Skills Base

– in the House of Lords at 11:36 am on 28th June 2007.

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Photo of Lord Leitch Lord Leitch Labour 11:36 am, 28th June 2007

rose to call attention to the development of the United Kingdom's skills base; and to move for Papers.

My Lords, it is my privilege to move this Motion on skills and to speak on this auspicious first day of a new Prime Minister.

Two years ago I was asked by the Government to undertake an independent review of the UK's long-term skill needs in order to,

"maximise economic growth, productivity and social justice".

The year 2020 was the focus of my review. But, before looking forward, let us look back. In the 19th century the UK had the natural resources, the labour force and the inspiration to lead the world into the Industrial Revolution. Today we are witnessing a different type of revolution. Developed countries simply cannot compete on natural resources and low labour costs. In the 21st century our natural resource is our people, and their potential is both untapped and vast. Skills will unlock that potential. There is a direct and irrefutable correlation between skills, productivity and employment. And employment heavily influences levels of social mobility, poverty, health and crime.

It is encouraging to see the progress made in the six months since the review ended. The Government recently announced they would soon publish their response to my review—the Leitch implementation plan. I am pleased that they decided to implement me rather than to execute me.

Let us look at where we are today. In many ways this is the best of times for the UK economy. We are the fifth largest economy in the world and now into a remarkable 59th quarter of continuous economic growth. Our employment rate is the highest in the G7, and there are 2.5 million more people in work than a decade ago. This is a strong position and proof that we do many things incredibly well.

Yet, despite these very real achievements, our productivity record remains an Achilles heel. We are distinctly average; and on key matters we are well behind France, Germany and the United States. Employment rates for disadvantaged groups have risen in recent years, but they are still far too low. Child poverty remains disturbingly high. Social mobility is poor. The correlation between parents' income and that of their children is higher here than in many other countries. Today, the children of richer parents are six times more likely to go to university than children from poorer families.

As we all know, the global economy is changing rapidly, challenging UK competitiveness. Emerging economies are growing rapidly; mortality rates are improving dramatically; technology advances at a furious pace. The progress of China and India is both awesome and inexorable. China has become the workshop of the world and India the IT department of the world; they are so hungry to compete.

We face enormous challenges, but also brilliant opportunities. We cannot and should not try to protect our people from change. Instead, we must prepare people so that they can make the most of change. Skills are the way to do that. High skills are vital to leadership, management and innovation, key drivers of productivity and creators of wealth. Demand for high-level skills is rising at a rapid rate. Vocational skills are essential for the day-to-day delivery of output, but their value is so often underrated. The employment opportunities for the least skilled continue to decline. People lacking basic skills become increasingly isolated from the labour market—a lost generation.

How do UK skills stack up against that enormous challenge? Our skills base has suffered from long-standing failures in the education and training system going back more than 50 years. Recent years have seen big improvements. Standards in schools have risen. The number of adults qualified to degree level has increased significantly. The proportion of people with no qualifications has almost halved. That is very good progress. But other countries have sustained higher investment and achievement. We remain desperately weak by international standards. Of the 30 countries in the OECD, the UK ranks 17th in basic skills, 20th in intermediate skills and 11th in graduate skills, where we invest less than many of our competitors. Worryingly, 6 million adults across the UK lack functional literacy—the skills that they need to get by in life. More than 7 million adults lack functional numeracy—even the most basic skills, such as checking your change in a shop.

Where we are today is simply not good enough. It is not good enough for the millions who will lose their chance of work; it is not good enough for business, whose success is determined by productivity and innovation; and it is not good enough for society. Those who miss out on jobs are far more likely to live in poverty and in poor health. In every country that I visited during my review, the sense of urgency to improve skills was palpable. In the US, I heard it called a simmering crisis. Many countries are improving further and faster than us and often from a higher base. We are running just to stand still. We will remain trapped in a undistinguished mediocrity. We must raise our game.

It is critical that we develop an all-party and UK-wide consensus about our skill needs. What do we do? The starting point is to set up a compelling vision for the UK. I have recommended that the UK should become a world leader in skills by 2020, benchmarked against the upper quartile in the OECD. World-class skills will require very significant improvement at every level.

By 2020, we must help all working-age adults to reach basic standards of literacy and numeracy. We should forget the argument about whose fault it was and just get on with making things better. Adults should be given a second chance to achieve a level 2 qualification—the vocational equivalent of five GCSEs. At intermediate level, we should boost the number of apprentices to at least 500,000. In higher education, which is so vital to the creation of wealth, we need to increase the number of people at degree level to more than 40 per cent of adults.

We could spend all this debate talking about schools and unemployed young people. Both are incredibly important, but that will not be enough. Even if we solved youth unemployment and all schools were perfect, we would have to wait more than 30 years to fully benefit the UK workforce. Seventy per cent of the 2020 working age population are already over the age of 16 today. The flow of young people into the workforce will actually reduce towards 2020; so solutions do not lie exclusively with helping those at school. That is why my focus was on upskilling and retraining adults.

Five principles must underpin the delivery of this world-class vision. First, responsibility must be shared. Employers, individuals and the Government must all increase their action and investment. We must invest more in skills. Employers and individuals should contribute the most where they gain the greatest returns, and the Government must target help where it is needed the most. Secondly, we must focus on economically valuable skills. Skills must benefit individuals through higher wages and businesses through improved productivity and bottom-line performance. Thirdly, skills must be demand-led. The skills system must genuinely meet the real needs of individuals and employers. Fourthly, the system must adapt and respond. No one can read minds or tell the future. We cannot accurately predict the future demand for particular skill types. The skills framework must react to future market needs. Finally, we need to build on existing structures, and to improve the performance of current complex structures through simplification, rationalisation, stronger performance management and clearer remits.

My recommendations included an employer-led commission for employment and skills to strengthen the voices of employers and advise government on progress towards 2020. I am particularly pleased that Sir Michael Rake has been appointed as the first chairman. He will bring a wealth of experience. I am also delighted that both the TUC and the CBI will play a full part in the commission. Sector skills councils should have a stronger role in articulating what employers need from the skills system, encouraging employers to participate and to invest more money in training at all levels. However, the performance of those councils has been patchy. Provided that they are reformed, re-licensed and refocused, they will become a powerful employer voice.

In the past, we have tried too often to predict and provide the skills we will need from the top down. This is always done with the best of intentions, but central planning, no matter who does it, is not effective. We need a much more decentralised skills system. Consequently, the role of the Learning and Skills Council must change. It should be streamlined further so that FE colleges and other providers have more freedom to respond directly to the needs of employers and individuals. I am enthusiastic about the principles of the Train to Gain Programme in England and apprenticeships throughout the UK. Both schemes should be dramatically expanded and extended to higher levels.

As a nation, government, employers, trade unions and individuals all need to raise their sights and commit themselves to a greater ambition for skills. For employers, I recommended a skills pledge to offer training to all employees who do not have basic or level 2 skills. Employers will be able to access this, at no cost, through the Train to Gain Programme. More than 150 employers with a total of 1.7 million employees have already signed up to the skills pledge. This is astonishing progress, and we have a great champion for this initiative in Sir Digby Jones. But if the rate of improvement is insufficient by 2010, the Government should introduce a statutory entitlement to workplace training in consultation with employers and trade unions. In general, however, I am against compulsion, and I hope that this will not be necessary.

Just as employers must raise their sights, so too must individuals. Just think how much wasted talent there is, and how much innovation and creativity is stifled by a lack of skills. We have not only an economic imperative but a moral requirement to do better. We need to build a stronger culture of learning and embed aspiration across the land—in every school, in every family and in every workplace. We must start with a nationwide campaign to raise that awareness, backed up by easily accessible and focused careers advice. We all know that too many low-skilled people are out of work. We urgently need to place skills at the heart of welfare to work programmes. At present, our skills and employment systems often have conflicting priorities. Both should be united behind a single aim of sustainable employment and progression. Only then can we avoid hundreds of thousands of people being trapped in an endless revolving door between work and welfare.

In conclusion, this review took me two years to complete—it felt like 10—and it has been difficult to do it justice in something like 14 minutes. In essence, in tomorrow's global economy, I strongly believe that skills will be the key lever within our control for improving both economic performance and social justice. By working together we can rise to the challenge and make our workforce one of the best in the world. The more I have immersed myself in this incredibly complex subject, the more passionate I feel about the importance and the value of skills. They are vital if we are to maintain and improve our prosperity. The economic prize is absolutely huge, but the real prize is altogether even richer and deeper. It is about pride, fairness and quality of life for everyone in the UK. Let me tell you, investment in people is quite simply the best investment we will ever make. I beg to move for Papers.

Photo of Lord Hunt of Wirral Lord Hunt of Wirral Conservative 11:51 am, 28th June 2007

My Lords, I congratulate the noble Lord, Lord Leitch, first, on his historic report and, secondly, on his uniquely authoritative and excellent speech opening this key debate. He has demonstrated remarkable foresight by choosing today of all days to initiate this debate. Even as this debate progresses, a new Prime Minister is choosing a new ministerial team, one of whom, Alistair Darling, said on the "Today" programme this morning that skills would be the top priority for this administration. That undertaking is to be welcomed with open arms and, I hope, an open mind. The Leitch report sets the agenda for the wider skills debate, setting out not only the problems of the here and now but also a clear prescription for the future. What is clear in the report and in this debate, from what the noble Lord said, is that everyone has to play their part—employers, employees, schools and colleges, and the state itself.

Some time ago I had the privilege of serving with my noble friends Lord Forsyth and Lord Henley in the Department for Employment in what was then seen as the third economic department. We had similar debates and conversations, and I know that many observers will feel that this debate about skills and how to improve them is never-ending. What is certainly never-ending is the need to keep ahead of the game by investing in people. New technology makes new demands and requires new skills of us all. When I had the privilege of launching the modern apprenticeships scheme, with the assistance of the TUC and the CBI, there were no website designers. That is now a major, exportable industry, characterised by high levels of skills and high value-added. As the Leitch report puts it,

"being world class is a moving target".

I want to focus on financial services. I declare my interests as set out in the register, in particular as deputy president of the Chartered Insurance Institute. The United Kingdom truly excels in financial services and the sector is a major revenue earner for this country. The UK insurance industry is the third largest in the world and employs about one-third of a million people. The 90,000 members of the CII cover retail financial services, general insurance, and life and pensions. The institute is a leading professional body providing training and qualifications in the sector in the UK, giving it a unique vantage point in this debate.

At the CII, we want to champion the need for increased professionalism in the sector. Professionalism and skills are, by definition, two sides of the same coin. The UK cannot afford to rest on its laurels, for nothing is sacred or guaranteed in the modern business world. As the wave of recent outsourcing demonstrates, emerging markets are already competing, and the noble Lord rightly mentioned India and China.

Sadly, within our insurance industry today, only one employee in eight holds some form of insurance qualification. We must urgently improve on this. That requires us to invest in the current workforce and not just focus on the future one. Professional bodies such as the CII are already championing the need for employers to invest in their talent through continuous professional development. Just this week the FSA brought out a discussion paper on the retail distribution review, and at the heart of that paper is the need for the industry to ratchet up its levels of qualifications and professionalism. Otherwise, too many people within this great industry will be in serious danger of finding themselves stranded with adequate skills at best, skills that have not been and will not be refreshed. Firms and individuals must address this challenge.

Professional bodies such as the CII are developing innovative ways to work with employers in identifying market trends and supporting skills best practice. We have developed a series of faculties within our membership to help focus on particular sectors and their needs, identifying specific skills requirements as well as skills shortages ahead of time. This helps to ensure that the CII's services are employer-led. But if the Leitch proposals are to gain momentum, and I believe it is vital that they must, there has to be a concentration on economically valuable skills. This in turn demands a focus on skills that are highly relevant to the needs of employers. Who trains, wins.

Photo of Lord Newby Lord Newby Spokesperson in the Lords, Treasury 11:56 am, 28th June 2007

My Lords, I, too, congratulate the noble Lord, Lord Leitch, on securing this debate and thank him for giving us a chance to consider his report. I suspect that very few Members of your Lordships' House would disagree with the analysis in the report and the setting, as the noble Lord does, of ambitious targets for skills attainment levels by 2020 surely makes eminent sense. As a nation, we should be ashamed of our current level of skills. To have over a fifth of the adult population functionally innumerate is a disgrace, as is having 15 per cent functionally illiterate. To have more than a sixth of our school leavers unable to read, write or add up properly is a pretty grim indictment of our education system.

In his report, the noble Lord places a high priority on the role of employers in driving forward the skills revolution. While I have considerable sympathy with that approach, we must be honest about its limitations as well as its potential. The problem of relying on employers to take more responsibility for setting and implementing policy on skills, and for increasing their own skills investment, is pretty well known. The first problem is senior management commitment. To be effective and if they are really going to work well, the sector skills councils require the best people in the industry to participate in them. But all too often the best people in the industry feel that they are too busy running their own firms to be prepared to devote time to working for the industry as a whole. Having drafted the development plan for what became the City and Inner London North Training and Enterprise Council in the early 1990s, I know that the majority of big City firms treated the whole exercise with disdain, and simply did not have anything to do with it. I do not think that those attitudes have completely disappeared.

