Uncorrected Evidence 874

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To bepublished as HC 862-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

COMMITTEE OF PUBLIC ACCOUNTS

WEDNESday 25 JANUARY 2006

EMPLOYERS' PERSPECTIVES ON

IMPROVING SKILLS for employment

Department FOR education AND SKILLS

MR DAVID BELL

LEARNING AND SKILLS COUNCIL

MR MARK HAYSOM

Evidence heard in Public Questions 1 -103

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Committee of Public Accounts

on Wednesday 25 January 2006

Members present

Mr Edward Leigh, in the Chair

Mr Richard Bacon

Angela Browning

Mr David Curry

Mr Sadiq Khan

Sarah McCarthy-Fry

Mr Austin Mitchell

Kitty Ussher

________________

Sir John Bourn KCB, Comptroller and Auditor General,National Audit Office, gave evidence.

Ms Paula Diggle, Second Treasury Officer of Accounts, HMTreasury, gave evidence.

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL

EMPLOYERS' PERSPECTIVES ON IMPROVING SKILLS FORemployment (hc461)

Examination of Witnesses

Witnesses: Mr David Bell,Permanent Secretary, Department for Education and Skills, and Mr Mark Haysom, Chief Executive,Learning and Skills Council, gave evidence.

Q1 Chairman:Good afternoon and welcome to the Committee of Public Accounts. Today we are dealing with the Comptrollerand Auditor General's Report on Progress on Employers' perspectives on improving skills for employment. Wewelcome Mr David Bell, who is the Permanent Secretary in the Department forEducation and Skills - I think it is your first time here as PermanentSecretary, so we congratulate you on your appointment - and Mr Mark Haysom, whois Chief Executive of the Learning and Skills Council. I should emphasise to start with that thisis a report on employers' perspectives, so my questions to you are based onwhat employers think of your work. Perhaps you can start by looking at the number of people who areinvolved in this process. We read atparagraph 1.2 on page 22 of skills brokers, sector skills councils, Train2Gain,and other people are mentioned in the report. Is this all adding to the bureaucracy as far as employers are concerned?

Mr Bell: This is a complexlandscape, which involves individual institutions, whether colleges oremployers; it involves national bodies like the Sector Skills Council, the LSCand so on. There is a responsibility onus to look at that national and regional/local framework to try and simplify itwhere possible. When it comes down tothe individual employer, whilst they are interested in that wider landscape,they are interested in having the right advice at the right time. Therefore, the notion of brokers, people whocan sit down with them and identify what is available locally and identify whatis right for their staff, is what really matters. It is about trying to simplify the infrastructure around thiswhole area, but for the individual employer, they want somebody who they canget in touch with, who can help them navigate their way through the system.

Q2 Chairman:Do you really think these organisations will bring the perspective thatemployers want?

Mr Bell: That is the whole issuearound this report: to what extent do employers influence the nature of theoffer? They do that in all sorts ofways. We see the involvement of employersacross 25 sector skills councils, so at that kind of level you have theengagement of employers in influencing what is right for their sector. Clearly, in the LSC, in its organisation,employers are heavily involved at that level. At the higher level we hope that employers are influencing what happensand what is on offer. At the locallevel there are important relationships that employers can form with, forexample, local colleges. One of theissues picked up in this report is the responsiveness of colleges to enableemployers to have what is available for them. Nobody can be complacent on the back of this report, but I think thereis a sense of employers welcoming the efforts that have been made to ensurethat their interests are considered whether planning at national level - the sectorskills councils and so on - right down to what happens locally, so thatsomething is available for them in their local area.

Q3 Chairman:Would you look at part 3, headed Employers want incentives to train theirstaff more. Look at page 33,paragraph 3.3: "Employers have mixedviews on whether the government's priorities for skills training would benefittheir business and many are not convinced that the direct benefits to theirbusinesses warrant their investment in qualifications up to level two." Is this a problem for you? Can you expect businesses to give time offto their staff, school-leavers, to train, when these businesses often do notsee any direct benefit to them?

Mr Bell: Perhaps, Mr Chairman, Ican put that in a slightly wider context about the whole approach. Mark may want to comment after I havefinished. Undoubtedly, the Governmentis placing a lot of emphasis on what one might describe as the level two threshold,in other words, seeing that as the platform of skills and knowledge thatemployees of the future are going to require to come into the workplace. There are economic benefits in that,clearly, to employers. They want peoplewho have got that baseline of skills to be able to take their place in theworkforce. All the evidence suggeststhat without that level two platform, employees are going to find it verydifficult to get employment. I wouldalso make the comment in passing that if we look to the future, that level twois clearly only a minimal, given the international challenges we face, andmodern economies are investing in level two and above. There is also a social benefit. All the evidence we have in relation to thelikelihood of finding employers in the first place, to levels of health,deprivation, and so on, suggests that a good investment at level two ensuresthat there are social as well as economic benefits. The report does, however, state elsewhere that, while the view isnot universal, employers do understand that rationale for strong investment atthe level two platform.

