Today, the Chancellor of the Exchequer presented the outcome of the 2020 Spending Review, setting departmental budgets and making spending announcements for 2021/22. Due to the uncertainty caused by Covid-19, the Spending Review mainly covers a one year period rather than the three-four year settlements we usually see.

We have pored over the detail of the Spending Review to consider what it might mean for universities, business and their collaboration.

This blog concentrates on announcements related to skills, talent and the critical levelling up agenda. For analysis of announcements related to research and innovation, read our second blog here.

Covid-19 has impacted almost all aspects of our lives. With some businesses closed and markets disrupted, unemployment rates have risen despite interventions like the Job Retention Scheme. University graduates and their employers across all parts of the UK face an uncertain time.

The Office for Budget Responsibility (OBR) expects unemployment to continue to rise, reaching a peak of 7.5% – or 2.6 million people – in the second quarter of next year. Unemployment is then forecast to fall in every year, reaching 4.4% by the end of 2024.

Young people are particularly affected by the impact of the pandemic on the labour market, with graduates and their employers facing significant uncertainty. We have repeatedly called for a range of measures taken to address the youth unemployment crisis the UK faces.

What did the Spending Review announce to help tackle unemployment, level up across the UK and deliver the highly skilled workforce we need to recover?

Responding to rising unemployment

The Chancellor has introduced a number of measures to reduce unemployment, complementing measures announced earlier in the year (in statements in September and July 2020) such as the Kickstarter Scheme, National Skill Fund and Job Support Scheme that have already began.

Perhaps most notably, the Chancellor announced a new £2.9 billion Restart programme that will provide intensive and tailored support to over 1 million unemployed people and help them find work, with approximately £0.4 billion of funding in 2021-22. A further £0.2 billion will be invested in other job search support measures announced in the Plan for Jobs this summer, including the Job Entry: Targeted Support and Job Finding Support schemes, the Youth Offer and Sector-based Work Academy Programme placements.

In a welcome move, the incentive payments for hiring a new apprentice introduced in the Plan for Jobs will be extended to 31 March 2021.

Little new for universities and higher education

Perhaps notable by its absence was no new announcements for universities or higher education. We were expecting a response to the Augar Review of post-18 education and funding, which was published in May 2019 and made a range of recommendations to the Government related to higher and further education.

A number of announcements made earlier in the year were restated in the review, including confirming previous announcements on increased FE spending and lifelong learning guarantee.

A welcome (re) focus on levelling up and the critical role of the UK Shared Prosperity Fund

With the transition period with the EU coming to an end, many universities and businesses were keenly awaiting details on the UK Shared Prosperity Fund (UKSPF), a UK-wide fund to boost economic development and replace EU Structural Funds.

The Spending review confirmed that the total domestic UK-wide funding through UKSPF will at least match current EU receipts, on average reaching around of £1.5 billion a year. The Government will develop further details of the UKSPF in a UK-wide Investment Framework  due to be published in the spring of 2021. The framework will invest in people, communities and local businesses.

Helpfully, the Spending Review states that UKSPF will include “investment in people and skills tailored to local needs, such as work-based training, supplementing and tailoring national programmes (e.g. the Adult Education Budget); and other local support (e.g. for early years)”, as well as “investment for local business including to support innovation, green and tech adoption, tailored to local needs.”

A new levelling up fund

The Spending Review announced a new Levelling Up Fund worth £4 billion for England, that will attract a further £0.8 billion funding for Scotland, Wales and Northern Ireland. The cross-departmental Fund for England will invest in a broad range of high value local projects of up to £20 million, or more by exception, including transport and community infrastructure. £600 million of funding will be made available in 2021-22, and the Government will publish a prospectus for the fund and launch the first round of competitions in the New Year.

Ten Freeports

The Spending Review confirmed that the Government will establish 10 Freeports across the UK – at least one in each of England, Scotland, Wales and Northern Ireland. The Chancellor has long been an advocate of Freeports, and in our report, Research to Recovery, we argue that they could have an important part to play in our recommendation to develop new Innovation Collaboration Zones.