6 May 2004
SPEECH BY ECONOMIC SECRETARY JOHN HEALEY to Yorkshire Forward, Rotherham, 05/05/04
SHAPING THE AGENDA
Let me begin by offering my congratulations to Yorkshire Forward on this, the fourth annual Shaping the Agenda conference. I have spoken at all of them, and have indeed seen how the agenda for regional economic development has been shaped, at first by the RDA board and staff, and then increasingly through the influence of many of the organisations here: Regional Assembly, LSCs, colleges and training providers, Chambers of Commerce, voluntary groups, JobCentre Plus and trade unions.
Over the last four years, through this process, we’ve seen: more confident and responsive leadership from Yorkshire Forward; better alignment of analysis and planning between agencies, authorities and institutions across the region; and greater priority given to economic performance within the region, again by agencies and others here.
These conferences – alongside the Regional Economic Strategy review, FRESA, and investment planning process – have played an important part in this consolidation and coordination of strategic economic activities and sense of purpose in the region.
In no policy area is this general trend I trace clearer than in the field of skills. I’ve always argued that learning and skills are much more than a matter just of education, and with due respect, too important to leave just to the educationalists or the Department for Education:
- When people with poor literacy and numeracy are up to five times more likely to be unemployed or out of the labour market altogether – then skills are rightly a mainstream employment challenge
- When failures and barriers in the training market discourage employers from developing their workforce – then skills are rightly a major enterprise policy
- When those who are part-time, poorly paid or already poorly qualified are less likely to get training at work – then skills are rightly a serious equality issue
- When one fifth of Britain’s productivity gap with Germany is due to our skills deficit – then skills must properly be a central economic concern
Starkly put, the UK economy will not maximise its long-term growth or jobs potential – and UK society cannot be inclusive – if over a third of the workforce have few or no skills or qualifications.
And, I see, this wider importance of learning and training is now increasingly reflected in the collaborative skills developments in the region:
- The Regional Employment and Skills forum
- Regional Skills Partnership
- Co-financing and shared budgets
- LSC support for our 5 industrial clusters in the Regional Economic Strategy
- University and business link-ups
- Business support more integrated with skills and training advice – with the aim of “no wrong door”
- Establishment and involvement of Sector Skills Councils
- Prospect of joint purchasing by JobCentre Plus and LSC
And the many features of learning provision which are now increasingly accepted when they would have been largely alien 4/5 years ago:
- Demand-led provision to meet the needs of the local economy and business, as well as the interests of learners
- The workplace as an important location and route for learning
- Involvement of trade unions
- The value of on-line learning
- A role for employers in specifying and helping design publicly-funded courses
- Greater links and options between vocational and traditional academic learning at all levels from schools to higher education
Now – you will have the opportunity to explore these issues further in workshops, indeed to help to shape the agenda in the region for developing them further.
You will also have the opportunity to explore one dynamic in the system that I have not mentioned: the devolution of policy and decision-making by central government in each Budget and Spending Review, with RDAs in the vanguard through progressively more funding, freedoms and flexibilities and responsibilities – de-centralised to the regions.
Now, it is fair to say that we’ve got very much further to go in the education and skills field, but the new director of the LSC – Mark Haysom – has declared he is committed to continuing to develop the “localness” of LSC operations, and that the appointment of Regional Directors strengthens, not weakens, the role of local LSCs.
Margaret Coleman – our new LSC director – yesterday described her role, bringing the regional dimension to the work of local LSCs, not a start of a regional bureaucracy to bear down on them.
For central government, we have set out – in “Devolved Decision-Making 2”, published with the Budget – our principles for determining the level at which economic policy design and delivery should be made; and our preference for devolved regional interventions where there are market failures which:
- Affect only some regions or localities
- Affect different regions to differing degrees
- Have the majority of their impact regionally or locally
And crucially – our presumption for devolution unless there are clear economies of scale or scope that would make national procurement, planning or delivery more efficient. In other words, unless the case is made not to devolve.
So you may want to bear this general factor in mind as you discuss the more focused topics in your workshops.
The other wider thing to keep in mind is the economic vision that is central to the more specific challenges on learning – whether attainment at Key Stage 3, adult literacy and numeracy or the flow of graduates from our universities.
As a government, we’ve set the ambitious and radical goal of seeing: growth in all our regions; but also a closing in the gap in growth rates between regions.
This is the long-term and deep-seated challenge, especially in regions like ours that have fallen behind over the last 100 years, with:
- In enterprise, small business start-up rates in our region of just 31 per 10,000 population, against an English average of 39
- In innovation, the business spend per head on R&D at just £72, vs a national average of £221
- In wealth generation, GVA per head in our region at just 86% of the UK average – with South Yorkshire at 73%, compared to the South East’s 120% or London’s 130%
In education, we have certainly made great progress in the last six years but still only 44% of our 15-year-olds get 5-plus A-C grades at GCSE, compared with 54% in the South East and East regions.
In higher education, 1 in 10 of our 16-19 year-olds apply to university – it’s almost double that in London.
