Strong Local Voice, Strong Local Champion

Employer Engagement in Further and Higher Education

Annette Brooke (Mid-Dorset and North Poole) (LD): I, too, start by agreeing with most of what the Minister said. I hope that we will have a stimulating debate, and I am relieved that more people have attended, because initially as I was listening to the Minister and thinking, "I do not disagree with much of that," I also thought that interest would not last long.

However, I hope the Minister is prepared to accept that there are questions to be asked. That does not mean that we are rubbishing what the Government are doing, but surely it is right to be critical about how well particular schemes are working, or about the size of the problem. I hope he takes my comments in that way. The skills are essential to our economy and society. The link between national productivity and international competitiveness is obvious, but we also need to focus on the broader benefits that are contributing to the quality of our lives as individuals, in our communities and in society as a whole.

As the Minister indicated, the scope of the problem of our skills deficit is enormous. The Government are having to make up for lack of investment in the past in this incredibly important area. We seem to have been speaking about this matter for long enough, but it seems that it is only in the past few years, with the various strategies, that there has been a real attempt to get to grips with it. The 2004 national employers skills survey shows that one in five establishments reported skills gaps in their work force and some 1.5 million workers-7 per cent. of the work force-were described by employers as not being fully proficient.

There has been progress. The 2001 survey showed that 23 per cent. of employers reported a skills gap and 9 per cent. of the work force was described as not fully proficient. An estimated 3.5 million people go to work each day without being able to read very well. The CBI has calculated the effect of poor basic skills on the UK economy at some £10 billion per year. When talking about the large sums of money that need investing, we must have regard to the cost of not investing in this important sphere.

As Leitch reports, more than one third of adults in the UK still do not have a basic school-leaving qualification, which is double the proportion in Canada and in Germany. Some 5 million people have no qualifications at all. The Government have set ambitious targets for 2020, but worryingly it seems that Leitch's conclusion will be that even if they are met, we will still be far short of having a world-class skilled work force. The challenge ahead is getting bigger.

We have made enormous strides in expanding higher education and I congratulate the Government on that, although we are still lagging other countries. However, it is worrying-I am picking up on what the hon. Member for Henley (Mr. Johnson) said-that a report last year by Manpower estimated that just over half of graduates felt that they were entering the work force with the necessary skills, while only 37 per cent. of employers were satisfied that the new graduates had the right skills for the job. They are likely to acquire those skills on the job, but even so, that is a worrying gap.

I am afraid that I am going to refer to some uncorrected evidence from the Public Accounts Committee last week-I believe I have to tell the House that-from an interesting sitting in which the Committee questioned the National Audit Office report on employers' perspectives on improving skills for employment. Mr. Bell quoted the Leitch report, talking about the

"tripartite responsibility on skills development".

That is a good phrase, although I would have included the words "plus one", as I will explain. Mr. Bell continued:

"The individual has a responsibility contribute to"

the skills development. He went on:

"The Government have a responsibility if they want to create a healthy and competitive economy and business also has responsibility. It would be good to encourage employers not just to say 'What are the Government going to do for me?' but to say, 'How can you contribute alongside employees and Government to become more competitive?'"

The title of our debate is a bit narrow, because we have to think about the interaction between the individual, the Government and business, as well as a fourth strand, which I would add in-the providers of the skills training, whether we are talking about further or higher education or public or private provision. There is a lot involved in the issue.

The skills agenda is covered by two Departments. There is also an enormous number of Government bodies involved in the delivery of skills. That is the plus side, for those who like local delivery. However, the enormous number of bodies leads to some questions: is there effective focus on improving skills? Is money being spent to best effect? Are businesses getting the improvements they demand?

The CBI often expresses the view that the education system should ensure that people leave school with the proper skills. Obviously, we need to address that issue, but as Leitch points out, we must also harness and develop the skills of those who have already left school and who will make up an important component of the 2020 work force. Those are two big issues.

I think I am allowed to say this: it is a pity that the Government have not fully adopted the Tomlinson proposals for schools. Parity of esteem between vocational and academic studies starting at age 14 is vital. Our education system needs a fundamental overhaul, although that should be phased in. There is good news, however, as companies such as JCB and Rolls-Royce are involved in the design and delivery of foundation degrees, and other companies are involved in the development of the new vocational diplomas. So there is a lot of good news, but could we do better if we really took the Tomlinson proposals on board and were brave enough to implement his recommendations?

The National Audit Office report makes it clear that improving skills for employment and ensuring that employers get what they want require the co-operation and involvement of those employers. I shall touch on some points made by that very good report. Employers are a diverse group-that has not been picked up so far in the debate. Small businesses provide a high proportion of our total employment, and it is obviously harder for a small business-with less than, say, five or 50 employees-to provide training in the first place. There is also an enormous variation in employer-supported training across the different sectors. So, there is no simple equation; we cannot pour the money in and expect employers to co-operate more. The approach should be more targeted.

As the National Audit Office pointed out:

"Recent research estimates that, on average, an eight per cent. increase in the proportion of trained workers can lead to a 0.6 per cent. increase in UK productivity."

I think that the Minister quoted similar figures. Given all the benefits and the effect throughout the economy, can we afford not to invest? Obviously, training is expensive, so what will make employers want to invest? They will want direct economic benefits and training that meets their needs. It is difficult to tackle the problem of the lack of level 2 qualifications, which some employers might be reluctant to invest in, and it is too easy to blame the schools system.

