£4 billion spent annually “failing to deliver skills we need” for economy

PAC extremely concerned at dramatic falls in further education and skills training

In a report today the Public Accounts Committee says the Department for Education’s (DfE) £4 billion a year spend on activities designed to develop workforce skills in England is failing to deliver the skills essential to economic growth and prosperity.

The number of adults participating in government-funded further education and skills training has dropped dramatically, from 3.2 million in 2010/11 to 1.6 million in 2020/21.  The drop is particularly marked in poorer areas.

The Committee says DfE’s response doesn’t match the scale of the problem and doesn’t address key factors involved in the national skills shortage, which include Brexit and the target in law to reach net zero by 2050.

Employers are meant to lead on identifying skills requirements and designing qualifications and training.  But they’re spending less on workforce training, and the DfE’s skills index shows the impact of further education on productivity declined 46% over the last decade.

Committee Chair Dame Meg Hillier MP said:

“Despite £4 billion a year of taxpayers’ money spent on skills programmes, participation has fallen off a cliff – especially among older workers and in poorer areas. The Government is not going to make inroads on levelling-up if it does not get ahead of this.

“With UK workforce numbers falling the Government needs to get serious on skills. The future of the economy depends on it.”

PAC report conclusions and recommendations:

We are extremely concerned at the dramatic fall in participation in further education and skills training among disadvantaged groups. The total number of participants in government-funded further education (FE) and skills training in the 20% most disadvantaged areas of England fell by 39% between 2015/16 and 2020/21 (down by 280,100 participants). The largest decline in these areas occurred among people aged 50 and over, with the numbers participating dropping by more than half. DfE asserts that participation has fallen most at lower levels of study and in classroom-based training, which tend to be more common in disadvantaged areas and among disadvantaged learners. DfE also suggests that large employers, who sometimes deliver skills training in partnership with FE colleges and other training providers, are less likely to be located in disadvantaged areas. Making the apprenticeships system work better for small employers is fundamental to increasing participation among young people and disadvantaged groups.

Recommendation 1: Within six months, DfE should develop an evidence-based plan setting out how it will support disadvantaged groups specifically to participate in FE and skills training.

DfE has not made clear what level of performance would constitute success for its skills programmes. DfE ultimately relies on measuring learners’ subsequent earnings as a proxy for the value of government-funded skills training and the extent to which that training meets the needs of the labour market. The FE Skills Index is DfE’s key indicator of the impact of the FE system on productivity, focusing on adult learners and apprentices who have successfully completed their training. DfE calculates the Index by measuring changes in the number of learners and achievement rates and shifts in the mix of learning towards more or less economically valuable training, based on earnings. Overall, the Index fell by 46% between 2012/13 and 2020/21, although the annual change in 2020/21 was an increase of 7%. DfE has not set a target for the level that it would like the Index to reach in future years.

Recommendation 2: DfE should set out, as part of its Treasury Minute response, what level of improvement in the FE Skills Index it is aiming to achieve and by when, so Parliament has metrics with which to monitor its performance.

The multiplicity of government skills programmes makes it hard for employers and individuals to navigate to the training that best meets their needs. As well as DfE’s range of interventions to support skills development, DWP and DLUHC also offer skills programmes, some of which cover the same types of learning. For example, numeracy training is available through DfE’s Essential skills – numeracy programme, some standalone technical qualifications, and the Multiply initiative which is funded from the UK Shared Prosperity Fund. Employers and individuals sometimes find it hard to understand how all the different skills programmes fit together, and therefore which programmes are most relevant to them. DfE states that the bulk of government funding supports only a small number of programmes, such as apprenticeships and the adult education budget. Government needs to strike a balance between keeping the system simple and intelligible, but also delivering training that meets people’s needs. DfE concedes that the complexity of the system can sometimes put employers off from engaging with what government has to offer.

Recommendation 3: DfE, working with other departments as necessary, should take action to review the number of skills programmes and eliminate overlap between them.

