Investing in skills: a Keynesian approach for the 21st century

Neil Carmichael told our sister paper FE Week that before he lost his seat in Parliament, his next plan for the Education Select Committee was going to be “a big piece of work on training and skills”. Here he outlines his vision

When the United Kingdom leaves the European Union in 2019 the economy will require a significant overhaul to even come close to delivering our current standards of living. Indeed, a key test of the success of Brexit will be the impact it has on family and personal income.

This will be no small task when the UK’s relative economic success over the last 20 years has been shared by too few.

To her credit, the prime minister appears to get that a more interventionist approach may be necessary, and her government has already recognised this, in part, by formulating a new industrial strategy. It is rightly ambitious, and has encouraging parallels with the active economic management pursued by Edward Heath’s government as it prepared the economy for the opportunities that lay ahead as members of the European Economic Community.

Mr Heath’s endeavours were rooted not only in consensus politics but also in the economic theories of John Maynard Keynes, at a time before monetarism was in vogue and when concerns about economic productivity were as paramount as the need for the economy to compete in export markets.

The modern economy will require greater investment in teachers

Keynes was an all-encompassing thinker who encouraged governments to invest in public areas in order to stimulate economic activity. This was often manifest in huge infrastructure projects, a theme that has seen a welcome return in the industrial strategy.

If we take Keynes as our guide, we must, of course, take into account the new economic circumstances we face. The education select committee recently visited South Korea and Finland, and its experiences provide a revealing insight into what might lie ahead for the UK economy as we leave the EU.

Both Finnish and South Korean economies were in dire straits at around the same time. Finland emerged from the Second World War shattered and adrift, while South Korea was created after another gruelling conflict saw the partition of Korea during the early 50s.

Both countries were unable to rely on natural resources or raw materials to rebuild their economies. But they came to the same conclusion: maximise the potential of their people. Their fledgling governments had an unerring focus and commitment to investing in education and training as a way to drive economic growth and raise living standards.

Today, the success of this strategy endeavour is obvious to all as they have built innovative, productive and resilient economies. While both countries have encountered occasional economic bumps, their ability to respond effectively remains impressive and is an example many other nations would dearly love to emulate.

Returning to Brexit, one of the reasons Leave won the referendum was because of salient concerns over immigration and, in particular, the sense that jobs were going to foreigners rather than locals. There are, of course, record levels of employment in the UK but there was a truth to this charge – mainly due to a skills shortage that necessitated foreign labour to keep British businesses competitive.

The newly coined ‘just-about-managing’ designation illustrates this conundrum, as such people may often lack the skills to advance into higher-paid jobs.

To make the best of Brexit and, indeed, to address some of the primary factors in the Leave vote, the government should be considering a game-changing approach to education. Investment in the Keynesian way should be uplifted, alongside major structural reforms to ensure UK workers have the skills we need to push our economy forward. This could be a new brand of Keynesian economics fit for the decades ahead.

Our economy will benefit in multiple ways. Equipping our people with the skills and know-how to be successful in the modern economy will require greater investment in teachers and trainers – following in the footsteps of Finland and South Korea – and ensuring they are granted higher status.

The challenges are not new; governments and policymakers have grappled with them for some time. But more than ever we now have an obligation not to add a learning deficit to those in our country who feel they are already suffering from an economic one.


Neil Carmichael is a former MP, and chair of the education select committee

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