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  • Spending Review 2020: key takeaways on people and skills

Spending Review 2020: key takeaways on people and skills

Unpacking what the Spending Review announcement means for business on the issue of people and skills.

25 Nov 2020, 5 min read

In today’s Spending Review, the Chancellor laid out stark economic prospects and pledged billions of pounds into job creation and support packages.

The Chancellor, Rishi Sunak MP, used his one-year economic statement to warn that ‘the economic emergency has only just begun’ and pledged to spend a further £55bn next year as part of a package of measures to support the recovery. This includes billions of pounds to help people find jobs, such as the Kickstart Scheme, announced back in July, and a newly announced ‘Restart’ programme.

Supporting jobs

The Chancellor announced his ‘Plan for Jobs’ back in July, including a Kickstart Scheme and an apprenticeship bonus. Read the CBI’s Factsheet on Kickstart.

Today’s spending review restated that:

  • Kickstart has £1.6bn in 2021-22 to ensure funding for over 250,000 jobs
  • Additionally, there will be £1.4bn of new cash to increase Job Centre Plus capacity and double the number of work coaches.

Building on the summer interventions, the Chancellor announced a new £2.9bn ‘Restart’ programme that will provide intensive and tailored support to over 1m unemployed people and held them find work.

This is a positive intervention that once again lays the path to economic recovery, but there is little detail about the programme at this stage. It will be important to understand how it will interact with existing schemes, as well as whether skills support will also be included as part of the programme.

Skills

Building on the Lifetime Skills Guarantee announced by the Prime Minister in September, the Chancellor announced £375m from the National Skills Fund for 2021/22. This includes:

  • £138m for the government’s commitment to fund in-demand technical courses for adults, equivalent to A level (Level 3), and to expand the employer-led boot camp training model
  • £127m to continue support for people to build the skills they need to get into work, including funding for traineeships, sector-based work academy placements and the National Careers Service
  • £110m, including £50m of capital investment, to drive up higher technical provision in support of the future rollout of a Flexible Loan Entitlement to test and develop innovative models for local collaboration between skills providers and employers.

Overall, this provides some detail on the government’s plans for the National Skills Fund. Support for adult retraining will be vital to combat unemployment, whilst backing for higher technical education and flexible loans can help deliver the courses our labour market needs. However, with £3bn earmarked in the Conservative Manifesto and investment in skills vital to recovery, today’s announcement begs as many questions as it answers.

College Capital Funding

As part of a manifesto pledge to bring the FE colleges estate into good shape, the government announced £1.5bn in capital funding for FE colleges to £2025/26. After bringing forward £200m in September, the spending review outlined £100m for 2021/22 followed by £300m per annum over the following three years.

FE is still the poor relation when it comes to capital spending, and previously announced funds now seem to be distributed over six years, rather than five. Nevertheless, today’s allocations give the sector greater certainty over future investment. Modernising colleges will help improve technical and vocational training, align to industry standards, and support business innovation.

Pay

It has been a difficult year for firms, particularly the employers who have been hit the hardest by lockdowns, many of whom have the most staff on National Living Wage and National Minimal Wage. In the Spending Review we saw:

  • A 2.2% increase to the National Living Wage (NLW) up to £8.91 and increases to National Minimum Wage rates from April 2021 in line with Low Pay Commission recommendations
  • From next year, the NLW will also apply to workers aged 23 and over, and a new rate for workers aged 21 and 22 will be introduced. For this new rate, the government has announced a rate of £8.36.

We welcome the NLW extension to over-23s, but with unemployment rising in lower-paying sectors, these increases may be tough for some firms to afford and we must ensure that the changes do not place more pressure on jobs.

Immigration

It’s positive to see the government working towards the points-based immigration system which takes full effect from 1 Jan 2021. The new system has a vital part to play in our economic recovery and will be a big change for UK firms. Read our guide to the new system, created in collaboration with Deloitte, to learn about the key changes.

In the Spending Review, the Government pledged an additional £217m to deliver the Future Borders and Immigration System

Employment tribunals

Responding to the justice system’s continued recovery, the government have announced £246 million for 2021, including funding to continue tackling backlogs in Crown and family courts and employment tribunals.

A well-functioning employment tribunal service is a vital part of ensuring fairness in the UK labour market, so we welcome additional funding and action to tackle backlogs. We hope this will help to tackle the lengthy delays that have increasingly become a problem for employers and workers.

What next?

Do get in touch with your thoughts and reactions to any of the announcements. Across the People and Skills team, you can contact the follow policy leads:

Read more on the 2020 Spending Review: