In its submission to HM Treasury earlier in the autumn, the CIPD called for a broader focus on economic growth that can help boost skills investment and productivity across all sectors in the UK. We highlighted the need for the government to work more closely with employers to address skill shortages and to raise job quality, labour market participation and productivity.
The economic context is that while inflationary pressures are moderating they remain considerable, so the high cost of doing business and the ongoing cost-of-living crisis are also likely to persist for some time. The labour market remains tight and still suffers from skills shortages in many areas. Notably, economic inactivity due to ill-health, alongside rising sickness absence has further complicated the workforce challenges.
Our key call to the Chancellor is to make a strategic shift: we need policies that unlock greater business investment, particularly in people management capabilities, skills development, and technology across the economy. This should be the linchpin to boosting productivity and driving growth across all sectors and firm sizes. That means a holistic strategy that goes beyond and enhances the current, relatively narrow focus on boosting growth in research and development (R&D) and new high-tech sectors and green growth industries.
The emphasis on increasing investment on R&D and high-tech sectors is of course critically important but too narrow to raise growth and living standards across the economy. We also need a complementary focus on policies that can support bottom-up workplace innovation and skills investment, especially in 'everyday economy' sectors such as retail, hospitality, and social care.
To support this more inclusive approach to boosting productivity and growth, there are at least three important areas the government could address or begin to address in the Autumn Statement:
- First, we need to develop a high-quality, locally delivered business support service, specifically targeting small and medium-sized enterprises (SMEs). The focus should be on enhancing HR, people management, and development capabilities among SMEs, where there's currently a notable weakness.
- Second, we need reform of the Apprenticeship Levy into a more flexible training levy. In its current form it has failed to reverse the long-standing decline in employer investment in training and has led to a significant drop in apprenticeship starts, especially for young people. In 2021/22, there were approximately 349,200 apprenticeship starts in England - a 31% decline from the pre-Apprenticeship Levy figures of 509,400 starts in 2015/16.
- Third, the pandemic and the subsequent challenges we’ve faced has highlighted the shortcoming of Statutory Sick Pay (SSP), which needs reforming and enhancing to provide a stronger financial safety net and help prevent people from falling out of employment.
Our call for a step change in quality of business support for SMEs draws on our research and recognises the particular challenges faced by small firms that hold them back from investing in skills and raising productivity.
And our call to reform the Apprenticeship Levy isn't just about correcting some of its unintended consequences. It's also a call to adapt to the evolving needs of businesses and the workforce. A more flexible training levy would empower employers to invest in a spectrum of accredited training and skills development, fostering an environment where learning is dynamic and responsive to industry demand. Rather than maintaining a rigid approach that risks falling further and further behind the needs of our economy.
Our proposed reforms to Statutory Sick Pay (SSP) underline the need to prioritise employee health and wellbeing if we’re going to tackle the challenges of a tight labour market and an aging workforce. By raising the rate of SSP and providing greater flexibility in how it is used, for example, to support phased returns to work, the government has an opportunity to better support the health and economic participation of the workforce.
In this Autumn Statement, businesses of all sizes and across all sectors are looking to the Chancellor for a strategic plan that goes beyond short-term fixes. And our proposed changes aren't just about navigating the current economic climate, they are about supporting employer investment in skills and the wellbeing of the workforce for the long term.
The recent reshuffle suggested a change in the direction of travel for this government. The Autumn Statement is an opportunity for the Chancellor to lay the foundations for what that looks like. That means not just a few headline-grabbing policy announcements but a strategic vision that can chart the course for a resilient, innovative, and prosperous long-term future for businesses.
