If the prime minister’s vision of a fairer economy with better opportunities for everyone is to become reality, says Julian Gravatt, the government needs to carefully review FE funding.

The Treasury’s next autumn statement on November 23 this year will be Philip Hammond’s first as chancellor. The statement matters for everyone in FE because treasury decisions set the overall budget and direction.

What he will say in the statement is still a bit of a mystery, because Mr Hammond has kept his cards close to his chest. He told the Conservative Party conference this week that it will be hard for the government to deliver a budget surplus by 2020, but also that “fiscal consolidation” will continue. This is Treasury code for spending reductions or increases in tax, but it doesn’t necessarily mean new decisions to cut budgets. When the economy grows, fiscal consolidation happens simply because earnings rise and people pay more tax. Unfortunately we may not be facing good times.

The cornerstone of every big Treasury statement is the official economic forecast from the Office for Budget Responsibility . This includes projections for tax, spending and the deficit. The 2015 spending review turned out better than everyone expected, partly because the OBR revised its forecasts upwards and decided the country would be £27bn richer. This gave George Osborne, the former chancellor, room to revise spending cuts down from the 20 per cent target to something closer to 10 per cent. For colleges, this meant stabilisation in the two main budgets (16-to-18 and adults) and the promise of more money for apprenticeships.

A year on, times have changed. The referendum vote has caused the pound to fall in value and is expected to put a brake on economic growth in 2017 and 2018. Downward revisions to the forecasts spray red ink all over the spending plans, which may in turn require some fiscal consolidation in response.
Last year’s spending review could yet be rewritten 363 days after it was supposedly fixed for four years.

Everyone in the government talks about long-term planning, but they’re shackled to short-term targets. Brexit adds to the uncertainty but it may also force the government to behave differently when it comes to domestic policy.

The spending review could be rewritten 363 days after it was supposedly fixed for four years

For the last 15 years, the official growth forecasts benefited from a rising population of migrant workers buoyed by immigration. The prime minister’s vision of an open economy with higher borders will require something different, including a stronger focus on post-16 education and skills. AoC’s pitch in the autumn statement is that the government needs to increase spending in the short-term to move the country as a whole to a different setting.

We have made a number of specific proposals. The 16-18 funding rates should be increased to avert a funding crisis in academic and technical education. Apprenticeship funding rates and the GCSE funding condition should be reviewed. Tough issues related to pensions should be tackled rather than left to fester.

These are just some of the actions the government can take if it chooses. Without them, the economic and social problems exposed – and reinforced – by the Brexit vote will get worse rather than better.


AoC’s autumn statement submission is available on its website. Julian Gravatt will be hosting the AoC Funding Forum on November 17 at the AoC Annual Conference.