Autumn Budget 2017: a wintry economic outlook

On a chilly morning in Glasgow last Friday, delegates gathered at the University of Strathclyde’s Technology and Innovation Centre in Glasgow for the Fraser of Allander Institute’s (FAI) post-Budget briefing.

Chaired by Alf Young, visiting professor at the International Public Policy Institute, the presentation focused on the economic and tax measures in the Chancellor’s first Autumn Budget and the implications for Scotland as the Scottish Government prepares to present its own Budget next month.

The economy

The FAI Director, Professor Graeme Roy suggested that arguably the most significant element was the substantial downward revisions in UK growth forecast.

In its forecast for the next five years, the Office for Budget Responsibility (OBR) has wiped off £60 billion from the UK economy. The principal reason for this is the OBR’s shift in its outlook for productivity. As recently as March this year, the OBR were forecasting a gradual acceleration of the economy, returning to growth of 2% by 2021. Now, however, they believe that weak productivity performance in the wake of the financial crisis can no longer be seen as temporary, and that the slowdown is evidence of structural weakness.

Professor Roy described the implications of this for household incomes as “nothing short of dismal”. Scotland will not be immune from these pressure, and the Scottish Fiscal Commission is likely to be just as (if not more) pessimistic as the OBR.

The reasons for the UK’s weak productivity – labour hoarding, flat investment, inefficiencies in the financial system and a lack of labour market slack – add to the pressures on the Chancellor, who also remains committed to fiscal restraint. This, Professor Roy suggested, means budgets will continue to be squeezed for the next 15 years.

Taxation

Charlotte Barbour, director of taxation for the Institute of Chartered Accountants of Scotland went on to review the tax elements of the Autumn Budget.

She explained that it was a “predominantly English Budget”, with a number of measures that would not apply in Scotland, such as those concerning business rates, stamp duty, training investment, capital and resource funding for the NHS, and a number of measures affecting housing.

However, there were also measures which will affect the whole of the UK, including changes to the corporation tax main rate, freezing of the VAT threshold, a rise in income tax personal allowance and the raising of the higher rate threshold for income tax.

While the Autumn Budget contained relatively few taxation measures, Ms Barbour suggested that forthcoming issues are likely to have significant impacts, including moves by HMRC to make tax digital, taxation changes concerning the gig economy, the devolution of tax powers and, of course, Brexit.

Scotland

David Eiser, research fellow at the FAI reminded his audience, that, as far as Scotland was concerned, the Chancellor’s Budget was the first of two important economic announcements this autumn. On 14 December, the Scottish Government’s Finance Cabinet Secretary, Derek Mackay, will deliver his Budget to the Scottish Parliament.

The Chancellor announced that Scotland is to receive an extra £2bn in block grant funding, spread over the next four years. But the Scottish Government has argued that £1.1bn of this money can’t be used to support day-to-day spending on public services, and has to be repaid by the Scottish government to the UK government”.

Mr Eiser noted that, while in principle it would be possible for the Scottish Government to offset grant cuts by raising income tax in Scotland, there is a still a need to consider the performance of the Scottish economy.

Mr Mackay will face pressure to match the Chancellor’s decision to reduce stamp duty land tax for first-time buyers on properties up to £300,000 in England. But Mr Eiser argued that there are more effective ways of addressing housing affordability issues in Scotland than reducing the broadly similar Land and Buildings Transactions Tax.

Overall, Mr Eiser assessed that there are opportunities in the Scottish Budget to increase public investment and to explore the use of fiscal transactions to stimulate the economy. But with the block grant – not to mention welfare and other reserved spending in Scotland – still driven by UK fiscal policy, the outlook for public spending in Scotland looks tough.

A wintry outlook

In Scotland, the focus now switches to Mr Mackay’s Budget speech next month. The FAI will be holding another post-budget review, and the Knowledge Exchange Blog will report on this shortly afterwards.

But, as Professor Roy suggested, the main story of the Autumn Budget was the outlook for the UK economy. It’s been reported that this has been the worst decade for UK productivity since the Napoleonic wars. That stark historic perspective presents a grim backdrop for the UK economy as it prepares to leave the European Union.


The Knowledge Exchange provides information services to local authorities, public agencies, research consultancies and commercial organisations across the UK. Follow us on Twitter to see what developments in policy and practice are interesting our research team. 

