One of the more specific shortcomings of former British prime minister Liz Truss’s flawed “Growth Plan” was its sparse mention of skills, training and education. The latter was not referenced at all. The omissions were odd, given their importance to economic growth. As Rishi Sunak, the new premier, and Jeremy Hunt, his chancellor, now attempt to fill the £50bn hole left behind by Truss’s plan with spending cuts and tax rises, they must not sideline the growth agenda. Indeed they should extend its ambit to help improve the fiscal arithmetic: supporting skills and education should be central to that.
There are signs the new Westminster government understands the importance of investing in human capital. As chancellor, Sunak cited “capital, people, ideas” as part of a three-pronged approach to growth. His appointment of Gillian Keegan — a former skills minister and apprentice — as education secretary seems an appropriate choice. Yet Sunak needs to make tough trade-offs ahead of the Autumn Statement on November 17. The skills and education agenda could fall by the wayside. That would only further weaken the UK’s productivity.
Funding for training and education in England is already under extreme strain. There has been a decline in per-student spending across colleges and school sixth forms since 2010-11, according to Institute for Fiscal Studies research. Spending on adult education has also been squeezed. International observers might find it peculiar that while UK universities compete well globally, there are limited vocational and technical training options. UK business investment in training per employee is half the EU average too. The NHS also has huge doctor vacancies, in part because of stringent government caps on medical school places.
A more effective system must focus on three key areas. First, it should ensure education curricula are preparing students for the evolving demands of work, including greater emphasis on digital and financial literacy. Second, with 80 per cent of the country’s 2030 workforce already in work, improving on-the-job training will be vital. And lastly, developing an effective retraining system will be crucial as life-long learning becomes ever more critical.
The 2021 skills for jobs white paper made some sensible recommendations. These included developing higher-level technical skills and a life-long loan entitlement, giving people a right to four years of post-18 education funding. Recommitting to these will be important, but not easy, as the government faces a tight budget and a cost of living crisis. As inflation eats into spending plans, Hunt will need to recognise that further slippage in skills and education funding now will only slash Britain’s growth potential. After a decade of squeezes, the college system has been enfeebled.
In England the apprenticeship levy — a tax on businesses to fund their apprenticeship training — also needs rethinking. Businesses say it is not flexible enough, and want better access to shorter courses. But it is also failing to deliver training for the lower-skilled and young. Bandwidth to reform the levy will be limited, but training investment by UK employers is down more than a quarter since 2005. Improved tax incentives for training expenditure could be a more direct route to explore. Meanwhile, ensuring unspent levy funds are deployed to firms and regions with an actual need is crucial.
Much work is needed to ensure the UK’s skills system can effectively respond to economic shifts, including the green transition and technological changes. With employers facing severe skills shortages, it is already well behind. Talking about the importance of skills is positive, but it is meaningless without action.
