Ms Claire McGee:

I am head of education and innovation policy at IBEC. I am joined by my colleague, Meadhbh Costello. We are here to discuss the National Training Fund. Education, skills and talent development consistently top the priority lists of the businesses that IBEC represents. Digitalisation, automation and globalisation are transforming the world of work at an unprecedented pace, with significant impact for education and learning. This is the European Year of Skills, the aim of which is to give a fresh impetus to lifelong learning, empowering people and companies to contribute to the green and digital transitions and supporting innovation and competitiveness. Let us use this new focus to our advantage.

Ireland is rich with high-tech, highly innovative business sectors with a global outlook, from technology, financial services, pharmaceuticals, medical technology, agriculture and food, engineering and manufacturing. The challenge for Irish industry is to retain its hard-earned size, scale and reputation by continuing to deliver world-class performance in all aspects of current and future operations.

Sustainable and inclusive economic growth will rely on gains in labour productivity and closing the productivity gap between multinational and indigenous companies. Labour productivity in supporting the adoption of game-changing technologies in Irish firms in both the digital and green sectors as well as ensuring that businesses have access to the necessary skills.

Lifelong learning will be essential to sustain and develop a skilled workforce that can adapt and respond to changing skills needs. This requires appropriate levels of strategic planning and financial resources.

The National Training Fund, NTF, is a strategic asset that can deliver a step change in skills and talent development. A lack of key skills remains a challenge for almost 81% of employers in Ireland. While businesses continue to face difficulties in filling vacancies across all industry sectors, the emergence of new technologies and megatrends, such as climate change, are fuelling a rapid transformation of the skill needs across the workforce.

Accessing the surplus of the National Training Fund to invest in digital skills, green skills, management skills and transversal employability skills will be critical for building the resilience of our workforce to the future of work. The surplus in the NTF is an opportunity to leverage the increasing interest from employers in lifelong learning to drive innovation and, again, a step change in skills delivery.

The National Training Fund is resourced by a levy on employers via the PRSI contribution. The NTF levy has increased by 0.1 percentage points of the total wage bill in the State in each of the years 2018, 2019 and 2020. This represents 1% of the total national wage bill. At a workplace level, this means the average spend on the NTF for companies per euro of wages has increased by 42% over the last four years. For 2023, the income of the NTF is forecast at €1,020 million, with expenditure forecast at €900 million, giving rise to an expected annual surplus of €120 million. This, in turn, will increase the accumulated surplus to €1.5 billion.

The scale of the NTF surplus has reached a spending stalemate. Now is the time to approve a short-term investment campaign with one-off mechanisms to utilise the existing surplus to prevent the year-on-year increase of unspent employer contributions. It is untenable that employers’ contributions would continue to accumulate while the demand from business for upskilling and reskilling goes underserved, particularly in the context of a tight labour market where strengthening the skill base is critical to leverage opportunities presented by digitisation and enhance the transition to a greener economy.

I will set out some of IBEC’s key priorities for the National Training Fund to increase business innovation and productivity. No. 1 is to introduce a national training voucher scheme to encourage more employers to engage in upskilling and reskilling of their workforce. The Indecon review of the NTF, published in 2019, called for a new innovative pilot initiative to increase in-company training, thereby increasing productivity and innovation capacity, particularly in SMEs. The introduction of a national training voucher scheme has the potential to boost in-company training and widen participation in upskilling and reskilling to include all businesses and all employers. Based on the principle of cost reimbursement, businesses should be able to claim back expenses for training costs incurred during the year undertaken with an accredited education and training provider. Such a scheme is highly attractive to business as it provides greater flexibility and freedom to plan and source relevant training directly without the burden of national administrative scaffolding or programmes which may or may not align with their strategic need at that particular time. There is a successful precedent in Ireland for using voucher schemes to encourage greater education and enterprise engagement with the Enterprise Ireland innovation voucher scheme.

