@RishiSunak's #Budget2020 - Is this the Budget to 'get it done'?
The government will invest £1.5 billion (£1.8 billion including indicative Barnett consequentials) over five years in capital spending to refurbish further education colleges, and has committed to a new £2.5 billion National Skills Fund to improve adult skills (£3 billion including indicative Barnett consequentials).
It will also boost science, technology, engineering and maths teaching with capital investment for up to eight new Institutes of Technology and 11 maths schools.
New Chancellor, Rishi Sunak has delivered his first Budget yesterday (11 Mar), in what was quite a difficult set of circumstances.
He has only been in the Chancellor's role for under a month, on Monday (9th March 2020) the stock market had the largest crash in share price since the 2008 Financial crisis.
Prior to yesterday's budget, Rishi Sunak also announced an emergency interest rate cut from 0.75% to 0.25% in a bid to support the economy during the Coronavirus outbreak across the globe.
The impact of Covid-19 was high on the Chancellor's agenda, as Health Minister, MP Nadine Dorries was diagnosed with Coronavirus earlier in the day and it was unknown if she had been in close contact with any of the Senior Government Minister's.
This was also the first budget in more than 40 years that the UK was not a part of the European Union. So, no pressure then, on Rishi on what was a very unique budget, let alone delivering his first budget to the nation!
Rishi Sunak called this budget the 'Budget to get it done' and announced massive capital expediture around building roads, more houses and railway projects and he confirmed £1.5 Billion in capital funding to the FE College estate, to clarify this will be to improve the college buildings and not an increase in expenditure on learners or to be used by staff.
So, how has the 2020 Budget impacted the FE and Skills Sector?
Education and skills
Further education capital funding – The government will provide £1.5 billion over five years (£1.8 billion inclusive of indicative Barnett consequentials), supported by funding from further education colleges themselves, to bring the facilities of colleges everywhere in England up to a good level, and to support improvements to colleges to raise the quality and efficiency of vocational education provision.
Institutes of Technology – The government will provide £120 million to bring further education and higher education providers in England together with employers to open up to eight new Institutes of Technology. These institutions will be used to deliver high-quality higher level technical education and to help close skills gaps in their local areas.
Facilities and equipment to support T levels – The government will provide £95 million for providers in England to invest in high quality facilities and industry-standard equipment to support the rollout of T levels. Funding will support T level routes being delivered from autumn 2021, including construction, digital, and health and science.
National Skills Fund – The government will consult widely in the spring on how to use the new National Skills Fund.
Apprenticeship Levy – The government will look at how to improve the working of the Apprenticeship Levy, to support large and small employers in meeting the long-term skills needs of the economy.
Apprenticeships – The government will ensure that sufficient funding is made available in 2020-21 to support an increase in the number of new high-quality apprenticeships in small- and medium-sized businesses.
Maths schools – The government will provide an additional £7 million to support a total of 11 maths schools in England, covering every region.
PE and sports – The Budget provides £29 million a year by 2023-24 in England to support primary school PE teaching and help schools make the best use of their sports facilities.
Arts Premium – The Budget provides £90 million a year to introduce an Arts Premium from September 2021, to help schools in England to provide high-quality arts programmes and extracurricular activities for pupils.
Freezing the maximum fee cap – As announced in July 2019, the government has frozen the maximum fee cap in England for the 2020-21 academic year at £9,250 for regular full-time undergraduate courses and at £11,100 for accelerated degree courses.
Removing the student finance three-year residence requirement for victims of domestic abuse – From academic year 2020-21, the government is removing the three-year ordinary residence requirement for student finance for those granted Indefinite Leave to Remain as victims of domestic abuse.
Entitlement to part-time Maintenance Loans – The Budget takes into account the fiscal impacts of part-time Maintenance Loans not being extended to sub-degree (level 4/5 courses) and distance learners, as announced in June 2019 and March 2019 respectively.
The accompanying red book statement to the Budget said:
1.152: 'Apprenticeships also provide the opportunity for people to learn valuable skills and get good jobs. Since its introduction in April 2017, the Apprenticeship Levy has enabled the government to raise the standard of apprenticeships, supporting employers to make a long-term, sustainable investment in training.
'The government will now look at how to improve the working of the Apprenticeship Levy, to support large and small employers in meeting the long-term skills needs of the economy. In the meantime, the government will ensure that sufficient funding is made available in 2020-21 to support an increase in the number of new high-quality apprenticeships in small- and medium-sized businesses'.
How has the FE Sector responded to the 2020 Budget?
David Hughes, Chief Executive of the Association of Colleges (AoC) responded:
“It was to be expected and absolutely right that the budget would focus on the coronavirus. We should all be glad that the government’s immediate priority is about containing the outbreak and keeping the country running.
"Despite that, I am confident that the Chancellor also has his sights set on the comprehensive spending review later this year, to be able to focus on the longstanding and profound challenges we face. These include climate change, productivity, prosperity and supporting the 50% of the adult population that Augar identified as being neglected and under-funded. Colleges will be at the heart of those plans because they are where businesses are supported, communities developed, and individuals given the opportunity to get on.
"We’re working with the Government to secure large scale, long term, transformative investments and policies which will put colleges centre-place in communities across the country. In the meantime, today showed a clear shift in attitude towards technical and vocational education, after a decade of neglect. Colleges will be keen to access the £1.5bn capital funding and will want to shape the new National Skills Fund to make sure it works for their communities and for the people and employers they support.
"To create a truly transformative post-16 education system the comprehensive spending review later this year must commit to long-term investment ensuring no one is left behind.”
