Examination of Witnesses (Questions 40-59)
3 FEBRUARY 2004
MR NICK
MACPHERSON,
MR ROB
SMITH, MR
PHILIP COX,
MR MARK
GIBSON AND
MS ROS
DUNN
Q40 Angela Eagle: I am worried having
heard some of the answers today. It is very easy to justify the
status quo by saying that excellence and the existence
of excellence is somehow unchangeable by government policy. Your
lack of willingness to think that there might be some strategic
planning aspect that might change things worries me enormously.
You are essentially sitting there and saying that the distribution
of regional wealth which shows that there is a London and the
South East ring where there are hugely more beneficial levels
of earning, higher quality jobs, higher levels of earnings, higher
living standards, just has to be accepted. Unless you have a more
open mind about changing what is already there and, dare I say
it, re-distributing higher quality value added jobs to the NorthI
do not mean taking them away, but I do mean trying to concentrate
in an era of growth on creating those kinds of jobs in the regions
that are laggingyou are not going to make very much difference.
You may meet the PSA target because it is actually quite a timid
target, but you will not make much difference in these huge disparities
that there are. That seems to me a tragic lost opportunity. You
must think more radically about what the possibilities are, surely.
Mr MacPherson: I am glad for your
support around thinking radically. I think we do need to think
radically. I do think the whole skills issue is critical to this
agenda. The evidence supports the judgment that, for example,
looking at the GCSE achievements, the North is still lagging.
Q41 Angela Eagle: Let me give you the
figures: the proportion of adults with no qualifications is 50%
higher in the North East and West Midlands compared to the South
East. The proportion of adults with degree level qualifications
is 50% greater in the South East and London than the North East.
At the end of 2000, 58% of 16 and 17 year olds in the North East
remained in full-time education compared to 70% in London. You
are not going to make very much difference to anything unless
you tackle those figures, are you?
Mr MacPherson: I think you are
right. We do need to tackle the figures. The encouraging thing
is that some of these gaps are narrowing in terms of skills. There
has been an encouraging shift, certainly over the last five or
six years. However, you have identified perhaps the biggest challenge
here which is why the Government is putting a large amount of
resources into skills. This is not some simple problem; it reflects
many, many, many decades of history. That does not mean we are
complacent about it. There are interesting issues around, for
example, migration.
Q42 Angela Eagle: I was just going to
mention that. The North does train and educate a lot of graduates
who then move south. London has far more graduates in it than
it actually educates. This is about quality of life and where
the good, high value jobs are, is it not? If there are good, high
value job opportunities in northern areas, people would be much
more likely to stay in the towns such as Leeds or Liverpool where
they were educated.
Mr Smith: Could I make a comment
about that because I think the work on this PSA is actually based
on the assumption that those sorts of disparities are not acceptable
and we need to do something about them. I think it is important
we say that because that is what we are at. Obviously there is
an issue about how radical we are in our thinking and how far
ministers are prepared to be radical and that is part of the work
of the PSA.
Q43 Angela Eagle: You can help them be
radical; you can think radically. That is part of your job too.
Mr Smith: I agree. I do think
in terms of graduates and where they live and the movement of
skills, clearly the environmental issuesthe general environmentare
hugely important. There certainly has been a renaissance in our
cities. In all of our big leading regional cities there has been
huge transformation in terms of infrastructure. There has been
huge transformation in terms of cultural and night life and those
kind of things. Many young people enjoy living in those cities
more than they did. There is an issue about how far some of the
disadvantaged areas are benefiting from the general prosperity,
and that is a problem. However, there has been a renaissance in
the cities. I think there is anecdotal evidence that more people
with skills are staying because they enjoy the cities and the
kind of living environment they can enjoy. I worry sometimes that
the statistics are not catching up with some of these trends,
to be honest.
Q44 Angela Eagle: I agree with that and
clearly we all agree that you have to get more regionally based
statistics, but there is still an issue here about what is called
the spatial division of labour which I think is a posh economist's
way of saying that all the high value added managerial or interesting
jobs still tend to be clustered down South and we need to create
more of those jobs up North. Do we have to wait for the market
to decide it has to go there or is there some kind of direction
that government could take, not least with its own funding streams,
to begin this transformation? That way, surely you avoid the overheating
in the South and some of the environmental problems that are caused
there, and get a more effective growthas you were saying
at the beginning of the evidence sessionwith less worry
about hitting overheating problems and causing property booms
and various other things that the South is experiencing with virtually
full employment.
Mr MacPherson: I think there are
some really interesting issues here. One is coming out of evidence
which the Lyon's Review has published in relation to moving jobs
from the South East. It is striking that re-location works best,
not so much where you are moving big public sector processing
factories, but ones where you are actually moving senior jobs,
often to a cluster, where you can actually get a bit of a clustering
effect which will make that labour market more attractive. This
is important. I do not think that demand management will necessarily
solve the problem.
