Policy Watch – Budget 2012. What did it tell us?


George Osborne’s third Budget speech lasted just over an hour this week but much of it was fairly predictable. There were three reasons for this. First, overall fiscal policy had been clearly set out in the Emergency Budget and Spending Review of 2010 and as ever, the Chancellor continues to make a virtue out of sticking unerringly to the path already set. Second, most of the issues for debate had been pretty much aired in the weeks building up to the Budget: mansion taxes, the 50p rate, Vince Cable’s ‘open’ letter all were obvious examples. And third, current economic conditions continue to provide the Chancellor with little of that ‘wiggle room’ that Chancellors often need. Indeed, the Office for Budget Responsibility (OBR,) who offer the independent forecasting on which the Chancellor relies, confirmed that little had changed since their last Report four months ago. “Our overall assessment of the outlook and risks for the UK economy is broadly unchanged from our November outlook.”

Any big new surprises in the Budget for the world of education and skills?

Perhaps two, if not big at least interesting announcements to note.

One was the intention to pilot “later this year” a system of enterprise loans to help young people start up and grow their own businesses. Just how much money will be available isn’t yet clear but it’s a welcome addition to the package of measures being launched in the form of a Youth Contract in a couple of weeks. There’s been growing support for such a move for some time. Sir Richard Branson, for example, has been campaigning for a couple of years for a Youth Investment Fund to provide enterprise loans for young people on the same lines as the HE student loan model. In addition, the think tank Policy Exchange have recently published a set of proposals that included an Enterprise Kick off Fund for young people aimed at providing small scale start-up loans on commercial terms with the Government acting as back up.

The other announcement of interest was the proposal to create a £100m research fund for UKHE. Intended to draw in private co-funding, this fund will target large capital projects and may counter balance some of the worries about future funding that the sector has been facing.

What about education and skills and the Growth Strategy?

The Chancellor confirmed that the Growth Strategy launched at last year’s Budget and essential to the ‘compelling industrial vision’ that Vince Cable has been promoting, is firmly on course. This is supporting growth in a number of key sectors such as advanced manufacturing, digital and creative industries, health and lifecare sciences and professional and business services.

One of the features of the Growth Plan is the emphasis on raising skill levels and on creating what the Government calls “the most flexible workforce in Britain.” Currently, the Government has adopted 12 education and skills measures to support this and in an accompanying document to the Budget Report, updated progress in this area. One measure, setting up the HE Global online portal, is now complete, another, Project Enthuse which is intended to improve the quality of science teaching in schools has just started, while progress is under way in the other ten.

Just as a reminder, the other ten, an essential part of the current skills agenda, include: improving the quality of apprenticeship programmes; speeding up the apprenticeship vacancy advertising service; endorsing the Ofqual/OFT review of the operation of the qualification market; publishing destination data on 16 and 18 year olds; funding to support the development of work experience models in FE and elsewhere; employer kitemarking of STEM courses; an improved careers portal as part of the new Careers Service; piloting of undergraduate STEM ambassadors; and focused funding for adult literacy/numeracy courses.

What other measures were announced that might be of interest to education and skills?

Most of the other related measures covered business support activity in varying degrees and included:

  • Ultrafast broadband coverage. While investment (£100m) remains to support the development of ultrafast broadband in a number of super-connected cities, an extra £50m will be made available to fund a second wave in ten smaller cities
  • £60m will be provided to help establish a UK centre for aerodynamics
  • Two new catapult (growth and innovation) centres covering Transport Systems and Future Cities will be established
  • There’ll be a further Treasury led review to help develop the concept of employer ownership
  • Lord Heseltine will lead a review to look at how best public-private investment can support future growth activity
  • £100m will be made available to help support non-traditional lending for small businesses
  • The recent recommendation for below inflation rate increases to the average National Minimum Wage will be implemented
  • Of interest to teachers at present, the Treasury is presenting further evidence to Pay Review Bodies on the introduction of regional, as opposed to national, pay structures
  • Welfare reform. The Government is looking to cut welfare spending by £10bn a year over the next spending review cycle

Individual Depts will provide statements about what the impact of these and any other Budget measures will mean for them as they continue to develop funding changes for the future.

Finally, how’s the economy looking generally?

No reference of course to green shoots but based on the figures provided by the Independent Office for Budget Responsibility, the Chancellor offered an optimistic albeit cautious set of predictions about the future. Key indicators include:

  • GDP growth. 0.8% for this year, (so up 0.1%,) 2.0% next year (slightly down on earlier predictions on the basis of concerns about export demand and oil prices,) 2.7% for 2014, 3.0% for both 2015 and 2016
  • Unemployment. Due to peak at 8.7% this year and then fall back to 6.3% by 2016. This is in line with current forecasts from both here and abroad but errs on the side of caution
  • Inflation. Due to continue to fall throughout 2012 and be close to the 2% target by 2013

And what about other reactions?

Generally along fairly traditional lines.

The Opposition has argued that this Budget brought to a close the figment that ‘we’re all in this together.’ Ed Miliband led with the line: “wrong choices, wrong priorities, wrong values.” The CBI was broadly pleased but disappointed that more had not been done to ease regulation. The TUC was concerned about the prospect of regional pay for public sector workers, the FT called the Budget, “an audacious gamble,” the Guardian criticised the Chancellor for “misplaced priorities” while the Daily Mail headline simply read “Not bad, Mr Osborne, but not good enough.”

As for the world of education and skills, attention will arguably now focus on two questions: have we got what the FT called “a 21st century industrial policy” with the skill levels to go with it and secondly, has enough been done to help young people progress into the world of work?

Steve Besley
Head of Policy (UK and International)
Pearson Centre for Policy and Learning

Print Friendly

Paul Champion
Strategic Project Manager

Mobile: 07540 704920

Leave a Reply