Examination of Witnesses (Questions 20-31)
THE INSTITUTE
FOR THE
MANAGEMENT OF
INFORMATION SYSTEMS
20 JANUARY 2004
Q20 Richard Burden: I was just struck
that the words "regional development agencies" did not
pass your lips.
Mr Virgo: I think One NorthEast
is a regional development agency.
Q21 Richard Burden: Do you think there
is any more the RDAs should be doing?
Mr Virgo: My local RDA is SEEDA,
and we can argue what the RDAs could or should be doing but certainly
with the ones where I actually know people working within them,
they are doing as much as they can with the remits they have.
I think the bigger problem is to make it much easier for the RDAs
to pull together initiatives in their area. At the moment they
are gathering up the pieces that have reached the bottom of the
funding pots of DTI, ODPM, the various European pots and so on.
Some of them are trying to work at a higher level, particularly
with Europe, so they have their regional offices in Brussels to
get at the Brussels money earlier. Some of the more effective
of them are using the lever of the Brussels money to blackmail
their way further up the funding agencies in the UK to get at
things at an earlier stage. Yes, there is a lot more one can argue
they should be doing but I think an important part of that is
to make it easier for them to do things and pull threads together.
There I have not got any specific recommendations but I feel sure
that there are a lot of people in the RDAs who would have ideas
as to how to make it much easier to deliver results for less effort.
Q22 Richard Burden: Do you think there
needs to be any further consideration given to the boundaries
between the province of LSCs and the province of RDAs?
Mr Virgo: I think there is a great
deal to be done to try and ensure that they can work together
and fudge their boundaries. It is not a case of moving the boundaries—and
this applies in an awful lot of areas. It is not a case of moving
the boundaries, but of trying to make it much easier to work across
those boundaries so people are not so worried about them. In that
context, yes, I totally agree the task is one of bringing together
the initiatives of DTI and DfES and others much more at the intermediary
level where at the moment we have coordination at a high level
and you have these people trying to bring the bits together at
the bottom. There is not enough at the middle level but I have
to say I do not have any ideas as to how to actually pull that
together. It may be that the Gershon efficiency review may have
proposals in that area in a much broader context.
Q23 Linda Perham: You proposed tax breaks
as an incentive for employers and individuals. I think you said
earlier that with employers it is the time rather than the money,
but certainly for individuals that would make a difference. Is
there any evidence where that has taken place in any other country
that it actually works?
Mr Virgo: In most other countries
the problem does not arise in the first place because the trainees
and the individuals following the schemes are under a different
regime anyway. The UK is different in that we do not have those
regimes that have sat in other countries for a very long time.
Q24 Linda Perham: Is there anything the
DTI can do to encourage the Government to change the culture here?
Mr Virgo: There is something both
DTI and employers can do, because within the Learning and Skills
Councils I think there are five regional pilots which enable the
employer to reclaim tax and so on, but these are only for small
firms and they are only for NVQ level one and level two, but they
are pilots and they were deliberately intended by Treasury to
test out these ideas and see how they would work, and I think
it is a great pity that they are not much more publicised. You
actually have to look up the small print and the Treasury papers
to find out how they work.
Q25 Linda Perham: We talked earlier about
the levels that LSCs operate at, and it is the low level. These
are needed at intermediate levels, are they not?
Mr Virgo: Exactly, and when the
pilots were originally announced I wrote to IMIS members saying
"Find a way of exploiting these, then find a way of telling
Treasury ministers how great they are. Now ask them to extend
them upwards."
Q26 Chairman: The only drawback with
tax credits and tax breaks is that you are actually paying tax
in order to benefit from them. If you are in a business that needs
to improve performance in order to start making a profit, the
fact that you have to make a profit, which you are not already
doing, is not much of an incentive.
Mr Virgo: You are paying the National
Insurance of your trainees whether you are making a profit or
not. We have looked at National Insurance and at Income Tax, and
of course, if the trainee is exempt from Income Tax, you can give
them the same after tax pay at less cost to you, but also, of
course, because in our concept it has got to be a professionally
recognised scheme, you have got to deliver the training; you cannot
cheapskate on it. So it does actually affect organisations which
are not yet paying Corporation Tax.
Q27 Chairman: There is a distinction
here between the tax that is paid by the company and the tax which
the company pays on behalf of individuals, either in terms of
some kind of payroll tax like National Insurance or that portion
of wages which the company would set aside for tax. That is helpful,
because it did not come out of what you said before.
Mr Virgo: Yes. I apologise.
Q28 Richard Burden: You have mainly covered
what I was going to ask you, but it is about the employer training
pilots and extending them upwards. You said "Find a way of
extending them upwards." Do you think the basic model there
is sound, and it is really just a question of will to extend them
upwards, to tackling intermediate skills, or is there some modification
to the employer training pilot schemes that you think would be
needed if it was going to hit the intermediate skills gap?