We need to make a breakthrough on the issue, which is why I support the strategy of focusing on young people and adults who do not have a level 2 qualification. I have said that to the Minister directly, although I do not like all the side effects of that strategy. There will be a market failure if employers do not have the incentive to invest in level 2 qualifications. I can see no other way around the problem than Government intervention in what is clearly a market failure.

A few problems, however, are thrown up by the free provision of basic skills and first level 2 qualifications. We have already heard about the impact on the other courses previously provided by colleges of further education. I am concerned that the focus on basic skills provision has cut provision of some other courses that might provide, or lead up to, basic skills in a more user-friendly way for people who have not participated in education for a long time, or who find it hard to participate. The colleges had a real point to make: the ones that are accredited for finance might not be the first stepping stone for some students or adults.

Also, much of the large amount of money that the Government allocated has been used up on high numbers of 16 to 19-year-olds, who, some say, might reasonably be expected to gain their qualifications at school. I do not think that that is a reason why money should not be invested, but while we are evaluating, we have to appreciate that there are two groups-those who have just left school and adults-and that it will take a lot of money to solve the issues.

There is also the matter of what we might see as dead-weight investment; the Government have conveniently provided an opt-out for some employers who might previously have invested the money themselves. I hope that most employers feel that their training money has been freed up, perhaps for investment in level 3. There is a more obvious direct economic benefit to a company from investing in level 3.

I hope that the Minister does not throw this question back at me, because I am generally not very keen on targets. As far as I know, the Government have not set a target for the number of adults achieving level 3 in vocational or academic subjects. It strikes me that that is a gap in the array of targets, and if a target is missing, that can lead to distortion in investment.

The Institute of Financial Services looked into the impact of the employer training pilots and did not reach incredibly optimistic conclusions, although I read the Minister's foreword on the subject. The IFS identifies only a small positive effect, and also highlights quality issues. I hope the Minister will respond on that point. Also, there is the roll-out of train2gain, but obviously there were big issues with the pilots. How will he tackle those?

On the employer training pilots, the principle of skills brokers is absolutely excellent, as is getting employers to talk to other employers. I want briefly to refer to my local college. I was employed there for quite a long time many years ago, so I am in regular contact. I asked the college for some input on its experience locally, and the principal provided me with the college's "working with employers" strategy for 2006-07. The first paragraph says:

"It is the intention of Bournemouth and Poole College to become the automatic first point of contact for employers in the sub-region, as the valued partners of choice for developing the skills of their workforce and supporting local economic development. Our clear message to employers is 'Your business is our business'."

It is a very good document, and there are some good examples in it.

I also considered the university of Bournemouth and spoke to a local leading employer, the chief executive of Hamworthy Engineering, who sits on the board of Bournemouth university and the regional development agency. All that networking and all those links are incredibly important. The university has good roots for continuous professional development.

I want to refer to a case study on Hamworthy Engineering's website, because it brings the "tripartite plus one" strategy to life:

"Mary is a degree-qualified engineer working in a medium sized engineering company in Dorset. She graduated some 10 years ago and has risen through the ranks from Junior Engineer to her latest promotion as Project Manager. Mary will manage a team of 10 people . . . and a budget of £750,000. She feels she is lacking skills and understanding in contractual law, and wants to boost her confidence by learning about management accounting. She also feels the need to update her technical knowledge in the specialised area of object oriented design. Mary works full-time so she has a limited amount of time . . . to devote to studying. Mary has embarked on her own, tailored professional development programme . . . Her employer will be sponsoring her study, as part of their staff development plan."

When Mary finishes, she will have

"achieved her personal and career aims, but also gained a postgraduate certificate in Professional Vocational Development".

That is excellent. I also have experience of incubator units, mentioned by the hon. Member for Henley, at the arts institute and at the university.

The Association of Colleges has made a few points to which I can particularly relate. It calls on the Government to adjust the pace of implementation, and I throw that at the Minister for consideration. It would like colleges to be allowed to be funded to offer qualifications in bite-size chunks tailored to local needs, rather than only long, whole qualifications that local employers may not want to buy. I have some sympathy with that argument.

The association would like national prescription, which does not fit every regional locality, to be reduced to give more local flexibility. In particular, it wants colleges to offer individuals essential stepping-stones training from basic skills to level 2.

We have mentioned the Foster review, which identifies the fact that experience of employer and college relationships is patchy, although I hope that my own local college is a good example. We also have to be aware that only a small proportion of employers have contact with FE colleges. There are important relationships with private providers, which is important. The Foster report mentions specifically the centres of vocational excellence and the skills academies, which are good examples.

This issue is a real challenge. We should look not only at the employers' perspective, but at how all four strands interact. There is an issue about how to use the money in the most effective way, although I accept that we have started from a low base. It is very encouraging that the Government are seeking to close the gap between further education funding and schools funding for the same age group, but there is still more to be done in that respect.

In the state sector, streams of money still come from lots of different directions. Can we simplify that funding? Like all MPs, I know how off-putting it is to make complicated and bureaucratic applications or bids for public funds-it takes an awfully long time to deal with the forms. We ought to be proud of how our further education and higher education colleges are developing and taking on the challenges of meeting the skills agenda. However, they need a great deal of support and a little less hassle.