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UK Skills Agenda

Volume 482: debated on Tuesday 4 November 2008

I am especially pleased to be here with my hon. Friend the Minister. This is my first chance to see him in action and it gives me particular pleasure to be doing that today. I am aware that quite significant parts of the UK skills agenda have been devolved, so although I will mention Scotland’s policies, I shall try to err on the right side of the rules and avoid straying into the tricky territory that is devolved policy.

The skills agenda is perhaps the most important single area of public policy today. The Government in many respects set the terms of progress by commissioning the Leitch review of 2006. The resulting report, “Prosperity for all in the global economy—world class skills”, was a practical piece of work that stated fairly orthodox facts of life about the future of our economy in the world and our need for a more highly skilled population. It also made a series of recommendations about how our education and training structures should be developed to meet the challenges at hand. That report has been followed through by the Government pretty much lock, stock and barrel, most notably through the creation of the UK Commission for Employment and Skills—the UKCES.

From my perspective as the Member for Falkirk, a Scottish constituency, the UK element of the UKCES needs a bit of unpacking. It is clear that the imperatives of the Leitch report apply across the UK and, indeed, much more widely in many respects—in the widest sense, they apply to any developed economy in the world today—but devolution means that different parts of the UK are carrying forward the ideas and philosophy central to Leitch in their own ways. Certain strands apply across the UK equally. The sector skills councils apply across the UK, which is very important. The Department for Innovation, Universities and Skills leads on those matters. However, there are also significant parts of the agenda on which it is for the devolved Administrations to make their own decisions and policies. As I said, I will refer to Scotland, but I shall endeavour to stay on the right side of the rules.

I shall examine the issue of skills through the prism of my own constituency. Falkirk sits in the central belt of Scotland between Edinburgh and Glasgow. Historically, it provided labour for the iron industry, which in turn served the shipbuilding industry on the Clyde and elsewhere in Scotland. Employment, skills and human capital in general revolved around a number of fairly simple assumptions about how a working life would normally pan out. Women tended not to work and men tended to be trained on the job. People tended to enter employment on leaving school, often staying with the same employer, in the same location, for their entire working lives. There was a tradition in Falkirk of skilled employment for some, as the iron industry required skilled artisans and engineers at one end of the spectrum, but much of the employment was semi-skilled and quite a lot of it was unskilled, even though people did it for their entire working lives. The schools turned out many kids who expected to enter similar employment to that of their parents, and the college sector, as it was then, often provided day release for them once they entered the foundries and associated employment.

Employment was available but, despite the fact that people often look back through rose-tinted lenses, it was not plentiful. Unemployment was much higher, employment was much lower and women tended not to work. Unemployment was a feature of life for greater numbers of people then than it is today, and working lives were often cut short by ailments caused by the industrial conditions in which people worked.

There is a danger here of presenting a monochrome, over-simplistic version of the local economy at the time. It is nevertheless fair to say that the essential nature of the local economy and people’s working lives can be understood only against the backdrop of the foundries and the industrial landscape that they formed.

Interestingly—I think it is interesting anyway, because I did it—I sent 10,000 questionnaires to local households. I should have said that I and my massively capable staff did that—they did it and I take credit for it. We asked various questions about life in the Falkirk area, and many of the norms and figures that we got were pretty much the same as those that people would get not only across Scotland, but across the whole of the UK. From a policy point of view, Falkirk is in many respects a typical place that we can generalise from outwards to the whole of the UK—I like to think so, anyway. People can see the results of the survey on

My predecessor in the House, Harry Ewing, who subsequently became Lord Ewing of Kirkford, said in his maiden speech that Falkirk was “solely an iron town”. That was in 1971. He pointed out that there had been recent investment in the industry and that it was well equipped for the tail end of the 20th century. However, within about 10 years of that speech, most of the foundries were either closing or had closed, and by the time I came on the scene, just over 10 years after that, they were all gone. There was one left, but it has now gone as well, which shows just how quickly the nature of employment has changed in my part of Scotland and, indeed, across the UK.

Let us fast forward to today. All those foundries are now closed and on the sites of the old foundries are new build housing estates. Indeed, it sometimes seems that if planning permission permitted, pretty much every available square inch in Falkirk would have a house built on it. That is because Edinburgh and Glasgow are only half an hour away and Falkirk sits in the middle of three motorways, so people live there and travel to work. Clearly, there are still many jobs in Falkirk—including those at Alexander Dennis, which builds the red London buses, one of which we saw at the Beijing Olympics—but there is far more commuting and there is a far greater flow of people moving into the new build houses than moving on elsewhere. That impacts on the local economy, and I will come to the skills base.