The second problem is that of funding. Small firms have limited resources and capacity to undertake significant amounts of basic or professional training for their staff. At the other end of the scale, the best firms, particularly those in parts of the service sector, often have little difficulty in recruiting good people because everyone in the industry wants to work for them. They can always hire in expertise. So even though they can and do grumble about overall skills levels, they can feel relatively insulated from the problems. That often leaves those in the middle—the medium-sized and medium performing—which have real difficulty in recruiting staff and probably need to do the most to upskill the staff they have. Is it realistic to expect them to bear the principal burden for skills training on their own? I think not.

On basic skills, it is certainly the case that employers look to government, not themselves, to pay. On apprenticeships, Yorkshire Forward has stated that,

"our experience in the region of developing adult apprenticeship programmes is that only with substantial public investment will harder to reach businesses engage in the scheme, and when the wage subsidies are removed, engagement seriously drops off".

This is a problem. If we are to meet the targets of the noble Lord, Lord Leitch, we will need a strong partnership between the private sector, the education sector and the Government, with each partner doing the things it does best, or which only it can do.

So far the position is patchy, although in some sectors we are seeing real progress. The design industry, for example, has recently produced a report, Hi-level skills for higher value, which examines how the industry can produce the people it requires to thrive in a business which is being rapidly reshaped by technology, globalisation and environmental concerns. Design is a very successful industry, with large and growing exports and a world-class reputation. Design and technology is a very popular subject at school, and yet the report describes how there is no nationally-sustained professional development for design and technology teachers and how education is not connected to current design practice. So children learning D&T are not being taught relevant things. Equally, college and university students are not being taught the professional skills required by employers in the design industry.

The report states that within design companies there is,

"little sign of a culture of professional development and design businesses are generally poor at developing their people".

And this is a very successful sector. The report goes on to make a series of practical suggestions about how to promote teacher development, how to improve links between colleges, universities and design companies, and the need for a UK design academy to establish industry standards and provide intelligence for future skills development.

The report was produced by some of the best people in the industry. I declare an interest as its chair, Jonathan Sands, is chairman of Elmwood Design, of which I am a non-executive director. There is no doubt that within that industry there is a momentum for change, but this change will be possible only if government also play their part. Within the design industry there is concern that current funding structures do not sufficiently encourage proposals for national training academies to focus on professional training practice. Given that this is an industry dominated by SMEs, it believes that there is a need for government support to enable it to take on graduates and make a contribution to the development and provision of training schemes.

To sum up, I welcome the fact that the Leitch report has thrown down the gauntlet to individuals, companies and government. I hope only that the challenge the noble Lord has now set is matched by the necessary action.

Photo of Lord Low of Dalston Lord Low of Dalston Crossbench 12:03 pm, 28th June 2007

My Lords, I join other noble Lords in congratulating the noble Lord, Lord Leitch, on securing the debate. Most especially, I congratulate him on producing the report which is its focus. In analysis and prescription it must surely be one of the most important reports for UK public policy—indeed, for the UK—for some time. I am sure—or, at least, I hope—it lies behind the new Prime Minister's renewed emphasis on the importance of education.

As well as the report's one big message about the need to up-skill the British workforce if Britain is to remain competitive in a rapidly changing global environment, the report has many subsidiary messages: about the need for greater investment in skills, about the importance of higher education and about the need for a great increase in the number of those undertaking apprenticeships. I want to focus briefly on one of the report's themes which possibly has not been developed as fully as it might be in the report: the importance of skills development for those at greatest disadvantage in our society, especially disabled people, in the quest for social justice and a fairer society. Indeed, the importance of skills for improving social justice and not just productivity and economic prosperity is at the heart of the report's terms of reference.

There is a raft of statistics, most fully summarised recently in a report by the Social Market Foundation in association with the Disability Rights Commission, to show that there is a close association between skills, employment and disability. Despite recent progress, disabled people and people with long-term health conditions still face significant disadvantage. They are far less likely to be skilled. Disabled people are half as likely as the non-disabled to have a degree and twice as likely to have no qualifications at all. Disabled people are also far less likely to be in employment than non-disabled people. The employment rate of disabled people and people with long-term health conditions has risen faster than average over the past decade, from 43 per cent in 1998 to over 50 per cent by 2006, but still remains some 25 percentage points below the national average.

That global picture masks significant differences in the employment opportunities of people with different types of impairment. Only one in 10 people with severe learning disabilities and two in 10 with mental health problems are in work. Disabled people and people with long-term health conditions have lower employment rates than the non-disabled population no matter what their qualification level, with the biggest impact being felt by those with low or no qualifications. However, research to isolate the impact of skills finds that a higher level of skills is associated, all other things being equal, with a higher probability of employment. Nevertheless, it is striking that disabled graduates still have a higher chance of being out of but wanting work than a non-disabled adult who has no qualifications at all.

The compound of low skills and unemployment means that disabled people and those with long-term health conditions are also more likely to be socially excluded and live in poverty. Disabled adults are twice as likely to be living in poverty as non-disabled adults. In fact, not being in employment, education or training for six months or more between the ages of 16 and 18 is the single most powerful predictor of unemployment at age 21.

Why should we be concerned about this? The easy answer is that increasing opportunities for disabled people is central to achieving national prosperity as well as equality of opportunity. The continuing skills deficit is not only a problem for disabled people: if it persists it will prevent the UK reaching its goal of world-class skills by 2020. In other words, it will be impossible to deliver world-class skills unless disabled people are better supported significantly to improve their skills.

That answer also comes from Europe. The Lisbon agenda contains an objective of an employment rate of 70 per cent by 2010 and the Commission has recognised that people with disabilities are a much underused source of labour in Europe which could contribute to overall economic growth. But I have to confess that I sometimes find that answer a bit glib. We should beware of automatic inferences of discrimination and denial of opportunity from the sort of statistics that I have quoted. Sometimes, lower levels of skill and qualification may be hard to disentangle from the disability itself. In going down the mainstream route, public policy limits its focus to those who may be easiest to employ. That makes sense in terms of raising the level of employment to make Europe the most competitive knowledge-based economy in a globalised world economy, but it may not make so much sense for a low incidence group such as visually impaired people, many of whom are among the most vulnerable disabled people who are hardest to employ or some of those mentioned earlier with the lowest employment rates such as those with severe learning difficulties or mental health problems.

There remains of course the argument about social justice. The Leitch report acknowledges the claims of social justice, but does not contain enough tough-minded argument about why we should heed its claims. Why should states put themselves out to get people into employment against the odds in an increasingly competitive environment? My answer to that question is citizenship. It is the right of every disabled person, as a citizen, that the state should use what Galbraith used to call its "countervailing power" to support them into work. This is not a difficult concept to promote under the European social model, but can the European social model survive in a more competitive Europe gearing itself up to withstand the pressures of globalisation? It may not survive completely intact, but I would argue that the kind of rights that go with citizenship have to survive if a Europe in crisis is to retain the contact with its citizens that alone can give it legitimacy.

The same goes for the United Kingdom. The prize—

Photo of Baroness Crawley Baroness Crawley Government Whip, Baroness in Waiting (HM Household) (Whip)

My Lords, perhaps I may ask the noble Lord to draw his remarks to a close.

Photo of Lord Low of Dalston Lord Low of Dalston Crossbench

My Lords, I am just doing that.

The prize is greater than simply increased productivity and employment, as the Leitch report recognises. It is also about tackling poverty and inequality. As a result of low skills, the UK risks increasing inequality, deprivation and poverty. If we take to heart the prescriptions of the Leitch report, people will have a fairer chance to progress and there will be less social deprivation and positive wider impacts on health, crime and social cohesion. That is essential if people are not to be allowed to sink into an underclass of deprivation and disaffection, which is as capable of dragging our society back as any skills deficit.

Photo of Baroness Morris of Yardley Baroness Morris of Yardley Labour 12:11 pm, 28th June 2007

My Lords, I congratulate the noble Lord, Lord Leitch, on securing the debate, although I suspect that was relatively easy compared with writing the report. I congratulate him, too, on producing a very good report which can take us forward in this crucial area.

One thing that I like about the report is that it gathers together the evidence of where we are, and noble Lords have given examples and statistics about how far behind we are falling compared with our competitor nations. The report will stand us in good stead; we will be able to refer to it as almost a bible of those statistics.

I want to give three examples where, in my previous work, I have noticed a lack of skills and the impact that that can have. When I was chair of the Children's Workforce Development Council, there was a simple but powerful statistic that I had not realised existed. We understand the importance of working with children before age five if we are to raise the standards of every child in school. Whereas we can be pleased that 80 per cent of people who work with children in schools have a degree, 80 per cent of those who work in early years provision do not have a degree. That is an absolute swap-around of qualifications. Whereas a very high number of middle-class children go to university, gain degrees and progress beyond that, we have still not cracked the problem of access to higher education for children from all backgrounds. If noble Lords look at the statistics, as the Prime Minister did in his Mansion House report, they can see that we are faring worse in terms of second degrees in some professions than we did 10 or 15 years ago. So the statistics in the report represent people doing jobs without the skills and qualifications that they need and citizens not having the opportunities they ought to have.

This is a good report, but it is not as though we have not bothered to do such a report for decades. Good, honest and hard-working people have tried to crack this one before us. If we are really to make a difference now we need a far better understanding of what has prevented us making it before. That is what I want to concentrate on, rather than the report itself.

For me, there are three or four key areas. We have a national inability to treasure vocational skills. If we do not treasure those skills while children and young people are at school and get education for those aged 14 to 19 right, we will not have begun at that early stage to get a throughput of skills and an appreciation that that type of skills matter.

Our national culture makes it sometimes difficult to get the skills agenda going. We are still suspicious of everybody having qualifications. If we manage to ensure that more people have higher-level qualifications, there is still a suspicion that we must have lowered the pass grade. As long as we have a national cultural problem of not believing in people's ability to raise standards and perform at a higher level, we will not change the culture as we need to.

Noble Lords mentioned employers' commitment to skills. Too many employers are still cutting investment in skills when the going gets tough, whereas all the evidence shows that such investment at that point makes the difference to an industry's survival.

The noble Lord, Lord Leitch, made employee demand the key part of his report, and I agree. We will have to look seriously at that. People are not queuing down the street demanding higher skill levels. Parents fight to get their children into good schools, but employees without adequate skills are not screaming that someone should upgrade their skills. That has been a problem as well.

We do not talk about rewarding higher skill levels with higher wages and a different salary structure; neither do our media pay sufficient attention to skills. How often do you read about a skills event on the front page of a newspaper? We have had a very good week in which we discussed reports on the link between social class and educational attainment in schools, but where is the national debate on skill levels? Where was John Humphrys? Did the "Today" programme go round every morning for a week looking at the lack of skills and what can be done? The media have a role in leading the national debate.

Our efforts so far have lacked consistency. We do not have a language to discuss skills. How many people in the street know what a level 2 or a level 4 is, let alone what an old level 4 was only one year ago? The noble Lord, Lord Leitch, equated a level to five good GCSEs. He did so because he knew that we understand that language. If we are to persuade employees to demand a certain skill level and employers to provide it, we need a national language for a national debate. We cannot do much about that. However, there is a national language in the rest of the education system. Whatever their skill level and previous educational experiences, people know what GCSEs, A-levels and degrees are. We have to stop changing the language and try to develop the conversation with the nation.

This is an excellent report. It gives us our best chance in a long time of taking the debate forward. Several things should happen alongside it. First, it needs the resources. Organisations in the skills sector should not have to fight each other for resources. At the moment, sector skills councils are arguing with learning and skills councils about the resources they need. We must also be prepared to use compulsion if a voluntary approach does not work. We must value economically viable skills but understand that the way into learning for some people is to do things that may not be economically viable. We must keep the structure simple. We must also make this the last report which we have to produce to set us on the road to becoming a nation that is strong in skills, strong in social justice and economically strong.

Photo of Lord Sheikh Lord Sheikh Conservative 12:17 pm, 28th June 2007

My Lords, I congratulate the noble Lord, Lord Leitch, on his presentation today and his excellent report. I should like to talk about the skills issue in the sector in which I have worked all my life, insurance and financial services. I have been very actively involved in training and the improvement of standards in my industry. I have held senior positions with the Chartered Insurance Institute and the British Insurance Brokers' Association. I have also been a visiting lecturer on insurance subjects.

We have a very successful and world-class insurance and financial services industry which brings considerable benefits to this country. We need, however, to look ahead to keep our premier position. We cannot assume in these fast-moving, globalised financial markets that the UK's pre-eminence will be maintained. Improved skills are a vital component in ensuring that this competitive advantage remains.

Over the past four months I have visited India, the United Arab Emirates and Bahrain to look at their insurance and financial services markets, and I believe that we should be more involved in those countries. The Leitch report offers a vision of the future which shows that the UK risks facing a skills deficit in the context of international competition.

My concern is that a belief in the excellence of the UK financial services industry makes it easy to assume that all in the financial services skills world is rosy. A recent survey of its members undertaken by the Chartered Insurance Institute (CII), a leading professional body with more than 90,000 members within the financial services and insurance sector, sheds an interesting but rather worrying light on the issue of skills.

The CII survey found that 71 per cent of financial services employers perceive a shortage of technical skills while 63 per cent also believe that the demand for professional qualifications will increase over the next five years. More worryingly, 46 per cent of the CII's members thought that new entrants were not as well equipped as entrants a decade ago, and 55 per cent of respondents felt that, unless action is taken to address this, the UK will fall back by 2020. This concern should be put in context. The same survey showed that awareness of the issues facing the sector is high—90 per cent believe that there is a direct correlation between the level of investment in training and the profitability of a company, and 94 per cent of employers agree that technical skills are critical in maintaining the competitiveness of UK financial services providers.

