‘Running to Stand Still: Why decades of skills reform have failed to shift the dial on UK productivity & investment in training’

Federation of Awarding Bodies launch independent research report ‘Running to Stand Still: Why decades of skills reform have failed to shift the dial on UK productivity & investment in training’

Yesterday afternoon (12.09.23), representatives from across the education and skills sector attended the Federation’s event to launch our major new report, ‘Running to Stand Still: Why decades of skills reform have failed to shift the dial on UK productivity & investment in training’, co-authored by Professor Tom Bewick and independent researcher, Matilda Gosling.

In this concluding part, we will briefly look ahead to the skills policy and delivery challenges facing the next UK government. Because of the nature of political devolution, these challenges will have to be managed through a combination of decisions taken in Westminster (on behalf of those living in England and the rest of the UK); as well as actions taken separately by ministers in Scotland, Wales and Northern Ireland.

There is not scope in this report to make highly specific policy recommendations. However, based on the analysis contained in previous chapters, including the interview feedback we received from sector experts, it is possible to identify the key policy ‘pinch points’ that an incoming administration will need to address from day one.

Whether the next UK general election results in a new government, a coalition of parties forming a government, or the current government of Rishi Sunak, re-elected for a further term, it is stating the obvious that any incoming group of ministers will face a challenging set of issues.

Similarly, the cost of living crisis people have been experiencing since the pandemic may easily turn into another round of austerity cuts, because whoever forms the next government, ministers will face challenging public spending constraints.

Skills policy is about more than one government department.

The skills and productivity performance of the nation is far too important to be the preserve of a single government department, or a solitary secretary of state for education operating out of an office in Whitehall. Indeed, as we saw in part 1, discussing the Leitch Review of Skills (2006), HM Treasury, where it takes the lead, can still manage to miss its own self-imposed skills targets. Similarly, SPAD: Skills Policy Audit Database, developed by FAB to accompany this work, shows that even the most influential government skills advisers can see their recommendations fall by the wayside.

To tackle the deep-seated skills and productivity challenges detailed previously in this report, it will require a whole UK and devolved government effort, on a scale perhaps not seen previously. Ultimately, solving the UK’s productivity puzzle goes beyond the contribution made by skills. The government has other serious considerations: like building enough homes, managing immigration, changing planning laws and investing in net-zero initiatives. All these issues matter to levels of output in the economy and the extent to which British living standards can improve over time.

Like Apple once famously said, we need to think different!

If the incoming government has a majority in the House of Commons, it will require the prime minister and the new cabinet to start to think very differently about the UK’s governance model for growing prosperity in every part of the country. Levelling-up was not a bad ambition. It fell below expectations because ministers allowed much of the rhetoric to get ahead of reality.78 We have seen hubris like this in the skills and qualifications reform debate, where ministers are adamant that what they are delivering is world-class, even before a single student has graduated from a programme.

Lasting reform will have to be about more than the balance of power and delivery between central and local government. Or ongoing discussions and differences about the nature of the devolution settlement. Instead, it will require fresh thinking about how to engage active citizens in the lifelong learning and skills challenge, wherever they may live in the UK. Only then will the country be in a position to run up the productivity and skills escalator the right way.

What is becoming clear is that after more than two decades of top-down skills policy making and programme delivery, mainly driven by Whitehall, the approach has largely failed. Some commentators would disagree with this assessment by arguing that the modern role of government is to be paternalistic, because not every citizen can make the right choices or know what is good for them.79 But as we saw during the pandemic, this kind of ‘nudge policy’ has its limits, particularly when it comes to winning over more sceptical members of the public, who baulk at the use of fear being deployed, as a basis for ensuring they do the right thing.80

Skills development is no different. People will have to be inspired to make the shift to higher performance working. In the welfare system, it would seem sensible to move from a crude ‘work-first’ benefits regime to a ‘skills-first’ human capital investment model. That will require allowing some Universal Credit claimants to take up to a year to retrain in areas where there is an occupational skills shortage.