Employment in Scotland is relatively high. The number of people of working age who are not on incapacity benefit and are in employment is slightly higher than it is across the UK as a whole, but working lives are characterised by far more uncertainty than they were in the days of the iron industry. The patterns of increased mobility and reduced time horizons in terms of how long someone might expect to stay in a job, a particular appointment or even a particular industry have, in common with a range of other features of life in the 21st-century global economy, placed the value of human capital—I believe this and I think that the Government do—at the top of the political agenda, and this is where the skills agenda comes into play.

It is more or less an article of faith within the skills agenda that higher levels of skills lead to higher levels of individual and collective productivity, yet as the UKCES has noted, Scotland apparently has higher levels of skills per capita but lower levels of productivity than the UK as a whole. Quite a lot of work needs doing to get to the root of why that should be the case, but it seems to me quite likely that there are important differences in the nature of available jobs. If people are upskilled and highly educated but fail to find jobs that suit their level of skills and education, they will be less productive by definition and perhaps even in terms of their own motivation. In addition, some OECD comparisons and some productivity measures, particularly those directed at the public sector, seem to me to need quite a lot more work before they can be considered properly valid and reliable. I know that the UKCES has commented on that and has made a pretty good start in that respect.

Another important variable is capital investment. New equipment virtually by definition drives productivity improvement, so older industries or service industries that have relatively low levels of investment in state-of-the art equipment will show lower levels of productivity even if the people who work in them are more highly trained and educated.

That point was made to me by Wendy Livingstone, the associate principal of business and innovation at Forth Valley college. Wendy is responsible for a new development in vocational education, which I think has implications across the whole UK. Often we speak of parity of esteem in relation to education and training, yet esteem is not really something that can be ascribed by politicians. It is essentially up to the “esteemers”, if I can put it that way—young people, employees and employers and what they think of particular qualifications. We cannot really define it; they have to decide what they value themselves. Vocational education can be a hard sell when it comes to people with considerable academic potential. Sometimes even the Government and hon. Members are guilty of over-emphasising academic qualifications and the importance of people entering higher education at the expense of a more vocational route. Wendy and Forth Valley college are running an innovative scheme in conjunction with Ineos, the large chemicals company that is a major employer in the Falkirk area and sits just outside my constituency, in that of my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty).

Ineos has noticed that graduate trainees often lack physical skills and practical orientation in their early years. It has also noted that many skilled people in the oil gas and chemicals industries are very smart, like my brothers; they have not had a formal higher education but it could easily be thought that they had been educated to that level. Indeed, their salaries are commensurate with that belief.

Forth Valley college and Ineos have designed a regime that will see local school leavers being recruited directly into jobs that will lead them to Master of Engineering status within six years. That is a year more than through the traditional higher education route, but crucially it includes six years of applied industrial experience. That is at the top end of the vocational market, but is shows that there can be a significant overlap between the vocational and the academic routes. That is particularly important.

The Forth Valley college and Ineos initiative needs to be seen in the context of skills development across the UK. As I said, the UKCES has a UK-wide role, although it is technically only advisory in Scotland. Nevertheless, I am struck by how Scotland’s principals are seized of the whole agenda, and all those to whom I have spoken seem very well acquainted with the work of Chris Humphries and his team at UKCES.

It is worth mentioning the fact that many things are done differently in Scotland. Some initiatives are precisely the same—for instance, the Catalyst series applies across the UK; and the sector and skills councils, too, cover the UK. Scotland can sometimes be guilty of the “not invented here” syndrome, but I wonder whether these things sometimes apply the other way around. Essentially, we have two systems; but each should learn from the other. That may sound hackneyed, but in this case it is true.

The Scottish credit and qualification framework is a case in point. It is widely recognised by employers, colleges—and, to a fair degree, by parents and schoolchildren. However, its corollary in England has yet to be embedded to the same degree. I wonder, when looking back to 2006, if it was necessary for England to change the structure; it seems to me that it could have used the SCQF system, which was already in place, was recognised and which now seems to work well. That is important, because people need to understand that a number of Government objectives impact upon the higher national certificate level on the vocational side when it comes to funding, and in how they measure its success. My hon. Friend the Minister may have a word or two to say about that.

England can clearly learn from a number of things that are going on in Scotland. I have spoken to a number of principals over the past few months, both in preparation for the debate and for other reasons, and in the broadest sense they believe that they have more room for lateral movement and local decision-making than their English counterparts. That enables them to have a stronger relationship with local employers. Indeed, initiatives such as that between Forth Valley college and Ineos are a case in point. I cannot back that up, but that is certainly their opinion, and it is probably worth further examination.

