AoC conference

I remember a cartoon in the FT last year that showed a cigar-smoking industrialist leading his son around a factory. The factory was full of people in white coats staring at computer screens and the industrialist was saying – presumably in a strong Lancashire accent: “Son, where there’s knowledge-rich low-carbon, high-tech… there’s brass!”.

The knowledge economy has become a bit of a cliché, but it reflects a very basic truth about Britain’s future. The global economy is an extended, international supply chain along which very many jobs are located. Some add more value to a finished product or service. Some add less.

Wages in Britain are high, and to pay those wages requires the greatest possible productivity and value-added in the jobs we do here. Some of that we will add through sophisticated technology alone, but most of it we will add through knowledge. Skills are applied knowledge. If we want to pay our way in a globalised economy we can no more cut off our investment in these capabilities than we can cut off our supply of oil or electricity.

In this kind of world it’s no longer credible to have any notions about a hierarchy of elite academic higher education and under that, vocational or further education. There is a higher skills system, built on a wider school system, with a single core goal. Which is: people equipped with the character, confidence and skills for the world of modern life and work.

In setting out over the last month our frameworks for Skills and Higher Education Policy I have explicitly seen them as a single higher skills system. They need to mesh and reinforce each other. Skills need to be a ladder up into a job, or, as often, on to higher qualifications, university, or professional advancement. They need to be accessible throughout a working life, and in a way that fits around work, or integrates work.

Where we are

Now, I remember the skills system as far back as the Callaghan days. So I know as well as anyone that we have done a lot of good work on skills policy in this country over the last decade. We have made real progress in tackling the economic and social scandal of adult illiteracy and innumeracy. We have revived apprenticeships, which were allowed to wither away in the 80s and 90s.

We have eradicated much of the poor quality that blighted our further education system – or rather, you have, in a huge push for quality management and student service. Last week, during Colleges week I visited Westminster and Kingsway Colleges in London and I was hugely impressed – the distance we have come is genuinely striking.

But the fact remains that skills are still an area of relative weakness for Britain. Especially in some key strategic areas for growth and job creation such as STEM, and especially at key levels like level 4, where a lot of the sophisticated skills for fields like advanced manufacturing are clustered and at the technician level. We also need the skills for growth areas like healthcare where demand will inevitably rise with an ageing population.

So it seems to me that we have a collective challenge now. We need to take that renewed skills system forward with a clearer sense of strategic priority. That doesn’t mean scrapping our commitment to basic skills – you don’t strengthen a ladder by removing the bottom rungs. You can’t build sophisticated STEM skills in a worker who can’t count.

But we do need to fill these skill gaps higher up. So on top of that basic commitment needs to be some more focused priorities for the additional spend.

And of course we are going to have to do this in an environment of considerable fiscal constraint. So there will have to be the clearest possible benchmarks for public investment, and they will have to be reform, relevance, and quality.

Like any public service provision, the skills system needs to target public investment where it produces the maximum return on investment. It needs to empower colleges and training organisations to innovate and users to improve quality by exercising choice wherever possible. And it needs to eliminate duplication that confuses the delivery of services.

The Skills strategy

The Skills Strategy we published last week reflects this – I know that Kevin Brennan has set out some of the detail for you. The strategy targeted three key areas for development in the skills system, and marks a radical shift in some of our priorities.

First, it tackles the gap in technician-level skills in this country by expanding our apprenticeship numbers to create a modern class of technicians. We’ve also made it clear that we expect expansion to be focused in strategic skills, especially those linked to areas like low carbon, digital technology and biosciences and modern infrastructure. Resources will be prioritized in these areas.

Second, it gives real new customer power to learners by creating skills accounts backed with much greater access to information about courses and their outcomes, that will enable learners to plan and invest in their own futures. By allowing learners to shop around, and opening up the field for over other training organisations, we expect to see pressure to provide quality, relevant training rise.

To achieve these goals, we need colleges and training providers to have the space and freedom of manoeuvre to be out there doing the right things for employers and learners. I know colleges feel that you have been over-managed and over-directed in the past. Some of that was a response to patchy quality in previous years – which you have now very largely irradicated. Some of it was a consequence of putting in place major reforms – to which you responded with characteristic flexibility and determination. So we can now move on and focus on investing in the future.

We will still have national goals and targets, reflecting our economic priorities . We will still want you to be putting the needs of employers and learners first, helping people access the training to which they are entitled. We will still want high quality. But I know that you want those things too.

So in future we should be able to operate at the level of the whole programme you offer for employers, and for learners, and how well that whole programme reflects the range of national needs, rather than getting stuck in the detail. We then want rewards to flow to those who best respond to the range of national needs, with funding reduced to those who don’t. We will work with you on building fair ways of doing that.

Finally our strategy commits to dramatically reducing the number of public bodies involved in skills and training policy. We welcome the UK Commission on Employment and Skill’s recommendation to reduce the number of separate publicly funded agencies sharply and that’s what we are going to do. The result will be a clearer, more focused skills system.

Expectations 

Now, clearly this is an approach that puts a new accent on vocationalism and I think that that’s right. The system has to be producing relevant, quality skills, with real market value.

Obviously our expectations of FE colleges are going to continue to be extremely high. But I think the last decade suggests that there is no shortage of good and ambitious leadership to be tapped in the sector. I want to say very clearly today that we are empowering you to innovate in the pursuit of wider national aspirations, and we will work with you to deliver our new measures and if you feel that Government is somehow standing in the way, I want to hear about it.

Our expectations of business will also rise – and here the track record is rocky, as business itself concedes. This strategy is explicitly targeted at producing the skills that business tells us they need, and in giving employers a greater role in shaping outcomes.

But business has to get a lot better at communicating those needs, both to you and to your students, clearly and quickly. Otherwise both you and the Government are left trying to make educated guesses about where the market is going.

We expect businesses to invest, and keep investing, in skills. And often the most effective way of doing this is going to be to build strong collaborative ties with colleges. And because they are the key beneficiaries of these new skilled people, we are going to expect business to bear more of the cost.

I’m delighted that Chris Banks, working with the CBI, AoC and Association of Learning Providers has agreed to carry out in independent review of the implementation of our fees policy to see how better to make this work.

Conclusion

I started by saying that skills are an urgent challenge for us in Britain. That urgency comes from an external challenge above all: this is a competitive and demanding world and people rightly expect Government to help them equip themselves for it.

There is a compelling case to make that investment in skills is not a cost to our society or economy but an investment that pays back many times over in growth. For us as a country the brass really is in knowledge-rich, high-tech, low carbon and the skills that drive it.

For that reason investment in skills is as important in the recovery as ever. We should be making that case. But that doesn’t remove the pressure to keep measuring what we do against those benchmarks of relevance, quality and reform.

The AoC will be central to that, you have the expertise and the experience. My ambition is that the new Department of Business, Innovation and Skills really delivers a dividend for you and for policy here – bringing skills right into the heart of growth policy making and seeing it as a driver of innovation, knowledge and enterprise. The SFA and the RDAs will be a key part of the machinery for making that real on the ground.

Our aim must be to put further education where it belongs, right at the heart of the knowledge economy, at the heart of our recovery and our future prosperity.

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