Ministers 'misled' on profits of skills

29th June 2007 at 01:00

SKILLS TRAINING may be a good thing - but will it make a difference if we can't make the trains run on time? That's the question raised by a new report which suggests the "skills agenda" isn't enough to put UK plc back on track.

Exhortations to train staff and make colleges more responsive to employers will come to nothing without more investment in transport, housing and hospitals, the report says.

Michael Davis, head of the Centre for Enterprise at the University of Southampton, argues that the role of skills training as a force for economic gain has been exaggerated, while factors such as investment in the country's infrastructure have been downplayed.

His analysis is part of a series of studies for the Scottish Parliament, which has rejected what it sees as the narrow demand-led approach to funding further and adult education taken in England.

Mr Davis argues that ministers have been misled down the skills road by "over-simplistic headlines" - including stories about the skills gap being the cause of low productivity compared with France, Germany and the USA.

Closer inspection of evidence reveals a very different picture, where physical capital accounts for 80 per cent of the difference in productivity. Under-investment in this area militates against good working practices and conditions, even for the best-skilled workforce.

"A big part of this capital deficit is explained by an under-investment in public capital such as transport infrastructure, housing and hospitals," Mr Davis says. "While the UK worker toils up and down the country on congested roads and delayed trains, the continental worker enjoys the speed and reliability of the autobahn and TGV.

"Any stressed-out sales rep could have told you this, but it is worth stating to make the point that greater investment in skills alone will not close our productivity gap with France and Germany."

Much is also said about the skills gap with the US, where output per head is reckoned to be 25 per cent higher. Mr Davis says only 1 per cent can be accounted for by skills shortages. Higher US government capital investment ensures that the output of workers is 40 per cent greater than their UK equivalents.

American economist John Van Reenan, quoted in the Davis report, puts it bluntly: "John Doe in the US could take Thursday and Friday off and still produce as much as poor John Bull in the UK toiling away throughout the working week."

Mr Davis's report shows how evidence is distorted to suit policies that downgrade the need for government investment in the wider economy. He says:

"It is far too simplistic to assert that investing in skills or qualifications will yield productivity returns. While all Treasury economists would no doubt agree, the reality on the ground is somewhat different."

The recent Leitch review of further education also overplays the skills card, according to the study. Leitch stated that basic skills tuition gives returns equivalent to more than pound;4 for every pound;1 invested.

Mr Davis says this claim can be misleading because the cost of such training is far from uniform. He says Leitch overestimates the economic effects of education and training in general.

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