Governance News Alert: HM Treasury Autumn Budget 2024: FIXING THE FOUNDATIONS TO DELIVER CHANGE

HM Treasury Autumn Budget 2024: FIXING THE FOUNDATIONS TO DELIVER CHANGE

Rachel Reeves, the Chancellor of the Exchequer, delivers the first Labour government budget in 14 years and the first by a female chancellor. Also published on Budget day are the first details of how the Lifelong Learning Entitlement will impact the student finance system. The budget committed to delivering the new Lifelong Learning Entitlement but revised the launch date again to January 2027.

The Budget document can be found here.

New guidance from the DFE on tuition fee limits in the Lifelong Learning Entitlement can be found here.

At-a-glance:

• The rate of employer National Insurance Contributions (NICs) will rise by 1.2 percentage points to 15 per cent from April 2025. The per-employee threshold at which employers start to pay National Insurance will be reduced from £9,100 per year to £5,000 per year (p4)
   
• Department for Science, Innovation and Technology spending will increase by 6.5 per cent. This includes £13.9 billion for investment in R&D in 2025-26, with at least £6.1 billion of support for core research, growing allocations at least in line with inflation (p102)
   
• It also includes £2.7 billion for association to EU research programmes and partnerships and the costs of the Horizon Europe guarantee scheme, and an extension of the Innovation Accelerators programme to continue to bolster high-potential innovation clusters in the Glasgow City Region, Greater Manchester and the West Midlands (p102)
   
• Resource spending on the education system in England will increase by £11.2 billion from 2023-24 levels by 2025-26, a 3.5 per cent real terms increase, with investment in schools, Special Educational Needs and further education (FE) (p53)
   
• This includes an additional £300 million for FE and £40 million to transform the Apprenticeship Levy into a Growth and Skills Levy, to help deliver on the commitment to launch shorter and foundation apprenticeships in key sectors (p71)
   
• At least £40 million will be invested over five years on commercialisation of university research for spin-outs proof-of-concept funding, and improvements to the support for researchers spinning out the UK’s cutting-edge research (p102)
   
• To create a stable environment for productive long-term partnerships with industry, the government will set 10-year budgets for key R&D activities. These will be set out as part of Phase 2 of the Spending Review (p103)
   
• A National Data Library will be created to unlock the full value of public data assets. It will provide secure access to researchers and businesses to public data assets (p103)
   
• £70 million in 2025-26 will be invested in a new Life Sciences Innovative Manufacturing Fund to build resilience for future health emergencies and capitalise on UK life sciences R&D strengths (p103)
   
• At least £25 million will be provided in 2025-26 to launch a new multi-year R&D Missions Programme to solve targeted problems that will bring in private and third sector investment to accelerate delivery of each mission (p103)
   
• In reforms to the planning system and ensuring sufficient capacity exists, £46 million of additional funding will support the recruitment and training of 300 graduates and apprentices into local planning authorities (p70)
   
• The lower rate of Capital Gains Tax (CGT) will increase from 10 per cent to 18 per cent and the higher rate from 20 per cent to 24 per cent (p4)
   
• From April 2025 the National Living Wage will increase to £12.21 per hour for all eligible employees, and the National Minimum Wage for 18-20 year olds will increase to £10 per hour for all eligible workers. The government is also increasing the minimum wages for Under 18s and Apprentices to £7.55 per hour (p139)
   

Implications for governance:

For higher education, the 2024 Autumn Budget is arguably characterised more by what is not in there, than what is.

The financial woes of many institutions, as covered in various news stories and spelt out in the recent Universities UK Blueprint document, appear to have failed to shift the dial on student finance or institutional funding. Many had expected at least an announcement of a wide-ranging review of HE funding but that also failed to materialise.

The University and College Union (UCU) described the Budget as “thin gruel for those working in universities”, while Carl Cullinane, director of research and policy at the Sutton Trust, said that the lack of clarity on future HE funding was “concerning” and criticised the absence of help for struggling students in the form of increased maintenance loans or the reintroduction of grants.

With no sign of measures to address the existing financial challenges, the rise in employer national insurance contribution (NICs) to 15 per cent will hit the sector hard, and comes on top of already onerous pension contributions. 

For governors at many institutions, the drop off in international students this year has already made it harder to balance budgets and many have announced restructuring and redundancies. Institutions must now find extra money to put towards NICs, which could well necessitate even more cost cutting measures.

Another possible cost to institutions is the raising of the National Living Wage, the National Minimum Wage for 18 to 20-year-olds and the Apprentices rate. However, the uplift does mean that students who work part-time may be better able to fund their living costs.

The only mention of higher education in the Autumn Budget document is in relation to R&D spending which will grow at least in line with inflation. There are new funding pots to boost the commercialisation of research, life sciences innovation and an R&D Mission programme.

Institutions will be keen to explore whether they can take advantage of any opportunities presented in this area of their activity. 

Also published on Budget day are details of how the Lifelong Learning Entitlement (LLE), launching in 2026/27, will work, in what the Department for Education is describing as a “transformation” of the post-18 student finance system in England.

It introduces for Level 4-6 qualifications a credit-based system with fee limits per credit. LLE learners, including higher education students, will be able to access “up to the full entitlement of £37,000 – equal to 4 years of study based on current fees”. A typical graduate who completed a 3-year degree worth £27,750 based on current fees, will have a £9,250 residual entitlement (adjusted should the modern fee limit change).

Many universities and colleges already operate under a system of credit-based modules, but some do not. The LLE will presumably require them to superimpose some form of credit-based framework on the qualifications they offer.

While meeting these new LLE requirements will undoubtedly increase bureaucracy, at least initially, there is no hint of it being linked to an uplift in current tuition fee limits. 

Some in the sector have warned that the “unprecedented” financial pressures across higher education – with the additional blow of raised NICs - will hamper the push for economic growth. Others are pinning their hopes on efforts to drive growth across the regions through the government’s new industrial strategy, offering potential opportunities for institutions to work in partnership with local bodies. Governors will no doubt aim to keep a close eye on further developments emerging from the budget, to assess how their institution is likely to be affected.