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In June 2003, the UK government will publish a national Skills Strategy and Delivery Plan. The strategy will establish a broad agenda for raising skill levels amongst young people and adults in close cooperation with employers to ensure that their skill needs are satisfied. The strategy will describe the roles and responsibilities of employers, individuals and government in skills development, including the government’s role in providing institutional, qualifications and quality frameworks. The aim of the strategy is to create a more demand-led learning system and it will include: a comprehensive approach to promoting participation in learning through better advice and rendering learning more attractive and accessible to learners of all ages; the government’s approach to engaging employers across all areas of skills development; adult workforce development, especially in relation to the delivery plan for the new Level 2 target for adults, i.e. to reduce by at least 40% the number of adults in the workforce without a Level 2 or equivalent qualification by 2010; and the outcomes of the review of the funding of adult learning. This evidence paper summarises the key statistical and research evidence on the nature of the skill challenge that the strategy will address and on the rationale for government intervention to meet the challenge. The paper aims to explain the rationale and evidence underpinning the progress report published in conjunction with this paper. The key messages are that skills play an important role in increasing productivity and providing a route to stable employment for workers. Workforce skills are lower in the UK than in other countries with the cause being a mixture of supply and demand factors. There is a particular need for the government to help adults who have not achieved a level 2 qualification, therefore lacking the skills required for ongoing employability.