25 March 2010

“No one ever died of excitement with a Darling Budget” exclaimed Anne McElvoy giving her judgement on the Budget in the London Evening Standard this week. But of course with the election only weeks away now, this was never going to be a Budget about excitement, it was, as most of the media recognised, more about politics. So what were the main messages for the world of education?

In terms of the big picture, there were three messages.

First, that to coin a phrase much beloved of Ministers at present, “our economy is at a crossroads.” This doesn’t sound like a very comfortable place to be but on the other side of the coin, inflation is forecast to remain at 2% for 2011 and the Chancellor’s growth forecasts are only slightly down at 3.0% rather than 3.5% for 2011 rising to 3 ¼ - 3 ¾ for 2012 although not everybody appears convinced. The political argument, however, remains about the timing of any cuts, the Conservatives calling for them sooner, the government, as the Chancellor affirmed in his speech, arguing that we should wait until the economy is stronger. “To start cutting now risks derailing the recovery…it would mean taking a huge risk with people’s jobs, incomes and our future.” Either way, both Parties are preparing us for a pretty tough spending review later this year.

Second, that with unemployment figures not as bad as predicted, down to 2.4m in the last quarter and with a further drop in the number claiming benefits, the government has been able to do two things: claim that its safety net policies of youth guarantees and rapid response services have worked and put back into the pot over £1bn in savings accrued from not having to pay out so much in benefits. There are sub texts to this picture such as the parallel rise in part-time working, the drop in the size of the workforce and the continuing NEET problem but the money saved has at least enabled the government to extend the Young Person’s Guarantee for another year and to sweeten some of the pill for HE with extra funding to cope with the surge in applications again this year.

Third, that the figure for public sector borrowing which the Chancellor had forecast in his Pre-Budget Report in December as a staggering £178bn has now dropped slightly to £167bn. Small steps but welcome all the same. The deficit figure is important for three reasons. First because it casts a shadow over the whole public sector with salaries pegged, projects cut and efficiencies expected, all very different to the years of plenty between 2002 and 2006. Second because the government has taken the unprecedented step of committing under legislation to halve the deficit within four years. Full details can be seen in the Code for Fiscal Stability published alongside the Budget but the crunch years will be 2010/11 to 2014/15 when the deficit is due to be slashed from £131bn to £74bn.

And third, because to secure this kind of reduction, belts will have to be tightened all round. This means as the Chancellor explained, “public pay settlements will be held at a maximum of 1% for two years from 2011” while public spending depts will have to find a further £11bn of ‘efficiency’ savings. BIS, for example, is offering up £300m. Over half of this will come from smarter working, “our back office budgets including consulting, marketing and improved procurement” and the rest, about £120m from rationalisation at the regional level. DCSF is already working through the £1.1bn of savings that it will offer up including £650m through collaborative procurement in schools, £50m through energy efficiencies, £45m over two years from Becta with £55m from the TDA budget and £100m from the start-up funding for extended school provision, all for 2012/13. Views remain mixed about the impact of such cuts, many see it as tinkering and not getting to grips with the real problems and the respected Institute of Fiscal Studies saw this as the weakest part of the Budget.

A chunk of the £11bn savings, £500m at present, will come from an area that’s been a favourite for the knife for much of the last 12 months, namely quangos. David Cameron’s speech last June set out a new approach to quangos and many of the points he made then about new bodies having to meet strict criteria and be more transparent in how they operate can be found in a Paper released alongside the Budget under the title of ‘Reforming Arm’s Length Bodies.’ The government has been conducting a review of such bodies and come up with reducing their number by 140 including potentially 30 from the skills system. This would still leave over 600: 43 grant giving bodies like HEFCE, 152 service delivery bodies like Jobcentre Plus, 52 regulators like Ofqual, 19 tribunals and 319 advisory bodies to be precise so this looks like a story that will not go away.

To go to some of the Budget detail, there seemed to be little that was either new or particularly dramatic for the world of education. The main points are these:

• Frontline services, as indicated in Pre-Budget Report 09 , will be protected through the next two years. This means frontline spending for schools will rise by 0.7%, resource spending for 16-19 participation will rise by 0.9% and that for Sure Start will rise in line with inflation
• Also as announced previously, as part of the drive to ensure children learn about finance, financial skills will be assessed as part of GCSE maths, and from 2011, financial capability will become a statutory PSHE component
• £15m will be made available to extend enterprise education into primary schools and FE; £55m has already been granted to secondary schools for this. In addition, further help will be made available through the Prince’s Trust and through universities to support young entrepreneurs
• The Young Person’s Guarantee, which guarantees 18-24 year olds jobs, training or work placements if they have been on Jobseekers Allowance for 6 months will be extended for at least another year
• A £270m Modernisation Fund is being set up to help fund 20,000 of the extra university places needed this year although mainly in STEM subjects and to help universities identify and deliver efficiencies over the next 4 years. This will include £20m to support a Shared Services Pilot Scheme between universities. £15m will also be available to support a similar scheme in FE
• £25m will be made available through a University Enterprise Capital Fund to support UKHE research and knowledge transfer and £30m for the Institute of Web Science for internet science, all given a further boost by the publication alongside the Budget of the Hauser Review which recommended the creation of new network of Technology and Innovation Centres
• And to complete the good news, the government will consult on scrapping the formal retirement age

© Edexcel Policy Watch 2010. Steve Besley is Head of Policy at Edexcel. Policy watch is a service intended to help busy people understand developments in the world of education. Visit Edexcel at www.edexcel.org.uk