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IPPR - Skills gap threat to post-Brexit economy – UK employers spend £6bn less on skills than Euro average

Cross-party line up of mayoral candidates backs think tank proposal for new devolved ‘Skills Levy’

A new report by IPPR, the progressive policy think tank, has a stark warning for British business leaders and politicians about the state of UK skills. The think tank calls for a £5.1 billion ‘Skills Levy’ to be introduced to boost employer investment and to turbo-charge skills devolution. The report finds:

  • Employer spending on training is half – or over £6 billion less – per employee per year than the EU average for continued vocational education;

  • Employers in England are spending £5.1 billion less on training in real terms than a decade ago. Public investment has also been slashed – the adult skills budget has been cut by 40 per cent in real terms between 2010/11 and 2015/16;

  • Improvements in qualifications have not delivered economic benefits – while there has been an 11 per cent increase in the proportion of the workforce with both basic and degree-level qualifications in the last decade, productivity has risen just one per cent and average pay has fallen in real terms.

The report concludes that this situation is unsustainable if the government is to achieve its goals on boosting growth and increasing productivity. As well as increased investment, the report argues the UK’s skills system will need reform if it is to prepare the workforce for the coming challenges of Brexit, the impact of automation on the labour market and the continued impact of globalisation. Specifically, it finds that:

  • Too many employers fail to use the skills of their workforce – a third of people say they have a qualification beyond what is needed for their role – nearly nine million people are ‘over-qualified’ – the highest rate in the EU;

  • Too much skills provision is low level, with poor outcomes for learners;

  • Those most likely to benefit from training – those who are unemployed, those with low skills, and those in low-pay occupations – are least likely to participate.

The government’s apprenticeship levy will come into force from April. But the £2.6 billion it will raise in 2016/17 will fail to restore employer investment to the levels seen a decade ago.

IPPR is calling for a new ‘Skills Levy’ to be introduced to boost employer investment and to turbo-charge skills devolution. The Skills Levy would raise over £5 billion – twice the amount raised by the apprenticeship levy. It would be:

  • Broader, applying to all employers with 50 or more staff;

  • Larger, set at one per cent of payroll for the largest employers (250 or more employees) - twice the current level;

  • More flexible, allowing employers to spend the funds on high quality vocational education and training, beyond just apprenticeships.

Clare McNeil, IPPR associate director for work and families, said:

“Britain’s economy can’t survive outside the European Union without bringing investment in skills into line with our competitors and making sure employers are making better use of workers’ skills.

“Government spending on boosting workers’ skills has also gone over a cliff in recent years. We desperately need radical action to ensure that the UK is prepared for the changes that will come our way with Brexit and rapid technological change.

“The government’s apprenticeship levy may go part of the way to upping skills investment but it won’t be enough to bring us in line with our competitors.

“That’s why ahead of the budget IPPR has been joined by a cross-party line-up of mayoral candidates calling for a new skills levy to ring fence cash to invest in ensuring the UK workforce is as competitive and productive as possible. This devolved funding would also give more control to local leaders to ensure funding is going to where it is needed most”

The proposals for greater skills devolution and investment has been backed a cross-party line up of mayoral candidates:

Andy Burnham, the Labour party's candidate for Manchester Mayor said:

"Throughout the Mayoral campaign I’ve been going around the ten boroughs asking people about their priorities for Greater Manchester. One issue that is raised almost everywhere is the shortage of skills and how we equip people with the training they need to access secure and well-paid employment.

"We want Greater Manchester to play a leading part of the new industrial revolution but not based on a low-paid, low-skilled call centre economy where young people are expected to carry out work experience for little or no pay.

“I want to see a thriving Greater Manchester where everyone benefits from our economic success. The Skills Levy can help to achieve that by making sure the money goes to the areas where it’s needed most – those areas where people feel left behind and forgotten.”

Sean Anstee, the Conservative party’s candidate for Manchester Mayor said:

“If we want Greater Manchester to be a place where people are able to access good jobs, with good prospects of promotion and where businesses are able to be more productive and profitable, then we must take decisive, bold action to address our skills shortage and help people get ready to start and stay in work.

“The skills levy offers greater ability and flexibility to a newly elected Mayor to transform how our skills and employment system works for local people and could provide a much needed boost to making sure all parts of Greater Manchester are able to realise their potential and feel part of our shared success."

Steve Rotheram, Labour’s candidate for Liverpool Mayor said:

“Devolution is all about being able to take the decisions that will help us close the North/South divide. The skills agenda is absolutely pivotal to how we lift the city region’s productivity and prosperity by ensuring local people have the right skills to support our growth sectors.

“But for devolution to achieve its potential we need the full-blooded support of government, rather than a half-hearted version, and they need to get behind IPPR’s proposed Regional Skills Fund. In terms of skills, £21 million would provide the means for the Metro Mayor to operate at the strategic level to start to translate the Northern Powerhouse rhetoric into reality."

Siôn Simon, Labour's candidate for West Midlands Mayor, said:

“Taking back control of our region from London means we can do something about the jobs and skills problems facing our people. The Apprenticeship Levy paid in the West Midlands should be spent in the West Midlands on the training, skills and institutions that we need.

“We're a region that makes things. We lead our country in manufacturing. We have to chart a course that means if you're willing to train-up and re-skill, the opportunities are there for you. Creating more high-quality apprenticeships for the people of our region is crucial for the future success of the West Midlands and our country's economy."

JPMorgan Chase has supported this work as part of its New Skills at Work programme. This joint IPPR–JPMorgan Chase initiative is bringing together and mobilising the best policymakers, business leaders, academics and civil society organisations across Europe to develop new solutions for the workforce challenges of the future.

Hang Ho, Head of Philanthropy for Europe, Middle-East and Africa at J.P. Morgan, said:

“It is critical that the UK Workforce has access to a wide range of skills which are relevant to the labour market and that bolster the long term health of the UK’s economy.

“The right training is key to this and it’s the joint responsibility of employers and policymakers to work together to ensure the UK’s current skills gap doesn’t widen any further and proactive steps are taken to reduce the gap.

“We are in a period of rapid global change and a skilled workforce is fundamental to creating a stable economic future for the country.”

Contact

Becky Malone 07585 772633 r.malone@ippr.org

Editor's Notes:

1. Copy of the report ‘Skills 2030: Why the adult skills system is failing to build an economy that works for everyone’ for the media can be obtained here.

2. The latest available data from the Eurostat Continuing Vocational Training Survey (2010) shows that UK employers spend 52% of the EU average on continuing vocational training per employee in Purchasing Power Standard.

3. The figures on spending over time were calculated by IPPR based on the National Employer Skills Survey, later the UKCES Employer skills Survey, which ran biannually from 2005 – 2015.

4. For more information on the New Skills at Work partnership see: http://www.ippr.org/major-programmes/new-skills-at-work

5. IPPR aims to influence policy in the present and reinvent progressive politics in the future, and is dedicated to the better country that Britain can be through progressive policy and politics. With nearly 60 staff across four offices throughout the UK, IPPR is Britain’s only national think tank with a truly national presence.

Our independent research is wide ranging, it covers the economy, work, skills, transport, democracy, the environment, education, energy, migration and healthcare among many other areas. ippr.org

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