Many would argue that this represents a false economy – short-term cost-cutting that damages the prospects for a quick recovery and increased profitability in the future. For individual employers as well as the economy as a whole, the long-term costs of job losses are significant. For Government, a reduction in tax receipts is compounded by the rising costs of increased numbers of unemployment benefit claimants. For business, productivity may suffer as employees’ motivation is affected by concerns about their job security, while other skilled workers are taken out of the workforce all together.
But the increasingly bleak economic climate might mean that many employers simply have no choice but to make cuts; and most HR teams would probably rather cut training budgets than make redundancies. This is a difficult dilemma: is it better to cut numbers to maintain or improve the skill set of your workforce, or better to avoid redundancies by making cuts elsewhere?
Government has relied on businesses to act in their own long-term best interests by improving the skills of their workforces. But now, given the inevitable cost-cutting, additional incentives may be required to encourage business to keep investing in skills through the downturn.
The Government’s flagship policy in this area is Train to Gain – a national advice, support and brokerage service that works with employers to identify their training requirements and access funding to help meet them. Its budget is set to rise to £1 billion by 2010-11.
Launched in 2006, the scheme now has approximately 100,000 employers taking part. Ofsted found strong support from employers using the scheme, but questioned whether this support was reaching companies that were otherwise unlikely to invest in training, or just supporting those that would be doing it anyway. In addition, other critics have claimed that Train to Gain funding is wasted on bureaucratic and time-consuming processes that simply accredit skills that already exist, without truly developing new ones.
Despite these concerns, Train to Gain appears to be working well for the employees involved. Research shows that, of the employees taking qualifications through the scheme in the past year, 43% received a pay rise and 30% were promoted.
The Conservatives have stated that they plan to scrap Train to Gain, considering the scheme to be bureaucratic, inflexible and restrictive, neither meeting the needs of people wanting to improve their skills nor employers’ requirements for skilled workers. In July they released a policy paper, Building Skills:Transforming Lives, which, among other things, proposes a large-scale expansion of apprenticeships of up to 100,000 a year coupled with bonuses for SMEs of £2,000 for each apprentice they take on.
The challenge for the Government is to respond to Train to Gain’s detractors by driving forward the take-up of the scheme. They must consider new and innovative ways to incentivise more employers to get involved, such as using the tax system to offer relief to companies, or using government procurement to favour suppliers who invest in training.
Maintaining momentum in this area is essential. After all, productive, skilled employees are the key to organisations’ success, and therefore to the ability of the UK to survive the current economic climate.
Marc Woolfson, account director at Westminster Advisers
