Flexible workforce development fund: first year evaluation

Appendix D: Background and Context

This Appendix sets the context for the evaluation, and covers:

• the role of skills and workforce development in a modern economy; and
• background on the Apprenticeship Levy.

Skills in a Modern Economy

A strong and growing economy is the ultimate aim of the Scottish Government, and in order to achieve this a vibrant, fair, and inclusive labour market ^[15] is required. Skills in their wider sense are crucial for both individuals and employers. For individuals, it will impact on their ability to obtain, sustain, and progress in well paid (fair) employment, while for employers, skilled employees are a key component of all business models - they need skilled employees to deliver their work effectively and efficiently.

It is no coincidence that economies with higher level skills tend to be more competitive, achieve higher economic outputs, and have higher income profiles. It is also crucial to recognise that skills are not static and that once acquired they will need to be refreshed and developed in line with new employer requirements, technological progress, and/or new ways of working. Workforce development is a key approach to ensuring that employees develop and improve their skills to support businesses to grow and prosper.

Stimulating sustainable economic growth is a key priority for the UK and Scottish Governments, and is with a view to increasing competitiveness and productivity at all levels.

There has long been a supportive policy environment at a UK and Scotland level to deliver a wide range of projects, programmes and interventions that seek to further support skills, training, and employment. This includes for example, pre-employment support, apprenticeships, and sector-specific skills support.

This is in recognition that education, skills, and a strong labour market are crucial to ensuring economic success. In a policy context, the Scottish Government ^[16] highlight a continuing commitment to:

• building on the strengths of, and fully utilising, a highly skilled workforce;
• developing the human capital and productivity of all of the workforce;
• creating a more educated, flexible, engaged, and innovative workforce;
• ensuring equality of opportunity to access employment opportunities; and
• preparing people for the world of work and career progression.

The Scottish Government has developed a strategic labour market framework which seeks to deliver “ a strong labour market that drives inclusive, sustainable economic growth, characterised by growing, competitive businesses, high employment, a skilled population capable of meeting the needs of employers, and where fair work is central to improving the lives of individuals and their families”.

Essentially, workforce development is about how to make current employees more productive through upskilling or reskilling. Having a trained and skilled workforce is vital to ensure that the immediate and future needs of an area (or country) are met. Indeed, there are a number of internal and external factors at play that will require adjustments to be made by employers (and others), and in particular highlight the need for a more flexible and skilled workforce. This includes for example, an ageing workforce, technological progress and change, and Brexit.

Apprenticeship Levy

The UK Government announced the introduction of the UK-wide Apprenticeship Levy at the Summer Budget 2015, and it came into effect in April 2017. The Levy affects employers in all sectors (public, private, third), and is to be paid on annual paybills in excess of £3 million (all other employers are exempt). It equates to a Levy of 0.5% of their total payroll.

The funding generated by the Apprenticeship Levy from larger employers is being used by the UK Government to support its commitment to boosting productivity by investing in human capital (e.g. via apprenticeships). Levy-paying employers in England receive their Levy payments back in the form of Digital Vouchers to spend on apprenticeships.

Scotland’s settlement from the Apprenticeship Levy is £690 million (over a three year period of 2017/18 to 2019/20), and there are estimated to be circa 4,000 levy-affected businesses in Scotland. At a Scotland level skills policy is, however, a devolved matter and responsibility for the investment of the Levy rests with the Scottish Government.

The Scottish Government undertook a wide-ranging consultation exercise during 2016 to determine how best the Levy income could be spent to further support skills, training and employment in Scotland. A total of 374 responses were received, primarily from the private sector (45%) ^[17] . In response, the Scottish Government announced in December 2016 that the Apprenticeship Levy would be used to deliver action against four identified priorities ^[18] :

• continuing expansion of the number of Modern Apprenticeship opportunities as part of the planned growth to 30,000 new starts each year by 2020, alongside an increase in the number of Graduate Level and Foundation Apprenticeships during 2017/18;
• support measures to tackle structural unemployment issues and challenge inequalities and under-representation in the labour market by supporting people who face barriers to education, training or employment;
• continuing implementation of the Youth Employment Strategy: Developing the Young Workforce, including the development of the network of Developing the Young Workforce Regional Groups and the delivery of employment-focused college provision for young people; and
• workforce development - responding to the immediate skills needs of employers, through:
  • the establishment of a new FWDF (which is the focus of this evaluation)
  • on-going and sector-specific skills support for priority sectors in the economy such as digital, care and early years.