I have mentioned the role of the Scottish Government. I would not wish, knowingly, to be too enthusiastic about a Scottish National Party Administration, but the reality is that the party has many capable and competent officials, who are doing a really good job. Many of the structures work really well. I do not have a quibble with officials over the professionals, who are virtually all of an extremely high grade, but I sometimes have a quibble about the funding. I have one or two concerns in that respect. However, it is not for me to criticise Scottish funding for something that is devolved. Indeed, I would prefer to do the opposite.

For example, Train to Gain is a good initiative; it is directed through employers, and its focus is up to level 2, on literacy and numeracy; it is basic stuff, but it is important to get everyone up to that standard. Train to Gain does not exist in Scotland; instead, it has individual learning accounts, which are means tested. Without wishing to confuse matters by referring to the two qualification frameworks, the higher awards are directed towards the HNC level. It seems that the English regime is much better in respect to its commitment to funding. It is also clear that the Department for Innovation, Universities and Skills is fully committed to funding apprenticeships—essentially making them available to anyone who wants one. Scotland does not. Unfortunately, in Scotland it has been cut. The impact will be seen in several years in workplace productivity.

In conclusion, I shall mention one other organisation. I have received advice about the subject from a large number of people and organisations, and it would be good to mention them all. It would be more fair to reel them all off. However, one organisation with which I have had contact over the last couple of years is the Edge Foundation, of which the Minister is aware. The Edge Foundation places an emphasis on applied skills and entrepreneurship, and it has an especially close relationship with the all-party group on skills, chaired by my hon. Friend the Member for Blackpool, South (Mr. Marsden), the National Skills Forum and a number of other leading skills organisations.

I have had the privilege of being briefed by a wide range of skills-related organisations, and it seems to me that the Edge Foundation has been in just the right place when it comes to taking an intelligent and highly enthusiastic approach to the skills agenda. The Government can lay the foundations for a skills agenda, but it has to be taken forward by all sectors—both the public and private sectors and what I would call the third sector. The foundation is a fine example. I have read its comments on the Apprenticeships Bill, and the Government would usefully take note of many of their comments in one way or other.

I have tried to present the UK skills agenda from the perspective of Falkirk and I have tried to emphasise how important the agenda is across the UK. I now leave the subject for my hon. Friend the Minister.

I congratulate my hon. Friend the Member for Falkirk (Mr. Joyce) on securing this debate. He is an outstanding Member of Parliament with a broad range of interests. We are talking today about skills, but it could have been defence or even foreign affairs. In every area that he touches upon, he displays an exemplary depth of knowledge and commitment.

I agree with much of what my hon. Friend said. I share his admiration for organisations such as the Edge Foundation. The project that he described between Forth Valley college, an outstanding college in his constituency, and Ineos is interesting and innovative. It is a cutting-edge way of doing things.

Having spoken to people in this sector over the past few weeks, I realise that there is clearly a demand from the business community for even more Government resources, not only for level 3 but for level 4 and above. Questions of parity and esteem, and the snobbery that sometimes afflicts the vocational sector, can be addressed by exactly the kind of project that my hon. Friend has mentioned. I am certainly be keen to find out more, and to see whether the Department could learn from what is going on in Falkirk.

As my hon. Friend says, they are devolved matters, but I am clear that we in England can sometimes learn from Scotland. Perhaps on qualifications structures—although perhaps not—but certainly on forging local agreements on those matters in which college principals in Scotland believe that they have more flexibility than their counterparts in England, I am keen to learn more. My hon. Friend and I have had separate discussions about setting up a forum to discuss and investigate the matter, and if Scotland’s practice is better and more flexible, we in England must certainly learn from it.

The rest of my remarks today will necessarily relate more to England, but we should indeed be clear that the broader skills challenges are nationwide, covering the entire United Kingdom. When Lord Leitch issued his report on skills in December 2006, he noted that for the UK as a whole changes to the global economy had significantly increased the importance of skills; that skills levels in the UK had been improving, but still lagged behind other countries; and that UK productivity levels had also improved, but not as much as elsewhere. Compared to the UK, output per hour worked was 17 per cent. higher in France and Germany, and 19 per cent. higher in the US. Up to one fifth of the UK’s productivity gap with France and Germany can be attributed to poorer skills.