Parliament cannot simply legislate for prosperity. But MPs can enable the right legal and regulatory framework to be put in place: an institutional model that empowers people and workplaces to make the step-change required. This could include building on the Lifelong Loan Entitlement Bill going through Parliament81 by giving every working adult a universal skills account to spend on courses at Level 2 and above. And for those working at the sharp end of post-16, representative bodies will continue to call for the tertiary education workforce to be better paid, better valued and more trusted in co-designing and implementing policy.

Stockholm syndrome?

Interviewees consistently told us they were frustrated by the progress of skills policy over recent decades, not because they believed senior civil servants and their ministers were somehow incompetent people. But because defining the outcome of getting somewhere positive – in terms of improved skills and productivity performance – is a whole lot different and far more complex than simply deciding on the means of delivery. Too often, we found, it is Whitehall knows best.

For some college leaders in England, the recent dismantling of the early 1990s legislation, which released them from the clutches of town hall bureaucrats, feels like betrayal. Of course, education sector leaders would always want to have positive and constructive relationships with public servants. But equally, we see evidence of the unrelenting march of centralisation in recent years, expressed most visibly, in ONS reclassification of FE colleges.82 In late 2022, the responsibility for the whole college estate was effectively transferred to the Department for Education, now fully inside the government sector. At least one senior college leader thinks that could start to resemble something more akin to a hostage situation, particularly if some of the gains of 1992 college incorporation are not kept.83

A UK-wide skills strategy that communicates and measures improved outcomes for learners

For the sixth largest economy in the world, it is extraordinary that the UK does not have a national mission committed to skills. At the moment, constituent parts of the UK can point to a collection of different skills strategies and publicly funded programmes.

We highlighted some of these in part 2 of the report. Understandably, the reason for fragmentation can be because of devolution. Ironically, even in the most complex private sector organisations, many of whom will work multi-jurisdictional, it is still common to encounter only a single HR department and people strategy.

‘UK plc’ needs an integrated skills plan. For example, the Apprenticeship Levy is a UK-wide taxation measure raised from employers via HMRC. There is no constitutional bar preventing the funding of apprenticeships, linked to UK-wide occupational standards, being delivered in an integrated way and at a four-nations’ level. All it requires is the determination of the UK government, working with devolved ministers, to act in the interests of its own internal labour market. By judiciously using ‘reserved matters’ legislation in Westminster, it is possible for an incoming prime minister to create a UK-wide Department of Employment, Productivity and Workforce Skills, almost at the stroke of a pen.84 Canada, for example, is a more devolved jurisdiction than the UK. The federal government must respect the policy remit of provincial premiers, which includes devolved responsibility to them for education and training matters.

Canada is made up of 13 separate provinces and territories. Yet, in the interests of its own internal labour market, the federal Canadian government has agreed the Red Seal Program for apprenticeships, which ensures that competency-based industry standards developed for each skilled trade, including the end-point tests, are administered exactly the same way in each province and are valid in every part of Canada.85

MPs and the National Audit Office have produced a number of reports over the past decade, pointing to the lack of clear metrics for how, as a country and a skills system, ministers are defining and measuring success. It is perhaps understandable, given previous attempts to tightly manage government departments from the cabinet office, that senior civil servants may be reluctant to sign-up to a whole new raft of performance-based targets. The old phrase, ‘hitting the targets and missing the point’, may have some grain of truth about it.

However, the country cannot know what it does not measure. Plus, it is clear that where ministers do commit to being a world beater in education, then that is what can happen. For example, take the reading ability of 9- and 10-year-olds. In 1997, the incoming Labour government was so concerned about poor literacy standards, it had to hire Professor Michael Barber, from UCL at the time, to set up a special delivery unit at the education department. Fast forward to the spring of 2023, and school children in England are now ranked in fourth place out of 43 countries for reading ability (up from joint eighth place in 2020), according to a highly respected international study.86

If our primary age children can become world-beaters in reading, since 2006, then it should be possible for the adult workforce to be world-class at skills in the next decade too.

