The rise to prominence of the competence‐based system of National/Scottish Vocational Qualifications (N/SVQs) has been one of the most significant developments to affect vocational education and training in the UK in recent years. Given that the N/SVQ policy has attracted a considerable amount of attention, much of which has been of a critical nature, it is somewhat surprising that the origins of such a major reform have received so little scrutiny. In so far as it provides an analysis of the factors which impelled the competence‐based N/SVQ policy this article aims to fill this gap in our knowledge. Drawing heavily on interviews with relevant officials of the time, it is asserted that during the 1970s and early 1980s the presence of four factors generated an interest among policy makers in competence as the basis for a reformed system of vocational qualifications, and each of them is examined in turn. They were: the pressure for increased vocational relevance in education; the perception that economic restructuring and related employment change were of a post‐industrial character; the desirability of replacing training arrangements which were based on time serving with greater training to standards; and the need to manage, and mitigate the effects of, high levels of youth unemployment.