How tax relief for training can make a real difference

Little of the £5 billion companies received last year for training reached those who most need it. The tax relief system should be reformed to focus on the most effective training courses and target the low-paid and low-skilled, says TOM WILSON

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ompanies received more than £5 billion last year from the Exchequer in tax relief for work-related training. That is equivalent to the turnover of

more than 250 further education colleges. And it vastly overshadows the £50 million Growth and Innovation Fund set up to support employers’ initiatives to improve skills and boost enterprise and jobs. But, as a forthcoming research paper

by Howard Reed of Landman Economics, commissioned by unionlearn, demonstrates, there is little to show that this vast sum is focused on the most effective training courses; nor is it reaching those who most need it. The £5 billion also vastly overshadows the

£800 million annual budget of Train to Gain, the scheme which provided businesses with training subsidies, until it was abolished in the October 2010 spending review. The scheme was scrapped because of ‘dead-weight costs’, i.e. companies being subsidised for training they would have carried out anyway and, as

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the Public Accounts Committee found, for failing to target the sectors with the highest needs and the providers providing the best- quality training. Yes, Train to Gain did have its faults, but it

did make a substantial contribution to work- related training. Apart from commitments (without detail) in the spending review to ‘explore mechanisms to increase employer contributions such as training levies’ we still need a strategy for growth which tackles head-on the two main problems with the UK’s provision of work-related training: that a third of employers provide no training at all and that those who receive the most training are those who are already the best-qualified. That is why unionlearn’s paper concludes

that there are very strong grounds for reforming the tax relief system by making it more progressive – targeting the low-paid and low-skilled – and more focused on high returns by restricting training to that which leads to qualifications (or accredited CPD).

Tax relief on training is available only to companies which pay corporation tax (just over 900,000 businesses with 8.3 million staff). However, there is no attempt to target tax relief on particular kinds of training, or particular types of trainee. This makes it a relatively expensive way of encouraging the particular types of training which policymakers might see as the most beneficial. As Learning Through Life, the main report of the Inquiry into the Future for Lifelong Learning, shows, the higher up your socio-economic position is and the younger you are, the more likely you are to take part in learning. Having a disability is a major barrier to participation. However, those who are least likely to learn anywhere, if they are to learn at all, are most likely to do so at work. Statistics from the Labour Force Survey

show that while lower-skilled workers are less likely to be offered training, when they are it often leads to a qualification. Therefore, one option could be to offer tax relief only