The writer is an economist at the LSE and former director of its Centre for Economic Performance
Growth depends as much on skills as on physical capital. Yet, while the UK government has started well on investment in physical infrastructure, it has still to reveal its hand on skills.
The challenge is huge. By the age of 18, roughly a third of our young people have ceased to receive any education or training. This is much worse than in competing countries. It is a key reason for the UK’s low productivity, low pay and low social mobility. It adds to the welfare bill as more young people end up, tragically, stuck on the claimants list. It is truly shocking.
To change it, we must address the severe shortage of apprenticeships. If you qualify for university, you can expect to find a place. If you qualify for an apprenticeship, the prospect is totally different. On the government’s matching scheme in recent years there have been three times more applicants than places available. The number of apprenticeships designed for young people, as a vocational equivalent to A-levels, is barely half of what it was 10 years ago.
Reversing this should be a top priority. It requires a flagship policy signalling the desire to help young people. In 2009, the previous Labour government passed the Apprenticeships Act. This aimed to ensure that from 2013 every young, qualified applicant received an apprenticeship offer. (The coalition removed this duty).
We need a comparable commitment from the Starmer government. By 2029, there should be enough training places up to the equivalent of A-levels to ensure that every qualified applicant up to age 21 gets an offer. In other words, we need an apprenticeship guarantee.
This is vital for the government’s mission of opportunity as well as growth. It would radically improve social mobility, which has always relied heavily on people rising through apprenticeships. Social mobility has fallen since that route became weaker. And skills policy must go well beyond its current aim of meeting shortages reported by employers (which is easiest done by retraining older existing employees). The primary educational job of the state is to get young people off to a proper start in life — becoming as skilled as possible. That is in everybody’s interest, including the employers.
At 15, our young people now do better than those in France and Germany in public exams. But then too many fall behind. Those who go to university will find a place, but those who want vocational training face an acute shortage.
Is an apprenticeship guarantee feasible? It can only be delivered if employers provide the places. The Chartered Institute for Personnel Development has found that 89 per cent of employers support the idea of a guarantee and 60 per cent believe apprenticeships should primarily be for the young.
But to make it happen would require a huge effort. Each local authority would have to assess the number of places needed, with help from central government, and then persuade employers to provide enough places. There would also need to be a recruitment subsidy for SMEs in high unemployment areas.
The cost is manageable within the Growth and Skills Levy, the overhauled Apprenticeship Levy, which is compulsory for employers with a pay bill of over £3mn. By 2029, the basic guarantee would cost £1.4bn — one-third of the total proceeds of the levy in that year. However, employers will only devote this amount to young people if earmarked for that purpose. It would therefore have to be ringfenced. Labour’s manifesto promised to redirect funding to young people; this is the only sure mechanism for doing it.
Our country desperately needs radical change to provide hope for a better future. The present Youth Guarantee — of “education, training or help with finding work” — is not enough. The quality of the job matters hugely. A new apprenticeship guarantee would not only be fair, it is crucial for growth.
