With permission, Mr. Speaker, I would like to make a statement about the future of the Skills Training Agency.
The Skills Training Agency provides training mainly in traditional craft skills through a network of 60 skill centres. Skill centres date back to the first world war, when they were set up to retrain service men for civilian employment. The agency has operated on a trading account basis since 1984. Its predominant source of income has been selling training services to the Manpower Services Commission and now to my Department's Training Agency for the training of unemployed people.
In the last five years the agency has financially broken even only in 1987, and this year it is expected to make a loss of approaching £20 million. At present 20 of the centres are seriously under-utilised. These centres are mostly, although not exclusively, in the south of England, where unemployment has now fallen substantially.
The Government have carefully considered the way forward. We believe that the aim should be to enable the skill centres to become a viable business, carrying out training not just for unemployed people but for employed people under contract with employers. Such employer business is now rapidly expanding, and will expand further.
As I told the House before, I commissioned Deloitte Haskins and Sells in December to advise me on the feasibility of moving the skill centres to the private sector. Deloittes has now reported, and advises that there is a viable core business of skill centres and that there is no reason why the agency should not move to the private sector.
In the meantime, there has been a significant development. I have now been approached by some of the senior staff of the Skills Training Agency who would like to mount a management buy-out. They have taken professional advice, and like Deloittes they believe that a business can be created which has excellent prospects of success. The management buy-out team would wish to develop training for employers as well as for unemployed people. The Government see great attractions in that course. We want the Skills Training Agency to become a viable business that provides good training for both unemployed and employed people and a good career for the staff who work in it. A management buy-out would be a most effective way of ensuring that.
In the light of the approach made to me, I have appointed Deloittes to conduct the necessary preparatory work with a view to offering the agency for sale through a private tender process. That sale will be open to all interested parties, but I intend to give the management buy-out team assistance to make a bid. I attach great importance to conducting the sale in a way that minimises uncertainty for both the agency's staff and its customers.
I will ensure through the contract of sale that all staff who transfer into the private sector are satisfactorily covered by pension arrangements. All other terms and conditions are covered by the Transfer of Undertakings (Protection of Employment) Regulations, and a new clause to the Employment Bill is being tabled today to ensure that staff are protected on transfer to the private sector by those regulations.
Given the current position of the Skills Training Agency, change is both necessary and desirable. In particular, the agency needs to expand rapidly and training that it provides for employers, as well as continuing to improve the training that it gives for unemployed people. I believe that it is now important to move as quickly as possible to remove the uncertainty. I am certain that the agency has a good future in the private sector. A successful move to the private sector will provide a better career for the staff and a more effective contribution to our national training effort.
Is the Secretary of State aware that his statement today means that the entire public training and employment service is to be dismembered, and almost his entire Department privatised? With the hiving-off of the public employment service later this year to an independent agency and the privatisation of training for the training and enterprise councils, it is the third and final step in the removal of all employment and training functions to the private sector.
The right hon. Gentleman failed to give the House some of the fundamental facts. What is his estimate of the Skills Training Agency's assets? What guarantee will there be against asset-stripping? I understand that, when Deloittes visited the skills centre at Reading, significantly it examined only the land area and its value. Will he take into account the public cost of redundancies and dole payments in the sale price? What credence can staff put on his assurance today that their terms and conditions will be protected by the transfer of undertakings regulations when he has made clear that he intends to repeal those regulations? Is he aware that staff know nothing about a management buy-out and have not been consulted?
Is the right hon. Gentleman aware that there is abundant evidence that the untrammelled free market does not work with training and that the MSC was created precisely because of the failings of the private sector? Is he aware that no single successful economy in Europe is without either a state infrastructure for training or the most tightly controlled requirements on employers to meet given targets? Neither is present in the right hon. Gentleman's statement today. Is he aware that, precisely because private employers grossly neglected training in the past, the latest chamber of commerce survey shows that 65 per cent. of manufacturing companies are limited by skills shortages? Yet the right hon. Gentleman now wants to hand over the training of the nation's work force to the very people who have failed to train their own employees.