Q4 Chairman:What they actually say, if you look further on in the report at paragraph3.6: "A number of stakeholders havesuggested revising public funding to promote increased take-up of training atlevel three, for example by sharing the cost with employers for level threetraining in high priority skills."

Mr Bell: They do, Mr Chairman,but perhaps I can also point out paragraph 14 on page 11: "Many employers and other stakeholdersrecognise the social benefits of much of the education and training foremployment that receives priority funding ..." I do not think that we should characterise this as an either/or; wereally should not, because in relation to the level two, the importantplatform, there is a strong recognition from Government about the need tosupport level three, because it is on that basis that you get the higher skillsand the higher value. The otherargument for shared responsibility at level three is that that is where theemployer gets the added value: if you have a highly trained workforce at levelthree and beyond, those are the sorts of people that will bring added value toyour business.

Mr Haysom: If I can add to the discussion about levelthree in particular, level two we talked about on a previous occasion when I camebefore this Committee - and David has articulated this very clearly - thereseem to be some misunderstandings in the level three discussion over time. It seems to be suggested that all of ourfunding somehow is going to level two and that we have somehow stopped fundinglevel three. I have brought along somefigures in which I thought the Committee would be interested. I think we need to focus our attention onadults: the Learning and Skills Councilfunds across the country to the extent of Ł457 million at level two, and Ł418million at level three. I share thatwith you because it demonstrates that there clearly is a commitment to levelthree. If I had more time, I would takeyou through this, but the very interesting thing is how that varies acrossregions; level two and level three has a greater prominence in differentregions at different times. There isclearly investment in level three. Theother thing to point out about the level three discussion is that it is aboutwho pays and to what extent more than anything else. It says very clearly in the report that employers are looking forgovernment to subsidise training at level three. As I have just demonstrated, the Government clearly doesthat. The Government is now interested,as we are interested in doing in testing for them, is to find out the extent towhich employers will contribute. Thatis why there are going to be two level three pilots later this year. There is one in the West Midlands, and asimilar activity in London as well, where we are going to be testing the extentto which employers are prepared to contribute towards level three.

Q5 Chairman:Can you please look at the risk, Mr Bell, that you might be providing fundingbut it was done anyway. If you look atparagraph 3.5: "There is a risk thatsubsidies for first level two training may be used for training by many of theoverall minority of employers who would have undertaken it anyway."

Mr Bell: Mark may wish tocomment on this, given the employer training pilots and this whole concept ofdeadweight, in other words the public purse paying for what employers would payfor themselves. The important point tomake is that the ETPs, the employment training pilots, are just that; they are pilotsto find out if this is happening, and therefore when we get to the roll-out ofthe programme nationally to learn some of those important lessons. It is important, however, to say that thereare about 26,000 employers that took part in these arrangements, and a largenumber, 14% of employers on that programme at the pilot stage had no priorinvolvement in public training. Thereclearly were benefits in investing in encouraging people to do that level oftraining. The vast majority ofemployers found the fee or subsidised training an attraction for gettinginvolved. In other words you have gotpeople to participate in a particular way. As you have said, there was a degree of deadweight amongst employersthat may already have put that money in; and we need to think carefully abouthow we avoid that, recognising that it cannot be avoided altogether when theprogramme is rolled out across the country.

Q6 Chairman:I am interested in employers' attitudes. This is illustrated by figure 8 on page 22 - the website. There were ten employers who were questionedabout the Awareness website, especially designed to help them; and only one hadever heard of it.

Mr Haysom: I think it isprobably best if I pick that up since it is a Learning and Skills Councilwebsite. I am not sure that ten isrepresentative.

Q7 Chairman:No, I am not saying that, but they happened to go to ten and only one was awareof it.

Mr Haysom: Yes, absolutely. There are several points about this. The main point is that we have not as yetstarted aggressively marketing this particular website because there is stillwork to be done. It says elsewhere inthe report that we need to make sure we take account of employer feedback, andwe are building that into the report. We are also working with the Department on the register of learningproviders, to make sure that is aligned; and we are also working with theagenda change, which has an element of it that impacts on this, which is thequality market. Until those things aretogether it does not make any sense to aggressively market it. Having said that, when you look to see howit is used and you look to see the links from the business link website, youcan see good traffic already going on.

Q8 Chairman:Have you seen, Mr Bell, the Financial Times for 24 January: "Business groups push tax breaks as best wayto raise skill levels: Businesses areurging the government to introduce a new tax break for training, arguing thatit would be the most effective way to raise the skills of the workforce. Have you seen that article, and do you have anycomment?