Focus civil servants on what they do best: policy

One way to achieve world-beating status in skills would be if ministers were to reform the Department for Education, in England, by focusing the efforts of the people working there towards making effective policy. The phenomenon of Whitehall government departments, like DfE and DWP, directly delivering skills and employment programmes, is a relatively recent development.

No one is calling for Whitehall to become a caricature of the comedy series Yes Minister, but it is the case that civil servants are increasingly becoming active participants in skills programme delivery themselves. Examples include T Levels, where a whole directorate based at DfE headquarters in Sanctuary Buildings, SW1, is responsible for ensuring these government owned qualifications are a success. Another example of ‘skills products’ the civil service are obliged to deliver on behalf of ministers, can be found at the Skills for Life website, where no fewer than 10 separate government skills interventions are listed.87

Because civil servants increasingly have their own involvement and reputations to think about in the ‘skills and qualifications game’, it could make it more difficult for officials to provide impartial advice to ministers about the productivity challenge or to draw up critical assessments for Parliament. The next government should reinforce the impartiality of the civil service, by removing any temptation that may exist to gloss over, or to place an overtly positive spin on the skills and qualification programmes directly under the state’s control.88

It would be much better if Whitehall officials’ time and energy were more focussed on evaluating the efficacy of the various interventions and programmes that are in place to improve the UK’s workforce skills. Instead, what we see is an absence of any independent metrics or accountable measures of success, as has been highlighted by both the NAO and Public Accounts Committee on several previous occasions. Another observed downside of the current situation, in terms of the way the great civil service ship of state might be moving, is, in the words of a former education department permanent secretary, David Normington, the danger: ‘technocrats not democratically elected leaders would be in charge.’89

Hold the delivery ecosystem to account via enhanced consumer accountability measures

With full policy competence and impartiality restored to government officials advising ministers, after the next election, it should also be possible for greater transparency and accountability measures to be put in place for the entire skills ecosystem.90

The world has come a very long way since it took days to access public services and performance data about programmes via manual based records and systems. Digitisation of government has genuinely helped deliver a progressive revolution in how most citizens connect with public services. To give government its due, this is also an area where the UK has excelled in recent years, claiming second place among OECD countries in 2020, in government digital rankings; and fourth place in the UN’s open data index.91

The challenge currently in the FE and skills sector is the evident lack of transparency. Digital records and data reporting are only partial. Again, with potentially their own skin in the game, as well as perhaps the fear civil servants will be blamed for the government programmes they manage if they go wrong, there is very little incentive for the department or its agencies to place more robust, consumer orientated accountability measures into the public domain. For example, despite regulated end-point assessments being a feature of the skills landscape since 2017, to measure the quality of apprentices in England, it is still not possible for the public to view the independent pass rates online, broken down by each EPAO operating in the marketplace. Yet, it is in the gift of statutory bodies like Ofqual and the Institute for Apprenticeships and Technical Education to make this happen.

Agree a 5-year funding settlement for all UK tertiary education providers

The chronic and systematic underfunding of FE and skills since 2010 for some in the sector is bordering on national neglect.92 To be fair to the current government, spending on FE per student has marginally improved since 2019, although with higher inflation, associated with the pandemic and soaring energy costs, sector budgets have still been hit hard.93

What is really required after the next election is a 5-year plan for FE, skills and productivity, with a 5-year funding settlement attached for both revenue and capital spending. The aim of the funding settlement would be to increase investment per student in FE by at least 40 per cent over the period, largely reversing previous cuts since 2010.94

Although unlikely to happen under the current government95, there is also a case to be made for lifting of the price cap on higher education tuition fees, in England. One way this is more likely after the next election is if higher education providers implement variable fees charges, linked to the real market value of the courses students undertake. One way of validating the price of degrees in future would be through publication of stronger data sets about long-term student destinations and wage-levels following graduation.

