MONDAY 9 DECEMBER 2002

__________

Members present:

Mr Barry Sheerman, in the Chair
Mr David Chaytor
Valerie Davey
Jeff Ennis
Ms Meg Munn
Mr Kerry Pollard
Mr Andrew Turner

__________

Examination of Witnesses

MR BRYAN SANDERSON, Chairman, and MR JOHN HARWOOD, Chief Executive, Learning and Skills Council, examined.

Chairman

Today is Monday and we are talking about skills and I see there are very few people from the press here because most of them, except their worthy colleagues here, do not take skills very seriously. They whinge in editorials about skills but they do not actually report important sessions on skills. Can I welcome Mr Sanderson and Mr Harwood to our deliberations. A year ago more or less you could make as many excuses as you liked to this Committee because you had not been there long, it was all early days and you had not really had time to sort things out and have a track record on which you could be judged. What about this year? Anything you would like to say in mitigation?

(Mr Sanderson) We had our annual conference a couple of days ago with the Secretary of State and all the DPs and Chairs from around the country. You would all have been pleased if you had been there with the buzz and the positive things going on.

We were not invited, were we, colleagues? We would have been pleased had we been there.

(Mr Sanderson) We thought it might be prejudicial to this meeting. It has definitely moved up a few gears since we last talked to you and we do now have a well established functioning organisation, a delivery vehicle for the Government. We have got some streamlining to do still but we have had a significant input into all the issues raised last time, including the proportion of staff with direct further education experience. Every local Learning Skills Council now is staffed with FE experience and most of the LSCs also have staff with school sector experience although that still needs a bit more strengthening. We have also strengthened business representation, particularly on the National Council. We have a couple of vacancies that we are evolving every year from now on within some portion of the Councils and we have had a very impressive response for the three vacancies this time. We had 350 or so formal responses of which about half were business people of very high quality, the best response that the Department of Education has ever had.

Was that at national level?

(Mr Sanderson) Yes. As a result we appointed Digby Jones from the CBI to the Council and Giles Clarke whom you probably know from Majestic Warehouses. He is the entrepreneur who founded that and also Pet Plan, the pet shop. They are two very high quality and very well known people in the business world. We are in the process of recruiting a sixth form head for the National Council and we have also put on the Council Shirley Cramer to represent the voluntary sector who is Chief Executive of the Dyslexia Institute. She has particular attraction for me in that she lived in the United States for ten years and did considerable work there so she knows about the type of community we are addressing. We have strengthened the National Council a lot. We still of course have an enormously challenging task to turn round a generation of neglect which you touched on in your opening remarks and this is an area that it is difficult to inspire people on with regard to culture change. Our 2003 priority is to work closely with employers to ensure that business gets the skilled workforce it needs, and we still have the vision that virtually every citizen has the opportunity to get world-class skills leading to successful careers and employment, but most of all I think for personal fulfilment. What have we done? The key achievements, if I can pick out a few. are: smooth transition of the sixth-form funding which was a potentially big issue, if you remember; we do not get many complaints about that now; a continuing increase in 16-18 participation; implementation of the Centres of Vocational Excellence programme which is moving very rapidly; improved adult literacy and numeracy - we are on track to exceed our basic skills target by about 8,000 places; major improvements in quality. There has been a significant increase in the percentage of providers assessed as excellent or good and the learner survey which we did, which we can go into more detail on, with our customers (our learners), showed a 90 per cent satisfaction response. That is all encouraging. In the coming year we intend to build on this progress which we are making towards the long term targets with the focus particularly on local businesses, RDAs and the sector skills agencies which are now beginning to emerge on the skills they need in local areas. I must say I still think that the skills inventory of what is needed now, let alone what we need in the future, a weakness in many areas. We intend to work closely with the Government and other key stakeholders to develop a national skills strategy for the needs of learners and employers; they are not always the same thing, of course. We are continuing the increase in participation - both John and I are very keen on this - so that we stay on track to meet the target we have been given of 92 per cent participation in 2010. That is the underpinning brick for all the other attainment targets leading right up to the HE one, also in 2010, of 50 per cent. We are working on continued improvements in adult literacy and numeracy to get that national scandal removed, or at least diminished, not least, and I would like to mention this particularly, so that we become leaner and fitter for purpose and cut bureaucracy. You will remember we set up a bureaucracy busting task force, as we called it, and they produced a trust in FE initiative which we have developed. We now have further plans to change the skills base of the organisation and we intend to increase productivity by 2006 (not far away) by about two-thirds over our inherited base-line, thereby saving the taxpayer about £100 million a year in administrative costs. By that time our administrative overheads will be down to below 2.5 per cent which I can tell you, coming from the private sector, most private companies would be rather proud of, and I think it compares very favourably with most bodies in the voluntary and public sectors. We are very pleased to confirm that we have funding in place, courtesy of the Secretary of State, and the extra money and flexibility that was announced at our conference last week was very welcome and it does underline the importance that the administration is giving to the FE sector and the skills needs of the country; it is overdue and very welcome.

Mr Harper, do you want to say anything?

(Mr Harwood) Not at this stage, thank you, Chairman.

Can I open the questioning by saying that it appears that the plans you put in place for the Learning and Skills Council are now maturing rapidly, yet what one hears out there on the street, not only in one's constituency but also here in London and the south east particularly, is this dreadful shortage: skills gaps. You cannot pick up a newspaper without people saying, "Why is it that we have this tremendous tale of under-achievement in our country - 35 per cent of the population under-educated, under-skilled?". You as the Learning and Skills Council do not seem to be able to turn these under-achievers into the skilled people that the nation needs.

(Mr Sanderson) Not in a year anyway.

Mr Pollard

Why not?

(Mr Sanderson) This goes back, as you know better than I, a couple of hundred years or so. We are trying. We have set up specifically some pilot studies in some key areas.

(Mr Harwood) We all know that the reason why the country is in the position it is in is for long-standing historical reasons and we are not going to turn those round within one year. However, we are making progress and part of that progress is about setting things up and part of it is about doing things. Let us just go through some of the components of the poor skills we have in this country. The first is add-on basic skills. We know that there are seven million adults who have real problems with numeracy and literacy. That is why we have a target for reducing that number and I am very pleased to be able to say that in our first year we exceeded that target. That is the first step on the road to sorting out the skills gap. The second is that we have generic skill gaps in terms of the employability skills and the generalised ability to do a job that either young people or adults face, and that is why we have a number of employer training pilots in place in order to try and find the best way of tackling those issues. The third way in which we are tackling it is through tackling particular skills shortages. As you know, we have a very ambitious modern apprenticeship programme which has started. You will, I am sure, have seen advertisements on the television, assuming that you watch MTV and other channels like that, so you will have seen or at least heard about that programme of encouraging young people to want to take up crafts skills and apply those sorts of skills even though they may be leaving school at 16, 17 or 18 and are not going on to university. Also, we should not lose sight of our Centres of Vocational Excellence programme. We have set a target of having 175 of those by 2004. We announced a few days ago that we are already at 150 of those with another seven being added in January, so we are already well ahead of our programme. You will be pleased to know, those of you who are trying to get plumbers, that the largest single group of centres of vocational excellence is in the construction trade.

More resources have been announced last week and indeed almost as we speak by the Secretary of State for Education and Skills, so resources are not a problem. Maybe I am old-fashioned but I thought that you had a strategy and then you got the resources to deliver on that strategy. If my memory serves me right you had the National Skills Task Force, the Government certainly did, I think shared by Chris Humphreys. Then you have had, and I have just been looking at your letter that you both signed, a workforce development strategy. We then have the Minister now saying, when most of us thought that perhaps by now, after five years of government, we had a national skills strategy, that we were going to have one but unfortunately we could not publish it until June. What was Chris Humphreys and his team up to? What have you been up to with your work and why did you need three goes at a national skills strategy whereas I always say half a dozen others plus this Committee sitting in a nice country house for a weekend with plenty of sandwiches and coffee could come up with one? What is going on here? Are you all blundering around in the dark because you have got no idea where you are going because you have not got a strategy?

(Mr Harwood) I do not think we are blundering around in the dark. There is clearly a need to involve as many partners as we can in this and, Chairman, you yourself said right at the beginning that, sadly, compared with some educational topics, skills is not seen to attract the media interest that you and certainly we would like. That shows that there is clearly a need for a wider effort in order to attract attention and to mobilise a broader range of people. I think that the sorts of programmes which are going to be envisaged in the national skills strategy are about mobilising a broader range of employers and of statutory agencies and so on in order to tackle the long-standing challenges that we are facing. We do not have a doubt about what we are trying to achieve. What we are looking for is more partners to engage in trying to do that achievement.

Mr Sanderson, can you shed any light on the reason why there are three different bodies all producing something? Why have we got three? What is the difference between the three of them?

