Britain’s skills problem

It is well known and acknowledged in the government’s Industrial Strategy that Britain has a skills problem: ‘We have a shortage of technical-level skills and rank 16th out of 20 countries for the proportion of people with technical qualifications’. As the Green Paper also says, ‘a bewildering complex array of qualifications, some of which are poor quality, makes the system hard to use for students and employers’.

This shortage of ‘technical level skills’ is important because it impacts on economic growth, inequality and social mobility. It also affects a lot of people. Well over half of young people do not do A-levels each year. Furthermore, only about 35-40% of a typical cohort finishing their GCSEs can expect to go to university. The shortage of ‘technical skills’ mainly needs to be supplied by those who choose non-academic pathways. This is a major educational issues and all parties should be addressing it in their manifestos.

The Sainsbury report and post-16 plan sets out a coherent framework for technical education after the age of 16. If properly implemented, it would be a vast improvement on the current system which is overly complex and fails to progress many students (particularly if they do not do well at GCSE). An article I co-authored for the May edition of NIESR Economic Review takes an in-depth look at the current system.

The post-16 technical option would consist of 15 routes, which are based on occupational groupings. Each route would have a ‘common core’, including English and Maths. At the outset, it would be possible to visualise where these routes might lead to in terms of educational progression and potential employment. This technical option would either be employment-based (most commonly delivered via an apprenticeship, which has at least 20% off-the-job learning) or full-time college-based.

However, there are areas of government policy with regard to skilling young people (and re-skilling adults) that need to be challenged. For example, bad as it is that school expenditure per pupil is likely to fall by about 6.5% between 2015-16 and 2019-20, the outlook for young people between 16 and 18 is much worse. Here the expected fall is about 13% over the same time period.

There are problems with the way the new apprenticeship standards are being implemented and it is difficult to see the coherence between this and the post-16 plan (apprenticeship reforms preceded the post-16 plan and have continued apace). These include proliferation of new standards for apprenticeships, some of which are overlapping; the lack of a formal qualification; and allowing apprenticeship standards to be adopted without an assessor in place (something that would never happen for school qualifications). Unlike in other countries, most new apprenticeships are for adults who have already been working and not young people entering the labour market.

There is also serious concerns over how apprenticeships are being funded and for whom. Although the apprenticeship levy has come into force (a payroll tax on large employers), this is geared towards the training needs of the 2% of employers that actually pay it. In exchange for this tax, they get credits that they can use to cover the direct costs of training their own apprentices. However, the other 98% of employers, need to rely on whatever the government allocate to a separate budget that goes directly to training providers. Although they are incentivised to hire apprenticeships (in the sense they won’t have to provide for so much upfront training costs), the budget going to training providers has been slashed for non-levy business. So there is a fair chance, small and medium sized enterprises won’t be able to find a further education college (or other institution) that has the funding to actually provide for their needs. The specialist media outlets that cover further education are currently full of stories about further education providers going out of business due to these funding cuts. There is no obvious rationale for generously supporting large employers to provide skills but not smaller employers. Indeed one might expect more ‘deadweight’ to come from subsidising training for the former because they are more likely to have both the capacity and incentive to fund more of their own training.

Finally, an even broader issue is why apprenticeships need to be the focal point of skills policy in the first place. This is a suitable model for training a person new to a job but not for enabling a person to become better at his/her existing job or for short-term training. The LSE Growth Commission has recently recommended that there should be a generalised tax break for ‘skills investment’ in the same way as there is in plant and machinery. This would broaden policy to consider skills beyond apprenticeships. There is good reason to think that the education and training system provided for young people needs to be differentiated in some ways from life-long learning that many of us need as the labour market changes over our long working lives.

‘Post –Compulsory Education in England: choices and implications’ appears in NIESR’s Economic Review No240. Sandra McNally’s co-authors were Claudia Hupkau, Jennifer Ruiz-Valenzuela and Guglielmo Ventura.