Association of Employment and Learning Providers chief executive Mark Dawe said:
"At last! After months of persistent lobbying from AELP, FSB, other stakeholders and individual MPs, the government has taken a significant step today to fulfilling the Prime Minister’s promise last summer that apprenticeships should be properly funded.
"While we welcome the impact of the levy in terms of getting large employers to engage in the programme, small businesses have traditionally provided the bedrock for apprenticeship opportunities for young people, especially in areas of the country where levy payers are scarce, and therefore the announcement in the Budget is good news. The Treasury red book however does not say how much new funding and how many extra apprenticeships in SMEs will be secured.
"We should now build on this announcement in the spending review with the government working with employers and providers to find a longer term solution to make the apprenticeship programme sustainable. This means a levelling up which enables more young people are able to get on to the apprenticeship ladder at level 2 and progress, and in the process making employers less reliant on migrant workers.
"The spending review should also sort out the woeful funding of the teaching of applied maths and English, i.e. functional skills, within an apprenticeship programme".
Helen Barnard, Deputy Director for Policy & Partnerships of the independent Joseph Rowntree Foundation, said:
“The test for levelling up the country is whether it helps those who are locked out of opportunities to boost their standards of living. This Budget was a strong start, but there’s still more to do to target support where it’s needed most.
"The Chancellor was right to confirm the expected funding for college capital and the National Skills Fund, but the Government must follow these up with ambitious plans to boost basic skills provision, support for workers locked in low-paid jobs and to drive up employer investment in skills. New spending on infrastructure is very welcome, but by itself won’t free people to grasp opportunities.
“We need to invest in people and target transport spending to connect people and places shut out of opportunity with the location of new jobs.
“This Budget must be the start of a government-wide focus on delivering routes out of poverty for families throughout the UK, with skills at the heart of that mission.”
Tony Wilson, Director, the Institute for Employment Studies (IES), said:
"Today’s emergency measures to cope with Covid-19 will be welcome news to many businesses – not least the commitment that government will meet the costs of Statutory Sick Pay in firms employing fewer than 250 people. However for those people unable to work due to the virus, today’s Budget offers pretty thin gruel. For those who are entitled to SSP, the current rate of £94 a week will remain unchanged – representing a loss of income of around three quarters for a full-time worker on the minimum wage.
"At the same time, we estimate that around seven million people – one in five of all in work – are not currently entitled to Statutory Sick Pay at all. While it’s welcome that government will make it easier for these people to claim Universal Credit, notably by waiving the requirement to attend a Jobcentre Plus office in person if they have Covid-19, today’s measures throw into sharp relief the inadequacy of the financial support available. At £73 per week, the standard allowance in Universal Credit is just one fifth of a full-time minimum wage and will be inadequate for many of those who may face a long period out of work (as it is now)."
Elena Magrini, Senior Analyst, Centre for Cities, said:
“Reducing inequalities across the country and ‘levelling-up’ means first and foremost ensuring people up and down the country have the required skills to get on in the world of work. Yet around one in five adults in the UK lack the basic qualifications they need to succeed in the labour market. And in places such Burnley and Mansfield almost one in three adults have few or no qualifications.
"Further Education plays a crucial role in levelling-up opportunities. Today’s announcement of a £1.5 billion investment in FE college infrastructure and a commitment to a National Skills Fund are welcome steps in this direction.
"To successfully level-up, this Fund, as well as the promised UK Shared Prosperity Fund, must focus on supporting people with few or no qualifications to achieve at least level 2 equivalents, offer retraining and upskilling opportunities for anyone working in occupations at high risk of automation and help people from disadvantaged background be work-ready.”
Alistair Jarvis, Chief Executive of Universities UK, said:
“Today’s announcement of increased funding for research and development represents a significant investment in the future of the UK, and is extremely welcome. The commitment to increase investment to £22 billion by 2024-25, including 15% more in the next year, will improve the economy and society and protect the UK’s reputation as one of the best places in the world to do research.
“Researchers in the UK’s universities are saving lives and keeping us healthy, developing new and exciting technologies, improving the environment and supporting families. The £400 million pledge to support high quality research at universities across the country will help universities extend this life-changing work, boost innovation and the economy, support levelling-up and skills development in the regions and deliver new breakthroughs in medical research.”
David Phillips is Managing Director of City & Guilds and ILM:
“I am pleased to see the Chancellor making important steps in levelling up FE provision around the country, however I was concerned to see no mention of apprenticeships in the Chancellor’s statement today.
“Looking in the detail of the Budget document did reveal that the Government is rightly looking at how to improve the working of the apprenticeship levy to support large and small employers, however I think this was a missed opportunity not to address this more comprehensively today.
“We know that 92% of levy-paying employers want greater flexibility in how they spend their levy funds, including the ability to invest in non-apprenticeship training. Yet, still three years after its introduction, the system remains rigid and is failing to plug the skills need it was intended for. It is very disappointing to see the Government repeatedly delaying making any changes or definitive decisions on its use and improvement. We are urging the Government to provide greater clarity and transparency around the apprenticeship system in order to unlock the potential economic and social prosperity the nation so desperately needs.
“With people working for longer and the skills requirements from businesses evolving more rapidly than ever, the action needed from the Government is even more urgent, in order to ensure people in all areas of the country have access to the training and development opportunities they require. Our recent research found 34% of the UK working age population have either not received workplace training in the last five years or have never had any such training – equating to 17.8 million people with outdated skills. It is therefore crucial that the Government acts now to ensure the adult education budget is adequately funded and distributed to meet the employment needs of today – and tomorrow.