I take comfort from that last statistic; there is recognition of the future danger. The key thing is to ensure that the education needs of the industry, both in training of new entrants and in continuing professional development throughout careers, are identified and met by the industry in consultation with educational bodies, trade associations, employers and individuals themselves. That is the task ahead.

I cite the CII survey identifying the problem. It is gratifying to see that the CII is developing imaginative solutions. For example, the CII's Faculty of Broking, in association with the British Insurance Brokers' Association and a leading insurance company, have developed the concept of a broker academy which provides a one-stop-shop providing training, education and professional qualifications.

Another identified area of specific need is the vital area of insurance claims, a specialist discipline which is often neglected. The CII has established a research project to look at the future of claims, and this will identify the skills that practitioners will need.

The Leitch report talks a lot about employer-led solutions, a direction which I strongly support. This can be done by an organisation setting up a structured programme for the staff which includes classroom and on-the-job training, mentoring and appropriate appraisals. Every encouragement and assistance should be given to staff to study for professional examinations. Excellent courses are available from the Chartered Insurance Institute and the British Insurance Brokers' Association.

In addition to improving and maintaining our expertise in London we need to build and promote better skills in other parts of the country and establish regional centres of excellence which will give us breadth of expertise.

Lastly, there are major challenges across all sectors in the UK in facing up to the fierce blast of international competition and skills. Improving skills can play a vital part in ensuring that UK business is flexible and has adequate capability to face the future with confidence and with a highly skilled, flexible and confident workforce. I hope that this debate will play a useful part in setting us down that road.

Photo of Lord Cotter Lord Cotter Spokesperson in the Lords (Small Businesses), Trade & Industry, Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson 12:25 pm, 28th June 2007

My Lords, thanks go to the noble Lord, Lord Leitch, for this excellent report and for initiating today's debate. I want to speak particularly about giving opportunities to young people entering the workplace, especially those who find the transition from school to work daunting.

Much is made, rightly, of university education but it does not suit everyone, so there is a real need for training and, in particular, apprenticeships. There has been a significant improvement in the quality of apprenticeships, rising from 42 per cent being of high quality, as mentioned in the 2006 report, to 88 per cent in 2007. That is important, as it is that this fact is publicised so that both young people and employers are aware of the acceptability and quality of apprenticeships.

However, there is a significant problem concerning the completion rate of apprenticeships, which remains at only 40 per cent. Last week, the Minister, in answer to a question of mine, accepted that there is concern over completion. He said that he is addressing that, which is encouraging; nevertheless, we have a problem.

I feel—modestly, I hope—that a second point that I made has relevance. I asked the Minister whether he would consider some form of recognition for apprenticeships, such as a diploma or something of that nature. I have been notified by the Association of Colleges that a diploma will be introduced next year. It will recognise technical expertise and the value of skills within one-year courses on subjects such as construction, health and IT. However, there is still no formal recognition of the completion of apprenticeship schemes, which usually last for two years.

What I am getting at is that apprenticeships should be recognised as a high achievement and that, in itself, would encourage more young people to stick the course so that they could feel proud of what they had achieved. Therefore, in talking about apprenticeships, we are trying to address the need that we have as a country to give our young people a real future. On the one hand, there is the need about which we have seen a lot in the media recently, such as that of young white boys and men who under-achieve. We also often hear about young black and particular ethnic groups who have difficulty in achieving and struggle to find their niche. Many in society have that problem. Therefore, a practical and efficient alternative needs to be provided.

A key failure in the present education system is the lack of advice and guidance that young people are given regarding the alternatives to higher education and the apprenticeship system. Career staff do not always offer adequate or positive advice and guidance early enough to people for whom a vocational education route might be more appropriate.

There is also the significant problem of the number of apprenticeships offered to people between the ages of 16 and 18. Many traders are unwilling to take on young adults who have just left school after completing their GCSEs due, sadly, to health and safety considerations but also simply because, rightly or wrongly, they believe that they are too young mentally to enter the workplace. Therefore, many young adults face doing menial jobs such as labouring until a company is prepared to take them on. What do the Government propose to do to overcome that sort of problem?

There is a key financial problem in the current apprenticeship programme. It is attractive to young people to take a modern apprenticeship, as there is an income, although it is the minimum wage. The income is attractive but it should not be the basis of the apprenticeship.

There is also no commitment in financial terms for the student to complete, other than the qualifications themselves, and many apprentices are not paid for their day release, for example, to complete the college course. This is a key factor why there is such a low completion rate, with apprentices leaving before they are qualified for higher paying occupations. The original scheme offered apprentices a bonus on completion. If they were reintroduced it may influence apprentices to complete their courses.

I have deliberately concentrated today on apprenticeships and the need for them to be of high quality and to be recognised as such. Trade and engineering focused apprenticeships are traditionally what is spoken of, and still today are vital, but they are not the only apprenticeship route. I was very encouraged to read how the SkillsActive organisation has drawn attention to the apprenticeships in sports and recreation, health and fitness and outside occupations, my point being that this is an expanding area. Young people need to be aware that those apprenticeships are available for employment that they will often find attractive, inspiring and perhaps even enjoyable. It is hoped that there will soon be one young apprenticeship partnership in sport scheme in every county in the country. Can the Minister ensure that that will happen?

I hope that as a result of the debate here today, we can see a real raising in the status for skill training, and real progress of the appreciation by business and young people, in particular of the worth of being trained for the job.

Photo of Lord Dearing Lord Dearing Crossbench 12:31 pm, 28th June 2007

My Lords, in a book published 17 years ago, Sir John Cassels, a chairman of the Manpower Services Commission, wrote that,

"by World standards the British workforce is uncompetitive"— uncompetitive because in relation to our competitors it was underskilled and undereducated. He did not limit his comments to blue-collar workers; he related them to our senior managers whom he found on average were much less highly qualified than those of our competitors. He said that 24 per cent of our senior managers had a degree, compared with, if I remember rightly, 62 per cent in Germany, 65 per cent in France and 84 per cent in the United States and Japan. He made similar criticisms of the training of our managers.

In an excellent report, the noble Lord, Lord Leitch, said that we have made progress, but to quote his own words back to him,

"the UK's skills base remains weak"—

I think he said "desperately weak" today—"by international standards".

We have progressed but not enough. The tragedy is that at the Paris Exhibition of 1871 the writing was plainly on the wall. This heralded the appointment of one committee after another telling us that we had fallen behind in terms of the skills of our workmen, our proprietors and our managers. The conclusion which I derive is that daunting though the targets of the noble Lord, Lord Leitch, are, we must accept them, welcome them and realise that to achieve them we need a new culture—a brilliant leadership as never before; otherwise in 130 years' time we shall have another Cassels-type report saying the same again.

My second conclusion is that if we are to achieve this, we must have coherence, organisational simplicity and continuity in our organisations, otherwise there is no hope that our managers and our workpeople will know how to access the system and use it. That is something that we do not have, so we must change radically, as the noble Lord, Lord Leitch, recognises in his your report. I have an example, which I know about because for a time I was chairman of what is best known as learndirect. One of the proposals in the report is that learndirect should be merged with the next steps organisations, under the well recognised learndirect brand, which is known by 80 per cent of the population. Under such a merged service, we can provide people with an expert skills check and expert advice on how best to meet their skills needs. The aim is to make it simple and to make it coherent, using the well know learndirect inquiry line, the web and face-to-face interviews, supported by an excellent information system. That has to be right up to date. Here is an example of how to provide that simplicity, coherence and effectiveness that we need across the whole scene.

Another recommendation is that we must simplify the whole run of qualifications. I wrote a report on this in 1997, which perhaps somebody will read one day. One of the noble Lord's most challenging targets is that we must reduce to 5 per cent those without basic skills in literacy and numeracy. That is immensely challenging because we cannot tell them what to do, so we really need to think how to do that. There is one area where we have them under our thumb—in school. Let us begin by committing ourselves to achieving only 5 per cent—less, if possible—of those leaving school without the basic equipment in the English language, both oral and written, and mathematics—or as I prefer to say, sums. Let us resolve to do that.

Since I am in the schools world, I shall make another point. If we are to change the culture, as the noble Baroness, Lady Morris, says we will have to do, we must secure a revolution in our attitude to technical education. The Government's plans for the 14 new specialised diplomas have that kind of thing in mind. Whatever the intent, we shall not achieve the ambition of getting our able people involved unless they are attracted by the cachet of excellent teaching, buildings and equipment, and the close involvement in both the system and the institutions of employers and workpeople. I would argue that we need such academies in every town and city to provide that kind of banner of excellence for technical education.

Finally, I turn to the target of 40 per cent achieving a level 4. Yes, that is another stretchy one—it goes from 29 per cent to 40 per cent by 2020. The noble Lord says that there needs to be a revolution in some of the values and practices of higher education. Yes, but let us not go for a simple model for higher education, and remember the FE colleges. If we are to achieve that, it will be through people at work in part-time learning. We have to rethink the issue, including the funding of part-time learning and learning accounts.

I conclude by welcoming the slogan suggested by the noble Lord, Lord Hunt: "Who trains wins". Unless we do, in 17 years' time there will be some of us here—not me, I dare say—who will be repeating what Cassels said, so let's train and win.

Photo of Baroness Wall of New Barnet Baroness Wall of New Barnet Labour 12:37 pm, 28th June 2007

My Lords, I am delighted to contribute to today's debate and to join colleagues and noble Lords who have congratulated the noble Lord, Lord Leitch. He suggested that, although the report took him two years to produce, it felt like 10. For those of us who were waiting for it and its implementation, it felt like much longer than that. I agree wholeheartedly with the sentiments of the noble Lord, Lord Leitch, and his ambitions and recommendations within the report. However, I want to talk specifically about the role of sector skills councils and trade unions. I declare an interest as someone working with the Sector Skills Development Agency to encourage employers and trade unions to get involved in these bodies and to take the maximum that they can from them.

I endorse the noble Lord's view that sector skills councils are uniquely placed to drive forward the whole skills agenda. I share his concern about the patchiness of some of them, but they are moving on in lots of ways. The longer people have, the greater effect they will bring. From experience elsewhere in the world, it is clear that a strong sectoral approach is essential if we are successfully to target the needs of employers and employees. That is crucial because, as the noble Lord, Lord Leitch, said, 70 per cent of the 2020 workforce have already finished school and are employed. Consequently, solutions to our skills problems will lie mainly in our existing workplaces, with employers and trade unions working together.

I also agree that, if sector skills councils are to deliver an enhanced role in the system, we must make sure that they are both fit for purpose and adequately resourced to do the job that we ask them to do, as the noble Lord, Lord Newby, suggested. The relicensing and refocusing process that is about to take place is important, and the newly defined role, especially in relation to qualification reform, employer engagement and investment, is essential. That is at the heart of what my noble friend Lord Leitch described, in a fantastic turn of phrase, as the "something for something deal". It is with employers that the significant "something for something deal" comes about. We must not lose sight of that as we respond to the recommendations proposed by my noble friend Lord Leitch and I hope that the Minister will assure us when responding that the recommendations will be embraced by our Government, as I am sure they will be.

Put simply, the deal is this: employers will engage and invest more in systems in return for more control over how the system works and what it does. The Commission for Employment and Skills, the pledge and the enhanced role for sector skills councils are the key to driving this deal. A reinforced approach to sector skills agreements can then provide the detail about how they will operate on a sector-by-sector basis. Some sectors will want to invest more in higher-level skills, such as the science and engineering employers represented by SEMTA and the IT and telecommunications sector represented by e-skills. The sector skills councils will want to deliver such a deal in very different ways in each of their sectors, and in each of the sectors they will decide that. For example, Skillset, the sector skills council for the broadcasting and audio visual industries, has developed a series of academies at universities and colleges across the UK—the noble Lord, Lord Dearing, said that that was the way forward—and there is a levy in part of that sector.

The overall point is that it sometimes seems easier and more effective to think of delivery mechanisms on a sector-by-sector basis, which often makes more sense to employers than taking solely a geographical approach, although my belief is that the two can and should be complementary—only then will they really work. In London in particular, where it is clear that sectors such as tourism and hospitality and financial services are vital, those SSCs should take an interest in how the skills and employment strategy now evolves under the guidance of the Mayor and how it fits into where they are going. I am sure that other speakers, in particular the noble Baroness, Lady Valentine, will comment on the London strategy.

We need therefore to ensure that sector skills councils have both the capacity and the resources to do the job properly. As we reorganise the system from a planned to a more demand-led approach, that should be at the centre of our plans. So much is being done by many of the sector skills councils—we have talked about patchiness—that we forget that they are quite young organisations; indeed, some have been in existence for only two years. They are also a relatively small part of the system within the entire Skills for Business network, comprising the SSDA and the 25 sector skills councils, and they receive less than £80 million of funding each year. For many of the sector skills councils, that has been a real and growing issue, and many would ask for a commitment from Government and from everyone to an increase in core funding, which equals increased accountability and practical delivery on the deal with employers around their commitment to increased investment.

I also want to talk about the role of trade unions, for which delivering the 2020 agenda is hugely important. Unionlearn, with which I work closely, and the network of union learning representatives are crucial to the delivery of the sector skills agenda. There are now over 18,000 union learning representatives in UK workplaces and they already play a significant role in ensuring that we reach that goal.

