John Cope is the Deputy Director of Public First and the former Head of Education and Skills at the CBI
Brexit is done. But that was just the battle – winning the peace will require us to think hard about what an independent, buccaneering UK looks like. ‘Singapore-on-Thames’ is one way of articulating this – a UK that is more competitive on tax, regulation, innovation, and trade.
Education will be critical to making this happen. Not just in schools, where England is climbing international league tables, but for people in work where we have a real upskill battle.
We first need to grasp the scale of the challenge. Careers are getting much longer, with most likely to be working into their seventies. Artificial intelligence, driverless cars, automation – the most visible sign being the death of the checkout – are pervasive, but still largely discussed as ‘the future’. Algorithms can often better understand our buying habits, relationships, and motivations, than we do ourselves, putting whole professions under threat. Our lethargy to adapt shows – UK workers are less productive than German workers by a quarter and lower than the G7 average by a sixth. Singapore-on-Thames we, currently, are not.
The importance of getting this right couldn’t be higher, so it’s unedifying to see government and business groups like the CBI trapped in a perennial scuffle over the last week. The Government has made clear it will not accept employer demands for a more open post-Brexit immigration system, with a frustrated No10 firing back that business ought to spend more time investing in its own workers than bleating to the Government about easier hiring from abroad. The independent Migration Advisory Committee (MAC) also weighed in, publishing evidence that currently the UK has “set too high a bar for the definition of ‘exceptional talent’” for a visa – something the Johnson administration refers to as their ‘brightest and best’ approach, albeit with no May-ite cap on numbers. The MAC also said the salary threshold needed for a work visa should fall from £30,000 to £25,600 to include more lower and mid-skilled people.
This debate misses the bigger picture.
No10 is right to be frustrated. Despite the pace of change, employer spending on training is stagnant, barely moving from £43.8 billion in 2011 to £44.2 billion in 2017. A dramatic fall when you consider the huge rise in the number of people in work since 2010. Add in the fact the number of adults in education is at a two-decade low, and you can see why No10 is touchy.
Business is right though, that Brexit should not be about pulling up the drawbridge, or just letting in the ‘brightest and the best’. An immense strength of the UK, and free economies around the world, is an openness to people, trade, and a free market economy. Importantly, most British people get this. Focus group after focus group shows what most people want is not quotas or a shameful ‘hostile environment’ – they want to know criminals are stopped at the border, the system is under democratic control, and migrants are in work and contributing their fair share to public services. A generous work visa supports that.
The mistake No 10 and business groups make is to portray investing in homegrown talent and attracting it from abroad as mutually exclusive. We desperately need employers to spend more on training as much as we need to stay an open, welcoming country. And it also misses the point – which is how we get employers to spend more on training.
Having spent several years at the CBI working with employers on education, the elephant in the room is the Apprenticeship Levy – a 0.5 per cent tax on businesses with a payroll above £3m. A good policy idea that has struggled on implementation.
When it was introduced, the purpose was clear: get more money into apprenticeships, make them core to our education system, and hold employers’ feet to the fire on training.
Several years on, apprenticeship starts have fallen with young people affected most. The Levy has become overspent with funds rationed to smaller firms. Anecdotally I’ve met CEOs who admit that to pay the Apprenticeship Levy, they’ve reduced, or replaced, other training. There has also been an explosion in degree apprenticeships where employers, with justification, are finding ways to use Levy funds to pay for training they did in the past. Some examples of this have made restrictions inevitable, including reports of highly paid CEOs and senior directors spending Levy funds on an MBA for themselves.
Reform of the Levy, especially due to the overspend, is inevitable.
First, the government should top up the billions companies pay to fix the overspend and immediately make more cash available for training. Greater flexibility will be needed so employers can use the Levy on high-quality training that doesn’t fit the apprenticeship model, including the creation of a new kind of ‘retrainership’ to upskill existing staff. Smaller firms need more support as they struggle the most to offer training and take on apprentices. Finally, on degree apprenticeships, some form of salary cap (yes, I see the irony within this article) of around £35,000-£40,000 could protect degree apprenticeships while preventing higher earners from accessing the Levy. These changes would all help.
Most importantly though, it’s time to stop the attracting vs growing talent debate and embark on a greater ambition by doing both. We won’t be Singapore-on-Thames overnight, but getting employers investing more in training through an improved Levy will certainly help our upskill battle.