No. 2 is to support the dual investment in technology and talent to help businesses, in particular SMEs, boost their productivity, support their digitalisation and introduce more sustainable business practices in areas such as energy efficiency and carbon emissions reduction. Businesses need support in adopting new technologies and in ensuring workers have the necessary skills for their operation. A new initiative is needed which links technology adoption, innovation and skills development in a practical way for business. A dedicated programme to support dual investment in skills and technology for the twin transition will support this as well as continuing to provide infrastructure investment in further education centres of excellence and research and innovation infrastructure and equipment in Ireland’s higher education institutions and research centres.

No. 3 is to invest in industry-academia collaboration to respond to industry skills needs and drive innovation in teaching and learning across that system. Industry-academia collaboration in skills provision is critical to responding to the existing and future skills needs of business, providing opportunities for work experience and work-based learning and enhancing the overall employability of education and training programmes. Funding should be utilised to strengthen industry-academia collaboration across institutions and develop innovative models for collaborative education and skills delivery. A funded graduate placement programme, for example, would support SMEs to attract and retain high-quality graduate talent and build a connection with an education and training institution.

No. 4 is to incentivise more SMEs to engage in apprenticeship programmes by addressing the high cost barriers. We are now reaching a critical phase of generation apprenticeship where more employers and business will be needed meet the targets set out in the action plan for apprenticeships. While the introduction of the €2,000 employer incentive scheme is welcomed by employers, businesses continue to face significant cost barriers in employing apprentices related to recruitment, training, mentorship, backfilling of positions and subsistence.

These costs can be particularly challenging for SMEs. To encourage more smaller businesses to take part in apprenticeships, the existing employer incentive should be increased to approximately €7,000. As SMEs often have limited HR functions and capacities, additional supports around the recruitment of apprentices should also be developed.

No. 5, very importantly, is to be more strategic around the National Training Fund to implement a lifelong learning strategy for Ireland to prepare individuals for these twin transitions. While Ireland’s lifelong learning participation rate stands above the EU average of 13%, we still continue to fall behind our international counterparts such as Sweden, Finland and the Netherlands, which are the economies with which we want to compare ourselves. The National Training Fund is an opportunity to financially underpin a strategic approach to lifelong learning and upskill Ireland’s workforce to prepare for digital and green transitions across all sectors of the economy. Further investment in upskilling, reskilling and lifelong learning opportunities in critical areas should be supported through Springboard+ and other positive initiatives. A new lifelong learning strategy will provide a renewed focus for the National Training Fund to meet its policy objectives and avoid the accrual of annual surpluses.

No. 6 is to future-proof Ireland’s openness and attractiveness as a destination for talent. IBEC’s latest CEO survey highlighted that 70% of companies identified the availability of housing for staff as a challenge to their business operations in 2023. Other quality-of-life issues related to healthcare, childcare, etc., are also impacting Ireland’s attractiveness for future investment. Construction, healthcare, childcare and education all require a proficient and quality level of service to continue and will require continued investment in skills. Unlocking the National Training Fund can address these skills bottlenecks to meet strategic challenges facing Ireland and deliver on Government strategies related to Housing for All, the national development plan and Sláintecare.

With the unrivalled pace of technological change and an increasingly globally competitive environment, there has never been a more urgent need for a talented, enterprising workforce, constant innovation in products and services and a quality and well-resourced education, training and research system. The digital transformation of business is changing how people work. New technologies and new business models are altering skills profiles for existing roles and creating new roles. Investment in people, technology and innovation needs to be a top five investment priority for Ireland to build resilience and readiness across the economy. Now is the time for Ireland to really consider what our new economic narrative should be. A strategy for lifelong learning and workforce development, financed by the National Training Fund, can provide the answer and put innovation, research, talent, and skills at the heart of our economy and society.

Ms Costello and I look forward to supporting the committee's work in this important area and welcome any questions.