“The Budget document also revealed that the Government will consult in the spring on how to target the National Skills Fund before confirming details of this at the spending review in July. I look forward to seeing the details on this Fund and announcements on apprenticeships and the apprenticeship levy in the upcoming spending review.”
Stephen Evans, chief executive of Learning and Work Institute, said:
“This budget rightly focuses on responding to Coronavirus, and also sets out a large increase in infrastructure spending to underpin future growth. But alongside investing in physical infrastructure, we need to invest in people too. If we want to see a levelling up of prosperity across the UK, we need to invest in skills. New investment in the National Skills Fund is welcome, but with the number of adults improving their skills at a record low we need to go further.
“Our research has highlighted how the apprenticeship budget is under growing pressure, with a funding gap of up to £1 billion. Large employers are using more of their apprenticeship levy funds than forecast, which means there is less left-over for small and medium-sized businesses who don’t pay the levy.
“The Chancellor has said that sufficient funding will be made available next year to support SMEs to increase the number of apprenticeships. We need either more funding or changes to how the levy works. The Spending Review will need to set out how we avoid a creeping rationing of funding for apprenticeships at SMEs.”
Dr Mary Bousted, Joint General Secretary of the National Education Union, said:
“While the Government obviously needs to address the short term challenge of the coronavirus crisis, it must begin to plan for the long term as well. This budget does not support a long term plan for the millions of young people being educated within a chronically underfunded system.
"The Government knows that lack of funding is putting schools and colleges under great pressure. Class sizes are rising, subjects are being dropped, SEND support is disappearing and inadequate pay is making the staffing crisis worse. All of this is happening just to balance the books.
‘The £7.1 billion already promised for schools over the next 3 years should have been increased. It is welcome but it falls well short of the £12.6 billion needed to replace the cuts since 2015, let alone provide a world-class education for every child. 83% of schools will be worse off this April in real terms than in 2015. Maintained nurseries continue to survive hand to mouth, with many under threat of closure, and 16-19 education continues to be suffer as well. The additional capital funding for FE colleges is welcome but, with almost 4000 schools in need of immediate repair, we greatly regret the Government’s neglect of schools capital funding.
‘The Government has recognised the need for short term action to support workers and businesses during the coronavirus crisis. If the Chancellor is to achieve his ambition for a high skilled workforce he must also recognise the need for long term investment in the education system and commit to addressing the underfunding that our education system has faced for far too long."
Angela Joyce, CEO of WCG, said the funding announcement in Chancellor Rishi Sunak’s first Budget was a ‘step in the right direction’:
“We welcome the announcement by the Chancellor that there will be additional funding made available over the coming years to improve college estates.
“It is a step in the right direction, recognising that the underfunding of colleges in recent years has had a serious impact on colleges’ ability to continue investing in the development of their facilities for the benefit of learners and businesses.
“We await with interest the detail around this funding to see how it will be made available to colleges and how those most in need of college estate investment will be able to benefit from the fund.
“There is still a long way to go in terms of the government balancing up the funding of colleges when compared to schools and universities.
“This capital investment, whilst welcome, still leaves a significant shortfall against what the sector actually needs if it is to be able to continue to deliver the highest quality of teaching and learning required by our economy, in facilities that are future-proofed.”
“Adult learning has received declining funding over many years now, so if this skills fund reverses that decline it can only be seen as a positive step.
“Again, the means of allocating that funding to learners and providers will be the key detail that will determine how successfully this fund can meet the needs of individuals, businesses and the economy.
“WCG will aim to play its part in providing input into the discussion around how the fund will be allocated and used.”
Gill Banks, CEO of Coventry College, believes the announcement of a new multi-billion-pound investment in Further Education can propel the sector to new heights – but only if it is shared out equally:
“This investment is fantastic news after decades of under-funding – and if this investment is shared out amongst all of the colleges across the UK, then it will benefit the Further Education sector as a whole.
“Our priority has been on ensuring our infrastructure has remained at a high standard to ensure our learners are reaching their potential.
“Further education is about social mobility and upskilling adults, and the learning environment plays a core part in this alongside the teaching itself, so we are looking forward to exploring how we can take advantage of this funding to ensure the College continues make a difference to thousands of people’s lives every year.
“We are currently recruiting for more lecturers across a variety of subjects to meet demand – so the National Skills Fund couldn’t have come at a better time for us.
“It is encouraging that the new Chancellor has recognised the important role that Further Education plays within the education system and training workforces of the future – and it is this sort of financial support that will enable us as a College to enhance and develop the experiences we can offer our students.”
A spokesperson for Edge Foundation said:
"We are pleased that the government has recognised the urgent need for funding for FE, arts, and skills development.
"However, on closer inspection, over 5 years the actual spend works out far less substantial and focuses on capital spend rather than staff and teaching, which is the real issue. So while we would welcome this investment, we need to highlight that without a significant increase in revenue funding for salaries in particular, FE colleges are going to continue to struggle to recruit high quality tutors.
"Edge also welcome funding for apprenticeships however we would want to see rapid action to address the discrepancy across funding for SMEs and larger firms to ensure SMEs benefit equally from the pot."
Alex Dyer, founder of Tutor House, said,
"The 2020 Budget was delivered earlier today by Chancellor Rishi Sunak, despite coronavirus taking an unsurprising focus within the speech, he promised many benefits to the education sector.
"It was enlightening to see, despite the outbreak and struggle in other industries, education is still a high priority for the government. On a whole, the £1.5 billion that has been pledged to transform further education colleges and institutions will only have a positive effect, and help to nurture talent in the UK over the next five years.