Q45 Angela Eagle: I am not suggesting
simply that.
Mr MacPherson: Obviously funding
is relevant and where the funding goes. This is almost certainly
as much a supply-side issue as a demand-side one and we do take
this very seriously. We are looking incredibly hard at the supply-side.
Skills very much comes into it. There is an issue about devolving
decisions around skills and some pilots are taking place with
the RDAs and the local Learning and Skills Councils. No doubt
there are more and better things we can do.
Q46 Angela Eagle: The Treasury seems
to be very focused on productivity as the main cause of this problem,
but it actually seems to me that quite a lot of this issue is
in the employment side, particularly quality of employment. I
noted what you said and we all welcome it, that employment levels
in generally are improving faster in the North, but we also have
to look at the quality and the type of jobs that are being created,
do we not?
Mr MacPherson: The market works
in such a way that productivity is a proxy for wages. There is
a labour market dimension to this, but the biggest source of the
divergence is productivity. The flip side of productivity is wages
and salaries.
Q47 Angela Eagle: Also whether you have
high value jobs. If you have a lot of labour intensive, service
jobs with low pay, you are not going to create the same platform
for economic lift-off as if you have jobs that have high value
added.
Mr Gibson: You are entirely right
and this is a genuine area for debate about how much government
spending is regionally based. I think it would be wrong to leave
the impression that the Government does not use a number of instruments
quite actively to do exactly what you are urging it should do.
A good North West example is the investment in the chlorine plant
at Runcorn, with a £390 million investment supported byin
round numbers£50 million of DTI funding. That was
a really tough decision for us. It consumed a lot of the regional
selective assistance budget but we did it because chlorine is
an investment there, it is high value added, high technology,
and we thought it was entirely right. The DTI is often criticised
for the help it has given in the past to Nissan in the North East.
Our view is that that assistance has been justified because, by
and large, Nissan is a high quality car maker with great productivity
in that plant, making good quality cars that are wanted by consumers.
We want to shift regional selective assistance to having precisely
the emphasis that you want it to have, which is high value added,
high skill jobs rather than large numbers of low value added jobs
in food processing or whatever it might be. That is a deliberate
shift in policy and it is an instrument that the Government uses
quite actively and deliberately to support and create jobs on
a regional basis.
Q48 Mr Mudie: The Treasury document Productivity
in the UK, page 15, says, "The variations in the UK's regions'
skills compositions have the major factor." Coming back to
a point that was made, that the spending review in the next budget
will demonstrate a regionalisation of mainstream budgets, we will
wait and see. As this was 2001, can you tell us how that was reflected
in the budget since 2001? I will set the scene for you. It is
difficultand I am sorry to take it up with you as Education
is not at the tablebut as the document says, that skill
shortage is reflected in lower GCSE results, A levels, degrees
as well as other skills. The major way to deal with that would
be more resources going into schools, further education and higher
education in the regions. Has that happened?
Mr MacPherson: The main funding
instrument for schools is the local government formula. As you
know, that changed last April with quite a lot of consequential
effects. It unambiguously shifted resources. We have heard a lot
about those schools which lost money, but the flip side of that
must be that a lot of schools gained money.
Q49 Mr Mudie: With all due respect, Mr
MacPherson, let us not go down that road because I understand
the differences in local government spending et cetera, et
cetera. Can you say unequivocally that in the last budget
the Education Department took deliberate decisions to spend more
in further education in the regions that are lagging, more in
higher education and actually tilted money in terms of schools?
I have not noticed it in Yorkshire.
Mr MacPherson: The local education
authorities clearly intermediate, but the actual funding changes
which came into effect as a result of the last spending review
unambiguously help the more deprived areas. At the same time I
think the health formula has changed.
Q50 Mr Mudie: So you had an agreement
somewhere in your co-ordinating committee with the Education Department
that they would twist spending and put more money into the regions
and into the further education colleges in the regions that are
lagging behind in terms of skills. Can you supply us with figures
for each year, and maybe even a minute of when that decision was
taken because I do not think it was taken? Will you undertake
to do that?
Mr MacPherson: What I am happy
to do is to provide you with a note on how the last spending review
helped schools in more deprived areas. Schools are funded on a
local basis; they are funded on the basis of local education authorities.
Since regions are, in a sense, the sum of those areas, I am happy
to provide you with a note[2].
Q51 Mr Mudie: Mr MacPherson, if you are
actually our representative and this is the team that is going
to deal with these regional disparities, that answer is not good
enough. Do you want to rescue him, Ms Dunn, because I am looking
for a specific decision that said that these regions need more
money going into their schools so the children get better qualifications,
more money going into further education, and even a different
decision with higher education, that they actually start doing
something about social exclusion by attracting children from their
own locality which does not seem to happen again in Yorkshire.