The right hon. Gentleman says that privatisation will enable the Skills Training Agency to use commercial practices to seize more opportunities. When we compare the performance of public and private agencies in the employment services, the private sector gives extremely poor value for money. Does the right hon. Gentleman recall his answer on 21 February that agency job clubs that have been hived off spend £396 on average to get an unemployed person into a job, while jobcentre job clubs in the public sector spend only £249—little more than half as much? Is he aware that the hived-off job clubs get only 50 per cent. of their clients into jobs, while the public sector finds jobs for 55 per cent. of its clients?
Is it not clear from what has happened to the job clubs that moving the Skills Training Agency into the private sector will produce a worse service at substantially higher cost? Does the right hon. Gentleman recall that when he privatised the Professional and Executive Register nearly a year ago he said, just as he has said today, that it would unleash greater commercial drive? Does he recall that within six months one fifth of all the premises were closed down? What guarantee can he give that the same will not happen in this case?
Is the right hon. Gentleman aware that the major losers by today's announcement will be the long-term unemployed? The Skills Training Agency currently devotes 80 per cent. of its resources to the unemployed. If it is privatised, that proportion will undoubtedly reduce sharply. Since the numbers of those who have been unemployed for more than three or five years are still increasing, what hope will there be that they will ever get jobs?
The Skills Training Agency broke even in 1987 and it lost money last year only because of ET. It provides quality training up to City and Guilds standard, much higher than ET. If it is privatised it will be forced by commercial market pressures to switch to lower budget, high volume, quick turnover and low-skill schemes. There will be no national perspective on a desperate national problem. It is not only the unemployed who will be the losers; it will be the nation.
I must say that the hon. Gentleman has a long and persistent record of getting all his predictions wrong. He has added to it yet again today. On training and the general points that he makes about the training and enterprise councils, he was condemned only yesterday by that well-known Conservative newspaper, the Sunday Mirror. Today, the labour force survey shows that for months he has been trying to fiddle upwards the unemployment figures. So I am not inclined to take too many lectures from the hon. Gentleman.
Let me try to spell it out. The case for action is that the present position is not sustainable. One third of the skill centres are seriously under-utilised. They are making a loss approaching £20 million a year on a turnover of £55 million a year. They have made a loss in all but one of the last five years. Perhaps even the hon. Gentleman might concede that ET was introduced only last September. The Public Accounts Committee has made it clear that there is no case for subsidising the Skills Training Agency and that subsidies must stop. I agree with that. I and the Government want to provide skill centres that give good training for both employed and unemployed people. I hope that that will be the result of the change.
There is no merit in having a whole range of half-empty skill centres. That is not doing anything for anyone. We are selling a training business, and what I am interested in are bids from people who want to run a training business. The management buy-out learn wants that, and I know of others.
On property, we shall get an up-to-date assessment of the value of every property before the sale, and the Government will share in any development gains in the years immediately after the sale. We shall make provision for that.
As to the management buy-out, it is led by Mr. Stuart Bishell. the deputy chief executive of the Skills Training Agency. The team sees an exciting future for the business and we shall provide financial assistance for the professional advice that it has.
The hon. Gentleman talked about PER. At the moment something like 150 of the 250 staff seconded to it remain with PER. What I remember about management buy-outs is the National Freight Corporation, which was also opposed entirely by the Opposition team, not least by the shadow Leader of the House, and which turned out to be an enormous success, acknowledged even on the Opposition side. The Government should wait before he condemns.
Is my right hon. Friend aware that I and many of my hon. Friends welcome very much the proposed change in the status of the Skills Training Agency? There is a crying need in the south-east in particular for a level of training and a sophisticated approach to it far in advance of anything that the Skills Training Agency has been able to provide. In private hands there will be a real opportunity to provide exactly the kind of training for which employers in our area are crying out.
I am sure that what my hon. Friend says is absolutely right. What is crucial is that the Skills Training Agency develops training not just for unemployed people—although, clearly, that is very important—but for people who are in employment. That is not just a very good market but an area that will expand, and I believe that, operating in the private sector, the Skills Training Agency can serve that end.