"Like further education colleges and apprenticeships, at Tutor House, we aim to provide students with the skills to fulfil their ambitions. Today I saw a positive shift towards a brighter future for the further education system, where we can help more students by providing them with the resources and facilities they might need. I hope the government continue to commit to this long term investment, and let’s be frank, it isn’t going to be a quick fix – education in the UK is going to need prolonged investment for it to be able to improve.
"We also saw the chancellor announce the abolishment of ‘reading tax’ today, ending VAT on publications including books and academic journals from 1st December. This will directly impact and benefit, not just FE institutions and their facility’s budgets, but students too, decreasing additional costs in resources necessary for their education."
Mike Cherry, National Chair, FSB said:
“This has been a pro-small business Budget and one which will help many small firms for the future.
“It’s good news to see £1.5bn of investment being made over the next five years for our FE colleges and £2.5 billion for the National Skills Fund. Adult retaining is critical, which is why we need to ensure a significant proportion of the National Skills Fund is ring fenced for small businesses. The funding will help to improve the FE estates and adult skills and bring better returns to the economy.
“The investment in the FE sector is vital for upskilling the next generation of workers and addresses the Augar review recommendation to reform and refund FE infrastructure. The National Skills Fund will help the workforce to improve their skills. Both funding streams align well with the Government’s aims for their ‘levelling up’ strategy.”
Tom Hadley, Director of Policy at the Recruitment and Employment Confederation said:
“Today’s budget gives a much-needed boost to businesses that are facing unprecedented pressure over Coronavirus. Measures aimed at small and medium businesses like 100% relief on business rates and refunding the Statutory Sick Pay bill for up to 14 days will help businesses address cashflow problems they are likely to encounter in the coming months. However, there appears to be little support for business of over 250 employees – this is likely to include temporary workers on the books of recruitment agencies.
“As the Chancellor said, the measures that were announced are exceptional and temporary. But businesses are facing long-term challenges which Coronavirus have made even more acute. It’s disappointing to see the government is ploughing ahead with ill-conceived IR35 tax changes. Businesses don’t have time to prepare and now is completely the wrong time for a huge regulatory shake-up. The government must delay IR35 to April 2021 to give business time and space to focus on protecting their workforce during the current disruption.
“Before Coronavirus, industries like healthcare, hospitality and logistics were facing damaging skills shortages. Shortages among medical staff will test the NHS as the country battles COVID19. Businesses need a long-term plan that focuses on building skills. The government should transform the Apprenticeship Levy so it can support training for temporary workers our economy relies on. Businesses need a negotiated exit from the EU and an immigration policy that addresses skills shortages at all pay and skill levels.”
Andrew Harding FCMA, CGMA, Chief Executive, Management Accounting, The Chartered Institute of Management Accountants, said:
"We are disappointed that skills development and apprenticeships do not have a more prominent place in today’s Budget.
"The U.K. doesn’t have a strong track-record when it comes to investing in skills and higher-level skills in particular. But with the world of work changing at breakneck speed, reskilling our workforce will be key to making the most of the digital revolution and boosting our country’s productivity.
"A recent report by the Industrial Strategy Council estimates that 20 percent of the workforce will be significantly under-skilled for their jobs by 2030. Worryingly, our own research also revealed that 37% of UK workers don’t feel that they need to learn new skills despite a growing awareness of the impact of technology on jobs.
"We must better support current workers to reskill and upskill throughout their careers, and this cannot be achieved through formal education alone. This is why we need to invest in reskilling, training and lifelong learning. One way for the Government to do this would be to change the Apprenticeship Levy into an Apprenticeship and Skills Levy, making it more accessible for employers and employees alike."
Cllr Gerald Vernon-Jackson, Chair of the LGA’s Culture, Tourism and Sport Board, said:
“This funding demonstrates that the Government have heard our calls for greater recognition of the vital role that libraries play in helping businesses to innovate and grow.
“Libraries provide a diverse range of services in our communities and bring people together to learn, network and access free Wi-Fi which improves digital skills and employability. They deliver unrivalled value for money and return on investment, generating £6.95 for every £1 of public funding.
“The British Library’s Business & IP Centre Network improves careers and livelihoods. Research shows that of those Business & IP users who went on to start a new business, half were women and more than a third came from the BAME community.
“Councils are committed to improving the life chances of their residents and stand ready to work with the Government to grow local economies and the entrepreneurs of the future.”
Barney Taylor, European Managing Director, Ensono said:
“Human capital is the engine of any economy. The workforce of the future needs a new set of skills to leverage maximum value from technology. Today’s budget didn’t provide the clarity on investment in technology skills that we would expect. We hope that the Conservative government sticks to its National Skills Fund pledge of £2.5 billion to improve UK adults’ technical skills, and that this will have a significant provision for technology skills.”
Simon Hansford, CEO, UKCloud comments:
"It’s pleasing to hear the Government’s support for our hard-working public services with this Spring Budget. The £5 billion emergency response fund to support the NHS and other public services is much needed given the rise of Coronovirus – the Chancellor also added ‘whatever it needs, whatever it costs’ referring to the NHS.
"Beyond this cash injection, public services must also collaborate with technology firms to combat the financial strain and demand of an ageing population and threating virus – the money will only go so far.
“Interestingly, what didn’t get any airtime during the live Budget announcement but has been confirmed is the roll out of Digital Services Tax – this policy tackles the issue of how we tax larger corporations to ensure SMEs remain competitive. This a policy we’ll be closely monitoring.”