(Mr Sanderson) I rather think I ought to be asking you that really because this comes from the Government.

One comes from you. The Workforce Development Strategy is yours. Tell us about it, and just tell us if you think it is different from the National Skills Strategy.

(Mr Sanderson) It is part of our remit to address the skills area of course. The complication arises because it is also part of several other organisations' remits and we now have a whole host of people involved in it. The RDAs are very interested in it, and it is right and proper that they should be, and the Sector Skills Agency is replacing the NTOs. What has been missing, it seems to me, is somebody who is setting the agenda, focusing it, pulling it together and who has got accountability for delivery. There is an awful lot of goodwill around and a lot of separate agendas, but the task of the Learning and Skills Council, and you are quite right to raise the point, is to pull all this together and make sure that we address it on a long term basis and keep on doing it and make sure that there is some delivery behind it. There should be a lot more recommendation and follow-up delivery than there is at the moment.

This Committee is confused because there seem to be three stabs at overall strategy. We are also a bit confused about why the national training organisations were abolished - or were they, because some of them seem to be limping on - and why there has not been a systematic introduction of Sector Skills Councils. Some of them have them, some do not have them. We understand that other people are looking for someone to start one in a sector where they do not have one. What is going on there? A lot of employers say to us that they do not know what is going on. Do you?

(Mr Sanderson) If I just put an employer hat on rather than this Learning and Skills Council one, some of the NTOs were working quite well, a few of them, but quite a lot more were not working very well at all (and this is just anecdotal), who were really rather flimsy, bureaucratic organisations. I think the Government was right to try and get some more attraction into many of them. The problem is that business has to be persuaded to do these things. You then hit issues of organisation. You cannot have too many of them, but lots of business sectors are very jealous of their independence, so it is very hard, for example, (and I speak from experience on this) to get different boards of engineers to combine together in one engineering group, because electrical engineers and construction engineers do not talk to each other too much. That I know has been part of the problem. It is really not feasible to have much more than, let us say, 15 or 20 of these in administrative terms. Focusing it down to 15 or 20 and getting the agreement of people to work in bands like that, or in sectors, has proved quite difficult. I know some of the apparent slowness of introducing these is due to that sort of intransigence in business itself.

Let me give you one more before we move on. We went to Birmingham to look at education in one city. Almost gratuitously we interviewed the Regional Office of Government. We were surprised to understand from the evidence that we took from that group that they did not seem to have much of a remit with the Government on the ground in region for co-ordination between yourselves, between universities, between education authorities. They were not quite clear what they did and how they interconnected with you or how you interconnected with the other people on the ground like Regional Development Organisations. I just wondered if you could tell us a bit more about how in a region you see your organisation meshing in with the others.

(Mr Sanderson) I am very pro the RDAs; let me stake my position on that because that is going to bias what I say. I do think there is a regional agenda in this area and there are many things better done regionally in the skills area than done nationally. Equally it is true that quite frequently it needs to be done at a sub-regional level and some of the best examples I have seen around the country, particularly in the north-east which I am more familiar with, are on a sub-regional basis rather than on a regional basis. We clearly need to work with the RDAs and we already are. We have in our remit something like 15 partner agencies that we are working with. That is a hugely complicated agenda. As a businessman I look at it and I acknowledge that there are a lot of stakeholders who all have to be interconnected with, but what seems to me to be often missing is a spotlight on who is accountable for the outcome, who can carry the can for making sure that this happens. Where the Learning and Skills Councils are at their best they really ought to be the ones that should make sure that the translation between business and the education communities happens and that there is some delivering of this sort of agenda. Goodwill is not enough. You also need to focus down and make sure that the accountability outcome is properly understood. I think that has been missing.

(Mr Harwood) One should not ignore the detail in relationships. First of all, every local Learning and Skills Council has someone from the Regional Development Agency sitting on the Council. Secondly, every local Learning and Skills Council has an observer from the Government Office who attends the meetings of the local Learning and Skills Council and has other rights of access and rights of liaison with the local Learning and Skills Council. Thirdly, the Learning and Skills Council is in all regions a key partner in the Framework Regional Employment of Skills Action which has been developed, nine of which were delivered to ministers a few days ago. I think there is a very clear, sound inter-relationship between the Learning and Skills Council and the Regional Development Agencies and the Government Offices at a local and regional level.

You should have the lead role and not the RDA, you mean?

(Mr Harwood) I do not think it is a question of claiming the role. I think it is a question of making sure that each party brings to the table te understanding and the drive that it can bring and making sure that we tackle some of these very long-standing skills problems.

(Mr Sanderson) At the moment we are up and running and they are not so it would make better sense perhaps for us to have a lead role.

You would not be very happy with that in the commercial situation, Mr Sanderson, would you, that no-one seems to have the lead role?

(Mr Sanderson) No.

But you think you should have it and do have it?

(Mr Sanderson) I think that is part of our remit, at least for the moment, but I think working with the RDAs should not be a problem. Already we are doing quite well in most areas.

Jeff Ennis

Going back to when the Learning and Skills Council came into existence last year, you drew your staff primarily from a larger organisation with the involvement of the FEFC and from smaller organisations, the old TECs. How much of a challenge was that, to get the staff to gel together, and what opportunities or weaknesses did that throw up in developing your new organisation?

(Mr Sanderson) That is definitely for John to manage but I will save his blushes a little bit by saying that that has been a big achievement. Almost the worst possible position of the TECs was that they were a rather independent culture. On one side we were starting with the local officers, and on the other side the FEFC, which did a great job in a very narrowly focused, highly top-down national culture, was starting with most of the head office, so there was a sort of built-in collision. In fact, it has moved an awful long way from there now.

(Mr Harwood) The problem has not been getting people to gel together in the way you describe, which I think has gone remarkably well because of the support and the motivation of people across the country. I think the real challenge has been to build the experience of the staff of the Learning and Skills Council about the new sectors which we are now responsible for funding, particularly school sixth-forms and further education. We have worked very hard over the last 18 months on a process both of bringing people in, recruiting people, secondments from colleges and indeed from some schools, and familiarisation of training programmes in order to equip the staff of the Learning and Skills Council with the knowledge and the understanding they need in order to be able to take the decisions and add value in the process. A huge amount of work has been done. It has been done, I think, very effectively and I would like just to pay tribute to the staff in colleges particularly for the support they have shown to the Learning and Skills Council in getting that to work properly.

Has it been difficult getting the staff to change their culture as it were from whichever background they came?

(Mr Harwood) It is always difficult to get staff to change their culture but I think that, looking at it now, one can clearly see that that has happened. There is a completely different cultural feeling. We have put a lot of time and effort into building a new LSC culture and that has happened in a remarkably short space of time.

Changing the subject somewhat, since you last came to give evidence the government have obviously rolled the education maintenance allowances out nationally and you mentioned, Mr Sanderson, the fact that one of your main objectives is to get more students to stay on into sixth form etc. How important a step do you think that initiative is in achieving that particular roll-out?

(Mr Sanderson) It is very important.

So you fully support it?

(Mr Sanderson) Yes. The decision has been taken for it. It has not actually been rolled out yet.

The other point, going back to what you said earlier, was the modern apprenticeships initiative. The performance and the success of those seem to be rather patchy nationally. In certain areas they have really taken off and are very popular with the trainees, etc. I can quote Barnsley as an example of that, where it has taken off, and yet in other areas they seem to be very much under-performing. What do we need to do to try and get a more stable and more successful modern apprenticeship scheme coming up from the ground?

(Mr Sanderson) You are right; it is patchy and I suppose that was inevitable. What we need to do above everything is to get SMEs more involved. Many of the very big companies have been doing this for ever; they look after their staff and their training. For SMEs it is much more difficult and there are about a million of them. About 700,000 of them we are hardly ever in contact with at all, not just the LSC but any aspect of government authority. We just need to find better ways (and we keep trying) of roping them in. It is probably peer group examples and so on.

That is the 64,000 dollar question in many respects, Mr Sanderson, to involve the SMEs. Have you got any thoughts on how to engage with them, because it is a big problem area?

(Mr Sanderson) It is quite a problem.

(Mr Harwood) Last month we launched a direct marketing mailshot to employers and that is an example of the material that we are sending directly to them to interest them in becoming a modern apprenticeship employer. If they can react to this then we will pay them a visit and try and sign them up. That is the most important thing we are doing at the moment, pursuing that, so I am happy to leave that with the Committee.

(Mr Sanderson) It has got to be the popular media, somehow or other. I am no media expert but we need to get the popular press on board, and we have got a bit of that. They are supportive, much better than the Today programme; and then there is television, that is what they really watch.

Chairman

To be fair to SMEs, BP ran down its apprenticeship scheme quite dramatically at one stage. It deserted apprenticeships in some areas and certainly squeezed them quite drastically, so it was not just SMEs. The old apprenticeship scheme was deserted by larger employers as well.

