Setting skills back on the right track

If the UK is to compete with other advanced economies it needs a highly skilled workforce. When firms can’t get people with the right skills they find it much harder to develop new products and services, and to enter new markets. At this stage in the recovery, when we need strong, sustained growth from UK companies to drive the country forward, we cannot afford a skills system which is not up to scratch. 

And yet this is just what we have, according to a new report which the IoD releases today in conjunction with CFE, the specialist education and skills consultancy. The report analyses the failings of skills policy over the last decade and concludes that it is not a question of government doing too little, but often one of government doing too much. Policymakers have been motivated by the belief that employers have not been providing as much training as they ‘should’ to employees. This belief has led to unhelpful regulations such as Time off for Training, as government sought to push employers in the direction it thought best.

CFE and the IoD present a different approach to skills provision, one which seeks to return the initiative to employers, who have always been best placed to identify which skills the workforce lacks. The Government needs to start by slimming down the vast, publicly-funded skills infrastructure which has been built up over the last ten years or so. It should also place funds in the hand of the customers of training – for example by creating genuine, cash-bearing Learning Accounts for employees, allowing individuals to choose to spend on the training which would be most valuable for them. By the end of the Parliament, all public funding for training related to mainstream workforce development should flow through demand-side mechanisms.

With this in mind, the Government should not try to skew the market in favour of certain qualifications; what matters is how well the system reacts to skills problems, not the aggregate number of skills shortages or skills gaps in the economy or how many NVQs at a certain level are awarded. But perhaps what matters most is the broader business environment; if government thinks that firms are not providing enough training there is one straightforward answer: reduce the regulatory and tax burden. With more cash in their pockets, employers will have more to invest in their staff.

Read the full report here

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