UK Skills: The long- term challenge
The Leitch Interim Review

Strong Economy
High Employment,
… but a Lack of Ambition

The above three lines seem to accurately convey where we are today. And it is that 'lack of ambition' identified by Leitch that must worry us all. Leitch's Interim report is excellent – particularly the analysis of productivity and the impact of demographic change. Whilst it is strong on analysis, the Interim report says little about what Government now needs to do. For the hard hitting recommendations, we will have to wait until the full report, due to be published next year.

The Review was commissioned as part of the 2004 pre Budget Report. Its remit was "to identify the UK's optimal skills mix in 2020…and to consider the policy implications of achieving the level of change required."

Andy Dean

NEWS FOCUS in this edition

The Report

As a start, here is an excerpt from the review… “The analysis presented here shows that the UK needs to be far more ambitious. Current targets will be difficult to achieve but can bring significant improvement. This current ambition will not go far enough to improve the UK’s comparative skills base or ensure that the economy is well positioned to operate in increasingly competitive global markets. It will not go far enough to improve social justice. The UK must confront the challenges identified and set a much higher ambition for skills if it is to become world class.”

It’s that call for a more ambitious approach to raising skill levels that is the most striking for as analysis undertaken as part of the Review shows, even if the Government were to meet all its targets by 2020, "the nation's human capital will still fail to be world class," we would, in other words, be running just to stand still.

Overview of key findings

• The UK has a strong economy and world-leading employment levels, but its productivity trails many key comparator nations; poor skills are a key contributor to this problem as well as having wider impacts on social welfare.

• Over the last decade, the skills profile of working age people in UK has improved. For example, the proportion with a degree has increased from one fifth to over one quarter of the population.

• Despite these improvements, the UK still does not have a world-class skills base:
· Over one third of adults in the UK do not have a basic school-leaving qualification – double the proportion of Canada and Germany;
· Five million people have no qualifications at all; and
· One in six do not have the literacy skills expected of an 11 year old and half do not have these levels of functional numeracy.

• Looking ahead to 2020, global, demographic and technological change will place an even greater premium on the UK’s skills profile.

• New analysis conducted by the Review shows that, if the Government meets its current ambitious targets for improving the UK’s skills, by 2020, the proportion of working age people without any qualifications will fall to 4 per cent; and the proportion holding a degree will increase from 27 per cent to 38 per cent; and • this will have significant benefits for the economy – increasing annual productivity growth by 0.2 per cent with a net benefit to the economy of
£ 3 billion a year, equivalent to 0.3 per cent of GDP.

• However, even if the UK can meet these targets, the nation’s human capital will still fail to be world-class. Considerable problems will remain; at least 4 million adults will still not have the literacy skills expected of an 11 year old and 12 million would not have numeracy skills at this level.

• The Review has analysed more ambitious scenarios for 2020:
· Tackling the stock of low skilled adults without qualifications, basic literacy and numeracy;
· Investing more in intermediate skills; and
· Further increasing the proportion of adults holding a degree.

• In all of the scenarios, the analysis shows the significant economic and social benefits that would result from higher productivity and employment gained through improving skills.

The deficit side of UK skills is thus fairly well defined. What makes things different now, as the Report clearly argues, is the emergence of some significant global 'shifts.' Firstly a shift in the power base of economic activity towards Asia and Eastern Europe. This too should not come as a surprise, indeed the Chancellor referred to it specifically when he commissioned the Leitch Review last year. The Report underlines the point that by 2015, China is likely to become the third largest economy in the world after the USA and Japan and that "these global changes will mean that the UK is likely to have a decreasing share of output in the industries where other countries achieve comparative advantage."

The Review has modelled some more ambitious scenarios for 2020. These include "training an additional 3.5m adults to gain a level 2 qualification, upskilling the same number to gain a level 3 and increasing the number of adults with at least degree level qualifications also by 3.5m." Based largely on improved productivity, this could deliver an annual average additional net benefit of 0.3%, 0.4% and 0.45% respectively of GDP though of course would come at a cost. The annual cost for such improvements to low skills, according to the Report would be £1.5bn, £3bn for intermediate skills and £9bn on improving the proportion of higher level skills.

On top of that, the Government has set ambitious plans to improve the skills profile of the UK at all levels; the 14 education and training related public service agreement targets on adult skills, level 2 and HE participation amongst others, bear testimony to that, but is it, will it, be enough to enable the UK to compete globally? According to this Report, the answer is no, "current ambitions do not go far enough."

Where next

The next phase of the Review will consider:

· The skills profile that the UK should aim to achieve in 2020 in order to drive growth, productivity and support social justice over the longer-term;

· The appropriate balance of responsibility between Government, employers and individuals for the action required to meet this level of change; and

· The policy framework required to support this.

The Leitch Review will report its final conclusions and recommendations to the Government in 2006.

SLIM Comments

This interim report accurately assesses many of our failings… but next year's work on the Review will be crucial… there will be a need to make 'political' recommendations, ones that will comment, indirectly or directly, upon present and past initiatives and make firm suggestions for how government, Individuals, Business etc will have to alter current practices and perhaps have to pay for skills. Will we see another reform of the LSCs… , and what of the SSC developments… and the continuing voluntary-policy of the private sector… (could the CBI accept anything else?) and how will individuals be inspired… From what we’ve seen so far from Leitch – this could be a significant moment in UK Skills Policy. As Leitch puts it…

"Being world class is a moving target…we face critical choices on priorities" and most significantly of all, "there is consensus that we need to be much more ambitious." And if we aren’t… "the nation's human capital will fail to be world class." The final report when published should be a blue-print for a very different 15 years of policy… but we've been here before… and the old obstacles remain – has enough really changed to enable us to remove them. I remain hopeful, but unconvinced.

More at:

Leitch Review Home Page

NIACE’s thoughtful response

The Guardian’s take

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