Raising demand for skills: the role of public procurement policies

Governments have limited policy instruments at their disposal in promoting lifelong learning. Of course, they can intervene on the supply side, through funding decisions and through attempts to steer provider behaviour by setting targets and so on. But their ability to raise demand for skills and training is more constrained. Attempts to incentivise demand, by subsidising individuals or firms, usually combine high levels of bureaucracy with the risk of fraud. Legislation and regulation are politically unpopular, allegedly undermining competitiveness through a tangle of ‘red tape’.

But does that mean governments can do little to raise skills demand? Hardly. Public authorities employ a lot of people, and governments – local as well as national – can try to set an example. And public agencies spend an awful lot of money as purchasers of goods and services. We are already familiar with government using public contracts as a way of promoting equality of opportunity and fair trade principles among firms that supply goods and services. Now, in its consultation on public procurement, the Scottish Government is proposing that it should use major public contracts as a way of promoting skills and training.

The consultation proposes that agencies responsible for public procurement should:

  • Ask every company undertaking a major public contract to produce a training and apprenticeship plan; and
  • Encourage sustainability, for example by inserting community benefit clauses to provide training and jobs for local people.

It also proposes that the company should publish its training and apprenticeship plans for those contracts. It has less to say about enforcing any such clauses, though the consultation asks respondents for their ideas: What sanctions might be appropriate for failure to comply?

This is, I believe, a welcome attempt to raise demand for training and skills. In the forty years since Prime Minister Callaghan’s speech at Ruskin College on Britain’s skills deficit, UK governments have proven remarkably unwilling to tamper with the demand side. The few exceptions, such as the empowerment of trade union learning representatives, have been tentative and rare.

There has been no such coyness on the supply side. On the contrary, one administration after another has tampered with funding, structures and systems in an attempt to make providers ‘more employer-led’. The underlying assumption is that employers are doing fine – they know what skills are needed, they know how to use them, and they know how to develop them – and all that is needed is for colleges and other providers to listen more closely to what employers have to say.

This is reasonable, if limited and unimaginative, if the employer has a long term view of skill and innovation. We might point to the German example, where training and apprenticeships are largely employer-led, albeit in a context which reserves a major partnership role for trade unions. But what if the employer is driven by short term margins, or sees training simply as a cost, or is clueless as to the skills they need?  

In this context, the Scottish Government’s proposals deserve support. Of course, they are not perfect. On their own, they will resolve neither the unemployment crisis nor the problems of skills demand. There is a notable gap when it comes to enforcement. Any skills clauses will need to be backed by monitoring and, if need be, penalties for non-compliance. Nor is the principle new new. Others have gone down this path already, including some pioneering local authorities.

Still, a coherent and consistent strategy at national level, affecting all major public contracts, could help to leverage a significant change in the culture and behaviour of employers. And in the UK, this will make a refreshing change.

The Scottish Government consultation on its Procurement Reform Bill is available at: http://www.scotland.gov.uk/Resource/0039/00398733.pdf

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