Skills are a key part of the government’s agenda, seen as vital for unlocking its ‘Levelling Up’ commitments in the light of skills shortages in areas like engineering, IT, and accounting. These shortages are long-standing. A 2018 study by the Open University found that skills shortages were costing UK companies £6.3 billion a year due to factors such as training and additional recruitment costs.
The government has acknowledged these shortages, and the need to ensure the education and training system is able to cope with the ever-increasing demands placed on it. In a foreword to the January 2021 White Paper on skills, the then Education Secretary Gavin Williamson indicated that more opportunities for training needed to be made available. As part of its response, the government has introduced a new policy – the Lifetime Skills Guarantee. It hopes that this initiative will address changing skills needs and employment patterns by giving people the opportunity to train and retrain throughout their lives.
What is it?
The Prime Minister announced the Lifetime Skills Guarantee in a September 2020 speech. The scheme covers a lot of ground policy ground. Pledges include increasing investment in FE colleges, introducing a lifelong loan entitlement, and a new funding system for higher technical courses. Only two policies, however, are being funded by the National Skills Fund: a new Level 3 qualification offer for adults and the extension of digital skills bootcamps.
The qualification offer, which commenced in April 2021, aims to give all adults without a Level 3 qualification (equivalent to A level) access to a fully-funded course. Previously, only adults under the age of 24 could access funding. The courses are taught by a range of state and private providers.
The government maintains a list of eligible courses, with 379 currently listed, and has made digital, engineering, health, and construction qualifications a clear priority with 37, 51, 54, and 66 courses available respectively. Whilst course lists are subject to review, investors in training providers that deliver these courses are likely to be particular beneficiaries of the scheme.
A high priority, and a long-term solution for a long-term problem
The Lifetime Skills Guarantee tackles big challenges, and the government has devoted significant effort to implementing it. The Guarantee was referenced multiple times in last month’s Budget, which also included a wider commitment to increase spending on skills by £3.8 billion by 2024/25 – a cash increase of 42% compared to 2019/20. These are not small pledges. The government has expended serious political capital on addressing the problem of skills shortages and, given this emphasis, is likely to release further funds in future years to support the scheme.
Announcing the Guarantee, the Prime Minister also made clear that the initiative is intended as a long-term scheme, rather than a short-term remedy to fill immediate skills gaps – that the nature of learning demands time and resources. He suggested that other countries have had an advantage over the UK when it comes to skills and technical education “for 100 years”. Indeed, the government’s Skills and Post-16 Education Bill confirmed that the planned rollout of the Lifelong Loan Entitlement, another major Guarantee commitment and one that aims to make it just as easy to secure loans for higher technical qualifications as for full-time degrees, remains over three years away in 2025.
Considering the CBI’s October 2020 analysis that predicted around 90% of employees would need to reskill by 2030, if the government is serious about this issue– and all indications suggest it is – then funding for initiatives like the Level 3 offer is likely to be enduring. The fact that only £375 million from the £2.5 billion National Skills Fund has been allocated for 2021/22 reinforces this. There are an estimated 11 million people who would be able to access the free qualifications under the Level 3 offer. Given the political weight the government has placed on these Level 3 offers – literally labelling them a ‘Lifetime Guarantee’ – the £95 million that is currently funding courses over 2021/22 is very likely to represent a prelude to further funding in the future.
The outlook for investors
The Lifetime Skills Guarantee is a key piece of the government’s education agenda. Both the Prime Minister and the Chancellor have been personally involved in its roll-out and have alluded to long-term planning happening in this space. This suggests that scheme will benefit from ongoing investment, particularly in sectors which government has identified as priorities. Technicians, engineers and social care professionals are consistently namechecked by ministers as occupations that the country lacks, and current course lists reflect this. Providers with speciality in these areas look set to benefit from the increased demand that funding from the scheme is likely to stimulate. As a result, investors in the technical education sector will want to monitor the government’s developing thinking closely in order to identify potential opportunities from future funding allocations for the scheme.