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Policy Briefing 1 November 2010
(18 October – 1 November 2010)
The previous two weeks have been dominated by three letters – C.S.R. The announcement of the Comprehensive Spending Review on 20 October laid out the Government’s spending plans until 2014-15. A total of £81bn of spending cuts will be made, with an overall ratio of cuts to tax increases of 74:26. The pivotal points of the spending review were that departmental budgets are to be reduced by an average of 19%; local authorities will receive 28% cuts; around 490,000 public sector workers will lose their jobs; and there will be an additional £7bn in cuts to the welfare budget.
In terms of education and skills the messages were mixed. Spending for schools will increase in real terms by 0.1% per year and the Sure Start budget will be protected. The increase in the school budget, however, includes the £2.5bn “fairness premium” and does not take account of rising numbers, so spending per pupil may actually fall. Protection of school spending also means a decrease in spending on 16-19 education.
The spending review bolstered further education with an additional £250m funding per year for adult apprenticeships whilst also announcing the complete abolition of Train to Gain and free entitlementfor a first Level 2 qualification (equivalent to GCSE A*-C) for the over 25s. Adult and community learning was pledged “continued support” without any detail of what this might mean in practice. Higher education bore the brunt of the cuts to education and skills, much of which will be made up of reduced public subsidy for the costs of university tuition. A National Scholarship Fund of £150m has been offered, however, to support disadvantaged children to enter higher education and part-time students have been promised loan support on equal terms as full-time students.
The voluntary sector was promised a total of £470m support to cover the training of Community Organisers, launch of the National Citizen Service, the Community First grant fund, and a newly announced “Transition Fund” for organisations involved in public service delivery. The CSR also promised to set specific proportions of services to be provided by non-state providers. Proposed reforms to public sector pensions may also contribute to the ability of voluntary organisations to take on public services. Such constructive measures, however, may prove to be of little comfort in light of the potential impact of local authority cuts on the sector’s income and the impact of welfare cuts on demand for services.
Following the CSR’s general outline, more details will be imminent with the publication of the new Skills Strategy in November, the outcome of the “Supporting a Stronger Civil Society” consultation published last week, and the individual departmental budgets to be published in November/December. To read more about the CSR, click here.
Skills
The National institute of Adult Continuing Education has published its response to the CSR. Chief Executive Alan Tuckett praised the government for not reducing the funding for adult and community learning but warned that the abolition of Train to Gain would have a significant impact on participation.
The CEO of the Skills Funding Agency, Geoff Russell, has issued a response to the CSR. Russell argued that all providers should change the way they do business to cope with £1.1bn cuts to FE over four years but that FE is set to receive increased revenue as a whole. He also spoke of the need for “the lecture room and the board room” to work much closer together.
During a speech to the Royal Society of Arts, minister for FE and Skills, John Hayes announced his desire to establish a circle of guilds through which to reinvigorate practical learning. The minister also promised a continued role for sectoral bodies in designing qualifications, training, and setting standards.
Higher education minister, David Willets has stated that there will be “a very careful process of deliberation in light of the Browne Report” to decide upon how to shift tuition funding away from grants to universities toward loans to students. The outcome of this process will be revealed in a forthcoming White Paper on graduate funding.
The proposed cuts to higher education will lead to the closure of “swaths of institutions” according to the head of lobbying group Universities UK. The recommendations of the Browne Review on funding, which suggests rises in tuition fees coupled with a 75% government levy on fees over £6,000, will see more universities going private or competing to attract international students.
Politics
The Treasury has launched a national plan on how the Government intends to unlock £200bn of public and private sector investment over the next five years to stimulate British enterprise. The plan includes investment in low-carbon growth, digital communications, transport, and scientific research.
The government have published a White Paper on local economic growth. The paper announces the 24 successful Local Enterprise Partnership proposals; the timescale for the £1.4bn Regional Growth Fund; and the ability for local authorities to recoup the business rates collected in their area as an incentive to encourage private sector-led growth. A map of the successful LEP bids may be seen here.
The legal framework for reforming quangos has now been published by the Cabinet Office. The Public Bodies Bill sets out how to implement reforms that require legislation and will give ministers the ability to abolish or merge bodies, modify their funding arrangements, and transfer their functions.
Proposals to reduce the £5.2bn lost in tax and benefit fraud and error each year have been published. The Fraud and Error Strategy sets out a wide range of options including the launch of a single fraud investigation service; penalties of £50 for minor offences; and naming and shaming fraudsters in local areas.
Over three-quarters of people applying for the Employment and Support Allowance (ESA) are either being found fit for work or withdraw their claim prior to medical assessment according to research conducted by DWP in pilot areas. The total found fit for work was 39% and the total amount of closed claims was also 39%.
Work Choice, a new employment programme will replace the current collection of specialist disability employment programmes. The programme will aim to tailor support to the needs of each person to help them find employment and will work with employers and co-workers on how to support a disabled person whilst in work. The programme has been contracted out to 8 providers, including the Shaw Trust.
