New Growth And Skills Levy Must End Cycle Of Failure To Address Britain's Skills Shortages

29th September 2024

The new Growth and Skills Levy must end the cycle of policy failure in addressing Britain's chronic skills shortages. But the Government must get its design and implementation right if it's to boost the number of apprenticeships after years of decline, and ensure that Levy funds go to young people who need it most, according to new Resolution Foundation research published on Saturday 28 September 2024.

The latest Labour Market Outlook examines the new Government's skills strategy, and in particular plans to replace the Apprenticeship Levy with a more flexible Growth and Skills Levy, alongside the new Youth Guarantee of training for 18-21-year-olds.

The Foundation says that Britain's chronic skills shortages are underlined by the fact that the share of job vacancies caused by firms finding it hard to recruit people with the right skills or qualifications has more than doubled over the past decade, from 16 per cent in 2011 to 36 per cent in 2022.

Skills shortages aren’t just preventing firms from recruiting either: an increasing share of workers are judged by their current employers to not have the right level of skills required to do their job. This skills gap has risen from 4.4 per cent of workers in 2017, to 5.7 per cent of workers in 2022, and is higher still in the hospitality sector, where around one-in-twelve (8.6 per cent) workers don’t have the right skills to do their job.

Britain also has a long tail of poorly qualified workers, with one-in-five people aged 25-28 only having qualifications up to level two (GCSE or equivalent), despite the country having an acute need for workers with sub-degree level qualifications (such as Higher National Certificates and Higher National Diplomas).

Despite this obvious need to boost skills levels for potential and existing staff, firms are not providing the training that is needed. The report notes that, while apprenticeships offer a clear route to filling skills shortages, the number of starts has fallen by over a third over the past decade - from a peak of 520,600 in 2011/12 to just 337,100 starts in 2022/23.

Furthermore, the fall in apprenticeships has been most stark among those aged 16-19 - the group who would benefit most from a vocational route into the workplace.

In contrast, workers aged 25 and above have gained most from the growth of higher-level apprenticeships in recent years. However, with the majority (59 per cent) of these workers having already been with their employer for at least 12 months, it is questionable whether this training is a good use of Levy funds, as firms may well have funded the courses anyway.

The Foundation says that the new Government will need to get the design and implementation of the Growth and Skills Levy right if it’s to play a key role in boosting skills, and not repeat the mistakes of previous, well-intentioned reforms.

First, the new Levy should ensure that there are sufficient opportunities for young people to access new apprenticeships. To do this, the report recommends ring-fencing a portion of the Levy for young people (aged 16-24) and removing Levy funding for degree-level apprenticeships.

Second, the Government should guard against a more flexible Levy being used by firms to subsidise training that they would have provided anyway, which would risk reducing the number of apprenticeships on offer to disadvantaged groups. To do this, lessons can be learned from Higher Education, where universities are scrutinised on their attempts to widen access to participation.

Finally, the Levy should not dilute one of the key successes of recent apprenticeship policy - raising the quality of courses. The report says that minimum standards should be maintained - such as those relating to the amount of off-the-job training – to ensure that Levy funds are not used to subsidise sub-standard courses.

Louise Murphy, Senior Economist at the Resolution Foundation, said, "For too long, well-intentioned reforms have failed to end the cycle of failure when it comes to addressing chronic staff shortages across Britain.

"One-in-three vacancies today stem from firms not being able to find people with the right skills, while too many young people struggle to find a route into skilled work that doesn’t involve university.

"The new Growth and Skills Levy offers a fresh chance to break this cycle. But the Government must get the detail right if it’s to avoid repeating the same policy mistakes. The new Levy must give firms the flexibility they need to provide more training to potential and new staff, while maintaining high standards for apprenticeships and ensuring that training is centred around young people who need it most."

Read the full report HERE