(Mr Sanderson) They ran down the apprenticeship scheme because they ran down the number of employees enormously; we just do not need so many people in manufacturing any more. In BP we were endeavouring to give anybody who wanted it, and encouraged them, up to five days' training a year every year in almost anything they wanted. We do not achieve that but it is open to people and it is funded.

Ms Munn

Moving quite nicely on from that issue of involving them at one level, you said right at the outset that business representation was being strengthened at national level. How would you describe the current state of business representation in terms of the local Learning Skills Councils?

(Mr Sanderson) It is patchy. It has got better than when we were last here but there are still some areas where we are struggling to get the right quality of business representation. If I step back a bit and say what would we have done differently in setting it up, I think somehow or other we would have got the message through to the local chairs, which are very big and important positions. You always expect that things are understated in the public sector job but the idea that you could do those jobs on a day or two a month is really not true. It needs a lot more commitment than that. One can see, going round the country, where people have the time and the expertise to put in that the impact is enormous, and of course they are wonderful jobs; they are fantastic and very rewarding.

Chairman

Not in financial terms?

(Mr Sanderson) No, not in financial terms.

They do not get paid, do they?

(Mr Sanderson) They get £5,000.

Chairs?

(Mr Sanderson) Chairs, and only the chairs.

None of the other members gets anything. Do they nationally?

(Mr Sanderson) Nationally they get a smaller amount. Most of them do not take it.

Ms Munn

Where that has worked well you say the impact has been noticeable. In what respects? What has the impact been?

(Mr Sanderson) I am not talking about the executives at the moment. I think the executives are generally working well around the country. I think some of the local councils need strengthening in business terms and some of the issues we face in getting through to SMEs really depend a lot on having a lot of local publicity and a local figurehead business person.

I am really asking the other way round in the sense of the influence of the local business community on the direction of skills development, for example. Obviously, there is an issue about overall basic skills learning, which is important and which you identified at the outset. Do you see a role for local businesses in determining the kind of skills agendas that should be happening in the local area?

(Mr Sanderson) I do see a role, but not the only role. Some of them have rather strange ideas of what is going to be needed five years down the road. The important thing is that role models are absolutely vital in everything we do and if businessmen run around seeing that so-and-so is working away and is enthusiastic about the whole skills agenda locally then they will join in. We are missing that in one or two areas at the moment.

Moving on slightly from the input of local businesses, given that Regional Development Agencies have clear ideas (whether you think they are the right ones or the wrong ones) about how they might want to see business developing the type of skills needed in that area, what is the interplay like between Learning and Skills Councils and Regional Development Authorities?

(Mr Sanderson) As John said, it is really on the whole very good. It is important to remember that the local Learning and Skills Agency boundaries are contiguous with those of the RDAs. Someone had enough sense in the legislation to think of that. Many of them are getting together regularly. As you might expect, there is a bit more enthusiasm in the north east, in Yorkshire, than there is in the Midlands but I think that is just the way it is. Nevertheless, they are getting together, they do think of things in a regional context and the RDA representatives and local government representatives are there with them. I think all this is happening and we just need to encourage it.

What I am not clear about, if you see both the influence on the skills agenda as being partly Regional Development Authorities and there are meetings and things going on but there is also the role of local business in terms of how it sees itself developing, is that you seem to think that some local businesses have not got a very long vision about what skills they are going to need.

(Mr Sanderson) It is not an easy thing to do.

Are you saying that two bits of that triangle work and the other does not?

(Mr Sanderson) It is easier perhaps with an example. If you take south west region, there is a regional skills agenda: say you want to maximise tourism across the region, for example, but there is a particular skills deficit in Erisbury(?), that is not a regional deficit; it is a deficit in the Bristol area, and that needs to be handled at a local area level, so there are different layers of agendas on skills and it is very important that different people with sets of authority are held accountable for delivering in those areas.

What about links with existing business organisations, such as chambers of commerce and other professional bodies which could have an input rather than necessarily looking to the small businesses that have not got the time?

(Mr Sanderson) There is no shortage of people who have an interest in this and there is no shortage of partners. As we said earlier, the real deficit in my view is that we need one single entity which has the capital for delivering the skills in a particular area and that they should always be identified and held to account for it. That on the whole does not happen.

Mr Pollard

I have resisted my colleagues' pressure to ask about plumbers this week.

(Mr Harwood) We were told you might. You will be glad to know that the demand for plumbing courses is rising.

I am delighted to hear that. Reading from your brief in April 2000, it said, "LSC Bureaucracy: the Facts", and it says here, "2,300 fewer staff, £83 million cheaper to run". Two thousand three hundred is about a third of what was previously part of the system. That suggests to me that either they were doing nothing or they were completely inefficient or they have changed responsibilities. Can you tell us how you will be able to achieve this 30 per cent saving - or 33 per cent; let us get the facts right - in the numbers of people employed? Were they doing nothing before?

(Mr Sanderson) It is going to get more too because what we are managing is going up from six to nine billion in a very short space of time. We cannot do that without increasing staff.

(Mr Harwood) The answer is that of course they were doing something but we have a different organisation, we have 47 local units rather than 72 Training Enterprise Councils. Secondly, we have a different relationship particularly with the work based learning providers where one of the features that we are working to and we have not quite finished yet, for example, is that in many cases the work based learning providers would have quite a lot of their work done for them by people from the Training Enterprise Councils. They would enter their data, they would check their health and safety and things like that. What we have done is to put more money into the fee we pay work based learning providers but we then expect them to be able to take control of that for themselves in the way that an FE college is able to take that responsibility for itself. That means that the Learning and Skills Council is not employing people who do that sort of work for work based learning providers. We are trying to run a more efficient operation because we have a smaller number of areas to cover, and we are using new technology to try and make ourselves more efficient. We are putting a lot of money into IT systems and we are also opening (which started early this year) direct entry ports so that instead of handling lots and lots of paper people can communicate their data to us electronically, they can store and collect it more efficiently, they can transmit it more efficiently and we get it in electronic form and therefore we can handle it much more efficiently rather than having lots and lots of paper flying around the place. It is things like that that we are doing which are making us more efficient and enabling us to honour that pledge to save significant amounts of public money in the transfer from the previous system to the new system.

(Mr Sanderson) But it is pressure as well. In the chemical industry where I came from if you did not increase your productivity by doubling it every ten years you were not standing still. In order to keep up with competition you had to do that and that is why new processes, new technology and so on are important. Some of that is unique to that industry, but most of it is not. Most of it is political in any business or in any other administrative activity. It is to do with all the sorts of things John has been trying to describe, and to have an expectation around that you are going to do that is part of the battle. I think we have crossed that barrier and we now have a expectation that we can constantly increase productivity.

Chairman

Are you not being a bit naughty though because Training and Enterprise Councils coped with enterprise and learning and you would have expected, as your remit shrunk, -----

(Mr Sanderson) There is a lot of like for like.

(Mr Harwood) If you take the total amount of staffing of Training and Enterprise Councils and FEFC you are talking about something around 11,000 people, so we have more than halved from that total. That is not what we are claiming. What we are claiming is that if we are looking at the approximate like for like spend on staffing we are making significant savings.

Mr Pollard

I find it incredible, a 33 per cent reduction in one year. I have got an LSC in my constituency. I do not recollect having several hundred people unemployed in my constituency. This is not Sir Humphrey clever accounting, is it, where we now call them consultants or something else rather than what they were before?

(Mr Harwood) No.

That is an unequivocal no?

(Mr Harwood) Yes, it is an unequivocal no.

Valerie Davey

I would like to explore a little further your relationship with the schools because just as you gain the 16-plus responsibility they have lost it by and large, so it is quite an uneasy relationship potentially. Can you tell me what has been happening on that front together with all the other work you have been doing? What have the local LSCs been doing in regard to schools?

(Mr Harwood) First of all we had to secure the transfer of the funding. When we appeared before you last year we agreed that one of the most difficult tasks we had in the forthcoming year was to make sure that that transfer took place as smoothly as we could secure it. Looking at it broadly, we have managed to achieve that. Moving on from that, and that was a huge task to be able to do that, the position with schools is I think slightly more complicated than was being suggested because it is not that the local education authorities have lost responsibility for post-16 learning. The LSC actually funds the local education authority and then passports that money through to the individual schools, but the LEA retains responsibility for capital development of, if it is a community school, the ownership of the premises, and also for issues to do with the raising of quality in the particular institution itself, and of course the local education authorities retain the right to be able to propose changes to the legal structure and distribution of schools, including the sixth forms in there. Our role is to work in partnership with the local education authorities in order to improve the levels of participation and the levels of quality and learning in those institutions in their particular area. As you will know, in Bristol we have been working very hard with the local education authority and with the partners in the schools to bring forward, following the area-wide inspection, what I think is a very innovative and interesting set of proposals in order to improve both quality and participation. I hope the Committee feels that they are equally innovative and will be equally successful.

