Improving our skills base

According to OECD and a report from the UKCES, the UK is ranked 24th out of 33 OECD countries with 37% of the adult population currently qualified at intermediate level as of 2013. This holds back our economy by creating skills gaps for employers. It also limits people’s career prospects, given the strong links between intermediate skills and earning potential.

People aged 24 and over are no longer entitled to Government funding for their learning at this level. Instead they have to either pay their fees up front, or take out a university-style Advanced Learning Loan. Since their introduction, learning at this level has fallen by at least one third, with £250m of potential learning opportunities lost in 2014/15 alone as take-up has fallen short of expectations.

The Learning and Work Institute has argued that three market failures have caused this low take-up:

  • Poor information about the link between learning and earning. For people to be prepared to take on debt to invest in their learning, they will need to know that they will earn enough as a result of improving their skills to pay the loan back. In other words, that it is a sound investment. Yet information on the pay and job prospects of people completing particular courses and particular colleges is not readily available;
  • Lack of bite size learning. Many employers and individuals want to learn particular skills or in bite size modules. Yet the loan system is focused on full qualifications, rather than modules or the outcome of learning; and
  • Flexible, tailored delivery. People and employers are more likely to invest in their learning if it is employer led (to maximize the link to career prospects) and flexibly delivered (in both timing and mode and place of delivery).

The Advanced Learning Loan system is expected to be extended to younger age groups and lower levels of learning in the Spending Review. It is therefore essential to make the system work if the UK’s economy, employers and adults are to gain the skills they need.

Our devolution ask

Cities and local areas should take a lead role in driving up demand for Advanced Learning Loans and keep a share of the money if they are able to boost loan repayment rates by supporting students to boost their earnings.

The Government estimates that 50% of the money loaned to people through Advanced Learning Loans will not be repaid, mostly because learners will not earn enough money after their course to do so. If cities are able to boost repayment rates by working with providers to tailor learning to employer needs and supporting learners with career advancement support, then the Exchequer will benefit. This financial benefit should be shared with local areas, in line with existing City Deal agreements on business rates and other taxes. This money can then be invested in further learning opportunities.

How we can help

The Learning and Work Institute has worked with BIS and the SFA for a number of years to assess the impact of loans and understand the factors that encourage and prevent people from investing in learning.

In 2014/15, we worked with the Humber LEP to bring together employers and providers to consider how best to increase the number of traineeships in the STEM sectors.

We are now beginning a flagship programme to trial new approaches to promoting and delivering loans in London, working in partnership with employers, providers and local authorities.

For more information please contact Fiona Aldridge