The Welsh Government has abandoned a manifesto pledge of creating 125,000 new apprentices in a challenging draft budget for 2024-25 which will also see firms having to pay around £50m more in business rates.
Finance Minister Rebecca Evans, as signalled in advance, delivered a sobering funding settlement, which with the impact of inflation will mean a real terms cut on 2021 of more than £1bn. As expected she prioritised funding to cushion the impact on health spending - although an extra £450m next year will still mean tough decisions will have to be made.
In this Senedd term the Welsh Government had promised in its manifesto to create 125,000 new apprentices, although that was earlier this year deferred by one year by Economy Minister Vaughan Gething, whose own department will see a 6% budget reduction next year
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In her draft budget Ms Evans confirmed the total number of new apprentices has been revised down to 110,000 - which includes the additional year.
Apprenticeship providers, as reported by BusinessLive Wales last month, such as colleges and contracted training companies, were braced for a cut in the Welsh Government's flagship apprenticeship programme of around 24% for 2024-25.
This is said has been created by a decision by the Cardiff Bay administration to reverse a commitment to provide transition funding from the loss of EU funds, coupled with an in-year budget cut of £17.5m in October. The overall budget for apprenticeships is down £5.2m on the indicative budget for next year published in February at £138.6m.
The overall budget for apprenticeships is down £5.2m on the indicative budget for next year published in February at £138.6m.
The sector said the fall in apprentices would disproportionately impact young people (16-24), and women, as in 2021/22 56% of apprentices were female. Improving skills is at the heart of the Welsh Government's economic strategy.
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Ms Evans said: "To live within our funding settlement and to accommodate the loss of EU funding we have had to review our ability to deliver on our apprentice target. We have reviewed what we can achieve and adjusted our funding accordingly.
"As a result of reprioritising £5m of funding we are now expecting to achieve 110,000 apprentice starts."
As a result of the funding cut, the sector is forecasting 10,000 less new apprentice starts next year . To put into context the latest available figures show there were around 20,000 new apprentice starts in 2021.
Chief executive of the body representing colleges in Wales, David Hagendyk of , ColegauCymru, said: "The cuts to the apprenticeship programme announced by Welsh Government today are a devastating blow to apprentices, employers, and communities. It could mean 10,000 fewer apprentices able to start next year, with the reductions falling disproportionately on young people, and those in the lowest socio-economic groups.”
“As Wales navigates turbulent economic times, colleges are the skills engine needed to drive economic recovery. It is critical that future inward investment is not damaged, and today’s budget decision is a huge gamble for Wales’ economy and communities. The Welsh Government must think again and reverse today’s catastrophic decision to cut the apprenticeship programme.”
Jamie Cater, senior policy manager (employment and skills), Make 海角视频:, said: "The Welsh Government’s decision to cut funding for apprenticeships is a blow to manufacturers who need support to access the right training for their current and future workforce. Across Wales, manufacturing employers look to the apprenticeship programme to secure and invest in developing talent; at a time of significant challenges in accessing skilled workers, today’s budget announcement will be met with disappointment through the sector.
“The announcement also highlights the pressing need for reform of the apprenticeship levy by the 海角视频 Government. The amount of money collected from Welsh businesses through the levy is increasing while funding is cut for the training they need. It is vital that there is more transparency in how levy funds are distributed and that all employer contributions are used to support funding for new apprenticeships.”
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The National Federation for Wales (NTFW), which represent training providers, has called for urgent review by the Welsh Government before "irreversible damage" is done to its flagship apprenticeship programme.
Lisa Mytton, the NTFW’s strategic director said: "Despite contrasting messages from the Welsh Government, demand for apprenticeships remains strong from learners and employers, and we urge Welsh Government to reconsider the proposed cuts which could have catastrophic consequences for Wales,
“Notwithstanding the value for money questions surrounding the levy payments (apprentice levy paid by Welsh firm to 海角视频 Government), there is also growing concern that the cuts will impact the sectors most in need of a skilled workforce, including health and social care.
“The network has been told that the budget for degree apprenticeships will be increased. Yet the data shows that degree apprenticeships recruit fewer learners from disadvantaged areas compared to real apprenticeships.
“Yet again, those most disengaged and disadvantaged in our society will be hit by the huge cuts.
“Some are questioning how the minister prioritised skills and young people in his recent economic mission statement whilst preparing to slash the apprenticeship budget. Like all NTFW members, employers consider his statement to contradict the reality of the situation and want to know what his new priorities are.
“Skills and further education are fundamental to our economic recovery. The time to invest in our learners and workers is now.”
Ms Evans also announced that business rates will increase by 5%, while firms in the retail, leisure and hospitality sectors will see reliefs falling from 75% to 40% - bringing to policy to support the hard hit sectors during the pandemic. The 75% relief rate in England remains.