You have stolen my thunder because I was also going to pay tribute to LSC in the Bristol area for the work they have done in very good collaboration. What I was wondering was whether, given that we are generally across the country looking for a 16-plus strategy which does involve our schools, our colleges and other providers in different ways, good practice is emerging in different parts of the country which perhaps others could learn from.

(Mr Sanderson) There are a couple of threads which we should pull out. We have to worry about quality first of all. We are getting more and more evidence of where quality is. It is not at all very clear-cut that one is better than the other. I suppose quite a lot of it depends on the history in the local area. There is no one national solution in this area, that is for sure. We also - and this does preoccupy me quite a bit - need to know a little bit more and better what our customers want, what attracts young people today, because otherwise we will not get the participation rates up. There is very limited evidence on this and that is one of the reasons why we are doing this survey every term from now on where, as we get a progression of results, we learn more and more about it. There is a small amount of evidence that they want big sub-university type units where they have got lots of options and where they do not have to wear school uniform and they are treated as adults, but it is tenuous, that evidence. The third one, and it has to come in, is cost effectiveness. Clearly that is an issue, a very sensitive one; anything to do with sixth forms is a sensitive issue, but we do have to look at that too. Otherwise we would not be guarding public money which is part of our remit. It is easy to solve problems by throwing money at them but those three criteria I think are what we keep looking at. We need much more information.

You say you want to know what people think and the Government phrasing usually is 14-19, not 16-19, so, given that remit, the whole area of 14-19, or even 13-19, which is what is being looked at, is the LSC looking at that in terms of therefore young people coming through and their needs as they move through the system?

(Mr Sanderson) Of course we are waiting for the outcome of the Green Paper discussion document. We have been given a very positive response to that, and perhaps Mr Harwood could say something about that.

(Mr Harwood) That is absolutely right and that is why we have been working on the flexibility pilots which are about broadening the curriculum for young people from 14 rather than waiting until they are 16 and then offering them a much broader choice. I think that is going to be extremely important for us in widening participation to encourage more young people to stay on if they see it is part of a four-year programme, and, secondly, we are tackling some of the challenges we were talking about earlier on in terms of what gets studied and making sure we change the profile of people entering work.

So the LSCs will be involved in that debate both nationally and locally?

(Mr Harwood) Absolutely.

Chairman

There was a time when many of us were trying to raise the education leaving age to 18, that no-one should get into the market entirely before 18, but now we have one or two voices calling for people to leave school at 14. Which option would you go for, Mr Sanderson?

(Mr Sanderson) I am certainly not the voice that you have just mentioned. I think that is about as contradictory as one could find for the economy. The extra skills we need are probably not going to be satisfied by leaving school at 16. Very few people do stop education at 16 now anyway. I think it has become a rather fictitious barrier.

These people, to be fair to them, are saying, leave at 14 into, rather than an academic qualification, more of a vocational type of course with work experience.

(Mr Sanderson) But it was put in what I thought were rather more disparaging terms than that. I do not think that is going to help the economy or the individual. We need a more and more highly educated population and, as you have probably heard, I am more in favour of some Baccalaureate type of solution. I think we have suffered enormously in Britain by focusing down too fast. The fact that we are about the last European country along with Ireland that does not have a second language to some degree of competence is not at all helpful in business. That is just one thing. To have people who stop studying science at 13 and 14 or vice versa just does not seem to me to be the way that modern society should be going. We are getting to the stage where people have to be interested in learning and have to be prepared to move from one skill to another and focusing down so leaving the education system too early will not help at all.

Mr Harwood?

(Mr Harwood) Absolutely right.

Jeff Ennis

I have a supplementary on all this from the college point of view rather than the school point of view. If we are going to address the skills gap to the sub-regional level LSC successfully we have got to build up the relationship and the needs and the demands of local businesses from the colleges' point of view and the interaction between the two. What sort of a role can the local LSC provide in acting as a bridge between the local employers and the local colleges, both FE and sixth-form?

(Mr Harwood) That is the key role we envisage for the LSC, that brokerage role of understanding what the needs of the locality or the sub-region are. What is particularly difficult is not just understanding what it is at the moment but actually what it is going to be in three, four, five years or even longer periods ahead than that. We talked earlier on about co-operation with regional agencies and I think one of the things that did not come out from that was the investment which is taking place in skills observatories or those sorts of activities which are about not just trying to plot existing skill shortages but are also trying to establish what they are going to be and which way the trends are going so that not only can the LSC and its various partners make appropriate provision for that in colleges and other organisations but we can also give, through connections, high quality advice to young people about the way the world is going to be when they actually finish their education.

Where do local business education partnerships fit into the equation, Mr Harwood?

(Mr Harwood) They are one of the ways in which that process actually works. The key role that the business education partnerships have is about tuning the aspirations of young people to the needs of business and what it is like when they are going to leave school and the range of opportunities that they will have to take part in employment. That is the key role that they have undertaken, that sort of aspirational and motivational role, in order to try and escape from some of the prejudices and the stereotypes that we have all inherited from the past.

Mr Pollard

I wanted to pursue what you said earlier on, Chairman, where you both seem to suggest that 16 is the absolute minimum and you should not turn away from that. If you go on to comprehensive schools you will find that a group of 14 and 15-year olds are switched off and get to a certain stage and then you cannot force-feed them with educational matters. You were quite dismissive of 16 and no less than that, otherwise we will not achieve. Is there not a system where kids at that age can be eased into vocational education where the mix of vocation and academic changes markedly, and therefore they have better self-esteem and so on so that it is a win-win situation rather than saying, "No: 16 is in. No change".

(Mr Sanderson) I think that is right. Clearly there is a big role for work based learning and what you have just outlined. We are, as you know, encouraging that. The point I am trying to make is that we are after all abut lifelong learning, and now the idea that there should be some cut-off point at 16 I think is wrong. To lower it to 14 would be even worse. That was the implication, I think. I do not think that is appropriate for today's world.

I agree with the broad concept.

(Mr Sanderson) Work based learning is obviously important.

We must encourage that. We are running courses on plumbing and bricklaying and building and all of that. There are messages coming from Government saying that it is okay to be an apprentice, adverts on the television and all that, yet we do not seem to be getting one group doing what we want them to do. How do we close that gap? How do we psyche the kids into doing what we want them to do?

(Mr Sanderson) We were saying when we were coming here, because we thought this might come up by some chance, that really a pure market economist could say that this ought already to have changed. You really can get £50,000 a year in London for being a plumber. I think it will change because of the publicity that that is getting as long as we provide the enabling mechanism through the Learning and Skills Councils to give people the appropriate qualification. That is what we have set out to do, and I think that should change it quickly.

(Mr Harwood) Can I add to the point which was made earlier on about 14 and 15-year olds who are of the impression that learning is no longer relevant for them? It is not just about broadening the curriculum, although that is obviously important and has a role to play . It is also about making the whole curriculum relevant and improving the quality of teaching and learning in those institutions. It is not just about somehow broadening the curriculum. It is about the way that institution works, the relevance of learning to those young people and also giving them something to achieve. Many young people are turned off if they are not achieving: it is not relevant, it holds no future. It is not part of their future. Quite a lot of the work we need to do is about peer group pressure, it is about families, it is about natural aspirations in communities which we are trying to tackle and we have got some interesting ideas about how to pursue that. It is also about what happens in institutions and we have got some really interesting work going on. I will leave you with the work that is going on in Birmingham which you may have heard about when you went up there. We have a number of schools at what we call a level two attainment programme which is about doing things which enable young people to be successful in the whole curriculum in their particular field. We have published a leaflet about it and there is a quote on the front of it from the Director of Student Services at South Birmingham College who says, "The project has been a roaring success. This has helped us to help students more than anything we have ever been able to do before." It is that investing in success for young people which will change the attitudes to learning.

(Mr Sanderson) It is very worrying with some young men particularly just to get them to lift their heads up and have some aspirations.

Chairman

But how do you spread the good idea, a good programme like that, throughout the other Learning and Skills Councils?

(Mr Harwood) We do it through our internal briefing and seminar systems that we put in place to make sure that where we learn how things that work in a particular area we have a system for replicating that across the country, but you need to make sure that that works in context. Things may work in a particular area because of the unique features and contexts in that area, and therefore one has to avoid falling into the trap of simply replicating things without understanding why they have worked in a particular area. We aim to do that both through the paper transmission of good practice to other parts of the organisation but also through running seminars and understanding events where people can actually work out why things work and what lessons they can learn, because it may only be part of it that they need to take on.

