The UK’s productivity problems are well-known and have been extensively analysed over the decades. The opening up of a major new gap in relative productivity per hour worked between the UK and most of the rest of the G7 has added impetus to the soul searching. Set against this backdrop, H M Treasury’s ‘Fixing the Foundations’ lays out the Government’s overall strategy on this issue.
Education, training, skills and human capital have long figured in debates about UK productivity, and they make a predictable appearance in ‘Fixing the Foundations’.
Higher education is to be further expanded; the student loans system tweaked; the qualifications system simplified; apprenticeship is to grow, funded by a compulsory employer levy (a flash of radicalism in policy development); and professional and technical education (PTE) refocused and boosted in status and scale with an attempt to push more provision into providing higher levels of skill.
The labour market
There are two comments that can be made about the Government’s thinking about the role of skills in boosting productivity.
The first is that, although generally laudable in intention, many of the proposed skills policies will continue to face substantial challenges, often caused by structural features in our labour market.
The example of PTE is apposite. It spans the divide between further and higher education, and the Government’s proposals suggest that the line between the two may be destined to become blurrier as national colleges, new institutes of technology, catapult centres and ‘elite professional institutions’ all work together to design new routes and courses.
One of the challenges that the Government will face concerns its desire to refocus PTE provision away from Level 2 and below (Level 2 is the equivalent of GCSE).
In the real world, Level 2 provision in both apprenticeships but also in further education colleges (pre and post-19) is unlikely to diminish any time soon, as it reflects massive volumes of very real employer need. Many service sector organisations and occupations currently specify skill needs at Level 2, and this will remain the case for the foreseeable future.
To illustrate this, the following are the current Top 10 (by volume) apprenticeship frameworks (all ages, all providers):
- Health and social care – Level 2
- Health and social care – Level 3
- Business and administration – Level 2
- Customer service – Level 2
- Management – Level 2
- Management – Level 3
- Business and administration – Level 3
- Children and young people’s workforce – Level 3
- Improving operational performance – Level 2
- Retail – Level 2
It is worth noting that if you calculate the top 10 in a different way, engineering appears in the table.
In other words, large chunks of our economy currently require a Level 2 (and below) workforce. For every one vocational qualification awarded at Level 3 and above, there are at least five being awarded at Level 2 and below.
As policy has found over the last three decades, it is much easier to supply more high-level skills (usually at either the taxpayer or the student’s expense), than it is to boost the underlying level of employer demand for such skills.
There are also major issues to be thought through about who might be best placed to provide TPE. Should it be HE, FE, or some combination of the two, and what ought the role of employers be in all this?
Thirty five years ago, the norm was that technician training was provided by major employers like ICI and BP, with the off-the-job element being provided at HND/HNC level by their local further education college.
Today there still remain some firms, such as Jaguar Land Rover, who make major investments in technician-level provision. Perhaps the best future model for much post-19 TPE would be part-time, with the student in employment, the workplace providing on-the-job learning and an off-the-job element provided by further or higher education (in other words, the original model for Foundation Degrees).
Plainly, in some areas and occupations, higher education institutions and degree courses have an important role to play. One example would be the Sheffield University Catapult Centre’s work on apprenticeships in advanced manufacturing.
In other occupations, however, and for some types of provision, further education colleges are the ones with the links to the employers, and with a closer appreciation of, and capacity to deliver on, the skill needs in the TPE field.
The second comment is that ‘Fixing the Foundations’ does not move beyond the well-established UK government policy position that our skills problem is primarily one of inadequate supply. Fix this, the argument goes, and enhanced productivity will follow more or less automatically.
Elsewhere in the developed world, including within the OECD’s own thinking, the definition of the problem has moved on, and there is now a recognition that policy has to also seek to stimulate demand for a more highly skilled workforce, and to help employers to think through how they can deploy those skills more productively within the workplace.
For example, in Scotland, the Scottish Funding Council has run a set of pilot skills utilisation projects to see if colleges and universities can help organisations to redesign work and jobs to enable better skill usage and more employee-led, bottom-up innovation. In Wales, the Government is running two pilot projects in the creative industries and construction to explore similar issues.
There is now considerable research to suggest that many UK organisations and workplaces are poor at maximising the usage of the skills and knowledge of large sections of their employees. If this is the case, then any policy on productivity that hopes to make a major and lasting change needs to address this issue in some way or other.
So one can but hope that ‘Fixing the Foundations’ will represent the opening shot rather than the last word on how we tackle some aspects of our productivity problem.