On 28 October, the Government will set out its spending priorities in the Budget. For employers, skills providers and policymakers alike, it will be a key moment to understand whether recent commitments on skills reform will be matched by the investment needed to deliver them.
Over the past year, there have been a series of significant policy announcements on skills, including plans for greater devolution, and reforms to qualifications and the apprenticeship system. We also await the Devolution White Paper and recommendations from the Milburn Review. While these developments are welcome, successful implementation will depend on factors including funding. Without sustainable investment, ambitions for growth, productivity and opportunity will be difficult to realise. Based on feedback from our members, there are three areas we will be watching closely on Budget Day.
Creating a Growth and Skills Levy that works for employers
Apprenticeships remain one of the most effective routes to developing occupational competence. They equip individuals with the skills, knowledge and behaviours needed to perform effectively in a role and are particularly valuable in sectors where safety, quality and professional standards are critical. However, apprenticeships are not the most appropriate solution for every workforce challenge.
The principle of a more flexible Growth and Skills Levy is therefore welcome. Employers consistently tell us that, alongside full apprenticeships, they need access to shorter, targeted training programmes to upskill existing staff, address emerging skills gaps and respond quickly to changing business needs. This is not just across the Industrial Strategy priority sectors but also across the foundational and supporting sectors of the economy.
The introduction of apprenticeship units has the potential to meet at least part of this need. However, they need to be designed with sector skills bodies and employers to ensure they meet employer need and there needs to be sufficient funding for employers to access these opportunities at scale where needed.
To support both increased apprenticeship starts and greater flexibility, the Treasury should ensure that the full value of levy contributions is available for skills investment. This would increase the apprenticeship budget and create a stronger incentive for employers to invest in the skills needed to drive productivity, growth and competitiveness.
Making devolution work for employers
Greater devolution presents a significant opportunity to improve the way skills policy supports economic growth. Bringing together skills, transport, housing and employment support at a local level has the potential to create more joined-up pathways into work and help strategic authorities respond more effectively to regional labour market needs.
However, there are also risks. Many employers operate across multiple regions and recruit from large geographic areas rather than within individual mayoral boundaries. If skills systems become increasingly fragmented, businesses could find themselves navigating multiple processes, priorities and points of contact. This would create inefficiencies and make meaningful employer engagement more difficult. It also poses risks for large infrastructure projects that involve employers across regional boundaries.
As the budget is devolved Treasury should consider how the skills needs of national employers and large infrastructure projects can be resourced without adding complexity to the system. This should include a funding model that incentivises and maximises employer engagement and investment.
Investing in skills throughout working lives
While reducing the number of young people who are not in education, employment or training (NEET) and supporting their transition into work remains a critical priority, it is only part of the challenge. Skills England analysis shows that more than 70% of the workforce of 2035 is already in employment. As technology, workplace practices and labour market demands continue to evolve, sustainable growth will depend increasingly on the ability of existing workers to reskill and upskill throughout their careers.
This requires a skills system that supports people to learn throughout their working lives, not just when they are young.
Delivering this ambition will require sustained Government investment, including through the Adult Skills Fund, and targeted support to ensure the objectives in the Jobs Plan are achieved. It will also require the right incentives for employers to invest in workforce development. Government should review existing fiscal incentives to assess whether they will drive the scale of employer investment needed to support growth, productivity and economic resilience.
Turning ambition into delivery
The Government has set out an ambitious vision for skills reform. The Budget is an opportunity to demonstrate that it is equally committed to the investment and infrastructure needed to deliver it.
For Skills Federation and our members, the priorities are clear: a flexible and effective Growth and Skills Levy, a devolved system that works for employers, and sustained investment in workforce development throughout people’s careers. If these foundations are put in place, the skills system will be better equipped to support growth, opportunity and productivity across the economy.
