Four decades of failure in tackling skills shortages

Tom Bewick’s speech to the #BattleFest Battle of Ideas Festival in London recently, set out the main reasons why, in his view, the UK has suffered decades of relatively weak productivity and skills performance:

I’d like to jump straight into my opening provocation by saying Britain’s current skills crisis has very little to do with the end of EU free movement.

Neither are these issues caused by the strained supply chains as a result of the pandemic. Because what we are experiencing today, as I shall seek to briefly set out in this speech, has been at least four decades in the making.

Brexit and the pandemic are symptoms, not causes

For sure, HGV drivers, butchers and other skills shortages in key sectors are being exacerbated by recent changes to immigration policy. And in the short-term, perversely some may feel, these shortages will not be overcome without some recalibration of the skilled visa regime to allow many more of these overseas workers in.

Similarly, the bottlenecks we’re seeing in some supply chains are the inevitable consequence of both implementing and then lifting strict lockdowns. After all, this country – along with other nation states – are still emerging from a unique economic and social experiment in meeting a global public health challenge. Do lockdowns work? I think that’s a debate that will rage on for years to come. As will, I’m sure, the merits of ending free movement from the EU.

Personally, I supported and campaigned for Brexit to restore control of our immigration policy; but not necessarily to restrict it. No one would claim the United States is a society built on illiberal attitudes towards legal immigration. Yet, the key point is control. America issued only 66,000 HB-2 visas last year, compared to the UK Home Office, which issued 195,000 overseas skilled visas to British firms (and more to non-EU, than EU).

With the US workforce four times the size of Britain’s, that makes our comparative rate of skilled visa issuance equivalent to the Department of Labor in Washington DC, making available to US firms 780,000 HB-2 visas per annum; which as I’ve just explained, is actually in practice, capped at only 66,000 per year. That’s what is meant by having control of immigration. When elected national governments can decide what skills, who and how many people to let in.

In my view, there can be little doubt: British industry has become addicted and over-reliant on importing foreign labour. This has come at a time when employers collectively have systematically failed over recent decades to invest sufficiently in the domestic workforce.

Two main reasons for the current skills crisis

Firstly, the inherent short-termism of British employers has been roundly exposed for what it is. In aggregate, British employer don’t plan ahead far enough and they don’t invest sufficiently in skills at all levels. Of course, there are some outstanding firms who are world beating in terms of their approach to workforce skills and investment. But this high-skills, high-wage approach is not systemic enough in the British economy as a whole. It is why we languish in international league tables and our productivity is behind most of our major competitors. We have become trapped in what economists call a ‘low-skills equilibrium.’

1. Employer short-termism

Don’t just take my word for it. The labour force survey has been going since 1992. It’s a comprehensive snapshot of employees working in the public and private sector; men and woman; and the kind of in-company training they receive. The survey in England finds that employer investment in training has actually declined in real terms since 2015, by 7 per cent. It doesn’t sound like much, does it, 7 per cent?

However, when you consider the total employer spend for on the job training is about £22 billion per annum; British companies today are investing £2 billion less each year than they were a decade ago. To make matters worse, they are not investing in precisely those sectors where we’re seeing chronic skills shortages, like in haulage and food processing.

The labour force survey shows that managers in the private sector; recent graduates in the public sector, including woman, are far more likely to receive training investment than a man from a working class background in a manual occupation. Why is that, I wonder?

We’ve seen a similar pattern in how employers are choosing to spend the Apprenticeship Levy. Overall starts have been falling for younger people below age 25 for a decade or more. And those starting on lower Level 2 apprenticeships since 2017 have been overtaken by those over 25 starting on higher-level apprenticeships, like management degrees. In other words, a scheme supposedly devised to help employers and managers identify and train the next generation of skilled workers, has too often been abused by some companies who instead send well remunerated senior executives to places like Cranfield University to study for an MBA; all paid for from the £2.5 billion levy!

So, a provocation I’d like to throw out here today, is why do we continue to allow the culture of British industry and management to be so short-term?

