Sajid Javid will make skills a central theme of his March budget as the government seeks to cement its electoral hold on former Labour heartlands by emphasising its post-Brexit plan to “level up” the country.
The chancellor is expected to announce more funding to repair crumbling further education colleges; measures to increase the availability of in-career retraining; and a further expansion of apprenticeships.
The Tory manifesto promised a £3bn “skills fund” to be disbursed over five years. Javid will set out how it will be spent, but he is also expected to go further.
Boris Johnson has repeatedly used “levelling up” as a shorthand for what he hopes to achieve in government. But it has been unclear what that would mean in practical terms, aside from backing new transport links and other infrastructure projects.
Treasury officials have been collating research on the drivers of regional disparities since the Conservatives secured their 80-strong majority last month and have identified low skills as critical.
A Treasury source said: “There’s a huge amount of work going on so that we do this right – identifying the real problem so that our policies address it. Skills will be a big part of that.”
The shadow education secretary, Angela Rayner, warned that partially reversing the deep cuts to FE funding since 2010 would not be sufficient. She said: “These devastating cuts have created a crisis in further education that has left a generation of people unable to reach their full potential. If the Tories are serious about creating the skills that our people and economy need for the future they will need to do far more than simply offer warm words or reversing some small fraction of their own cuts.”
The independent Augur review of post-18 education, commissioned by Theresa May’s government, recommended “reforming and refunding the FE college network”.
It also floated proposals for a “lifelong learning loan allowance” so that workers can retrain throughout their careers to adapt to changes in technology and to requirements of their local economy. That idea has the backing of a number of centre-right thinktanks, including Bright Blue.
Javid is keen to show he has a firm grip on economic policy in the face of hostile briefing that have suggested Johnson’s chief adviser, Dominic Cummings, is heavily involved in drafting the budget.
The chancellor told an audience at a CBI lunch in Davos earlier this month: “This is a new government that is correcting the course of economic policy. We are putting people and place at the heart of our plans for a more human capitalism.”
With Cummings known to be keen on “machinery of government” changes, involving merging departments and shifting their responsibilities, the treasury also wants to signal its dominance over economic policy. The purse strings have been significantly loosened since Javid took over from his predecessor Philip Hammond who, when asked to describe himself in a single word, once said “fiscal”.
Javid has promised a significant increase in government borrowing to fund long-term investment projects. However, he has also said he will balance the current budget – covering day-to-day spending from tax revenues – and Whitehall departments have been ordered to identify potential savings worth at least 5% of their budgets.
In a letter signed by Javid and Johnson, ministers were told to single out projects that could be scrapped “to allow the government to refocus our efforts towards the things which matter most”. A spending review is due by the autumn.
Johnson’s Conservatives redrew the electoral map in December, winning a swath of seats in former industrial areas in Wales, the Midlands and the north – many of them held by Labour for decades.
While the Labour leadership candidates debate how best to win back these traditional heartlands, Downing Street insiders say Johnson is impatient to find policies that could deliver tangible benefits to voters in these areas in good time for the next general election.
Other measures aimed at rebalancing the economy are likely to include moving officials from some government departments to towns and cities outside London. The treasury itself, as well as the foreign office, have been identified as potential candidates.
The treasury has invited a group of experts in “human capital” to address senior Whitehall officials, including some from No 10, on Friday.
The work of the LSE professor of economic geography Henry Overman has been influential in shaping Whitehall thinking on regional inequalities, insiders suggest.
In a briefing paper before December’s election, he said: “A better educated labour force is the most important driver of local economic performance.” He warned that if the government simply spread infrastructure spending more fairly across the UK, “the overall effect on regional inequalities would be limited, since relative to the concentration of skilled workers, differences in infrastructure play a relatively small role in driving long-term disparities.”