Mr Bell: I have not seen thatspecific article, but I am aware of the debate. I think it is a very interesting question here now, about how youincentivise - and I use that word advisedly - employers to participate in training. We have asked Sandy Leitch, who did thefirst stage review of skills to consider precisely this question in the secondstage report: what is the balance between incentives and voluntarism on the onehand, right the way through to compulsion at the other, with incentivessomewhere in between. At the momentdifferent ideas are being considered. On a personal level I think that this is quite a difficult call. Employers do legitimately say, "Give us someincentive to do this", and tax breaks may be one way of doing it. On the other hand, you might say, "ifemployers are not doing this, should there be a degree of compulsion at somestage?" I think that there areinteresting arguments either side of this, and we look to Sandy Leitch toadvise us further.

Q9 Sarah McCarthy-Fry:Can I move to part 2, Employers want training that meets their businessneeds. In paragraph 2.3 on page 26,"Although they are offered a choice of quality assured providers, employersengaged in Employer Training Pilots told us that they would prefer to nominatewho delivers their publicly funded training." Why do you think that is?

Mr Haysom: I think employerswant to be in control of who trains their staff, and I understand thatentirely, having spent most of my life running businesses. I would recognise that entirely. That is very much what we are trying tointroduce with the national employer training programme.

Q10 Sarah McCarthy-Fry:That does seem a little broad. It isself-evident they wasn't to be in control of whom, but have you any insight intowhether it is the standard of the training delivered or what it is that makesthem want to pick their own providers?

Mr Haysom: We have learnt anawful lot through the employer training pilots, as you can imagine. We know for instance that they want to makesure that training is delivered flexibly, at a time and place that suits them,and those are all very important parts of this. We also know - and again from personal experience I know - thatyou choose training providers on the basis of specialist knowledge and skills.

Mr Bell: There is a reallyimportant role for employers here in driving demand, particularly in relationto further education colleges. We knowthat the picture is not universally positive in relation to what further educationcolleges provide for employers, and I think that employers have to be reallypushy on that front and say, "we need this, this and this". I do not think that there is an absolutelyideological objection to using public services in relation to further educationcolleges, but business has taken a very pragmatic view, as paragraph 2.2 says -"If they do not provide what we want, we are not going there." That acts as a real incentive and should actincreasingly as an incentive to colleges to make sure that what they provide isthen going to be chosen by employers. In some ways I urge employers to be even more demanding of what it isthat colleges provide.

Q11 Sarah McCarthy-Fry: How are you monitoring whether colleges areproviding what employers want?

Mr Bell: A couple of years agoOfsted was asked to look at this issue and colleges' responsiveness toemployers. Ofsted looked at particularexamples and particular areas. It wasfound that in some sectors of the economy colleges generally were moreresponsive than others. For example, ininformation technology colleges were generally seen to be more responsive thanthey were on construction. We canmonitor that through mechanisms such as inspection. We can also pick that up through the Learning and Skills Counciland the regional/local operation, because it is very important that employerswho sit on the regional/local bodies say, "I am sorry, this kind of provisionin colleges in our area is not meeting our needs". Do not forget that the LSC does a lot of gathering of data andevidence from employers to track that, so it is a very important issue thatcolleges have a demand pressure on them.

Q12 Sarah McCarthy-Fry:In a reply to the Chairman you were extolling the virtues of the skills brokersthat were going to work with the employers, and then going they are going toact as a liaison between the providers. When we go national on this, are you satisfied that you have done enoughmonitoring of the effectiveness of the brokers in the pilot programme that theyare going to be able to do this huge task?

Mr Haysom: I am going to answerin much the same way as I did before; there is a huge amount of learning out ofthis. David is absolutely right thatthe brokerage role is key on this. Weare going through a contracting process at the moment to make sure that weselect people on the basis of the experience that we have gained. We want experienced people; we want peoplewith massive credibility as far as the business community is concerned, and wehave got top criteria from national standards that we have established in orderto measure that.

Q13 Sarah McCarthy-Fry:Can we come back to page 22, paragraph 1.2, because some of these brokers willbe based in colleges. "College-basedbrokers need to counter the risk that their advice to employers might emphasisecourses provided by the college ..." Casestudy 1 shows that the danger is that they are going to push the courses thattheir college provides, because they are based in the college, rather thananything else. What kind of safetymeasures do you have in place to prevent this?

Mr Haysom: Very clearly, part ofthe contract we will have with brokers is that we will be insisting that theyare impartial in their advice, and we will monitor it through managementreports, through the referrals that they make, and so on, to watch what ishappening. We will be watching that allthe time.

Q14 Sarah McCarthy-Fry: Are you planning to have some kind ofaccreditation scheme?

Mr Haysom: Yes. As I say, there is a national qualification,a national standard that they have to meet.

