Policy blog - Budget 2015-45
A brief analysis of the possible impact over the next 30 years of the latest Budget.
Stood at the dispatch box delivering his second Budget of the year, George Osborne said this latest version was “a plan for Britain for the next five years”. Politicians don’t tend to shy away from hyperbole, but the Chancellor was actually understating the significance of his plans. The truth is that we were hearing a plan for at least the next 30 years.
Of course, many measures are currently only scheduled for the five year term of the current Parliament at most and they may not even survive that long. The 1% per year pay rise for public sector workers is one such example: announced for the next four years and met with a chorus of consternation from the unions. The Chancellor is unlikely to change his tune on that one, but where there is discord, may we expect ballots for industrial action.
One issue where a ballot has already been lined up is the anticipated education spending cuts. Whilst the Conservative manifesto pledged to maintain per pupil funding for four to 16 year olds in state schools, there are fears that other areas of school and college budgets will feel the pinch as the Government attempts to reach a public sector account surplus by 2019-20. We need to wait for the Comprehensive Spending Review (CSR) to conclude before we can be sure, but the Institute for Public Policy Research (IPPR) predicts an 8.9% real terms cut in education spending between 2015-16 and 2019-20.
It is too soon to tell how battles over education wages and budgets will end, but whatever happens will impact on young people’s lives for many years to come. A huge cohort of teachers is retiring and a new set of baby boomers is beginning its journey through the education system. Decisions made now on education wages will directly influence the calibre of the next generation of teachers recruited. Decisions made now on education budgets will directly influence the quality of resources available to educate an exceptionally large generation of students.
The CSR will help to clarify how much the deficit reduction will affect educators’ finances and students’ education over the next few years, but whatever happens, we need to thank tax payers from 2045 and beyond for ensuring that the cuts aren’t going deeper. The Institute for Fiscal Studies estimates that 73% of all students will be unable to pay off their student loans after 30 years, when they will automatically be wiped. This percentage will surely increase further when grants are replaced with maintenance loans from 2016-17 and ‘high teaching quality’ institutions are allowed to increase tuition fees in line with inflation from 2017-18, as was announced in the latest Budget.
It goes without saying that a lot can happen in 30 years. For starters, I’ll be very surprised if the student loan repayment period hasn’t been extended by then, but taxes may well be needed to cover the unpaid debt that remains. In other words, it looks likely that mid-century tax payers, many of whom are the baby boomers just starting school, will have to bail us out. Yet another reason to invest in their education now you might think, because today's nursery-goers will need to figure out a way to earn more than a living when they’re working in three decades’ time. It may only be one Budget and CSR, but generations will ultimately care about what George Osborne decides to do.
About Kevin Armstrong
Kevin is responsible for the charity group's research and policy activity. The group's research provides new knowledge about how to best improve the wellbeing and effectiveness of the education workforce. Our policy work persuades governments and other organisations to put this knowledge into practice.