Osborne’s Spending Review. An apprenticeship levy and a ‘truce’ with austerity?

George Osborne’s decision to impose an apprenticeship levy on large firms represents a significant change in policy. In Germany and other European countries, employers are required to make a significant cost towards the cost of apprenticeship and skills training. Under Osborne’s scheme, employers with an annual wage bill of more than £3 million will have to make a payroll deduction of 0.5%. The scheme is expected to raise close to £3 billion –double the current size of the apprenticeship training budget.

Even though a step in the right direction, imposing a levy in itself is not enough to upgrade Britain’s ailing apprenticeships. Unlike in Germany, where agreements exist between employers, trade unions and state institutions, ensuring apprenticeships provide real transitions to work, UK firms will still not be compelled to offer them  and certainly not high-skilled ones.Though well over 2 million apprenticeships have been offered since 2010 –David Cameron promises 3 million more –the majority  have been ‘low-skilled’ and ‘dead-end’ –mostly at Intermediate (GCSE) Level, without guaranteeing progression to employment or further training. Significant evidence also shows that firms have reclassified existing workers to be able to access training funds . This has  allowed government to meet targets. Last year, for example, only 120 000 under 19 year olds began apprenticeships.  This can be compared to up to 60% of young Germans –mostly at Advanced Level.

FE gets off lightly?
There’s much relief that a further round of cuts will not decimate the FE sector as Osborne told MPs that core funding for FE (and Sixth Form colleges) will be protected. But the protection is in cash-terms and as  there may be  falling numbers of students because of demographic changes, colleges fill face reductions. The extension of the FE loans system to 19 to 23-year-olds raises as many questions as it provides answers as does the ‘opportunity’ for Sixth-Form Colleges to become Academies so as to be able to avoid VAT payments.

A ‘truce’ with austerity?
Because of growing opposition endangering his own ambitions to become the next prime Minister, Osborne made a significant U-turn on tax-credits.  Does this represent a fundamental change in course, or at least a ‘truce’ with austerity? Not at all. The Chancellor has been given extremely optimistic forecasts by the ‘neutral’ Office for Budget Responsibility (OBS) about future economic performance, that growth will be 2.4% for this year and next and that investment levels will continue to steadily increase.

As a result Osborne’s been allowed what the Financial Times (26/11/15) described as a ‘£27bn emergency exit route’ that allows him to retain his target for a budget surplus by the end of the Parliament –but more importantly, to continue to shrink the size and the role of the state to levels not seen since the 1930s. But previous OBS predictions have not always been correct, with the highly respected Institute of Fiscal Studies, continuing  to provide the clearest opposition to the government on economic policy, telling The Guardian (28/11/15) that it was only ’50-50’ that Osborne would not have too revisit his plans.