2. Government skills policy failures

The second cause of our current difficulties, is the failed neo-liberal policies and hollowing out of labour markets since the 1980s. In that time, central government has experimented with no fewer than 44 different skills initiatives and structures to tackle skills gaps: from Training and Enterprise Councils to Sector Skills Councils to Local Enterprise Companies. They’ve all failed. It’s no surprise that the latest wheeze in the Skills Bill before Parliament is the aptly named, Local Skills Improvement Plans.

Like George Orwell’s ministry of double speak, these plans promise to simultaneously solve England’s productivity gap and net zero targets at the same time.

Meanwhile, the sectoral wages councils that once protected low paid workers have all been abolished. The employer training boards with levy raising powers, bar two of them, have also gone. And in so far as trades unions still exert any real bargaining power, they have manifestly shied away from debates like controlling the labour supply through ending cheap labour and free movement with the EU. Ironically, in my view, many unions have openly defended neo-liberal policies that are explicitly designed to weaken workers’ bargaining power.

Unfortunately, I don’t have time to develop this argument as much as I would like. But the way to think about it is this: the top-down training state; the technocratic, everything must be decided in Whitehall, is manifestly a major part of the current problem. Our country over the past 40 years has been let down by a combination of both market failure and government failure. And it’s a close race between them, I would say, as to who would get the gold medal for sheer incompetence.

Just look at the HGV lorry driver crisis. We all know that this issue has been around for years. Yet, only last week does the government finally get round to announce a ‘skills boot camp’ to fund more HGV training places. Which, in a nutshell, answers my point really about why skills planning by technocrats has failed. It’s what behavioural economists refer to as ‘human reasoning failure’.

The best will in the world, civil servants can just never keep up with the complexities of the British labour market with its over 75,000 occupational roles.

What are the solutions?

In summary conclusion, my solutions for the skills crisis would be the adoption of at least four interconnected polices:

1. We can plug the current skills shortages with a temporary visa scheme that for every foreign worker brought in, the employer has to train up one domestic worker;
2. We should bring back a modernised form of the sectoral wages and skills councils, and crucially give employers the levy raising powers so they can collectively invest in their own workforce training;
3. We should abolish the technocratic-led Training State, by devolving all government post-18 education and skills spend to citizens of working age, via an individual lifetime skills account; equivalent in value to the monies undergraduates can borrow from the student loans system today; and finally
4. Underpinned by a system of national learning entitlements, give democratically elected mayors and local civic leaders far more powers to develop their own area based strategies to plug skills gaps and improve productivity.

Sadly, the government’s Post-16 Skills Bill currently going through Parliament fails to do any of these things.

It means, sadly, the skills crisis and its failings will rumble on.

Tom Bewick is the chief executive of the Federation of Awarding Bodies.

This speech, reflecting a personal viewpoint, was delivered to an audience at the Battle of Ideas Festival on 10^th October 2021, Church House, London.

How do we solve the skills crisis? #SkillsWorldLive Radio 4.1 

Welcome back to a brand new season of the Skills World Live Radio Show! Thank you for sticking with the number one podcast in FE. 

In this episode, presenter, Tom Bewick, explores why we have a skills crisis in the UK and what can be done about it.  

After all, you can’t read a newspaper or switch on a news channel at the moment without one story or another about supply chain shortages, caused by not enough HGV drivers, abattoir workers and even bricklayers. 

The skills crisis comes at a time when various business lobby groups have been calling on government to relax immigration rules which will allow more overseas visas to be issued, now that the UK has ended unfettered immigration and free movement with the European Union. 

In our Head to Head segment this week Tom talks to the former Labour Treasury minister and chief economist at the Institute of Directors, Kitty Usher. He is joined by Viren Patel, the Open University’s business development director, who has teamed up with the IoD to produce the Annual Business Barometer — a handy snapshot of employer sentiment on workforce skills. 

In The Final Take this week, Tom talks to Baroness Fox of Buckley (Claire Fox) about the recent Battle of Ideas Festival in Westminister, organised by the Academy of Ideas; and her thoughts on the Skills Bill, which came back to the House of Lords this week at Report Stage. 

We’re now taking a short break for the half term and will return with episode 2 of the new season on the 5 November!

The #SkillsWorldLive Radio Show is aired live every Friday at 10:30am on the Skills World Live Productions website.

You can watch the show in playback on our website or listen to the show via Spreaker, Spotify or iTunes.

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