National Audit Office report published on Developing workforce skills for a strong economy

The country faces a major challenge in ensuring it has a sufficiently skilled workforce. Government has strengthened its approach in recent years, but it is unclear whether its interventions will deliver the step-change in skills development that is required, according to the National Audit Office (NAO).

Having a skilled workforce is critical to the country's economic success and to achieving other government aims, such as levelling up. The skills system involves a range of players, including government departments - led by the Department for Education (DfE) - employers, training providers, local bodies and individuals. DfE estimates that it spent £3.9 billion on adult education, apprenticeships and other skills programmes in 2021-22.¹

Economic and societal changes are making the skills challenge more acute. For example, the UK's exit from the EU has reduced the supply of workers from member states and potentially increased the need for the country to train its own workers. The requirement to achieve ‘net zero' greenhouse gas emissions will create new skilled jobs and around one in five existing jobs is likely to be affected by the transition.

Employers' spending on workforce training has fallen. DfE surveys indicate that the amount employers in England spent on training per employee dropped in real terms by 11% from £1,710 in 2011 to £1,530 in 2019. The 2019 survey found that 39% of employers had provided no training in the previous 12 months.

Participation in government-funded further education and skills training has declined significantly, particularly in disadvantaged areas. The number of adult learners fell from 3.2 million in 2010/11 to 1.6 million in 2020/21, a decrease of 48%. From 2015/16 to 2020/21, the number of participants aged 19 and over in England's 20% most disadvantaged areas dropped by 39%, compared with a 29% drop overall. Largely because of the drop in learners, there was a 46% fall in the Skills Index - government's measure of the impact of the further education system on productivity - from 2012/13 to 2020/21.²

DfE's regular surveys of employers means it has a reasonably good understanding of current skills needs. In 2019, employers across England, Northern Ireland and Wales reported that 24% of vacancies were due to a lack of the required skills, qualifications or experience among applicants. The sectors most affected by skill-shortage vacancies were construction and manufacturing. Government has introduced new arrangements to strengthen its understanding of future skills needs. These include establishing a new Unit for Future Skills within DfE, and employers leading the development of new local skills improvement plans.

DfE considers that the skills system will be most effective if it is led by employers, but it is unclear that the conditions are in place for this approach to be implemented successfully. It will rely on employers having the capacity and willingness to be much more involved in identifying skills needs, designing training content and engaging their employees in that training.

Employers and training providers told the NAO it was hard to navigate government's growing, and sometimes disjointed, set of skills programmes. DfE's programmes include well-established initiatives such as apprenticeships, along with newer interventions such as Skills Bootcamps.³ Other government departments also run or fund programmes with a skills element, such as the Department for Work and Pensions' employment support schemes. DfE considers that the range of programmes reflects the diverse needs of employers and learners but recognises that there is some duplication between programmes and scope for simplification.

DfE is taking steps to encourage and incentivise people to develop their skills. DfE's National Skills Fund will provide £2.5 billion to support adults to develop skills, including through the Lifetime Skills Guarantee.⁴ It is also working to improve how it communicates with people about the skills programmes on offer. In January 2022, it launched two campaigns, one aimed at supporting adults to gain new skills, and another providing information on the education and training options available for 16- to 18-year-olds.

The 2022 white paper, Levelling Up the United Kingdom, set out the government's plans to address regional and local inequalities, but its aims go only some way towards addressing the decline in participation in skills training. By 2030, the government wants 200,000 more people in England to successfully complete high-quality skills training annually, including 80,000 more people in the lowest skilled areas. Achieving this would only partly reverse the fall of around 280,000 learners in the 20% most disadvantaged areas since 2015/16.⁵

The NAO has found that DfE is managing its skills activities more effectively, having introduced a clear purpose, stronger governance and more rigorous risk management. DfE has a range of metrics for monitoring the performance of its individual activities and, at the time of the NAO's examination, was still working to define what success would look like for the skills system as a whole. Different parts of government are working together more effectively to coordinate work on skills and monitor progress.

The NAO recommends that government, led by DfE, should develop a strategy and supporting implementation plan for achieving its objectives on workforce skills, building on the approach set out in the Skills for Jobs white paper.⁶ Among other things, the plan should set out how employers and individuals will be incentivised to develop skills and engage with the skills system, and the metrics that government will use to monitor progress.

Gareth Davies, the head of the NAO, said:

"To help people achieve their potential in the workplace and drive economic growth, it is essential that government and employers support opportunities for learning and development. The government has taken sensible steps to address skills shortages in recent years, but the challenges it faces have increased. There is a risk that, despite government's greater activity and good intent, its approach may be no more successful than previous attempts to provide the country with the skills it needs."

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Notes for Editors

1. This total excludes £6.2 billion spent on learning for 16- to 19-year-olds, which covers skills training as well as academic learning, but DfE does not disaggregate the figures.
2. The ‘Further Education Skills Index' is government's proxy measure for the impact of its skills programmes on productivity. Its value is affected by three factors: changes in the number of learners and in achievement rates, and shifts in the ‘economic value' of the training carried out.
3. Skills Bootcamps are courses lasting up to 16 weeks for people aged 19 and over who are looking to change sectors or progress in their current industry. The courses are designed to help people develop sector-specific skills, and where relevant they provide a fast-track route to an interview with a local employer.
4. Under the Lifetime Skills Guarantee, adults who do not already have an A level or equivalent qualification, or who are unemployed or earning below the National Minimum Wage, may take a free course.
5. DfE has defined the ‘lowest skilled areas' as the bottom third of local authorities when ranked according to the proportion of the adult population who hold at least a level 3 qualification. These areas are concentrated in the east of England, parts of the north of England and the West Midlands.
6. In January 2021, DfE published the Skills for Jobs white paper. It explained how government would carry out reforms so that the further education system would support people to get the skills that the economy needs throughout their lives, wherever they live in the country.