Inside Story: What we learnt about two decades of Whitehall policy that has failed to shift the dial on improving UK productivity and skills
Professor Tom Bewick talks to FE News about a recent major UK skills review he co-authored with the independent researcher, Matilda Gosling, called Running to Stand Still. In this interview he gave us the inside track on the report; and why he thinks it speaks truth to power about what has gone wrong, under successive governments, to solve the UK productivity puzzle.
Q1. Why did you write the report?
TB: About a year ago now, the chancellor of the exchequer, Jeremy Hunt, announced that he was asking Sir Michael Barber to undertake a another government skills review. The FE sector got very excited about the prospect of influencing the agenda. Yet, here we are all these months on, and the sector is still non the wiser as to what Sir Michael is actually working on; and there has been absolutely no public consultation about it with any experts in the sector.
Faced with the realisation that, once again, Whitehall would just ignore the people who work in and care about the future of skills and prosperity in this country, we decided to conduct and publish a skills review of our own. This was independently commissioned and financed by the Federation of Awarding Bodies (FAB), which included in-depth interviews with 25 experts from across the FE and skills sector. Matilda Gosling audited the recommendations of all the previous government skills reviews, tracking back to the Leitch Review of Skills, conducted by HM Treasury in 2006. And what we found – in terms of repeated and failed attempts to meet the scale of the skills ambition, was extraordinary. We also discovered that Whitehall doesn’t even implement many of the recommendations it has asked for from various government commissioned skills advisers.
Q2. What is your basic argument?
TB: Our basic argument is that despite two decades of policy hyper-activity in the skills arena, with many different quangos that have come and gone, as well as various government skills initiatives under successive governments; we found that none of these things have really translated into improving average real earnings for most working people. In fact, what has happened, since around 2005, is that living standards have flatlined and people feel poorer because despite the skills they have acquired and practiced in the workforce, this has not translated into higher take home pay. It’s why we called the report, Running to Stand Still…
Q3. What data surprised you the most?
TB: In amongst some of the gloomy productivity statistics, we discovered some positive things about the impact of education policy in recent decades. For example, thanks to the focus on improving school standards, the UK has made great strides in virtually eradicating the number of young people who enter the workforce with no qualifications. This is paying back dividends, in terms of the data analysis we did on the wage returns, which found that Level 2 and Level 3 qualifications hold quite a bit of currency in the labour market; which is counter to what you’ll often hear some ministers and government skills advisers saying, who tend to denigrate lower level qualifications as “low-value”.
When we looked into the ONS data on real earnings growth and training hours invested by employers, for example, we were surprised to see that all categories of workers have seen stagnating pay and declining training opportunities, except those on National Minimum Wage, who tend to have these lower level qualification. In other words, perhaps contrary to the received wisdom, workers at the bottom of the labour market have seen more protection in terms of inflation adjusted pay rises than many middle-income groups.
As a close Whitehall skills observer, however, probably the most shocking data discovery was the fact nearly all the 2006 Leitch Review skills targets were missed, with only the higher education participation target met early. It’s just not good enough, as a United Kingdom, that we set a goal of being in the top quartile of OECD countries for qualifications attainment by 2020, yet, where we’ve ended up is still towards the bottom of the pack in the skills areas that really matter.
Q4. What is the skills escalator?
TB: One of the ideas we wanted to get across in the report is that a country’s skills performance is a constantly moving equation. It’s why opportunities need to be available in the qualifications and apprenticeship pyramid from Level 2 right up to Level 8. Unfortunately, the skills system has become so complex and so difficult for individuals to navigate these different jumping on and jumping off points; and they are just not visible.
Instead, what has happened in recent years, is government skills policy has drifted towards helping only those at the top end of the skills escalator, leaving those who are trying to get on at the base being left further behind. This really matters, because it is one of the reasons UK productivity is second from bottom compared to our major European competitors over the past decade. Policymakers have deluded themselves into believing that if you focus solely on growing higher level skills (L4+), that this will somehow ‘trickle down’ into the rest of the workforce. But as we know from mainstream economics, trickle down doesn’t work… It just exacerbates inequalities.
