Briefing | CIPD urges UK Chancellor to focus on skills in plans to boost growth

The government appears to be pinning its hopes to drive growth on its new industrial strategy, alongside planning reforms and talk of future infrastructure investments like the plan for Heathrow’s third runway. 

There is no argument that the chosen sectors in the industrial strategy such as defence, green energy, advanced manufacturing and life sciences are important to UK growth (and security) and deserve government support. But enhancing these sectors won’t be enough to meet the government’s ambition of improving living standards in every part of the UK, because they employ too few people and are disproportionately located in London and the south east. 

Consequently, it is crucial that the chancellor, in her Spring Statement this week and in the Spending Review in the summer, starts to outline the key areas of policy and spending that can improve the way workforce skills are developed and utilised across all sectors of the whole economy. The latest plans to boost investment in construction skills are welcome but are narrow and include skills programmes that still need reform. 

Tackling skills and qualification mismatch 

On the supply side of skills policy, there needs to be increased efforts to address the high level of mismatch between the qualifications and skills of the workforce and those needed by employers.

CIPD research shows overqualification is a UK-wide phenomenon and that overqualified workers typically experience lower job satisfaction, motivation and wage growth. The problem is particularly acute for many young people, who are increasingly finding that the expected return from higher education of a well-paid, graduate level job is failing to materialise.

New Apprenticeship Guarantee required  

Among the changes to skills policy needed to address both rising levels of overqualification and technical skills shortages is a much stronger emphasis on creating apprenticeship opportunities for young people. The government’s Youth Guarantee is a positive initiative but won’t address the collapse in apprenticeships provisions for young people in recent years.

Our research shows there is strong employer backing for a broader Apprenticeship Guarantee, which would provide a guaranteed apprenticeship place for young people aged 16-24. Labour’s Lord Layard made a persuasive argument for an Apprenticeship Guarantee in the Financial Times last week. Better training and employment opportunities for young people can also support efforts to improve their mental health and wellbeing and tackle rising economic inactivity.  

Besides improved apprenticeship provision, employer consultation on the design of the new Growth and Skills Levy should be fast-tracked to ensure it can improve how employers train their existing workforces. Designed in the right way, the levy can help tackle skills gaps and shortages, supporting technology adoption and the transition to net zero. 

Improving management skills and technology adoption 

On the demand side of skills, raising management capability will also be essential if we are to address the UK’s major weakness of poor diffusion of new technology and ideas innovation across the economy.

Evidence from the London School of Economics suggests raising management capability is central to supporting technology adoption and efforts to increase productivity. Other research also suggests a strong link in particular, between HR and management practices on skills development and the use and responsible adoption of new technology such as AI.  

An effective way for the government to better help businesses strengthen their HR and wider management capability would be to improve publicly-funded business support.  

There is no shortage of publicly-funded business support services available to SMEs yet take-up is often low and the support available is often criticised for extreme variability in cost, quality and availability. 

The government should review publicly-funded business support services and programmes with a view to developing a cost effective, accessible business support service for SMEs to support improvements in people management, skills development and technology adoption.

Keeping people working well 

Steps to improve organisations’ HR and people management capability would help government efforts to cut more from the welfare bill through its ‘Keep Britain Working’ review.  

Equipping managers with core people management skills lies at the heart of working cultures that get the best out of people while supporting their wellbeing. We also need more businesses to develop effective sickness absence management policies such as return to work interviews, reasonable adjustments, flexible working and phased returns to work.

SMEs in particular need help in this area as well as improved access to occupational health support.  

Labour market regulation and enforcement 

Finally, it is important that the UK Chancellor does not overlook what will be needed to ensure the Employment Rights Bill measures support rather than undermine efforts to create jobs and get more people into work.  

There is a need for more resources for Acas, the Central Arbitration Committee and an increased capacity in the employment tribunal system.  

It is also essential that the government continues to consult with employers as details of the key measures in the bill are finalised, to ensure they don’t deter employers from hiring candidates with health conditions or more development needs.  

The headlines from this Spring Statement may focus on the savings it proposes but with a real focus on skills and the future of our workforce it could also lay the groundwork for the growth we need.