TSA comments on the Budget 2018

Commenting on the budget, Dr Philip Wright, Chief Executive Officer of the Textile Services Association said:

"We are seeing some positive indications on English apprenticeships from the Government, particularly the commitment to halve the fee for SMEs, however, this only addresses the funding issue and does not touch on the way the training must be provided.

“The way apprenticeships are currently structured is too rigid, there should be more flexibility around how many training hours an apprentice must spend away from the workplace, for example, and the focus should be on competencies rather than simply time spent."

Full details on the budget are available online.

You can also download a detailed analysis of the changes in energy and environmental policy included in the budget, below:

Budget 2018 - Changes in energy and environmental policy

 

Political commentary (provided by GK Strategy, the TSA's Public Affairs Consultant):

Philip Hammond described this as a “Budget for hard-working families” as he declared that “austerity is coming to an end.” However, he reserved the right to edit the Budget in the New Year in the event of a no deal Brexit, stating that the Spring Statement may become a full fiscal event in such circumstances.

Hammond set out a broader fiscal picture of a falling deficit, going from 1.4% of GDP in 2018-19 to 0.8% in 2023-24, with expected economic growth for 2018-19 was revised up from revised up from 1.3% to 1.6%.  He said that the Government will provide £500m of additional funding for departments to prepare for Brexit through 2019-20, on top of the £1.5bn already announced for that year. Meanwhile, from April 2019 the National Living Wage will increase from £7.83 an hour to £8.21.

Responding on behalf of the Opposition, Jeremy Corbyn insisted that “austerity is not over”, setting out the Government’s record on poverty and relative spending cuts during the Conservative’s period in office.

 

Key announcements in the Budget are:

Apprenticeships

The Chancellor indicated that he will introduce a package of reforms to strengthen the role of employers in the apprenticeship programme, so they can develop the skills they need to succeed. As part of this:

  • the government will make up to £450 million available to enable levy paying employers to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains
  • the government will provide up to £240 million, to halve the co-investment rate for apprenticeship training to 5%
  • the government will also provide up to £5 million to the Institute for Apprenticeships and National Apprenticeship Service in 2019-20, to identify gaps in the training provider market and increase the number of employer-designed apprenticeship standards available to employers. All new apprentices will start on these new, higher-quality courses from September 2020
  • the Exchequer Secretary to the Treasury and the Minister for Apprenticeships and Skills will work with a range of employers and providers to consider how they are responding to the apprenticeship levy across different sectors and regions in England, as well as the future strengthened role of apprenticeships in the post-2020 skills landscape
  • Mr Hammond also announced that the National Minimum Wage will also go up by 5.4% from £3.70 to £3.90 per hour for apprentices from April 2019.

Economy and Public Finances

  • Investment in productivity – The Budget increases the National Productivity Investment Fund to £37 billion for areas critical to productivity: housing, transport, digital infrastructure, and R&D
  • Economic growth – the UK economy is expected to grow by 1.3-1.6% each year until 2023
  • Spending control – the Government pledged that spending for departments, local authorities, social security and other public bodies would grow by 1.4% between 2018-19 and 2023/24 in real terms
  • Fiscal outlook – Public sector Net Debt (PSND) and forecast borrowing were both reported to have decreased since the Spring Statement, partly owing to increased tax receipts
  • Brexit preparations – The Budget confirms an additional £500m of funding from reserves for Brexit preparations for 2019/20 and funding has been allocated for pursuing economic prosperity for a UK outside of the European Union
  • Private Finance Initiative – The Budget confirms that PFI, or PF2 (the successor to PFI), will no longer be used and reinforcements will be made to properly manage current PFI contracts
  • Asset sales – The Budget has committed the Government to the appropriate sale of assets to the private sector, including its remaining stake in RBS, mortgages, student loans and the commercial property portfolio of Network Rail

Personal Tax

  • Personal Allowance and higher rate threshold – The government will meet its commitment to raise the personal allowance to £12,500 from April 2019, one year earlier than planned. The threshold will remain at the same level in 2020-21 and then increase by Consumer price index
  • Stamp Duty Land Tax (SDLT) and first-time buyers relief – The government will extend first-time buyers relief in England and Northern Ireland so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property