Is the Secretary of State aware that when the Select Committee inquired into the Skills Training Agency in 1984 we were assured by his predecessor that it was necessary, in the public interest, to keep a national network of skill centres "to act as a pace setter"—those are his words—that this network would be under the control of the Department, and that it was of the smallest viable size? Can he explain why he has gone back on that? He said that the STA broke even in 1987 but that it will lose £20 million this year. Is he aware that the reason for that—as I discovered when I visited my local skill centre a fortnight ago—is that, whereas previously it was receiving £150 a week for its training programme, it gets only £30 a week under the new ET programme? That is why it has gone into the red.
What guarantees can the Secretary of State give concerning the future size of the national network? Can he guarantee that, under the new dispensation, it will remain at its present size? If that does not happen, he will have destroyed a valuable training asset.
Clearly, I cannot give a guarantee about the size before I have had offers and the sale process has begun. Obviously, what I would like to do is preserve as many skill centres as possible to provide the kind of training network that the hon. Gentleman wants. If the scheme were to remain in the public sector, there would be a large-scale programme of closures throughout the country. I am afraid that the hon. Gentleman must accept that that is the alternative.
Again I have to point out that we are talking about losses that have occurred not just in the last 12 months but over the last five years. The hon. Gentleman referred to 1987. With his knowledge, he will realise that, although the Skills Training Agency did break even in one year, it was a very marginal thing. In the other four of the five years, it made losses.
The policy was set out very clearly in the White Paper that I published before Christmas. Indeed, the hon. Gentleman, as Chairman of the Select Committee, has interviewed me about that. We want good training for both unemployed and employed people. I want to see the skill centres operating more effectively in the private sector, and I certainly hope that training will continue in inner cities and in other areas of that kind. I am convinced that this is the best prospect for the agency.
My right hon. Friend ought not to be discouraged by the entirely predictable, negative and old-fashioned attitude of the Opposition to what, after all, is very good news. If the management of this agency, which is losing money at present, is prepared to risk its own money to bring it up to date and give it a really good future, that is something that should be welcomed with great enthusiasm. A commercial attitude is much more likely to lead to the provision of proper skills training for the future.
I agree entirely with my hon. Friend. The fact of the matter is that Opposition Members—at least those on the Front Bench—have opposed every measure of this kind. It is significant that, once operations have been moved to the private sector, one hears very little about Opposition Members wanting those operations to be returned to the public sector. I think that that will be the situation here. What we want is an effective private sector operation, using marketing and other commercial skills, and, above all, providing training for both unemployed and employed people.
I think we have now moved into the mad Maoist phase of this Government, who are smashing up our national institutions. Because of their mad belief in the power of market forces, they are doing enormous damage. Does not the Secretary of State understand that training, like education, does not make a profit but is an investment for individuals, for the country and for the economy?
The reason the skills centre network has been whittled back and, as the Secretary of State said, is losing money is that he has reduced expenditure on training, and our economy is showing the resulting skills shortages.
It is notable that the Secretary of State said that there is a "viable core" in our training network. That implies major closures and selling off land to make a profit for the few who might go along with the privatisation. Will the Secretary of State give me an absolute guarantee that the Handsworth skills centre will remain open, as it has done valuable work in an area of massive unemployment, despite the constant cuts imposed by the Government?
I repeat what I said but, as it happens, the Handsworth centre is one of those that is generally reckoned to be part of the core business that would exist in the private sector. That is recognised by both Deloittes and the management buy-out team.
The hon. Lady may go on about the cause of all this but one of the great causes is that when unemployment decreases there is a reduction in the demand for training for unemployed people. I should have thought that the hon. Lady would welcome the fact that unemployment has decreased.
The pity has been that we have not been able to develop training for employed people and for employers in the way that should have happened. There is no merit in having half-empty skill centres. I remind the House that the all-party Public Accounts Committee—[Interruption]—this was before the hon. Member for Nottingham, North (Mr. Allen) was a Member of the House—said that there was absolutely no case for subsidies in this sphere. The present financial position of the Skills Training Agency is a loss of about £20 million on a turnover of £55 million. That cannot be justified. I should like to see a future for the agency and I believe that that will be ensured in the private sector. The proposals of the management buy-out team are an encouraging step forward.
