Mick Fletcher takes a close look at the July 2015 Budget and considers what it might mean for FE and skills.

Yesterday’s emergency budget said little directly about FE.

We’ll need to wait for further announcements expected imminently; perhaps the promised paper on productivity, or the government response to the dual mandate consultation?

Nevertheless there’s much in the budget that affects FE indirectly though not in a consistent direction.

The most significant element is perhaps the announcement of a levy on large firms intended to support employer investment in apprenticeships.

The proposal, which appears to reflect the arrangements advocated by Professor Lady Alison Wolf in her recent paper Fixing a Broken Training System is a first and welcome sign that government is serious about putting pressure on employers to increase financial contributions to the programme.

It offers a realistic way of putting employers in charge of managing key aspects of apprenticeship funding without the need for the bureaucratic controls necessarily associated with public money.

Drawing in extra money from employers is one way the Department for Business, Innovation and Skills (BIS) can help fund increases in the number and quality of apprenticeships without necessarily having to cut further into the adult skills budget.

This is not to say that there won’t be such transfers, but it takes some of the heat off colleges who have been feeling increasingly beleaguered, trapped between the higher priorities of the research and apprenticeship budgets. It could however be less good news for many training providers.

Many actual and potential adult FE students will be badly hit by changes to the benefit regime and particularly the withdrawal of tax credits

Training providers provide two main services for employers. They offer skills in designing, supporting and assessing work based learning as well as providing off the job training; and if they do this well should have nothing to fear from monies being routed through employers rather than Skills Funding Agency.

They have also however played an important role in enabling employers to navigate the byzantine rules surrounding skills funding in order to secure public subsidy for training. It seems clear that a major objective of the funding reforms is to eliminate the need for such brokerage.

Perhaps the second most significant announcement is the transfer of higher education maintenance grants into loans which at a stroke delivers large savings to the BIS budget.

Once again this change takes some of the heat off FE colleges who feared that higher education teaching was untouchable as it is mainly funded by students and research was protected as central to growth strategy.

It is even possible that making higher education less attractive to students might offset the growth likely to result from removing the cap on full time numbers — growth that was likely to come at the expense of less prestigious institutions like FE colleges.

There are however other indirect effects which might be almost as powerful. The budget clearly has impacts on the major customers of colleges — individuals and employers — and their reactions, if hard to predict, are important.

There is no doubt that many actual and potential adult FE students will be badly hit by changes to the benefit regime and particularly the withdrawal of tax credits.

The loss of income will make it harder for people to afford the fees now being charged or to contemplate taking out a loan. In theory, the loss of income might make people more ready to invest in learning to improve their job prospects; in practice they are more likely to take on extra low paid work to pay the bills and have even less time to spend on study.

The incentives on employers, apart from the levy, are also mixed. The extension of the investment allowance might encourage firms to train staff in operating new equipment but that apart there is little in the budget to drive growth or encourage the adoption of high value product strategies.

There is little to encourage science, technology, engineering and maths (Stem) and the ‘Northern Powerhouse’ seems to be suffering the fate of the ‘March of the Makers’ — a great soundbite but little real action. It is unclear how demand for FE will be boosted by the Chancellor’s efforts.