Explicitly link skills investment to productivity outcomes

To focus public investment on outcomes, government should link reform to the production of industry skills plans, devised locally and sectorally, with the full participation of local democratically elected leaders and employers. Unlike the current Whitehall-driven LSIP process, a designated local board of employment interests, under the direction of democratically elected leaders (e.g. MCA mayors or council leaders), would sign-off on the plans. Civic leaders would also be given new statutory powers to create, merge and close post-16 provision in an area.

The last piece of the investment jigsaw relates to the Apprenticeship Levy and improving employer investment in training. Here, the next government has a number of options available to ensure the private and public sectors invest more in productivity enhancing skills, including the option of extending the scope of the levy. Because skills are a shared responsibility between the individual, the employer and the state, reform of the Levy could be the beginning of a proper co-investment model of lifelong learning in future.96

One way to get the devolved administrations on board, including MCAs in England, would be to offer them a 5-year funding deal, outside the usual Spending Review or blockgrant-in-aid cycle. In return, DA ministers would sign up to a UK-wide national skills mission, in which all four home nations would collaborate. Whether this could be delivered in a similar way to when the UK Commission for Employment and Skills (UKCES) once existed, remains to be seen. But it is certainly a goal worth striving for.

Focus on building the base of the skills pyramid, not only the capstone

Data highlighted in this report and elsewhere shows that access to adult skills and apprenticeships, as a total participation measure, have declined in recent years. It is particularly noticeable that the UK, when compared to other advanced economies in the OECD, has turned into a skills laggard by comparison. That said, the UK performs particularly well at higher education level, with a significant number of under 35-year-olds (57 per cent) in full-time residential degrees or starting higher-level apprenticeships, beating Australia, Germany and France on this measure.97

Where more work still needs to be done is in ensuring fairer access to entry-level qualifications (L1–L3), as well as apprenticeships for under 25-year-olds and other underrepresented groups.98 The missing 2 million adult learners, as expressed in the decline of certificated qualifications below Level 3 in recent years, should be of major concern to incoming ministers, because it is a significant reason why the UK’s productivity record is so poor.

Social mobility charity the Sutton Trust found that only 5 per cent of those starting a degree apprenticeship in 2020/21 were from lower income areas, compared with 6.7 per cent of those going to university.99

The approach of all the various government agencies involved should be examined more closely. Ultimately, qualifications are about progression and opportunity for the many jumping on the UK’s skills escalator, as opposed to becoming the preserve of a lucky few. For that reason, it is odd that the Department for Education is not planning to publish progression data for students achieving T Levels, going directly into skilled employment and apprenticeships, until after the next general election. Why this matters is because the policy intent behind these government-owned qualifications at Level 3, was that they were explicitly designed to directly support industry skills needs. As the then secretary of state for education at the launch of T Levels made clear:

‘If we’re ever going to close the productivity gap then we need more people getting into the top half of the hourglass, and essentially we need to change the shape of the hourglass so it bulges out in the middle…with more skilled jobs for people doing high quality training when they finish school.’ 100

Closer scrutiny of qualifications reform

The cross-party group of MPs involved in the House of Commons Education Committee have looked extensively at the government’s qualifications reform plans in England. They are right to urge caution and to make the reasonable request of ministers that learner choice in post-16 course enrolment should be a fundamental part of any upper-secondary system of education.101 Even the government’s own impact assessment found that some disadvantaged groups, particularly white teenage males and those with SEND, will lose out significantly if the current trajectory of qualifications defunding and reform takes full effect from September 2025.102

Skills integration: towards a single post-18 tertiary organisation?

One of the consistent messages we received from experts who participated in this research was a strong sense of institutional loss involved in the constant chopping and changing of bodies committed to skills. This is particularly the case in England, where every single skills and qualifications quango, that was in place in 2009, no longer exists. In fact, Ofqual is one of the longest serving of any of the public bodies created or reformed since 2010 to support skills policy and delivery.

The tension for the next UK government to resolve will be how to reconcile these perceptions of ‘sector fatigue’, with a countervailing sense that the institutional architecture currently in place to support productivity and skills across the UK is not firing on all cylinders.

