‘Making a Success of the National Skills Fund’ – setting the scene

To help address some of the rising challenges set to impact the economy and labour market throughout the 2020s and beyond, the Conservatives promised in their General Election manifesto to introduce a National Skills Fund from 2021. This fund would provide £3 billion over five years, to contribute towards retraining and upskilling the adult workforce.

To explore this proposal further, we recently teamed up with fellow educational charity, Campaign For Learning, to publish a new policy paper titled ‘Making a Success of the National Skills Fund’ where 12 leading authorities from across the education and skills sector unpick the policy and explore some of the challenges that the Government might face in its implementation.

  1. Longer working lives

In October, the state pension age will increase to 66 and between 2026 and 2028 will rise again to 67. Longer working lives is a reality for thousands of older adults who will seek to remain in paid employment, up to and beyond the state pension age because of economic necessity.

  1. Limits on low-skilled migrant workers

In February 2020, the government outlined its new skills-based immigration policy. The rationale for restricting low-skilled worker migration is to shift the economy away from a reliance on cheap labour from Europe and encourage UK employers to concentrate on investment in staff retention, skills, technology and automation. However, this decision could cut the labour supply by up to 90,000 people per year which could adversely affect some sectors.

  1. Risks and opportunities from increasing automation

In 2017, it was estimated that around 7% of jobs in the UK are at a high risk of being affected by automation and a further 65% of a medium risk of being so. Automation will gather pace as the 2020s wear on. Some job roles will disappear, new ones will be created. Employment in some sectors will increase – as jobs in new roles outweigh declines in old ones.

  1. An increasingly flexible labour market

Over 25% of employees work part-time. More than 1 in 20 are temporary workers and 15% of workers are self-employed – with self-employment being popular among workers aged 50 and over. Average earnings in real terms has only just reached pre-2008 financial crash levels. Close to 1 in 8 part-time workers would like a full-time job. And a quarter of temporary workers are looking for permanent jobs.

  1. The need for adults to train and retrain

The need for adults to train and retrain is strong and obvious. Developing a system of post- 18 education and skills to meet these needs will be a challenge which the new Conservative Government must fulfil.

  1. Up-skilling

Increasing the proportion of the adult workforce with a first Level 3, first Level 4-6 and indeed a first Level 7-8 is a critical part of the policy challenge not least because employers are likely to demand workers with Level 3+ qualifications.

  1. Re-skilling

There are two classic examples of re-skilling. The first is from higher education where an adult with a first Level 6 wishes to re-skill to achieve a second Level 6. The second is from further education where typically 16-18 year olds achieve a first Level 3 – in the form of A levels – and aged 19-24 or even older wishes to re-skill to achieve a second Level 3 – usually in the form of vocational qualifications.

  1. Myth-busting

As adult training and retraining policy develops, myths and funding constraints surrounding re-skilling must be swept away. Graduates need to re-skill at any level they wish, from Level 2 to Level 6. Non-graduates need up-skill to Level 6 as they wish, but re-skill at Level 2 and 3 if it meets their needs.

  1. Post-18 education and training

Our best estimate is that the cash cost of post-18 education and training in England in 2019/20 is about £22.4bn. If these figures are correct, 83.5% of funding went to higher education, leaving just 16.5% to be shared between adult further education, adult retraining and adult apprenticeships. This balance needs to be readdressed.

  1. The Review of Post-18 Education and Funding in England

One of the key recommendations of the Independent Panel Report to the Review of Post-18 Education and Funding was to create an all-age entitlement to a first full Level 2 and a first full Level 3. Estimated to cost £500m, the entitlement would represent an up-lift to the grant-based Adult Education Budget.

Another important recommendation by the Independent Panel on Post-18 Education and Funding was the removal of the ELQ rule for Level 4, 5 and 6 regulated degrees. If this is accepted by the new Conservative Government, adults seeking to re-skill at Level 4, 5 and 6 would be eligible to access fee-loans.

  1. The National Skills Fund and a ‘right to retraining’

During the general election, the Conservatives promised to introduce the National Skills Fund (NSF) from 2021/22 at a cost of £3bn over five years. The NSF would represent about 3% of public spending on post- 18 education and training and 18% in public spending on adult further education, the National Retraining Scheme and adult apprenticeships (excluding ESF and construction training grants). This £3bn investment is seen as a down-payment towards a Right to Retraining.

  1. Issues to address

There are, perhaps, five separate but interrelated issues surrounding the National Skills Fund proposal:

  • how the National Skills Fund will relate to existing funding for post-18 education and training
  • the level of training and retraining the National Skills Fund will support and how funding will be applied
  • how the National Skills Fund will specifically relate to the National Retraining Scheme which among other things has a sector focus aimed at supporting workers impacted by the rise in automation
  • the nature and extent of devolution and whether the National Skills Fund is seeking to support a specific employer akin to the apprenticeship levy and digital employer accounts
  • whether the National Skills Fund should be brigaded in some way with other budget lines such as the Adult Education Budget.
  1. Levelling-up all adults through training and retraining

Longer working lives, the impact of automation and flexible labour markets will impact the nation as a whole. Our position is that every adult – whether 24 or 64 - should have the same opportunities to train and retrain. Access to adult training and retraining opportunities will enable adults, employers and communities to level up and will in turn, help benefit deprived communities in England.

  1. Income insecurity and low Pay as a barrier to adult training and retraining

Making a financial contribution to the cost of training or retraining is rightly viewed by policy makers as a barrier to in participation. This is why policy makers attempt to take the sting out of training and retraining by offering entitlement to free provision or access to income-contingent fee loans, which preclude up-front costs for adult learners. And yet, even where provision is free or covered by fee loans, adult training and retraining might be held back by income insecurity and low-pay.

  1. In-work progression and adult training and retraining

At Whitehall level, a major ideological difference exists between the Department for Work and Pensions, and the Department for Education. For the DWP, in-work progression is about increasing weekly earnings through working extra hours. For DfE, progression in work is about investing in adult training and retraining to secure and increase earnings in the future.

Universal Credit is expected to be rolled-out by 2024. A third of claimants will be in work.

Enabling adults claiming Universal Credit to retrain through the National Skills Fund without loss of benefit will be a critical policy challenge.

The full ‘Making a Success of the National Skills Fund’ policy paper with articles from authors including the Association of Colleges, Oxford University and the Federation of Awarding Bodies is available to view and download now.

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