FE should brace itself for Austerity 2.0

The Spring Statement is bad news for Further Education. Britain’s economic doom loop just got bigger.

Since the autumn budget, a black hole of £14 billion in the public finances has opened up. It comes on top of the £22 billion deficit Labour says they inherited from the Conservatives. No wonder Mel Stride, shadow chancellor, rose to the dispatch box with such glee to accuse Reeves of being “the architect of her own misfortune”.

Given that the ‘Iron Chancellor’ refuses to budge from her self-imposed fiscal rules of creating a £9.9 billion surplus by the end of this Parliament, significant cuts to non-protected departmental expenditure are on the way.

We won’t know the full details until the Treasury publishes the outcome of the comprehensive spending review. But it doesn’t take an economic genius to work out that with growth slashed by half, taxes at a new record high and debt interest running at more than the cost of the £100 billion a year education budget, the sector desperately needs to develop a credible plan.

For all the political grandstanding of newly minted ministers overseeing another “skills revolution”, in reality, what FE is about to enter is the age of austerity 2.0.

Of course, it won’t be felt evenly across the whole tertiary system. FE providers in areas with big defence contractors and supply chains could potentially see a boom in enrolments and investments. Similarly, those bidding for a share of the government’s £600 million construction skills fund may use it to stave off mass redundancies among staff. The DWP’s get Britain working funds will find their way into the more entrepreneurial parts of the sector.

It will create a dog-eat-dog mentality, including the scramble to be rebadged by the Department for Education as one of ten new technical education colleges.

The challenge for policymakers and sector leaders is that FE has hardly recovered from the last scorched-earth policy of austerity brought in by George Osborne. During that period, according to the Institute for Fiscal Studies, education spending overall under the Conservatives declined as a share of national income, from about 5.6 per cent when Labour left office in 2010 to 4.4 per cent in 2022-23.

Spending per student declined by 14 per cent in colleges for 16–18-year-olds and by 28 per cent in school sixth forms. College staff have seen their real terms pay fall by 18 per cent since 2010, with a significant pay gap opening up with school teachers and industry professionals.

During last year’s general election campaign, Labour promised to end this doom loop by restoring economic growth.

However, growth has not materialised and even when it does, according to the OBR forecast, the country is looking at increasing living standards at about half the rate it was before the 2008 financial crash.

All this points to an elephant in the room: where is the department’s and the sector’s blueprint to set out how skills reform will improve productivity?

This week in Parliament was a golden opportunity for the phalanx of sector leaders summoned before the education select committee to say how they would improve the system.

Disappointedly, the sessions were light on solutions. Instead, we heard a range of platitudes and special pleading by a sector that runs the danger of being caught fiddling while Rome burns.

Of course, that approach suits the technocrats in SW1, who love nothing more than to tinker here and salami-slice there.

Until FE deploys far more intellectual rigour for how the country could reform its skills model to boost economic growth through a joined-up lobbying blueprint, it will continue to be viewed as a ‘Cinderella service’.