In December 2006, the government published a report which concluded that the UK must become a ‘world leader in skills’ if it is to secure its future economic and social prosperity. Among the key findings, the report identifies the considerable potential of optimising human resources, and assesses current weaknesses in national skill levels. The study sets out a series of targets and recommendations, and estimates the possible financial rewards in terms of productivity and employment growth. Overall, the leading employer and trade union organisations have welcomed the report.
On 5 December 2006, the UK Labour government published the final report of the Leitch Review of Skills, Prosperity for all in the global economy – world class skills (719Kb PDF), which recommends ambitious new targets and far-reaching reforms aimed at making the UK a ‘world leader in skills’ by 2020. The report is the culmination of a lengthy consultation process which began in 2004 when the Chancellor of the Exchequer, Gordon Brown, and the then Secretary of State for Education and Skills, Charles Clarke, asked Lord Sandy Leitch, the former head of Zurich Financial Services, to lead an independent review of the UK’s long-term skill needs.
Key findings
In his foreword to the report, Lord Leitch writes that:
For developed countries who cannot compete on natural resources and low labour costs, success [in the modern global economy] demands a more service-led economy and high value-added industry.
In the 21st century, our natural resource is our people – and their potential is both untapped and vast. Skills will unlock that potential. The prize for our country will be enormous – higher productivity, the creation of wealth and social justice.
Without increased skills, we would condemn ourselves to a lingering decline in competitiveness, diminishing economic growth and a bleaker future for all. The case for action is compelling and urgent. Becoming a world leader in skills will enable the UK to compete with the best in the world.
Lord Leitch argues that the scale of the challenge facing the UK is daunting, although he remains optimistic in achieving the objectives of higher national skill levels. Despite relatively low unemployment and sound economic growth, the UK confronts a persistent productivity gap with major competitors, such as France, Germany and the US (UK9805121F). The UK also suffers from ‘serious social disparities with high levels of child poverty, poor employment rates for the disadvantaged, regional disparities and relatively high income inequality. Improving our skill levels,’ Lord Leitch insists, ‘can address all of these problems.’
The UK to become a world leader in skills by 2020
The report makes it clear that, despite deficits in the UK skills base, progress has been made over the last decade in this area. The proportion of people qualified to degree level or above increased from 21% of the adult population in 1994 to 29% in 2005, while the proportion with no qualifications declined from 22% to 13%. However, considerable weaknesses remain compared with many other developed economies, such as the following:
- out of 30 Organisation for Economic Cooperation and Development (OECD) countries, the UK ranks 17th on low skills, 20th on intermediate skills and 11th on high skills;
- more than one third of adults do not hold the equivalent of a basic school leaving qualification;
- five million UK adults lack functional literacy;
- 17 million UK adults have difficulty with numbers;
- more than one in six young people leave school unable to read, write or add up properly.
The report argues that low skills not only hinder productivity and growth but also risk a ‘lost generation cut off permanently from labour market opportunity’. The main message is that, ‘where skills were once a key driver of prosperity and fairness, they are now the key driver.’
With other countries also investing in skills – many setting of from an already higher base – being world class, the report indicates, has become a ‘moving target’. The study acknowledges that, even if current targets for skills supply are met, the UK’s comparative position will not have improved significantly by 2020. On this basis, the report recommends that ‘the UK commit to becoming a world leader in skills by 2020, benchmarked against the upper quartile of the OECD’. Towards that objective, the study puts forward the following aims:
- 95% of working age adults should have basic skills in both functional literacy and numeracy, increasing from 85% and 79% respectively in 2005;
- more than 90% of adults should be skilled to level 2, the standard expected of a school leaver completing compulsory education aged 16 years, namely five General Certificates of Secondary Education (GCSEs) at grades A–C, or their vocational equivalents. This target represents an increase from 69% of adults in 2005;
- the number of apprentices should be increased to 500,000 persons each year;
- more than 40% of adults should be skilled to graduate level and above, increasing from 29% in 2005.
However, the report adds an important proviso, noting that, ‘these ambitions will not deliver economic benefits unless they are based on economically valuable skills that are effectively used in the workplace.’
