A bold and radical skills policy is key to delivering an economy that works for everyone
Our economy and our labour market are set to experience profound, rapid and accelerating change in the coming years. We are entering what some have called the fourth industrial revolution, with some estimates suggesting that millions of jobs are at risk from automation. And that’s before we consider the potentially seismic economic impact of Brexit.
Two out of three of the workforce of 2030 have already left full-time education. So if we are to adapt to transformative change in our economy, and if we are to turn these trends to our advantage, we will need an adult skills system that is fit for the future.
Our track record here is a cause for concern. As deindustrialisation transformed our economy, our skills system failed to support workers to adapt. Entire communities were left behind.
Our skills system is beset by some significant, systemic and long-standing weaknesses. Employers are not investing enough in skills. UK employers invest just half the EU average in continuing vocational training, and investment per pupil has fallen by 14% in real terms since 2007. Too much of current provision is delivered at low levels, with poor labour market outcomes, and limited opportunities for progression. Over nine in ten apprenticeships are delivered at Level 3 (equivalent to A-Levels) or below. And the skills system has failed to address the deep social and regional inequalities that scar our society.
The apprenticeship levy is a welcome change, and a long-overdue recognition of the need to intervene in the market in order to boost investment in training. Since April, large employers with a payroll of over £3 million have to pay 0.5% of their pay bill above that threshold into a digital account, which can only be redeemed to pay for training costs for apprentices.
However, its design means that the apprenticeship levy may accentuate, rather than address, regional inequalities. It will raise more money in London and the south east, where wages are higher, and where there are more large levy-paying firms. It will raise less and stimulate training less, in the regions that need it most; the regions with lower levels of qualifications, lower levels of productivity and lower levels of pay. Incredibly, despite touting it as a key part of their industrial strategy to boost growth in every area, government has made no assessment of the regional impact of the levy.
Recent reforms may accentuate social inequalities in skills too. Currently, the adults who could most benefit from participation in lifelong learning – those who left school early, who have lower-level qualifications, or who are stuck in low-paid occupations – are the least likely to take part. Employers tend to invest more in employees who already have higher levels of qualifications and pay, rather than low-skilled staff.
Yet the government has recently restricted entitlement to funded training for low-skilled adults in work on low pay. People in work, who are looking to study for a qualification equivalent to A-Levels, have to fund courses through Advanced Learner Loans, a new system which operates similar to tuition fees. The year after funding entitlements were cut, and replaced with Advanced Learner Loans, participation by adults on courses affected fell by a third.
We need a new approach. In an IPPR report, launched this week, we call for a radical overhaul of the adult skills system, to make it fit for the economy of the future.
We need to address the regional inequalities that hold our economy back. So we’ve called for the apprenticeship levy to be reformed into a productivity and skills levy. Set at 1% for large firms, this would raise £5.1 billion, twice that raised by the current levy. By top-slicing a quarter of the contributions of the largest firms, the levy would generate a regional skills fund of £1.1 billion which could be devolved to local areas according need, to invest in high quality vocational training. This would address, rather than accentuate regional inequalities, and it would turbo-charge skills devolution.
Second, we need to address the social inequalities in our skills system. We need to boost employer-investment, but we also need to ensure that individuals are able to invest in their own skills. So we've called for a Personal Learning Credit to help individuals take control of their learning and career. Learning from previous experiments with learning accounts in the UK, and from examples in France and Singapore, the Personal Learning Credit would focus support on those who could most benefit from lifelong learning, but who are currently least likely to participate. Low-skilled, low-paid workers - who are currently poorly served by the current system - would be entitled to £700 a year to invest in training. It would also provide support for the growing number of self-employed workers who are poorly served by our increasingly employer-led skills system.
The deep social and regional inequalities in our society aren't just an affront to social justice. They are holding our economy back. If we are to address these inequalities, and to truly build an economy that works for everyone, we need a skills policy which is much bolder and more radical.