This chapter discusses the assumptions underlying official training policy in the UK. It is argued that UK training policy ignores the fact that Britain's vocational education and training problem is one of lack of employer demand for skills rather than one of lack of supply.

Particular attention is focused on the presumption that employers will require ever more highly trained workers at all levels, that training is crucial to their economic success, and that any government support for training must make use of the price system and must place primary responsibility for training decisions in the hands of the employers. It is argued that, in important respects, these views are out of touch with reality.

Keep and Mayhew acknowledge the potential importance of market failures associated with training. But they argue that there is an additional problem of what might be termed ‘managerial failure’, a problem that is particularly prevalent in Britain. Here managers opt for a low-skill employment strategy relying on cost competitiveness, which limits their demand for skilled labour. The reasons advanced for ‘managerial failure’ are as follows. Managers in Britain have been brought up in a confrontational system of industrial relations, where workers are not required to think, and where initiative and talent are required of a minority. Training is a positional good, more of which may threaten existing power relationships. Moreover, the volatility of the British economy relative to other OECD economies makes returns to training harder to quantify than easily comprehended costs. This chapter also argues that short-termism has become institutionalized in Britain through a variety of mechanisms.