Q15 Sarah McCarthy-Fry:Where are these brokers going to come from? How many pilots did you do?

Mr Haysom: We did twenty overdifferent periods and in different parts of the country. An awful lot of pilots have gone on.

Q16 Sarah McCarthy-Fry:Even so, when you roll it out nationally you are suddenly going to have to findthese brokers. How are you going tofind the people -----

Mr Haysom: You are absolutelyright to focus in on this area because it is a hugely important one, one thatwe have spent an awful lot of time looking at. We are going through the process now of tendering. We are confident that we can find peopleacross the country who have sufficient experience. Business Link is obviously a major resource here as well.

Q17 Sarah McCarthy-Fry:On page 23, paragraph 1.5 mentions the Union Learning Representatives and theUnion Academy, which, from my own experience I know has been a tremendoussuccess in encouraging the employees to ask their employers for training. I know we are looking at this from anemployer perspective, but if the drive is coming from employees, then that isvery useful. Who is funding this UnionAcademy? Is it funded by the TUC or theDepartment?

Mr Haysom: We put Ł11 million,as you can see, into the Union Learning Fund, and over the course of ourinvolvement with them - we started quite modestly with the Union Fund, and Ithink we had something like 14,000 individuals who came forward for learning.We are expecting that to be over 100,000 now in 05/06, so there is Ł11 milliongoing into it.

Q18 Sarah McCarthy-Fry:Does it then come under the remit of the Learning and Skills Council?

Mr Haysom: We would ask forfunding, yes.

Q19 Sarah McCarthy-Fry:The Chairman asked you about the economic benefits to employers of trainingemployees to level two, and it also comes out in the report that employers maybe reluctant to train - although they are not paying for the trainingthemselves, the employees' time is a huge constraint. I have worked in business myself, and I know that the difficultyis if you send people out for training you are losing the time when they couldbe working for you. I found that whenbusinesses are getting accredited for other quality issues, very often,particularly in a manufacturing industry, where people have always done a jobthe same way, it is not until you come to get accreditation where you arerequired to read a drawing perhaps that you find some of your longstandingemployees do not have the skills required to read a drawing even though theyare perfectly capable of doing the job. Is this a route that you could use to emphasise to employers therequirement; that although people are doing a job they need basic levels?

Mr Bell: Absolutelycorrect. It is fair to say from the firstLeitch report, and looking ahead, that the level of expected skills, even ofthe existing workforce, is rising all the time, so as well as worrying aboutwhat we are going to do in the future, those in work need to be trained up to ahigh level. That is why I would notwant to draw a very sharp distinction between level two or level three, becauseclearly in the example you cite for the employer getting that level twoplatform is absolutely crucial to business success. If that person cannot read the drawing properly, then that willhave a direct impact on the employer. It is important again to emphasise the point: level two investment - the basic platform - accompanied, as Marksaid, through serious funding for level three for higher level skills.

Q20 Sarah McCarthy-Fry:Green enterprise was mentioned very much, and the whole key about greenenterprise is that you have to have flexibility of workforce.

Mr Bell: Absolutely.

Q21 Sarah McCarthy-Fry:It is no good having one person that can do one thing; they have to be able tomove around.

Mr Bell: It is veryinteresting. When employers were askedin this report about skills shortages, one can identify particular sectors ofthe economy, but also employers, as we know, want more generic skills - theability to transfer your knowledge from one area to another and the ability towork in a team - all those generic skills that are terribly important to be aflexible employer. That is anotherimportant reason why we do not just look at the investment in level two andlevel three, as it were, for 16-plus students and for adults, but we also thinkof how to generate those sorts of attributes in the employees of thefuture. Therefore, it seems to me thatthe schools system has an important contribution to make to ensure that we arepreparing workers of the future to be much more flexible, given that that isthe nature of the economy that they are going to grow up into.

Q22 Angela Browning:Mr Haysom, I understand that the funding streams from the Learning and SkillsCouncil for FE colleges reflects the priority that you give to the types ofcourses they run. For example, it wasrecently described to me as rather like a traffic-light system, and thereforesome of the practical skills in which we have shortages, for example engineering,would be in the green light, whereas A levels now appear in the amberlight. You are shaking your head, and Iam delighted you are shaking your head. Can you briefly outline how your funding streams are going to influencethe priorities in FE colleges?

Mr Haysom: We have talked alittle about this on previous occasions, have we not? The way that we envisage this working, and the way in which itis working to a greater extent already, and will work even more in the future,is that we want to be able to take from sector skills councils, regional skillspriorities and local employers as much information as we can gather aboutdemand. Then we want to sit down andhave a series of intelligent conversations with suppliers, colleges andothers. We want to see where we can getto in terms of shaping what happens in colleges and other providers againstthat demand. There are priorities, asDavid has clearly outlined and as I have already referred to. There are some things in the lowerpriorities but one is not A levels - absolutely not.