Does my right hon. Friend accept that there will be a large welcome for this move from everybody who has had any real involvement in training at the coal face, and that there is a great deal of difference between the funding of training and its delivery? Does he also accept that the public sector does not have a monopoly in quality training because the private sector has already demonstrated that it can produce quality training for a large range of skills and at all levels of requirement?
My hon. Friend is entirely right. Over the past four or five years, the amount and quality of training that has been carried out by the best employers in this country has been very good. As I said on Friday, at the launch of the training and enterprise councils, the aim must now be to bring the level of the rest up to the level of the best and, in the private sector, the Skills Training Agency will be able to help in that respect.
Notwithstanding the continuing and inadequate levels of training and skills training in this country, if the Secretary of State is to withdraw his Department from this aspect of what should be its legitimate activity, does he accept that a management buy-out seems the least offensive of all the possible options? That being the case, will he give some more information about the type of support that will be provided—to which he alluded in his statement—for those preparing and bringing forward such a management buy-out, especially if he is to adjudicate—presumably this is the case—on the eventual outcome of that process?
Will the Secretary of State note that this country's training policy continues to lag woefully behind those of our major industrial competitors, such as Europe, North America and Japan, in that for over a generation we as a country have not geared the potential of young people coming on to the labour market to the practicalities of the industrial market at home and the export market abroad? If the Government continue to sell off, to privatise and to withdraw from their role, how will we ever overcome that inbuilt disadvantage in our system?
That is the whole point and reason for setting up the training and enterprise councils, which I announced at the end of last week. The purpose of this change is to improve training standards not only for young people—although that is important—but to help people who have been in employment for 10 or 20 years to become qualified and remain qualified. That is the major, No. I, aim of the training and enterprise councils. The people concerned in the management buy-out understand and know the business, and to that extent they are in a position to develop it. They are led by the deputy chief executive and two senior colleagues of the Skills Training Agency, who will now hold further talks in the agency, which until now have been confidential. We shall be giving financial assistance to help with professional advice. I believe that they have a contribution to make.
Will my right hon. Friend confirm that skill centres can be sold off individually, because no doubt one or two training companies will wish to bid for some of their local skill centres? Will he confirm that of 3,000 staff, 1,600 are administrators? Is not this top-heavy structure the clearest possible evidence that no business should be run by politicians or bureaucrats and that privatisation is urgently needed?
The Skills Training Agency has about 3,000 staff—1,600 instructors, 400 industrial staff and about 1,000 administrative staff. We expect and hope to see a core business with a range of skill centres within it, but that does not mean that offers cannot be made for individual centres. I believe that this is the best way forward for the Skills Training Agency. No change is not an option, as anyone who has objectively considered the matter must accept.
Is not skill training in Britain a complete shambles? First, the Government abolished almost all the industrial training boards. A short time afterwards, skill centres were closed. Subsequently, the Employment Select Committee held an inquiry and found that skill centres were making a profit. The right hon. Gentleman justifies the Government's decision by saying that they are making a loss, but is it not a fact that places at skill centres have not been taken up because industrialists have not played their part in filling them? Is it not a fact that we have the worst record in Europe, and probably the developed world, for skill shortages? When will the Government stop pampering industrialists and introduce one or two penalties to ensure that places are filled and skill training offered?
As far as I understood the hon. Gentleman, he is advocating directing industrialists to use skill training centres, which is a curious policy. I entirely agree that there is a difference between that and direction, which is what the hon. Gentleman and the hon. Member for Nottingham, North (Mr. Allen) require. I should like the Skills Training Agency to provide good training for employers and people in employment, but all too often it does not do so. It has not developed its business quickly or rapidly enough. I should like it to achieve that aim, and if it does so it will attract business from employers, who certainly understand the point and need for further training.
