Where is the meaningful investment in young human capital via a youth development dividend in the new government’s plans? asks Simon Edwards, IF supporter.
Long-term economic growth
Rachel Reeves’s first speech as Chancellor demonstrated that both our major political parties diagnose long-term economic growth as the solution for the UK to maintain her place among the strong economies of the world. Her grand statements about building growth on strong and secure foundations might have come from the mouths of her political opponents, Rishi Sunak, Boris Johnson or Liz Truss.
Yet these politicians share consensus in a more worrying way. They are unanimous in their refusal to sufficiently acknowledge how meaningful investment in human capital can play a key role in delivering the economic growth they purport to want. They pretend not to see that our youth forms a core component of our human capital.
A youth development dividend
But what if our political leaders came together to adopt a strategy comprising 10 years of free, higher education in select subject areas, identified as significant for the development of a modern economy? Designed as a grant, it would comprise payment of tuition fees as well as maintenance costs and would extend to vocational courses such as those for electricians, carpenters, plumbers and coders. It would be integrated in a scheme that involves collaboration with UK businesses and would include on-the-job training leading to the eventual hire of candidates that successfully complete courses.
This is not a completely novel scheme. Following the Second World War, the US government helped to boost economic growth partly by means of the Servicemen Adjustment Act – better known as the GI Bill – which for a period of over 10 years, increased access to higher education for eight million war veterans.
The scheme delivered economic growth, more home ownership, and increased the innovation capabilities of a motivated sector of society. But those benefits were only realised because of the courage of the Franklin Roosevelt administration and the pragmatism of Truman who succeeded him as President.
What chance here and now?
Former Prime Minister, Rishi Sunak, appeared to recognise the importance of youth development but all he could offer was a parody of military national service. Meanwhile, the number of young people out of work keeps ticking up: according to the latest Office of National Statistics (ONS) figures, unemployment among 18–22 year-olds reached its highest rate since early 2021 when the nation were still in the COVID-19 lockdown.
The problem is that investing in younger generations takes money. Realists among us fear that if a dividend proposal was placed in front to politicians, they would offer “fiscal responsibility” as the grounds upon which to usher proponents out of the back door. Yet, unlike the money the government found to: bail out banks in 2008 (£137 billion); fight the futile wars in Afghanistan/Iraq (£40 billion): or even spend on COVID-19 (£500 billion!) the UK economy and social fabric will stand to benefit more broadly from these proposals.
A Youth guarantee?
The new government has promised a youth dividend of sorts – one that they say would eradicate youth unemployment. Just this week, Prime Minister Kier Starmer, announced a new Foundation Apprenticeship at the Labour Party Conference based on the acknowledgement that the current apprenticeship levy and programme has failed to deliver on the needs of young people and business with apprenticeship levels falling over the past 5-6 years.
The new Foundation Apprenticeship will be managed by a new body called Skills England. The apprenticeships will be shorter and funding directed away from Level 7 (equivalent to a master’s degree and more likely accessed by older or already qualified employees) and more towards the 2.5 million roles which are in critical demand, 90% of which need training or education. Meanwhile employer investment in training has declined over the past decade. More flexibility in the length and the type of training needs to be audited carefully in order to avoid lower quality delivery and greater abuse within the system.
While the Prime Minister’s focus is a welcome move in the right direction, the further education sector, starved of funding under previous governments, also requires greater investment.
Stagnation nation?
The future may be a little less hopeless, but we should be under no illusion that without substantial investment younger generations are set to take on: lower apprenticeship wages; more student loan debt through higher fees; longer debt periods for repayment; higher taxation than other generations; while receiving stagnant wages; falling public services and crumbling national infrastructure. We must therefore take every opportunity to make the case for a cross-party, youth development dividend as well as supporting new apprenticeship models that work for all.
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Photo by Chris Gray on Unsplash