I hope you listened to the File on Four programme about modern apprenticeships. It was pretty savage, was it not, about performance and retention? It said that there were a high number of people dropping out from modern apprenticeships. I understand that it was saying that if the local college was in contract with you to do so many apprenticeships you might think you have got plumbers and electricians and they might produce all hairdressers and you cannot do anything about it, can you?

(Mr Harwood) We can do something about that.

That is not what the Chairman of the Learning and Skills Council told us in Birmingham.

(Mr Harwood) If I may help to explain that, we are quite in a position to be able to discuss with colleges what it is that we get for the money that is going in. The position, if you are talking about work based learning, is slightly different and I will readily agree with you that the quality of some work based learning is not what it needs to be. There has been a lot of discussion about that and that is something that we take extremely seriously. We are putting a lot of effort into improving the quality of work based learning which in some cases means that we have to say that we are not prepared to contract any longer with those providers because they are not, even after we have put resources in to try and help them improve, able to supply learning at the quality that we need from them.

Do you think the File on Four programme was fair or did you know it was coming on?

(Mr Harwood) I did not know it was coming but the File on Four programme is entitled to make what comments it likes. What I am here to do is to talk about what we are actually doing, which is improving quality. Quality is not as good as it needs to be and it does need to be improved and that is what we are here for.

(Mr Sanderson) One of the other problems, Chairman, is that one of the reasons for not finishing is that less scrupulous employers, particularly in the south east where there are skill shortages, stand around places which are offering these courses and do not let students finish. They say, "You do not need to finish. We will take you now and pay you X and Y", so quite a big slice of the drop-out rate is due to people getting jobs before they have their qualifications.

Mr Turner: What proportion of members of the area LSCs are (a) businessmen, (b) businessmen operating in SMEs, and (c) businessmen operating in micro businesses?

Chairman

Mr Turner means businessmen or businesswomen.

(Mr Harwood) The answer to the first question is 41 per cent. The answer to the subsequent questions I would have to do some further analysis on.

What was your target?

(Mr Sanderson) There is a statutory requirement on us to have 40 per cent at the moment.

The target was 40 per cent?

(Mr Sanderson) No, the a statutory requirement is 40 per cent.

What was your target when you started last year? You told us a target.

(Mr Sanderson) Forty per cent.

Are you happy with 40 per cent?

(Mr Sanderson) Yes. A lot of them are SMEs but I cannot tell you the figure.

Mr Turner

My reflection is that micro business is not well represented.

(Mr Sanderson) They do not usually offer themselves up for anything like this in my experience. I do not know the answer.

What is it about quangoes that puts off people who are running tiny businesses, or in fact large businesses as far as my constituency is concerned?

(Mr Sanderson) By "micro business" I presume you mean five people or less.

Yes.

(Mr Sanderson) The answer, as they would see it anyway, is that they do not have time for anything other than the bottom line.

So how can you be representative of their needs at area level?

(Mr Sanderson) It is difficult. I think what we need somehow or other is preferably two or three micro business representatives around the place, or more than two or three, who have made it to the level where they are prepared to give up time. We have a few of those but those are rather rare beings. Of course, the temptation is for them to go on and become middle sized businesses. If we could get good general commerce or CBI representatives who understand the needs of these people then that is a second best. I must say, speaking as an ex-businessman myself, I think it is very much a second best. It is far better to have people who have had a direct line and know what it means.

It does not really sound as if you have got a strategy.

(Mr Sanderson) You cannot have a strategy to seduce people away from their first love, I do not think, which has got credibility. The first love of a small businessman is to make money and they are not usually prepared to give up the time that is necessary for outside bodies. Having run a business myself I can have some sympathy with them. It is very demanding to survive sometimes.

Does Mr Harwood think it is that impossible?

(Mr Harwood) I think it is very difficult. It is not really my job to go round recruiting members of the local Learning and Skills Councils although I do obviously have an interest in that. The real challenge is to be able to recruit a group of people who are committed and have the drive and approach that we want to secure. That is what is going to make a difference, I think, rather than some mathematical relationship in their backgrounds. I could tell you some micro business people who would add immense value to a local Learning and Skills Council and some micro business people who probably would not add very much value to their local Learning and Skills Council. The real issue is the individuals and the drive that they bring.

Chairman

I think Andrew Turner's point is a good one. It still sounds to me a bit like gentlemen players. If you are a small micro business and you are expected to give up hours of the week helping the Learning and Skills Council, and there is no pay in it, there is nothing, I can see that that is prejudicial to anyone who works for themselves in very small business. I cannot understand why in some areas of our public life there is money paid, for example if you are on a hospital health trust you are paid, and for a small business if it was £5,000 or £10,000 a year I think people would be encouraged to give their time. I think sometimes people like yourselves, Mr Harwood and Mr Sanderson, should have been banging on the Minister's desk saying, "We will not get the breadth of people and the experience we need unless you give us the chance to offer some payment", and I think you really should think about that.

(Mr Sanderson) I did bang on the desk to get payment for local chairs, with minimal success.

Perhaps the Committee can help in this.

(Mr Sanderson) I am being a little less forthright on this than you obviously want me to be.

If you play for Sunderland Football Club and you ask some people to do it for nothing and pay others a quarter of a million pounds -

(Mr Sanderson) That is not a small business. That is extremely offensive, it has a £50 million turnover! Look, I do not think the answer is necessarily to pay people.

Why not, Mr Sanderson, you have not explained it.

(Mr Sanderson) There is a place in our society for -

--- for the gifted amateur?

(Mr Sanderson) --- for small micro businesses who are entrepreneurs - they are very particular sorts of people, you must have met some of them - who are concerned only with business, but that is what they want and that is what they want to do -

Mr Turner

They are the overwhelming majority of businesses.

(Mr Sanderson) They are in terms of number of businesses but not in terms of number of employees.

They are the overwhelming majority of businesses. How do we do what they want if they are so badly represented?

(Mr Sanderson) You are making assumptions ---

Of course I am but we make those assumptions about all sorts of things.

(Mr Sanderson) I do not think they are all that badly represented. We do have small businesses represented on Learning and Skills Councils, micro ones less so.

(Mr Harwood) I think it is important to make clear that we do not have a relationship with employers simply through the membership of six or seven of them, or whatever it is, on the local Learning and Skills Council. If we were relying on those people in order to change business then we would not be making much progress. What matters is the leadership and direction that those people give to the work of the executive team in the Learning and Skills Council, and I think the sort of work we do on the employer training pilots with SMEs is going to generate the relationship that we need to secure in the future to make a difference in what SMEs do and the contribution they are able to make. It is part of a much bigger picture.

(Mr Sanderson) Suppose we had one micro business on every one of the 47 local and Learning and Skills Councils, do you think that would make a massive difference to the other 900,000 or so that are not on them?

I have no idea actually but the fact that you use the word "local", which is something in my area which stretches from Farnborough to Freshwater, tells me that you have a very different view from that of micro businessmen about what is local.

(Mr Sanderson) About what is local?

Chairman

Is it not also the case, Mr Sanderson, that those of us who have constituencies know that, by and large, what pressure you have is there is a group of usual suspects - well-intentioned, excellent people - in every community who come forward to serve on boards of different kinds.

(Mr Sanderson) That is certainly true.

Chairman: I chair a small business organisation of 13 employees and unless we had some compensation for key employees to have a day a week or two days a month to work on a Learning and Skills Council, we could not afford to let them go because we would have to hire someone to replace them. That is the difficulty, the bind you get into. That is why I teased you about Sunderland Football Club. Really I meant the old cricket system of gentlemen and amateurs. At the present moment, a lot of people just could not contemplate giving that service without payment. Kerry Pollard?

Mr Pollard

Can I give an example to try and help Andrew out.

(Mr Sanderson) I thought he was doing rather well.

I was a chief executive of a housing association before I came here and it dealt with people with special needs and we were pressed by the Housing Corporation to get somebody on the board who had special needs. We got the best person we could ask for, I spent hours and hours trying to get this person, and they came to one meeting and had a nervous breakdown the day after. We scrapped it altogether. The point to make is you can be tokenistic and have somebody along representing -

(Mr Sanderson) --- that is what I was trying to say.

Mr Pollard: --- I think that is what you are trying to say. There is another way and that is using one of the representative organisations like the Small Business Service or the Federation of Small Businesses. These are all representative bodies and they are in Andrew's constituency with thousands of members. I do not know why he is banging on about this. It seems to me a complete and utter waste of time. I think he is quite potty for thinking that a small business person is going to give up his or her precious time to go along and chat, as they would see it, it just would not happen, and running a small business myself I know that would be the last thing I would do. Can I talk about apprenticeships. Many SMEs are single practitioners and they say to me that they would willingly take on an apprentice except they have to fill in a form that is as thick as a telephone directory to do it. We have got to make it easy for them so that all they have to do is to train the person, whether male or female, in their particular skill, not fill in loads of forms. How can you make it easier?

