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Skills for Employability: Meeting the Needs of Business

Malcolm Wicks MP,  Minister of State for Energy
Holiday Inn, Regent's Park, London,  08 February 2007

I am pleased to be here today. It’s a bit like coming home – in 1999 I was Minister for Skills, and initiated the review that ultimately led to the Sector Skills Councils, and I now hope to be able to catch up on what progress we’ve made since then, and what we still need to do.

You can’t get very far away from skills – after the department for Education & Employment I went on to DWP and worked on JobcentrePlus, where skills are obviously a crucial issue. The it was on to pensions – the question being why so many people were on Pension Credit, and one of the answers being that people had undertaken a serried of poorly skilled jobs, and never built up any pension savings. And as Energy Minister, you couldnl;t go to a big conference without people saying they canlt get the skills they need. So I do not need persuading that the issue of skills is fairly central.

I am particularly pleased to be speaking at a skills conference that addresses the need to meet employers’ demand for skilled people. For me, this is at the heart of the debate on skills.

It’s not a coincidence that the Chancellor and Alan Johnson are today hosting a debate on the skills challenge. Looking at very much the same issues as we are.

Lord Leitch’s review sets out very starkly – not for the first time, but a good modern refreshment of it - the challenges that the UK faces to remain globally competitive. The UK has the 5th largest economy, but we do not have a comparable skills base - we are average at best and lag significantly behind on critical measures; 17th in the OECD for low skills; 20th for intermediate skills; and 11th, critically, for high skills.

And the global playing field is changing fast. Constant technological innovation and globalisation, and we heard something about that just now, are stoking demand for high skill jobs. The emerging Asian economies are already well placed to capitalise. You know the kind of statistics, but I’ll rehearse some of them - China produces 250,000 engineers every year; India 350,000 a year. While here in the UK, the number of first degrees awarded each year in Science, Engineering and Technology subjects is around 125,000, with numbers in engineering actually in decline. We certainly need to respond to that kind of challenging arithmetic.

To get ahead, the UK cannot simply rely on the improved skills of new entrants to the labour market – and this is a critical point. Until recently when we talked about education and skills people thought of young people and university – but more than 70% of the 2020 working age population have already left compulsory education. For UK productivity to improve, we need to ensure these people are motivated and have access to education and training opportunities and are improving their skills – hence the title of my first ministerial job, Lifelong Learning. We need to improve lifelong learning. We need to think about how to connect people and the businesses that employ them to provision of relevant skills training - with content and delivery driven by the needs of employers and employees.

So why do skills matter to my department, the Department of Trade and Industry? Skills matter because it is this government’s mission to create the conditions for business success and help the UK respond to the challenges we hear about in terms of globalization.

Productivity can be seen in terms of five key drivers: investment, innovation, enterprise, competition and, crucially, it’s about the agenda today, it’s about skills. These elements, together with employment, drive economic growth. Having the right skills is therefore crucial, not only for the prospects of individuals and companies, but to the very competitiveness of our country. We therefore welcome Leitch’s ambition for UK skills.

Leitch says, and I quote, that “achieving world class skills is the key to achieving economic success and social justice in the new global economy”. In a world of increasing competition, we must all focus on those skills that provide a real return to individuals, businesses and the wider knowledge economy, skills that result in jobs and progression in rapidly changing and increasingly globalised markets.

We are moving towards a genuinely demand-led approach to investing in vocational skills in the workplace but we need to move faster. The pace of change must be quicker. All this - and much more - is good news for business to help the UK compete in this global economy and why my department will be playing a full and constructive role in progressing this agenda.

Let’s look at the challenges. Certainly Leitch represents some big challenges. There are challenges for Government. We need to ensure the Employment and Skills Commission provides the stronger voice for employers and delivers real value.

We must also improve the impact and effectiveness of the network of Sector Skills Councils to deliver a high degree of excellence in all aspects of performance. The network’s own data shows that Sector Skills Councils have a mixed reputation.

A key task of the new Employment and Skills Commission will be to ensure all 25 Councils deliver sustained high quality performance. This requires more sharing of best practice, learning from what works and moving on from what doesn’t. This is an agenda that we need to work together on to achieve the strong industry voice at the heart of skills delivery.

The English regions have a vital role in understanding and addressing employers’ needs for skills and the priorities which will deliver regional economic growth.

We have to make sure the regional and local dimension of skills is coherent and simple and delivers to business need. We want to see the effective integration of skills and business support through joined up support from Train to gain and Businesslink. And we have to ensure that the regional and sectoral skills priorities integrate effectively.

We must also continue to develop our qualifications frameworks for adult vocational skills, building on the major improvements over the last few years to increase the responsiveness and flexibility of qualifications.

There are major challenges of course not only for Government but for businesses too. Employers have expectations of what the State will do to address education and training needs - rightly so. And the Government has responded with investment in adult skills rising to around 3.3 billion pounds this year through the Learning and Skills Councils.

But Leitch is surely right to emphasise success in the skills challenge requires not just Government action, but is dependent on a partnership approach, in which individuals and businesses shoulder their responsibilities too. Failure by any partner – either individuals, business or Government - will put this agenda at serious risk.