Comprehensive Spending Review 2020
The Budget launches the Comprehensive Spending Review 2020 (CSR), setting out the overall level of public spending within which the CSR will be delivered. The CSR will conclude in July and will set out detailed spending plans for public services and investment, covering resource budgets for three years from 2021-22 to 2023-24 and capital budgets up to 2024-25.
The CSR will prioritise improving public services, levelling up economic opportunity across all nations and regions, strengthening the UK’s place in the world and supporting the government’s ambitions to reach net zero carbon emissions by 2050. It will focus on linking departments’ spending proposals to the real-world outcomes they seek to achieve, and delivering value for money for taxpayers.
The Comprehensive Spending Review 2020 will prioritise:
- Levelling up economic opportunity across all nations and regions of the country by investing in infrastructure, innovation and people, to drive productivity and spread opportunity
- Improving outcomes in public services, including supporting the NHS and taking steps to cut crime and ensure every young person receives a superb education
- Strengthening the UK’s place in the world
- Reducing carbon emissions and improving the natural environment
HM Treasury will review the fiscal framework ahead of Autumn Budget 2020 to ensure it remains appropriate for the macroeconomic context, while ensuring the sustainability of the public finances.
Spending Round 2019 committed to a £7.1 billion cash increase in funding for schools by 2022-23.
The Budget builds on this by providing £29 million per year by 2023-24 to support primary school PE teaching and help schools make the best use of their sports facilities,
As well as £90 million per year to introduce an Arts Premium from September 2021 to help schools provide high-quality arts programmes and extracurricular activities for pupils, with £25,000 per year for secondary schools to invest in these activities.
Supporting people to improve their skills is a vital part of the government’s aim to level up opportunity across the country. Increasing productivity depends on improving the skills levels of this generation and the next. Achieving this will require vocational and technical education that genuinely responds to the needs of business and the country as a whole. The government will confirm its plans on skills at the CSR. But the first steps come now.
Further education should be at the forefront of providing all learners with the opportunity and tools to progress into skilled employment. At Spending Round 2019, the government increased day-to-day spending on further education by £400 million in 2020-21, recognising its vital role in equipping people with the skills they need to succeed.
The Budget goes further, providing £1.5 billion over 5 years (£1.8 billion inclusive of indicative Barnett consequentials) in capital investment to ensure that all further education college estates are in good condition. This investment will ensure that colleges have cutting-edge facilities to train people for jobs in the industries of the future, and is part of the government’s plan to upgrade the nation’s infrastructure.
Alongside this, adult skills provision must improve to meet the needs of people and business now and in the future. To address this issue, the government has committed to a new £2.5 billion (£3 billion inclusive of indicative Barnett consequentials) National Skills Fund to improve the technical skills of adults across the country.
The government will consult widely in the spring on how to target this fund most effectively, before confirming details at the CSR. The government wants to hear directly from people and employers across England to understand what works in the current system and what does not, and to ensure that the fund is focused on helping people gain the skills they need for rewarding, well-paid jobs.
More broadly, the government wants to facilitate two culture changes with this fund: for individuals to be able to train and retrain over the course of their lifetimes; and for employers and the government to increase investment and fill the skills gaps that hold back productivity at a local, regional and national level.
Apprenticeships also provide the opportunity for people to learn valuable skills and get good jobs. Since its introduction in April 2017, the Apprenticeship Levy has enabled the government to raise the standard of apprenticeships, supporting employers to make a long‑term, sustainable investment in training. The government will now look at how to improve the working of the Apprenticeship Levy, to support large and small employers in meeting the long-term skills needs of the economy. In the meantime, the government will ensure that sufficient funding is made available in 2020-21 to support an increase in the number of new high-quality apprenticeships in small- and medium-sized businesses.
Supporting schools and young people
At Spending Round 2019, the government committed to a £7.1 billion cash increase in funding for schools in England by 2022-23, compared to 2019-20 budgets. This funding settlement included an increase to minimum per-pupil funding levels, a commitment now enshrined in law. The minimum per pupil amount will increase to £3,750 for primary schools and £5,000 for secondary schools in 2020-21, with the primary schools minimum then rising to £4,000 in 2021-22. The settlement also provides for £780 million extra in 2020-21 to support children and young people with special educational needs, to ensure all can reach their potential.
On average, schools will see an increase of over 4% in funding per pupil compared to 2019‑20 budgets. The three-year settlement will also allow the government to raise starting salaries for teachers to £30,000 by September 2022.
This funding settlement reflects the government’s commitment to high quality education for all school children. The Budget sets out new steps the government is taking to support children to have the opportunity of an active and enriching school experience.
To ensure that children get an active start in life, the government will bring forward an updated School Sport and Activity Action Plan following the Comprehensive Spending Review. Ahead of that, the Budget provides £29 million a year by 2023-24 to support primary school PE teaching and help schools make best use of their sports facilities. The funding will support high quality teacher training and professional development for PE, informed by best practice PE teaching.
The government also believes in the benefits of participating in the arts and the essential role it plays in all children’s education. The Budget provides £90 million a year to introduce an Arts Premium from September 2021, averaging out as an extra £25,000 a year per secondary school for three years. The funding will help schools to provide high quality arts programmes and extracurricular activities for pupils, including those delivered in partnership with arts organisations, as well as supporting teachers to deliver engaging and creative lessons in the arts.
Youth Investment Fund – The Budget confirms £500 million for a Youth Investment Fund to build new youth centres, refurbish existing youth facilities and provide high-quality services for young people across the country. The government expects that at least 800,000 young people will benefit from new or upgraded youth facilities.
Levelling up and getting Britain building
The government is committed to levelling up across the UK by raising productivity and growth in all nations and regions, creating opportunity for everyone, and addressing disparities in economic and social outcomes.
