The skills system in England, long characterised as complex and fractured, is once again in the process of another overhaul. The Government’s ambition is to reshape skills provision to more effectively meet the evolving demands of the economy.
But will new proposals risk further fragmentation while undermining employer investment in training?
Striking the right balance in employer investment
It is right to ask employers to invest more in training, including those who do not currently contribute to or benefit from the apprenticeship levy. There is a need to balance work-based provision to address difficulties in recruitment due to skill shortages, and skill gaps among the existing workforce. This means providing for younger entrants to the labour market, as well as for older employees seeking to upskill or reskill. However, reforms must avoid creating unintended consequences.
Apprenticeships have fallen by 40% since the introduction of the levy with a shift away from younger people to higher level qualifications for older workers. However, a blanket ban on the levy funding for all Level 7 apprenticeships could be hugely damaging to the occupations and sectors that currently benefit from this programme and where there is demonstrable demand. Expecting employers to fund this training, outside of the levy, as employer contributions to National Insurance increase, risks undermining private sector investment in training. If employers are struggling to invest in smaller levels of training, they will be less inclined to fund larger more expensive modules of higher education, especially if they already contribute towards the levy. This could ultimately exacerbate existing shortages.
The case for flexibility and cost sharing
The Lifelong Education Institute (LEI) has advocated for greater cost sharing in education and skills training, between employer, employee and the state, so that the burden does not fall entirely on the individual. We have also called for greater flexibility in skills training, allowing individuals to undertake small ‘bite-sized’ modules of learning, as well as tax-incentives for employers to invest in skills.
The Lifelong Learning Entitlement (LLE) has survived the autumn budget, although its implementation has been pushed back a further year. A reformed LLE could be the vehicle for stimulating take up in skills training among working adults, leading to a more productive workforce. But this is unlikely to result in large scale uptake unless very small units of accredited learning are made available (e.g. 10-20 credits) and costs are subsidised in some form.
We have argued that the LLE should be aligned with the Growth and Skills Levy, and other sources of public funding such as the Adult Education Budget and the Shared Prosperity Fund. This would allow employers to fund bespoke training by topping up individual loans, a position which HEPI support in their recent paper. To take this further, by ring-fencing an amount of the increased NI contribution for workforce development employers would be able to see the direct benefit of this investment. Ultimately, by bringing together these different areas of policy (levy reform, LLE and NI contributions) the government could implement a new, integrated skills account for working adults. This would provide individuals with direct access to funding and a clear pathway for continuous skill development, addressing both immediate and long-term labour market needs.
Integrating the fragmented skills landscape
England’s tertiary system remains a disconnected bricolage of siloed funding and policy initiatives administered by different Government departments and agencies with competing objectives. Skills England has been established to advise Government on the skills needed for productivity growth including what training should be accessible through the Growth and Skills Levy, in line with the priority growth sectors in the new industrial strategy. Yet independent of this the Office for Students will continue to regulate higher education provision including the LLE when this comes online. At the same time a merged Jobcentre Plus and National Careers service will be focused on achieving an 80% employment target by moving young people (aged 18-21) into education, training, or work via the Youth Guarantee scheme and assisting those on health-related benefits back into employment.
The system is the sum of these parts, and more. But it is not easy at this moment to discern the golden thread running through the fabric of current skills policy. For example, will proposals to widen and deepen devolution loosen England’s highly centralised skills system? And how will the Department for Work and Pensions foster lifelong career progression and skills development when adults who are already in the workforce are unlikely to come into contact with Jobcentre Plus?
The 2025 Spending Review will set departmental budgets for the next three years and deliver ‘mission-led’ reforms for public services. With competing pressures to increase spending for health, social care and defence, how will education and skills fare? The challenges facing England’s skills system are substantial, but policymakers must adhere to the guiding principles of integration, flexibility, and cost sharing to ensure that reforms are fit for purpose and responsive to current demands.
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