:

Concerns

• DfE funding for 16 to 18 education in colleges will fall by around 2% because the autumn census reported a 2% fall in student numbers. Colleges face increased competition for sixth form age students at a time when there are fewer young people. This means colleges are contracting now but will need to expand again when the current school population reaches the age of 16.

• Apprenticeship numbers remain below last year’s levels with the result that college income from apprenticeships in 2018-19 forecast to be 2% below income in 2016-17 despite the introduction of the levy.

• Inflation is running above 2% which requires colleges but funding rates remain fixed in cash terms. Retention of teaching staff is a challenge which is why both AoC and SFCA recommended pay rises for 2017-18.

• Colleges have little control of pension costs. DfE increased Teacher Pension Scheme contributions from 14.1% to 16.48% in 2015 and may make further increases to take effect from April 2019.

• Although some financially weak colleges have merged with stronger counterparts, there are still 35 colleges with financial notices to improve. The planned implementation of the college insolvency regime continues to unsettle banks and governors.

Positives

• Colleges will benefit from £57 million in new DfE funding for work placements in 2018-19, which is the first allocation of funds from the technical education budget allocated in the 2018 Spring Budget

• Colleges are well managed financially. For the average college earnings before depreciation, tax and interest (EBITDA) are above 5% of income and expected to rise in 2017-18. Collectively the college sector is repaying debts built up at the start of the decade. Despite falling income, the FE college debt-to-income ratio is expected to fall to 23% by July 2018.

• The Prime Minister’s statement on the government’s Post 18 education and funding review is a clear sign of government intent to rebalance the higher education system towards the types of courses where colleges have historic strengths.

Summary of the Spring Statement 2018

The economy continues to grow, continues to create jobs and continues to beat expectations

The economy has grown for five consecutive years, and exceeded expectations in 2017.

Employment has increased by 3 million since 2010, which is the equivalent of 1,000 people finding work every day. The unemployment rate is close to a 40-year low. There is also a joint record number of women in work – 15.1 million. The OBR predict there will be over 500,000 more people in work by 2022.

The OBR expect inflation to fall over the next 12 months, and wages to rise faster than prices over the next five years.