Can regional collaboration between FE, HE and mayoral authorities help drive economic growth?

By Andrew Westwood, Professor of Public Policy, Government and Business at the University of Manchester

The Labour government is committed to addressing fragmentation in a ‘broken skills system’ and to more collaboration than competition in the post 16 system. Skills England will be the body to lead and co-ordinate these efforts. Furthermore, both before and since the general election in July 2024, Labour also promised a devolution revolution with more mayors and combined authorities and deeper and wider settlements across the board. And the government has also pledged to deliver economic growth and increases in living standards everywhere - and both devolution and skills reform are key parts of making that happen. This blog explores how all three of these objectives allow us to think about new models of co-operation and ways of working together and address longstanding weaknesses in both post 16 education and regional inequality - both of which consistently hold back economic growth across the country as a whole.

The first issue to consider is devolution and the progress that government - at many levels - is making on its agenda. There is now a devolution white paper - and a clear direction of travel at the sub-national level in England. It promises a wave of new mayors and combined/strategic authorities as well as local government reform to the size and roles of the individual local councils that make them up. Every place - as well as every college and university - will be part of this agenda by the end of the Parliament.

The white paper confirms an all too rare political consensus over institutions and powers. The model of mayors and combined authorities has been endorsed and will now be extended to the remaining parts of England, ‘completing the map’ of devolution promised during the election. This is not just agreement between the main parties. The Lib Dems, Reform and possibly the Greens all have shots at winning some of these mayoralties including in elections this year and each are therefore supporting these changes. This gives some institutional certainty going forward into the next decade that we have rarely seen in England - as opposed to the policy churn affecting regional policies and institutions, economic strategies and technical education as set out in All Change (IfG 2017). The Reform candidate for Lincolnshire is Andrea Jenkyns, a former Conservative minister for FE and HE, so if she wins she might even have some understanding of the importance of these sectors.

However, building new institutions is hard and takes time. Even those MCAs that have been around for a few years are still growing their capacity to take on new functions - whether for delivering public services or driving local economic growth. The most successful are doing this in strategic partnerships including with colleges and universities bringing them into thinking about how to best resource and deliver to these same twin objectives.

But devolution and the prospect of a stable institutional framework isn’t enough to deliver economic growth on its own. We are starting from a very difficult place - most cities and regions in England depend on subsidy and their GDP per head or per hour is low compared to the UK average and worse compared to most other countries in Europe. Philip McCann (my colleague at TPI) has shown that if you compare the UK (without London, SE and E) it looks a lot like Mississippi. In Europe most of the former East Germany has now overtaken the economic performance of most of Northern England (see Tom Forth: Why is North England poor?)

The second issue takes us into the supply and utilisation of human capital - and the various skills policies and organisations that oversee this. As ministers - including both Keir Starmer and Bridget Philipson have noted - the current system is fragmented and often incoherent (particularly to users - whether individuals or employers). So the challenge of tackling fragmentation is a big one. In trying to do so we must all acknowledge how stronger incentives in each of the different system(s) tend to work against regional coherence.

HE funding is based on a single national market, overseen by the Office for Students, and quality judged on national outcomes (which tend to favour London and SE). Until now, FE has also been seen as a market, driven by student demand and overseen to a largely national model run by the ESFA (although these responsibilities will be imminently absorbed back into the DfE). Apprenticeships are largely based on employer demand - mainly from levy payers and this constitutes a third quite distinct system but also with little regional or local focus. Finally, adult education funding is devolved to mayors (where they currently exist) and allocated according to local and regional priorities and needs. Taken together, these are four very different systems across FE and HE and each tends to favour competition over collaboration and progression. Worse is that with the exception of adult education, they operate on a one size fits all basis, too easily detaching providers from local or regional needs. Bringing them together into a coherent whole is a significant challenge and one where central government has largely failed over recent decades to do so.

Finally, and most importantly, we must return to economic growth as it remains the government’s main mission (and everything will be seen through this lens - including decisions at the forthcoming Spending Review in June). This then provides the main way of thinking about how devolution and the broader skills system in England must come together to drive it. Before thatc, it is worth reflecting on the government’s model of growth and where it is different to the preceding models that have helped shape the current skills system(s).

For the last two or three decades, the various parts of our tertiary sector have been part of a general theory of growth where more human capital is good and expanding it (as well as research and development) would help drive productivity and a growing economy. Successive governments have focused on the supply side, whatever their political persuasion. However, this government has a different theory of growth and of governing and reforming public services. In both, it wishes to be much more interventionist and to make choices. There is now an overarching Industrial Strategy with eight key sectors and sub sectors to come. It is also organising itself around missions and prioritising cross government prioritisation of time and resources in support of them. There is also a spatial dimension to this with the industrial strategy picking out second tier cities as a focus and more recently Rachel Reeves renewing support for the OxCam arc and for new runways and bridges around London. Specific places are also being targeted as AI growth zones and Investment Zones as well as on the building of a series of new towns.

Tensions arise for the skills system(s) because it is the more general, supply side theory, together with competition as a driver, that have underpinned the way different parts have been funded and regulated. As a whole, governments have been happy to stand back and let the markets of student or employer demand to drive the flow of resources. However, the new government wants to send clear signals about the provision that it wishes to prioritise - to drive its missions or economic growth in the economy. But picking priorities in our current system is very hard to do in practice. So government will have to find new ways of stimulating the provision and outcomes that it wants to see. Incentives will matter - but some incentives are currently stronger than others (and they tend to be the ones with most funding attached). This is especially true today when many universities and colleges are under significant and growing financial pressure. The incentives to think locally, civically or in terms of missions or industrial strategy aren’t yet evident or anywhere near as strong.

There are risks then - and one is that we end up just layering one on top of the other - asking colleges and universities to do more while leaving most existing incentives and models in place, ie expecting institutions to be collaborative and competitive. From this comes another very familiar risk - that of increasing complexity (something we’ve been pretty good at over recent years). Furthermore, we might spend a lot of time and effort rewiring the system and institutions and not nearly enough on the relationships and activities that actually deliver growth.

We should not be distracted from the reforms and policies necessary to drive growth - especially in the cities and regions where stagnation and decline have been one of the biggest causes of our poor growth and productivity record for the UK as a whole. Fixing this is going to take a long time, but fix it we must. That must involve strong local institutions working together - including local and regional governments, colleges and universities as well as others in the public, private and third sectors too. But we won’t fix it if we keep trying to rearrange, carve up or reallocate resources and responsibilities in a zero sum game. We need dial shifting interventions and the long term commitment to see them through. Colleges and universities must step up and play their part helping to build capacity and new governing institutions as well as thriving local economies. This is what most of them were originally set up to do - but at least some of that commitment needs revisiting and rethinking. Alongside, they will need the right incentives from government but also the rolling back of those that have caused many institutions to look the other way.