IoD urges Government to increase incentives for workplace training in skills shortage areas

The Institute of Directors has today written to the Chancellor of the Exchequer urging the Government to push ahead with tax incentives for workplace training and reforming the apprenticeship levy citing “clear market failure” in upskilling staff to meet national skills shortage priorities.

Whilst the IoD welcomes initiatives to provide free courses in subjects where we have skills shortages, such as the Skills Bootcamps and the Level 3 Lifelong Learning Guarantee in England, these are not sufficient to ensure a step-change in the skills of those already in work.

The need for policy intervention is evidenced by businesses constantly citing skills shortages as a top issue of concern, with over 40% of IoD members consistently citing this as exerting a negative effect on their organisation.

To have a demonstrable impact on skills shortages across the whole economy, the Institute of Directors is calling on the UK Government to:

  • Introduce a tax super-deduction for firms investing in reskilling staff in national skills shortages areas
  • Enable apprenticeship levy funds to be used to subsidise firms to release individuals from the workforce to undertake external training of the employer’s choosing in national skills shortages areas
  • Establish the proposed Future Skills Unit as a separate agency with a single remit – to advise on the future national shortage skills areas, underpinning the lifelong learning free training offer and these new workplace training incentive schemes

Kitty Ussher, Chief Economist at the Institute of Directors, said:

“We need a stronger policy response to the post-pandemic, post-Brexit labour market challenges we are facing. The remaining piece of the jigsaw is the problem of businesses, particularly small and medium sized firms, having insufficient incentive to invest in upskilling their staff in areas where the national need is clear. As things stand, reskilling an existing team member, as opposed updating existing expertise, is not tax deductible. There is also the risk that the individual, once retrained in a skills shortage area, is more likely to be poached by competitors. This represents a clear market failure.

“We are therefore calling on Government to introduce a tax super-deduction for firms investing in reskilling staff to meet our national skills shortage priorities. We think this would have a significant impact on firms’ decision-making.

“For working individuals, the availability of time to retrain is often the most significant challenge rather than the availability of courses. And while we strongly support apprenticeships, they aren’t the best way to upskill older workers or to incentivise firms to improve director-level and other forms of management training. However, these issues could be countered by enabling apprenticeship levy funds to be additionally used to subsidise firms to release individuals from the workforce to undertake training in areas where the UK has demonstrable skills shortages.

“Taken together with the establishment of an independent Future Skills Unit, with a statutory remit to advise on what this national list of shortage skills should be, these recommendations could make a demonstrable difference in addressing the UK’s skills needs for the benefit of the UK economy as a whole.”

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