A House of Lords select committee has thrown its weight behind calls for a skills tax credit to encourage employers to spend more on training.
The industry and regulators committee, which ran an inquiry into skills and apprenticeships earlier this year, said the UK has “lost the advantage” of employer-led workforce training, which could be reversed by tax incentives.
UK employers spend less than half the EU average on training per year, down from £2,139 per employee in 2005 to £1,530 in 2019, according to Learning and Work Institute (L&W).
This idea had “support in principle” from several committee witnesses including sector bodies and former skills minister Robert Halfon.
Youth guarantee
Following its inquiry launched in April this year, the committee concluded that the skills system is complex, lacks strategic direction and operates in a “fitful, short-term fashion”.
Labour’s promised post-16 education strategy should simplify the system with longer term funding and “a smaller number of priorities and programmes”.
Other areas of concern include the exact role of Skills England, proposed reforms to the apprenticeship levy “pulling in different directions” and barriers to Labour’s youth guarantee.
The committee wrote: “For providers to be able to guarantee opportunities for young people, the funding necessary for this will have to track demand more closely, as it does in the higher education system.
“Otherwise, funding restrictions will mean that there will always be a cap on how many people can be taught, and there will be no guarantee.
Labour’s skills minister Jacqui Smith is expected to formally respond to the report in a public committee session on November 26.
Early policy decisions such as restricting level 7 apprenticeships and introducing “foundation” apprenticeships suggest that the new government is willing to refocus funding towards younger people.
The tax credits idea
Modelling for a “skills tax credit” and an enhanced “super tax credit” by Learning and Work Institute suggests the idea could unlock over £1 billion in employer investment in training, reversing much of the cuts to adult education since 2010.
The credits would allow businesses to deduct training costs from their corporation tax liabilities, similar to the research and development tax credit.
Skills tax credits were first recommended to the government in 2012 by Dragon’s Den star Doug Richard, who was appointed to review the apprenticeship system.
The suggestion had the support of former skills advisor Baroness Alison Wolf in 2019, although she told the education select committee protection would need to be built into the system to avoid “massive fraud”. The Treasury at the time it would need a “clear economic case.”
Barriers to employer-funded training
Some employers fear investing in staff who may leave to work in other companies, the committee heard.
To combat this, the government and Skills England should “take a lead” in communicating that investing in staff actually helps employees “retain staff for longer”.
Simplifying the skills system could also help tackle “low levels of employer awareness” of what training is available.
Right skills for industry – and people
“We know that the government has got a new industrial strategy, but for that to be a success, we have got to have the right skills in place,” committee chair Baroness Ann Taylor told FE Week.
“There are significant gaps in a whole range of industries such as construction and nuclear as well as smaller industries.
“The evidence suggests that the system isn’t meeting the needs of industries, or young people who leave school without the intention of going to university and don’t have the opportunity to gain the skills they need, want or deserve.”
‘Taking skills seriously’
A DfE spokesperson said: “It is high time we took apprenticeships and skills training seriously as a country and this government is mission-driven to do so.
“We will unlock opportunities for our young people to harness their talents and grow our economy.
“Through Skills England and our new growth and skills levy, we are working with businesses, unions, mayors and training providers to find and fill skills gaps across our country.”
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