Since its peak in 2003–04, total public spending on adult skills has fallen by 31%. Alongside that, the average amount invested in training by employers has fallen by almost 30% per trainee since 2011.
That said, much of the decline in government funding was in adult education courses with low rates of return. And past experience suggests that much of the government-subsidised training would have taken place anyway.
Instead of simply defaulting to previous funding levels, policymakers should ask two questions before embarking on any reforms aimed at stimulating training. Will it be genuinely valuable? Will it be genuinely additional (rather than training that would happen anyway)?
There is an additional consideration specific to skills policy. Few areas of public policy have experienced as much turbulence and churn over the past two decades. Any future reforms must be weighed against the risk of adding to the policy instability and inconsistency which have plagued the sector. That’s not to say that the system couldn’t be improved. But we must avoid change for change’s sake.
One thing that wouldn’t need a disruptive overhaul would beto reform the apprenticeship levy. It should provide a simple uniform subsidy rate for all private sector employers, set at a lower level than current rates.
These are among the findings of ‘Investment in training and skills’, published today as a pre-released chapter of the 2023 IFS Green Budget, produced in association with Citi and with funding from the Nuffield Foundation. Other findings and recommendations for reform include:
- The UK has seen a significant decline in participation in adult education and training. The number of publicly funded qualifications started by adults has declined by 70% since the early 2000s, dropping from nearly 5.5 million qualifications to 1.5 million by 2020. Although the total number of adults participating in employer-provided training has remained fairly stable, the average number of days of workplace training received each year has fallen by 19% per employee in England since 2011.
- Public funding for adult skills is set to increase by 11% from £4.3 billion today to around £4.7 billion by 2024–25. Given the low returns to many adult skills courses, rather than expand the range of courses available, the government should consider whether increasing existing funding rates would offer a better return. Funding provided for an adult learner taking GCSE English or maths has fallen by 20% since 2015–16.
- The government currently provides ‘advanced learner loans’ (ALLs) to students studying advanced further education courses. These loans represent a tiny fraction of public outlay on student loans. Last year, the amount lent through ALLs (£124 million) was less than 1% of the amount lent through higher education loans (£19.9 billion). From 2025, ALLs will be replaced by the newLifelong Learning Entitlement, but three years after it was announced we still don’t know fundamental aspects of how it will work, such as which courses will be covered by the new entitlement.
- The Labour party has committed to broaden the apprenticeship levy into a ‘growth and skills levy’, which will allow employers to use subsidies for non-apprenticeship training. Past experience, with schemes such as Train to Gain, suggests that this policy may lead to significant deadweight cost (i.e. subsidising training that would have taken place anyway). The challenge lies in offering employers flexibility to choose the training they need but also ensuring this is genuinely productive and that as much as possible is additional.
Imran Tahir, a research economist at IFS, said:
‘Adult skills policy is not a simple area, nor one that is easy to “solve”. History shows us that spending and setting qualification targets are not enough. What matters is ensuring that individuals and employers have the capacity and incentives to invest in additional education that builds valuable skills. One key step towards such a system is reforming the existing apprenticeship levy. The government should introduce a single uniform subsidy rate, set lower than the current rates. This will create a simpler and more coherent system, and one that better ensures employers invest in the right form of training.’
Dr Emily Tanner, Programme Head for Post-14 Education & Skills at the Nuffield Foundation, said:
‘Rapid changes in the labour market mean that upskilling and retraining are essential for the workforce to thrive and skills gaps to be met. Long-term planning that takes account of the complexities and trade-offs in skills policy is needed to ensure that resources are invested effectively and in a manner that develops the skills for fulfilling and productive jobs.’