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Labour framework balks at the tax hurdle

The publication of Labour's Plans for a Skills Revolution signals the start of intensive consultation on the party's adult training strategy. Labour intends to complete the consultation process by the end of June, and prepare a revised policy document for the party conference in October.

Essentially, Labour has proposed three policies. First, increasing the take-up of Investors in People. Then, tax-based individual learning accounts (ILA) linked to "learn as you earn" smartcards. And the University For Industry as proposed by the Commission for Social Justice to reduce the cost of learning to employers, employees and providers.

Labour wanted to propose a more radical strategy, but a mixture of political, economic and administrative factors conspired against it. On top of the Social Chapter and the national minimum wage, any legal obligation on employers to invest in training would have been seen as a triple tax on business.

And any obligation on employees to "earn to learn" by contributing Pounds 1 per week into a compulsory learning account would have been seen as a tax on the low-paid. Lastly, policy-makers have yet to devise a non-bureaucratic and effective compulsory training system.

For these reasons, it was always likely that Labour would propose a statutory framework which fell well short of making employers or staff invest in training. Indeed, the task now, as Labour sees it, is to strengthen the strategy outlined in the consultation paper, particularly through demand-side measures to encourage employers and employees to increase their investment in training.

The focus on the demand-side is important. Labour declares that "the key element of our approach does not lie in institutions and structures, but in the new partnerships to be built between individuals, enterprises and government". Clearly, this is another example of Labour not wishing to rock the boat prior to the general election, since it is inconceivable that a skills revolution will be developed without serious institutional reform.

In terms of employers, Labour is right to recognise that the problem rests with small and medium-sized enterprises rather than large companies. Encouraging them to take-up IIP is sensible. There will also be a need to assist firms affected by the minimum wage to develop broader productivity plans. Yet these objectives will only be met if the UK has a powerful network of local employer organisations. Hence the strong institutional case for merging local training and enterprise councils, business links and chambers of commerce.

In terms of employees, there must be a question about whether tax-based ILAs will be opened voluntarily by non professional and managerial workers. And although targeted grants are welcome, the very low-paid might not be able to afford Pounds 25 to trigger the state payment of Pounds 150.

More generally, Labour should acknowledge that lack of money is only one constraint faced by employees. Lack of time, poor availability of local courses and non-existent child care all hamper learning. Overcoming these barriers requires reform on the supply side.

Already some FE colleges are opening on weekends so employees can learn when they have time. Labour should generalise this practice and generate a strong weekend learning tradition which matches our strong night-school learning tradition.

Similarly, FE colleges should help students to spread the cost of their learning by introducing pay-as-you-go systems. The funding formula must also be reformed to encourage colleges to meet the learning needs of employers, especially the smaller ones.

Finally, New Labour has a golden opportunity to transform the nation's 30,000 schools into "local centres of lifetime learning". Linking schools to Labour's planned University For Industry initiative, and providing integrated child care on the sites of larger schools, could open up learning for thousands of part-time and low-paid employees.

At present, however, a debate is raging about whether Labour should threaten stakeholders with an obligatory training system to give them an added incentive to invest more in learning. Yet the problem remains, finding a system that works. Consequently, New Labour should offer a different trade-off.

Either employers and employees voluntarily invest in learning, or higher corporation and income tax will be imposed so that the state can do it for them. Now that would be a threat to take seriously.

The author Mark Corney wrote Strengthening Labour's Training Strategy

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