If New Labour is still strongly identified with Tony Blair’s early admonishment for ‘Education, education, education!’, then it seems likely that the equivalent focus of Sir Keir Starmer’s employment and education policies will be on ‘Skills, skills, skills!’.
Read more: How Labour can solve the skills crisis
The king’s speech on 17 July, which set out the new government’s legislative agenda for the next year, confirmed the manifesto pledge to create a new body, Skills England. This should work across government departments with key partners in the economy to "oversee the national skills effort of the coming decade, ensuring [that] we have the skills we need for the challenges of the future".
Those challenges, even just in addressing the current extensive labour and skills shortages, never mind forecasting the skills needs of the future, are undeniably enormous. The CIPD skills survey (2023) found that "skills and labour shortages continue to impact employers across virtually all sectors of the economy".
Even if you adopt a ‘no-people’ workforce strategy of automation in response, it might well be frustrated by the global talent shortages hindering the fields of robotics and AI.
An employer-led partnership?
But are the enormous skill shortages evident in the UK purely down to addressing "the [education system’s] bureaucracy around the approval of qualifications", and the failures and constant changes in government policy which Skills England is designed to address?
Or do employers themselves need to shoulder a large part of the culpability? Rather than moaning at inflexible levies, should they be looking at their own lack of attention to and investment in their employees' training, development and careers?
Government spending on skills last year was, it's true, estimated to be 23% lower in real terms than in 2009/10, according to the Institute of Fiscal Studies. Apprentice starts were down by one third, or 160,000 since the levy was introduced in 2017, according to the CIPD.
But employer investment in training has "plummeted 28%" since 2005, according to research from the Learning and Work Institute, with almost no recovery in the training spend since the financial crash in 2008. UK employers invest only half the average per worker in training of their major European competitors.
Yet there is a wealth of evidence that employer training is associated with higher pay and productivity, a win-win for employers and employees. The Institute for Employment Studies (IES) carried out case study research involving 16 organisations across six countries. We found them all focusing in tight labour markets on the skills, career and pay progression of their low-skilled workers.
IES found that these employers generally reported highly positive outcomes, including: enhanced recruitment and retention, improved employee loyalty, higher service quality and sales performance, alongside of reduced absenteeism and attrition rates.
Put employers in the training policy car, but not as drivers
In the king’s speech, the monarch said: “My government will seek a new partnership with both business and working people.”
The workplace and the skills of our workforce are indeed at the heart of the UK’s economic recovery. But there aren’t enough of them.
Read more: Skills gap to worsen by 2035, research suggests
A report by the Resolution Foundation and the London School of Economics calls for the urgent need to replace the over-flexible, lowest-cost-possible employment and workforce strategies that multiplied here in the 2010’s with a new formula for growth in the 2020s: invest in skills, career and associated pay progression.
The skills levy, we can all agree, is a poorly designed policy which has had the opposite effect to the intended one. The new government’s proposed reforms to it and commitments to our young people sound very promising.
But the need for it to compel employers to invest in their people, and to prevent companies free-loading by poaching staff from competitors who have invested in them, continues to be a challenge that this government and its partners in Skills England have to address.
Starmer and his government need to give employers the necessary flexibility on how to invest their training spend. But not on whether to invest. Too many have taken the short-termist, short-sighted ‘don’t-train’ route in recent years.
Employers, along with employees and trade unions; schools, colleges and educational providers; local government bodies and charities; HR and training leaders; and relevant policy experts, all need to be involved, of course.
But recent history would suggest that government shouldn’t, as Bridget Phillipson put it recently, ‘put business in the driving seat’.
By Duncan Brown, independent adviser, principal associate, IES
