IFS warns apprenticeships policy risks being ‘poor value for money’

The Institute for Fiscal Studies (IFS) has warned that the government’s target to increase the number of apprentices risks being ‘poor value for money’.

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In a report on the matter, the think tank suggested that increasing the number of apprenticeships could ‘come at the expense of quality’.

The IFS also warned that the target could diminish the apprenticeships ‘brand’, changing it into another term for training.

From 6 April 2017, the government will introduce its new Apprenticeship Levy, which will bring significant changes to the funding of apprenticeships for all employers.

The Levy forms part of the government’s target to encourage the creation of three million apprenticeships in England by 2020.

However, the IFS has warned that the focus on targets could ‘distort policy’ and ‘lead to the inefficient use of public money’.

The Institute recommended that the government move away from ‘arbitrary targets’, advocating a more gradual expansion in the number of apprenticeships and a ‘stronger focus on quality’.

Neil Amin-Smith, Research Economist at the IFS and co-author of the report, commented: ‘We desperately need an effective system for supporting training of young people in the UK.

‘But the new Apprenticeship Levy, and associated targets, risk repeating the mistakes of recent decades by encouraging employers and training providers to re-label current activity and seek subsidy rather than seek the best training.’

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Significant rise in number of individuals being declared insolvent

The number of individuals declared insolvent rose by 13% in 2016, figures from the Insolvency Service have revealed.

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90,930 people in England and Wales were declared insolvent last year – a rise of 13.1% when compared to insolvency figures from 2015.

However, the number of bankruptcies in England and Wales fell in 2016, with a total of 14,989 bankruptcy orders being recorded – a 5.4% decrease when compared to 2015.

Meanwhile, in Scotland, which utilises an alternative insolvency service, personal insolvencies rose by 7.9% during the final three months of last year.

The data also revealed that around 16,502 English and Welsh businesses entered insolvency in 2016, marking a 12.6% rise when compared to 2015.

Sarah Albon, Chief Executive of the Insolvency Service, commented: ‘Personal insolvencies increased last year for the first time since 2010, however the total was still the second lowest number in the last 11 years. It is very distressing to live with unsustainable personal debt so it is important for people to seek advice.’

Chancellor on course to hit deficit target as government borrowing falls

Figures published by the Office for National Statistics (ONS) show that government borrowing totalled £6.9 billion in December 2016. Although this figure is slightly higher than many economists had predicted, it represents a drop of £0.4 billion compared to the previous year, and could see Chancellor Philip Hammond meet the deficit target set in his Autumn Statement.

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In December, the Chancellor scrapped his predecessor George Osborne’s target of eliminating the budget deficit by 2020 and instead announced an updated Charter for Budget Responsibility which sets out new fiscal rules to bring the public finances into balance. Under the new plans, the government would borrow £68 billion over the full financial year to the end of April 2017.

The ONS revised the borrowing figure for November down from £12.6 billion to £11.3 billion, and the latest figures mean that borrowing for the year is £63.8 billion, which is £10.6 billion lower than for the same period in 2015. This should help Mr Hammond meet his deficit target.

A Treasury spokesman said the government had made ‘significant progress in repairing the public finances’, reducing the deficit from 10% of Gross Domestic Product (GDP) six years ago to 4%.

However, even if the Chancellor’s Autumn Statement target is met, Britain would still have one of the largest deficits among the world’s industrialised nations at around 3.3% of economic output.

Single market access and skills are main Brexit concerns for small businesses, finds FSB

The Federation of Small Businesses (FSB) has published its initial findings from a six-month research programme on the business impact of leaving the EU. The report found that access to the EU single market and the ability to recruit workers with the right skills are the main concerns of UK small businesses.

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Currently, 32% of small businesses are involved in overseas trade as an exporter and/or importer, with the vast majority trading with the single market (92% of exporting small firms and 85% of importing small firms).

According to the report, 29% of exporting small firms, regardless of destination, expect their level of exports to decline as a result of Brexit, although 20% expect it to increase.

The difference is more marked for current importers: 31% expect to see a decrease, compared to 7% that expect to see an increase.

