Monday, 07 March 2011 00:00

More than £5 billion was shelled out last year by the exchequer in tax relief for work-related training. That is the equivalent to the turn-over of more than 250 FE colleges. But as a forthcoming research paper by Howard Reed of Landman Economics, commissioned by unionlearn, shows, there is little to show that this vast sum is focused on the most effective training courses nor is it reaching those who most need it.

The £5bn vastly out-shadows the £800 million annual budget of Train to Gain, the scheme which provided businesses with training subsidies, until it was abolished in the October 2010 Spending Review. The scheme was scrapped because of "dead weight costs", ie companies being subsidised for training they would have carried out anyway and, as the Public Accounts Committee found, for failing to target the sectors with the highest needs and the providers providing the best quality training.

Yes, Train to Gain did have its faults, but it did make a substantial contribution to work-related training. Apart from commitments (without detail) in the Spending Review to "explore mechanisms to increase employer contributions such as training levies" we still need a strategy for growth which tackles head on the two main problems with the UK's provision of work-related training: that a third of employers provide no training at all and that those who receive the most training are those who are already the best qualified.

That is why unionlearn's paper concludes that there are very strong grounds for reforming the tax relief system by making it more progressive – targeting the low-paid and low skilled – and more focused on high returns by restricting training to that which leads to qualifications (or accredited CPD).

Tax relief on training is available to only companies which pay corporation tax (just over 900,000 businesses with 8.3 million staff). However, there is no attempt to target tax relief on particular kinds of training, or particular types of trainee. This makes it a relatively expensive way of encouraging the particular types of training which policymakers might see as the most beneficial.

Statistics from the Labour Force Survey show that while lower skilled workers are less likely to be offered training, when they are it often leads to a qualification. Therefore, one option could be to offer tax relief only on training which leads to accreditation. This would be very popular with Mr Osborne as it would mean a saving of about £4.5bn. But this saving could be put to better use by using it to allow businesses to claim tax relief on National Insurance Contributions for employees who undertake training. This would provide financial support for training for all employers, including public sector and voluntary sector organisations as well as private sector companies who do not earn enough net profits to pay corporation tax.

One of the main difficulties for Howard Reed in investigating tax relief and training was the paucity of government statistics on the value of tax relief. In these financially straitened times it is vital that sums such as £5bn can be used to make a real difference to the training of employers and the productivity of businesses. We are happy to work with ministers to make this money work.

Tom Wilson is director of unionlearn, the TUC's learning and training organisation

 

Read other FE News articles by Tom Wilson:

Bright sparks why apprentices can shine

Preparing for a tough 2011

Learning from the German skills system