Autumn Statement: Rise to NLW, but no extra funding for childcare sector

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Rises to the National Living Wage and the National Minimum Wage have been announced by the Chancellor.

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Chancellor Philip Hammond

Giving his first– and what would turn out to be - his last Autumn Statement, Philip Hammond told Parliament that the NLW (for employees 25 and over) would rise from £7.20 an hour to £7.50 an hour in April 2017 – worth up to £500 a year for a full-time employee.

An announcement regarding extra early years funding had been anticipated by some in the sector, but this did not materialise.

The Chancellor reiterated that Tax-Free Childcare will be introduced gradually from early 2017.

Roll out will start on completion of the trial. Once the scheme is fully rolled out, he said that the government will keep it under review to ensure it is delivering as intended and to assess the benefit it is delivering for working parents.

The government will provide £50 million of new capital funding to support the expansion of existing grammar schools in each year from 2017-18, and has set out proposals for further reforms in the consultation document ‘Schools that Work for Everyone’.

On Universal Credit, the Chancellor said that the taper rate – the amount a person’s benefits are cut as their salary increases -  would be cut from 65 per cent to 63 per cent from April 2017.

Currently for every £1 earned above the income tax threshold, a person receiving UC has their benefit reduced by 65p and keeps 35p.  They will now keep 37p for every £1.

The Chancellor said that he would be abolishing the Autumn Statement – but he is not resigning.

Instead, from next year the Budget will move from the spring to the autumn and will respond to forecasts from the Office of Budget Responsibility.

Although there will be one more Budget in spring next year, from Autumn 2017 the Budget will move to the autumn and there will be a Spring Statement.

Mr Hammond said, ‘So the spring Budget in a few months will be the final spring Budget. Starting in autumn 2017, Britain will have an autumn Budget, announcing tax changes well in advance of the start of the tax year. From 2018 there will be a Spring Statement, responding to the forecast from the OBR, but no major fiscal event.’

Sector reaction

Early years sector organisations expressed disappointment that there was no extra funding for the sector.

Neil Leitch, chief executive of the Pre-school Learning Alliance, said that today was ‘a missed opportunity’ for the government to show that it had listened to the sector’s concerns.

‘We are very disappointed that today’s Autumn Statement included no mention of additional support for the early years sector,’ he said.

‘The early years play a vital role in supporting children’s learning and development – particularly those from more disadvantaged backgrounds – and yet despite much government rhetoric on the importance closing the gap and improving children’s life chances, the increased investment needed to achieve these goals has not materialised.

For years, government funding hasn’t kept up with the rising costs of delivering free entitlement places – and with the rollout of the 30 hour offer less than a year away, more and more providers are warning that they may opt out of the scheme if the proposed funding rates do not increase.’

He added that the rise to the NLW, growing pressure from other rising business costs such as pensions and national insurance contributions, many providers would struggle to stay afloat.

Purnima Tanuku, chief executive of the National Day Nurseries Association’s said, ‘Some measures announced in this autumn statement will increase take-home pay, which is good news for our deserving, dedicated workforce.

‘However, the increase in the National Living Wage to £7.50 means even higher wage bills. As government funding fails to keep up with nurseries’ soaring costs, this is another blow to sustainability. We need the government to act now to support nurseries in order for them to be in a position to deliver its ambitious 30 hours of funded childcare next year.

She added that, ‘The announcement of increased business rates reduction will not benefit many nurseries, most of whom are facing a big increase in business rates next year due to the revaluation. And few nurseries are likely to be able to qualify for 100% rural businesses rates relief.

‘We are pleased that the government has pledged to keep an eye on tax-free childcare, but would like them to consider our more radical suggestion of a childcare passport, channelling all funding streams into one account for parents to pay their choice of provider.’

Kevin Courtney, General Secretary of the National Union of Teachers, 'The Chancellor’s statement is a huge disappointment for schools and colleges.  We desperately need a significant increase in education funding to protect schools and colleges against the impact of inflation and the higher pension and national insurance costs being imposed by the Government.
 
'The Government is not protecting education funding – it remains on course to inflict significant real terms cuts.  Schools and colleges are already being hit, with job cuts and increasing class sizes.  Teacher pay and conditions remain under attack, even as the recruitment and retention crisis intensifies and pupil numbers continue to rise.
 
'With schools facing 8% real terms cuts by 2020, we urgently need extra resources to support any changes to the school funding system.'

Families

Charities expressed their disappointment about the lack of support for families.

The Child Poverty Action group said that while the Treasury said that a single parent with one child and no housing costs earning £15,000 will gain £170 per year from the lower Universal Credit ‘taper rate’ announced today, in reality today’s announcement simply means this lone parent will lose £3000 a year, rather than £3,170 a year, as a result of the substantial package of cuts announced in the Summer 2015 Budget. 
 
Alison Garnham, Chief Executive, Child Poverty Action Group, said, 'For all the talk, this was a rescue package for ‘just managing’ families that failed to turn up.  That’s hugely disappointing for those of us who felt that the Prime Minister was going to take robust action to help hard up families.  The Chancellor applied a sticking plaster to family budgets haemorrhaging losses imposed on them by his predecessor’s budgets.  
 
'The Prime Minister knows the country isn’t working for just managing families. These families have been left worse off and horribly exposed to rising prices. So it was surprising and disappointing that today the Government chose the better off and businesses, rather than ’just managing’ families, when it chose to spend billions on raising personal tax allowances and cutting corporation tax.
 
'The rhetoric on just managing families will end up being meaningless if the Government intends on largely persisting with policies that will tip the just managing into hardship and more children into poverty.'

Matthew Reed, chief executive of The Children’s Society, said, ‘The rising cost of living will turn the four-year benefits freeze into a major income cut by 2020. Cutting off child tax credit for families who have a third child and further reductions to family support under Universal Credit risk turning just-about-managing families into just-not-managing families. At this rate, despite the Chancellor’s tweaking, many low income families are going to be much worse off by the end of the decade.'

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