On the issue of recruitment, the FSB research found that 21% of small businesses employ non-UK EU citizens, with the majority of these employees already living in the UK with the right to work here. Additionally, some 47% of small businesses that employ EU citizens mainly rely on mid-skilled workers, while 21% of businesses primarily use lower-skilled workers.

Mike Cherry, National Chairman of the FSB, said: ‘Evidence from our members . . . shows the need for ministers to safeguard and promote an easy trading landscape, and to make sure small businesses have access to the right talent at the right time.

‘We also see future opportunities to revamp future funding for business support and access to finance, and for a lighter-touch regulatory system that promotes growth and productivity.’

Over the next few months the FSB will be releasing a series of in-depth reports on what small businesses want from Brexit, focusing separately on markets and trade, skills and labour, EU funding and business support, and the future of regulation.

HMRC set to introduce voice recognition technology to tax helplines

HM Revenue & Customs (HMRC) is set to introduce voice recognition technology to a handful of its tax helplines, which will require taxpayers to vocally confirm their identity before being granted access to government services.

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Starting this month, a small selection of callers to the self assessment and tax credits helplines will be able to enrol for voice identification.

In a taxpayer’s first call, HMRC will ask them to repeat a vocal passphrase up to five times, with the individual then being passed back to an adviser to finalise the call.

The taxpayer’s recorded passphrase will then be securely stored, meaning that they can use their voice to confirm their identity once the service goes live.

The government hopes that the introduction of voice recognition technology will help to speed up the compulsory security steps that taxpayers must complete when calling HMRC.

Ruth Owen, Director General of Customer Services at HMRC, commented: ‘Millions of our customers are choosing to use our digital services rather than picking up a phone or pen, with more joining them every day.

‘But we know that not everyone can, or wants to, deal with us online, and so we’re continuing to improve our services across all contact channels. Voice identification is the latest example of the cutting-edge technology we are using to make it easier for people to manage their tax and tax credits.’

Prime Minister outlines plans for new industrial strategy

Prime Minister Theresa May has outlined proposals for the government’s new industrial strategy, which is designed to provide a boost to the UK economy.

The ten-point plan, which is set out within a government green paper, aims to support those looking to start up in business and help new firms to grow.

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It also seeks to drive growth across the UK, encourage trade and inward investment, upgrade infrastructure and deliver affordable energy and clean growth, amongst other proposals.

Alongside the plan, the Prime Minister announced a new strategy for governing the country. She stated: ‘Underpinning this strategy is a new approach to government, not just stepping back and leaving business to get on with the job, but stepping up to a new, active role that backs business and ensures more people in all corners of the country share in the benefits of its success.’

Business groups have largely welcomed the Prime Minister’s plan. Carolyn Fairbairn, Director General of the Confederation of British Industry (CBI), said: ‘A modern industrial strategy will be a landmark opportunity to build a successful, modern economy as the foundation for a prosperous, fairer and more inclusive society.’

Meanwhile, Adam Marshall, Director General of the British Chambers of Commerce (BCC), commented: ‘Business communities across the UK will be pleased to see that harnessing the potential of our cities, towns and counties lies at the heart of the government’s approach to [the] industrial strategy.’

Government must ‘change way tax and budget decisions are made’, report urges

In a recently published report, the Institute for Fiscal Studies (IFS), the Chartered Institute of Taxation (CIOT) and the Institute for Government (IfG) have called for the government to change the way it makes tax and budget decisions.

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The report comes following the 2016 publication of an open letter to Chancellor Philip Hammond, in which the three organisations called for significant changes to be made to the UK’s tax system in order to ‘simplify the making of tax policy’.

It outlines the need to publish ‘clear guiding principles and priorities’ for tax policy, and to improve consultation, ensuring that consultations occur before key decisions are made.

The institutes also called for the implementation of a more robust policy-making process, and for decisions to be challenged before they are incorporated into the Budget speech.

The report did, however, welcome the Chancellor’s announcement to move to a single Budget each year.

Paul Johnson, Director of the IFS, commented: ‘Tax policy is too important to leave to the Chancellor alone. We need a more open policy-making process as a route to a better tax system.

‘The lack of any explicit tax strategy allows policy to be made on the hoof and makes it harder to engage the public in a much needed rational debate about tax.’