Skills and training reform critical to Britain’s post-pandemic recovery

The Coronavirus pandemic has accelerated the transformation of the UK’s economy and its skills requirements.

A fundamental redrawing of the country’s skills and training industry is needed to ensure the labour market is equipped to meet this demand, writes John Longworth, Chairman of the Independent Business Network.

Coronavirus has turbocharged the transformation of the world of work.

A shift to remote working, the economic downturn, mixed with pre-existing changes to the UK economy means that the demands on the labour market are unprecedented.

Preparing the next generation of school leavers, graduates and existing workers to compete effectively in the jobs market poses a unique challenge to policymakers and employers alike.

Increased use of sophisticated software has boosted the need for digital skills. Dissatisfaction with the relevance of higher education has driven demand for more tailored vocational skills.

Alongside this, longer term trends are also having a significant effect. A report by Deloitte Access Economics predicts that by 2030 two-thirds of all jobs will be made up of soft-skill-intensive occupations.

Government needs to re-examine the way it funds skills and training

To meet these requirements, the Government needs to re-examine the way it funds skills and training to ensure money flows to where it’s needed and where it’s most effective. Introduced in 2017, the apprenticeship levy was intended to provide money to improve skills and training provision.

However, according to the Chartered Institute of Personnel and Development and its chief executive Peter Cheese, the levy has hindered development opportunities due to the conditions imposed on it in terms of how apprenticeships are organised. Businesses need to be given the flexibility to decide whether apprenticeships are job-based, classroom-based, or both.

Furthermore, to avoid confusion over which employees are eligible for the levy, the Government should specify that it can only be used to fund schemes for under 25s and introduce human tax credits for businesses to use for older employees.

This would deduct the cost of training from their overall profits, and they would only pay tax on the adjusted amount; a major incentive for businesses to upskill their existing workforce.

As well as funding for businesses, the way funding is allocated to providers needs to change.

Funding from the Adult Education Budget is skewed in FE Colleges’ favour. Funding allocations need to be revised to ensure a greater link between quality of provision and teaching standards, ensuring only those providers who maintain high standards receive funding.

More work also needs to be done to communicate the advantages apprenticeships have to offer, particularly to young school leavers and their parents. A 2014 independent analysis by the Million Jobs campaign estimated that over a third of all graduates enjoyed lifetime earnings below those of the average higher apprentice. While nearly half of those from post-1992 universities earned less than higher apprentices.

Perceptions, however, fail to match up with this reality.

The same study by the Million Jobs campaign found that school-leavers are more than twice as likely to associate university rather than an apprenticeship with providing a good long-term earnings potential and job prospects, while fewer than one in six say they are preferred over university by their parents and friends.

The Government also needs to commit to targeted investment in areas such as job creation schemes, accompanied by the Government’s ‘Lifetime Skills Guarantee’, to fill the need across the country for skilled workers in areas such as engineering.

Working with local authorities, this investment would help to fulfil the needs of individual areas, rather than simply creating jobs where they may not be needed. Such targeted investment would help both young people looking to get into the job market, and more experienced workers seeking to retrain, either while in employment or out of it.

Forecasters are positive of the UK’s prospects for economic recovery.

With varying estimates for the next year ranging from 4.6 per cent at the bottom end to 7.25 per cent at the top end. These figures, however, are dependent on businesses and their staff possessing the necessary skills to thrive post-pandemic.

Currently, apprenticeship funding is failing the needs of business. Negative perceptions of apprenticeships and further education persist despite often enjoying more favourable earnings and employment rates than university degrees.

Apprenticeship funding, particularly the levy, needs to be redefined so businesses can adapt funding to their needs. Meanwhile funding for FE colleges and other providers needs to change to ensure the quality of provision stays high. This must go hand in hand with targeted Government investment in job creation and retraining for sectors that need it most.

If all of this happens, the Government stands a better chance of achieving the post-pandemic growth it is yearning for.

John Longworth, Chairman of the Independent Business Network