Q5. Why is UK productivity so sluggish?
TB: There is no one single reason. In this report we focused on skills and labour productivity. But the UK problem runs far deeper. We’re not building enough homes to accommodate record levels of migration; total factor productivity is affected by levels of business investment (which is chronically low in this country compared to other OECD countries); and a long-tail of underperforming companies fail to adopt innovation and new technologies. But skills is a major factor in understanding our comparative poor performance, because the UK is mainly a services economy. So, getting our human capital strategy right is absolutely essential, particularly if we are to go from being what I call a skills laggard in the OECD, to a genuine world beater.
What is really interesting about this debate is that even experts disagree on how to solve the productivity problem. I guess that’s why it is often called a puzzle. No one can really agree on exactly how to solve it from an economic point of view, probably because, in the end, it is going to take some really bold political choices to be made.
Q6. How has Whitehall ‘failed’ in your view?
We were very careful in the report not to find fault with civil servants. Indeed, even many of the skills ministers that we’ve seen – nearly 20 since 1997 – have been excellent and passionate about making a difference. Indeed, I’ve had the pleasure of getting to know and work with quite a few of them since 1997.
I don’t even think this is a party political issue. There is just something about our over-reliance on top-down delivery of the English skills agenda which never quite works in the way the grand architects at the centre think it will: whether that is what Lord Leitch wanted to happen (under Labour); or Baroness Alison Wolf (under the Conservatives) said would happen, with apprenticeships and qualifications reform; or what Lord Sainsbury, naively in my view, thought would happen with T levels and technical education reform. All these people are incredibly distinguished and intellectual thinkers, but the skills policies they have authored, I’m afraid, have not always enabled this country to succeed; or importantly, for most ordinary workers, to receive the real pay increases they could now have expected to have seen if economic growth had continued in a straight line of 2.1 per cent since 2008. I think some of these people and Whitehall orthodoxy, more generally, should be more held to account for these failings. Why does it always have to be unelected peers of the realm to tell the country what it needs?
I would like to think the government, in future, will start involving more people with real front line experience of skills delivery – to help co-design and implement policy. The philosophy at the moment is Whitehall knows best.
Q7. What did you mean by skills postcode lotteries?
In the report we looked at how skills policy has diverged quite considerably since 1997. We were careful to point out that we respect the devolution settlement and that ministers across the 4 nations will want to continue to oversee education policy for their residents. We’ve also seen increasing divergence in England, with 10 MCA areas being devolved the Adult Education Budget (AEB), for example. All this means that British citizens, depending on which postcode they live in, are getting very different learning opportunities – hence a postcode lottery.
What concerned us, however, and some of the experts we spoke to, is that the UK also needs its own national skills mission. After all, we are the world’s 6th largest economy and the 8th largest manufacturing economy, so it is odd we don’t do more integrated skills and labour market policy at the UK level. Moreover, employment is a reserved matter to Westminster. I think a lot of skills policy should be treated as UK reserved policy, not as devolved education policy. The danger, otherwise, is that we end up paying for what I call parallel skills bureaucracies. We see this in London, where 50 skills advisers have been hired by the mayor to distribute the AEB, essentially replicating the role of the ESFA.
It feels to me that we need to make better strides in protecting our own UK internal market, based on the free movement of people, goods and capital. Vocational and technical qualifications should be seen as the handmaiden of the free movement of people; so, it may make sense to plan, fund, regulate and deliver VTQs, in future, more at a UK level. We don’t exactly go that far in terms of making these recommendations in the report, but we do point out it might be desirable for the next government to look a fresh at this issue. One thing the next government could decide to do is to take skills out of the current English schools department, DfE, by creating a UK Department of Employment, Productivity and Workforce Skills.
Q8. What are the solutions to improving UK productivity?
