Skills Levy Call

Policy think tank promotes levy to meet skills gap.

Skills Levy Call

UK & Europe

A report by policy think tank IPPR has issued a stark warning for British business leaders and politicians about the state of UK skills and has proposed a £5.1 billion ‘Skills Levy’ to be introduced to boost employer investment and to turbo-charge skills devolution. 

The report found:

- Employer spending on training is half – or over £6 billion less – per employee per year than the EU average for continued vocational education; 

- Employers in England are spending £5.1 billion less on training in real terms than a decade ago. Public investment has also been slashed –  the adult skills budget has been cut by 40 per cent in real terms between 2010/11 and 2015/16; 

- Improvements in qualifications have not delivered economic benefits – while there has been an 11 per cent increase in the proportion of the workforce with both basic and degree-level qualifications in the last decade, productivity has risen just one per cent and average pay has fallen in real terms.  

 The report concludes that this situation is unsustainable if the government is to achieve its goals on boosting growth and increasing productivity. As well as increased investment, the report argues the UK’s skills system will need reform if it is to prepare the workforce for the coming challenges of Brexit, the impact of automation on the labour market and the continued impact of globalisation. Specifically, it finds that:  

- Too many employers fail to use the skills of their workforce – a third of people say they have a qualification beyond what is needed for their role – nearly nine million people are ‘over-qualified’ – the highest rate in the EU; 

- Too much skills provision is low level, with poor outcomes for learners; 

- Those most likely to benefit from training – those who are unemployed, those with low skills, and those in low-pay occupations – are least likely to participate. 

The government’s apprenticeship levy will come into force from April. But the £2.6 billion it will raise in 2016/17 will fail to restore employer investment to the levels seen a decade ago. 

IPPR is therefore calling for a new ‘Skills Levy’ to be introduced to boost employer investment and to turbo-charge skills devolution. The Skills Levy would raise over £5 billion – twice the amount raised by the apprenticeship levy. It would be:  

- Broader, applying to all employers with 50 or more staff; 

- Larger, set at one per cent of payroll for the largest employers (250 or more employees) - twice the current level; 

- More flexible, allowing employers to spend the funds on high quality vocational education and training, beyond just apprenticeships.    

“Britain’s economy can’t survive outside the European Union without bringing investment in skills into line with our competitors and making sure employers are making better use of workers’ skills,” says Clare McNeil, IPPR associate director for work and families. “Government spending on boosting workers’ skills has also gone over a cliff in recent years. We desperately need radical action to ensure that the UK is prepared for the changes that will come our way with Brexit and rapid technological change.

She continues: “The government’s apprenticeship levy may go part of the way to upping skills investment but it won’t be enough to bring us in line with our competitors.   

Following the report, the IPPR has been joined by a cross-party line-up of mayoral candidates calling for a new skills levy to ring fence cash to invest in ensuring the UK workforce is as competitive and productive as possible. It argues that this devolved funding would also give more control to local leaders to ensure funding is going to where it is needed most.



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