Budget 2017: what it could mean for higher (and further) education

If politics is never dull, economics certainly isn’t either, and current mid to long-term macroeconomic worries will no doubt have an impact on the Autumn Budget announcements tomorrow.

The good news is that estimates for borrowing and tax revenues have been much better than expected – in fact, July this year witnessed the first government surplus since 2002. Poor productivity and the uncertain consequences of Brexit negotiations make mid and long-term forecasts less predictable, and inevitably less optimistic. That might point to restraint from the chancellor,  Philip Hammond – a man already known for his caution, especially given the pressure that rising inflation is putting on public services and household finances.

As such, if Mr Hammond is to relax any of his fiscal restraint, any desire to expand the education budget will have to contend with demands from other parts of government.

So what can we expect? Funding for higher education has been widely debated in the past few months, especially since the Labour Party’s pledge to abolish tuition fees. Although the Conservative Party manifesto proposed a comprehensive review of funding of the tertiary education system, political pressures forced the government to make more immediate changes.

Last month, the government announced that it would freeze tuition fees at £9,250 and increase the repayment threshold from £21,000 to £25,000. According to the Institute for Fiscal Studies, these changes come at a cost of £2 billion each year in the long run. So, while it’s unlikely that the 2017 Budget will announce any further spending commitments on higher education, we may get some further clarity on the scope and aims of the promised review of higher education funding.

For example, we may find out whether the review aims to encourage greater efficiency from universities (a potential major oversight, if not included).

Our recent Educating for our Economic Future report highlighted the widening skills gap we face as a country, and the importance of the further and higher level technical education system in addressing this gap. Indeed, the UK will need to make use of the full potential of its workforce skills as it prepares to leave the European Union and skills gaps become harder to fill with foreign workers. This won’t be easy as young people in the UK have, on average, poor literacy and numeracy skills, with digital and financial skills presenting a challenge too.

In fact, the UK is one of the few countries where young people have no better skills than older cohorts, meaning that they are entering a much more unpredictable labour market no better equipped than older generations. This isn’t good news for productivity, which could stagnate even further if the skills gap is not directly addressed.

The government therefore has an unmissable opportunity to tackle this longstanding issue through the review of tertiary funding and further and higher level technical education routes. Indeed, the UK stubbornly stays among a minority of countries that fund upper-secondary technical education more poorly than academic routes.

In any case, the review will buy some time for ministers, as all government reviews do. The scope and objectives of the review will, however, tell us whether there is a serious commitment from the government to change things, or one more kick into the longest of grasses.

David Robinson is director of HE, FE, and skills at the Education Policy Institute.