Structural reforms
The report emphasises the need to deliver economically valuable skills through a more streamlined, demand-led skills system that is responsive to both employer and individual needs. Key recommendations include the following:
- increasing skill attainment at all levels;
- routing public funding of vocational skills through ‘Train to Gain’ (UK0505107F) and ‘Learner Accounts’ by 2010;
- strengthening the input of employers in relation to skills through the creation of a new Commission for Employment and Skills;
- increasing employer engagement and investment in skills by ensuring that only vocational qualifications approved by Sector Skills Councils (UK0211105F) qualify for public funding;
- giving employers until 2010 to implement a voluntary pledge to enable workers to attain basic skills and a first level 2 qualification, or face the introduction of a statutory right for employees to receive such training;
- increasing employer investment in higher level skills, particularly in apprenticeships and in degree or post-graduate levels;
- raising people’s awareness of the value of skills through the creation of a new universal adult career service to identify skill needs with a skills ‘health check’ available for all;
- creating a new integrated employment and skills service together with a network of employer-led Employment and Skills Boards.
In addition to reduced poverty and inequality, the report estimates a potential net benefit of at least £80 billion (approximately €121 billion as of 26 January 2007) over 30 years, achieved through a boost in the productivity growth rate of up to 15% and an increase in the employment growth rate by around 10%.
Social partner responses
The report was welcomed by both employers and trade unions. The Director-General of the Confederation of British Industry (CBI), Richard Lambert, stated: ‘Companies will wholeheartedly endorse Lord Leitch’s central tenet that the skill needs of employers – and their employees – should be put at the heart of the UK’s adult training system.’ However, he urged caution when it came to compelling companies to train their staff, adding: ‘Despite suggestions that compulsion could be revisited, Lord Leitch is right to have focused on incentives and reforms, rather than compelling firms to train, for which a good case has never been made.’
Nevertheless, the General Secretary of the Trades Union Congress (TUC), Brendan Barber, insisted that it was necessary to bring more pressure on employers to train workers. He commented: ‘The TUC welcomes the Leitch Review of Skills as an ambitious and coherent strategy to revolutionise workplace learning and eradicate low skills by 2020. This means that the clock is ticking for the one in three employers who fail to train. Those employers are now on notice to clean up their act by 2010, or the new individual right to workplace training will be implemented.’ He added: ‘The new right to workplace training would transform the lives of millions, especially low skilled and low paid workers, as well as boosting Britain’s competitiveness.’
Eileen Arney, Learning and Development Adviser at the Chartered Institute of Personnel and Development (CIPD) commended the review but emphasised that the challenge remained one of ensuring that skills were effectively used in the workplace. She stated: ‘Poor management all too often means that skills are not used to best effect, and investment in workplace learning does not deliver the intended benefits.’ She cited a new CIPD/Ipsos MORI survey of 2,000 UK employees which found that almost one in three workers did not feel that they were being managed well enough to make effective use of their existing skills.
Commentary
The Leitch report has been widely welcomed for outlining an ambitious strategy to transform the UK from skills laggard to skills leader by 2020. Both the CBI and the TUC have praised Lord Leitch’s vision but remain divided over the suggestion that employers should be compelled to train workers to level 2 if the proposed voluntary pledge fails to deliver sufficient progress by 2010.
The real question, however, is whether the Leitch blueprint is capable of delivering the prize of improved competitiveness and productivity, and lower levels of poverty and income inequality. This is a hugely ambitious agenda and one might ask whether too much is being expected of skills policy on its own. It is worth remembering that the UK has been pursuing a ‘skills revolution’ for the past quarter of a century. While considerable improvements have been made in the supply of skills during this time, the productivity miracle that policymakers hope for has not materialised. Part of the explanation may be that many organisations are not making effective use of workers’ skills.
This may partly reflect weaknesses in UK management that were signalled in the 2003 Porter report on productivity (UK0312103F) and which are addressed to some extent in the Leitch report. However, the problem may go deeper than this. Research has revealed, for instance, that many UK companies continue to compete in markets for relatively standardised goods and services, and do not require high level skills from the majority of their employees. Turning the UK into a world leader in skills is certainly a formidable challenge. However, ensuring that those skills are used in the workplace and harnessed to improved economic performance is likely to be an even bigger test.
Jonathan Payne, SKOPE, University of Cardiff