We need to devolve skills provision to avoid youth unemployment rising. Photo: Getty
Show Hide image

Government has the wrong approach to tackling the skills gap

With youth unemployment falling to 733,000, it is time for devolving skills to improve the prospects for young people and safeguard against any future rise in the figures.

Centralised power has its merits, but when it comes to skills and training, the status quo is simply not working, and a local approach is desperately needed.

ONS figures due in a couple of weeks are expected to show a slight dip in the number of unemployed 16-24 year olds, but a fundamental disconnect remains between the skills the UK is producing and the skills employers need. Take London as an example - there is no shortage of jobs, but businesses are struggling to fill one in three vacancies because of a lack of suitable candidates. The government's £4bn spend on skills provision in England is not delivering value for money, with too much spent on hair and beauty and health and safety training when the general trend is moving towards more high-skilled sectors such as digital, engineering and science.

Addressing the mismatch in the skills provision has to be a priority or the current and future generations will be unable to compete with a highly-skilled international workforce.  Skills support must follow a demand-led model and be closely aligned with the needs of the local economy.

Whitehall is not best placed to determine the skills needed in Manchester, Newcastle, London or Birmingham. It is local councils that need to take this leadership role as they have the comprehensive local knowledge and relationships with education institutions, employers and training providers in the area. Having central government hold the purse strings is not only inefficient but it is neutering our ability to tackle unemployment.

There is already extremely valuable work being done at a local level with town halls leveraging their strong community links and acting as a broker between learners and businesses. Devolving budget responsibility will enable local governments to take a more long-term view of skills needs. They can then respond effectively to the ever-changing jobs market and ensure residents have the requisite skills to get ahead.

So, how local should the approach go? There is no one size fits all solution, which highlights once again how the UK skills system is misjudged. In London for example, each borough has vastly different business characteristics and economy. Through our charity, the City Bridge Trust, we offered grants of £100,000 to each London borough to support projects run by third sector organisations to reduce youth unemployment, because we recognise the granularity of the capital's jobs market. The money is being used by local councils to fund community projects and skills providers who work with the hard to reach and understand the support and training needed to help their residents find and sustain employment.

In Waltham Forest, which borders the expansive Epping Forest open space, managed by the City of London Corporation, there are a number of opportunities in the booming horticultural industry, while the borough of Hackney is perfectly located to take advantage of jobs in the local digital sector - Silicon Roundabout. In the City, commercial developments such as One New Change have seen more demand for retail experience. This has led to us backing the Cheapside Employment Project - a free service to employers that provides customised training for local residents and matches them with vacancies in the retail, hospitality and construction sectors. Many unemployed or low-paid young people cannot afford to travel outside of their community, so it is vital that there is local training provision aimed at getting those people into jobs close-by. Looking through a national lens, these nuances are missed.

The devolving skills argument is showing no signs of abating because it makes practical sense. Youth unemployment is a complex and long-term problem but the solution is obvious. Councils already have strong community relationships and engage regularly with local businesses and colleges on a strategic level. They facilitate greater collaboration within the community; developing apprenticeships, internships and corporate volunteering partnerships that bolster economic development in the area.

By and large, councils have a good track record with aligning skills support with the needs of employers. They must be given the freedom and funding to enhance skills provision and ensure young people are fully prepared for the labour market.

Mark Boleat is the policy chairman of the City of London Corporation

Getty
Show Hide image

I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.