Some cake is always possible – we have to take tough financial decisions but investment in skills will boost economic productivity
Robert Halfon MP is Chair of the Education Select Committee, a former Minister for Skills, and former Deputy Chair of the Conservative Party.
As the saying goes, “you can’t have your cake and eat it too” but I disagree. What is the point of having cake if you can’t at least have a slice?
On Monday, Jeremy Hunt came before the House to announce that many of the measures from the mini-budget would be put on hold. This is whilst the Government takes “eye watering” decisions on the tax and spend plans, which will be introduced as a measure to calm the markets and restore economic stability.
As I said to the Chancellor, it is possible to take tough spending decisions, but to also ensure that much good can be done.
Take George Osborne, for example. Under his chancellorship, the Government rightly had to reduce spending in order to cut the UK’s deficit and reduce our debt, but he was also able to help the most vulnerable with the cost of living by cutting taxes for lower earners, freezing council tax, introducing the living wage, and implementing a fuel duty freeze and cut which has continued for a consecutive 11 years.
The then-Chancellor also invested in infrastructure to level-up the country, including hospitals and roads. Most importantly, the Government focused on investing in skills and apprenticeships. By 2015, we had nearly two million apprentices.
Osborne recognised that economic growth went hand in hand with growing our skills capital, and by doing this, the Government was able to increase employment and boost the country’s productivity.
But as the old NASA saying goes, “Houston, we have a problem”.
Despite the enormous efforts of Conservative governments since 2010, Britain still has a significant skills deficit. In the OECD averages for reading, maths and science, the UK’s score was lower than that of Poland, Estonia and Singapore. In reading and science, the UK placed 8th, but in maths, we dropped to 11th place.
Over one in ten young people aged 16-24 are not in any form of education, employment or training; 260,000 are unemployed and 432,000 are economically inactive. This is expected to cost the economy £10 billion this year due to lost productivity, tax revenues and additional welfare costs.
Earlier this year, the National Foundation for Educational Research reported key findings from its project, The Skills Imperative 2035, which considered the skills that would be most important in the current context of rising automation and digitisation.
They reported that problem-solving, critical thinking, analysis, communication, and collaboration skills will be in high demand over at least the next 15 years. Indeed, 92 per cent of employers say that these so-called ‘soft’ skills are more important than ‘hard’ skills
But these skills are not being prioritised. The £6.6 billion skills gap is emphasised by the Department for Education’s own Employer Skills Survey which highlights that by 2030, seven million additional workers could be under-skilled for their job requirements.
So what should be done about it?
First, the Government should build on the apprenticeships programme which has produced over five million apprentices since it was introduced in 2010. The Kickstart scheme and the £3,000 incentive scheme to boost apprenticeships was an incredible success, seeing a 43 per cent increase in apprenticeship starts in the last quarter of 2021.
It is clear apprenticeships work and their financial returns are nothing short of extraordinary: for every £1 invested, there is a £28 return to the wider economy.
Second, the Chancellor could consider introducing a Skills Tax Credit – as a counterbalance to the Research & Development Credit which already exists – which small and medium sized businesses especially could use as an incentive to invest in the skills our country needs.
Third, there also needs to be reform of the apprenticeship levy. Big businesses should be able to use more of their levy if they employed more apprentices from disadvantaged backgrounds, or employed degree, or higher, apprentices if they were in the particular skills sectors that are needed to boost our growth and the economy.
During the Party Conference this year, I was pleased to speak at a fringe event with David Willetts hosted by the Taxpayers’ Alliance. Whilst Lord Willetts and I agree on many things, we do differ on our opinions when it comes to university and apprenticeships.
His’s main point of argument during this event was that more people want to go to university. I don’t believe this is necessarily the case because the demand for apprenticeships from young people is at an all-time high.
Last year’s UCAS data shows apprenticeship searches through their Career Finder jumped by 50 per cent to 1.5 million. According to a recent YouGov poll for the Times Education Commission, 44 per cent of parents would prefer for their child to study for an apprenticeship, versus 35 per cent who favoured an academic degree.
The problem is that people just don’t know enough about this pathway. Indeed, according to the Social Mobility Commission, only 26 per cent of teachers feel confident they have enough knowledge to be able to talk to their pupils about apprenticeships as a future pathway.
By transforming the way we approach careers education in this country, the Government could rectify this in a heartbeat. Embedding careers education in the national curriculum would not necessarily cost any significant extra money, but it would ensure that children all the way through primary to secondary school would have opportunities to visit businesses, or spend time in work placements to see first-hand how their knowledge and skills can be applied to the workplace.
This is why I brought forward my successful amendment to the Skills Act to increase the number of career education encounters that pupils have at school to at least six, particularly with vocational and technical education providers.
Building an apprenticeships-and-skills nation means more productivity. More productivity means stronger growth. There is a clear cost-benefit win when it comes to rocket-boosting our country’s skills, and it will bring the vital economic growth that the Prime Minister champions.
As I said to the Chancellor on Monday, this should be the guiding philosophy with which he approaches the next fiscal chapter in the coming weeks.