Backing Adults – Turning the National Skills Fund into Skills Accounts

#SkillsMismatch – 20% of the Workforce Under-Skilled for Their Jobs by 2030 

Andy Haldane knows a thing or two about the UK’s skills and productivity puzzle. As the long-standing chief economist at the Bank of England, he’s had a ringside seat on developments in the British economy – both pre- and post the 2008 financial crisis. The historic weaknesses in the country’s vocational skills base is what he calls: “the collapsed left lung of the UK’s education system.”

As chair of the UK government’s Industrial Strategy Council, Haldane hasn’t pulled any punches about the scale of the challenges ahead, saying:

“The ISC estimates that an additional 7 million people – 20 per cent of the workforce will be significantly under-skilled for their jobs by 2030; and another 1 million will be over-skilled. That will leave many more workers less productive in their jobs or out of work completely” (Worsening UK skills gap will hold the country back, Financial Times, 24th October 2019.)

Low Productivity and Under-Employment

To compound matters still further, wage growth – a key measure of increases in output per worker – has slumped since 2010. It is just 0.3 per cent per annum today compared to the long-term trend rate of growth for the British economy of around 1.75 per cent.

Official unemployment is currently low by historical standards, yet, under-employment – particularly amongst graduates – is at an all-time high.

The Office for National Statistics (ONS) estimates that 31 per cent of millennials, who studied bachelor’s programmes at Level 6 and above after 2007, graduated into job roles that do not require a university degree.

Redressing a Decade of Lifelong Learning Going Backwards

These major mismatches, that a number of economists and business lobby groups have long pointed to, coincide with over a decade of going backwards in lifelong learning policy.

A perfect storm has gathered around falling participation levels in learning:

• Reductions in employer workforce investment
• Over-reliance on low-skilled migration from the EU
• Government austerity cuts disproportionately affecting FE colleges, and
• Weak linkages between higher-education expansion and productivity improvements in the economy as a whole

Three Aims for the National Skills Fund

Against this context, the National Skills Fund has a real job of work cut out to try and improve, or at least reverse, some of these negative trends.

The new national imperative – given that 80 per cent of the workforce will still be in employment in 2030 – must be to shift the entire skills base up the value chain; creating better quality, higher-wage, more environmentally friendly and digitally-based jobs.

To achieve this, the National Skills Fund must essentially deliver on three key aims:

1. Halt the collapse in post-compulsory participation in lifelong learning – The first aim of the National Skills Fund must be to halt the collapse in post-compulsory participation in lifelong learning which has seen a reduction of 4 million adults taking up opportunities since 2010, according to the Learning and Work Institute’s respected annual participation survey.
2. Government and the private sector coming together – Second, there is an enhanced role for government and the private sector coming together to tackle skills gaps and shortages on a more geographical and sectoral basis. The Confederation of British Industry (CBI) has called for the “partnership of the century” which, in part, is to deal with the fact training investment per employee has actually fallen in the UK, by an average of 23 per cent since 2005 (British firms invest five times less per employee than their German counterparts, according to cross-national studies funded by the European Commission).
3. The ‘skills progression ladder’ of opportunity – And third, post-compulsory public spending on education and training needs to be rebalanced towards higher technical qualifications at Levels 4 and 5 (sub-degree level), as well as ensuring the ‘skills progression ladder’ of opportunity is not kicked away by the Department for Education by removing – too hastily or crudely – many important qualifications at Level 3 and below.

Apprenticeships might be excluded from the scope of the National Skills Fund, but reform of the employer Levy could benefit from being co-ordinated with other forms of post-18 education and training spend.

Indeed, there is an argument to consolidate all forms of non-schools-based funding into a single National Skills Fund, including HE student finance, with tripartite contributions from the state, employers and individuals collected and disbursed via the tax system.

Breathing New Life into Lifelong Learning

What is clear is that breathing new life into the economic lungs that will drive Britain’s future prosperity, skills and improved productivity performance, will take some time to fully realise.

Skills 4.0 and the fourth industrial revolution beckons.

The National Skills Fund, including the extra investment that is earmarked to come with it, is a recognition at least, that for too long the patient has been hooked up to basic life support.

Now is the time, in the words of the Prime Minister, Boris Johnson, to “level-up” education and skills investment across the whole country.

That is ultimately how the UK’s productivity puzzle can and will be solved.

Top Three Recommendations:

1: Adult Skill Accounts funded through the National Skills Fund

We know from past experience that the Individual Learning Accounts concept was a popular one amongst adult learners. The problem was not so much simulating demand, but weak implementation of the scheme, which led to fraud.

A reintroduction of more secure skills accounts, linked to a lifelong learning entitlement to retrain in accredited qualifications that meet specific skills needs up to Level 5, could be just the kind of kick-start the British economy needs.

2: Targeting Sectors No Longer Able to Recruit Low Skilled Migrant Workers

As the country recalibrates to life outside of the European Union and an end to Freedom of Movement with the EU27 in January 2021, the intended points-based immigration system has the potential, over time, to help reduce the country’s reliance on low-skilled labour from overseas.

The National Skills Fund, perhaps topped up from the fees employers and individuals will have to pay to acquire new work visas, could be specifically targeted at those sectors – like health, hospitality and social care – which have in recent decades overlooked attracting, retaining and retraining the resident labour force.

3: Introduce a ‘Right to Time Off to Retrain’

Linked to new skill accounts, the government could look at statutory legislation to give all employees, with workers aged over 35, the ‘right to retrain.’ The legislation would grant employees a statutory right to request up to 8 days annual ‘learning leave.’

The self- employed would receive tax credits in lieu of the time taken off. All or even a more limited combination of these measures would help create additional demand and boost productivity.

Tom Bewick, Chief Executive of the Federation of Awarding Bodies (FAB)