Chairman: I think Mr Pollard wants a quick return to the mid-19th Century!

Mr Pollard: There was nothing wrong with that!

Chairman

He remembers it well! Mr Sanderson or Mr Harwood?

(Mr Harwood) I think I am probably going to be the conveyer of bad news on this.

Thank God for that.

(Mr Harwood) I really do not think that a one-person organisation is going to be able to take on a modern apprentice unless we are able to - and this is the point you may be getting to in the question - provide an infrastructure which is supported by somebody else that does some of the basic skills work and theoretical framework for the training and so on. The idea that somehow one person could do all that and do some other business as well seems to me to be extremely unlikely. I am not saying there is not some super-person who could not do it somewhere but it seems to me extremely unlikely. The issue is not actually how does one get a modern apprenticeship into a one-person micro business, it is about two other things. One is how can we support businesses which are taking on modern apprenticeships to make sure that those that do not have the scale or the wherewithal to be able to provide the more educational parts of the process are supported in that by other providers. That is the sort of support structure we are trying to get to. The second thing is to make sure that the whole process is the least bureaucratic we can make it, but of course that has got to come with some expectations about the quality of learning and the accountability and making sure that the people who are undertaking that learning and conveying those skills have themselves the skills to be able to do that. It is balancing those two together. That is why I think we are making considerable progress in cutting out a lot of the Victorian paper chase and all that sort of stuff and concentrating on the key skills which are enabling people to do a good job in the areas where they can bring added value.

(Mr Sanderson) We still have to make sure they do it though. This is public money they are spending.

Mr Pollard: One brick in front of another!

Mr Chaytor

Can I come back very briefly to the 66 per cent productivity target. Forgive me if this question was asked earlier, but how are you going to calculate it?

(Mr Sanderson) Why do you not go through it.

(Mr Harwood) We are calculating it on the basis of the overhead costs of running the organisation. We know the cost of running our predecessor structures, which for next year will amount to somewhere around £300 to £310 million a year at current prices. We know that we will be running the overhead costs of the organisation next year for £218 million.

So it is a cost reduction, not a measure of productivity?

(Mr Harwood) It is a measure of the cost of managing the scale of our budget. That is what the overhead cost is about. It is about enabling that overall budget which will be rising to £9 billion in 2006 to be run for a certain overhead cost which Parliament has prescribed.

So it is the ratio between staffing costs and the overall costs -

(Mr Harwood) The ratio between the overhead costs of running it.

Therefore it is a measurement of input and not a measurement of output?

(Mr Harwood) The output of course is what we have managed to achieve with the programmed spend that Parliament gives us, which is going to rise from £7.5 billion this year to just over £9 billion in three years' time. Our job - and you will be able to hold us to account as to whether we do that - is to achieve the sort of change in terms of skills and in terms of 16-18 participation that we are all setting out to achieve and to see whether we are able to do that within the overhead costs' envelope that has been set for us.

Pursuing that point with reference to the grant letter that was sent last week where the Secretary of State is really quite explicit in saying that he expects the Council to ensure that it has the right staff, in your letter to the Chairman for today's meeting you say that most of the LSCs have staff with experience of the schools sector, therefore not all of them do?

(Mr Harwood) That is correct.

£1.5 billion is what you are currently spending on the schools sector but some of your local LSCs do not have staff with experience of schools.

(Mr Harwood) They do not have experience of having worked in the schools sector, that is correct.

What proportion, broadly, of local LSCs have not got any staff with experience of working within the schools sector?

(Mr Harwood) It is about a third.

About a third? Also on the grant letter, in terms of the budget as it is projected over the next three years, the separate budget line for school sixth forms is merged into the learning participation budget line for 2004-2005. What is the significance of that?

(Mr Harwood) I do not know what the significance of that is because I did not write the letter.

It is the Secretary of State's decision and £1.5 billion has been switched from its old budget line and aggregated with a different budget having been all rolled up together. There must be some reason for that, there must be some implications of that?

(Mr Harwood) What the Secretary of State is trying to do is to simplify the budget lines that are the votes that are allocated to the Learning and Skills Council. That merged line will be necessary when we have achieved convergence and we are able to, in that case, not need to have a separate guaranteed funding line for schools because we have a single funding system.

So the corollary to that is convergence will have been achieved by 2004?

(Mr Harwood) It will not have been achieved by 2004. I think what is happening is that the funding lines are being merged in advance of that, but I must emphasise that that does not in any way undermine the requirement on the Learning and Skills Council to maintain the real terms guarantee for sixth forms.

Last year when we met you said that the cost of convergence would be around £280 million for 16-18 years and £600 million for all FE students. In view of the announcement by the Secretary of State recently of the £1.2 billion extra, are you going to be able to distribute that £280 million in the first instance to achieve convergence 16-18?

(Mr Harwood) We shall certainly be distributing the additional funding the Secretary of State has conveyed to us for next year and the two years afterwards. Our best estimate at the moment - and we have not finalised this so I would not want this to be regarded as the definitive final version - is that the additional funding that we are due to receive from the Department and Treasury over the next three years will go a substantial way to achieving that convergence.

How are you going to be distributing that as of 1 April next year? Are you going to be distributing it on the same formula, the same methodology to sixth forms as to colleges?

(Mr Harwood) No, we are maintaining the two funding streams that we have at the moment until we achieve convergence, so the sixth form funding system that currently exists will continue with an LSC formula, as I am sure you know, and then the non-schools formula will continue.

Chairman

Before you move off, if you are changing topics entirely, I have just one supplementary to the main questions that David was leading on. All this money that has become available is under the general Government logo of "Investment for Reform" and in a sense what I wanted to ask you, building on David's line, was how do you guarantee that the partners that you are working with on this work together, because presumably if weak colleges, for example, are identified by OFSTED with their expanded remit, you must come in behind that and learn from that and take action that will help those colleges cease to be colleges that not only are under-performing but will start to receive less money from the Department if they are not careful. How does that relationship work in terms of you helping to deliver on the reform?

(Mr Sanderson) It is a bit of a carrot and stick and you are right to raise it. I think that the big difference for me compared with business experience is there is not an option normally to close these places down. If it were an under-performing business you would pull the rug from under it and dispose of it somehow or other. FE colleges in particular in my experience are so fundamental to the urban regeneration programme in so many cities around the country, that is not an option however they are performing, so we have to turn them around and there we have a big issue for the Learning and Skills Council.

Has North East Derbyshire College been closed down, as the Minister said in a recent debate on FE, or is it still open under a different name? We have a colleague in the House of Commons who is particularly interested to know, Mr Dennis Skinner.

(Mr Harwood) He has been asking questions about it, but the answer is that learning will continue in the building which is currently occupied by the North East Derbyshire College but it will continue as a merged institution.

Mr Chaytor

If I could just move on to the question of targets that the Secretary of State has set in his letter. He says he wants to reduce by at least 40 per cent the number of adults without a level 2 qualification by 2010. Does that make sense? Do you know how many that is? Is there not an easier way of setting that target? If I can refer to another one just to reinforce my point.

(Mr Sanderson) That is probably the most difficult one.

Mr Chaytor: I will give you an even more difficult one. The previous one is improving the literacy and numeracy skills of 1.5 million adults. How do we judge if they have improved?

Chairman: Can we start with the two, I do not want to lose either of those.

Mr Chaytor

On the level 2 qualification, we do not know how many have not got it now but we are told we have got to reduce that by 40 per cent and we do not how many people there will be by 2010.

(Mr Harwood) We think that having a target of reducing something by X per cent is a good first step, but for managerial purposes we need to convert that into the other way round so that we can plot progress. What we have proposed is that we should have a percentage target of the achievement in the adult population. We are talking about a 73 per cent target. That in a sense gives us something positive that we are trying to aim for.

A target for those who have, not a target to reduce -

(Mr Sanderson) You can see the point of that.

(Mr Harwood) We can do all the things that we need to do which is to disaggregate that across 47 areas and set performance targets for each one of our Learning and Skills Councils and then together aggregate the total. Can I go on to the basic skills target. That is a similar one where what that has been converted into is, first of all, a proposition that we should equip so many adults with basic skills qualifications each year. I talked about it at the beginning probably before you arrived, about our achieving more than we set out to achieve in our first year so in our first year we actually achieved about 250,000 rather than the 40,000 that we set as our target.

When we say a basic skills qualification, are we are talking about the same national qualification across the country or are we leaving it to the discretion of local LSCs?

(Mr Harwood) We are talking about a basic national minimum standard across the whole country. That is the first thing. The second thing is that we obviously need to know the people who are flowing through that process. That is a measure of flow and what we need to make sure, because of course what we are talking about is a bath out of which water is flowing but also into which water is coming possibly at the same time, is how full the bath is, and that is why next year with the Department we will be doing a survey of adult literacy and numeracy in order to check how well we are tackling the basic challenge.

