ISE’s Stephen Isherwood considers the skills and education reforms where ambition meets real-world challenges.
The UK government’s latest plans to reshape the skills and education landscape signal a serious effort to address long-standing productivity issues driven by skills shortages and regional inequality.
Yet, while these reforms hold promise, they also face significant challenges. The next 12 to 18 months are crucial if the government is going to establish momentum for meaningful reform.
Skills England: ambitious goals, complex execution
The centrepiece of the government’s reform is Skills England, designed to tackle the skills shortages plaguing sectors like healthcare, engineering, and tech.
The initiative promises to unify the fragmented skills system by bringing together businesses, training providers, and government to better match education with labour market needs.
At the core of these reforms is the growth and skills levy, which replaces the apprenticeship levy, offering businesses greater flexibility in spending on training.
This shift is a response to criticisms that the current system is too rigid, with employers directing funds to high-level apprenticeships at the expense of those at lower skill levels.
The government also plans to expand modular upskilling programs, aiming to address the rapidly evolving needs of industries.
However, implementing change in a complex system is going to be a challenge. The integration of various stakeholders, from local governments to educational institutions, is no small feat. Ensuring smooth coordination will require a high degree of consultation and careful management to avoid deepening existing inequalities.
Regional inequality and the skills divide
One of the core aims of the Skills England initiative is reducing regional disparities in skills and employment.
The plan involves giving mayoral authorities more control over funding decisions and curriculum planning to better align training with local labour market needs. While this sounds promising, devolving control to local governments carries risks.
Misaligned funding and mismatched priorities between local and national government could easily delay progress.
If poorly executed, it could deepen existing inequalities, particularly if wealthier regions are able to attract more funding or better resources than struggling areas. And employers will still have to navigate different systems across the UK (skills and education are devolved policy areas).
Additionally, the government’s intention to improve career guidance is positive but may not go far enough. There are concerns that rural areas and disadvantaged regions may lack the infrastructure and resources needed.
Further education: bridging the funding gap
The government’s renewed focus on Further Education (FE) colleges is critical to filling regional skills gaps.
FE colleges are seen as essential in preparing workers for high-growth industries, yet they have long been underfunded, “a long historical pattern where further education receives the smallest increases when overall spending rises and the largest cuts when governments are looking to reduce spending”.
While the government has promised more targeted investment, it’s unclear where this could come from or whether this will be enough to meet the potential demand. Another concern is that FE colleges will be expected to rapidly adapt their offerings to meet local labour market demands and risk being spread too thin.
Higher education: a funding crisis in waiting
On the higher education front, the situation is equally fraught. University funding has reached a crisis point, with the £9,250 annual tuition fee cap unchanged since 2017.
Rising inflation leading to increased operational costs mean universities are now facing real-term funding cuts. This financial squeeze threatens the quality of education and student services universities can deliver.
Then there’s the student loan debt problem. Around 20% of 2023 student loans are predicted never to be fully repaid, and lower earning graduates actually pay back more over their lifetime than high earning graduates.
The government has already lowered the repayment threshold to £25,000 in an effort to increase loan repayments, but this is unlikely to solve the deeper problem of a system some see as financially unsustainable.
Another potential fix—raising tuition fees to reflect inflation— has received press coverage but would likely be met with strong public opposition.
Universities have increasingly relied on international students, who pay higher fees, to subsidise their operations. However, immigration policy changes, particularly around student visas and dependent rules, have already led to a 17% drop in applications.
The government faces a delicate balancing act between political pressures to tighten immigration and universities’ need for international fee income.
Ambition meets real-world challenges
The UK government’s plans for skills and education reform are bold and needed, but the road ahead is fraught with complexity. These reforms must navigate a minefield of financial, political, and structural challenges at a time when the economy is not growing at a rate that can support much additional funding.
But without significant investment, and careful management, the risk is that the reforms may fall short of their ambitious goals, leaving both the workforce and the economy ill-prepared for the future.
Political fortitude, meaningful collaboration with industry, flexibility in implementation, as well as adequate funding, will all be crucial if the government is to succeed in creating a skills landscape fit for a modern, dynamic economy.