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  1. Spotlight on Policy
16 May 2016updated 09 Sep 2021 11:57am

Make skills reform make a difference

The government is launching significant reforms that will affect the skills of the workforce but Neil Carberry, director for employment and skills at the CBI, says it needs to meet business halfway

By Neil Carberry

Skills are the currency of the 21st-century labour market. With ever higher demand and ever larger shortages in the UK for graduate-level skills and skilled technicians, those who care about economic and social prosperity are focussing on the issue.

And demand is rising fast. We are close to the point where half of all jobs will require higher skills, while the digital revolution will change the types of jobs and sectors we work in. Training, and retraining, are the critical tools to ensuring the UK can compete in this environment, supporting the growth of new sectors, and helping whole communities adapt to changing times.

As a nation, we already spend a lot on training. Despite some claims to the contrary, British businesses spend more than many of our competitors – over £45bn a year – on workplace training, while government has a commitment extending to billions of pounds itself. And our universities are a world-leading source of competitive advantage.

That said, when you move beyond input measures such as cash, the story is less rosy. Much of what we deliver today is not well targeted. How we use people’s skills in firms could be improved, as UK Commission for Employment and Skills (UKCES) data shows. And our system of vocational education, the routes we offer to most young people, aren’t well aligned with their needs or those of business. As the CBI has shown, we have some sectors where skills achievements outweigh the number of available jobs, while in others – including important sectors such as automotive – the opposite is true.

So how do we change this? We need a new focus on outcomes for learners. And we need to care as much about the young people we send on to higher skills through colleges and apprenticeships as those who go on to university. For businesses, this will mean being more than a reluctant customer of the skills system. More of us need to roll up our sleeves and follow many of the great firms that are already working in partnership with the system to improve it for learners and for companies.

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There are roadblocks in the way, however. There are three in particular that government must address if we are going to deliver truly great training and get businesses involved – many of which are sceptical of government promises.

First, make offering quality apprenticeships easy, and discourage poor ones. At the Confederation of British Industry we aren’t interested in just three million apprenticeship starts – we want three million great careers. However, the new Apprenticeship Levy gets in the way of this.

A levy is just a way of funding skills, of course, and while the CBI would have preferred another route, what really matters is how it works. At the moment, much of the investment in apprenticeships cannot be met from the levy. As one managing director put it, the levy “penalises people doing the right thing”, because it will become more expensive for firms to provide quality programmes than to pay the levy and do nothing. That’s what economists call a “misaligned incentive”.

Many CBI members have already  told us, with the heaviest of hearts, they will have to cut back the quality or volume of apprenticeships – the exact opposite of what the levy is supposed to do. One engineering firm we talked to – a committed employer of apprentices – has a £2.5m total training budget. Its levy contribution will take a quarter of that. To find the savings to pay it, the firm is having to reduce the number of apprentices by one-third.

It’s important to say that cost is not the only issue. But the current design is being driven too much by the government’s need for fiscal savings – not creating great careers. A wider definition for levy spend and an allowable expenses regime would help change this.

Second, open the paths to great college and apprenticeship routes at school. The CBI stands with Lord Baker on this. Our curriculum for 14-to-18-year olds lacks choice, alienates many, and funnels young people down an academic and exam-heavy route, assuming that Youngsters entering the world of work need a clear and relevant training path a vocational system must be poorer quality. The work of Lord Sainsbury and his colleagues to address this by simplifying the vocational system is welcome. But it will be a bolt-on unless we do more to redesign the path people take from age 14, and offer them a choice of rigorous, demanding options linked to real-world outcomes and careers advice. It is time for a change of tack.

Finally, many young people need a second go at the leap into work, and many more people need to top up their skills to stay and develop in work as times change. Our further education system matters because of this, and ensuring it is delivering is vital for economic growth and social cohesion. Ensuring that devolution deals and the area reviews of provision work with local enterprise partnerships to deliver provision matched to local needs will be vital. There is no doubt that business and government need to step up on skills if the UK is to prosper. The business community is looking for a real partnership for change, which will require some reforms from government, too.

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