Businesses must raise their ambition for skills at all levels, particularly if they are to avoid an approach to investing in skills based on compulsion. Now I’m not suggesting employers are abrogating their responsibilities. They invest around £30bn each year, according to some estimates, to support education and training opportunities for their workforce.

But it is all about how employers make the most of their investment in skills to develop new products and services and increase the levels of enterprise and innovation within businesses. The Train to Gain service is now in place and I believe it is popular with business. This helps companies identify their skills needs and access the best solution. It will be important that the expansion of Train to Gain continues to put employer needs centre stage.

And it is worth employers asking whether there is more that they can do voluntarily on a collective basis to maximise their investment in skills. Increased levels of voluntary collective action, through Sector Skills Councils for example, could reduce the need to consider compulsion as a credible option. And I think we need to be honest about this – it’s a critical priority for business and government. Many larger employers recognise the importance of skills and training, but also there are many employers who don’t, and rely on poaching people from their rivals. So when business asks me what I am doing, sometimes I ask them what they’re doing.

Given the scale of the productivity challenge, employers and individuals will have to increase their investment in skills at all levels. Of course, basic skills are important. Sir Digby Jones - the new Skills Envoy who will speak later in the day - is right to highlight the basic skills challenge. Now I think there was some scepticism earlier on in this session on basic skills data. And when people tell you five million adults lack functional literacy skills; and 7 million lack functional numeracy, we need to look at the evidence base. I’m convinced that there are numerous people who don’t have these skills. In my work at DfES I had the opportunity of seeing the evidence base – but also of meeting people who are now benefiting from access to skills. I still remember meeting Mary, who had only learned to read at age seventy – she remembered the stigma she had suffered for years, before she finally plucked up the courage to say that she couldn’t read. She now had the joy of being able to write letters, and communicate with her family and friends by post. I’m concerned that whatever the numbers and definitions, this is a very basic problem. Business wants this fixed, and so do we.

But, in tackling basic skills, we should not lose sight – because of a focus on core skills - of the need to invest in technician, pre-university and university skills. For example, one of the consequences of constant technological innovation and globalisation is a huge increase in the number of jobs that require degree-level qualifications. The UK must be prepared for this challenge.

I know that Universities UK yesterday published new data showing that thiose with degrees are still seeing a verifiable salary premium. I think Leitch is therefore right to call for a shift of emphasis to intermediate skills at level 3 and driving up performance at level 4 and beyond. This is welcome; so too is the call for greater interaction between employers and providers of higher education over up-skilling the workforce to degree level.

Leitch also attaches great importance to improved management and leadership skills. These skills are often an essential precursor to greater investment in and better utilisation of the skills of the workforce.

Employers will need to work with the SSCs to better articulate business needs and so embed a genuine demand-led approach to the supply of skills. This engagement has to be proactive and sustained. And again there’s a challenge for business – there’s no point complaining unless you get involved in the local skills framework.

Through the £74m investment the Government puts into the Skills for Business Network and Sector Skills Councils, we have to ensure that they are fit for purpose. But only businesses can empower them to speak and act authoritatively on behalf of their sectors, making a real difference. Let’s see more and more employers choosing to work with their Sector Skills Councils.

But we shouldn’t forget a lot is happening already. We should not be put off by the scale of the challenge that Leitch sets out. We are already doing a lot that will help the UK face the future.

Look at Skills Academies - We have made significant progress on the National Skills Academy Network: The Manufacturing Skills Academy, which Alistair Darling launched last month, will deliver a truly national coverage of engineering technician level skills that our successful manufacturing sector needs to stay at the cutting edge of technology. It will deliver employer designed qualifications at Centres of Vocational Excellence across England. This Academy is being backed by some of our most successful high end manufacturing companies like BAE Systems, Rolls Royce and Caterpillar. The commitment they have shown to their own engagement and that of their supply chain shows a commitment to British manufacturing for years to come. The Academies in Construction and Financial Services have also been launched.

Participation in Apprenticeships is at a record level with more than quarter of a million young people involved, completion rates above 50% and around 130,000 employers involved nationally. I met one such apprentice through British Gas – through Centrica – recently. If that opportunity hadn’t been there he’d have had real difficulty. He spoke about how now with his girlfriend he was buying an apartment – we mustn’t forget that these figures are ultimately about real people.

New Engineering and manufacturing diplomas for 14- 19 year olds are being developed by SSCs. We have exceeded our target of 50,000 available Foundation Degree places by 2006. There are now 2,175 courses running and over 730 planned, with good representation by engineering subjects, which is critical. And the Government’s proposed reforms will mean that FE Colleges have a greater role in designing and awarding Foundation Degrees; and ensuring that employers and individuals value them.

Let me say something about enterprise education. Government is encouraging the provision of enterprise education, to help young people develop an enterprising mindset which can be applied to all aspects of personal and working life. Over 90% of secondary schools now show enterprise in their school development plans.

So in conclusion, I think there has been good progress and plenty of reasons to be optimistic. But the challenge is a considerable one – let’s be confident but not complacent. Leitch makes clear that the current rate of improvement in skills - whilst encouraging - will not be enough to secure our position in the global economy. We must accelerate. We’ve all got responsibility – individuals, parents, businesses large and small - but government also has responsibility and it’s one we take on with enthusiasm.