Automatic enrolment into workplace pensions are to be introduced among all employers irrespective of size. The earnings threshold at which an individual is automatically enrolled into a workplace pension is set to increase and a new scheme, the National Employment Savings Trust (NEST), will work to reduce the burden on employers.
The government will commit £2billion towards the Enterprise Finance Guarantee (EFG) over the next four years. The money will be made available to small companies without credit history or collateral, including Community Development Finance Institutions.
An examination of the vetting and barring scheme for those who work or volunteer with vulnerable individuals is set to occur. This is in response to complaints about the disproportionately bureaucratic and burdensome nature of the process. The review will include the scheme’s coverage, the future role of safeguarding bodies, and suggestions for its future form.
A total of 4,200 new health visitors, double the current amount, will be recruited to give advice and support and play an important role in safeguarding children. This recruitment drive will involve a new improved training programme; a focus on retaining workers; and creating a clear vision and identity for the profession.
The Department of Health have developed a set of resources to support GP consortia to commission services for patients. This includes a service specification that sets out how to design services to improve patient outcomes; a costing tool to determine how much money could be saved by implementing a service; and procurement advice and templates designed to reduce the need for GP commissioners to rely on external support.
Sixteen areas have been given direct control over local spending. The Community Budgets scheme will pool together strands of Whitehall funding into a single local account to wrap money and services around the needs of the most vulnerable in areas such as education, health, anti-social behaviour and housing.
The Independent Commission for International Aid has been established to evaluate the effectiveness of spending on international aid projects. The Commission will undertake around 20 major evaluations, reviews and investigations with recommendations per year.
The voluntary sector
Roberta Blackman-Woods, MP for Durham, has been appointed the shadow minister for Civil Society. Blackman-Woods was elected as an MP in 2005 and has a previous career as a professor of social policy alongside work as a consultant to Save the Children and the Child Poverty Action Group.
The Charity Commission has created an online consultation on how it will find £8m of cuts to its £29.3m budget by 2014/15. Options include adopting a lighter approach to regulation, only investigating cases involving large sums of money, and reducing advisory services to individual charities.
The Office for Civil Society has announced that the organisations to deliver the majority of its grant funding will be the following – Big Lottery Fund; Community Development Foundation; Social Investment Business; and V. The private firms PWC and Tribal will also be involved in administering grants.
Shadow minister for the Cabinet Office, Liam Byrne, has accused the government of “driving a steamroller over the big society” with the spending review. Byrne believes charities would be hit hard by cuts to local authorities and the £100m Transition Fund would not come close to providing what the sector needed, especially given the impending VAT rise which is expected to produce a £170m bill for the sector.
The Code of Good Governance, a guide setting out best practice in the running of charities, has been updated. The code was revised to be easier to understand and is based around six key principles - understanding their role; ensuring delivery of organisational purpose; working effectively both as individuals and a team; exercising effective control; behaving with integrity; and being open and accountable.
British Waterways, the Design Council, the National Endowment of Science, Technology and the Arts (NESTA), the Theatres Trust and the School Food Trust are all planning to transfer to the voluntary sector following the government’s review of public bodies.
Eight infrastructure bodies have sent a letter to the Treasury which calls for a single national database for Gift Aid claims. The letter suggests that written declarations are replaced by an online mechanism; the declaration conditions on addresses and sponsored events are relaxed; and that ministers work with professionals from the tax profession to harness their skills towards the general improvement of Gift Aid.
According to a research report by New Philanthropy Capital, the voluntary sector may have to prepare for between £3.2bn and £5.1bn of cuts, more than will be available via trusts or public donations. To cope with this new financial situation, NPC suggests that charities may take a range of measures, including shrinking public service provision and partnering with other charities or private sector providers to offer more attractive services to commissioners.
The National Endowment for Science, Technology and the Arts (NESTA) has launched a £1.5m grants programme for community organisations. Neighbourhood Challenge will award £150,000 to ten different organisations to provide tools, skills and small-scale finance for their work in areas of deprivation.
Think tanks and research
The Institute for Fiscal Studies’ analysis of the Spending Review suggests that, contrary to the chancellor’s claims, the outcome of benefit and tax reforms will be regressive. Reforms are set to reduce the incomes of lower income households by more than that of higher income households (with the exception of the richest 2% of the population). They are especially critical of the reforms to Council Tax Benefit which will be replaced by a system of grants to LAs to decide themselves how to rebate council tax bills, potentially incentivising them to move low-income families.
An analysis of the spending review by PriceWaterhouseCoopers warns that the reduction in government contracts to external suppliers will lead to around 500,000 job losses in the private sector, the same number as those expected in the public sector. PWC also suggest that the North East, Northern Ireland, Scotland and Wales are expected to especially suffer from the cuts.
Research undertaken on social care budgets by the Audit Commission suggests that cuts to the NHS and local government will mean that many vulnerable people will not be sufficiently supported to take control of their own personal budgets. The report also warns that some local authorities are off-course to meet national plans for their implementation.