If current polls are correct, there will be a Labour Government in a few days.
If Keir Starmer becomes our Prime Minister, his party has committed to a national skills strategy, and that presents a once-in-a-generation opportunity for a true reset.
This might sound overly dramatic. However, there is a structural problem with the current skills discourse.
Demand, not supply
The loudest voices are on the supply side of the skills debate. Yet our problem is not primarily about which skills are supplied, especially through the publicly funded system. The problem is fundamentally about skills demanded by employers, both in quantity (too little) and levels (too few higher-level skills). Fundamentally, this demand deficiency is grounded in an economy built around low-level skills.
For this reason, the national skills strategy is a critical pillar of a new industrial strategy. Everything that Labour has said about its government missions is grounded in increasing growth. Assuming that is not going to be achieved by just sweating human and physical assets harder, it will require increasing the productive potential of the economy.
Achieving stronger productivity requires a strong mission-driven industrial policy, application of new techniques and technologies, and a skills system to develop more people capable of operating in that higher productivity environment.
On their own, skills don’t drive growth strongly enough, but without the right skills at all ages and levels, that potential to boost productivity is inherently limited. For a Labour government, the national skills strategy is of fundamental importance to achieve its growth goals, improve public finances, and generate resources for further economic and social investment – including in education.
Dual speed economy
What has happened over the past decade and a half is an acceptance of a polarised economy: one-third high skill, high productivity, and high income and a large lower-skilled, low productivity economy. Higher education has been, at least until the recent perplexing government critique of the sector, the world-leading success story.
But outside of HE, we’ve seen £1 billion taken out of the skills system. And the UK is in the top third of OECD countries for low skills, according to the Learning and Work Institute. They found that employer investment in training per employee is now less than two decades ago despite the higher skills needs of a modern information, high technology economy.
Critiques of the current system from the supply side of skills are entirely understandable and justifiable. Nonetheless, it would be an enormous mistake to just focus on the supply side as current debates in the skills sector tend to do.
The apprenticeship system and the levy specifically, as an area of the system where resources are largely protected, naturally draws the most attention. Lots of businesses hate the levy because, well, it’s a levy and they are restricted on what it can be spent on (for example, on standards-based apprenticeships). And lots in the skills sector demand a return to increased provision for younger people at lower levels.
There’s a problem with these perspectives without a broader shift in the overall system. Simply put, when a system is sub-optimal, you can’t fix it by moving resources within the system. So yes, we could get more young people through and, yes, we could just allow employers to spend the levy on whatever they want.
But while we might see some initial wins in numbers through the system, we’d lose vital medium-term productivity gains as qualifications become less about demonstrating that you can do the job, more about passing a test, and less transferable between firms and even industries. We’d gain, and we’d lose simultaneously – and largely stand still.
Instead, a potential Labour government would do better to embed the national skills system where it belongs—in the context of a new industrial policy. It should understand the problem in precise terms: we have an economy in which employers do not demand sufficient levels of skills.
