Policy pitch: Divert money from Tax Credits to Lifelong Training Accounts

Have you ever heard the following?

"The government should stop subsidising exploitation wages."

"I work hard for my money. Families on child tax credits need to get up off their backsides."

If you've canvassed on council estates you probably have. And, no doubt, the #labservatives have too, which is why both of them supported massive cuts to welfare.

There are good reasons for continuing with in-work benefits. The policy of both Labour and the Conservatives is to raise the minimum wage and cut benefits. This will result in employers replacing lower paid employees with automation; reorganising their business to employ fewer, more highly paid, staff; and moving jobs overseas. They may also find ways to avoid the minimum wage by subcontracting to the self-employed. All this could be very bad for the employment prospects of those with low skills. Far better to pay in-work benefits.

At the last election, the Liberal Democrats championed the cause of benefits. Both Labour and the Conservatives proposed cutting them. There was strong support for Liberal Democrat policy from experts such as the Resolution Foundation, the IFS and the Economist. However, we failed to sell this to the electorate.

When budgets are tight, if a policy does not have public support, perhaps we should consider other policies which bring similar, perhaps greater benefits, and which will have wider support in the community.

Vince Cable has already proposed lifelong learning accounts. A good policy, though I suggest we re-name them lifelong training accounts. But with an existing deficit, an ageing population adding to budget pressures, and so many other priorities, will the electorate believe it could happen?

Diverting money from Tax Credits to lifelong learning would be controversial. Existing Conservative and Labour policy of cutting benefits will reduce the standard of living for those on low incomes. So, in the short term, would this policy. However, it would also focus resources on addressing the underlying cause of low incomes. For too many, the school system has not given them the skills they need to thrive in the modern work place. We often hear that we need to invest in lifelong learning, to keep our skills up-to-date, and so ensure that we have good jobs all the way through to retirement. Unfortunately, in the main, it is the high-skilled who do this, and the low skilled do not.

This policy would be a way to prioritise the real reason for stagnant living standards. It would not just be about providing the funds, but also about changing behaviour and attitudes.

It might work as follows:

• 1) Money would be explicitly redirected from tax credits to these accounts. Some of the Government's existing reductions in benefits would continue, but the money would then be shifted to lifelong training. The controversy surrounding this could be useful in itself, in raising awareness of the new accounts, and sending a powerful signal of the importance of raising skills

• 2) The accounts would have the appearance of a bank account, in the name of the individual, so that they would feel a sense of ownership

• 3) The money could be spent on any approved training course which the individual wanted. This might be numeracy or literacy lessons, information technology training, languages, or indeed anything else that is currently taught at school or in college. It would also be used for training which is more directly related to work. I think the options should be as wide as possible, as long as the training would help employment directly: courses in brick-laying, book-keeping, perhaps even how to be a tattoo artist. It could be different from the approach of the Singapore government, which tightly defines what courses are supported with public money. Giving people more freedom to choose their own training should increase motivation and take-up

• 4) The training courses themselves would have to be regulated. The reputation of this initiative would soon be damaged if bogus courses were created, as a way to siphon off training funds for other purposes, or if the courses were of very low quality, and so brought no meaningful benefit to those attending

• 5) The money directed into the accounts would have to be spent within a fixed period of time, perhaps five or ten years. If it were not spent, the funds would be reclaimed by the state. This would then free up more funds for future funding of lifelong learning, but mostly it would be to encourage take-up. The policy would actively encourage people to use the funds. Reminders would be sent to those with unspent training funds, to remind them that they must "use it or lose it"

• 6) The initiative would also encourage people to use their own money for training, by encouraging employers to match fund those of their workers who were willing to partly pay for their own training, and by match funding from the state itself

• 7) It could also allow employers to use the funds for company-specific training. Someone with unspent lifelong learning money could even mention this in a job application, as a way to increase their chance of employment

• 8) As this money would be redirected from some income-related benefits, it would be targeted at those on low wages, the very people who are most losing out to globalisation

The initiative would aim to

• - foster a national culture of lifelong learning

• - help people to make the modern world work for them, especially those who fear globalisation and new technology

• - provide skills that modern business needs

• - give support for those on low incomes in a way that has more support in the wider population

• - provide support in a way that respects the dignity of the individual, rather than tell them what it can be spent on

Many people feel trapped in dead-end jobs; that they have no way of improving their options. As a country, we need to stop just talking about lifelong learning. This needs to be a priority not just for the highly skilled, but for everyone.

In the Social Democrat Group, we don't form policy. The above idea will have faults, so I hope others will give feedback on how it can be improved. I already know that some other members of the Social Democrat Group committee disagree with parts of it. But that's fine. We all need to start putting out our ideas, debating and disagreeing with each other, within the Lib Dems and beyond; and so help the wider centre-left to develop a programme to tackle the alienation of so many in our society.

We have already started a joint seminar programme with Policy Network, which aims to discuss this kind of issue. If you want to know more, please sign up for information.

* George Kendall is chair of the Social Democrat Group, which is being formed to celebrate and develop our social democrat heritage, and to reach out to social democrats beyond the party. He writes in a personal capacity.