Does my right hon. Friend agree that it is probable that the beneficiaries of this change will be the unemployed? If, through efficiency and a more commercial approach, it leads to resources being released, and if the skill centres can improve the range and relevance of the courses that they offer, it will be to their advantage. I have a particular interest as president of Sussex Training (West), the local agency for the youth training scheme, and Downs Enterprise Agency Ltd. Is my right hon. Friend concerned about the future role of the training agencies in their new relationship with the management bought-out Skills Training Agency? The White Paper seems to suggest that the Skills Training Agency will almost take over the raison d'étre of some of the training agencies, many of which, as I am sure my right hon. Friend agrees, are doing an excellent job in training young people and providing them with permanent employment.
We do not want existing organisations which are doing a good job to be taken over. We do not, for example, want the training and enterprise councils to take over organisations in the area and to push them to one side. That is not the purpose. The purpose of the training and enterprise councils is to act as a focus for training in the local area and to enable more training to take place, which is exactly what my right hon. and hon. Friends and Opposition Members have been asking for. I hope that I have assured my hon. Friend. I agree that, the better the training centres, the better the service will be for unemployed people.
Does the Secretary of State accept that his bellicose remarks to my hon. Friends the Members for Oldham, West (Mr. Meacher) and for Manchester, Blackley (Mr. Eastham) show that, in spite of the numerous statements he has made in the House and outside, he is hiding the Government's total failure on engineering and other training? Does he not accept that the nation is on the point of collapse in employment training? He should take note of what was said by my hon. Friend the Member for Blackley—that direction is the only way to obtain results with bad employers. One cannot rely on good will, so one must use compulsion. What reason does the Secretary of State have to believe that the people involved in the management buy-out will be skilled enough to succeed when it seems that up to now they have failed as much as the Secretary of State has failed?
I have taken the trouble to see the people who are leading the management buy-out team. I leave others to judge, but I regard Mr. Bishell, for example, as an outstanding leader in that organisation. I do not accept the hon. Gentleman's statement about the nation being on the verge of collapse. However, he is at least frank in saying that he wants to see employers being compelled and directed to use skill training centres. I do not believe that such a position would work and it is not a way of providing training. One of this Government's greatest achievements is that, over the past 18 months, unemployment has come down by almost I million and the figures are now established, to the eternal discredit of the hon. Member for Oldham, West (Mr. Meacher).
I hope that my right hon. Friend will encourage the management buy-out. Does he agree that the evidence of the National Freight Corporation shows any doubters just how advantageous and successful a management buy-out can be in the public sector for employees and for clients? May I urge him to go a little easier on the hon. Member for Oldham, West (Mr. Meacher), who has an uncomfortable week ahead of him eating all the words in the labour force survey?
I take my hon. Friend's point. Tomorrow, we have Employment Questions, in which the hon. Gentleman will doubtless seek to defend his position on the labour force survey. My hon. Friend was right about the National Freight Corporation. When I came to the House almost 10 years ago to announce a management buy-out, it was opposed loudly and by no one more than the hon. Member for Holborn and St. Pancras (Mr. Dobson).
What fees were paid to Deloitte for past work? What fees are to be paid for future work? What did Deloitte do in Scotland and the north of England? What were the qualifications of the Deloitte staff? What experience did they have? What was said about land values—which are considerable—going not to the Treasury, but to the privatised company? Who put the case for the long-term unemployed? Did Deloitte discuss the management buy-out statement with Stuart Bishell and if so, what was said? What is the connection of Deloitte with a prominent Conservative Member of Parliament? How much did Deloitte contribute to Conservative party funds?
Whether it is reasonable or not, Mr. Speaker, I do not have all the information that the hon. Gentleman requires. I shall let him know about the fees given to Deloitte. Deloitte was employed on the basis of its acknowledged expertise in the area. It was employed to give advice to me on the feasibility of privatising—
If the hon. Gentleman listens, he may get some answers before asking more questions.
Deloitte was employed to give advice on the feasibility of privatising the organisation. On property, it is a direct recommendation of Deloitte, which we shall follow, to obtain an up-to-date assessment of the value of every property before the sale takes place. That was one of the crucial provisions. On the interview for the management buy-out, Deloitte talked to the management buy-out team. Deloitte talked about the feasibility of the buy-out, which was one of the factors taken into account.
