Skills in London

  • By Spike van der Vliet-Firth

This is a crucial time for skills in London, as a government policy has undergone transformation in areas such as apprenticeships. It also provides opportunities to develop in this area, and make the case for more long term devolved powers for local authorites.

Background

London’s skills challenges and opportunites
This is a crucial time for skills in London, as highlighted in a report by the APPG for London, because:

  • Skills shortages still persist for employers - almost a quarter (23 per cent) of all vacancies in London are due to a lack of applicants with the right skills, while almost half of firms (42 per cent) are not confident they will be able to recruit people with the higher-level skills their organisation needs over the next five years.
     
  • London’s globalism has allowed employers to access skills from abroad with relative ease. Brexit is likely to significantly reduce this labour supply, with sectors such as construction and accommodation and food services particularly reliant on EU migrants. They account for a third of all jobs in these sectors. But it could also encourage employers to invest more in skills and grow the talent that already exists in London.
     
  • Too many Londoners lack the basic skills to take advantage of London’s job opportunities. One in three Londoners leave school at age 16 without having achieved a standard pass grade in GCSE English and maths. Some 210,000 working-age adults in London cannot speak English well and around 25,000 cannot speak English at all.
     
  • Inequalities persist. Young people, disabled adults, BAME groups and women are under-represented in the labour market, especially in higher skilled, better paid jobs. Too many Londoners are stuck in low paid, low skilled jobs.
     
  • Automation and disruptive technologies will change skills needs and those on low incomes are likely to be most affected. It will also create new jobs. This means skills like creativity; collaboration and critical thinking will become much more important in helping Londoners deal with these changes, as outlined in this Centre for London report.

Analysis

The current skills system is too centralised and is not sufficiently responsive to the different needs of employers and local economies. The Adult Education Budget (AEB) is being devolved to the Mayor in 2019/20. The AEB aims to engage adults and provide the skills and learning they need to equip them for work, an apprenticeship or other learning. It is worth an estimated £310m a year in London. London borough Leaders will be working closely with the Mayor, alongside employers and providers, to shape this budget by sitting on the Skills for Londoners Board and considering how we might change the system so it better addresses the challenges above and is more responsive. The Mayor has just published his Skills for Londoners Strategy. The strategy explicitly acknowledges the role of boroughs and sub-regional partnerships in working with the Mayor on skills. All sub-regions are establishing Skills and Employment Boards to carry out this work.

Other parts of the skills system are undergoing change. The Apprenticeship Levy is a charge introduced by government in April 2017 that applies to all employers in the UK with a pay bill over £3 million. It is designed to put apprenticeship funding and development in the hands of employers and to help deliver the national target of three million apprenticeship starts by 2020.

An apprentice is now someone of any age and level of study who is developing new and substantive skills. The quality of apprenticeships is ensured by ‘Apprenticeship Standards’, designed by employer groups known as ‘trailblazers’.

The levy rate is 0.5 per cent of an employers’ playbill which is collected monthly via Pay as You Earn (PAYE). The levy affects all London boroughs as large employers. The levy funding sits in an online pot called the Digital Apprenticeship Service (DAS) Account that can only be spent by the employer on the training and assessment costs of an apprenticeship. The employer has 24 months to spend their funding before it expires and is returned to government. Small employers who do not pay the levy contribute 10 per cent of the training and assessment costs to an apprenticeship, with government providing the rest. Previously small employers have not contributed to the costs of training an apprentice.

The government has set a target for all large public sector organisations, which are expected to employ an average of at least 2.3 per cent of their staff as apprentices. London boroughs will need to increase their apprenticeships by 577 per cent to meet this target. London Councils has set out our concerns around the target.

London Councils supports the principle of the apprenticeship levy, as it dedicates significant funding for skills development and focuses on employer needs. However, we are lobbying government for more flexibility in how it operates and what it can be spent on. For example, employers can only transfer up to 10 percent of their levy funds to one other employer – but many want to work with their supply chains on apprenticeships, including London boroughs. Some apprenticeship standards are not yet available and employers are calling the levy bureaucratic and difficult to understand. Since the introduction of the levy, the number of apprenticeship starts has slowed significantly. Statistics from May 2018 show that delivery between August 2017 and February 2018 was down by one-third on the previous year.

Commentary

A more radical devolution deal for London
London government wants to take a whole systems approach to skills. This will require a more radical devolution deal for London on skills to include:

  • Ring-fencing and devolving London’s unspent Apprenticeship Levy, with a longer term aim of full devolution of the apprenticeship levy to London government;
     
  • Devolving the levers and funding to create a coherent all-age careers offer in London, bringing together a multiple initiatives and providers of careers advice for young people and adults. This would build on London Ambitions, which sets out what good careers advice for young people looks like and brings employers, schools and colleges together.
     
  • Devolving the 16-19 budget including post-16 technical education capital funding.
     
  • Devolving replacement funding for the European Social Fund (UK Shared Prosperity Fund) to London. ESF is currently worth around £420 million in London over a seven year programme for employment and skills projects.
Spike van der Vliet-Firth, Principal Policy Officer

T: 0207 934 9916
E: [email protected]