For too long the UK has under-invested in infrastructure, leaving many people stuck with delays and poor service.
By the end of the parliament, public sector net investment will be triple the average over the last 40 years in real terms. In total, around £640 billion of gross capital investment will be provided for roads, railways, communications, schools, hospitals and power networks across the UK by 2024-25. The government will publish a National Infrastructure Strategy later in the spring, and the CSR will provide full departmental spending plans.
The Budget announces the government will invest £1.5 billion (£1.8 billion including indicative Barnett consequentials) over five years in capital spending to refurbish further education colleges, and has committed to a new £2.5 billion National Skills Fund to improve adult skills (£3 billion including indicative Barnett consequentials). It will also boost science, technology, engineering and maths teaching with capital investment for up to eight new Institutes of Technology and 11 maths schools. The government is committed to giving everyone the opportunity to fulfil their potential, regardless of where they are from.
The government is also taking action to review the Green Book, which sets out how decisions on major investment programmes are appraised in order to make sure that government investment spreads opportunity across the UK.
The Budget reaffirms the government’s commitment to strengthening the ties that bind the Union. As well as taking action that will support people and businesses in every nation of the UK, and targeted support to each nation, it sets out the funding the government will make available through Barnett consequentials for the devolved administrations to fund public services, infrastructure and other priorities.
The Budget sets out the next stage of the government’s comprehensive plan to level up opportunity and share prosperity across the UK. The only sustainable way to drive economic growth and improve living standards in every corner of the country is to boost productivity.
The government is therefore investing in people and places – by taking the first steps in its plan to level up skills across the country, ahead of setting out further details at the CSR, and by committing record levels of investment to infrastructure that will directly support productivity.
These actions will boost national growth as well as addressing economic and social disparities and restoring the fabric of our towns and cities.
UK Shared Prosperity Fund (UKSPF) – The UKSPF will replace the overly-bureaucratic EU structural funds, levelling up opportunity in each of the four nations of the country. Funding will be realigned to match domestic priorities, with a focus on investing in people. It will, at a minimum, match current levels of funding to each nation from EU structural funds. The government will set out further plans for the Fund including at the CSR.
Cultural Investment Fund – The government confirms a £250 million Cultural Investment Fund for culture, heritage, local museums, and neighbourhood libraries. Of this, £90 million will be made available from April for a Cultural Development Fund that will support cultural regeneration proposals outside of London.
Youth Investment Fund – The Budget confirms £500 million for a Youth Investment Fund to build new youth centres, refurbish existing youth facilities and provide high-quality services for young people across the country. The government expects that at least 800,000 young people will benefit from new or upgraded youth facilities.
National Museums maintenance – The government is providing £27 million for critical maintenance work on the National Museums’ estates. The government understands the maintenance challenges faced by the National Museums and will take further action to address these at the CSR.
Football Foundation scheme – The Budget commits £8 million investment in local football facilities alongside matched funding from the Premier League and Football Association, providing quality football facilities in areas with the greatest need.
The labour market and earnings
Employment is at a record high. The number of people aged 16 years and over in paid work was 32.8 million in 2019 and was at a record high of 32.9 million in the three months to December 2019. The employment rate – the proportion of people aged 16 to 64 who are in paid work – also reached a record high of 76.5% in the same period. The OBR expects the employment level to increase further over the forecast period, reaching 33.4 million in 2024.
Alongside the Budget, the government has published its remit to the Low Pay Commission (LPC) for 2020. Confirming the government’s ambitious target, the remit asks the LPC to make recommendations with the view of reaching a National Living Wage (NLW) of two-thirds of median earnings by 2024, provided economic conditions allow. The government is formally announcing a new, ambitious target for the National Living Wage (NLW) to reach two-thirds of median earnings and be extended to workers aged 21 and over by 2024, provided economic conditions allow. Based on the latest OBR forecast, this means the NLW is expected to be over £10.50 in 2024.
This builds on the 6.2% increase of the NLW to £8.72 an hour that takes effect from this April, meaning the government is on track to meet its current target of 60% of median earnings by 2020. Since the NLW’s introduction in 2016 real wages have grown fastest for the lowest paid full-time workers.
As people earn more, the government is committed to reducing taxes on their wages. The Budget confirms a tax cut for 31 million working people with the increase in the National Insurance contributions (NICs) thresholds for employees and the self-employed, saving the typical employee around £104 and a typical self-employed person around £78 in 2020-21. Taken together with increases to the NLW and to the Personal Allowance, an employee working full-time on the NLW anywhere in the UK will be over £5,200 better off compared to April 2010.
Enhanced local business support – Supporting enterprise is an important part of the government’s ambition to level up regions across the UK.
To ensure that all businesses have access to high quality support and advice in their region, the government will:
invest £10 million to increase Growth Hub capacity and provide a high-quality, core business advice and guidance offer across all 38 Growth Hubs
invest £13 million to expand the British Library’s network of Business and Intellectual Property Centres to 21 cities and 18 surrounding local library networks, providing entrepreneurs with business support, free access to market intelligence, IP workshops and one-to-one coaching
SME productivity – Industry-led initiatives have a valuable role in supporting small businesses to improve their productivity. The government will invest up to an additional £5 million in Be the Business to expand its national productivity campaign and further develop its digital tools and resources.
Business support reform – The government will use the CSR to make it easier for businesses to access the information and support that is relevant for them. As a first step, BEIS will lead the development of a digital service to provide businesses with tailored information about appropriate sources of support.
