New sectoral framework for meeting skills and productivity challenge

In August 2002, the UK government began the process of developing a new network of nationwide sector skills councils responsible for leading a skills, productivity and competitiveness drive. This feature examines the background to the initiative, the main roles and responsibilities of the new bodies, and the key challenges they are likely to confront.

The Labour Party government is in the process of building a new UK-wide network of 'sector skills councils' (SSCs) that are intended to provide employers with a central role in tackling the UK’s well-documented skills and productivity 'gaps' relative to its major competitors (UK0011197N and UK0111104N). The new SSCs will replace the existing structure of national training organisations (NTOs), all funding for which ceased as of August 2002. To assist this process, the government has also established the Sector Skills Development Agency (SSDA) to help fund, support and champion the construction of the new 'high-quality' sectoral network. Following a consultation on the future of NTOs in 2001, the government produced a policy statement entitled Meeting the sector skills and productivity challenge, which sets out the key principles and steps necessary to develop the new structure.


Since the mid-1960s, successive UK governments have grappled with the problem of how to develop strong and effective sectoral employer bodies capable of addressing the training and skill needs of their particular sectors. In 1964, the government created statutory industrial training boards (ITBs) with the power to raise a compulsory training levy on employers in their industry. In the 1980s, Conservative Party governments sought to address the problem by appealing to 'voluntarism'. The ITBs were duly abolished and replaced by a succession of voluntary sectoral organisations - non-statutory training organisations (NSTOs), industry training organisations (ITOs) and, more recently, national training organisations (NTOs). The new SSCs therefore represent the latest chapter in a 20-year effort to develop effective sectoral employer training and skills bodies on a voluntarist basis.

The latest initiative is accompanied by an acknowledgement that previous attempts in this area have met with, at best, only limited success. According to the government’s policy statement, Meeting the skills and productivity challenge, NTOs have 'not delivered the fundamental wide-ranging change that is now needed' and, furthermore, 'are unlikely to deliver the step-change required in the future'. Research commissioned by the Department for Education and Skills (DfES) highlighted key weaknesses with the NTO structure. In particular, it revealed that there currently existed 71 NTOs of variable size and quality, with a 'long tail' of over 50 very small organisations covering sectors which accounted for just 15% of the workforce. A key policy aim, therefore, is to develop a 'smaller and stronger network' which, according to John Healey, minister for adult skills, 'will be at the centre of a new demand-led strategy to engage employers - large and small - in meeting the skills and productivity challenge'.

What are sector skills councils?

Sector skills councils are designed to be independent, 'employer-led' bodies, which it is intended will be developed by leading employers in industry, business or public service sectors. They are licensed by the secretary of state for education and skills in consultation with the relevant ministers in the devolved administrations of Scotland, Wales and Northern Ireland. Each SSC will have a chairperson and governing board, initially approved by ministers, which must be representative of employers in the sector but will also include other 'stakeholders', notably trade unions. In return for leadership and strategic action to meet sectoral skills and business needs, each SSC will receive public funding of up to GBP 1 million per annum. In this way, employers are to be afforded additional leverage on policies affecting skills and productivity, as well as greater influence with other education and training partners.

SSCs will be asked to address four key goals:

  • to reduce skill gaps and shortages and anticipate future needs;
  • to improve productivity, business and public service performance;
  • to increase opportunities to develop the productivity of everyone in the sector’s workforce, including action to address equal opportunities; and
  • to improve learning supply, including the development of apprenticeships, higher education and national occupational standards.

The Sector Skills Development Agency

The new SSDA has been set up by the government to guide, underpin and develop the SSC network. The SSDA is a private company limited by guarantee and a non-departmental government body. The agency is headed by a business leader chair, Margaret Salmon, and chief executive, Christopher Duff, both appointed by the secretary of state for education and skills. It has an employer-led board which is expected to work in partnership with key stakeholder bodies, including trade unions.

The main functions of the SSDA are to:

  • assist employers in sectors bidding to set up SSCs;
  • fund, support and monitor the performance of SSCs across the UK;
  • ensure quality and consistent standards across the network;
  • provide minimum cover for essential functions in sectors without an SSC;
  • ensure skills provision is designed to meet sector needs;
  • ensure generic skills are effectively covered in the work of SSCs;
  • promote best-practice sharing and 'benchmarking' between sectors; and
  • provide a website portal for public bodies and individuals to access high-quality sectoral labour market intelligence across the UK.

'Trailblazer' sectoral skills councils

The development of the new SSC network began in November 2001 with the licensing of five 'Trailblazer' SSCs to act as a 'test-bed' for the new structure. These have a two-year licence, and are designed to 'build on some of the best practice within the ... NTO network', as well as 'demonstrate the added value and potential of SSCs for employers and the government'. The five Trailblazer SSCs, selected from 31 expressions of interest against specified criteria and a selection process, are:

  • Skillset- the SSC for the audio-visual industries (broadcast, film, video and interactive media);
  • Lantra- the SSC for the environment and land-based sector (including farming, agriculture, forestry and rural development);
  • Cogent- the SSC for the oil and gas extraction, chemicals manufacturing and petroleum industries;
  • Skillfast-UK- the SSC for the apparel, footwear and textiles industry; and
  • Skillsmart- the SSC for the retail sector.


Since the early 1980s, successive UK governments have made several attempts to develop effective sectoral employer training and skills bodies on a voluntarist basis. The latest chapter in this story comes with the present Labour government’s decision to abolish NTOs and replace them with a smaller network of SSCs. At the same time, there is an acknowledgement that past initiatives have not been able to secure the 'step-change' in performance that British policy-makers currently wish to see.

One problem is the fact that UK employers have found it difficult to organise collectively to meet skills and training needs at a sectoral level. UK employers' organisations are extremely weak and fragmented in comparison with some other European countries. Historically, the UK has never possessed the strong employers' organisations that one finds, for example, in Germany where they play a key role in helping to prevent firms 'free-riding' on the training activity of others. The absence of anything resembling a European model of 'social partnership' in the UK, together with the weakening of trade unions and the collapse of multi-employer, industry-level bargaining in the 1980s, has further compounded the problem. Large tracts of the UK workforce now lie outside the coverage of collective bargaining, while the decline in industry/sectoral agreements has left many employer organisations even weaker than before in terms of their ability to coordinate their members.

In light of this, it remains to be seen just how successful the new SSCs will be in meeting the ambitious goals they have been set. Although SSCs are being marketed as 'employer-led' bodies, it is interesting to note that their design, objectives and activities, along with their licensing, funding and staffing arrangements, are controlled from the centre by government. In one sense, therefore, the SSCs do represent a radical departure from previous initiatives in that they are a response to the failure of many employers to coordinate their activities to meet skill needs on a sectoral basis. However, in so far as employer participation in the new bodies still takes place on a strictly voluntarist basis, there are grounds for thinking that they may confront similar problems to their predecessors. Finally, given the UK’s continuing problems of weak employer demand for, and usage of, skills, it will be interesting to see how the SSCs will fare when it comes to tackling the deep-rooted structural problems of a low skills, low productivity economy. (Jonathan Payne, SKOPE)

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