Technical education – reformed for whose benefit?

by Stacey Dingwall

The expansion of grammar schools may not have made it into this year’s delayed and reduced Queen’s Speech but another education policy did – the government’s planned ‘major’ reform of technical education.

As Her Majesty set out, the government’s plan is to ensure that people “have the skills they need” for high-skilled, well-paid jobs, facilitated through “a major reform of technical education”.

A reformed system

The Chancellor detailed plans for a new ‘T levels’ system in March’s Budget, which is being created with the aim of equalising technical and higher education in order to improve the country’s productivity levels. The Budget announcement promised an increase of 50% in the number of hours students train, as well as £500m of funding per year to deliver the new system. The reforms will also simplify the system, reducing the currently available 13,000 qualifications to a mere 15.

The Budget announcement followed the April 2016 publication of the findings from Lord Sainsbury’s review of technical education. The review found “serious” problems with the existing system, noting that British productivity levels lag behind countries including Germany and France by up to 36 percentage points. It also highlighted that the country is forecast to fall to 28th out of 33 OECD countries in terms of developing intermediate skills by 2020.

The Sainsbury Review made a series of recommendations, including the introduction of a framework of 15 qualifications, which the government accepted in full (where possible within existing budget commitments) in its July 2016 Post-16 skills plan. The plan details how the government plans to deliver its reformed technical education system, by working closely with employers and providers, and ensuring that the system is an inclusive one, accessible no matter someone’s social background, disability, race or sexual identity.

Investing and cutting

Also included in the planned reforms is the construction of new ‘Institutes of Technology’, which are intended to “enable more young people to take advanced technical qualifications and become key institutions for the development of the skills required by local, national and regional industry”. At a time when schools and colleges are facing continued cuts and pressures on resources, this is one part of the reformed system that’s come in for criticism.

Speaking to The Guardian, Marcus Fagent from design and consultancy firm Arcadis stated that capital investment is essential to the new technical education system, in terms of space to teach the new curriculum. He also highlighted how addressing the issue of space for teaching has enabled countries like the Netherlands to deliver successful technical education provision.

The fact that our continental neighbours do it better with regards to technical and vocational education is something that keeps coming up. Even the new system has come in for criticism for its continued focus on leaving it so ‘late’ to try and promote technical education as a potential path for pupils. While Britain sticks with starting at 16, countries like Germany offer vocational routes to pupils from as young as 10.

Decentralisation and young people

This week, the Local Government Association will publish a new report that argues that previous reforms within the skills system have failed due to a lack of progress in the devolution of powers to the local level. Written by the Learning and Work Institute, the report will also recommend the creation of “one-stop” services covering apprenticeships, technical education reform, local adult skills planning, the successor to the European Social Fund and oversight of employment services.

In amongst all the arguments over reforms and provision, it’s telling and worrying that the voice of those who will be most affected by the new system is rarely heard – that of the young people trying to navigate a complex and ever-changing education system. With more reforms to GCSE grading also announced in the last week, they have every right to be anxious about navigating an education system that’s supposed to support them to deliver the productivity gains the country needs.

Follow us on Twitter to see what developments in public and social policy are interesting our research team. If you found this article interesting, you may also like to read our other education articles. 

What’s happening in the English education system and how does it compare to Singapore’s system?

by Stacey Dingwall

At the end of last year, we looked at the state of the Scottish education system following the publication of some disappointing Pisa results for the country. In this blog, we focus on some of the issues recently highlighted within the English education system, and how the system compares to that of Singapore – a system that is frequently identified as a model for other countries.

Pisa (Programme for International Student Assessment)

Although there was no significant change in England’s absolute score in the 2015 OECD survey of maths, science and reading, or in the country’s performance relative to other countries, England’s rankings did not experience the same decline seen in Scotland and Wales. While Scotland’s scores across all three areas were the lowest they had recorded in any other Pisa survey, pupils in England performed slightly above the OECD average in reading for the first time.

After a similar stagnation in scores were achieved in the previous Pisa survey, the Minister of Schools for England, Nick Gibb, promised reforms and funding in order to ensure that the country was able to better compete with the top performing countries. The 2015 results show that East Asian countries including Singapore continue to dominate the rankings, and are continuing to make advances.

