Lord Leitch manages to hold up both a mirror and a torch to UK Skills in this impressive Interim Report issued this week alongside the pre Budget Report. The mirror reflects the current profile of UK Skills while the torch highlights where we need to be by 2020. The overriding message bouncing between the two is ‘ignore this at your peril.’
The tone is set in the opening Foreword. “This is a formidable challenge…being world class is a moving target…we face critical choices on priorities” and most significantly of all, “there is consensus that we need to be much more ambitious.” It’s that call for a more ambitious approach to raising skill levels that is the most striking for as analysis undertaken as part of the Review shows, even if the Government were to meet all its targets by 2020, “the nation’s human capital will still fail to be world class,” we would, in other words, be running just to stand still. Hence the need for a more ambitious approach.
The Review of UK Skills that Lord Leitch has been chairing for much of this year was commissioned as part of the 2004 pre Budget Report. Its remit was “to identify the UK’s optimal skills mix in 2020…and to consider the policy implications of achieving the level of change required.” This 170+ page document provides an Interim Report and a final Report will follow in 2006.
The weak points in the UK skills base that are picked out in the Report’s mirror should not come as a surprise; they have been highlighted in numerous skill Reports over the years. In a word, “the proportion of adults in the UK without a basic school leaving qualification is double that of Canada and Germany; over 5m people of working age in the UK have no qualification at all; 1 in 6 adults have low literacy levels and half have low levels of numeracy.” On top of that skill levels are unequally distributed. Even in an area generally regarded in OECD Reports and elsewhere as a UK strength, higher level skills, countries such as the USA, Japan and Canada are already ahead and, as Ministers regularly remind us, countries such as China and India are fast catching up.
Respondents to the Review’s Call for Evidence earlier in the year cited similar concerns, albeit from differing perspectives. These crystallised into five skill needs; to improve basic skills, to improve generic and transferable skills, to improve maths and science achievement by 16 year olds, to increase the supply of intermediate and technical skills and to improve the supply of high level skills.
The deficit side of UK skills is thus fairly well defined. What makes things different now, as the Report clearly argues, is the emergence of some significant global ‘shifts.’ Firstly a shift in the power base of economic activity towards Asia and Eastern Europe. This too should not come as a surprise, indeed the Chancellor referred to it specifically when he commissioned the Leitch Review last year. The Report underlines the point that by 2015, China is likely to become the third largest economy in the world after the USA and Japan and that “these global changes will mean that the UK is likely to have a decreasing share of output in the industries where other countries achieve comparative advantage.” Secondly is another familiar shift but one beginning to gain almost universal strategic importance and that is the shift in the demographic balance. The oft quoted statistic is that by 2020 there will be 2m more people over the age of 50 than there are today. This makes global migration flows and achievement levels of young people, even though there may not be so many of them, doubly important as they provide the future labour stock. It also intensifies the importance of upskilling, retraining and lifelong learning for older workers. Thirdly there is the shift in the nature of employment with occupations at one end of the spectrum increasingly requiring higher levels of skills and those at the other requiring different skill sets as they become more service centre based. And fourthly, there are the shifts resulting from new technology and evident in new ways of producing goods and services, faster information flows, ‘fragmentation of production chains’ and new forms of specialism.
There are other noteworthy shifts but its these four that the Report sees as exerting the greatest pressure on UK skills currently. So, is it all bad news, are we left just competing for the Eurovision Song Contest? There are some bright sides and the Report points to four. The UK has a strong economy and high levels of employment; the skills profile of working age people is improving; there is a growing number of graduates and, although not everyone is convinced, standards in schools are improving. In effect, “as the 4th largest economy in the world with the highest employment rate in the G7 group of major industrialised countries,” the UK has a substantial platform from which to build.
On top of that, the Government has set ambitious plans to improve the skills profile of the UK at all levels; the 14 education and training related public service agreement targets on adult skills, level 2 and HE participation amongst others, bear testimony to that, but is it, will it, be enough to enable the UK to compete globally? According to this Report, the answer is no, “current ambitions do not go far enough.”
The Review has modelled some more ambitious scenarios for 2020. These include “training an additional 3.5m adults to gain a level 2 qualification, upskilling the same number to gain a level 3 and increasing the number of adults with at least degree level qualifications also by 3.5m.” Based largely on improved productivity, this could deliver an annual average additional net benefit of 0.3%, 0.4% and 0.45% respectively of GDP though of course would come at a cost. The annual cost for such improvements to low skills, according to the Report would be £1.5bn, £3bn for intermediate skills and £9bn on improving the proportion of higher level skills.
But critically this requires everyone, employers, individuals, providers and Government to be whistling the same tune. Hence why in the final Report, the Review will consider the skills profile that the UK should achieve by 2020, the appropriate balance of responsibilities required and the policy framework needed to support it all. It should make for a fascinating final Report and whistles all round.
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Briefing created by Steve Besley at Edexcel, 8 December 2005