In 2025, the Government is planning to introduce the Lifelong Loan Entitlement (LLE), a new flexible system for student loans, with which they are hoping to drive a number of changes including:

  1. Changes in the tertiary education offer: Creating a skills-based system that helps address the country’s productivity gap by creating alternative higher education routes to a bachelor’s degree, such as via Higher Technical Qualifications.
  2. Changing consumer behaviour: Promoting flexibility within tertiary education by increasing both standalone Level 4/5 attainment and modular course provision enabling individuals to take shorter stand-alone courses over time.

While there is an acknowledged need in England for more individuals to be qualified to Level 4 and 5 to address the country’s productivity puzzle, standalone modular courses do not necessarily contribute to meeting that need if they are not part of a recognised qualification framework. Higher Education qualifications in England are structured to build towards clear education outcomes. They have clear currency which makes them transferable between employers, while still including skills-based elements. This may not apply to short courses.

If the Government’s ambitions for modular delivery is realised, there is a risk that – while such short courses could help meet an employer’s short-term training demand – they may add little to an individual’s education if they cannot be recognised as part of an established qualification. In this scenario, employers are the main beneficiaries of the system, while the financial risk lies with the student that takes out the loan (and the Treasury which underwrites it).

There is, therefore, a risk that the LLE could exacerbate the widely acknowledged issue of low employer investment in skills, further increasing the dependency of employers in England. This could be the equivalent of a state welfare system for skills.

Since the abolition of the statutory Industrial Training Boards in the early 1980s, employer engagement in the skills agenda has been voluntary. While employers maintain that skills are important, they have largely adopted the role of a consumer rather than being an integral part of the skills system (as for they are, for example, in Germany). This lack of investment was one of the impetuses for the Government to introduce the apprenticeship levy. Employer involvement in trailblazer groups to develop apprenticeship standards has been decidedly mixed, however, and often dominated by the largest companies in each sector.

Previous attempts at Employer Ownership Pilots – testing out various ways to encourage employers to co-fund training investment – have also shown mixed results, while making it clear that it will take considerable effort to move employers away from the ‘welfare dependency’ of a state-funded skills system.

The Local Skills Improvements Plans proposed in the Skills for Jobs White Paper will once again place employers in the role of customers, with local chambers of commerce asked to draw up a wish list of skills and then present this to local FE colleges – with penalties for those institutions that do not apply. This is an approach guaranteed to produced limited results, but the risk has potential to move from state welfare support for skills to one shared by learners. Further if there is rapid growth in such short courses via commercial providers this could exacerbate this the risk to student benefit and lead to significant increased demand on the Treasury through the LLE.

The LLE has significant potential to transform tertiary education. The need to develop skills-based pathways that support individuals and enhance productivity is clear. To help realise the benefits and limit the risk of some unintended consequences it is therefore recommended that:

  1. The LLE should be focused qualifications or courses linked to ‘registered and approved’ providers to help ensure that taxpayer’s interests are safeguarded and help prevent uncontrolled expansion and cost before the system develops.
  2. The LLE should be focused on courses that have the ability to contribute to a qualification.
  3. Work to develop thinking about how to incentivise employers to engage in both the funding and design of employer led qualifications should be undertaken with BEIS and DfE. This approach should be used to fund short skills based training courses that benefit the employer but don’t lead to a transferable qualification.