If I had the complete answer, I’d be a very rich man! What struck me in doing the research for the report, was just how divided even economists are about the solutions. It really depends what lens is being used by policymakers view the productivity gap. There’s an excellent paper by Ewart Keep, we reference in the report, where he reviews the academic literature on productivity and finds that placed-based approaches to improving skills and prosperity have a mixed record.
Similarly, human capital theory has its supporters and detractors. Some economists think the market should just be left to correct itself; and that employers and individuals will use their enlightened self-interest to invest in skills and training. The problem with this approach is that it doesn’t appear to work in practice: there are just too many externalities, as firms worry that the investment they may make in skills utilisation will end up being poached by a competitor. You can see this behaviour in the data: the number of training hours reported by UK firms has declined by 60 per cent since 1997; and we invest about half of the amount in workforce training as our European neighbours do.
In the end, I think the answer lies in a new statutory model of co-investment. We’ve never quite cracked this idea of rights and responsibilities, between the state, the individual and the employer. We’ve kind of got that consensus now for how we fund and support higher education, but it is not there for how we support a lifetime of upskilling and reskilling. We say we have the Apprenticeship Levy. Meanwhile, we let 98% of British companies get away without paying it, yet, they still expect to use it to fund free off the job training.
Q9. What is your main message to the political parties at the next general election?
If we get an incoming skills minister, after the next election, who preaches top-down from tablets of stone, rattling off all the skills products they and their department will be rolling out for employers, then I will know we are in Groundhog Day.
My advice to political parties: take a lead from the iconic Steve Jobs when he said what Apple needed to do after a punishing patch of corporate failure: Think different! He said. Steve Jobs basically turned that company on its head and stopped presenting Apple as being about technology products, but rather, he instituted changes that got people to engage in Apple as a lifestyle brand. Even today you can see how that legacy has lived on. People don’t buy technology from Apple, they sign-up to a lifestyle.
We need a similar approach in skills and lifelong learning. There is no point rolling out even more government owned qualifications and boot camps that independent evaluations are finding are of dubious quality, meanwhile, ministers feel obliged to turn up at broadcasting studios defending them as world-class!
How can a government skills programme be world-class when there is absolutely no empirical evidence these schemes have impacted positively on improving productivity and real earning per-capita GDP growth? I think that’s just hubris to pretend it is. And I think all the political parties are guilty of thinking Whitehall knows best, instead of trusting the sector to deliver for them. That’s what we mean in the report by cultivating a higher-trust skills ecosystem model: Ministers stand back and set a clear destination for where our skills metrics should be; but then they hold feet to the fire and ensure people are made more accountable for delivering this important national skills mission.
Q10. Any final reflections on your 5 years at FAB? And what are you looking forward to at Ecctis?
I’ve had the most amazing adventure representing the UK’s awarding bodies and assessment organisations. The work FAB and the members do is quite amazing. Working on Skills World Live with FE News during the pandemic was genuinely ground-breaking. And winning Trade Association of the Year (2023), back in February, felt like a nice way to draw my 5 year tenure to a close.
Of course, I shall really miss the FAB team, but I also know I will still be crossing paths with them and working with them in my new CEO role at Ecctis. Many AOs are clients of my new organisation, so I’m looking forward to continue to meet their needs.
What excites me about my new team, based in Cheltenham, is the international expertise and reach in what we do. You can’t get more fundamental to life changing opportunities than to be facilitating high-skills mobility to the UK and around the world, which is precisely why the people at Ecctis are so respected globally for what they do.
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What information will ministers need to set a ‘clear destination’ for where skill metrics should be, and how might the Appple ‘lifestyle approach’ be adopted by ministers and those who teach history, IT, or business to adolescents in the skills ecosystem? My Concise OED gives ‘ecosystem’ as a biological community of interacting organisms and their physical environment, hence cows mooing in a field but not necessarily inclusive of farmer, milkmaid, dog walkers, vet, or other Homo sapiens.