Hospitality Cymru executive director David Chapman said: “. “While we appreciate the economic pressures the Welsh Government is under, there will be concern from businesses that relief has been reduced to 40%, from 75%, and that business rates will be increased across the board by 5%.
“It must be remembered that hospitality businesses already pay more than their fair share of business rates because the current system is out-of-date and punitive for bricks and mortar businesses.
“This reduced level of support now leaves businesses in Wales at a competitive disadvantage to businesses in England. Small businesses, in particular, will feel hard done by as their counterparts will see rates frozen across the border. A typical local pub or restaurant in Wales will, for example, be paying £6,400 more than one in England.
“It’s extremely disappointing that at the same time the Government is taking £16m worth of funding from the tourism budget. This is a strategically important sector in Wales and central to our culture – it needs investment and this sharp reduction in overall budget is worrying.
“At a time of intense economic challenges, this slashing of the tourism budget will do little to inspire long-term confidence in the sector, particularly alongside the looming introduction of a visitor levy and other policies that are impacting hard on the sector.”
Helen Edwards, business rates partner with the Cardiff office of property advisory firm, Gerald Eve, said: This 5% increase means businesses across Wales will have to find an extra £52m next year at a time when they are already under pressure from continuing inflation and the cost-of-living crisis
“It is good to see the Welsh Government did not increase business rates in line with inflation of 6.7%, which would’ve seen an extra £68m added to bills but it will still hurt ratepayers and stifle the economic growth we badly need.
“Welsh small businesses will be particularly hard hit, especially as their English counterparts will see a freeze to their rates bills. It means small firms in Wales have the highest commercial property tax in the 海角视频.
"Those in the retail, hospitality and leisure sectors will suffer hardest, with relief for them being cut from 75% to 40%, alongside the 5% annual rise. It leaves ratepayers in the hardest pressed sectors facing total support levels dropping from £140 million last year to just £78m in 2024.
“This will cripple many small businesses and lead to further voids in the high street and an acceleration of pub closures. It also puts Welsh businesses at a significant disadvantage compared to their English counterparts where the 75% relief has been extended for a further year. ”
Head of the Welsh Retail Consortium, Sara Jones, said: “The below inflation cap on the business rates multiplier at 5% is welcome acknowledgement of the catastrophic effect that this outdated tax has on retailers of all sizes. It’s encouraging that the Finance Minister has heard and acted on the retail industry’s representations. However, in spite of this supportive move, the Welsh business rate will move to a 25-year high and a fifth higher than at the start of the previous decade, and is higher than anywhere else in Great Britain
“Whilst we are encouraged by the Finance Minister’s recognition of the challenges faced by the retail industry it is vital that decision makers use all levers available to reform the rates system and keep the cost of doing business down by removing unnecessary burden. Retail trading conditions remain challenging, and the near-term economic outlook is weak, it is clear that further support will be needed in the short to medium term to aid retailers with the cost crisis, helping them keep down prices for customers”.
The Welsh's Government's business support brand Business Wales will see its budget cut from £26.6m in the current financial year to £20.9m, - a worse outcome that the indicative forecast back by February of £22.4m. However, tjhe Development of Wales will see funding increasing from £10m in this financial year to £31.4m for 2024-25.
Ben Francis, Wales policy chair at the FSB, said: "High street businesses are currently hoping for a successful and busy Christmas period after many difficult years, with businesses continuing to struggle with increasing cost pressures alongside a drop in customer spending. In this climate, Welsh Government’s decision not to implement the same level of business rates support as similar businesses in England is a significant and regrettable blow and some businesses will undoubtedly face difficult choices in the months to come.
"The realities facing our high streets are stark. More than 1 in 6 shops in Wales are vacant and retail sales in October fell by 2.7% on the year. With retail analysists suggesting the next quarter could be even tougher and 83.5% of our members reporting increasing costs, a hike in rates bills in April will place significant additional pressure on these businesses
"We recognise the difficult and unenviable choices facing the minister and Welsh Government . However, as we have consistently argued, economic recovery – and prosperity to support our public services - will only come on the back of the health of the small business economy and a new plan for growing the economy.
Any prospective new First Minister needs to put this front and centre of the task facing their Welsh Government agenda”.
Director of CBI Wales, Ian Price, said: "Businesses recognise that tough decisions were needed in the draft budget, and it’s right the government prioritised protecting the vulnerable and others most in need across society.
"With business concerned about lack of funding in colleges for apprenticeship training, we would like firms that qualify for the Apprenticeship Levy in England to be permitted to spend these funds on developing a skilled workforce in Wales."