Departments that have not been ring-fenced, which include the Department for Education (DfE) and the Department for Business, Innovation and Skills (BIS), face average real reductions of 25 per cent or more over the next four years.
However, a "cuts approach" to education and skills would threaten much needed investment in human capital to support growth, a critical factor in eliminating the budget deficit. And with growing ranks of the unemployed and a new swathe of public sector workers who will need re-skilling, more will clearly need to be delivered for less in the sector.
Whichever scenario starts to unfold, radical changes have to be contemplated by the further education and skills sector.
The Government sees this Budget as an exercise in changing the way public services are delivered and, where appropriate, redrawing the boundary between the state, the individual and the private sector. Evidence from the Institute for Government, drawing on lessons from Canada's experience in the mid-1990s, concluded: "Efficiency measures or doing `more for less' are not viable solutions to eliminate a sizeable budget deficit . there is no substitute for making choices about the relative importance of government programmes to eliminate a large deficit."
The big number is pound;113 billion - with four-fifths of this, the total amount of planned fiscal consolidation over the next four years, coming from public expenditure cuts. But what does this mean for FE and skills?
Excluding capital expenditure, the 201011 budget for DfE is pound;50.9 billion and BIS pound;19.2 billion. If, say, education and defence escape with a 10 per cent reduction and a 30 per cent reduction was imposed on other departments, crudely this would mean saving around pound;5 billion in DfE and pound;6 billion in BIS at today's prices. This would be achievable for schools, but highly damaging for parts of FE.
How can the sector deal with cuts on this scale? One simple solution would be to remove complexity from the system, eliminate poor provision and reform Train to Gain. Increasing private sector spending on skills will not be easy as we emerge from recession. Public money, therefore, needs to go further. But how?
Well, full-cost savings will only result from taking a longer-term view about the core business of the sector: the curriculum and how it is delivered. Structural changes through mergers, shared services and other collaborative models can only be part of the solution. Freezing staff salaries and pensions cannot be sustained over time when education needs to attract and retain the best talent to drive up skills and standards - especially if employers and individuals are expected to pay more in the future.
What is needed are four changes: a culture shift from "employer responsiveness" to "enterprise responsiveness" provision as part of Local Enterprise Partnerships; an intelligence-driven approach to how providers can improve the cost-effectiveness of their provision; radical innovation in how teaching and training is delivered (is this that different from, say, 10 years ago?); and continued investment in technology where the Government should be wary of throwing the baby out with the bath water by abolishing Becta.
Raj Patel, Director of research and policy, Learning and Skills Network.