In his report, Lord Leitch set out the number of people whose skill levels must improve—and by how much—if we are to be in the world-class bracket for skills by 2020. He highlighted the potential benefits of raising our game and growing our economy by at least £80 billion over 30 years, and he recommended that we as a nation focus our help on those who can least afford and are least likely to pay for their own training. He was also clear that the training system would not work unless it was genuinely responsive to both employers and individuals. The thrust of what we have been doing over the last two years has been about making the system more flexible, demand-led and responsive. We have come a long way, but we still have a long way to go.

Government funding is big and getting bigger. It will rise from £4.6 billion in 2007-08 to £5.3 billion in 2010-11. That is a 7 per cent. increase in real terms and it will apply to more than three million learners. We have shifted resources towards those courses that have proven, sharp end, work-related benefits.

My hon. Friend the Member for Falkirk was delicate and sensitive when he touched, very elliptically, on whether our ambition in this Parliament is matched by that of the Scottish National party in its area of responsibility. I cannot fail to note that it has been reported that funding for apprenticeships in Scotland has been cut by the SNP Government from £52.8 million to £50 million, that adult apprenticeships have been refocused into three sectors and that apprenticeships outside those areas have been abandoned.

My hon. Friend will know that Labour colleagues in Scotland—not least John Park MSP—have been trying to do something about that situation, and an Apprenticeships Bill has been introduced that mirrors that of the UK Parliament. It has been well received in Scotland by employers, trade unions and colleagues in the Scottish Parliament. As we hope to do in England, the Bill will give apprentices in Scotland rights that currently do not exist.

At a time when there is a call throughout the UK for public procurers to support apprenticeships, Glasgow city council—a Labour council—is leading the way with plans to offer 30,000 apprenticeships to young people in the city. That is a tremendous aspiration and we wish those involved luck and support. In England, as my hon. Friend said, we are expanding and improving Train to Gain so that it is more accessible, responsive and flexible for small and medium-sized enterprises. We try to put employers at the heart of skills provision and by 2010-11, the budget for Train to Gain will rise to more than £1 billion. As my hon. Friend could not help noting, subtly but sadly, there is no Train to Gain in Scotland, and its lack is acutely felt by employers and organisations north of the border.

In the current climate, all those needs and challenges are more pressing. During previous downturns, training has too often been one of the first budget lines to be cut. However, evidence shows overwhelmingly that we cannot reserve investment in skills for periods of growth. The research evidence is unequivocal: firms that cut training during downturns are two and a half times more likely to fail than those that do not. Firms that invest are demonstrably more likely to pick up more quickly in subsequent upturns. We must get that crucial message out.

Much of the response to the current economic situation must come from the UK perspective. Businesses across the whole of the UK that do not invest in staff will suffer. The economic downturn is a global problem, not a devolved issue. Above all, that message must come from business itself. Companies invest vastly more in skills and training than the Government do. Last year, we estimate—although it is not easy to count—that employers invested about £38 billion in training their staff. That compares to £5 billion from the Government for adult skills and £5 billion for universities. That is why we wish to make the support for small and medium-sized businesses under Train to Gain available now, so that it is flexible whenever and wherever it is needed.

The reforms tie in with the support for small and medium-sized enterprises that was part of last month’s financial restructuring in the banking sector. UK banks using the recapitalisation scheme have committed to market and maintain competitively-priced lending to small businesses and home owners at 2007 levels for the next three years. My hon. Friend was right to highlight the UK Commission for Employment and Skills, and I wish to associate myself with his commendation of it. As he mentioned, it is led Sir Mike Rake and Chris Humphries and it has already had a positive impact and plays a major part in delivering skills strategy in England. As far as I know, there is no such strategy in Scotland. The strategy brought forward in September 2007 as a response to Lord Leitch’s report was overwhelmingly rejected by the Scottish Parliament. It was brought back to the Parliament the following May and rejected again, leaving Scotland waiting—even now—for a skills strategy in response to the 2006 report.

Meanwhile, the UK commission has produced an important report on simplification. It is a key piece of work with strong ministerial support. It will encourage greater collaboration between employers and between Government and employers on addressing skills needs. That is crucial in raising skills levels at the right place and the right time. It is not something that the Government or any one player will be able to do alone.

My hon. Friend pointed out that the Scottish economy has higher skills levels but lower levels of productivity. That is an interesting phenomenon about which he made some interesting points. The skills utilisation study under way now by the UK commission might be exactly what is needed to shed some light on that matter.

I hope it is clear that the Government share my hon. Friend’s belief that skills are a top priority and are at the forefront of our efforts to ride out the present global challenges, generate long-term economic success and promote opportunity for all. I agree with him that skills are a devolved matter but the challenge is for the whole UK to raise its game and respond appropriately and effectively to current economic conditions. Again, I congratulate my hon. Friend.