This month saw the publication of the Institute for Fiscal Studies’ (IFS) Green Budget. The report looks at the issues and challenges facing the Chancellor as he prepares for his Budget in March.
The study has highlighted the risks threatening the government’s spending plans, including how key aspects of the Apprenticeship reform programme, intended to create growth and increase productivity, may actually challenge it.
Key to this analysis is the rising cost of employment, specifically in the public sector.
This is where cuts have already hit hard, and although the rate of cuts over the next 4 years is “significantly”slower than the last 5 years, Departmental spending will be cut on average by 2% in real terms between 2015/16 and 2019/20; this is on top of an average 10% cut since 2010. Therefore, employment and wage decisions in the public sector will have to take into account these squeezed financial circumstances.
This is where the IFS has identified that the new Apprenticeship Levy may place increasing cost pressure on public sector employers. The Levy will be charged at 0.5% on the part of an employer’s pay bill above £3 million per year, which they feel could place an additional cost pressure on employers.
However it is not all bad news, as they identify that “alongside this, employers who offer Apprenticeship training will be able to access funding for this investment” – with the large volumes that public sector employees may deliver.
The other pressure the IFS highlighted that is relevant to us here is the recent consultation on Apprenticeship targets for public sector bodies. As currently set out, “the government is planning to mandate that public sector bodies with 250 or more employees must have apprentices accounting for at least 2.3% of their workforce.”
This highlights a key issue with this target; how will a sector who’s capacity to recruit has taken a significant hit be able to take afford these additional apprentices year on year?
In a sector facing rising demand on its services, but falling investment, it would be increasingly difficult to find the spare capacity to take on apprentices to meet this target. Would Public Sector employers have to lose staff in order to meet recruitment targets? If so, this would seem to go against the underpinning argument that increasing Apprenticeship recruitment will increase productivity and employment in the economy.
As the IFS puts it: “It remains to be seen how onerous different parts of the public sector find the obligation to take on a minimum number of apprentices” – and how the policies intended to support Apprenticeships may challenge the government’s spending plans more broadly.
