Investment in Skills Must be at the Heart of the Autumn Budget

The Prime Minister’s conference speech gave welcome prominence to further education – a rare moment when skills took centre stage and the White Paper sets out some ambitious reforms. Having made a commitment to tackling youth unemployment and to making further education a defining cause of this government, the Autumn budget must now back this up with real investment.

In our submission to the Treasury we argue that skills underpin every one of the Government’s national missions, from boosting productivity and economic growth to tackling regional disparities and preparing for the transition to net zero. With employers across sectors facing persistent skills shortages and the labour market undergoing rapid transformation, targeted and sustained investment in skills is essential.

Drawing on intelligence from our 19 employer-led sector skills body members, the Skills Federation’s recommendations span four key areas: reforming the Apprenticeship Levy, strengthening education and training for young people and adults, supporting devolution, and boosting employer investment.

Reforming the Levy

The government’s intention to reform the Apprenticeship Levy into a broader Growth and Skills Levy is a positive move. While apprenticeships remain a valuable route to occupational competency, they are not always the optimum solution for employers, or for individuals. However, employers cannot be expected to invest more when existing funds are held back. Skills Federation, along with many other organisations, urge the Treasury to make the full amount collected through the levy available for skills development. 

Apprenticeship Units

The White Paper announces that the first flexibilities will be ‘apprenticeship units’ which will be available in critical skill areas. Developing short flexible courses which are aligned to the existing standards makes sense as an initial approach. 

We also recommend funding pilot schemes in priority sectors which would allow for rapid action on workforce planning without destabilising the wider system. Employer-led sector skills bodies, funded by their industries, are well-positioned to lead pilots. Their deep understanding of sector-specific challenges makes them ideal partners for identifying and implementing flexible training solutions.

Supporting young people

Effective post-16 education is essential to deliver the Youth Guarantee, and the new target for two-thirds of young people to progress into academic, technical, or apprenticeship pathways at levels 4–6. To meet this ambition, however, the FE sector needs to be funded appropriately with sufficient finances available to fund competitive pay for teachers and industry standard equipment. 

Skills development for adults

With 70% of the 2035 workforce already in employment today, upskilling and reskilling throughout people’s careers, not just at the start, is critical. We welcome the approach of government developing sector skills packages that clearly define industry roles in meeting skills needs and investing in these. Employer-led sector skills bodies have been integral to packages announced so far and should continue to be a key partner to roll out the approach further.   

We propose that government works with employer-led sector skills bodies to develop “sector skills packages” that clearly define industry roles in meeting skills needs and invests in these. The construction sector’s existing package is a successful model that can be learnt from.

Navigating devolution

Devolution allows skills provision to be tailored to local needs, but creates complexity for employers operating across geographical boundaries who face different arrangements in different regions. We recommend commissioning employer led sector skills bodies to develop national workforce plans that can be implemented at a local level to take into account specific circumstances. 

We also need to solve challenges for employers that work across national boundaries and funding UK-wide competency standards to ensure consistency across devolved nations would be a positive start.

Boosting employer investment

Employer investment in training has declined significantly, falling from £59 billion in 2022 to £53 billion in 2024. Although some of this may reflect efficiencies or technological advances, UK employer investment remains below the EU average. This may be a cultural challenge and fiscal incentives, such as a skills tax credit, could help shift employer attitudes and increase investment.

If the Government is serious about growth, productivity and regional opportunity, it must start with skills. The Budget is the Government’s opportunity to show that its commitment to further education and youth employment is more than words.

By Alison Morris, Director of Policy, Skills Federation