Election Blog Week 4
Last week the political parties published their manifestos, their potential programmes for government. However, hidden behind the manifestos has been talk of the £20 billion ‘black hole’ or the impending spending cuts. It is important to understand what the ‘black hole’ is, particularly as it will likely have a significant impact FE and skills spending.
These cuts have been a cloud overhanging the sector during this election campaign. Both Labour and the Conservative Party have constrained themselves in terms of public spending through self-imposed ‘fiscal rules’. They have both agreed that public sector debt should be decline as a share of GDP in the fifth year of a forecast.
While this discussion can get quite technical, it boils down to the fact that the current government has given a figure to the Office for Budget Responsibility for total public spending for the next five years, showing 1% post-inflation spending rises. It does not have to outline how much each department receives until the Comprehensive Spending Review. Labour, in an attempt to reassure voters and financial markets, has promised to match this spending, leading us to a situation where neither party is holding the other accountable for the proposed cuts.
Using the 1% rise in real terms spending, and taking into account spending commitments made on childcare, the NHS and defence, we can see that non-protected budgets, such as FE and skills, are in line for significant budget cuts, up to 3.5% according to the Institute for Fiscal Studies.
It has to be said that this is all based on current spending projections, which could be altered by a change in the fiscal rules, improved economic growth, or tax increases.
A report this week by the IFS outlined just what these cuts could look like for 16-18 provision, looking at potential paths for future spending. With the number of 16-18 year olds set to rise by 110,000 over the next parliament, even maintaining current levels of post-inflation spending would mean a cut to per-pupil funding. This highlights the seriousness of the potential cuts. Any cuts would be amplified by the rising number of learners.
As an aside, while the IFS report was welcome, it failed to mention independent training providers. This is disappointing, and once again a reflection of the lack of understanding of the sector. We know ITPs deliver around £200m of 16-19 study programmes, often to the most disadvantaged young people. This is where cuts to FE spending will be most damaging, likely contributing to a rise in the already significant number of young people not in education, employment and training.
All this comes while another report, the Open University Business Barometer, reported that 62% of businesses are struggling with skills shortages. This is an enormous number. If the political parties are serious about getting the economy growing these skills gaps cannot be allowed to continue.
One way to get around this problem would be to treat post-16 education spending as borrowing for investment, rather than day to day spending. This removes post-16 education spending from the day-to-day current spending, and would allow the government the space to invest properly in people's future, or in economic parlance, ‘human capital’.
Of all the levers for economic growth, skills should be the first one the next government pulls. Equipping workers with the right skills builds our capacity to achieve goals such as net zero, or meet the health and social care challenges of an ageing society.
To take one salient example, the Labour Party is pinning much of its hopes for growth on reform of the planning system. While this may be an effective way to bring in investment, how will the infrastructure be built while the skills shortages in construction and engineering are so acute?
The next government will need to answer this question, and answer it with ambition.
Election Blog Week 4
Last week the political parties published their manifestos, their potential programmes for government. However, hidden behind the manifestos has been talk of the £20 billion ‘black hole’ or the impending spending cuts.
