Work Local: It’s time to make devolution work

14th July 2017

This week’s labour market statistics offered some rare good news for the government – with employment reaching new record levels and the unemployment rate touching a forty-year low.  The new Secretary of State, David Gauke, has taken over at a good time.  But there are also plenty of causes for concern – many of which have been building for years and will grow more acute in the decade ahead.

That’s why in our new Work Local project, with the Local Government Association, we are arguing that it is time for a fresh look at how we organise our employment and skills system.

The system needs reform

Behind the headlines, our labour market is becoming increasingly polarised – and often characterised by temporary, low paid and insecure employment.  In research for the TUC also published last week, we found that one in ten workers are now in some form of insecure work – a figure that has risen by half a million in just five years.  Those in work also feel poorer – with average real earnings stuck where they were in 2011, and having fallen since the turn of the year.  And in addition to the 1.5 million people who are unemployed, there remain a further two million people who are not currently looking or available for work, but who want a job.

Add this all together – those out of work who want work, and those in work who want more work – and we estimate that fully one in six of the workforce in England – or 5.5 million people – want a job or want more hours.  At most, one in five of these people will have access to employment support through Jobcentre Plus.

On adult skills the challenges are if anything more stark.  Nine million people lack basic skills like literacy or numeracy while 13.5 million people lack basic digital skills. This locks people out of the chance to work and to build a career – with those qualified below Level 2 nearly three times more likely to be out of work than those qualified at Level 4 or above.  At the same time, participation in adult learning has fallen by 1.5 million over the last seven years, as government and employer funding is squeezed.

The picture is different in different places

Inevitably, the headline employment figures mask big differences between areas in employment, incomes and opportunity.  In part this reflects local residents.  For example, the likelihood of having low qualifications varies hugely between places – from one in three residents in Sandwell to just one in seventeen in Richmond on Thames.  While the likelihood of being disabled ranges from more than a quarter in Blackpool to one in ten in Waltham Forest.  These differences matter, with for example disabled people more than twice as likely to be out of work as those who are not disabled.

But variations between areas also reflect very different labour markets in different areas.  For example manufacturing accounts for more than one in five jobs in Burnley but fewer than one in fifty in Cambridge; while the share of jobs in the public sector ranges between one in ten and one in three.

Local areas have different people, different jobs, different economies and different geographies.  The same model cannot possibly be expected to work in Bassetlaw as in Brentford, or in Blackpool as in Bath.

We have one of the most centralised employment and skills system in the developed world

Yet despite these wide local differences, local areas have little scope to influence priorities, funding and delivery in our employment and skills system.  Instead, central government and its agencies are directly responsible for policy, design, funding and oversight.

This centralisation also then leads to silos and fragmentation – with 20 different employment and skills funding streams accountable to eight departments or agencies, spending more than £10 billion a year; and operating with different objectives, boundaries and timescales.  It is no wonder that investment often fails to meet local needs.  This is bad for the economy, for employers and for individuals.

The future is bright… if we can get it right

In new analysis, we have forecast how well our future skills base will meet skills needs.  The bad news is that as the economy becomes increasingly higher skilled, we will face growing gaps between the skills that we’ve got and the skills that jobs will need.  On current trends, by 2024 there will be six million fewer low skilled jobs than there are low skilled workers; and four million more high skilled jobs than there are high skilled workers.

But to put this another way, if we can meet these challenges – if we can support employers and future workers to get the skills that they need, where they need them and when – then the potential prize is huge.  We estimate that up to 4 per cent of economic growth is up for grabs – equivalent to £90 billion of output, or an additional £1,176 a year for every worker.

So what do we do about it?

In truth, we’ve been talking about how we can make the employment and skills system more locally responsive for decades.  From Training and Enterprise Councils to the New Deal for Communities, Employment and Skills Boards to City Strategy Pathfinders, and Total Place to Devolution Deals we have tried all sorts of ways to co-ordinate, organise and implement things differently in different places, reflecting different local needs.

Some of these approaches have been more successful than others.  But they’ve also all be characterised by variations of ‘earned autonomy’ – with local areas granted limited flexibility over programmes or budgets, within an essentially centralised system.  Unsurprisingly, this has often tweaked things rather than transformed them.

We think it’s time now to take a leaf out of other countries’ books – where from Canada and the US to the Netherlands and Denmark devolution has meant taking the plunge: redrawing the boundaries between central and local government, so that local areas can develop integrated, locally responsive and coherent services within clear national frameworks.

Work Local

So in ‘Work Local’, we’re consulting on what a devolved, integrated and locally responsive service should look like and how we can get there.  As we set out in the report, we think it means in particular six things:

  1. A ‘one stop’ service that is rooted in place – integrating employment, skills and employer support at the front line, with common branding, making full use of public estates and underpinned by a coherent digital offer
  2. Clear and responsive local leadership – building on the best of the Devolution Deals and approaches overseas, and incorporating Local Enterprise Partnerships
  3. A system driven by local opportunities and needs – including tailoring the approach to reflect different growth priorities, resident needs and labour market challenges
  4. A common approach to what is devolved – including employer support, careers services, adult skills, Jobcentre Plus and element of the Apprenticeships system
  5. Within a clear national framework – so maintaining a national approach to the benefits system, qualifications, regulation and the Apprenticeships Levy for private sector employers
  6. Governed by Local Labour Market Agreements – setting out responsibilities, entitlements, outcome measures, funding commitments and delivery plans

We think that the first Work Local pathfinders can be up and running by 2022.  But as we set out, this means starting the groundwork now – in particular, agreeing the principles and readiness criteria for future reform; investing properly in building capacity and capability (both in local and central government); and beginning the progressive transfer of power and responsibilities – for example on careers, adult skills, the Shared Prosperity Fund and employment programme commissioning.

You can find out more about the project and how to get involved at https://www.local.gov.uk/work-local.

The consultation will now run until 5 September, and you can respond online here.