In conclusion, I thank my noble friend Lord Leitch for the debate and for the work that he has done to put a much greater focus on the whole sector skills process. His report gives us the freedom to make sure that we can grow from where we are and have the confidence to take it forward. Thank you.

Photo of Baroness Valentine Baroness Valentine Crossbench 12:44 pm, 28th June 2007

My Lords, I join others in thanking the noble Lord, Lord Leitch, for placing skills firmly on the public agenda. I welcome Sir Michael Rake's appointment to the new Commission for Employment and Skills; I am sure that he will bring his leadership from BT and KPMG to bear on an employer's perspective on that commission. I am chief executive of London First. Our 300 members include London's leading companies, universities and further education colleges, representing a quarter of London's GDP and one-sixth of its workforce.

Future UK prosperity and social well-being are critically dependent on improving skills at all levels across the UK. Publicly funded skills provision is complex. The noble Lord, Lord Leitch, and his team spent two years preparing his report; in five minutes, I will restrict myself to two areas for government focus.

First, I will talk about unemployment in our major cities. Successive Governments have spent a lot of money, but publicly funded skills programmes still do not equip the urban unemployed with the skills needed to get jobs. Expectations have been raised among jobless people, but the resulting qualifications are not the promised passports to jobs. There is too little emphasis on understanding employers' needs or matching training to locally available jobs.

London feels this most sharply. Despite our world-class economy and rising prosperity, unemployment remains at a stubborn 8 per cent, which is the highest in the UK. Some 600,000 people draw jobless benefits, and 150,000 of those are long-term unemployed. That disconnect is not sustainable either financially or socially. Other UK cities have similar problems. Thousands of entry-level jobs are available, but to win and keep one of those jobs the long-term unemployed need the softer skills of communication and—dare I say it?—getting to work on time and well presented. Those are not trivial issues. Communities with endemic long-term unemployment face complex problems ranging from housing to social services issues, as well as the skills gap. If the Government are to dent unemployment in cities, they must adopt a joined-up approach.

Until this morning, at least, the Government's skills programme was delivered by the Learning and Skills Council under the DfES, whereas job search programmes were run by Jobcentre Plus under the DWP. Those two departments need a shared objective: to give unemployed people the skills that are needed for jobs. They must become genuinely joined up, with joined-up targets providing a seamless service for people looking for work and for employers with vacancies needing particular skills.

My second priority for the Government is the contribution of skills development to productivity. Improving an individual's job skills once in work provides a double benefit: more efficiency for the employer and better career prospects for the individual. Employers know that to compete globally they need the best people operating at maximum competence. They already invest £20 billion a year in training, compared with government spending of £12 billion and individuals' spending of £2 billion. Nevertheless, there is no room for complacency. The Leitch diagnosis is right, but I beg to disagree with parts of his favoured remedy.

I ask Her Majesty's new Government to consider the following in their response to Leitch. Having 22,000 different nationally approved skills qualifications is too many. They are too complex and are largely incomprehensible to employers. The Government should not rely on them, nor should they invent new ones. To be credible to business, qualifications should pass two simple tests: are they responsive to employers' needs and are they simple to understand? Most businesses understand the business case for training their employees. A sound, government-subsidised employee training scheme could encourage more smaller businesses to see the light, but only if the training is right for the business, is not constrained by rigid qualifications targets and is convenient for employer and employees, particularly those who cannot easily get away from the day job. Legislation or taxation to coerce employers into training programmes is doomed to failure if it is designed to deliver arbitrary qualifications targets rather than useful workplace skills specific to each business.

In summary, skills matter for employment, for competitiveness and for social well-being. The Government of our new Prime Minister will need considerable skill and determination to pursue policies that genuinely equip employers, employees and would-be employees for a better future.

Photo of Lord Bilston Lord Bilston Labour 12:50 pm, 28th June 2007

My Lords, the Government have shown a greater commitment to further education and skills than any previous Administration. Significant increases in funding have achieved success rates in colleges, which, I am particularly pleased to say, hit the Government's target of 77 per cent two years early. Colleges have shown that they can manage public funds effectively in a way that helps the Government to deliver what they need. They have an historic public service ethos coupled with a professional, business-like approach, which makes them the perfect partners for government, employers and individuals.

That record of achievement demonstrates that colleges are pivotal to the Government's skills agenda. Without them, the overall skills base of the nation will not improve, as my noble friend Lord Leitch identified. It was therefore particularly pleasing to hear our new Prime Minister refer to colleges a number of times in his acceptance speech at the special Labour Party conference in Manchester. He spoke of bringing together businesses, universities, colleges and the voluntary sector. He specifically said that every school should be formally linked to a college or university. I hope that these new partnerships will build on the successes already in place as part of the Government's 14-19 agenda.

Noble Lords will know that Sir Andrew Foster referred to further education as the "neglected middle child" of the education world, so it is welcome indeed that the Prime Minister has already signalled his commitment to colleges. I am confident that their contribution to his plans to further improve education and skills in this country will be recognised and encouraged. FE will also be crucial to the success of the Prime Minister's welcome ambition to ensure that all young people stay in education and training until they are 18. I was delighted to hear him say on Sunday that every young person will have access to personal learning relevant to their needs and an offer of an apprenticeship or a place in a college or university. There is no doubt that succeeding in ensuring that all young people remain in education or training until 18 will be an historic legacy of this Labour Government.

Debates around skills focus mainly on the economic challenges that the nation faces from its major competitors. We are often told that the investment by China and India in developing their skills levels means that the UK also needs to step up a level and produce more graduates and more skilled workers than ever before. The Government's recent decision to allow colleges with the necessary expertise and experience to award foundation degrees will be a great help in ensuring that more people have access to higher-level courses.

There is a lot of emphasis on national skills, but we must not lose sight of the impact on individuals and local areas. For example, my local further education institution in the city of Wolverhampton recently launched a new scheme to improve training and learning opportunities for 2,600 Royal Mail workers at their offices in Sun Street, Wolverhampton. In partnership with the Communication Workers Union, the college has offered, in the workplace, a variety of new courses to employees who want to learn new skills. The courses on offer include IT, skills for life, customer services and British Sign Language.

Within each college, there are many truly magnificent examples of personal achievement. Just last month, adult students from the City of Wolverhampton College were among those commended for their achievements during Adult Learners' Week. For example, fireman Tony Bucknall gained a teaching qualification from the college while working full time, and has now been promoted to become a crew commander at Wolverhampton fire station. Since completing the course, he has founded a youth inclusion course to support young people outside mainstream education.

Those two examples demonstrate the potential ripple effect of government investment in improving people's skills levels. The Royal Mail workers who took up courses and achieved new qualifications will become more productive for their employer and gain personal confidence. Tony Bucknall's achievements were magnificent, not just for himself but for the fire service and the community as a whole.

This puts me in mind of the phrase "two sides of the same coin", which my right honourable friend the former Deputy Prime Minister uses to describe the Labour Party: social justice on one side and economic prosperity on the other. The two sides in this case are exemplified by the achievements of our further education colleges. On the one side, our colleges are succeeding in helping the Government to meet the global economic challenges that we face—for example, by helping to ensure that 2.2 million key skills qualifications were achieved in 2005-06. On the other side is the work undertaken in transforming the lives of individuals by giving them extra confidence and encouraging them to make a contribution to their communities and local economies. In conclusion, I ask the House to remember that "skills" is not just an amorphous name given to the need to address global economic challenges; it is also about individuals' personal ambitions and achievements.

Photo of Lord Bhattacharyya Lord Bhattacharyya Labour 12:57 pm, 28th June 2007

My Lords, I thank my noble friend Lord Leitch for securing this important debate. He has produced such a lot of data that it would take a final-year undergraduate to analyse it and come to some conclusions. I declare an interest as director of the Warwick Manufacturing Group and, more importantly, as a former apprentice. I wonder how many members of your Lordships' House have served an apprenticeship. I suspect not many. Perhaps we should form an exclusive club.

My apprenticeship was the foundation of my career. What was amazing was that there were apprenticeships at every level then, from school leavers to graduates and postgraduates. My apprenticeship made me understand the gap between what I had learnt as a student and the reality of industry. There is no point in forcing industry to invest in skills or in leadership. It has to want to do it. All too often, it has not. This is short-sighted because a quality workforce and strong management are vital for sustained increases in productivity.

Although the gap has narrowed, productivity in the US and Germany is around 15 per cent higher than here. That has not happened simply because of a skills shortage; other things contribute to that. But if business is not investing in skills, we have to think very carefully about why society should take up the burden. We do not know what a particular skill will be worth to society in the future. A generation ago, we also had a skills gap, but the skills were utterly different. That teaches us that predicting manpower needs is not likely to produce success. So we need to ask what we should invest in and, most importantly, who should pay.

Government resources have to go on what gives the most benefit for society as a whole, so the first priority is to give those at the bottom of the skills ladder stronger education and training, as the Government have repeatedly articulated. Over the past decade the number of people with no qualifications has fallen by a third, yet 45 per cent of British workers still have low or no skills. That is twice as many as in Germany and three times the number in the United States. We should invest to make sure people leaving education have the skills to find and retain a job. We should invest to make sure people in the job market are able to continue their education. That means stronger basic education and more apprenticeships. I believe that the bulk of state funding should go on supplying a decent education and skills base for all, ending the tragedy of wasted potential.

However, transforming our skills is not just about improving the abilities of those at the bottom; it is vital to deepen our intellectual capacity, too. We have to increase investment in the top end of the skills sector to drive growth. We rightly think of skills as a key way to increase productivity, but successful economies have found that the path to increased productivity also requires increased ability to find technical solutions to tough problems. For example, American productivity growth has been driven by firms exploiting advances in technology. The mechanisation and automation of the automotive industry has allowed unskilled and semi-skilled workers to have an increased growth in competitiveness because technical advances allowed them to do that. Technology has automated many industrial processes, so the American economy now needs fewer craft skills, but requires people with intermediate qualifications and post-graduate knowledge.

The fastest growing developing countries now have a tremendous skill shortage because they are going up the value chain. They do not have the skills required at the upper end of that chain, so enormous efforts are being made in China and India to close the skills gap that they are now finding and they are recruiting people from the West.

To achieve success in the UK, investment in mass higher education at post-graduate level is critical. There is a strong case for increased skills funding at graduate level to build our capacity for applied research. At the top end of our skills base, the private sector should contribute a greater share. We must encourage companies to invest in solving the most complex technical problems: one of the reasons our pharmaceutical industry is so competitive is because of that.

Today, we have dozens of business schools but rarely produce strong technical managers. It is a paradox: we have the best business schools in the world and we have problems of productivity and competitiveness. Our economy therefore faces two great challenges. The first is ensuring strong basic skills for all. We can do that by investing in schools, further education and apprenticeships, including academies. In this area, it is an advantage to involve the private sector. We also need to drive forward innovation at the very top. We can deliver high-end skills by using the fiscal system to encourage partnership and give more support to post-graduate apprenticeships. However, thinking that we will improve our skills base by a voluntary code will never work. We must have some regulation.

Photo of Baroness Prosser Baroness Prosser Labour 1:03 pm, 28th June 2007

My Lords, I, too, thank my noble friend Lord Leitch for calling for this debate. I shall address my remarks to three areas of concern. It will come as no surprise to your Lordships that the first area is how this agenda relates to the needs of women workers. The report of the Women and Work Commission, which I chaired, expressed serious concern at the underutilisation of women in the labour market. The commission estimated that between £15 billion and £23 billion could be added to the United Kingdom's GDP annually if women were able to work to their full capacity or potential.

The argument the commission set out regarding, in particular, women returners getting stuck in employment far below their capacity and the consequent loss of national income fell on fertile ground, and the Chancellor of the Exchequer allocated £40 million in the 2006 Budget to be spent over two years on upskilling or retraining women, in particular those in low-skilled or low-paid employment. That money is being spent as we speak: £20 million is directed to providing NVQ level 3 training in the London area to women returners and women in low-skilled occupations where they are under-represented at level 3 and 21 contracts are in operation to deliver 7,500 level 3 qualifications over two years with funding available for a further 4,000. London's greatest skill needs, which include engineering, construction and transport and logistics, are all priority areas where women are currently under-represented. The second tranche of the £40 million is being distributed via the sector skills councils.

The women and work sector skills initiative, working with employers, will develop a range of projects designed to upskill women in male-dominated occupations. Sectors include food and drink manufacture and process, logistics, the retail motor industry and science and engineering. That Chancellor of the Exchequer is now the Prime Minister, and I shall be calling on him in that capacity to explain that momentum must be maintained until the number of women in non-traditional areas of employment reaches critical mass and we no longer raise an eyebrow at the sight of a woman electrician, plumber or motor mechanic. The women of whom I speak are women with ability who have found themselves at the bottom of the employment ladder.

There is equally a problem in finding employment in some sectors for women who have good qualifications. Research published this week by the UK Resource Centre for Women in Science, Engineering and Technology considers whether recruitment practices have a role in bringing more women into IT and related fields. We have a general shortage of skills in these areas, and losing women through poor or inappropriate recruitment practices should not be tolerated. Areas of concern highlighted by the research include the need to attend to the training requirements of hiring managers, the look and feel of websites, highlighting family-friendly policies and culture and having women on recruitment stalls. The research also found that few organisations are doing much to recruit experienced women who want to return to work after a break or career shift. Despite these problems, there was found to be a strong belief that the greater presence of women would strengthen productivity and effectiveness.

My second area of concern was mentioned by the noble Lord, Lord Low of Dalston, and is the waste of the talents of those with disabilities. In response to the Leitch report, the Disability Rights Commission pointed out the far greater propensity of people with a disability to be without skills and, indeed, without employment. More than one-third of people in Britain without any qualifications have a disability or a long-term health condition. Every quarter, around 600,000 become sick or acquire an impairment, and within one year 13 per cent of them have left employment. There are strong moral reasons why access to training and upskilling should not operate in a discriminatory way. Economic arguments also hold sway, and it is high time that the world of work woke up to the value of a diverse workforce.

Finally, I shall say a few words about social mobility, a debate that has been in the news this week. I promise noble Lords that I wrote my speech on Wednesday, before the debate on the "Today" programme this morning. I firmly believe that social mobility over the past 100 years or so has been achieved partly by access to better education but also, importantly, via the world of work. Fifty years ago, poorly educated people could find employment and work their way up, either in an environment more suited to the practical than the academic or by attending night school or via day release. Working one's way up provided role models and extended a work ethic, which in turn influenced the aspirations of a younger generation.

The changed nature of the labour market calls for a new settlement, which values vocational as well as academic skill and which recognises the importance of second-chance education or training opportunities. I urge government and employers to work together to build stronger links between schools and employment. We cannot continue to import the skills we require while allowing late-flowering citizens and others who are currently disadvantaged to fall by the wayside.

Photo of Lord Bilimoria Lord Bilimoria Crossbench 1:10 pm, 28th June 2007

My Lords, I commend the noble Lord, Lord Leitch, for the huge amount of work he has done in this area of skills and for the very important report he has published, and I congratulate him on his excellent speech.

In my role as the UK chairman of the Indo British Partnership, I am constantly having to look ahead to see how Britain can deal with the challenge of the rising giant of India, where millions of people are hungry for learning and skills. We are in a hugely wealthy nation with a welfare state that looks after our citizens to the extent of a roof over our heads, subsistence, free health and mostly free education. Despite that, huge amounts have been poured into education by this Government. The former Prime Minister, Tony Blair, said, "Education, education, education", and the current Prime Minister just the other day said:

"Our national mission is to be world class in education".

So the fundamentals are education. Yet, as the Leitch report pointed out, the shocking truth is that one in six young people leave school unable to read, write and add up properly.

In a recent Question to the Government, I asked how many children in England and Wales leave primary school education without the ability to read and write to a proficient standard. The figure given was 122,800 students. Twenty-one per cent did not reach target level 4. Is that good enough to enable Britain to compete in the future? Is that good enough when in a country such as South Africa, where I am a member of the advisory board of CIDA University, I have seen first-hand an institution where disadvantaged students—who just a few years ago would never have had the opportunity to go near the door of a university, let alone attend one—run the university. They are so hungry for learning, but so humble and so grateful. They are so articulate and confident and are taking the world on. Tremendous success stories are coming out of this new and unique institution.

Here in the UK, I am proud to be chancellor of Thames Valley University, known as TVU, which is a modern university. It is one of the largest universities in Europe, with 60,000 students. We offer seamless education opportunities for people as young as 14 years old right through to pensioners, and for people who want to study anything from vocational skills right up to PhD research. Last week, I visited our Reading campus and was amazed to see the opportunities on offer for children as young as 14, children who come to TVU from school two to three days a week to take part in learning that the schools cannot offer, children who potentially would drop out of school, but who are taking vocational training and engaging in learning.

Walking around the campus is utterly inspiring. There is even a building construction site, simulated right down to the scaffolding, with students learning masonry, tiling and other skills. There are automotives, motorcycles, music technology, carpentry, design and fashion. Our students are engaging in the World Skills Competition and interacting with countries such as Japan and Finland. This is world-class teaching and world-class skills teaching right on our doorstep, and I know that it can be replicated around the country and beyond.

Some students just want to go up to level 2 or level 3, others want to go all the way to PhDs, but they have that option. Why is this not being taken up more? There is the ability to have a seamless progression from further education to higher education—and one of TVU's mottos is "further and higher".

TVU is also leading in lifelong learning, with an incredible diversity in the age of students. I try not to regret too much, but my one major regret is that I did not embark on lifelong learning until eight years after I started my business, and attended the business growth programme at Cranfield. It was a turning point in my career, in my business's career and in my life. At TVU, 77 per cent of part-time students are over the age of 25. That is the kind of commitment to lifelong learning that is wonderful. It is never too late to learn.

We need to show that we are serious about Britain maintaining our position as a tiny country where knowledge has been the source of our competitive advantage, where learning, knowledge and skills, combined with hard work, has put us at the forefront in the world for centuries. This country, thanks to having the most open environment and economy in the world, has been able to adapt, to be flexible and to stay at the forefront in so many areas. If only we could have the will to skill embedded in the attitude of our children from as early an age as possible. If only we realised that education and skills is a passport to success, a passport to the UK's future success to compete in the global marketplace. Otherwise, we will be left behind. President Clinton had a great saying: the more you learn, the more you earn. The more Britain learns, the more Britain will earn.

According to Universities UK, currently 1.1 per cent of the UK's GDP is spent on higher education. The world leader in this field by far is the United States where it is 2.9 per cent. Therefore, if the Leitch report recommends more spending to enable this to happen, more spending to the tune of billions, to create more institutions like Thames Valley University, we have to be prepared to spend more. It is a calculated investment. With investments, there should be rewards. The reward here is a highly skilled nation ready to take on the world, with a real will to skill.

Photo of Lord Haskel Lord Haskel Labour 1:17 pm, 28th June 2007

My Lords, I, too, congratulate my noble friend on his report. He and other noble Lords call for a focus on economically valuable skills. It seems to me that one skill is central to this—a skill required by perhaps our largest occupational group. I speak of management skills. Surely, it is the skills and capabilities of those leading and running organisations that will determine whether the skills of others are valuable. The CBI, in its recent report, said:

"Leadership, management and supervisory skills are weaker than employers would like".

My noble friend also drew attention to that in his report, as did the noble Lord, Lord Dearing, and the Chartered Management Institute—and I am indebted to it for its briefing.

Yet, there is lots of management around. I wonder if my noble friend Apprentice Bhattacharyya was among the 6.2 million people who watched "The Apprentice" on television. That is where ruthless trading seems to be the key skill. Of course making money is an important motivator but where that is combined with the desire to create new products and new services, many skills beyond ruthless trading are needed. First, you have to be more competitive, and being more competitive means being more productive. My noble friend told us how, in spite of improvements in recent years, our productivity still lags behind that of other competitor nations. Some of that is due to poor management. My noble friend, in his report, said:

"Differences in management practices between the USA and the UK, for example, explain 10-15 per cent of the productivity gap in manufacturing between the two countries".

Another recent paper shows that in the services sector better organisation combined with earlier and better introduction of information technology by management explains why some services firms have greater productivity than others—management skills again.

In the UK, small and medium-sized enterprises account for over half of employment, but the high failure rate of these companies is well known, and the Association of Business Recovery Professionals has shown that poor management is the main reason for this business failure.

Innovation is identified by the Government as a key element for growth and creating our knowledge economy. But Professor Michael Porter, in his review which stimulated much of this debate, states that innovation will require "changes in management behaviour".

My point is simple. In all sectors of our economy, manufacturing and services, small and medium-sized enterprises, encouraging innovation and raising productivity, management skills are pivotal to raising our game. Ruthless trading and a Milton Friedman desire for a "get rich" philosophy will not do the job. To borrow a phrase, it may help the few but it will not help the many—and there are many. The Working Futures report indicates that there are 4.6 million managers and senior officials in this country, and the number is growing.

Several noble Lords drew attention to qualifications. The Council for Excellence in Management and Leadership concluded in its report that in the longer term, the proportion of managers with management-related qualifications similar to other occupations will not rise much above 20 per cent. In any occupation, that must be unacceptable.

How do we achieve better management practices? As ever, the answer is the carrot and the stick. The stick is competition. Many researches have shown that competition helps with the rapid exit of poorly managed firms to be replaced by new firms or by well managed firms expanding. That is the best inducement to both greater management effort and the need to learn better management practices quickly. I am calling for a much greater emphasis on management training skills under the proposed Leitch implementation plan that my noble friend told us about—in the proposed commission, in the reformed sector skills councils, in "Train to Gain" and in the awareness programmes of the value of skills. That is how we will raise the competitiveness and the productivity of our economy, and the excellence of our public services, both of which are central to the prosperous economy and society that the Government seek.

Photo of Lord Sawyer Lord Sawyer Labour 1:22 pm, 28th June 2007

My Lords, I add my congratulations to my noble friend Lord Leitch, both on leading the debate and on his excellent report. I know from our conversations how much time and energy he has put into that work. I know that at times he has even had to sacrifice his hobby of antiquarian book collecting to get on with the report. Given the success and warmth with which his report has been received today, he can probably treat himself this afternoon to an antiquarian book.

It is a first-class report. What I like about it is that it is accessible, understandable and comprehensive. You can read it and it does not turn you off. You can go through the statistics and make sense of them. It is a valuable road map for the future. I welcome it and support its conclusions.

In particular, I support the emphasis on the demand-led approach. I see the importance of the balance between the state education sector and employers, but I think that we need to recognise the importance of entrepreneurs and employers, who create work, jobs and businesses. They can play a very important role in the skills development agenda. I was sorry to hear the noble Lord, Lord Newby, who is not in his place, sound a little pessimistic about the role of employers. I think that employers have an important role to play and would like to say something about that in the short time available to me.

I think that I know something about the world of work. I started work at 15 and I have been trying to avoid it ever since without success. I am also a signed up member of the Apprentice Club, so there are at least two of us in the House today—probably many more on these Benches.

I come to the debate from many angles. I still consider myself to be a student and a learner. I think that that is very important for all of us who sit on these Benches and, like all of us, I take on many other roles as employer, chairman, coach—whatever we are called on to do in our capacity as Members of this House. I enjoy thinking about that, coming from the background that I did to become Chancellor of the University of Teesside, because I can see the full range of what can be achieved in skills development. Across that interplay, I see mediocrity but I also see excellence, and we must concentrate on the excellence.

I agree with my noble friend Lord Haskel. I am convinced that the most important factor in developing a skilled workforce is the quality of leadership and management. It genuinely starts at the top. I go further and say that it is not just about management innovating and making profit; it is very much about management being able to develop people's skills, to communicate with vision and to describe with passion what can be achieved by a skilled workforce. Managements who can do that stand the most chance of success.

I am equally convinced that the quality of work needs to be discussed, because it is crucial. That is crucial, because for employers to make work challenging, exciting, welcoming and rewarding and to truly value people for performing that work is what makes people want to learn, develop and grow. The quality of work and encouraging employees to do that work and be valued by managers, leaders and employers is for me at the heart of all this. Let people get excited about their job, excited about their work and they will be queuing up to learn and to get new skills.

Go to another workplace where that does not happen and people cannot wait to go home, they cannot wait to leave and they are demotivated and disappointed. We have good role models that we should advance. That is what I want to talk about. How do we measure that? It is a hard thing to measure. Investors in People has done a really good job in trying to concentrate on that and get companies to link their business plans with the workforce training and development. The report suggest that we continue to work with Investors in People to take that forward.

I have been thinking about how we could measure that more rigorously and comprehensively. I think that it must be based on the appraisal of leaders and managers by the workers. That is fundamental. I know that a lot of big businesses do that, but it is a key index of how well a business is doing if the managers and leaders have been appraised by the employees. That is done by the best; it needs championing and extending.

The Sunday Times list of top 100 companies that value employees is a very good index to look at. My noble friend might think about talking to the firm that compiles that index to see how it could link with what we do, how we can get to measure companies that really value their employees. It is about raising aspirations and raising awareness. Show me a company that values its employees and I will show you a company where skills and training are doing well.

That is my contribution. Once you stand up, your time goes in no time. We need concentration on leadership and management; we need to make work rewarding and fulfilling; we need to value people; and we need to try to measure performance. I have a complementary slogan to that of the noble Lord, Lord Hunt: "Who values wins".

Photo of Lord Ramsbotham Lord Ramsbotham Crossbench 1:28 pm, 28th June 2007

My Lords, I am one of those people who believes that the only natural resource that every nation has in common is its people, and woe betide it if it does not do everything that it can to identify, nurture and develop the talents of its people—all its people—because if it does not and they go to the wall, it is fraught. Earlier this week, I cited a speech made by Sir Winston Churchill in the other place in 1910, in which he talked about the criminal justice system. In it, he said that there is a treasure in the heart of every man, if only you can find it. I believe that finding it is a duty on all of us.

I declare an interest as a member of the advisory and strategy board of the City and Guilds Institute, which is one of the vocational training award-winning bodies in the country. I therefore welcome especially the impassioned comments of the noble Baroness, Lady Morris of Yardley, regarding the status of vocational training; the need for a national language for a national debate, not using merely academic terms; and the remarks of the noble Lord, Lord Dearing, about the attitude to technical training. That national language is needed if we are going to have and take part in the national debate called for by the noble Lord, Lord Hunt of Wirral.

I also agree with the notion of entitlement to the levels of skills mentioned by the noble Lord, Lord Leitch, in his excellent report, which I fully support. I agree with his analysis, and support the diagnosis and targets. However, I have a slight worry about the entitlement to level 3 skills for young people and level 2 skills for adults, because providing funding for youngsters but not for adults resulted in 700,000 fewer adult learning programmes last year than the year before, which cannot be what the noble Lord meant in his report.

Democratic studies show that the skills shortage that we will face in the years to come can be bridged only in three ways: by attracting migrant labour, by re-skilling the existing workforce, or by attracting more of the currently unemployed. The noble Lord, Lord Low of Dalston, mentioned one group who could be approached; the disabled. Noble Lords will not be surprised that I wish to draw attention to another possible source; those in our prisons. Two years ago, British Leyland discovered that it had a possible skills shortage in its trucks division. The governor of the local prison was approached to see whether he had anyone who might fill that shortage in the future. Very sensibly, he gave an aptitude test to people who lived in Preston. Some people with potential were found, British Leyland sent in people to help to train them, and they came out not only with a job to go to but with potential. When asked about this, the governor explained that it was possible only because they came from Preston and it was therefore worth the while of British Leyland to work with people who would come to them. I mention this because, at the moment, that sort of activity, which all sorts of firms with all sorts of possibilities could repeat to their advantage all over the country, is being prevented by the way in which our prisons are organised. Perhaps when the Minister takes part in meetings to discuss this with other Ministers, he could explain that this sort of activity could be a possibility if prisons were organised in community or regional clusters so that people did not go away from home. It is not difficult or new; it was originally proposed by the noble and learned Lord, Lord Woolf, in his report on the Strangeways riots in 1990.

My two other points are in support of helping prisoners and others to enter the workforce. First, some people suggest that there are now too many qualifications, and that the qualifications system, in which the City and Guilds Institute is involved, is too complex. I suggest that that is not wholly true, because in a truly demand-led economy, there is a need for far more qualifications, not fewer. That need will expand in the future, and we should do nothing to reduce the number of qualifications that might be available. Secondly, I am extremely glad that attention has been drawn to something else that has happened in recent years and which has implications for all those who are looking for employment. At the end of the 1990s, we had one of the most highly regarded careers services in the world. It has gone, and we now have almost no service at all. If we are to maximise the opportunity provided by the report of the noble Lord, Lord Leitch, career information must be available to all those, of all ages, who want either to enter the workforce or to move within it. As I say, I am enormously grateful—I am sure that many people are—for the trouble that the noble Lord, Lord Leitch, has gone to. I simply hope that all the other points made by noble Lords in this debate will enable there to be a national debate to make certain that we maximise the vocational skills inherent in this country.

Photo of Baroness Lockwood Baroness Lockwood Labour 1:34 pm, 28th June 2007

My Lords, I am sure that my noble friend Lord Leitch must feel encouraged by the response to his important report this afternoon and by the consensus across the House on all aspects of the problem. I shall focus largely on higher education. Noble Lords may recall that I have a long-standing interest in higher education, which stems from my association with the University of Bradford, where I was chancellor until recently.

The noble Lord, Lord Leitch, recommends some very stretching targets for the higher education sector; not least the target of more than 40 per cent of the 2020 workforce qualified to degree level or above. This will be a big leap from today's position, where some 29 per cent of the population have reached that standard. I agree with the report that, to achieve this ambitious target, we will need to ensure that our universities work as closely as possible with employers and individuals. The University of Bradford does, and continues to do, just that. Next week, for example, it will open its new microtechnology and nanotechnology unit to add to its already worldwide work on polymer technology. The unit is part of a campus that is fast growing because of recruitment and research successes. The University of Bradford is also top of the league in its access programmes, and second from the top for its graduate employment. These are both very important. Access is particularly so, and I will return to it shortly.

The higher education sector in Yorkshire and the Humber comprises 14 higher education institutions, and has a combined turnover of more than £1 billion a year. As a percentage of the region's GDP, it is estimated that, directly and indirectly, the sector generates £3 billion, and that nearly 10,000 new jobs will have been created by 2010. About half those new jobs will be in the universities. Co-operative and collaborative working between Yorkshire universities, in all its guises, has changed enormously. Indeed, there has almost been a revolution. This has made it one of the driving forces in the regeneration of the region.

There are several examples of this. First, there is the Graduate Enterprise Scheme, which successfully promotes enterprise and entrepreneurship among the region's students. Secondly, there is the Knowledge Rich programme, which brings together universities and Yorkshire Forward to facilitate the appropriate expertise for use in business and in developing clusters. Thirdly, there is Yorkshire Forward itself, which was the first RDA to set up the secondment of a senior academic to act as an intermediary between the RDA and higher education institutions and to have regular officer and vice-chancellor meetings. Out of this has come a relationship that has been key to the sector's economic development and very important for the growing inward investment made by many national and international companies that are now locating their businesses in Yorkshire.

Such activities do not simply happen. Increased funding, as well as enlightened initiatives, has facilitated these developments. As many noble Lords have indicated, further investment is still needed for all sorts of reasons, not just because of our low competitive position with other countries, but also because of our need to bring up our standards to those of our competitors. In that sense, widening student participation is essential.

The experience of the University of Bradford, as well as that of Yorkshire Forward, which has a big programme to bring level 2 qualifications up to and above national standards, has indicated that formal approaches are not always sufficient in themselves and that there needs to be much more innovative outreach work, often with bite-size parts and small training programmes in order to widen access to learning. I think that the noble Lord, Lord Bilimoria, said that the more you learn, the more you learn, which is absolutely true. It is also true that the more you do not know, the less you know, and we have to rectify that problem too.

Photo of Lord Rowlands Lord Rowlands Labour 1:40 pm, 28th June 2007

My Lords, is it not very sad that in 2007 we are still bedevilled by the vocational and academic divide, and still have not established parity of esteem between vocational and academic qualifications and routes? I declare an interest as president of the National Training Federation for Wales and as adviser to a Merthyr charity, Tydfil Training. I have looked at the Leitch report through the eyes of a Welshman. Of course, most of the skills strategy is devolved and now needs to be the strategy of four nations, not just one.

The Welsh labour market is characterised specifically and especially by the preponderance of a large number of SMEs and micro-employers, which presents particular challenges in delivering and engaging employers in skills. The other sad feature of the Welsh labour market is its higher preponderance and higher percentage of economically inactive people of working age, which is much greater than many national figures. To mean something to Wales, any skills agenda will have to address both those issues.

Having emphasised the distinctive character of the situation in Wales, I have to say that I believe Welsh policymakers should share almost all the ambitions and major recommendations of my noble friend's report—that is, the need for a high-skilled, hi-tech labour force; the real need for economically valuable skills; and, in particular, the necessity to find out the needs and demands of employers—and deliver on them. Therefore, I support the noble Lord's proposed commission with one major proviso: the commission should accurately reflect the different regional and nations' employers, not just the great, the good and the large; otherwise, it will be just another quango. I hope that my noble friend will ensure that that happens.

We should support the proposed new duties and responsibilities on the skills councils, but, again, with a major proviso, which my noble friends, including my noble friend Lord Leitch, spoke about. The skills councils are not resourced or robust enough, and perhaps not even representative enough, for those duties and responsibilities. Certainly, in Welsh terms, I do not believe that they are. Therefore, it is very important that, if we are to place these duties on skills councils, they are capable and truly representative of the employer network.

Behind all my noble friend's proposals in this regard is the concern and feeling that the skills presently being delivered—the frameworks and apprenticeships—do not reflect employers' or learners' needs. My noble friend recommends that we have half a million apprentices. I do not think that we need a target of half a million. The content of those apprenticeships is equally important. Are the frameworks fit for purpose?

No longer in Wales is the average apprentice a 16-plus year-old going into manufacturing or the public utilities, the great traditional apprenticeships of the 1950s and 1960s. The overwhelming majority of Welsh apprentices are 19 years old plus. They do not go into those traditional industries but into a diverse range of service sector industries—food, tourism, retail and warehousing—where there has not been a traditional ethos of established apprenticeships, which is why one finds the most remarkable variation in completion rates between sectors. Because of that, there is no established idea of apprenticeships in a lot of the new service sectors. We need to address that to make sure that the apprenticeship frameworks are fit for purpose. It is quite clear that some of these failure rates reflect not a lack of interest or commitment but that apprenticeships are not appropriate and fit for purpose.

Training providers have been blamed at various times for trying to foist inappropriate programmes on employers—the supply side as opposed to the demand side. All that training providers are doing is delivering the programmes that the awarding and funding bodies specify. Those specifications need to be examined and addressed. It would be invaluable if the Leitch recommendations could drive that message through and that programme forward.

There must be a skills agenda to address the 7.9 million people of working age who are economically inactive nationally. In Wales and in the communities that I represent, that is a horrifyingly disproportionate number. A skills agenda has to address that. Since I left the other place, I have seen lone parents and long-term unemployed people who have never been anywhere near the labour market get into sustainable employment as a result of skilfully delivered numeracy and literacy programmes with job-specific qualifications attached and motivational programmes. It is happening, but it can happen more. There has to be more success.

Since my noble friend Lord Leitch's report has been published, there has been a second report by Mr David Freud on reducing dependency and increasing opportunity. I had hoped that his report would complement my noble friend's, but unfortunately it does the opposite. As my noble friend states on page 4 of his report:

"Don't always chop and change. Instead, improve performance of current structures ... Continuity is important".

The Freud report will chop and change, seeks to uproot, radically alter and centralise.

Perhaps I may send one simple message to my noble friend on the Front Bench and to the Ministers who will be responsible for carrying this agenda forward: please embrace Leitch but not Freud.

Photo of Baroness Sharp of Guildford Baroness Sharp of Guildford Spokesperson in the Lords (Further & Higher Education), Education & Skills 1:48 pm, 28th June 2007

My Lords, I, too, congratulate the noble Lord, Lord Leitch, not only on initiating this extremely good debate, but on writing a report which, as the noble Lord, Lord Sawyer, said, is accessible, understandable and comprehensive. From the point of view of this House, the comprehensiveness of the report is important. We perhaps tend to concentrate too much on the higher education sector and we hear relatively little about the vocational skills sectors. I am delighted that we have been able to devote this three-hour debate to the vocational skills sector because it has not had the publicity that it should have in this House. On these Benches, we have long maintained that investment in people is the most important investment that we can make and that as a nation we cannot afford not to make it.

In many senses, the Leitch report presents this country and us with some inconvenient truths. As the report stresses, it is urgent that we all raise our game, which means working in partnership; that is, partnership between government, industry and the individual. For a start, he suggests that the Government should set some extremely ambitious targets. Many of us gulp when we look at those targets and ask, "Is it really possible to achieve them?". The noble Baroness, Lady Lockwood, talked about the higher education target; but the higher education sector shows how the targets can be achieved and, picking up on a point made by the noble Baroness, Lady Morris, how a culture can be changed. Twenty-five years ago the ivory-tower culture of our universities was in place, but look at how they are now working side by side with industry to fulfil its needs. There has been a total change in culture by our universities. It can be done, and the noble Lord, Lord Bilston, recognised the degree to which our further education sector has risen to the challenges and started to change its culture. But I do not underestimate the huge change still to be achieved.

Among the ambitions is the wish to do something about the Careers Service. Here I echo the sentiments of the noble Lord, Lord Ramsbotham. Over the past five to 10 years careers services have not served the best interests of this country. As the noble Baroness, Lady Valentine, mentioned, it is vital to bring together the Careers Service and Jobcentre Plus to serve the community. As the noble Lord, Lord Rowlands, pointed out, some 7.9 million people are not in work. They need help in finding out where they can go.

People may have underestimated the degree of revolution suggested in the report. What has not had much mention is the suggested shift to a demand-led approach to skills. There are two aspects to demand, that of employers and that of individuals. Most of the money the Government use to subsidise training goes through Train to Gain into the hands of employers, while the reintroduction of individual learner accounts will put money into the hands of individuals to drive their own demand. It is vital that these two aspects of demand push forward the agenda in skills. However, we on these Benches depart a little when considering the hurdles to be overcome in the implementation of this, which must be thought about.

For example, what do we mean by "economically valuable skills"? Employers are continually asking for a workforce that is rich in creativity and communication skills, and good at analytical thinking and problem-solving. If truth be known, I have a lot of sympathy with the Universities UK briefing, which claims that this is precisely the set of generic skills that universities try to instil in their students, and that the graduate premium and high employment rates among graduates attest to the value placed by employers on these skills. Given that, is there a danger that we may move too far from the present position, where universities train students in generic skills and companies then train them in company-specific skills, to one where the individual, and ultimately the economy, is locked into a narrower and more specific skills set? That underlines a point made by the noble Lord, Lord Leitch, in his introduction: the need for whatever mechanisms are introduced to be flexible so that there is a chance for movement as the economy itself moves forward. However, it is not always possible to align the interests of the individual with those of employers or indeed the nation.

Let us take the commitment to train up to 95 per cent of the workforce up to the full level 2 standard, the equivalent of five GCSEs, which the report regards as the "platform" for employability. At present only 70 per cent of the workforce has achieved this level of qualification. The assumption is that most people would seize the opportunity of training to this level, free of cost. Yet the conundrum is that they do not, and there may be some rationality in that. As Mick Fletcher, writing in the Guardian a year ago, put it:

"One reason why young people in England leave school earlier than in many other advanced countries must be because they can get a job. It may be a dead-end job, but if you see a degree as beyond you, and a level 2 as not adding much to your chances, going for it makes a sort of sense".

We know also that a level 2 qualification does not add much to the pay packet. People have to achieve level 3 or level 4 qualifications to increase their pay. It may not be easy to persuade the 11.5 million adults currently lacking level 2 qualifications that it is worth their sweat and worth their while to take them up, even if employers sign the pledge and push them through the courses.

Equally, employers may not be so keen on releasing workers to gain these qualifications because the qualifications themselves may seem irrelevant to employers' needs. I echo the plea by the noble Baroness, Lady Valentine, that qualifications need to be relevant. A letter I received from the Business Services Association said:

"However, public funding for basic skills training is rigidly focused on qualification outcomes, making it close to impossible for skills providers to tailor their offerings to employer demand. Because employers don't release staff to gain qualifications their jobs don't require, and that is all providers are funded to deliver, there is little hope of challenging the low skills equilibrium. Leitch's proposals for an employer pledge and statutory entitlement to time off for learning will mean little until employers can see a value in the learning".

In the light of that, I want to raise the question of small and medium-sized businesses. What is the benefit to SMEs? A five-person business cannot afford to lose 20 per cent of its workforce to train for a week. What are we going to do about such businesses? Exempt them from the rigours of the pledge?

The noble Lord, Lord Rowlands, mentioned the wide variations between apprenticeships, which is an important issue. At the moment, to gain a level 3 advanced apprenticeship in engineering takes an average of 156 weeks. The same advanced-level apprenticeship in business administration takes 74 weeks, and 64 weeks in the retail sector. For a level 2 qualification, equivalent to 5 GCSEs at grades A-C, it takes 88 weeks to achieve the qualification in the electro-technical sector, 74 weeks in construction and 43 weeks in catering. There are already real problems about the notion of equivalences across our national qualifications. This also raises difficulties in relation to devolving these responsibilities to sector skills councils. Some equivalence has to be maintained.

I should also like to pick up on the point made by the noble Lord, Lord Dearing, about adult education. If 70 per cent of the workforce has already finished its education, it is clear that we are going to have to train adults, and it is madness that we are currently discriminating against part-time education. Many adults want to come back into part-time learning, but part-time further and higher education for adults currently enjoys very little in the way of subsidy.

Members on these Benches warmly welcome this report, which presents us with an enormous agenda. While there are challenges in that agenda, let us see it go forward.

Photo of Baroness Morris of Bolton Baroness Morris of Bolton Deputy Chief Whip, Whips, Shadow Minister, Education 1:59 pm, 28th June 2007

My Lords, it gives me the greatest pleasure to thank the noble Lord, Lord Leitch, for introducing this crucial debate and to congratulate him on his impressive speech and excellent review. We have had a high-level skills debate and I pay tribute to all noble Lords who have spoken so knowledgeably. The constraints of time will not permit me to give all of them the attention that they deserve, but I would like to mention the noble Lord, Lord Low, who as always has been an articulate champion for the disabled. I agree with him, the noble Baroness, Lady Prosser, and the noble Lord, Lord Ramsbotham, that we must develop the potential of all our people. The noble Lord, Lord Ramsbotham was also right in what he said about the Careers Service.

I wholeheartedly agree with the noble Baroness, Lady Morris of Yardley, that we must value vocational education. I support the noble Baroness, Lady Valentine, and my noble friends Lord Hunt of Wirral and Lord Sheikh when they call for a less complex system and for training and qualifications that are responsive to employers' needs. In answer to the noble Lords, Lord Haskel and Lord Sawyer, yes, I was hooked on "The Apprentice".

It is now widely acknowledged that Britain's future will be as a skills and knowledge-based economy. We have in front of us a massive opportunity, but one that can be grasped only by a step change in the nation's skills. When his review was published last year, the noble Lord, Lord Leitch, said:

"Without increased skills, we would condemn ourselves to a lingering decline in competitiveness, diminishing economic growth and a bleaker future for all".

He added that the case for action is "compelling and urgent". So I am surprised and disappointed that such a serious piece of work has waited seven months for a government response—seven months in which the number of apprenticeship enrolments has fallen, the number of NEETs has risen and we have fallen further behind our international competitors in intermediate and high-level skills.

The delay in itself would be bad enough but, simultaneously, the Further Education and Training Bill embeds the Learning and Skills Council in the management of skills, in complete contradiction to the Leitch review's core message of simplified, employer-driven skills with a streamlined LSC. It is therefore hardly surprising that many of the people to whom we speak are unhappy that there has been such a delay. We on these Benches share their frustration, not for political advantage but for the 1.3 million young people who are falling behind as every week and month passes and for the countless employers and employees who are confused and alienated by the complexity of the current structure.

Given that we have just debated a half-hearted Further Education and Training Bill, what we need, if the review of the noble Lord, Lord Leitch, is to be taken seriously, is clarity and boldness from the Government. We need to know how the schools programme will be structured, how it will be funded, what the balance of responsibility will be between employers, the state and individuals, and what the priorities will be. This is where the Government will have to be bold. Are we going to put more into training the existing workforce, or are we focusing on core and life skills? These are tough decisions.

In order to deliver a demand-led system, the Government will have to address the proposal of the noble Lord, Lord Leitch, for a fundamental change in the role of the planning bodies, with less complexity and easier navigation for all involved.

So what of the future of the Learning and Skills Council? The Government are currently proposing the fourth reorganisation in five years and, through the FE Bill, the council has been given many more powers, even though it is not given its first mention until page 73 of Leitch. In the recent House of Commons Trade and Industry Committee report, Better Skills for Manufacturing, questions were raised as to whether a region-led system of provision is compatible with the new powers being given to sector-based, employer-led bodies that operate nationally. If the Government are serious about employer and learner demand-led skills, they need to tackle the problems of too much bureaucracy and too many fingers in the pie, which stifle initiative and limit the powers of employers and learners to drive the system. The relationship between the LSC and the sector skills councils must be addressed; otherwise, there is a danger of establishing parallel structures which will fail to make the system more cost-effective and simple and which will lead to further confusion.

Our economic competitiveness group, led by my right honourable friend John Redwood, last week outlined a suggestion for a system of allocation of skills funding that would make the LSC redundant. It proposed that taxpayer funds should be allocated in accordance with the choices made by trainees rather than by the training providers. It is envisaged that such a framework will encourage trainers to tailor their course content to better reflect the needs of the market. This submission will be considered along with the work of our policy groups. I hope that this demonstrates our commitment and the thought that we have given to the skills agenda.

We welcome the proposal of the Leitch review to give greater responsibility to the sector skills councils while acknowledging that some SSCs are better than others. There is also a contradiction in the remit of the SSCs, which currently have too much to do and are increasingly becoming servants of the Government instead of champions of employers and employees.

Under the Leitch proposals, Train to Gain would play a major part in helping people to climb the skills ladder, with the whole adult training budget—with the exception of community learning—being funnelled through it. Yet significant concerns need to be addressed. The Association of Colleges questions whether it is necessary to spend £40 million a year on brokers, and the 157 Group of leading FE colleges can demonstrate that the vast majority of training that it has conducted under the scheme was generated by the colleges themselves, without the support of a skills broker.

Edge, the independent foundation that aims to raise the status of practical and vocational learning among 14 to 25 year-olds of all levels of ability, believes that there is a genuine risk that Train to Gain will simply accredit skills that people already have rather than adding to their skills. This fear is shared by many college principals, who say that Train to Gain is more about assessing than teaching. If this is so, we will waste a good deal of taxpayers' money on simply handing out certificates rather than adding to the skills of the workforce. We believe that this could be overcome if the Government embraced the learner accounts, for which the noble Lord, Lord Leitch, is a powerful advocate. This would give individuals much greater control over training and counterbalance the emphasis on the sometimes narrow objectives of Train to Gain.

We need to explore where as a nation we prioritise our skills programme. It is estimated that there will be 600,000 fewer young people aged 15 to 24 entering the UK workforce between 2010 and 2020. The Leitch review's analysis of demographic trends suggests that, as fewer young people enter the job market, it becomes vital that we retrain and upskill the existing workforce. Currently, much emphasis is placed on core skills and life skills. While I can appreciate the Government wanting to give people who have been failed by the system a second chance, it begs the question: why have they been failed in the first place?

At the same time, there has been a marked fall, as the noble Lord, Lord Dearing, said, in adult learning, participation in FE and work-based learning. There has also been a particularly worrying decline in apprenticeship enrolments, which may reflect the fact that many frameworks do not require dedicated workplace training under an experienced mentor. If any noble Lords care to read our further thoughts on apprenticeships, I direct them to the excellent pamphlet written by my honourable friend John Hayes MP and Dr Scott Kelly and published by the Centre for Policy Studies.

The Leitch review wishes to "embed a culture of learning", and we certainly need a long-term, sustained campaign to change cultural attitudes towards training and skills. Many people are turned off education by bad experiences at school. Edge believes that people need to know that learning by doing is as important as learning by listening. I completely agree with the sentiment that in order to change the culture of a nation we have to start at school.

Last Friday, I had the pleasure and the privilege of being the guest of the noble Lord, Lord Haskel, when he received a much deserved honorary doctorate from the University of Bolton. In his speech, the vice-chancellor Dr George Holmes spoke of the university being in the real world and preparing people for the real world. He said that it would respond to Leitch by providing high-level skills for a strong economy in the exciting way that was so vividly described by the noble Lord, Lord Bilimoria. Universities and colleges have a vital role to play.

We, too, want to play our part in the consensus of which the noble Lord, Lord Leitch, spoke passionately, because we care passionately about skills, not only because of the good of the economy but because we care about individual empowerment. When our new Prime Minister spoke in Manchester last week, one of the most moving passages in his speech was about the values that his parents had taught him and that would never leave him. He said that each and every one of us has talent and that every one of us should have the chance to develop that talent. He said:

"Each of us should use whatever talents we have to enable people least able to help themselves".

I, too, grew up with those core values. They are values that the Conservative Party shares. That is why we believe in developing the whole person and esteeming and valuing people in all their diversity and why we support the noble Lord, Lord Leitch, in his ambition to equip people with the skills to be flexible and to take advantage of their opportunities.

Photo of Lord Adonis Lord Adonis Parliamentary Under-Secretary (Schools), Department for Education and Skills, Parliamentary Under-Secretary, Department for Children, Schools and Families, Parliamentary Under-Secretary (Department for Education and Skills) (Schools) 2:10 pm, 28th June 2007

My Lords, the House is indebted to my noble friend Lord Leitch, not only for opening this debate, but for his invaluable work in leading the review of skills which has now set the frame for national strategy and policy in this area, so crucial to our national prosperity and—a theme much rehearsed in this debate—to the wellbeing of each individual and their family. The ultimate accolade that I can pay to my noble friend is also the simplest: the national skills challenge is now simply dubbed "Leitch", in the same way that 10 years ago, the higher education challenge was simply dubbed "Dearing". Once you become a single word it is a sign that you have entered the national consciousness in a serious way. After the authoritative exposition by my noble friend today, one can see why.

I am also grateful to all the other speakers in what has been an excellent debate. We have ended the debate with two outstanding slogans—"Who trains wins" and "The more you learn the more you earn". We have also had several entries for Sir Alan Sugar's next series of "The Apprentice". Indeed, I took the noble Baroness to be volunteering to enter the entire Conservative Party into this process and we look forward to seeing how they do.

We have also had excellent speeches that cover the needs of particular skill areas, geographical areas or segments of the population. The noble Lord, Lord Sheikh, referred in particular to the insurance and financial services industry. The noble Lord, Lord Newby, spoke about design and design technology, which is an important area. The noble Baroness, Lady Valentine, spoke about London and the outstanding work that London First is doing. My noble friend Lady Wall mentioned the important work of the trade unions in this area and their engagement with sector skills councils. My noble friend Lady Prosser spoke about the much wider issue of women employees and in particular how women can be trained in non-traditional areas of employment.

The noble Lord, Lord Ramsbotham, quite rightly raised the issue of prisons and the aspirations of those in prisons and how we improve education and training therein. He also referred to the careers service and the Connexions service, issues raised in my noble friend's report. My noble friend Lady Lockwood referred to universities and the important work that they do in their wider economies and in access programmes. My noble friend Lord Rowlands spoke about Wales and the important challenges that are faced there. They were all important speeches and I will be able to touch on some of them later. They are of relevance to particular sectors and areas and I hope that the leaders in those areas will take note. Of course, I will draw the various speeches and remarks to the attention of my colleagues in the various parts of the Government that have responsibility for them.

This debate could not be more appropriately timed. The formation of the new Government has been taking place while your Lordships have been in session. My noble friend Lady Crawley has been keeping me in touch with who my new boss is and other features of the Government. It has been quite useful to know what has been going on outside your Lordships' House over the past few hours. One of my right honourable friend the Prime Minister's chief objectives in the formation of his new Government is the creation of a new department with a special focus on skills, particularly to take up the challenge set by my noble friend Lord Leitch.

In the machinery of government changes announced a short while ago, my right honourable friend the Prime Minister announced a new Department for Innovation, Universities and Skills which will drive delivery of the Government's long-term vision to make Britain one of the best places in the world for science, research and innovation. They are critical drivers of sustainable economic growth in the global economy. It will also take on responsibility from the Department for Education and Skills for higher education and further education, including the implementation of the review of my noble friend Lord Leitch of skills, as well as science and innovation policy from the former DTI.

Alongside this new Department for Innovation, Universities and Skills, there will be a new Department for Business Enterprise and Regulatory Reform, which will create the conditions for business success. There will also be a new Department for Children, Schools and Families, which will, for the first time, bring together key aspects of policy affecting children and young people. All those departments will have relevance to the skills agenda, but the creation of the new Department for Innovation, Universities and Skills will have a particular focus on this area.

So what is the skills challenge that we face? It is summed up very simply at the beginning of the Leitch report:

"The Review recommends that the UK commit to becoming a world leader in skills by 2020, benchmarked against the upper quartile of the OECD. This means doubling attainment at most levels. Stretching objectives for 2020 include: 95 per cent of adults to achieve the basic skills of functional literacy and numeracy ... exceeding 90 per cent of adults qualified to at least Level 2 ... shifting the balance of intermediate skills from Level 2 to Level 3", and,

"exceeding 40 per cent of adults qualified to Level 4 and above".

My noble friend's report also sets out two principles of action by which we should proceed in seeking to achieve these goals. First, there must be shared responsibility between employers, individuals and the Government; and secondly, there should be a focus on economically valuable skills, providing real returns for individuals, employers and society. So far as possible, skills should be portable—and of course no skills are more portable than the essentials of literacy, numeracy and ICT competence—to promote mobility in the labour force for individuals and employers.

Why is this challenge so pressing? Quite simply, it is because of globalisation. Following demographic shifts, the fall of communism and radical changes in economic policy by China and India, set out so graphically by the noble Lord, Lord Bilimoria, the global marketplace now incorporates more than 6 billion people. There are 1.5 billion new workers in these emerging economies alone—a low cost and, in many instances, educated, enthusiastic and highly ambitious workforce. Across the world, as the noble Lord, Lord Hunt of Wirral, rightly said, technology is empowering individuals, companies and communities to work more productively and at higher skill levels than ever before. Experts predict that, while there are 3.2 million unqualified adults in work today, by 2020 that figure will be only 600,000 in this country.

Therefore, the imperative for further action is great. One of the first acts of the new Department for Innovation, Universities and Skills, early next month, will be to publish the Government's full response to the Leitch report. I cannot pre-empt that response today, but let me say something about each of the main issues raised by my noble friend's report. The first concerns adult literacy and numeracy.

In England today, 5.2 million adults with poor literacy skills would be unable to pass an English GCSE and 15 million adults have problems with numbers. More than 6 million adults in the workforce in England do not have a level 2 qualification—that is equivalent to five good GCSEs—which is the basic level we expect for employability. The issue is not just about the skills of school leavers, which are improving thanks to our schools policies, but also about improving the skills of our adult workforce. Some 70 per cent of those who will be in the workforce in 2020 have already completed their compulsory school education, and most of those did so more than a decade ago.

It is for that reason that the focus of government adult skills policy since 1997 has been threefold: first; improvement of the literacy and numeracy competence of the lowest skilled; secondly, a reinvigorated and expanded apprenticeship route for young employees to gain systematic work and training opportunities where they are not in further or higher education; and thirdly, the acquisition by young adults in particular of their first level 2 qualification. As my noble friend Lady Morris so rightly said, that may not be in GCSEs but in vocational qualifications or through the future diploma route, which are every bit as important as conventional GCSEs, so that as many adults as possible gain not only basic skills but the confidence, motivation and earning power which come from success in gaining worthwhile qualifications.

Let me take these three priorities in turn. To improve adult literacy and numeracy, in 2001 we launched our Skills for Life programme, providing free accredited basic literacy and numeracy qualifications through further education in every community nationwide. The investment in Skills for Life has been huge: £3 billion since 2001, as well as £1 billion over the same period on ESOL provision for native speakers of other languages. I am glad to say that every Skills for Life target has been exceeded; some 1.6 million adults have improved their literacy and numeracy skills as a result, and the numbers on ESOL courses have trebled in the same period. I take the point made by the noble Baroness, Lady Sharp, about the need for flexibility in the provision of basic skills programmes. We need to continue looking at that. But I believe that these are firm foundations on which we can build in our response to Leitch.

Secondly, on apprentices, following the welcome remarks of the noble Lord, Lord Cotter, and my noble friends Lord Bhattacharyya and Lord Haskel, I say quite frankly to the House that the Government believe that it was a major error of policy, inflicting serious damage on millions of young people, that the old apprenticeship route was allowed to wither in the previous generation. When I think of those grievous errors of policy in the past, the diminution of apprenticeships was probably one of the most serious in the whole education and skills policy. Our policy since 1997 has been to rebuild the apprenticeship route in a way relevant to modern employment sectors. I am glad to say that thanks to significant public investment of more than £4 billion in the apprenticeship route since 2001, the number of young people participating in apprenticeships has trebled from 75,000 to 250,000.

Apprenticeship completion rates, as the noble Lord, Lord Cotter, rightly said, were initially highly unsatisfactory, but they continue to improve and are up from 24 per cent in 2002-03 to 59 per cent today. The noble Lord said that the absence of a bonus at the end was a disincentive for completion. In fact, there is a bonus at the end in respect of employers; providers get 25 per cent of the funding at completion, which gives them a big incentive to keep their apprentices engaged. He also referred to bonuses in respect of individuals, and I take his point there, but in the models that we have tested we have not found that a particularly efficient way in which to do things. I am glad to say that around 130,000 employers are now involved. So the work that we have done on apprenticeships so far provides a firm foundation on which we can build, in response to my noble friend's recommendation that there should be 500,000 apprentices at any one time.

Thirdly, on level 2 qualifications, we have made good progress in this area too, increasing the proportion of the workforce qualified to level 2 from 65 per cent in 1997 to 70 per cent in 2002 and 73 per cent in 2005. Two major new resources in our armoury for increasing the level 2 proportion have been, first, the creation of a right to a first free level 2 qualification for all adults, irrespective of age, to which was also added a new right to a first free level 3 qualification for young adults aged 19 to 25, which was a change that we made recently that relates directly to my noble friend's recommendation on migrating our skills base from level 2 to level 3—for precisely the reason given by the noble Baroness, Lady Sharp, that this is where the particularly strong gains to individuals in the economy start to come through.

The second major new resource has been the new Train to Gain programme, which assists employees to gain qualifications directly in the workplace, including time off for the purpose. The noble Lord, Lord Newby, raised the difficulty of engaging employers in training and said that there should be flexibility around their requirements for that purpose. That is precisely what Train to Gain seeks to do. A bespoke package of training is agreed with each employer who engages in the programme, much of it actually delivered in the workplace of those employers who engage. We are now engaging 40,000 employers in Train to Gain as a result, and there has been a very substantial public investment—not just a requirement on the part of the employers. Train to Gain had a budget of £217 million last year; in this current year it will be £461 million, and we will have more to say about this in our response to the Leitch report.

I shall highlight three other significant developments in the context of the Leitch report: first, the new Commission for Employment and Skills; secondly, the new skills pledge; and thirdly, the development of national skills academies.

The new Commission for Employment and Skills will be a forum promoting systematic employer and other stakeholder engagement in the national skills debate and the vital contribution of employers and other stakeholders to upgrading skills in pursuit of the Leitch partnership principle. Through the new commission, we will reform sector skills councils, the importance of whose work was rightly stressed by my noble friend Lady Wall. Their remit will be more sharply focused on raising employer ambition and investment in skills at all levels and seeing that there is more uniformity of practice in terms of ambition and aspiration in areas such as apprenticeships. They will play a key role in articulating the future skill needs of their sectors and ensuring that the supply of skills and qualifications is driven by employers.

The Government are delighted that Sir Michael Rake, the former international chair of KPMG and new chairman of BT, has accepted the post of chair of the commission. Sir Michael has been the driving force behind KPMG's award-winning corporate social responsibility programmes, tackling educational and social disadvantage. These include the Every Child a Reader programme, for remedial work with younger children on reading, on which I have personally worked closely with Sir Michael and KPMG. I can attest to Sir Michael's commitment and passion, and his new role will be vital. We will set out the full membership of the new commission in due course.

Secondly, on the skills pledge, many businesses are fully involved in training their employees, but others are not. The pledge is a simple concept—a statement reinforcing shared responsibility for workforce development between employers, employees and the Government. It will help us to work with businesses that have traditionally been harder to reach and enable both employers and individuals to make their commitment to skills clear. We will provide employers with access to the support of an impartial skills broker, and free training for their staff in literacy, numeracy and a first full level 2 qualification, building on the Train to Gain programme that I have already described. I am glad to tell the House that 150 employers, large, medium and small, including the police, McDonalds and BT, have led the way and signed up to the pledge. Together, these 150 employers employ more than 1.7 million staff, who stand to benefit tremendously from the support on offer. We look forward to working with these employers and many more in the future.

Thirdly, national skills academies are new institutional centres of excellence to train young people, focused on particular employment sectors. The governance and mission of these skills academies are employer-led, including a substantial employer contribution to their infrastructure costs. Since launching the programme in 2006, we have established five national skills academies, each with employers of outstanding national reputation, generating £42 million of employer investment alone in addition to the huge non-monetary contribution being made by the employers concerned. The five academies are the Fashion Retail Academy, the Construction Academy, the Manufacturing Academy, the Financial Services Academy and the Food and Drink Academy. Building on the success of these first five national skills academies, we intend to establish eight more, including academies focusing on glass manufacturing, coatings, print and building products, sport and leisure, and the hospitality and entertainment sector. I believe that those developments will be warmly welcomed in the House.

On the specific points raised in the debate, the noble Lord, Lord Low of Dalston, rightly raised the issue of the needs of adults with learning difficulties or disabilities and the support on offer for them. I am glad to be able to tell the noble Lord that the amount spent on students in these areas has increased steadily over recent years and in 2004-05 the Learning and Skills Council provided almost £1.5 billion to support 641,000 learners with learning difficulties or other disabilities. In that year, which is the last year for which we have figures, 11 per cent of post-16 learners declared a learning difficulty or disability, which is higher than the generally acknowledged number of people with disabilities in the general population, at around 10 per cent. So clearly the further education and training sectors are making a significant impact in this area. As the noble Lord will know, however, following the Little report recommendations, provision for such students has been included as a priority in the Learning and Skills Council's grant letter and has been listed in the Learning and Skills Council's annual statement of priorities. He and I have discussed this specific issue and how this work can be taken forward by the council.

My noble friend Lady Wall and others including my noble friend Lord Sawyer referred to the work of trade unions and getting much stronger employee engagement in the skills challenge. We very much agree. The new union learning representatives are playing a vital role in this area. They have been a feature of the majority of good practice case studies in the Skills for Life in the Workplace documentation. In our response to Leitch we will say more about the potential for union learning representatives to play an even bigger role in this area. I believe that they can play a very constructive role in taking forward measures to meet the skills challenge.

My noble friend Lord Bilston said some valuable words about not only the wider contribution of further education in general but the particular contribution it makes in delivering higher education, including foundation degrees. I endorse everything he said on that.

I hope that the situation in careers guidance is not as bleak as the noble Lord, Lord Ramsbotham, painted. The Connexions service has done a great deal of valuable work and is in some ways better than the previously available careers guidance service. However, I accept that more needs to be done. The Leitch implementation plan will set out the new policy direction on information and guidance. That featured strongly in my noble friend's recommendations.

The debate on Leitch can too easily be consumed by large numbers, acronyms and dates by which to achieve this or that high-level ambition. Those are necessary features of the discussion, but let us not forget that underlying all of this are the life chances, aspirations and well-being of individuals, each of whom is of equal worth and merits individual respect and support. In the society of tomorrow, respect and support for the individual as a student, employee and citizen must be our cardinal principle so that the terrible waste of talent of previous generations is not repeated. In the words of our new Prime Minister, we must all do our utmost to bring this about.

Photo of Lord Leitch Lord Leitch Labour 2:32 pm, 28th June 2007

My Lords, I thank all noble Lords for speaking with such eloquence, expertise and conviction on such a crucial subject for our nation's future. For me it has been a real privilege and a great experience to listen to these immensely valuable contributions.

It is clear that skill levels massively influence our economy and our society at every level. Where we are today in skills is simply not good enough for tomorrow. Change needs to happen; the status quo is not an option for us in the much more challenging global economy. Clarity of vision; the mantra of economically valuable skills, both generic and vocational, demand-led for both individuals and employers; greater engagement and investment; focus at every level; common-sense reformation—those are some of the clarion calls that we must listen to and apply. Today's debate is an important milestone on the UK's journey to improve the skills of our people. What is absolutely clear is that skills are so vitally important and should transcend political divides.

Of course this is a tremendously complex and difficult subject. This study was one of the most difficult pieces of work that I have ever had to do. Nevertheless, I assure noble Lords that, throughout my review, I always slept like a baby. I woke up crying every two hours. This was incredibly difficult but worth while.

Seriously, I am very encouraged by the Minister's very positive response. That, coupled with the passion, commitment and wisdom which we have heard today, inspires me to believe that we can succeed to become truly world class on skills. As we all realise, the prize awaiting us is enormous: a stronger economy, a fairer society and an even better quality of life for everyone in our country. I thank noble Lords and beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.