Employers Should be at the Heart of DWP’s Approach to Skills

A recent report from the Education Committee warns of funding pressures and apprenticeship barriers. Manufacturers are urging government to ring-fence levy funds and expand incentives, ensuring employers are empowered to drive high-quality, future-focused training across the workforce.

The wide-ranging report of the Education Committee’s inquiry into Further Education published in September gave a comprehensive and clear analysis of the state of the sector. From funding to different pathways and the myriad issues affecting apprenticeships in England, the report identifies a number of the problems which Government must solve as responsibility for apprenticeships and adult skills moves to the Department for Work and Pensions.

As one of the eight sectors prioritised by the Government’s modern industrial strategy, manufacturers are eager for more effective support for investment in training and will recognise many of the challenges the Committee’s report sets out as they engage with their local providers.

The Role Of Employers

Given its focus on the FE sector, the Committee has relatively little to say directly about the role of employers; yet, giving businesses the confidence and capacity to invest more in training should be central to the Government’s skills policymaking. The last government rightly worked to put employers at the heart of the skills system – particularly in relation to apprenticeships – and reforms should be geared towards empowering providers to meet their needs.

The report correctly notes that FE colleges are under significant financial pressure – and the same is often true of the independent training providers on whom many manufacturers rely for their apprenticeship training. Finding the resources to review funding bands – as per the commitment made in the industrial strategy – as well as looking at capital funding and teacher recruitment should be a priority for the Government if it is to increase the number of apprenticeships. Maintaining delivery of high-value apprenticeship standards will be critical if the Growth and Skills Levy and wider skills reform agenda is to be a success.

Make UK’s Industrial Strategy Skills Commission recommended that all of the money raised from employers via the Growth and Skills Levy, and Immigration Skills Charge, is ringfenced for investment in the skills system. The Government has the opportunity to do this at the forthcoming Autumn Budget. Businesses are mystified as to why this does not already happen – doing so would allow the Government to address some of the challenges identified by the Committee’s report, ensuring that training providers are adequately funded to offer the training employers want, while giving businesses the confidence that the money they pay into the system is directly contributing to their own ability to invest in skills.

A New Opportunity To Think More Creatively About Upskilling and Retraining

While the Committee understandably focuses on pathways for young people, the transition of adult skills from the DfE to DWP also provides a new opportunity to think more creatively about upskilling and retraining. Manufacturers are frustrated by the potential damage that removing levy funding from level 7 apprenticeships could do in this regard. The Lifelong Learning Entitlement which will come into effect from 2027 will help to enshrine adult learning, upskilling and retraining in how businesses and workers think about careers, but there is more to be done.

An immediate step for the Government would be to include Skills Bootcamps and Higher Technical Qualifications into the Growth and Skills Levy. However, a step change in business investment in skills across the workforce could be achieved by considering enhancing tax relief on training. Manufacturers benefit from existing incentives in the tax system for investment in physical capital – R&D activity, new equipment and machinery – but have little such support for investment in human capital.

At the Autumn Budget, the Government should commit to evaluating the existing relief on work-related training and considering where enhancing this relief – such as in sectors like manufacturing – would generate a significant return on investment for the Government and stimulate more effective employer spending on training. Using the tax system more effectively to incentivise businesses to invest in productive training should be a key part of the Government’s thinking ahead of the long-awaited post-16 skills white paper.

The Government has reached a critical point in its efforts to reform the skills landscape and support more people into work and development opportunities, and the Education Committee has highlighted many of the immediate challenges it faces. After a year of upheaval – establishing Skills England, significant apprenticeship reforms and now moving policy decisions over to DWP – the system needs a chance to bed down. As it does so, it is vital that the focus is on providing the right incentives for businesses to invest in high-quality skills training and employer-led qualifications.

By Jamie Cater, Make UK Senior Policy Manager – Skills