1. Autumn 2018 budget submission
Julian Gravatt, Deputy CEO

2. Summary

3. Background What this presentation is about
Autumn budget will be on 29 October 2018
Earlier than normal because of UK/EU negotiations
The economic forecasts will contain uncertainties
The Treasury will explain how it is funding the four year NHS deal (spending up 3.5% real terms a year)
There may be stealth taxes and income from public sector pension increases
The Treasury wants to defer spending changes to to the 2019 spending review
Treasury asked for proposals by 28 Sept 2018

4. AoC proposals for spending review
Action the government should put in place for 2020
An education spending target (as % of GDP)
Higher 16-to-18 funding per student (up 5% a year)
A new target for every citizen to be able to reach Level 3
A new higher technical offer
A national retraining scheme
A new approach to supporting institutions
An education workforce strategy

5. AoC proposals for autumn budget
Action to be taken this year (ie before Christmas)
16-18 funding rate £4,050 in by extending Teacher Pay Grant
Fund exceptional teacher pension increase
Maintain adult education spending by redeploying any underspend
Guarantee non-levy apprenticeship budget
Set up a higher technical development fund
Provide capital grants for technical equipment
Standardise ESFA payment profile
Extend the restructuring facility for a year

6. 2019 spending review

7. The big challenges The UK industrial strategy has the right aims
The aim is to “boost productivity by backing businesses to create good jobs and increase the earning power of people throughout the UK with investments in skills, industries and infrastructure”
.. but the skills policies are insufficient
Reform of technical education
Initiatives to improve digital and STEM
Pilots of National Retraining Scheme

8. What are the really big challenges
UK is falling behind its potential in several ways
Productivity is 20-25% below competitors
Productivity and growth sluggish since 2008
Public investment in skills is falling (education spending will be less than 4% of GDP by 2020)
Spending is front-loaded
There are skills shortages in technical occupations
Stark divisions in the education system
- 15% of 19 year olds have not reached Level 2
- 7% of pupils are in private education but 40% of
those in elite roles are privately educated

9. College finances Ability of colleges held back by their finances
Colleges collectively made a 0.1% surplus in
16-18: fewer students, fixed rates, smaller budget
Adult education: low funding rates, devolution
Apprenticeships: fewer new starts, slow payment
No funding to cover inflation in any budget
Higher costs (CPI 2.4%, higher pension costs)
Pay levels in colleges have been squeezed
College insolvency regime in 2019

10. Proposals for 2019 spending review
Action the government should put in place for 2020
An education spending target (as % of GDP)
Higher 16-to-18 funding per student (up 5% a year)
A new target for every citizen to be able to reach Level 3
A new higher technical offer as an alternative to the BA/BSc route
A national retraining scheme
A new approach to supporting institutions
An education workforce strategy

11. Short-term action

12. Raising the 16-18 funding rate
Pay
Median pay in colleges £30,000, in schools £37,000
Big variations around these averages
DfE providing a Teacher Pay Grant to support pay rises of 1-3% in schools/academies for two years
Increases school sixth form rate to £4,030 in and £4,050 in
Funding rate
16-18 funding rate fixed at £4,000 for five years
Funding drops by 25% at age 16
Increase the funding rate in stages, starting now

13. Funding for teacher pensions
Teacher pension scheme
Employer contribution due to rise from 16.48% to 23.5% (figures are provisional)
A £1.5 billion increase (stealth tax) for state-funded education (£140 million for colleges)
Will cost colleges an average of 2% of their income
Action
Treasury should delay the valuation while it resolves some technicalities and anomalies
If not, it needs to be provide higher funding to cover the extra costs

14. Maintaining adult education
After years of neglect, some big changes
Devolution of c50% of AEB to Greater London, Greater Manchester, West Midlands, Liverpool City Region, West of England, Tees Valley, Cambs in 2019
AEB halved between 2009 and 2015
HMT promised £1.5 billion spending from
There have been shortfalls because funding rates are too low and qualification list too restricted
DfE should redistribute any year end underspend (on ) in November 2018 to fund over-delivery

15. Guaranteeing non-levy apprentices
Protecting real apprenticeships
Some successes in recent reforms (the levy, the operation of DAS, more employers engaged)
Some problems (starts down 30%; too many mid-career management apprentices; underspends)
Levy-paying employers have first call on the entire training budget; risk this will squeeze SMEs
Treasury should separate the budget in two and guarantee a larger budget for smaller employers

16. Higher technical education
Reforming the system in the 2020s
More and more people are taking full-time three year residential degrees and graduating with £50+k student loan debts
Despite low unemployment, many graduates in jobs that don’t use/need their skills
Post-18 review should put in place measures to develop higher technical education
This is a long-term reform. A development fund should be established now

17. Standardising the payment profile
A straightforward but long overdue change
Colleges operate on wafer-thin margins
Government is the main paymaster (including funds controlled by students and employers) but pays colleges late each spring
The shortfall is 6% of annual payments each March
DfE makes a standard 1/12th payment to academies each month on 1st day of the month
DfE should pay colleges in the same way

18. Extending the restructuring facility
Avoiding an unhelpful rush to the door
HMT has authorised c£150 million in loans to colleges from the restructuring facility and expects to commit a total of £300 mil by March 2019
Most of the 51 mergers have been self-funded
Government-supported mergers have been prolonged. The process is complex and costly.
Rather than have colleges rush to meet an arbitrary deadline, better to complete the job properly by leaving the facility open for another 12 months

19. More information

21.
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