In conversation with SoS Kwasi Kwarteng MP - Key takeaways

On 16 May 2022, the Lifelong Education Commission welcomed Kwasi Kwarteng MP, Secretary of State for Business, Energy and Industrial Strategy, and discussed the productivity puzzle, linking the country's industrial strategy to skills development, and how a 'Green Skills revolution' can be a driver for growth.

Key takeaways

  • The skills agenda/puzzle is the most important thing to get right to boost productivity in the long term. It shows that we can benefit from the new industrial revolution and meet the decarbonisation challenge, both of which need to be underpinned by a very skilled workforce.

  • Many conversations with businesspeople have revolved around the skills challenge. It is a fundamental issue, and we cannot hope to get economic growth or achieve levelling up without skills.

  • A few things stick out that require urgent attention: the digital revolution, which comes with a significant skills shortage in digital and AI; the need for cross-departmental cooperation; and the wider concern that the UK has an analogue workforce in a digital economy, which raises the need to find ways of bridging that gap.

What levers are BEIS investigating, especially regarding low SME in-work training rates? Would the government consider a skills tax credit modelled on the R&D tax credit?

  • SMEs have been identified as a key problem, and the Help To Grow scheme has two elements: (1) a management element, such as offering training like a mini MBA to people in SMEs (e.g., Brunel University); and (2) a digital element, which is more about the business hardware. Often, SMEs don't know what they don't know, they do not always see the need for all types of training, when there is a constant need to refresh and reskill knowledge.

What role can modular/bitesize qualifications play?

  • Clearly there is a huge shortage of labour, alongside constraints on supply chains and high freight cost. We are facing historically low unemployment, and every employer is pushing to hire, even if the people that they get in do not necessarily have the skills needed to drive progress in industry. We need to identify 2 or 3 areas (like management, digital) on which to focus government solutions.

What about regional areas and regional skills gaps, how does levelling up square with responsibility for refreshing industrial strategy?

  • The problem with the old industrial strategy was that it was diffuse and unfocused. A better approach is to have a separate innovation strategy, hydrogen strategy, net zero strategy, as well as targeted looks at how we can upskill local areas. The priority here is industrial clusters and looking at their expertise, such as the North East and Teesside, which is seeing a kind of reindustrialisation driven by green tech, offshore wind, the supporting manufacturing, and a commitment to carbon capture off the coast. What are called agglomeration effects can drive economic growth, so breaking industrial strategy down is more effective way of driving progress.

What are the innovation sectors to focus on, taking the example of a climate change GCSE in DfE: would the focus on skills be in traditional vocational areas (science, engineering) or is there an opportunity for broader climate focused course innovation?

  • We need to update syllabi away from C19th compulsory education logic, and BEIS supports the efforts of DfE in this regard. We need to take into account offshore wind, solar, and the internet, and renewables need to be at the heart of the new skills required to bridge with the capacities of the existing workforce.

How would departmental collaboration between BEIS and DfE work best, in particular how can we retain interest in universities?

  • It is worth noting that of the BEIS budget, 50% is dedicated to innovation, and UKRI takes the lion's share of that funding, which funds the science base as well as university arts and humanities research. But we also want to go from a world where R&D is the exclusive preserve of universities and academia to a model where private capital is brought into R&D, as with the Crick Institute (AstraZeneca and others). Galvanising innovation means creating something much wider than exclusive university access to pots of government money, we want to end up in a situation where universities can incubate companies that then end up being part of the corporate world.

How can we juggle long-term solutions to the skills problem with short-term concerns such as the cost of living crisis?

  • There is always a tension between long-term strategies and goals and short-term immediate thoughts. One thing we are looking at is more sensible regulation (e.g., of energy supply, Ofgem leading on more continuous process). I want to impress on you the slogan Enterprise Net Zero and Innovation, to emphasise how far BEIS is a strategic department.

Regarding your trip to the US, where you will be selling UK plc to the US RE a future nuclear deal: how can we ensure that we bring in international investment but do not lose sight of shoring up the domestic skills agenda?

  • We have the National Security and Investment Act, which allows government to screen the provenance and purpose of capital from overseas. There is a drive to include covenants in purchase deals to ensure that they bring about domestic investment and job guarantees. Post Brexit we need to fight hard to attract FDI, and there has to be give and take between "everything has to be British" and attracting overseas capital.

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