With the UK’s poor economic forecast doing few favours to the skills budget, government must ensure it’s putting money into policies that will actually raise overall productivity, argues Sandra McNally

While the chancellor acknowledged the importance of education and skills in his budget speech, the bleak outlook for the economy makes it difficult for him to deploy the resources that are needed. Bad and worsening economic conditions affect FE as they do everything else. Falling tax revenue means that the government has less scope to invest in public infrastructure. And uncertainty reduces firms’ incentives to invest.

There was no increase in core funding announced for either schools or FE colleges. This means that real spending per student will continue to fall. Economic research shows that school resources affect student outcomes and the magnitude is bigger for those from disadvantaged backgrounds. The cumulative effect of lower spending over time will make it hard for educational institutions or parents to compensate. FE colleges should expect more students to turn up needing to resit GCSE exams, but they will have fewer resources to give them the remedial teaching that’s needed.

Specific measures that provide incentives for greater take-up of post-16 maths seem sensible (at least in principle), but this doesn’t seem directed at the margin of greatest need – which must surely be those who do not even get a good GCSE maths grade and repeatedly fail thereafter.

Although the policies seem to meet a clear need, they should be evaluated in terms of results

The financial help with T-level preparation is welcome but small in relation to any sensible benchmark – such as the number of level three learners, the overall size of the FE budget and, indeed, the amount announced to prepare for Brexit.

There were a number of announcements made that target specific areas such as teacher training and distance-learning courses in digital skills. Although such policies are well intended and seem to meet a clear need, they should be evaluated in terms of results.

Rigorous evaluation of government policies is a core objective of a research institution such as ours. Policies need to be evaluated according to whether they actually increase skills, lead to employment with good prospects and raise overall productivity. One hopes that the government is designing pilots or targeted policies in a way that will enable such evaluation.

In view of the decline in adult training (as documented, for example, in a recent CVER blog post), it is good to see an announcement of a retraining scheme for adults. It is also good that the apprenticeship levy will be kept under review as it is far from clear whether it will achieve its objectives of increasing skills in the most appropriate way for the economy.

In other countries, apprenticeships are a form of entry to the labour market and targeted at young people. This is not the case in England, where most apprentices are over 25. Whether this actually helps adult workers themselves (in terms of higher wages) or improves firms’ productivity is an empirical question – and another research issue for my department.

Other countries offer tax credits as incentives for firms to invest in training. This was recommended by the LSE Growth Commission but has not yet been taken up in the UK. Whereas investment in research and development is risky, investment in training is not risky for the economy, although it may be to the firm if the worker moves elsewhere. There are various ways in which this risk can be addressed in practice.

Promoting firms’ investment in training would help to overcome the barriers of affordability that prevent individuals from investing in their own training. It could cover the full distribution of firms rather than be so focused on large firms – as is the current set-up of the apprenticeship levy and associated incentives. It is particularly important that measures are in place that provide incentives for the development of low and middle skills, hence enabling investment that supports the workers most exposed to the changes in the economy expected to arise from technological advances.

Sandra McNally is director of LSE’s Centre for Vocational Education Research