Q23 Angela Browning:There is less money though, now.

Mr Haysom: No, that is not true;more and more money has gone into training and education for young people tothe extent that I recall on a previous visit here that there was quite a lot ofquestioning about the impact of that - the growth of funding for young peopleand the impact then on adults. It iswrong to say there has been a reduction for young people.

Q24 Angela Browning:I may come back on that, but I will not delay the Committee on it at themoment. How do you make sure that whatis perceived nationally to be a skills shortage is really reflected at a locallevel? I know of women in theirthirties in my own Devon constituency going to train for midwifery, havingpreviously trained as nurses, only to find at the end of the day that there areno midwifery vacancies in Devon. Theyare unable to move because of family commitments, and only finding that out atthe end of a year's training. How areyou going to marry up what is seen as a national problem or national skillsshortage and really targeting it in local areas?

Mr Haysom: The way we are notgoing to do it - if I can come at it from that angle - is to sit in London or ahead office in Coventry and somehow produce a perfect map of skills shortagesand training provision across the country. That is not the way it works. The way this has to work is the way I have just described; we have totake all of those inputs from the national level, the regional level and thelocal level, and then to really see how that works in the local environment;and then to work it through with colleges and other providers. That does not take you however to a positionwhere every course that is provided in every college in the land is going tolead to a positive employment outcome in that location, because people in Devonmay indeed wish to train to be a midwife and then go elsewhere in the country-----

Q25 Angela Browning:They may, but the problem was family commitments and they were not free totravel.

Mr Bell: There is a question, isthere not, about the initial advice given to the returners? If it was known that there were not going tobe employment opportunities locally people might have made a different choice.

Q26 Angela Browning:Exactly.

Mr Bell: There is an importantissue there.

Q27 Angela Browning:Mr Bell, you talked about generic skills, and we are all familiar with what arebasically life skills and interpersonal skills. Many, many employers say these are lacking, and I quite agreewith the role the schools play. However, yesterday we had an announcement in the House about welfarereform. Quite clearly, into the marketplace will come a lot of people, including people with disabilities who maynever have worked and who will not have the benefit of the schools having aninput; so how will you tackle this problem? Unless there is a qualification at the end of the course now, it isvery, very difficult to get the funding for people to attend it. Even young adults with disabilities for thesocial services package are having their funding cut, so how are you going todeal with this group of people as well as the existing people? We are talking about generic skills that areimportant in the workplace, but there is no formal qualification at the end ofit.

Mr Bell: Mark may want tocomment in terms of provision for those with disabilities. A more general point to make, however, isthat in giving people those level two skills, the platform that I mentionedearlier, that does include of course development of those more genericskills. In other words, you areencouraging people to be able to communicate effectively in such training; youare encouraging people to participate with others, and to do all those generalgeneric things that are important. I donot think you should just see getting people to the level two baseline assimply about a set of knowledge; it is also about the attributes that onerequires to be a productive employee in the future.

Mr Haysom: I recall that we talkedabout this, but there should not be a situation where there is not suitableprovision for all people in communities, with or without disabilities. If there are examples of provision being cutthat impact on people's disabilities, I need to know about them. I know that individual courses have changedand that one provider has stopped provision, and that those people may have togo somewhere else; but in every single part of the country there should be amap of provision for people with disabilities.

Q28 Angela Browning:I am particularly focused on what FE colleges provide in this area, where nowsocial services are being asked to pick up the element of the package thatpeople with disabilities were gaining in an FE college; when of course socialservices do not have the money in the existing budget simply to pick up thattab. That is the reality in myconstituency.

Mr Haysom: I am not aware ofsocial services being asked to pick up that tab. I am aware of the opposite happening: an awful lot of costs previouslyborne by other parts of government have over time switched to us to fund. A review published late last year talksabout that aspect of it and about seeking re-addressing those sources offunding.

Q29 Angela Browning:I will write to you on that specifically, but my broader was that in the lightof yesterday's announcement we do want to see more people with disabilitiesgetting back into work, but I am also concerned about people who have neverbeen in work and are being introduced to the workplace in their twenties andthirties with quite complex disabilities, particularly in communication. Will the training needs that will inevitablybe needed by employers considering taking those on, whether it is making themready for work or whatever, be in place?

Mr Bell: Colleges have quite agood story to tell when it comes to working with young people, and adults withdisabilities in fact. I think that thecolleges are well placed to do that. You made a passing comment about employers being prepared to take thosefolk on, and that is a more significant question, because employers are alwayshaving to make an assessment of what is going to be in their interests in termsof the success of their business; and they may be sceptical, frankly, abouttaking some people back, and I do think that that is one of the questions to beaddressed by colleges, to ensure that when they are talking to local employersthey say, "we have been training these people and they could be productiveemployees for you in the future".