Above all, we need institutions that really add value to industry efforts to improve the performance of employees, trainees, apprentices and the self-employed. Quangos should not become simply performative bodies, or worse, extractive institutions in the economic sense of the term, introducing lots of new regulations and processes that lack efficacy.103 This is especially important when the UK’s productivity numbers continue to go down the tubes. Instead, we need public bodies that understand the part they play in the national skills mission. It requires the public servants who work in them being held to account for the outcomes they achieve towards the agreed mission.

Labour plans

Wales has sought to deal with concerns about bureaucracy and duplication of effort of competing post-16 quangos, by creating an integrated (FE and HE) Commission for Tertiary Education and Research (fully operational from 2024). We also see echoes of this approach in the Labour Party’s UK policy statements related to the creation of ‘Skills England’, which the party is committed to establishing if they win the next general election.104

The idea of a single tertiary system model is supported by the Association of Colleges, in a policy statement that included calling on the next government to introduce a statutory right for individuals to lifelong learning.105 It is probably too difficult politically to call for a UK-wide statutory qualifications regulatory body (replacing Ofqual, CCEA regulation, SQA and Qualifications Wales), although if the logic was followed of the importance of vocational qualifications being portable and available across the UK’s internal labour market, it would be an attractive proposition to create one. It might also help address concerns among some educational experts and commentators that the growing divergence in setting qualification grade boundaries, for example for A level and GCSE qualifications between England, Wales and Northern Ireland, could be administered in a fairer way.106

A genuinely integrated skills system

There is little doubt that the current fragmentation and competition among public skills and qualifications bodies in England – including the perception of growing regulatory overload – is getting in the way of progress. Incoming ministers, if they are to engage in restructuring existing public bodies, should ensure that any disruption is kept to a minimum, perhaps by initially integrating many of the existing post-16 quango functions, including TUPE staff, within an integrated umbrella tertiary body. From day one of the next government, it would be important to appoint an interim board and chief executive of the umbrella body, reporting to both ministers and Parliament.107 Such a body could be tasked with drawing up a coherent post-16 skills strategy, working closely with the devolved administrations, before a final structure is put in place. For inspiration of what’s possible, in terms of creating a genuinely integrated tertiary education and skills system, incoming UK ministers could look no further than Norway.108

Conclusion: The road to a higher-trust skills system

People may not care much about the word productivity. But everyone, including policymakers, would want to live in a successful country, where economic growth is both environmentally sustainable and inclusive.

At the centre of any future debate about how we improve real wages is the importance of improving the relative position of UK skills. At the moment, we are neither bottom or top of the class of advanced nations. For example, the UK has never been placed in the top five of nations competing in the bi-annual World Skills Competitions.109 This should be made an explicit ambition of the next UK government. Indeed, the current post-compulsory education and training landscape, including investment put in by government and employers, requires much improvement.

The UK and similar countries are now entering a second decade of what the economist, Larry Summers, has referred to as ‘secular stagnation’. According to this economic theory, large swathes of advanced economies, including the UK, maybe stuck in a low-growth future.110 If this is the case, it will require a very different model of human capital development from the one we’ve been used to.

Ultimately, the future is decided by the path people and policymakers choose to take. And there is nothing inevitable about accepting sluggish productivity and stagnating real wages as a permanent feature of the UK’s economic story. Demography is not destiny.

The central message from this research is that the FE, HE and skills sector wants to play a fulsome part in solving the UK’s skills and productivity puzzle. But the path to achieving success lies in building a higher-trust delivery model than what currently exists; as well as much greater transparency and consideration of the skills outcomes to be achieved.

Productivity is about the nurturing of human potential. Through the power of education, everyone can be included and inspired to develop a love of learning. To that end, it is why running to move forward is always going to be a better outcome for a nation’s long-term prosperity and growth, than simply running to stand still.

By Professor Tom Bewick & Matilda Gosling