Sector feels the squeeze in emergency Budget

2nd July 2010 at 01:00

Now that the dust has settled over the emergency Budget, the funding challenges facing education and skills are emerging. With health and international aid protected, the rest of Whitehall faces a 25 per cent real terms cut by 201415, including the Department for Education (DfE) and Department for Business Innovation and Spending (BIS).

Mercifully, the Chancellor recognises the pressures facing education and, unsurprisingly, defence as well. The Institute for Fiscal Studies calculates that if schools and defence sustain 10 per cent cuts, the rest of Whitehall will be cut by 33 per cent. BIS spending looks vulnerable, so much so that supporters of a post-16 Further Education Funding Council should ask whether 16-19 further education (pound;4.8 billion) would be better placed in a department facing 33 per cent cuts or one where the Chancellor "feels its pain".

Minimising the cuts to 16-19 FE and apprenticeships will need hard negotiating. The DfE faces spending pressures from rising nursery and primary school numbers, increasing participation by 16-18-year-olds and academy expansion, although the pound;2.5bn Pupil Premium is promised to be funded outside the education department budget. Then there are the demands from creating "free schools" and 14-19 technical schools.

FE can take comfort from the decision to "protect" 16-19 provision. Housed within DfE, it will be hard to cut 16-19 FE by 33 per cent and school sixth forms by 10 per cent. Ironically, the funding gap could be ended by levelling down instead of up.

By comparison, the outlook for HE and adult skills is more ominous. The deal for full-time HE appears to be a cut in funding in return for higher fees backed by income-contingent loans to maintain unit funding. The real issue is, will student numbers be cut?

On adult skills, funding rates will be savaged to maintain places, but fee collection could be difficult as disposable income falls and employer training budgets tighten. Pressure to redirect the pound;0.8bn workplace learning and pound;1.8bn adult FE budgets to cut spending and expand adult apprenticeships will mount.

In the Budget, the Government decided to freeze child benefit for three years and restrict child tax credit to family income of pound;25,000, thereby taking pound;545 a year from families on income of up to pound;40,000. Families with 16-19-year-olds in full-time further education or unwaged training are entitled to universal child benefit and child tax credit. Even though cuts in child tax credit will be offset by higher income tax allowances, families on pound;25,000 to pound;40,000 with children staying on will feel the pinch.

Means-testing child benefit and child tax credit to household income of pound;40,000 will save around pound;4bn, protect middle-income families more, provide a cushion against cuts to 5-19 funding and stop DfE ministers turning to education maintenance allowances (pound;0.5bn) as an easy killing, which are only paid to young people from households of less than pound;30,000.

Nonetheless, the best way to protect adult skills and HE funding is to join up BIS and the Department for Work and Pensions (DWP) budgets. Unemployment among 18-24-year-olds can be reduced if adult apprenticeship funding from BIS is linked to recruitment subsidies from DWP. Also, DWP spending on jobseekers' allowance should be turned into tuition and maintenance loans to encourage more 18-24-year-olds to study full-time level 3 courses and expand the number of full-time HE places.

Mark Corney, Education and skills consultant.

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