Mr Cox: I wonder if I may come
in here. In our memorandum we discussed the position on skills.
We have been doing some work to understand why the skills performance
in some regions is lower than in others. We have been talking
to DFES quite a bit about this. What we set out in the memorandum
is suggesting that the issue is not necessarily to do with the
amount of funding that is going into schools or further education
colleges, it is actually maybe due to other factors.
Q52 Mr Mudie: For example?
Mr Cox: We talk about places based
factors for example, about the extent to which the circumstances
in which people find themselves, the incentives they may have.
Q53 Mr Mudie: So are you suggesting to
me that the inner city schools in my patch, for example, will
be turned round without any additional resources? Are you also
suggesting that there are other ways you can get these children
to GCSE standard, et cetera?
Mr Cox: I think what I am suggesting
is that we need to look very carefully about why people are underperforming
in schools. I think it is the case that in the North East their
performance at the very early key stages is very, very good indeed.
Q54 Mr Mudie: Yes, but we have been in
government for how many years now and you are still leaning across
the table and saying "What are we doing?" This document,
for example, on skills said that skills was the major reason.
The only thing, when you turn to what we are doing in here, there
is reference to a memorandum of understanding between the Learning
and Skills Council and the RDAs. That is the only thing in this
document that is specific in terms of helping deal with skills
shortages. This is five years old. Spell out half a dozen things
we are doing in terms of skills shortages and skill disparities
in the regions that are happening now in mainstream or RDA policy,
because I have not seen any.
Ms Dunn: Can I come in here?
Q55 Mr Mudie: Are you going to deal with
the five?
Ms Dunn: I hope so. I did not
offer to come to Nick's help earlier because unfortunately the
figures I have in front of me give spending per head for education
in total but they do not break them down between schools and FE
and so on.
Q56 Mr Mudie: That is an important point.
You are speaking for Education; Education do not have to be here
to answer questions directly so you are speaking for them. You
have to look in that paper which suggests to me that there is
not a live debate decision being taken on what is called regionalisation
of mainstream expenditure. Has such a decision been taken?
Ms Dunn: I would like, if I may,
to step back a bit, put it in context and make a plug for something
that has not been mentioned yet, and that is regional economic
strategies which are produced within the regions by the RDAs in
consultation with a lot of other regional players.
Mr Mudie: In the document the National
Audit did on RDAs, education authorities are not part of that
strategy, they are not mentioned. Neither are higher or further
education unless it is through the Learning and Skills Council.
If that is the way you do a regional strategy and these key players
are not at the table, then I think we are missing a lot.
Q57 Mr Beard: If they are not at the
table, who is actually deciding what skills are being taught at
the further education colleges?
Ms Dunn: I want to go on from
my plug for regional economic strategies to mention regional skills
partnerships which are being developed. It is well over five I
hope. They are being developed and will start to be rolled out
from April 2004. We will be able, I am sure, to let the Committee
have details of each of the regional skills partnerships once
they are finalised. I can tell you that regional skills partnerships
are being developed in consultation with a number of regional
players: the RDAs, the Skills for Business Network, the Small
Business Service, the local Learning and Skills Councils and JobCentre
Plus are all working together.
Q58 Mr Mudie: Where is the education
authority? If we are actually saying that GCSEs and A levels are
the start of the problem, what is the education authority? Where
are further and higher education?
Ms Dunn: The process of developing
regional skills partnerships has been done in much wider consultationand
I think that will become evidentincluding with local further
education colleges and so on. I think there is a case for saying
that you cannot just look at skills in isolation from all the
other things that impact on people's ability to become skilled,
people's desire to become skilled and then the jobs that would
flow from that. The point about the approach that has been taken
with regional skills partnerships is that it is designed to look
at skills development in the regions in two ways: firstly, from
a regional perspective, what the region itself thinks it needs
and it attempts to look at that in the context of the region's
wider view about what its economic strategy for growth and prosperity
should be. What I think is important from our point of view is
that it would be the first time that there would be an approach
to this issue that starts from the region and does not start from
government, at the centre, saying what that strategy should be.
Q59 Mr Mudie: What about the other four?
Are you going to write to me on them?
Ms Dunn: We do mention some of
them in our memorandum. We mentioned the Skills Strategy which
was published by the DFES in July, including a number of policies
designed to overcome market failures, particularly in deprived
areas. We mentioned: Education, Maintenance Allowances, Adult
Learning Grants, Modern Apprenticeships, Centres of Vocational
Excellence and of course we would also mention Employer Training
Pilots as a policy response that seems to be having a very positive
effects.
2 Ev 186 Back
|