In skills, 1 in 6 of our working population have no qualifications – in the South East and South West it’s fewer than 1 in 8.
And of course, we know that such disparities are just as great within our region as between our region and others.
The most basic requirement of growth in the long run must be continual advances in technological knowledge – in the form of new goods, new markets or new processes. Clearly this has been true of the UK –one study estimated that since the Second World War 75% of UK economic growth came from technical progress, as opposed to the contribution of labour or capital.
The implication is that Government should invest heavily in the science base, and as the Lambert Review reported: the scale of a country’s overall investment in R&D has a direct relationship with the dynamism and productivity of its economy. The US Office of Technology Assessment stated that “every $100 of public money put into academic science yields, on average, a perpetual return of $30 per annum in industrial, commercial, medical and other social benefits.”
But whilst such investment is arguably a necessary condition of prosperity in the long run, it is certainly not sufficient.
First, the realisation of new discoveries and technological possibilities depends on translating research from labs into productive use by business.
Second, public acceptance of technological and economic change is needed, both on difficult science issues like GM, animal research, nanotechnology, and on NIMBY issues like planning, where it is crucial to allow clustering and dynamic market effects to work.
Third, companies need the ability and incentives to adopt and adapt new discoveries – in other words actively competitive markets which force firms to innovate.
The average product lifecycle for consumer electronics is now 3 months. In the late 1990s, Sony launched a new product every two hours. To keep up with all the product launches, Procter and Gamble has more scientists on its payroll than Harvard, Berkeley and MIT combined.
But fourth, long-run prosperity and productivity requires skilled, adaptable workers and managers who can cope with shifting occupational patterns.
Now, the evidence strongly suggests that there has been – and will continue to be – a relentless shift in demand towards higher-skilled jobs. Some say 8 out of 10 new jobs in Britain in 2010 will require degree-level skills.
This is one reason for the priority we place as government on getting 50% of young people into higher education: if we don’t, others will. India produces twice as many graduates each year than the UK; and China produces 350,000 engineers alone annually.
However, three thoughts for you beyond the simple drive to raise the numbers in HE, all with implications for wider skills and economic development policy in the region.
First, human capital will continue to dominate economic and especially urban success, so perhaps our city growth strategies should concentrate at least as much on attracting people as attracting firms – and good schools, amenities and a safe environment are all elements of urban renaissance.
Second, we have a particular challenge in our region at both ends of the workforce age spectrum. To take the sub-region, in South Yorkshire: we have an estimated 3000 young people (12% of 16-18 year-olds) not in education, employment or training. And in two years’ time the largest age group in our ageing workforce will be 45-50 years old.
Which leads me to the third: in the knowledge economy, a highly skilled and talented workforce is crucial to adapting to change, using knowledge and translating innovation into wealth creation. But it is also important to equip lower skilled workers with new, updated skills to cope with the shocks implied by technological change.
This means developing the right skills, not just high skills. And it is especially important in regions such as ours, where in some areas some business sectors are trapped in a low-skill, low-wage, low productivity equilibrium.
The introduction of Centres of Vocational Excellence; the union work supported by the Union Learning Fund; Learndirect; and the early signs of success through our employer training pilot – all promise ways to help boost the demand for and investment in workforce development. But it is clear we need to do more to reach existing employers in the region. And it is also clear we need to do more for our existing and potential employees.
In an economy where competitive and change pressures are increasing, the uncertainty and insecurity for individuals is intensified.
Government can’t say to its citizens: we’ll protect you from change.
It shouldn’t say, as it has done in past decades: we’ll leave you to the mercy of market forces.
It can say: we’ll help equip you to cope with change.
Investing in skills is central to dealing with the challenges of competitiveness for business and insecurity for individuals. With a low skills base, individuals are more likely to be unemployed, intermittently employed or working in low-paid jobs with few prospects; companies are more likely to be trapped in that “low skills equilibrium”.
So building now on the national skills strategy and on the success of the New Deal for Work – which has helped more that 100,000 people into work across the region and 2280 jobs here in Rotherham alone – the Chancellor confirmed in the Budget that we will develop a New Deal for Skills.
The New Deal for Skills will help people:
- Get into work
- Stay in work; and
- Get on at work
by raising skills levels.
It will offer all individuals with low skills – employed or unemployed – a local skills advice point, free information and advice, and a training guarantee to achieve at least a first NVQ Level 2 qualification.
This means: delivering a service for welfare to workforce development; and breaking down the barriers between work and learning, so individuals do not stop training when they get a job and don’t stop looking for work when they’re learning.
Just like the original New Deal, the New Deal for Skills could have been conceived with the needs of the Yorkshire economy in mind.
It is part of a set of Government policies with the potential to transform the prospects for our economy and our people in Yorkshire – if we adapt them and take full advantage of them in our region and sub-regions.
That is the underlying challenge of this morning’s workshops.
On the other hand, if we fail to help everyone to develop the skills required in their changing labour markets, we risk a protectionist, reactionary backlash which seeks simply to preserve jobs that match the available skills and familiar work patterns. That is the brake we have to release from the region’s economy.