Spending Review: In the Bleak Midwinter?

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Our first glimpse of today’s Spending Review was George Osborne’s tweeting a picture of its grey and brown cover. It was a distinctly unpromising start. But in the end it turned out to be more of a pale, wintery blue.

This was always going to be the most important instalment of HE’s trilogy of autumnal policy papers. Especially after the first two – the Green Paper and the Nurse Review – had proved a little disappointing. At best we were expecting the beleaguered Chancellor to replay some of his better known tunes – hoping for renditions of “world class universities”, “science driving productivity” and “human capital”. By now, MPs know which ones to cheer or boo. “Fixing the roof”, “Crashing Cars” and “Labour’s Mess” really get the crowd going. Even some of his more recent songs like “We are the Builders!” are quite popular although some greet the “Northern Powerhouse” like it’s a prog track or one with a drum solo.

We weren’t expecting to like his new material. Earlier in the summer he’d promised us 25-40% cuts and a revolution in the role and size of the state. He didn’t really deliver either of these things. BIS got a 17% cut in the end which in relative terms almost makes you hear Noddy Holder piping up in the distance. But it’s worth remembering that some of the new stuff always needs a few more listens. We all want to know what the critics really think. Expect Martin Lewis, IFS and Andrew McGettigan to step forward in coming days.

But the new album definitely holds a fair share of surprises. We got more than we expected and all the details that the Green Paper or Nurse couldn’t give us. Some of it is inevitably disappointing. HEFCE’s teaching fund got cut by £120m which looks likely to fall on student opportunity cash with a promise to explore how “universities can take on more responsibility for widening access and social mobility”. The freezing of the graduate repayment threshold was confirmed at £21k and so too was the shift from grants to loans mooted in the July Budget. In the really fine print we also see a change to the discount rate on student loans. At a stroke this moves the RAB charge downwards by some 20 percentage points. Some festive cheer there for the Treasury at least.

But there are a number of (largely) unexpected gifts. Maintenance loans extended to part time students and to higher technical studies, postgraduate loans for all under 60 (broadened from the initial proposal for only under 30s). Additional funding for teaching high cost subjects also protected in real terms. 

But the big headline is really about science. Given the alternatives, many vice chancellors and scientists might have been happy with flat cash. Jo Johnson had warned us that it was the best we could hope for. But unexpectedly it remains protected and in real terms, rising to £5.2 billion by the end of the parliament. No matter that the cumulative rise is allocated to a new £1.5bn global challenges fund that will (coincidentally) help the Government meet its international development target of 0.7% of GDP spending. How is that worked out? Each year’s real terms rise accumulates to an eventual five year total of some £1.5 billion. When there’s that kind of money around and other targets need to be met, enterprising spin doctors and senior officials really do come into their own.

Science and Innovation Audits will have plenty of capital funding to aim at too as well as the possibility of some revenue funding to pay for the things that must happen inside new buildings and laboratories. 

There are even a few new quangos. Nurse will definitely be happier than the nurses. While the latter along with midwives and other health professionals will now be taking out loans to study, Sir Paul will see health research protected and his review accepted in full. Research UK is real, together with its seven slightly reconfigured branch offices and a new ministerial committee. He will now have to explain exactly how his vision of dual support and Haldane is going to work in practice. That’s not going to be easy. See James Wilsdon’s takedown here.

Even industrial strategy got a name check with increased funding for Vince Cable’s Catapult Centre network. That can’t have been Sajid Javid’s idea. It’s more Heseltine than Thatcher and one can’t help but think that he might be slightly disappointed. After all he wanted to give more for Christmas.

Further Education – or the ‘post secondary, non tertiary’ sector as the OECD describe it also looks to have escaped real damage. It still has to find £360 million worth of efficiencies. The UK Commission for Employment and Skills and a surprising number of other organisations are sitting firmly in that firing line. BIS 2020 is still firmly on the cards. But in better news for FE (and perhaps HE too) the confirmation of an apprenticeship levy set at 0.5% for larger employers could bring extra income to the sector. Some colleges and universities will be paying it, but both should be gaining far more from the levy than it costs them. In the same way, the promised shift of business rates to local government and new powers to raise it further to pay for infrastructure could and should bring further opportunities.

For all of these early presents we must thank both the Chancellor and the Office for Budget Responsibility. The OBR’s forecast of an additional £27 billion in tax receipts over the parliament meant that Osborne could find a solution to tax credits and allow more departments and budgets to be protected, or to be cut rather less than we feared. BIS continues to exist and it can just about afford a Christmas party. It will have to be an efficient one though, and there may be a few less people there than in previous years, but Roy Wood is already tuning up. As for George Osborne, well he just might like to know, he’s put a great big smile on somebody’s face.

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