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Why a National Skilling Wage is the route to net zero

The UK needs to start training its workers again.

By Dhananjayan Sriskandarajah

Returning to think tanking after 15 years away, I am struck by how wide the chasm between political rhetoric and the mechanics of delivering on policy objectives has grown. Think about the gap between the Rwanda plan and what is really needed to address irregular migration, or the difference between promises to solve the housing crises and what is actually being done.

This month, a report by my colleagues at the New Economics Foundation (NEF) revealed the gap between promises of a green transition and the reality of a workforce that isn’t ready to deliver on the necessary scale. They showed that we won’t be able to meet grand targets to insulate houses from across the political spectrum – a critical part of reaching our net zero commitments – unless we invest in upskilling people.

In fact, their analysis found that the amount employers are spending on training their workers has dropped by almost a fifth in the past decade. Investment per-employee in skills declined 19 per cent in real terms between 2011 and 2022. In the north-east and south-west of England this decline was even steeper, at 27 per cent and 32 per cent, respectively. The overall decline is only beaten by the state’s own withdrawal of funding from adult education, which fell 30 per cent over the past two decades.

At a time when we need to be upskilling thousands of people across the country, this lack of investment means the UK is at risk of being left behind in the global race to develop green industries. This will make it even harder to meet its climate commitments of reaching net zero by 2050.

It also raises significant questions about how the UK will turn around its stagnant productivity. Few workers can afford the risk of upskilling during a cost-of-living crisis.

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Take retrofitting our homes, for example. This is one of the most obvious and easiest ways to tackle climate change and reduce household bills. But retrofitting is far from quick, cheap or easy to do.

My colleague Alex Chapman, one of the authors of the skills report, is one of the few Britons who has had a heat pump installed at his home. He positively beams as he talks about his bills falling and his house feeling warm all day long.

For many this seems like an impossible task. It is far too expensive and difficult to find somebody with the experience and skills necessary to install a pump. However, Alex found an expert who made a quick and reliable assessment of his home’s heating needs before installing the new system. There was minimal disruption and his pump is performing so efficiently his bills are now 10 per cent lower.

But there are not enough expert installers around. This means that, for many, a heat pump remains out of reach. We also know there are around 19 million homes across the country that need their insulation upgrading because they currently fall below energy performance certificate (EPC) rating of C.

There is an awful lot of work to do. Without retraining and upskilling large parts of our workforce, improved energy efficiency will remain a promise rather than reality. What can be done to incentivise businesses to start training people again, or give people who want to upskill themselves the freedom and flexibility to do so?

One solution would be to introduce a National Skilling Wage (NSW). For those in-work, this would be paid in the form of a tax credit to all employers for every hour a worker spent on an approved training course. For those studying under their own steam, reforming student finance so that learners can receive the NSW through a Personal Learning Account would help provide the confidence and financial security required to make a mid-career leap.

Set at a rate equivalent to the Real Living Wage, this would start to provide workers and businesses with the financial stability and confidence to commit to training. It would also provide businesses with clear benefits through productivity and a long-term return to the state through additional corporation tax.

Crucially, it would also help us build the skills we need as a country to meet our climate commitments. If we are serious about providing warm, secure homes for everybody and cutting our emissions to net zero then we also need to be serious about building the workforce to deliver these aims.

With a National Skilling Wage, we could reverse the trend of employers scaling back on training and provide the security to allow business and individuals to develop their own skills. This would help workers, employers and the country at large. And it would close the stubborn gap between political rhetoric and policy delivery.

[See also: Two thirds of councils are on course to miss climate targets]

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Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
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