The Institute of Directors has written to the Chancellor of the Exchequer urging the government to create tax incentives for workplace training saying there is a ‘clear market failure’ in upskilling staff to meet skills shortages.
The IoD said that while it welcomes initiatives to provide free courses in subjects where we have skills shortages, such as Skills Bootcamps and the Level 3 Lifelong Learning Guarantee in England, these are insufficient to ensure a step-change in the skills of people already in work.
Kitty Ussher, chief economist at the IoD, 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.”
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 mentioning this as having a negative effect on their organisation.
To have a demonstrable impact on skills shortages across the whole economy, the IoD is calling on 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 areas of national skills shortages; and
- 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.
“As things stand, reskilling an existing team member, as opposed updating existing expertise, is not tax deductible,” explained Ussher. “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.”
Upskilling and reskilling
She added that the introduction of a tax super-deduction 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.”