Q30 Angela Browning:Turning to the small business, particularly referencing paragraph 28 on page14, I wanted to talk about the challenges for small businesses intraining. One of the difficulties forreally small businesses is that as they increase the number of people theyemploy, including usually the principal in the business, it is critical thatpeople can multi-skill. Very few peoplein a small business have the luck to be doing just one job in the course of aday. Their training needs are veryoften to multi-skill the existing workforce, which may be very smallindeed. Are your brokers going to beable to deal at this micro level; and how will this affect costs? I notice in the report, quite rightly, thatit says the broker could identify shared costs between different employers, butare you going to regard the micro businesses collectively, or will they haveindividual assessments of their multi-skilling needs?

Mr Haysom: They all have to haveindividual assessments, do they not, because every business is different andevery business needs to be understood? If a broker is going to be successful, then they truly have tounderstand how they can help to make a bottom-line impact to that business, andtherefore have to understand the nature of what could be provided to make areal difference to that business. Ifthat can be brought into co-operating with other businesses, so much thebetter, but the starting point surely has to be in helping that individualbusiness?

Q31 Angela Browning:You are not going to get the economies of scale with this group of people.

Mr Haysom: It is harder, is itnot? That is absolutely the case. This is the group of employers that is thehardest to reach, and it is the group that most urgently needs reaching. Again, the learning out of the pilotssuggests that there are ways of achieving that, and we have got some greatexamples of us being able to achieve it.

Mr Bell: To reassure you, a lotof the provision under the employer training pilots was targeted at thecompanies with between 1-49 employees, and 70% of those that participated werein that category. They actuallyreceived more assistance and higher rates of wage compensation. That is just one example of how thestrategies together are trying to focus particularly on the needs of smallbusinesses. I hope you will bereassured that we are very sensitive to the particular needs of smallenterprises.

Q32 Kitty Ussher: When I go round the larger employers in myconstituency I am repeatedly told by the good employers - and I will come backto the bad ones later - that skills is their main blockage to achievingsuccess; and that if the Government cared about the future of their business,then they would help solve that problem for them. What should I say?

Mr Bell: There is an answer tosome extent in this report about the wide range of ways in which government ishelping employers to improve the skills base, not least the sums of substantialmoney that we have described earlier. We can say to those employers that we are ensuring that more youngpeople are coming through the schools system and are hopefully better preparedto take their place, with higher numbers of them getting the level two platformand above. We would say that there issignificant investment in making sure that the existing employees are at leastat that level two baseline, because without that we could say to them that theyare going to find it really hard to compete. We could also say to them at level three: "We recognise that the real challenge in the future for theircompany and for this nation is to invest in the high-level skills. There is a strong story to tell on the partof government in relation to each of those different categories of today'semployees and tomorrow's employees.

Mr Haysom: Can I add one thingto that? We should also say to themthat we are trying through all of this to listen to them, to really understandwhat employers are seeking, and to make sure that their voices are heardthrough sector skills councils and in all the other ways that David mentionedearlier; and to shape qualifications that are relevant to people, to make surethat they are the qualifications that employers want, and then to fund thosequalifications and then not other things that employers do not want. There is awful lot of really good activitygoing on, but it is a huge, huge task, is it not? That is the other thing that comes through here.

Q33 Kitty Ussher:I do say all of that, but it comes back to, "How you can help my companynow?" Is the answer in the future thatI give them the phone number of the brokerage guy?

Mr Haysom: Yes, absolutely,because there will be a national programme which rolls out in two parts thisyear, and so there will be this programme called Train2Gain, and there will bebrokers who are there to help them.

Mr Bell: It was very interestingthat the Leitch report talked about the tripartite responsibility when it comesto skills development. The individualhas a responsibility to contribute to that. The Government has a responsibility if it wants to create a healthy andcompetitive economy; but the business also has a responsibility. I think it would be good to encourageemployers not just to say "what is government going to do for me?" but to say,"how can you contribute alongside employees and government to become morecompetitive?" That is an importantpoint, just to keep reminding them that the responsibility is shared acrossthree parties.

Q34 Kitty Ussher:Sure. I wanted to pick up on the pointyou made that colleges need demand pressure on them from employers, but itcomes back to the situation that we need these guys; we need more training; weneed skills levels to rise, to make our economy more prosperous. Skills are the biggest potential gap in termsof having an effect on productivity. Itis very easy to blame the private sector, but we need the results, and if theyare not doing it we need to solve the problem. I would say to them, "You should invest because you will reap therewards from it"; but what they are saying to me is, "You have got to make iteasier for me". In terms of investmentin fixed capital, the Government provides loan schemes, particularly indeprived areas, and twenty or thirty years' research has been done into thetype of work that the Government can provide. In human capital there is absolutely nothing, and employers say this tome as well. What would your response beto that?

