Helen Barnard, Deputy Director of Policy and Partnerships, Joseph Rowntree Foundation

This week, the new Chancellor will deliver the first Budget from a government with a sizable majority for nearly a decade.

 The election result gives the government the freedom to think bigger and longer term than has been possible since the 2010 hung Parliament.

The government came to power on the back of two promises:

  • First, to ‘get Brexit done’
  • Second, to ‘level up’ across the country

The first of these looks to be progressing quickly. The rest of the Parliament is likely to be spent tussling over what ‘levelling up’ really means.

What ‘levelling up’ really means

Fundamentally, it must include rebalancing our economy so that someone’s prospects and living standards are not drastically curtailed because of where they live.

The UK’s economy has been severely unbalanced for decades. Employment and progression opportunities are strongly tied to where you live.

People are trapped in poverty because of low earnings and a lack of good jobs in places like the North East, and by high housing costs in London and elsewhere.

4 million workers are locked in poverty – a rise of around half a million over the last five years. Rising employment has been outpaced by rising in-work poverty.

Investing in human as well as physical capital

Most of the discussion of levelling up has so far focused on hard infrastructure; trains, buses and broadband. It is undoubtedly right to redress the balance of infrastructure spending, which has been tilted towards the South East for so long.

Transport spending in London is two and a half times higher per head than in the north of England. Places like the East of England and the West Midlands have also received far less investment than the South East, leaving them with old, creaking infrastructure.

But new buses or trains will only lift living standards if people have better jobs to travel to and the right skills to break out of low paid jobs and progress up. That means investing in human as well as physical capital and improving the quality of jobs at the bottom end of the labour market.

It was obviously good news that the government promised a National Skills Fund, with £600 million of new money on top of existing funding meaning a total £3 billion over the parliament. Likewise, the sorely needed injection of £2 billion to upgrade the FE estate over the next five years.

But skills funding should not only come from these pots. Regional growth funding and the new Shared Prosperity Fund should also be used to invest in skills and people, as well as in infrastructure.

We have just lived through a lost decade in skills

Government investment fell significantly, employer investment fell and there was a big drop in the adult participation rate. By the end of the decade only one in three adults were taking part in education, a ten percentage point drop, equivalent to 3.8 million fewer adults taking part in training since the start of the decade.

The UK has some of the biggest skills gaps in the world. Three in ten workers, 8.5 million people, are low skilled. That puts us 20th out of 33 OECD countries.

UK employers are also less likely to invest in their workers than firms elsewhere. And employers are especially unlikely to invest in low paid workers.

The training low paid workers get is often confined to induction and health and safety, rather than anything which opens up opportunities to move into a better job.

At the same time, the Government’s adult skills budget has tended to focus on entry into the workplace, not on helping low paid workers progress.

Putting skills at the heart of its levelling up strategy

To turn the tide on skills, drive up productivity and deliver real levelling up, the government must put skills at the heart of its strategy and take three steps:

  1. Invest in basic skills training and provide more funding, simpler access and more financial support for people on low incomes to train, especially those trapped in low paid jobs.
  1. Drive up employer investment in skills. Employers worry about skills shortages but many do little to train their workers to fill them. The government should incentivise employers to train low paid workers just as it incentivises them to invest in R&D.
  1. Use infrastructure spending to deliver better jobs and training for people locked in poverty, as well as shiny new trains and buses.
Helen Barnard, Deputy Director of Policy and Partnerships, Joseph Rowntree Foundation

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