Teaching

The success of Singapore’s education system has been attributed to its investment in its teachers. All of the country’s teachers are trained at its National Institute of Education and are selected from the top 5% of graduates. Teachers are required to commit to the profession for at least three years and are mentored by ‘master teachers’ at the start of their careers.

As we highlighted on the blog recently, the House of Commons Education Committee raised concerns about teacher training and recruitment in England in the report of their inquiry. The evidence the Committee received suggested that the government is failing to take “adequate” action to tackle what is described as “significant” teacher shortages in England. The report highlights data that more than 10% of teachers leave the profession after a year.

Teacher workload was also highlighted as a significant issue, and the Education Policy Institute gave evidence to the Committee that 60% of respondents to a survey they carried out identified it as a “key barrier” to accessing continuing professional development. EPI analysis also found that teachers in England average four days of CPD per year, compared to 12 in Singapore. Teacher CPD was identified as important for not only professionalism during the inquiry, but also for pupil outcomes.

The schools landscape

The quality of the teaching workforce in England is not the only area in which concerns have been raised over the impact on pupils. The education system in England is a complex one, and has become even more so in recent years with academies, free schools and the reintroduction of grammar schools. Government policy has not been consistent: the Education Bill and the academisation of all schools in England were both abandoned shortly after their announcement.

Last week’s Budget included the announcement of a one-off payment of £320m for 140 new free schools to be created, in addition to the 500 already pledged before 2020. However, there’s still no evidence that significant improvements at the primary level are associated with academy status, and differences at GCSE level between converter academies and other similar maintained schools are not statistically significant. At the end of last year, the EPI found that grammar school pupils’ higher GCSE attainment is not actually a result of better grammar school performance, but can actually be attributed to the high prior attainment and demographic of pupils at selective schools.

The EPI concluded that grammar schools are more likely to widen the attainment gap for disadvantaged pupils. It was further reported earlier this month by the Sutton Trust that a policy of ‘social selection’ is being operated in admissions to the best performing schools.

Research from the NFER has indicated that parents are confused about academies, and the different types that exist. A preference for schools to be accountable to local education authorities was also indicated, which conflicts with the government’s focus on expanding academies/free schools.

Singapore operates a centralised schools system, which is integrated and characterised by a prescribed national curriculum. English academies are not required to follow the national curriculum.

Funding for schools

Despite the Budget announcement, recent news in the education world has been dominated by claims from schools that they are underfunded. As we noted in a blog from last year, when the government announced its plans for total academisation, cuts of £600m to the Education Services Grant awarded to local authorities were also planned. Even though the policy has been abandoned, the cuts have not been reversed.

Analysis for the National Union of Teachers (NUT) found that under the government’s new ‘fair funding’ formula, 98% of schools would see cuts by 2020. Responding to the consultation on the formula, representatives from over a dozen Conservative-led councils said that they were “extremely concerned” over what they see as inadequate levels of funding.

At last week’s Association of School and College Leaders (ASCL) conference, headteachers told education secretary Justine Greening that current funding levels have resulted in them having to cut some subjects and support services, and increase class sizes. The day before the conference, the heads of over 1,000 schools in England wrote to parents and MPs to report the same issues.

The government insists that funding for schools is higher than ever before, at £40bn for 2016-17 and rising to £42bn in 2019-20 to take account of rising pupil numbers. However, Labour argue that as the budget does not provide for funding per pupil to increase in line with inflation, it actually represents a real-terms reduction in the funds spent for every pupil. In December, the National Audit Office published a report which said that as the government was only offering flat cash funding per pupil over the next five years, “Schools have not experienced this level of reduction in spending power since the mid-1990s”.

The latest data from the World Bank indicates that Singapore allocated a lower percentage of its GDP in 2012 than the UK: 3.3% vs 5.6%.

The future?

In an article published just before the Budget, Theresa May published an article which spoke of her government’s ambition to “make Britain the world’s greatest meritocracy”. Meritocracy is a key policy of the Singapore education system, and is identified as one of the main reasons for the system’s success. With evidence continuing to point towards disadvantaged pupils being denied the opportunities of their peers, and schools declaring that they don’t have enough funding to provide vital services, it’s clear that there is still some way to go before this ambition can begin to be realised.

Follow us on Twitter to see what developments in public and social policy are interesting our research team. If you found this article interesting, you may also like to read our other education articles.