The International Monetary Fund. The Organisation for Economic Co-operation and Development. Make UK. Combined authorities. Backbench MPs. Every single one says that that skills improvement is a top priority if we want growth and prosperity.
On Wednesday, the chancellor presented her three-year departmental spending settlement to drive the government’s agenda.
What did skills get? One sentence in a 35-minute speech – and even that referenced previously announced funding!
At this point the government’s reluctance to embrace the low-risk, high-benefit, easy choice that is skills investment is starting to look, well, a bit weird. Politicians often want to be seen as ‘making tough choices’ – but when that is at the expense of making a really easy choice, that’s not rational.
The government should embrace three truths, if they are to get the growth they want by releasing more funding for skills:
First, skills is its best lever for growth, assessed against four key criteria:
Cost
Additional spend of less than a billion more would be transformative; compare that to the numbers announced yesterday for other measures that will cost tens of billions.
Impact reliability
Skills spend gives an almost guaranteed return, whether that is someone not becoming NEET, someone earning more or a company filling a long empty vacancy – or just people gaining confidence. By contrast lots of Wednesday’s big announcements have been (rightly) characterised by the press as “gambles”.
Speed
Sizewell C is the right thing to do, but it will take decades to see the benefits; by contrast, benefits from skills spending come in months and years, not in parliaments and decades.
Gearing
Spending on skills catalyses and enables tonnes of other benefits – 1.5 million homes needs skills; northern transport transformation needs skills; new nuclear power stations….you get the picture.
The criteria that skills falls short against are, unfortunately, the ones that politicians love: the bigger the number the better, and the more industrial/military the photo op.
The second truth that the government should embrace is that skills investment is what everyone wants. With nearly one million young people NEET and 3 million inactive adults and businesses desperate for better home-grown skills, everyone is united around the need for more skills investment. Who is against skills investment? That is not a rhetorical question. Who? Perhaps politicians, whose everyday existence is predicated on conflict, don’t quite know what to do when there is no conflict.
The third and final truth is about the ‘how’ they should spend on skills.
Trying to be too targeted does not work. It is like heating a room: you cannot just heat the corner of the room you want to sit in, you have to heat the whole room. Similarly, you cannot just get better skills in one corner of the economy – you have to improve skills across all of it. And all the precision comes at a cost. For example, is all the faff required to channel the £600 million announced for construction precisely going to deliver a better outcome than a simple increase to apprenticeship and bootcamp funding bands in the construction sector? It definitely won’t be quicker.
The prize is huge and it is within government’s grasp; every government department wants more skills investment. Every business. Every family. Every council and every mayor. It is dead cheap – hundreds of millions, not tens of billions. It starts to deliver returns within 3-6 months if done through existing mechanisms. The provider and assessment base is raring and ready to go, to convert those extra funds into extra precious outcomes. Skills investment will transform lives and earnings prospects for hard pressed families and individuals, creating a political dividend; it will unleash ‘animal spirits’ across firms and investors, economically gearing and compounding that initial extra spend. Productivity, growth and the tax base goes up. Borrowing costs go down.
In this, the 500th edition of FE Week (congratulations to everyone!), this is as close to a no-brainer as one will ever see in public policy.
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