Start-Up Loans – The government will extend the funding of the British Business Bank’s Start-Up Loans programme to the end of 2021-22, supporting up to 10,000 further entrepreneurs across the UK to access finance to start a business. The government will set out plans to expand the programme at the CSR.
Start-up and Innovator visas – DIT will become an endorsing body to allow it to directly support visa applications for eligible foreign investors seeking to start a business in the UK.
Abolishing the reading tax from 1st December. Books, newspapers, magazines or academic journals, however they are read, will have no VAT charge.
Alan Pearce, VAT partner at Blick Rothenberg said:
“The Government has finally taken the decision to remove VAT from digital publications. It follows a recent Tribunal decision that indicated that digital publications should have always been VAT free, the same as hard copy books.”
From the largest UK-headquartered multinationals to the smallest family-owned firm, businesses are the lifeblood of the UK economy. They have created 3 million new jobs since 2010, giving more people the chance to succeed in life and provide for their families.
The UK is one of the best places in the world to do business and the most attractive country for inward investment in Europe. The government is committed to unleashing businesses’ potential, and the Budget supports the development of the high-tech, high-skill jobs of the future.
The government wants to ensure that the United Kingdom continues to be attractive to investment and remains a dynamic environment to start and grow a business. To cut the cost of taking on staff the government is increasing the NICs Employment Allowance to £4,000, benefiting 510,000 businesses. At 19% the UK’s Corporation Tax rate remains the lowest in the G7 and G20. The government is reforming Entrepreneurs’ Relief, while continuing to support the vast majority of entrepreneurs and increasing tax incentives for businesses investing in structures and buildings, and R&D.
The Budget will help businesses to take advantage of opportunities for the UK outside the EU, for example through new financial support for British exporters and by investing in additional business support for SMEs through Growth Hubs. The government will also extend the Start-Up Loans Programme to ensure would-be entrepreneurs can access the finance they need.
Additional funding for veterans mental health – The government will provide a £10 million uplift in 2020-21 to the Armed Forces Covenant Fund Trust, to deliver charitable projects and initiatives that support veterans with mental health needs. This funding demonstrates this government’s ongoing commitment to ensuring that our veterans can access the services and support that they deserve.
A new one year National Insurance break from contributions for businesses that employ veterans was also announced.
Caroline La Jeune, a Partner at Blick Rothenberg said:
“Successful entrepreneur’s fears realised with the reduction of Entrepreneur’s Relief to a lifetime limit of only £1m. This runs counter to the Chancellor’s headline commitment to encouraging private businesses.”
“It will be interesting to see, when the detail behind the Budget is revealed, whether the reform of Entrepreneur’s Relief will be mirrored by a similar reform of Investor’s Relief, which also provided a 10% tax rate on the first £10m of qualifying investments.”
Businesses provide the jobs that hard-working families depend on today, and through investment and innovation they will create the jobs of tomorrow. Backing business is vital to levelling up the economy across the regions and nations of the UK and boosting productivity growth.
The government is committed to making the UK the best place to start and grow a business, supporting enterprising businesses to succeed while attracting established businesses to locate and invest in the UK. In order to do so, the government is investing in the priorities of the business community by improving transport networks and digital connectivity and by investing in people’s skills and health. The government will ensure that the UK’s tax system remains competitive and that the regulatory regime supports competition and innovation, along with improving business support and ensuring the UK becomes a 21st century exporting superpower.
Business and enterprise support
Supporting enterprise is an important part of the government’s ambition to level up opportunity across the UK. The government will do this directly by extending the funding of the British Business Bank’s Start-Up Loans programme to the end of 2021‑22, supporting up to 10,000 further entrepreneurs across the UK to access finance to start a business.
To ensure that all businesses have access to high quality support and advice in their region, the government will invest £10 million to increase Growth Hub capacity and provide high‑quality, core business advice and guidance across all 38 Growth Hubs.
In addition, the government will invest £13 million to expand the British Library’s network of Business and Intellectual Property Centres to 21 cities and 18 surrounding local library networks across England, providing entrepreneurs with business support, free access to market intelligence, IP workshops and one-to-one coaching. (29)
The government will use the forthcoming CSR to make it easier for businesses to access the information and support that is relevant for them. As a first step, BEIS will lead the development of a digital service to provide businesses with tailored information about appropriate sources of support.
The UK is a global financial centre, with world-leading finance hubs in London, Edinburgh, Birmingham and Leeds that support jobs across the country. To maintain the competitiveness of the UK financial services sector, the government will be taking a number of steps to ensure that the UK’s regulatory regime remains proportionate and effective. These will enhance coordination between regulators and ensure the UK continues to lead the way on financial services innovation and the use of technology, including on the regulation of payments and cryptocurrencies. The government will also introduce a Financial Services Bill later in the session which will ensure that the UK maintains its world-leading regulatory standards and remains open to international markets.
Support for the self-employed
The government has reviewed how support for the self-employed can be strengthened. It will improve access to finance and credit for self-employed people, by extending funding for the Start-Up Loans programme as above and by exploring how to improve the guidance available for self-employed people applying for a mortgage. Self‑employed people will also benefit from the government’s continued efforts to tackle late payments. BEIS will shortly publish a consultation on the merits of strengthening the powers of the Small Business Commissioner.
The government will make it easier for self-employed people to find the information and guidance that is relevant to them and their business. The Budget announces that HMRC will launch new interactive guidance in summer 2020 which will make it easier for self‑employed taxpayers to navigate the tax system. They will also benefit from the new digital support service described above. Self-employed people working in rural and hard to reach areas will benefit from the £5 billion for gigabit-capable broadband rollout and funding to improve mobile coverage that the Budget announces.