Chairman

Will that be after the National Skills Strategy or before it or when?

(Mr Harwood) I suspect it will be part of the National Skills Strategy because clearly when I was talking about skills earlier on one of the key components in raising skills in the workplace is the need to make sure that we reduce the number of adults who have real problems in numeracy and literacy. A key part - and this was identified by Chris Humphreys's National Skills Task Force - was tackling that table of adults who have real problems in literacy and numeracy.

Mr Chaytor

If I could ask about one more target also. On the 90 per cent of young people by the age of 22 having participated in a programme fitting them with the skills for entry into higher education or skilled employment, essentially that includes everyone from one end of the spectrum with five A-levels to the other end with a single NVQ 1. Would it not be more sensible and meaningful to disaggregate that target to two separate targets?

(Mr Harwood) There seem to me to be essentially two targets we are trying to aim for, one is attainment, but before anybody can attain they have to participate. The LSC last year set its long-term goal of 2010 a participation target of somewhere around 92 per cent so we think that the latest target fits very well with the one we were undertaking which is about a participation target for 2010. If we are to keep up and catch up with what is happening in the rest of Europe that is the sort of level of participation we need to be aiming for by 2010.

(Mr Sanderson) The rest of Europe is nearly there already.

If 91 per cent of those 92 per cent have got a NVQ 1 that is quite a different picture overall, hence my question.

(Mr Harwood) That is why I disaggregated the issue about first of all the percentage of participation but then building on that we need to adopt an attainment target. I think personally that we should be aiming to have a system which funds a basic entitlement to a level 2 qualification in this country and we ought to be saying to all adults who do not have a level 2 qualification we will fund you in order to achieve that level 2 qualification.

Does that £1.2 billion enable you to do that?

(Mr Harwood) It enables us to get a significant part of the way. It does not actually take us up to 2010 but it funds the line profile on the graph that we have for the next three years.

Chairman

Who are your front-line troops for doing that? Less than a year ago when we were doing an inquiry into what is happening with Individual Learning Accounts, the great optimism was that Individual Learning Accounts would be part of that process of getting to those people with very few skills, and certainly no formal skills or qualifications. Who do you think has really got to deliver here? Who do you put there as your priorities for achieving your goals?

(Mr Harwood) I think the answer is that the three main strands of our work are firstly in schools, secondly in colleges, and thirdly in work-based learning providers, and those are the key troops, as you put it, on the ground who are going to achieve this.

Where do the FE colleges rate in that?

(Mr Harwood) I just said schools, colleges and ---

In terms of numbers?

(Mr Harwood) In terms of numbers at the moment they are about a third, or more than that, of 18-year-olds. There are more young people 16-18 in FE colleges than there are in schools.

That is right and one of the concerns that some of us have in this Committee is we understand that the figure for FE is 40 per cent of higher education and we now see a pattern developing, a fashion that there may become of mergers between FE institutions and HE institutions. There is a small voice of concern, if you talk to people who are in that sector, that in this drive where everyone wants out there to become a research-rich university at the end of this process, we are going to lose the focus and the interest in genuine FE with this push to move towards delivery of HE in an FE context. Is that something that worries you? It certainly worries the hell out of some of us.

(Mr Sanderson) It does worry us. Ten per cent of HE is delivered in FE colleges now.

Ten per cent of HE?

(Mr Sanderson) Yes.

Chairman: We had a figure given by the Minister of 40 per cent, did we not?

Mr Pollard: 14 per cent probably.

Chairman

We will check those figures.

(Mr Harwood) I cannot give you percentage figures but there are now more students undertaking higher education courses in further education colleges than there were under-graduates of any description when I was at college. That shows you the scale of how things have changed.

(Mr Sanderson) On your point about mergers, if I may, I do have strong beliefs on this. I have been involved in a lot of business mergers and I think they need to have a very clear and highly focused point to the agenda. I am bound to say that of the ones I have seen around so far - there are not all that many yet but there are propositions - I have yet to see one that looks to me like it makes a lot of sense. There is no point in just scale or size, in my view. Having 40,000 students instead of 20,000 does not automatically bring benefits, in fact quite the opposite sometimes. In particular, if we are going to learn from business, we should learn that most mergers do not achieve the end objectives that they were set up to do. 60 or 70 per cent of any sort fail and the ones that really fail are where you put two failing institutions together. That almost never works; you just get one failing institution. So my prejudices, as you can hear, are very sceptical indeed. I think the point you made is valid, that the one that suffers is usually the one with lower esteem, in which case FE against HE would somehow get lost in the melee. We have to be very, very wary indeed of seeing this as a route forward.

Chairman: This Committee hears very much about the FE sector and the delivery capacity and potential capacity of the FE sector. Meg Munn?

Ms Munn

Continuing this theme about further education and the concern about institutions which have had significant problems - and I do not particularly want to label them as failing - there have been a lot of colleges which have had difficulties and significant financial difficulties. My own town of Sheffield is one and I do not have to go very far to Barnsley to find another. There are rescue plans in place and there is an awful lot going on to put such institutions onto a sound financial food footing. What is your assessment across the country of the situation in relation to further education institutions as a whole as to those which are struggling, getting better or going to continue to struggle?

(Mr Sanderson) The consumer survey is out and the survey of learners came back with a modestly encouraging response. Most students think they are getting a good or satisfactory education from FE colleges, so it is not all gloom. The general response was really quite good.

I am sure that is the case and I know that is the case in Sheffield, but I know also that the college principal would say that the financial viability of the college is still on a knife edge and there is an awful lot of work, although we have got a very good rescue plan, if the college is to succeed. I am not asking what the student or the learner thinks about it, I am asking about the financial viability of the whole structure.

(Mr Sanderson) We all know and we probably all agree that they have been under-valued and under-recognised for a long time. We are getting the first serious corrective measures in this latest letter from the Secretary of State.

Chairman

It is interesting that many of the questions you have been asked today are about the co-ordination of the effort. We have not even touched on your relationship with Work and Pensions and the training delivered under the various government programmes coming from that ministry and the concern that some of us have about the declining unit of resource devoted to the New Deal and associated programmes. How closely do you work with Work and Pensions?

(Mr Harwood) We work very closely with Job Centre Plus, identifying people who are candidates or interested in training and retraining and in the management and support for work-based learning providers, many of whom they fund as well as we do, so we have that close relationship. But we are looking to improve our relationship both with DWP and DTI in order to make sure that we are able to integrate what we are trying to do with their aspirations and ambitions and their plans. One of our key roles is to be able to make that mesh together at a local level.

Does it worry you that the resource for some of these training programmes like the New Deal increasingly gets squeezed? Some people in my locality believe that you cannot with the present squeezed budget deliver quality training. Do you have a role in that?

(Mr Harwood) We have a role in making sure that our training that we fund works effectively and delivers the outcomes that we are seeking from it and you are seeking from it. At the moment my preference is to stick within the boundaries of what you are asking us to do and make sure we do that well, not to start straying across the borders into giving comment about other people's activities.

But it would not worry you that down the road from you, and you are the Learning and Skills Council, that another government department is delivering lower cost and that increasingly there are stretched resources between the two of you?

(Mr Sanderson) Of course we worry about these things but we have a very wide agenda already and unless this particular issue is transferred over to us it is not in our remit.

The evidence has persuaded me that we do need a National Skills Strategy. Meg Munn?

(Mr Sanderson) It is for you to direct us, not the other way round.

Ms Munn

I do not think I had an answer to my first question about the overall state of further education and its financial viability given the announcement we have just had. It is not just about, as this Government would say I am sure, throwing money at the problems; it is about the structures that are in place to use that money effectively. What is your assessment about further education across the country?

(Mr Harwood) My assessment is that the quality of teaching and learning is improving. One can see that in quite short timescales in our performance review process. We had the latest performance review which took place last November. Unfortunately, the results are not out yet so I cannot share them with you because I do not know what they are. Hopefully that will show further improvement in the quality of teaching and learning across further education colleges. There are, however - and it varies in different parts of the country - 10 to 20 per cent of institutions who are having real challenges both in terms of the quality of teaching and learning that is taking place and in their financial viability and quite often those two tend to be linked. They are not always linked but they can be linked into cycles of decline. What we are doing, first of all, as you know from our performance last year, is targeting the standard funds. We have gone away from generalised standard funds to targeted standard funds which invests in individual institutions that need that support in order to be able to manage better and to cope with the challenges that they are facing. I think the evidence in that is that we are delivering the change. If I can turn to another institution which will be familiar to at least one member of this Committee, the Isle of Wight College, that has had a very rocky track record over recent years. I am glad to say that that college is now forecasting that it will break even and will be able to cope with managing within the finances it is getting in the forthcoming year and that will then lead to it being able to pay off its debts in two or three years' time. That has been achieved by the working and the support and help and investment that the Learning and Skills Council has been able to make on an individual basis working with that institution. That is what we are doing with all of them.