Mr Virgo: It will need modification
for going upwards. I would argue that in going upwards, you actually
need to involve the Sector Skills Councils and via them you need
to involve the professional bodies and trade associations so as
to have your industry quality control of the courses that are
available, because if you try and do it through the current mechanisms,
there are lots of them, there are lots of people on them, but
there is very little employer input on them. The modification
is actually to build a much stronger bridge with the Sector Skills
Councils and have employer quality control on there, but there
the big problem is that you have got to find ways of doing quality
control that is relevant for small firms, because the Sector Skills
Councils will almost certainly, when they are properly functioning,
have good inputs from large organisations. The inputs from small
firms are very difficult to organise. SEMTA has a long track record
in trying to organise this, and I think at that level you have
to work through the trade associations and the professional bodies,
because certainly in the professional bodies a lot of those who
are active are the individual practitioners, who are small firms,
and the trade associations are effectively the only way of getting
inputs from that trail of small firms. Obviously at the geographic
level, there are the chambers of commerce, but the chambers of
commerce have a problem when it comes to specific skill areas.
Q29 Mr Clapham: A little earlier you
touched on distance learning, and I know that you are very keen
on widening opportunities by way of distance learning using the
internet. Could you say a little about how this will actually
work and whether you feel the service should be provided by the
private sector or the public sector.
Mr Virgo: My feeling is that it
has actually got to be provided by partnerships, public and private,
at all levels. When I was looking at the concepts of what a community
learning centre should be and how it should operate, if we take
the model of a reasonable size town, the learning centre needs
to bring together the local training needs of let us say the pub
chains, the banks, the high streets, the rest of it, people who
have a national need to retrain and update lots of people locally.
So there are lots of private sector national networks. Then you
have the public sector needs of the councils and the rest of the
public sector, and you have to cut across the boundaries. If you
can bring together those budgets, you then get quite a lot of
money coming in but you then obviously need to locate the centres
on the libraries, schools and the rest of the local centres. So
in a sense you have a village college concept. When one looks
around the world, these models work when you have geographically
isolated communities because that has always been the only way
of delivering in those communities. What we also need to do is
to recognise that in our inner cities we have a lot of communities
which are equally isolated, sometimes geographically because there
are no bus services. We need to aggregate resources across boundaries.
The other thing to bear in mind is that one of the great advantages
of having people together in a learning centre as opposed to doing
it from home is that they help motivate and support each other.
There are things on distance learning that you can do perfectly
well in isolation, lots of them, drill and practise and so on,
but there are other things that are much better if you are in
a little learning community. You may be studying different things,
but you are motivating each other, and that communal side of learning
is something that one should encourage. You do not throw the baby
out with the bath water.
Q30 Mr Clapham: So you would see distance
learning in the context that you have just explained it as being
very important, for example, in some areas of the UK where we
are dealing with regeneration and where we want to develop new
skills?
Mr Virgo: Very much so. Those
are particular areas where the Prince of Wales study concept of
the study centre is actually important, because in many of those
regeneration areas home is not a safe place to study. The learning
centre is. I used to work with what was then Haringey ITEC, which
was next to Broadwater Farm, and the ITEC was in an old London
Board school with massive steel doors and the rest of it, and
it was quite clear that if there was any problem, the kids at
the ITEC were going to turn out to defend it, but it was in those
days a fortress of learning in a beleaguered area.
Q31 Mr Djanogly: The White Paper suggests
that retaining skilled workers is a concern for businesses in
heavily knowledge-based industries. Do you think this is a particular
problem?
Mr Virgo: It is a problem that
comes and goes. In this context, I mentioned earlier the Strathclyde
Regional Council v. Neil case, which essentially is about
the enforceability of the old local authority blue book rules
which basically say if you are paying for somebody on a course
and you amortise the cost over 24 months flat line, that is an
enforceable contract. Certainly when you are paying for people
to acquire skills in short supply—in particular there were
some skills in telecoms where I remember people—and these
are mature people who have gone off on a mature course—at
the end of it are worth four times as much on the market as they
were when they started. At the time EDS was the organisation that
did the training contracts test case and there was a lawsuit with
TASS, and that is where this Scottish case got the publicity,
because that was the one that was used in the out of court settlement,
which of course could never be publicised, but we had it written
up in the journals of PITCOM proceedings afterwards. A long time
ago, when Ross Perot was bringing in his training contracts, because
he was losing 40-50% of people after his key training programme,
he said afterwards that his objective was to cut the wastage rate
down to 10-15%. If he lost less than that, it meant his training
was not good enough; if he lost more than that, it meant that
the terms and conditions afterwards were not good enough. There
has to be a certain amount of turnover. If the turnover is below
a given level it is not healthy but if it is above a given level
then it is wipe-out, you do not bother to train, and you poach
from elsewhere. Nowadays you do not bother to poach within the
UK; you contract it out to another part of the world. So that
issue of retaining your investment is partly contractual, but
an awful lot of it is to do with career paths, terms and conditions
and so on. The contract is a part of it, and Perot's argument
was the contract concentrates the mind. I should add that I went
to business school under a contract of that kind back in 1971
whereby I was due to repay to ICL the cost of sending me there
if I did not work for them for 18 months, which meant that I did
not seriously consider joining anybody else, but equally ICL looked
and found me a really good project to do when I went back and
I got hooked and I stayed for three and a half years.
Chairman: This has been very helpful
and if we need to, we will come back to you, Mr Virgo. We are
most grateful for the time and trouble you have taken both in
your presentation this morning and in the evidence you gave us.
Thank you very much. It is a very good start to our inquiry. You
have probably caused us more problems than we have solutions for.
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