UK employers need a level playing field when it comes to skills

At the first meeting of the new Digital Policy Alliance skills group it was agreed that, rather than try  to agree a  collective submission to the House of Lords Digital Skills Committee we should encourage all member to make their own and that I should make a personal submission using the material I have on file, including from previous EURIM (now DPA) exercises. I have now done so, using material from the interdepartmental working group of the Department of Education and the Science and the Ministry of Technology (set up in 1965) onwards. In 1967 they recommended the establishment of a “National Computing Centre” to address the expected shortage of systems analysts by 1970. In the mid 1980s the then Director of the NCC enveigled me into spending five fascinating, but ultimately futile, years finding solutions to to the problems of the day. I think we found them. But they were unacceptable to officials and ignored.
 
Over the past couple of weeks it has been interesting to note how much and how little we have progress since then.

I had always known that our tax regime put UK employers and contractors at a disadvantage against their overseas competitors but until I checked some of the current HMRC small print I had not realised how serious that could be. One example is the apparent exemption from national insurance for up to a year for those employed by contractors back home in Brazil, India, Russia or the Ukraine. More generally accommodation and travel expense allowances subject to income tax for uK employees are often similarly exempt. Then there is the comparative tax position of spend on training and career development, whether funded by the employer or by indviduals seeking to reskill themselves.     

The summary of my submission is as follows:

1.             There have been regular enquiries into shortages of what we now call “digital skills” for almost 50 years. The underlying cyclical pattern was identified in the 1980s. Recession accelerates the decline in demand for old skills and delays investment in training for the new skills that are taking their place. Recovery sees a “crisis” and another round of studies. No amount of effort in “trying to predict the unpredictable” in order to better target vocational education, will bring about significant change unless we better reward employers who recruit trainees and retrain existing staff more than those who compete for staff trained by their customers or competitors, import supposedly skilled staff or export jobs.

 

2.             It is currently more economic for many UK employers to compete for skilled staff or import from overseas, rather than train their own. This problem will not be addressed until we level the playing field between those who recruit trainees and retrain existing staff and those who import supposedly skilled “contractors”. Some of the latter can be paid tax free allowances for travel and accommodation and exempted from national insurance up to year. This can enable employers to save 50% (sometimes even more) compared to UK staff or contractors with equivalent take-home (after tax and expenses) earnings.

 

3.             We need to copy our overseas competitors in exempting employees following professionally and technically accredited training programmes from income and payroll (c.f. National Insurance) taxes and allowing individuals acquiring new skills, not essential to their current jobs, to offset the cost against current and future earnings. We also need the same tax and expenses regime for imported staff and contractors as for their UK counterparts. The changes needed also include addressing how IR35  penalises those seeking to keep abreast of changing demand for skills.

 

4.             When seeking to predict skills needs, we need to distinguish between core disciplines (which change slowly, if at all, over time) and technology, product and service technology related skills where demand can change before the curriculum, let alone content, is agreed.

 

5.             We also need to find better ways of relating publicly funded and accredited qualifications and courses to current and emerging skills needs and employers’ recruitment and training plans, without overloading those who do seek to plan ahead with “consultations” asking questions they cannot answer. The solution entails pooling budgets for demand assessment and forecasting via, for example, consortia of Sector Skills Councils and LEPs, to enable the use of industry strength market research

 

6.             Few employers can forecast their needs more than a year ahead in the detail needed to plan conventional courses and qualifications. Those able to do so commonly wish to mix and match modules for just-in-time delivery (to meet immediate skills needs) with those for longer term career development across academic and professional disciplines. This presents challenges to colleges, universities and funding agencies. Those willing and able to respond can derive significant earnings from the delivery of short course modules (both residential and on-line) within the global apprenticeship and continuous professional development programmes of major engineering and financial services employers. They are alleged, however, to be actively discouraged by funding councils from doing so.  


I thought of posting the full submission but it is 11 pages and my blogs are usually far too long anyway. 

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