Are there any that you are worried about? I am happy with the plan that we have got in Sheffield, I know Barnsley is working hard to get through, and we have heard the Isle of Wight has got a good plan. Are there some that you are not happy about?

(Mr Harwood) No, all of them have plans. Some of the plans are more drastic than others because they need to be more drastic. We had a couple of names mentioned earlier on today.

But they are all working?

(Mr Harwood) Yes, absolutely.

Chairman: Barnsley and the Isle of Wight have been mentioned. I must give my colleagues a chance.

Jeff Ennis

It is nothing to do with Barnsley, it is really a follow-up to your question in terms of the relationship between the LSCs and the Employment Service because my perception in South Yorkshire has been that we have seen the squeezing out of a lot of the smaller training providers who were providing a niche for specific local needs since the Employment Service have drawn the contracts up and let the contracts in regional offices, in Leeds for example. Have you got any views on that particular series of events because it seems to me that we are working to a formula-based strategy now rather than a locally-based strategy to some extent.

(Mr Harwood) Many work-based providers of course have contracts with us and with the Employment Service so we do have an overlap. Some are unique to them and I cannot comment on what is happening to them but on those that we work jointly with them we have a very close liaison with Job Centre Plus to make sure that we do not say or do things that destabilise it from the other point of view and I know that they try and do the same thing. There is a reduction in work-based learning providers and some of that is because the quality or the range of what is being provided is not what is needed.

Some of them that have been providing a good service have gone to the wall.

(Mr Harwood) That may well be the case. If there are particular ones in that category I would be very happy to take those up outside the meeting if you wanted me to do that, but, broadly, there is some restructuring going on, for reasons to do with improving the quality and range.

Mr Turner

Since you have mentioned geographically advantaged areas, what would you expect your sub-regional LSCs' approach to be to provision of minority courses like, for example, dental nursing in my constituency, where clearly the candidates for dental nursing are likely to be young women with young families and the idea of travelling for an hour and a half to get to a college is almost impossible but there are not the numbers to justify a course at the local college?

(Mr Harwood) That is a very difficult issue, first of all because it highlights the need for regional economic strategies and skills strategies as well as local ones because you may find that at a local level there is not a sufficient critical mass of students or applicants in order to make a course viable but on a regional level there is clearly a need for a certain level of provision to be made available. I think the first point I would make is it is one of the very important reasons why we are working with the regional development agencies and with sector skills councils at a national level to be clear on the numbers and the extent to which we need to provide for that sort of learning to take place. Having done that, and hopefully we would be able to work through that as sector skills councils come on stream, there will be difficult choices about the parts of the country where we need to make some sort of provision but it may need to be on the basis that is it is residential or located in a place where people can have a reasonable chance of travelling to well or it may need to be on more innovative ways of working -

(Mr Sanderson) --- Technology comes in.

(Mr Harwood) --- whereby one is able to use remote locations but use technology to access those remote locations so that you can provide learning groups which would otherwise be uneconomic or not capable of being provided for other reasons, and do that at a host college. That is very much the sort of advantage that the LSC brings through being a national and regional organisation which is able to make those sort of investments and judgments, to make sure that we do not lose that type of provision which is small numbers but critical to particular industries.

I will think about that because it sounds perfect in concept ---

(Mr Harwood) In theory - the question is making it work in practice.

(Mr Sanderson) Being realistic, with a geography like yours with the logistics problems in your constituency, you are never going to be able to provide individuals with every course they need at a reasonable price.

No, I accept that but this is one that is disappearing. What about when the reviews have taken place and the co-operation is in place within the maintained sector, you still may find that you are short of more academic courses like, say, chemistry. Have any of your area LSCs begun to involve the independent school or independent further education sectors?

(Mr Harwood) I am afraid I cannot answer that question off the top of my head but we can certainly find out and talk to you about it. I would not be surprised if they had because there is a lot of innovative work going on but I cannot cite any particular examples of that at the moment.

(Mr Sanderson) I have come across only one. I know they are in Surrey, where there is a significant number of courses in the independent sector, discussing it with them, but how far it has gone I do not know.

Chairman

We have had rather good value out of our questioning. I just want to ask one or two very small things. When we announce an inquiry we get a lot of letters in from all sorts of people and some of them prefer to be anonymous so the Chairman gets to ask the questions. We have had some criticism from some of your regional staff about the power of what everyone in the LSC world knows as the "head office". We have had a letter saying why should it be the head office, why should it not be in modern parlance the main office and just seen as part of a network of offices working together rather than this big HQ? Is that a valid criticism that some of your people out there regard you as head office and not main office?

(Mr Harwood) I would be very surprised if any current member of the LSC staff wrote to you about -

(Mr Sanderson) We have tried to eradicate the term head office. It is never used internally. There are always going to be people who say things like that and all organisations have a tension between whatever the headquarters is called (there has to be one) and the regional and local offices. That tension could be positive tension or negative tension and I think we have got to make sure that it is positive.

Also there is a freeze on administration costs for the next three years.

(Mr Harwood) That is correct, that is why I said earlier on ---

Does that apply to the head office --- main office?

(Mr Harwood) The national office!

(Mr Sanderson) Right across the board, but exactly in what proportions we will determine after due discussion. It will involve freezing the skills that we are reliant on. Basically we are trying to up-skill quite dramatically and get rid of some of what we consider to be unneeded, extra staff at the bottom of the pyramid so there will be a net staff reduction of 500 in order to meet this target.

Some of your high-performing LSCs are at round about 1.5 or 1.6 per cent administration costs and others are up to six per cent administrative costs yet they have all got the same freeze.

(Mr Harwood) I think you are making an assumption about the same freeze when that has not been announced. What we have said is that the LSC's administrative overheads remain at £280 million for the next three years starting in April. We have a study which has been going on over the last few months to work out what the appropriate level of local overhead costs should be in each area. What we need to do is make sure that we are able to equip each local area with the overhead costs it needs to deliver the targets placed upon it and that does not necessarily mean that every local area will have a plus or minus percentage more than it has got the moment.

(Mr Sanderson) It does have to add up to the whole.

It is good to give a voice to some of your people in the regions. What are your aspirations for the next year? What are the three things that you are going to shake the media with - because we want more media interest in skills training?

(Mr Sanderson) The skills agenda is obviously top of our immediate priority list. There are so many priorities, are there not, and I think getting that higher profile please, with some help from all of you because we cannot do it alone, is very high on our agenda. It is very difficult to get sections of the media interested in this and we will set out to do that. John, you have the next one.

(Mr Harwood) I was going to do all three actually! First of all, it has got to be to continue to increase the level of 16-18 participation. If we are going to get to 92 per cent by 2010 then every year we have got to have a significant increase of 16-18 year olds staying on in learning. That is an uncompromising message. We do not give it up because it is 2010, we do not give it up because we have done well this year. Every year we have to make sure people's objectives are focused on increasing 16-18 participation. The second objective is to tackle the skills agenda and demonstrate that we are tackling the skills gap not just through the supply side of places where people can learn but also the demand side of encouraging many more young people to want to follow those courses of learning. That is something to do with parity of esteem and I think it means we have got to start talking to QCA about the structure of the examination and qualification system and so on. That is my second point. The third one is about empowering and encouraging local Learning and Skills Councils themselves to exercise leadership in their areas to tackle and be active and driving about tackling these issues at a local level.

(Mr Sanderson) Can I add one? This process - and I am not being sycophantic - is very helpful, the equivalent of having to go and talk to shareholders in London and New York which I used to have to do. It is necessary. I would make a plea to you all, please give us time. The agenda that John has just described so ably is not an agenda which fits comfortably within the lifetime of a single parliament.

Ms Munn

We are given the same amount of time.

(Mr Sanderson) I know you are all going to be re-elected but even if you were not, please, we have got an organisation which functions now and which works. It not perfect but we are doing our damnedest to make it better all the time. We are gradually getting a higher profile and getting better and better people coming in. What we do not need is a restructuring and somebody pulling us up by the roots and adding bits again. The turmoil involved in putting this together was enormous. It was very difficult and it could have gone badly wrong. Please do not do that, we need support.

Chairman

For our part, can we make a plea to you that when you see things that you think are important for the learning and skills of this country that you do go into government in the inner circle of the executive and thump the desk and say when they are getting it wrong. Can we agree on that?

(Mr Sanderson) Yes.

Chairman: Last time I advised anyone to thump the table I cannot even tell you who that was, whether it was the Chairman of the QCA - Thank you for your attendance.