Employers are spending less than they used to on workforce training, which risks leaving the economy without the skills it needs. DfE’s employer skills surveys indicate that employers’ spending on workforce training per employee fell in real terms from £1,710 in 2011 to £1,530 in 2019. The 2021 employer skills survey found that 52% of the total workforce had received some training during the year, which was the lowest proportion since the first survey in 2011. BEIS is particularly concerned about small and medium-sized enterprises (SMEs), which often lack the resources to invest in workforce training. Several of the organisations that submitted written evidence raised concerns about the inflexibility of the apprenticeship levy and suggested that employers should be able to use their levy contributions to fund a wider range of skills activities.

Recommendation 4: DfE, working with other government departments, should review how it incentivises employers to invest in skills development, including through the apprenticeship levy, and, in light of its findings, take action to improve the effectiveness of the incentives. DfE should write to us within six months with an update on what it has done.

We are concerned that continuing financial pressures and workforce challenges are hampering colleges’ ability to play a full part in the skills system. Colleges play an important role in reaching disadvantaged groups and giving people opportunities they would not otherwise have to develop their skills. In January 2021,we reported that there was clear evidence of the college sector’s financial fragility and that the situation was affecting students. We found that financial pressures had caused some colleges to narrow their curriculum and reduce the length of courses. Some colleges had significantly reduced enrichment activities, such as careers advice and employability activities. We are also concerned about colleges’ ability to recruit and retain teaching staff. DfE recognises that pay in the college sector will often not compete with pay in relevant industries, but highlights that the 2021 Spending Review increased funding for skills by £2.8 billion. It is considering how to give colleges greater funding certainty, and is working with the sector on initiatives such as supporting people who want to teach part-time and work in industry part-time.

Recommendation 5: Within six months, DfE should provide us with an update on how it is helping colleges deal with the challenges relating to workforce shortages and funding arrangements.

DfE has high expectations for its new Unit for Future Skills, but the Unit does not yet have all the skilled staff it needs to meet these expectations. In February 2022, DfE announced the creation of a Unit for Future Skills. This is a division within DfE but is intended to work across government, examining the interaction between the jobs and skills markets. DfE also plans that the Unit will engage with businesses and training providers to establish what additional analysis they would find helpful. The Unit currently has 18 staff, which is below complement as it has struggled to recruit the highly skilled analysts it needs. DfE recognises that it needs to be data- and evidence-driven in what it does, and that the key to ensuring that the Unit achieves the necessary profile is to produce outputs that stakeholders find easy to use and helpful.

Recommendation 6: DfE should write to us, alongside its Treasury Minute response, with an update on:

The staffing position of the Unit for Future Skills, and how any shortfall in resourcing is affecting the delivery of its programme of work; and how it plans to assess and monitor the impact of the Unit’s work.

Sector Response

Dr Mary Bousted, Joint General Secretary of the National Education Union, said: 

“It’s good that the PAC is looking at skills and FE as this sector does not get enough attention from Government. It is also worrying to learn that employers are spending less on workforce training.

“The fact that PAC has identified that the fall in participation in FE and skills training among disadvantaged warrants is dramatic and needs serious attention. We fear the DFE views ‘skills’ as a bolt on. They’re missing the opportunity to engage with all the recent reports calling for a modern approach to secondary assessment, which could integrate a focus on the skills that young people need for adult life.

“FE is so vital for giving a further chance to adult returners, adult re-training and adults with English as an extra language or learners with extra needs. FE is vital to supporting students with access to higher education and vocational education, including BTECs and Apprenticeship programmes.

“The Government’s decision to de-fund Applied General Qualifications (AGQs) which include BTECs and Cam Techs at level 3 was the wrong decision. Scrapping these qualifications will massively impact disadvantaged students who use them to progress into higher education and employment. Pinning a qualification system on a binary choice of only A Levels or the untried and untested T Levels, without that third route of applied general qualifications, is ill-thought out. It will mean thousands of students miss out on opportunities to progress and widen their life chances. De-funding AGQs will potentially mean the closure of FE colleges and this won’t help levelling up.

“The DFE needs to join up its policies on skills and education. The FE sector is vital for giving accessible opportunities for learning and it really makes a contribution to social cohesion and life chances but that’s lost unless we address the chronic and long term underfunding.”