Skills to bring forward the recovery: the need for "Tax Free Training"

Recession is a time to catch up on maintenance and training. Slump is a time for radical change in order to survive. That means you will need a very different skills mix when recovery comes. But so will everyone else. You will go down in the competition for the new skills if you do not plan ahead. The same is true for UK plc. Given that HMG has no money, part of the national recovery package should be a short order “tax free training” programme to use the opportunity to reskill the existing UK workforce for the 21st century – beginning with a reform of IR 35 to reflect the full cost of keeping skills up to date.


The 1996 report “The End is Nigh” , on how to avert the impending Y2K Skills Crisis, included a section (8.5.3, starting page 141) on how a tax free training programme might work. This section was drafted specifically for the then Shadow Chancellor, now Prime Minister. It needs updating but the basic principles remain the same.


The key was to stimulate employer-funded investment in training by reducing national insurance and income tax for those following professionally recognised and monitored skills development and updating programmes. Those funding their own training would be similarly able to off-set costs against tax.


The recommendations included checks against abuse akin to those subsequently used successfully for the Millennium Bugbusters’ Programme. These were then ignored, very expensively, for the ill-fated Individual Learning Accounts: a great idea, but implemented without industry strength quality control of the accrditation process – and with predictable (and predicted) consequences.


The main reason the concept of tax incentives has not yet been adopted beyond a few unpublicised, Treasury-mandated, regional trials, is that departmental officials hate the idea of tax incentives as an instrument of policy. It is a direct threat to the hierarchies of committees and funding agencies that have, step by step, increased their stranglehold on the UK education and training industry since 1917: when a previous coalition government laid the foundations for a centralised, standardised, silo’d public service – fit for a steam-age nation state. 


The main change since 1996 is the sheer scale of need today: to retrain those millions whose skills are no longer in demand. That need now goes well beyond the ICT industries whose skills needs I was addressing in 1996 – albeit that report did correctly identify the timing of the transition of demand from “low bandwidth, networked systems” to “Broadband, Networked & Multi-media skills”.  


Were I revising that report for today, I would include a need to mobilise the Trade Unions and reputable associations of small firms in supporting local training programmes to NVQ level 3: the missing link in the UK skills chain. I would also call for a cull of the education and training quangoes – with authority passing to those Sector Skills Councils which have demonstrable support from the industries they serve.


Those of you who have read the BIS consultation report on Skills for Sustainable Growth will have seen that it does talk of the need to rationalise consultation processes and of life-long learning accounts. The leaked list of BIS Quangos for the axe also gives some confidence that they may be serious. Hence my willingness to spend time on a response. The consultation paper on FE funding, however, illustrates the need for robust inputs to make a reality of simplification and rationalisation, let alone of enabling a system that will deliver vocational education and update training when, where and how needed by students and employers – as opposed to when, where and how “the planners” have decided.