Does my right hon. Friend agree that the success of private sector training companies, in areas where there is no skill centre, in achieving an enhanced level of skill capabilities across the spectrum means that it does not matter who owns the skill centres provided they deliver the goods? Is it not the case that the rigid Civil Service structure of the skill centres makes it impossible to recruit skilled instructors in a highly competitive environment, such as electronics, so they are not delivering the goods?
I am sure that my hon. Friend is right. I must say first to the hon. Member for Linlithgow (Mr. Dalyell) that we shall try to obtain the figure for him. I do not have the figure now. If we can obtain the figure before I sit down, I shall give it to him here. Otherwise I shall write to him.
My hon. Friend is correct on what he said about the training provision. It does not matter which sector the training organisation is in. In this case a private sector organisation can provide better training for employed people and facilitate training by employers.
After 10 years of power and a series of major changes in employment training provision, the Secretary of State must answer many more questions than he has attempted to answer this afternoon. Will he respond to the one question that should be dominant? Is employment training in this country today superior to, as good as or worse than that in all competing countries?
No, not all competing countries. The training and enterprise councils are intended to improve training standards. Not just in the past 10 years, but in the 10 years before that—[HON. MEMBERS: "No."] Certainly, in the 10 years before that we were behind Germany, Japan and the United States in training employed people. We now seek to improve our standards and, as I have suggested, the way to do that is to set up the training and enterprise councils, which will engage the attention and enthusiasm of employers. A good feature of the training and enterprise councils proposal is that employers are responding to it. They want to take part in the councils in the interests of improving training in this country.
Does my right hon. Friend agree that, if the Opposition had read his employment White Paper "Employment for the 1990s", they would not have reacted with such surprise to his welcome announcement today? Will he confirm that he will do all in his power to maintain the skill centres in the north-west of England and that in their new privatised role they will be able to react more flexibly to the shortage of skills in industries such as electronics? Will he confirm that that will be of great value to industry in the north-west?
My hon. Friend is right on both points. We set out the policy in the White Paper, which was published before Christmas; the hon. Member for Oldham, West responded to that point. The skill training centres in the north and in Scotland and Wales are among the strongest in the network.
(Bosworth: Is my right hon. Friend aware that the Leicestershire business men—business men in Hinckley in my constituency in particular—with whom I discussed the proposal on Friday will welcome the transfer to the private sector? We have serious skills shortages in Hinkley, and business men believe that the transfer will provide a more flexible response to training need, which is lacking at present, and that it will put an end to ridiculous excess capacity in training establishments.
My hon. Friend is right. Many people throughout the country—including many of the staff inside the Skills Training Agency—will welcome the changes. No change is simply not an option for the agency. The present proposals give the prospect of good careers for the staff and better training for the public.
Is it not an extraordinary and reprehensible omission that the Secretary of State cannot provide figures for the fees to be paid to Deloitte, given that huge rake-offs to City accountants have been such a prominent feature of all previous privatisations? Is not the real reason why the Secretary of State is promoting a management buy-out that he knows that no one else will tender for the Skills Training Agency while it is encumbered with ET? Is he aware that it is the 31 per cent. shortfall in ET placements in skill centres that has caused under-utilisation and a deficit in this financial year, compared with a £200,000 operating surplus the previous year? Is it not his intention to bribe the management buy-out team with the offer of asset-stripping and the selling-off of valuable sites in the south-east in return for their continuing to patronise his increasingly discredited ET programme.
That is even more ridiculous than the hon. Gentleman's previous statements; he is getting hysterical. As I told the hon. Member for Linlithgow (Mr. Dalyell), I shall provide the figure. I do not have it with me. The hon. Member for Oldham, West did not even raise this question in his first lengthy intervention.
Other people are interested in tendering. That is why we are making it a general offer for sale. In any case, the loss to which the hon. Gentleman refers has not suddenly appeared in the past 12 months; it has been taking place for the past four or five years.