Mr Bell: You say there isnothing -----

Q35 Kitty Ussher:You, the Government, will broker some kind of regional selective assistancetype firm-based public sector support for investment in fixed capital.

Mr Bell: Yes.

Q36 Kitty Ussher:Specifically to raise productivity; but you will not do it for human capitaland skills and so on, whereas the economic effect is exactly the same.

Mr Bell: We could say that thereis continuing growth in the amount of money that has been invested in skillsdevelopment. That is the first thing tosay. One would also then say that partof the conversation with the broker is, "what does your company need - not justtomorrow but what might it need in the future?" There is a difference obviously between long-term capitalinvestment and support for that, and the human investment, which may well beongoing but will depend on particular needs of your workforce at a particulartime. I do not think any of theinterventions that we have referred to or that Mark has referred to are simplyone-off; it is about keeping the needs of the workforce under review andinvesting judiciously at the right time. There is no sense in which we would say this is a one-off, but I do notthink that you can quite draw the parallel with the capital investment, whichinevitably has to be fixed over a longer period of time.

Q37 Kitty Ussher:I am not sure I would agree with you on that, but we will move on! Lancashire was a pilot for the employertraining. Lancashire is in myconstituency; why do my companies not know anything about it?

Mr Haysom: I find that verydifficult to answer. I do not knowwhich companies you are referring to.

Q38 Kitty Ussher:I would need to check with them first, but they are large manufacturing firms.

Mr Haysom: I think the statistics speak for themselvesabout the number of employers that we have dealt with - not just privatecompanies but the number of employers that we have dealt with and the number ofemployees that we have helped. If youwould like to let me know of any individual employer, then I will happily lookat it.

Q39 Kitty Ussher:How proactive would the brokers be in terms of reaching out to employers intheir areas? Will they knock on doorsasking them what they need?

Mr Haysom: That is very much theidea. We are going to be targetingtheir activity, however, at those employers that are hardest to reach, as wehave said before. There is a target of 50%for their work to reach companies that are new to training and new to thepublic sector in particular.

Q40 Kitty Ussher:That is what I find to be the most frustrating aspect; the bad employers, theones that are not investing in their staff, do not even recognise that theyneed to invest; and those are the ones, of course, where the job losses arebecause they cannot face the competition. I have trade unions coming to me and staff saying, "we are going to loseour jobs and are not reaching our potential. How will the broker solve that type of problem?

Mr Haysom: That is part of thejob that we have got to do, which is to demonstrate that making thisinvestment, shared with the Learning and Skills Council or the state makes goodbusiness sense. That is the case wehave got to build. I do not think youare going to convince, in your words, "the bad employers", to train unless theycan see something that is about productivity for their own business or abilityto expand, or whatever it is. I do notthink, however, we should be totally dispirited by this. Throughout the report there is reference toour major survey, which is the National Employer's Skills Survey, and it was upto date at 2004 - and we have just had 2005 numbers coming through - but if Ican give you two numbers from that, the percentage of employers training staffover the last 12 months in 2005 was 65%, and that was up from 59% just twoyears ago. There is some movementthere. To see the correlation withthat, the percentage of employers reporting skills gaps is down from 23% in2001 to 16%. As I said earlier, and asyou are rightly flagging, this is still a huge, huge task.

Mr Bell: There is also aninteresting question about employees being more demanding. If the case for higher level skills keepsbeing made, and we talk about our international competitiveness and localcompetitiveness, I think we want employees to be more demanding, saying, "Ifyou are not going to give me the opportunity to train and develop my skills, Iwill take my labour elsewhere." I amnot naďve about that. That is notstraightforward and easy for people to do that. However, I do think that employees will become increasingly awareof the need to ensure that their company trains them up in the future.

Q41 Kitty Ussher:I will certainly encourage my trade unions to make those demands, and I am sureemployers will be delighted. Can I drawyour attention to page 39 where there is a case example and a summary statingthat colleges, by being proactive, can provide opportunities to employers. I realise I am on shaky ground here becauseI am very delighted to welcome the principal of my own college in myconstituency in the audience, but I would like to ask Mr Haysom what experienceyou have of making sure that case example is spread out more widely.

Mr Haysom: Is this case study11?

Q42 Kitty Ussher:It is case study 12. The college, byreaching out, has done what -----

Mr Haysom: Exactly. One of the things that we are working on -and again I recall talking about this on a previous occasion - is our Agendafor Change, which is very much targeted at transforming the way colleges workwith employers; and a lot of that is built on best practice that exists outthere already, learning the lessons from what works and taking that across thewhole of the network.

