6 short weeks ago, in the November 2015 Autumn Statement, George Osborne promised some respite from the anticipated cuts for the non-protected aspects of the Education and Skills sectors for the foreseeable future – with the caveat that these would depend upon growth in the UK economy.
Following the terrible weather conditions at the beginning of the year, George Osborne recently set out his vision of equally turbulent economic conditions the UK economy will be facing in 2016. The crux of his argument was that the economy faces a series of challenges to continued growth, and we can infer that these challenges may threaten the levels of spending he has set out.
So what are these economic headwinds?
It’s a heady mix of external threats, based on a combination of failing Chinese currency (which has been at its lowest level in 5 years and triggered several shutdowns of trading), historically low oil prices and evolving security developments in the Middle East (with particular emphasis placed on the Iran/Saudi Arabia situation).
Osbourne has also highlighted that the public finances remain in a fragile state, setting out that 2015 “was the worst for global growth since the [2008] crisis”. This view is supported by several sources; data released before Christmas showed weak economic growth (already contradicting targets predicted in the Autumn Statement), and some commentators stating a 2% overall growth figure for 2015, compared to the 2.4% figure expected by the treasury.
In its most recent update the Office for National Statistics highlighted that “UK GDP in volume terms was estimated to have increased by 0.4% between Quarter 2 (Apr to June) 2015 and Quarter 3 (July to Sept) 2015, revised down 0.1 percentage points from the second estimate of GDP published 27 November 2015.”
Similar mood music has been sounded by Robert Chote of the Office for Budget Responsibility in his January 2016 remarks to the Scottish government, stating that we should be wary of the much lauded extra “£27 billion that we had apparently found down the back of the sofa over the next five years” and that “the lesson is that what the sofa gives, the sofa can easily take away…the sums lost or gained have often been much larger than they were last November.”
There is also a party political angle to all this, the chancellor warned against “creeping complacency”, with “some believing that it is now safe to ease back on austerity”– a clear political shot at the Labour party’s current anti-austerity narrative.
A key thing to remember here is that this has happened before: previous to the March 2015 Budget and the Autumn Statement, the chancellor prepared the nation for significant cuts, only to dial back the levels of cuts when he delivered his statement.
However the external and international risks to the economy seem much more severe and sustained this time, if current trends continue we anticipate the March 2016 budget may include some ‘clawing back’ of, or additional cuts to, the funding settlements for unprotected department set out in the Autumn Statement. This may include additional cuts to the Adult Education Budget, or the non-teaching budgets at the Department for Education, meaning additional pressure on schools and post 16 providers.
We’ll be keeping a close eye on these developments, and will be covering the budget announcements on 16 March with keen interest.
