The Mais lecture 

Thinking here largely comes from the Chancellor’s Mais lecture, which (perhaps understandably) didn’t get much attention at the time.

In it, the Chancellor stressed the importance of productivity for easing pressure on the public finances. In particular, the need to improve on the anaemic growth seen ever since the Financial Crisis.  No problem there, we’ve been saying this for years.

The Chancellor drew attention to the low rates of private investment in capital, people and ideas.  Admittedly, the last decade hasn’t been a great time for business to invest in the UK, with the after-effects of recession followed closely by Brexit and a pandemic. Geo-political events and supply chain pressures continue to muddy the waters.  Nevertheless, the Chancellor seems to think that now is the moment to look again at barriers to investment.

The Chancellor drew on some familiar – if depressing – statistics to illustrate the UK’s lack of investment in its people such as that “UK companies spend less than half the European average on training their employees”.

Qualifications, taxes and investment

The lecture also drew attention to the confusing qualifications landscape, in particular, the bewilderingly high number of vocational qualifications, the implication being that it needs simplifying. The language in the Tax Plan, however, is very concise:

We will encourage businesses to offer more high-quality employee training and explore whether the current tax system – including the operation of the Apprenticeship Levy – is doing enough to incentivise businesses to invest in the right kinds of training.

Evidently, the tax system can’t be used to cure every ill.

Unlike investment in capital and ideas, investment in people gets no general support.  Indeed, the only tax arrangement specifically related to people isn’t a break, but a Levy designed to help fund apprenticeships.  And the Chancellor did confirm, on the floor of the House, that the Apprenticeship Levy is in scope.

The Apprenticeship Levy is five years old and has had a big impact – for good or ill – on what training is done.  Nevertheless, this exercise might not change things that much.  The Levy proceeds have already been spent.  If the Levy raised less, Government would have to meet the shortfall from other taxes or spend less on apprenticeships.  

The last time the Treasury looked at using tax breaks to support training, in 2018, it came to nothing. Admittedly, this was about use of people’s own money, but the response tells us a lot about government priorities.  Tax breaks have to support the “right” ends.  The Treasury is caught in a dilemma between dictating what training gets done – how can it know best? – and trusting firms to fund the training that best meets their needs – which opens the door to “creative” solutions that are there largely to exploit the tax breaks.  A particular worry would be if tax concessions for employer-funded training ended up supporting disguised remuneration. So, it’s probably not the time yet to set up an “executive training centre” in the Maldives.

The future process is, at this stage, quite vague.  No consultation or evidence-gathering exercise has been launched.  Presumably, promising ideas will get mentioned in the Autumn Budget.

Of course, this plan and any follow-up proposals are about stimulating more spend, more training and more qualifications.  But the UK’s productivity problem, arguably, is that we don’t make good use of the skills we already have.  The demise of the Industrial Strategy leaves little capacity in government to tackle this issue.  The Treasury’s apparent “solution” – Help to Grow: management – seems to be floundering. An article in the Financial Times in February reported that just 2,500 small firms had signed up in the eight months since it opened for applications in May last year suggesting that it is not proving attractive to the SMEs it is aimed at.

Furthermore, the scheme doesn’t address the underlying issue for the majority of small and medium sized firms which is bread-and-butter people management. This is why CIPD has been making the case for HR/people management support to be integrated in the business support offer across the Local Enterprise Partnership and Growth Hub network in England and across the equivalent business support infrastructure in Scotland, Wales and Northern Ireland.