Recommendation 16

HM Government Rejected

This section is addressing recommendations in paragraph 121, 131 and 132 on Labour market inactivity after COVID19; addressing gaps in the UK’s skills and easing labour shortages; and the Apprentice Levy in England. In the Autumn Statement, the government also set out the challenging labour market post-COVID19. Since the 2008 Global Financial Crisis, much of the UK’s growth has been driven by an increase in the number of hours worked. This was partly due to falling unemployment–which is now close to its lowest rate in 50 years–and increased labour market participation after 2008. However, since the COVID19 pandemic this trend has reversed. Labour market inactivity Despite low unemployment, there are now 630,000 more inactive working age individuals in the labour market than there were pre-pandemic, primarily driven by those aged over 50 leaving. Amongst the 50–64 cohort the inactivity rate now stands at 27.3%, 2.1ppts higher than pre-pandemic. As the report sets out, this fall in participation amongst workers is a risk for the UK’s economic stability–as labour market tightness and its associated pressures on inflation create the risk of a higher interest rate peak. This shortfall of labour is also dampening the UK’s growth, as businesses struggle to fill roles and the productive capacity of the economy is reduced. There does not appear to be one single cause driving older worker inactivity, and a recent ONS survey of recently inactive people aged over-50 highlighted retirement, redundancy, changes in lifestyle, caring responsibilities, and illness as some of the most common reasons. To understand what action should be taken as a result of the rise in economic inactivity, the Department for Work and Pensions will thoroughly review workforce participation concluding in early 2023. Immigration Since leaving the European Union (EU), the government has introduced a new points- based system to refocus the immigration system towards securing the skilled labour businesses need to stay competitive and innovative. In Build Back Better: our plan for growth the government announced plans to introduce attractive and competitive visa offers, both new and reformed, to achieve this. So far, we have launched an improved Global Talent visa (May 2021), the Global Business Mobility visa (April 2022), the High Potential Individual visa (May 2022), and the Scale-up Worker visa (August 2022). The government will also launch a new Global Talent Network by the end of the year and a reformed Innovator visa in spring 2023. The government recognises inward migration can ease short-term skills gaps; it continues to monitor labour market pressures in key sectors and take appropriate action where necessary. However, immigration will not be the long-term solution to addressing labour shortages, and reform within industry is vital. The government wants to see employers make long-term investments in the UK domestic workforce to ensure it is equipped with the skills necessary to maximise productivity, drive economic growth, and build a high- wage, high-skill economy. Skills It is crucial that over the long term, the UK’s domestic workforce is equipped with the skills necessary to maximize their productivity and drive economic growth. That is why the government is taking steps to ensure the education system provides the skills current and future employers need, for example through T-Levels, Higher Technical Qualifications and Skills Bootcamps. To maximise the impact of these commitments, Sir Michael Barber has been appointed to advise the Chancellor of the Exchequer and the Secretary of State for Education on the implementation of current reforms. The government has already transformed apprenticeships–which are jobs with training for anyone of any age–to align with employer needs. Combined with the introduction of the Apprenticeship Levy, the government has created hypothecated funds to support employer investment in the high-quality training an apprenticeship can deliver. Where these funds are not spent by levy payers, they are allocated to non-levy paying employers who receive support for 95% of the cost of high-quality apprenticeship training. There will not be a formal review of the Apprenticeship Levy or system at this time. The government is committed to protecting the quality of apprenticeship training and improving the system to respond to the legitimate concerns raised by employers. The government will ensure that apprenticeships continue to meet the needs of employers.