Additionally, the government will consider how to provide appropriate support to self-employed parents so that they can continue to run their businesses, as part of its wider review of Parental Pay and Leave.
Chief Executive of the British Safety Council Mike Robinson said:
“The Chancellor is right to focus the government’s immediate efforts on addressing the coronavirus crisis. I welcome measures that mean people won’t be penalised for following advice to self-isolate. People who are unwell should never have to go to work and the government’s actions should ensure those who do fall ill are protected. I am sure many employers will also welcome the support from government to pay out sick pay.”
“We are in unchartered territory when it comes the effects of the coronavirus outbreak on people and the economy. Here at the British Safety Council we are taking every step to protect our people and our customers and to put in place measures to ensure business continuity.
“While I welcome some of the specific measures announced today, this outbreak has raises important questions about the available support for workers who are unwell. Long before coronavirus, the British Safety Council called for changes to sick pay to support the lowest paid and we have been increasingly vocal about the negative impact of presenteeism and people working when they are ill. All of our focus now must be to tackle the current crisis and we will work with the government to minimise coronavirus’ worst effects – but once the crisis is over we will revisit the way we support unwell workers and stem the tide of presenteeism.”
Investing in innovation
The UK’s success in the global economy will be rooted in innovation and cutting-edge technology. By driving technological change, the government will create the high quality, highly paid jobs of the future, the Budget sets out plans to increase public R&D investment to £22 billion per year by 2024-25.
The government will invest that money in the people, ideas and industries that will cement the UK’s world-leading position in science and technologies ranging from nuclear fusion to electric vehicles and life sciences.
This landmark investment is the largest and fastest ever expansion in support of researchers and innovative businesses, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France and China.
Achieving the government’s ambitions on R&D will require investment from the private sector. To boost that investment the government will increase the rate of R&D tax credits and consult on widening the definition of qualifying expenditure to include data and cloud computing.
In life sciences, the government will provide the British Business Bank with additional resources to launch a dedicated £200 million investment programme which is expected to enable £600 million of investment, helping to ensure the UK remains a world leader in life sciences innovation.
Professor Markus Perkmann of Imperial College Business School said:
"The government plans to almost double the public investment in Research & Development. This will more than compensate for the loss of EU funding for research of which the UK is a large recipient, and indicates that the government is keen to maintain and expand its commitment to the UK science base. There is a commitment to establish a new type of “moonshot” funding agency, with details still to be worked out, particularly to what degree it will move independently from the current set-up of government research funding."
Dr Ralf Martin, Associate Professor of Economics at Imperial College Business School, said:
“The Chancellor wants to spend more on R&D and preferably not in London. However, to innovate you need innovators and most are in and around London.
“Crucially, London also generates more knowledge spillovers benefiting the UK.
“To "level up" we should focus on low productivity regions. But London also generates a lot of knowledge spillovers for lagging UK regions. Every 20km square in central London generates more than $500MM worth of knowledge spillovers over 10 years for lagging regions.
“However, Cambridge is doing even better. Hence, maybe a bit less funding for London and a bit more for Cambridge?”
UK labour productivity (measured as output per hour) did not grow at all in 2019, following subdued growth of 0.5% in 2018. This weakness has partly contributed to the OBR’s judgement to revise down potential productivity growth – the underlying rate that determines how quickly productivity can grow sustainably – by an average of 0.1 percentage points per year across the forecast.
The UK’s level of productivity has been lower than that of other advanced economies since the 1960s. The UK’s level of productivity is more than 20% lower than other major advanced economies such as the US, France and Germany.
In addition, UK productivity growth has slowed more since the financial crisis than other advanced economies. UK productivity growth has averaged 0.3% since 2008, slowing from 2.3% in the decade prior. By comparison, growth across the G7 has averaged 0.8% since 2008, compared to 1.9% in the decade prior.
There is wide variation in productivity within the UK. As measured by output per hour, the only two areas with average levels of productivity above the UK average in 2018 were London (31.6% higher than the UK average) and the South East (9.1% higher than average). Productivity can vary significantly within each of the nations and regions as well as between them.
In the long term, higher productivity remains the only path to sustainable economic growth and rising living standards.
Investing in skills and infrastructure to improve productivity across the UK permits growth by enabling firms to pay higher wages, offer goods and services at lower prices, and increase their profits.
Productivity improvements, by enhancing economic growth, are also a fundamental source of long-run growth in tax receipts and the government’s ability to fund public services. A low average level of productivity – as well as significant variation between and within regions – are signs of untapped economic potential.
The government is committed to levelling up investment across nations and regions to improve living standards nationally, as well as to address disparities in economic and social outcomes.
The government’s significant progress in restoring the public finances to health over the last decade means it can now afford to support the economy in the short term while investing to support long-term growth. The new fiscal framework allows for a significant increase in growth-enhancing infrastructure investment, while maintaining control of day-to-day spending and the commitment to long-term fiscal sustainability.
At Spending Round 2019, the government increased departmental spending by 4.1% in real terms between 2019-20 and 2020-21, delivering the fastest planned growth in day-to-day departmental spending in 15 years.
Spending Round 2019 funded vital public services: high‑quality, readily accessible healthcare; schools and colleges that ensure every child receives a superb education; and action to cut crime and help keep our streets safe.
Individual budgets for all departments have been set until 2020-21 for both departmental capital totals (CDEL) and departmental resource totals (RDEL).
Longer-term settlements have already been announced for the NHS and schools, which have confirmed budgets until 2023-24 and 2022-23 respectively.