Business tax

  • Digital services tax (DST) – From April 2020, the government will introduce a new 2% tax on the revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their UK users. The tax will:
    • apply to revenues generated from the provision of the following business activities: search engines, social media platforms and online marketplaces
    • apply to revenues from those activities that are linked to the participation of UK users, subject to a £25 million per annum allowance
    • only apply to groups that generate global revenues from in-scope business activities in excess of £500 million per annum
    • include a safe harbour provision that exempts loss-makers and reduces the effective rate of tax on businesses with very low profit margins

Energy and transport tax

  • Fuel duty – Fuel duty will be frozen for a ninth successive year.

Environmental Taxes

  • Plastic packaging – To reduce the problem of excessive and environmentally harmful plastic packaging, and incentivise manufacturers to use recycled plastic, the government will introduce a tax on the production and import of plastic packaging from April 2022

Skills

  • Apprenticeship Levy: £450 million to enable Apprenticeship Levy paying employers to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains with up to £240 million to halve the co-investment rate for apprenticeship training to 5%

Housing

  • Stamp Duty: First-time buyers purchasing homes worth up to £500,000 under shared ownership to be exempt from stamp duty

Transport

  • Roads: A £28.8 billion National Roads Fund, paid for by road tax, includes £25.3 billion for the Strategic Road Network (motorways, trunk and A roads)
  • Potholes: £420 million to local authorities in 2018‑19 to tackle potholes, repair damaged roads, and maintain bridges

Broadband

  • Rural Broadband: £200 million to pilot deploying full fibre internet in rural locations

International trade

  • E-Passports: By summer 2019, citizens of the United States, Canada, New Zealand, Australia and Japan will be able to use e-passport gates

Health and Social Care

  • NHS funding - NHS is government’s number one spending priority. The government will invest an additional £20.5bn in real terms funding by 2023-24, confirming the final settlement and budgets for capital, transformation, public health and clinical training places in Spending Review 2019
  • Mental health - £250 million a year investment by 2023-24 into new crisis services, including:
    • A new crisis hotline
    • Children and young people crisis teams in every part of the country
    • Mental health support in every major A&E in the country
  • Air ambulance trusts – additional £10 million in capital funding to be made available
  • Social care – Additional £240 million funding investment in 2018-19 and again in 2019-20, with a further £410 million in 2019-20 for adults and children’s social care.

Education

  • Schools funding– £400 million investment on school equipment and facilities and £200 million for the Youth Endowment Fund to help young people avoid violence

Defence and security

  • Defence and counter terrorism spending – Additional £1bn budget for MOD across 2018-19 and 2019-20 and £160 million in funding for counter terrorism policing. There will also be a £21.5m investment in the justice system

Welfare

  • Universal Credit Work Allowance increase – The Budget announces that the amount that households with children, and people with disabilities can earn before their Universal Credit award begins to be withdrawn – the Work Allowance – will be increased by £1,000 from April 2019
  • Extra help for households moving onto Universal Credit –Additional payment providing a fortnight’s worth of support during their transition to Universal Credit
    • The government is also extending the 12-month grace period to all gainfully self-employed people
    • From October 2019, the government will reduce the maximum rate at which deductions can be made from a Universal Credit award from 40% to 30% of the standard allowance

Living Wage

  • National Living Wage (NLW) and National Minimum Wage (NMW) – Supported by the NLW, the lowest earners (full-time workers at the fifth percentile) have seen their wages grow by 8% above inflation since 2015
  • The government will also accept all of the LPC’s recommendations for the other NMW rates to apply from April 2019, including:
    • Increasing the rate for 21 to 24-year olds by 4.3% from £7.38 to £7.70 per hour
    • Increasing the rate for 18 to 20-year olds by 4.2% from £5.90 to £6.15 per hour
    • Increasing the rate for 16 to 17-year olds by 3.6% from £4.20 to £4.35 per hour
    • Increasing the rate for apprentices by 5.4% from £3.70 to £3.90 per hour

 

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