It’s the last Spring Budget for the foreseeable future on Wednesday: from now on, Philip Hammond has declared that he and his successors will announce the annual Budget in the Autumn. The Chancellor has made it clear that he intends for it to be a lower-key occasion than in the past. But as is customary, a few major announcements have been trailed so far including measures to protect consumers from confusing contract small print, broadband vouchers for small businesses and a continued freeze on fuel duty.
Writing in The Sunday Times yesterday, the Chancellor notably revealed a plan to invest in technical education. There’s a supplement of £500m a year to support ‘T-level’ technical routes for 16-19-year-olds and the inclusion of work placements in vocational courses. There will also be a paring down of the 13,000 qualifications to 15 employer-approved “world class” qualifications. It’s also been reported that there will be an extension of maintenance loans to students at National Colleges and Institutes of Technology on higher-level vocational programmes (those at the same levels as undergraduates).
Though the devaluation of the pound post-Brexit has led, via strong export performance, to an unexpectedly bumper tax take, headlines about Hammond’s ‘war chest’ are probably wide of the mark - the UK economy looks healthier than was predicted in November, true, but it is less healthy than was predicted a year ago. Short of some welcome central investment in the creaking social care system, and this £500m attempt to restart the debate around vocational education (again), this money is likely to stay firmly in the chancellor’s current account. It is a hedge against the great unknown that is the cost of Brexit in both the short and long term. Hammond himself has cautioned against any expectation of a "spending sprees" on Wednesday.
The research side of higher education spending has done fairly well recently, with substantial money allocated in the Autumn (£2bn a year by 2020 for research and development funding) and further commitments in the Industrial Strategy. With the HE Bill hopefully making its way out of the Lords this month, we can expect little to no news on the teaching side of HE in the Budget, particularly with the major focus around student support looking likely to focus on vocational education.
Awash with cash?
The Chancellor's focus will also likely be directed towards fixing recent political hiccups, including the growing grumbles over business rates. As was reported by The Times a few weeks ago, universities look set to be some of the biggest losers in the coming changes, with a collective £623m increase in the sector’s tax bill looming. Other big losers include pubs, shops, and hospitals. However, the Chancellor told disgruntled Tory MPs last week that he is prepared to soften the blow and perhaps revise the business rates system altogether. Whether this will provide relief for universities remains to be seen.
Last week the Treasury reaffirmed its commitment to an ‘efficiency drive’ of £3.5 billion spread across all departments by 2019-20. All departments will have to present two new plans, one of 3% reductions, and another of 6%. Given that the schools budget is one of only two protected areas specified in this announcement, alongside the NHS, DfE (which is responsible for universities as well as schools) will face a particular challenge in finding the savings. The risk of HE budgets being squeezed when moved back to DfE was raised at the time of the machinery of government changes - perhaps it is only surprising how quickly things might have come round to bite.
As it happens, the debate about whether universities are fairly or sustainably funded was revived last week with the publication of an Institute for Fiscal Studies report on comparative education funding (covered in last Monday’s briefing), and the release of new HESA data on universities’ finances. The IFS report showed universities receiving significantly more, in real terms, per student compared to 1990, as well as compared to schools and colleges, while the HESA release underlined the IFS’s conclusion that the sector is more reliant than ever on state-subsidised tuition fee income.
The HESA stats also highlighted the sector’s heavy dependence on EU income: 14.7% of all research funding in England, and slightly smaller in the devolved nations. This year is also the first to use the new FRS 102 reporting methodology, helpfully explained by the experts at BUFDG on Wonkhe.
Both of these contrast with the HEFCE report last November on universities’ forecasts to 2018-19, which painted a rather bleak portrait of the sector’s financial health, and also stressed the diversity of financial position in which universities find themselves. But it’s becoming increasingly clear that in a diverse, market-driven environment, it is no longer appropriate to talk about whether ‘universities’ are fairly or sustainably funded as one homogenous bloc.
Some institutions are thriving, with growing intakes of domestic and international students, and look set to securely weather the Brexistential threats. On the other hand, there are plenty of universities that look ever more exposed to shrinking domestic and international recruitment. In some cases, these are also crucial anchor institutions on which a successful industrial strategy that promotes economic growth outside South East England will need.
Unfortunately, vulnerable institutions far from London are not typically at the forefront of the minds of Treasury officials when considering funding for universities, many of whom consider the relative financial success of the most prestigious universities to be representative of a sector “awash with cash”. Compare this to recent reports of dilapidated school buildings and growing recognition of long-term underinvestment in 16-19 and vocational education. Let's hope that the Exchequer is taking a more nuanced look at the sector when considering ongoing spending and support for higher education. How much of that we'll see on Wednesday remains an open question.
Policy Watch: Sainsbury's Delivery: Technical education, employer leadership and careers guidance - Wonkhe's Ant Bagshaw on the policy context of the Chancellor's new skills drive.