Leitch Review of Skills: Initial Reactions

Centre for Cities Reaction

We are impressed by the principles which Leitch has used to underpin recommendations, but we’re not sure about the recommendation to build on existing structures. For instance, will it bring greater responsiveness to local conditions and local demand?

Of the specific recommendations, the following will have the biggest impact for towns and cities:

• Improving basic skills
• Increasing people’s aspirations and awareness of the value of skills
• Creating a new integrated employment and skills service.

We particularly welcome the integration of skills and employment services, which is a step forward in tackling worklessness, but need more detail. Streamlining the Learning and Skills Council is also welcome and overdue.

A new Commission for Employment and Skills with a network of lower level Employment and Skills Boards should strengthen employer engagement, but seems to be a rather toothless tiger. We need more detail on the role and responsibilities of the Employment and Skills Boards, which should come with the Treasury’s review of sub national economic development and regeneration.

It’s going to be a tough challenge to encourage employers to invest more in “portable skills” for their employees – transferable skills are the most vulnerable to ‘freeriding’ on the investment of others. Evaluation of the Employer Training Pilots by the Institute for Fiscal Studies found that there was little evidence of additional training being provided, suggesting that employers were substituting the government subsidy for there own investment in training.

Leitch touches on education and schooling for young people, but I am not so sure that concentrating so much on the current stock of adult workers is right. The interim report showed that the cost benefit ratios for improving the skills of those still at school were much better than improving adult skills. In the long term, wouldn’t it be better to concentrate more on the flow of young people coming through than the current stock of adults?

It’s not all that easy to see what the costs of recommendations and financial implications are, but there was a lot on this in the interim report.

What does the Review say?

Current skills position

A provider/supply driven system.

The UK is falling behind competitors but appears to be better on high level skills than low and intermediate.

• out of 30 OECD countries, the UK lies 17th on low skills, 20th on intermediate skills and 11th on high skills
• more than one in six young people leave school unable to read, write or add up properly.

Training by employers is disproportionately focused on high skilled workers who are five times more likely to be trained at work than low skill workers.

Some really good underpinning principles

• shared responsibility among employers, individuals and the Government for investment in skills with Government investment focusing on market failures, ensuring a basic platform of skills for all, targeting help where it is needed most
• focus on economically valuable skills
• demand-led skills provision
• adapt and respond – no one can accurately predict future demand for particular skills types.

Some pretty stretching targets

Talks about being a world leader in skills – upper quartile of OECD countries.

• 95 per cent of adults to achieve the basic skills of functional literacy and numeracy
• exceeding 90 per cent of adults qualified to at least Level 2
• shifting the balance of intermediate skills from Level 2 to Level 3
• exceeding 40 per cent of adults qualified to Level 4 and above.

The expected benefits if targets are met

Potential net benefit of at least £80 billion over 30 years, an annual average of £2.5 billion, through increased productivity and employment, based on the evidence and cost benefit model developed in the interim report.

A new partnership

Between Government, employer and individuals with the balance of responsibility being:

• the Government should provide the bulk of funding for basic skills and the platform of skills for employability, with employers cooperating to ensure employees are able to achieve these skills
• for higher intermediate skills (Level 3) employers and individuals should make a much higher contribution, in the order of at least 50 per cent
• at Level 4 and above, individuals and employers should pay the bulk of the additional costs as they will benefit most.

A demand led system

• Transform incentives of providers to react to employers and individuals rather than meeting supply side targets.
• Streamlining the Learning and Skills Council with the main role being to manage the Train to Gain programme (support to employers for training) and individual learning accounts (support to individuals for training).
• Funding should be routed through mechanisms which put effective purchasing power in the hands of the customers. Move away from funding the provider to funding the customer.

A Commission for Employment and Skills to strengthen employer voice, merging the Sector Skills Development Agency and National Employment Panel, to

• report progress, scrutinise, recommend policy and operational improvements.
• be responsible for Sector Skills Councils and a network of employment and skills boards
• recommends that the commission is chaired by a business leader and report to the PM or Chancellor.

The Commission will also ensure better integration of the employment and skills services.

Reform, re-licence and empower Sector Skills Councils with a lead role in developing vocational qualifications – only those approved by the SSC should get public funding, and role in raising employer engagement and demand for skills.

A Network of employer led Employment and Skills Boards reporting to the Commission:

“Their role will be to engage local employers, articulate local labour market needs, scrutinise local services and recommend improvements in integrating labour market and training support. Engaging local employers will improve the matching of work-ready applicants to sustainable jobs, including the disadvantaged. This network will rationalise and build on successful city, employer coalition and regional models.”

The Review recognises that employment and skills boards are already developing through local initiatives in a number of cities and the need to avoid a ‘one size fits all model’ but recommends that the Boards should be licensed by the Commission for Employment and Skills and that geography should fit with the conclusions of the forthcoming HM Treasury review of sub-national governance.