Invest in employment and skills to restart the engines of growth

Stephen explains the UK’s engines of growth have stalled since 2008, resulting in lower average earnings and public services under strain. The Chancellor’s recent Budget focused on personal tax cuts but failed to prioritise widening access to learning, skills, and employment, which are crucial for growth.

A single Budget isn’t going to fix all our challenges, particularly not a pre-election Budget. Nonetheless, it was a bit disappointing that widening access to learning, skills and employment didn’t feature much in the Chancellor’s speech.

The UK’s engines of growth have stalled since 2008: that’s why average earnings are £12,000 per year below where pre-financial crisis trends would have taken us. It’s also why public services are breaking at the seams despite taxes overall rising.

A further £380 million cut to adult skills on the way?

A main focus was on personal tax cuts, though for lower and higher earners these don’t fully offset previous rises: the Chancellor was only able to cut personal tax rates by raising some other taxes and pencilling in a further period of austerity in public services after the election. Learning and Work Institute (L&W) estimates that this could mean a further £380 million cut to adult skills in England by 2028. On top of previous cuts, that would mean the Government spending £1.3 billion, or 25%, less on adult skills in real terms. And that comes alongside employers investing 26% less per person in training than in 2005.

And where has the axe fallen to date? Predominantly on learning opportunities for adults wanting to improve their English and maths, or young people wanting to do an apprenticeship, or people wanting to gain a level 2 qualification. Contrast the focus on skills bootcamps, where two-thirds of participants already had a level 3 qualification, with the 63% fall in a decade in people taking English and maths courses. Is that the right priority for public funding?

Continuing lack of investment in skills is bad for growth and bad for opportunity. A previous Chancellor said you can’t spend your way out of a recession. It’s equally true that you can’t cut your way to growth.

We need to break out of this low-growth loop that makes every decision a zero-sum game. The good news is that improving employment and skills can help, and we know how.

How can we do better?

We need ambition for growth and opportunity, making the next decade one where learning, skills and employment help us break out of the loop we’re stuck in.

Of course, it’s not just what the Government spends on services, it’s how that money is spent – the outcomes it achieves and the people it helps. Our economy and society are not just about the Government, they’re about individuals, communities and employers too.

So here’s a five-point plan for a decade of growth:

1. Invest in learning for all. Invest in adult learning, prioritising English, maths and digital skills and learning up to level 3, backed by a clear strategy putting lifelong learning at the heart of all government policy.
2. Get employers training. A Skills Tax Credit and reform of the apprenticeship levy to increase training and grow opportunities for young people and at all skill levels.
3. Help people to learn. A widened Lifelong Learning Entitlement to give people more time and financial support for learning.
4. Widen employment opportunity. Better-quality support for people to find work, widening access so that more than the current one in ten out-of-work disabled and older people get help.
5. Promote better work. Improve employment rights and support progression at work.

All this needs to be part of wider plans. We need to link investment in skills with our plans for net zero and to build more homes: where are the construction workers and the heat pump fitters going to come from? And make learning the golden thread across policy areas – making social prescribing in health services to learning and skills the norm, for example.

It would be easy to think that we can’t escape where we are now – low growth, low wage growth, lower investment in skills. But we can. To do so we need to turn on the engines of growth by promoting learning, skills and employment.

By Stephen Evans, Chief Executive of Learning and Work Institute