Who pays?

Employers have always been reluctant to invest in training. Hence individual learning accounts, writes Peter Robinson

Some observers believe that the Government has a clever two-pronged strategy for lifelong learning. The Learning and Skills Council is designed to shake up the supply side of the learning market. As other instruments such as individual learning accounts are introduced, the Government will raise the stakes over the demand for learning.

Behind this is the perennial debate over who will pay for additional investment in lifelong learning: the state, employers or individuals? This has to be asked if the demand for learning is to be increased since extra demand has to be paid for by someone.

The accounts were in the 1997 election manifesto because Labour had decided to drop some of the traditional instruments, such as a levy system, designed to increase employer investment in training. However, they still needed some instrument to signal that they were serious about tackling the perceived problem of low levels of investment in learning by employers.

Lifelong learning is designed to equip people with the skills to help them progress in the labour market. This implies that in practice employers are highly unlikely to put significant sums of money into the accounts. There is simply no incentive for them to pay for learning to help employees move on to better jobs. And, if enhancing workforce skills increases business performance, firms should be paying directly for this anyway.

The state will only put "promises-to-pay" into the accounts, which will be honoured when individuals sign up for courses. This would be little different in practice from the system that we now have, which will be developed further as the proposals are put into action.

So we are left with accounts as vehicles for increased individual contributions, although why individuals should want to lock up resources in a learning account rather than in an individual savings account is unclear. Cash in an ISA would carry the same tax breaks but would be available for all kinds of emergencies.

At the heart of the Government's problems is a lack of clarity over what individual learning accounts are aimed at. Some clarity in this debate can be arrived at by applying the Government's mdel for the reform of pensions. Most high earners have access to occupational and personal private pensions. Stakeholder pensions are a cheaper form of personal private pension aimed at those on between half and average earnings (pound;10,000 to pound;20,000 a year). For those on low incomes - less than pound;10, 000 - or with intermittent work records because of caring responsibilities, the state promised to fund the pensions.

This latter group strongly overlaps with those that the Government primarily wishes to target for lifelong learning - people with few qualifications - those who have the poorest paid jobs and are at risk of social exclusion. But if we do not expect such people to contribute to private funded pensions, it seems unclear how we could expect them to make a significant contribution to paying for learning. For this priority group, the local learning and skills councils will need concentrate on breaking down barriers to participation and the state will need to pay for their learning.

Learning accounts are presumably aimed at the same group as stakeholder pensions: those in the middle reaches of the labour market - who might be expected to make some contribution to their learning - for courses leading to intermediate qualifications. This is precisely the same group that cash savings are aimed at.

Behind all this activity on learning accounts is an assumption that the demand for learning is being held back by financial or capital market constraints. So, although the assertion of a "systemic failure" in further education lies behind the Government's reforms, the next stage of the strategy seems to be related to a very well-rehearsed market failure.

Curiously, the prospectus for the Learning and Skills Council mentions learning accounts only once as helping people to overcome "the financial barriers to learning". It makes no mention of the role they are supposed to play in helping to change the "culture" around lifelong learning. If the Department for Education and Employment does have a clever two-stage strategy for a "revolution" in lifelong learning, the documentation around the setting up of the Learning and Skills Council does not reveal much revolutionary intention.

Peter Robinson is senior economist with the Institute ofPublic Policy Research

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