Since its peak in 2003–04, total public spending on adult
skills has fallen by 31%. Alongside that, the average
amount invested in training by employers has fallen by
almost 30% per trainee since 2011.
That said, much of the decline in government funding was in adult
education courses with low rates of return. And past experience
suggests that much of the government-subsidised training would
have taken place anyway.
Instead of simply defaulting to previous funding levels,
policymakers should ask two questions before embarking on any
reforms aimed at stimulating training. Will it be
genuinely valuable? Will it be genuinely additional
(rather than training that would happen anyway)?
There is an additional consideration specific to skills policy.
Few areas of public policy have experienced as much
turbulence and churn over the past two decades.
Any future reforms must be weighed against
therisk of adding to the policy instability and
inconsistency which have plagued the sector. That’s not
to say that the system couldn’t be improved. But we must avoid
change for change’s sake.
One thing that wouldn’t need a disruptive overhaul would be to
reform the apprenticeship levy. It should provide a
simple uniform subsidy rate for all private sector employers, set
at a lower level than current rates.
These are among the findings of ‘Investment in training and
skills’, published today as a pre-released chapter of the 2023
IFS Green Budget, produced in association with Citi and with
funding from the Nuffield Foundation. Other findings and
recommendations for reform include:
- The UK has seen a significant decline in participation in
adult education and training. The number of publicly
funded qualifications started by adults has declined by 70% since
the early 2000s, dropping from nearly 5.5 million
qualifications to 1.5 million by 2020. Although the total number
of adults participating in employer-provided training has
remained fairly stable, the average number of days of
workplace training received each year has fallen by 19% per
employee in England since 2011.
-
Public funding for adult skills is set to increase by
11% from £4.3 billion today to around £4.7 billion by
2024–25. Given the low returns to many adult skills
courses, rather than expand the range of courses available, the
government should consider whether increasing existing funding
rates would offer a better return. Funding
provided for an adult learner taking GCSE English or maths has
fallen by 20% since 2015–16.
- The government currently provides ‘advanced learner loans’
(ALLs) to students studying advanced further education courses.
These loans represent a tiny fraction of public outlay on student
loans. Last year, the amount lent through ALLs (£124
million) was less than 1% of the amount lent through higher
education loans (£19.9 billion). From 2025, ALLs will be
replaced by the new Lifelong Learning Entitlement, but three
years after it was announced we still don’t know fundamental
aspects of how it will work, such as which courses will be
covered by the new entitlement.
- The Labour party has committed to broaden the
apprenticeship levy into a ‘growth and skills levy’,
which will allow employers to use subsidies for
non-apprenticeship training. Past experience, with schemes such
as Train to Gain, suggests that this policy may lead to
significant deadweight cost (i.e. subsidising training
that would have taken place anyway). The challenge lies in
offering employers flexibility to choose the training they need
but also ensuring this is genuinely productive and that as much
as possible is additional.
Imran Tahir, a research economist at IFS, said:
‘Adult skills policy is not a simple area, nor one that is easy
to “solve”. History shows us that spending and setting
qualification targets are not enough. What matters is ensuring
that individuals and employers have the capacity and incentives
to invest in additional education that builds valuable skills.
One key step towards such a system is reforming the existing
apprenticeship levy. The government should introduce a single
uniform subsidy rate, set lower than the current rates. This will
create a simpler and more coherent system, and one that better
ensures employers invest in the right form of training.’
Dr Emily Tanner, Programme Head for Post-14 Education
& Skills at the Nuffield Foundation, said:
‘Rapid changes in the labour market mean that upskilling and
retraining are essential for the workforce to thrive and skills
gaps to be met. Long-term planning that takes account of the
complexities and trade-offs in skills policy is needed to ensure
that resources are invested effectively and in a manner that
develops the skills for fulfilling and productive jobs.’
ENDS
Notes to Editor
Investment in training and skills is chapter by Imran
Tahir from the forthcoming IFS Green Budget.
You can read the chapter under
embargo here. It is embargoed to 0001 Thursday 12th October.
The chapter will be published on the IFS website here.
