Budget analysis: With reform deferred until 2027 the focus shifts to making existing support deliver
We set out five questions ahead of the Budget. In summary, it delivered on devolution but kept us waiting on employment.
Young people were a clear priority going into the Budget, and many were expecting further action to reduce the cost of hiring them. Instead, the Budget confirmed funding for the previously announced Youth Jobs Grant and Jobs Guarantee, and £100m over two years to expand local apprenticeship services. Any big reset will come in 2027, following the Milburn Review and the Government’s response to it. Making the most of existing initiatives and investment will be crucial to supporting young people who need help now.
On hiring costs, there were no blanket National Insurance cuts of the kind business groups have been lobbying for. However, the Chancellor confirmed that the youth minimum wage rates will rise at the same pace as the adult rate (3.9%), sensibly slowing the pace of convergence with the adult rate.
As expected, the Budget went big on devolution, with plans to devolve tax revenues as part of the roadmap to fiscal devolution. We’re yet to see what further devolution on employment and skills might look like though.
There was substantial investment in AI, as reported ahead of the Budget, but relatively little on skills beyond additional funding to understand the economic impacts of AI on jobs and broader Union Learn funding. The Yorkshire-based pilot on locally led approaches to AI adoption signals the role mayors will be expected to play in joining up work and skills in a changing labour market.
There was no major welfare reform, as expected, with the Government saying it will respond to the Milburn and Timms reviews with a white paper in early 2027. However, it was good to see an emphasis on employment support, recognising that the welfare system needs to act as a “springboard” as well as a safety net.
With one million young people not in education, employment or training (NEET), economic inactivity above pre-pandemic rates, and the OBR forecasting a rise in unemployment, many questions need answering. The Budget didn’t provide the answers. The focus now must be on finding the right ones, and on making the most of what’s already in place in the meantime.
Any views expressed are those of the author and not necessarily those of the Institute as a whole.