Mr Bell: I just wish everyonewere like East Berkshire College because the picture we cannot say to you isabsolutely universal with that kind of proactive stance. For instance, initiatives like centres ofvocational excellence - there is a very good initiative there where collegescan build their expertise, but that expertise is very much based on workingwith local employers and responding to demands. For example, I visited Burnley College recently, where there is astrong growth in the number of staff working in the residential sector foradults. Lots of little businesses aresetting up in that area, and the centre for vocational excellence thenpositions to support that. To give avery good example, the college responds to the local demand and employers say,"We need something to help train our workforce".

Q43 Mr Mitchell:I see from one of the other reports Skills for Life: Improving AdultLiteracy and Numeracy, to which Mr Haysom gave evidence in December, thatin the Skills for Life Strategy more than half of the qualifications in thefirst three years were gained by 16 to 18-year olds. What are you doing is remedying the failures of the schools. Here are people who should have been giventhese basic literacy skills in schools and are were not, and are now trying tocatch up on them by labour provision. Isee from the report that employers require convincing of the benefits to theirbusiness of improving low levels of literacy and numeracy. Why should they? They have paid through taxes for this to be done in schools andit has not been done; why should it be taxed twice?

Mr Bell: I think it is anextremely sharp and important argument. We would want to say, however, that this is a war that cannot be foughton one front. We have to see what elseis going on in the education system to avoid that happening in the future. It seems to me that that is everything fromensuring that children leave primary school with the right level of basicskills to start secondary school, to ensure there are catch-up lessons forthose at the start of secondary education; to ensure, as this Government is nowdoing, that there is a premium placed on English and mathematics when it comesto the judgment of institutions at the age of 16 and so on. It is a sharp argument and it is a fairargument in many ways for employers to say, "Why should we do what thestatutory education system should do?" The Government's response properly could be, "We are tackling that oneacross so many different fronts." It isa fair comment.

Q44 Mr Mitchell:It is fair to say that it discourages employers from seeking and taking upopportunities for training for their workers. A number have said to me in Grimsby, where we have not got a very strongmanufacturing base now, that there is a need for skill training. We are fairly deficient in the area. They do not see why they should beconcentrating on literacy and numeracy when they do want skills.

Mr Bell: Yes. There is an important point to be made hereabout the future. We must not in anysense give out a message that it does not matter to -----

Q45 Mr Mitchell:Of course it matters. It matters tosociety, but what does it matter to them when they are interested in skills?

Mr Bell: But you then put thatalongside the Government's proposals in relation to 14-plus education, so themovement towards specialised diplomas for those wish to follow a morevocationally orientated route is set alongside the English, maths and basicskills requirements. You can addressboth the basic skills requirement of English and maths, to satisfy theemployer, and at the same time for many young people of 14 plus, they are goingto have the opportunity to follow a specialised diploma in a particular skillsarea. In the medium term that is thesolution, but, equally, it cannot be denied that the employer can argue, "Whyshould I be spending time and effort at 16 plus on the business that shouldhave been done below the age of 16?"

Mr Haysom: Part of our responseto that, because as you might expect this is an issue that must be tackled, hasto be to get that skills-for-life training embedded in other training as wego. We are doing things with employersthat they very clearly want us to do because it raises the skills of theirworkforce; and while we are doing that we are also identifying and tacklingsome of those skills-for-life issues. Iam right in saying I think that in the employer training pilot something like14% of training involved the skills for life. Once you are in there talking to employers you can start to win thatargument a bit.

Q46 Mr Mitchell:That is true, but I see in our earlier report that the Department for Educationbelieves that improvements will come through in the schools, which it expectsto see reflected in the results in two or three years' time. We have been pumping huge sums of money intoeducation. There has been a steadyimprovement since 1997 for a long period: why has that not come through alreadyand what will make it come through in the next three years when it has not comein the last eight?

Mr Bell: It has comethrough. We have seen significantimprovements in the percentage of young people achieving the required standardat age 11; we have seen in secondary education more and more young peopleachieve the higher grades in GCSE. Evenif you take the English/maths indicator, more and more young people are comingout at the age of 16 with the basic English and maths; but - and it is animportant "but", there is still much more to do.

Q47 Mr Mitchell:This situation was appalling ----

Mr Bell: I think the situationrequired substantial improvement before then. We know, for example, in terms of those youngsters entering secondaryeducation that previously less than half of them had the basic English and maths. We have to say that the situation was veryserious. Many improvements have beenmade since, but there is a huge amount still to do to ensure that every youngperson coming out has those skills for working life, absolutely.

Q48 Mr Mitchell: We do not know whether the latest WhitePaper will materialise into a bill that will replicate what is in the WhitePaper - I doubt that it will - but what in that will improve thesituation? I should say that you coulddo with a literacy course in your own department because my assistant put theWhite Paper through a spell-check and I looked through because I was lookingfor the aberrant apostrophe, and on both counts it failed! The question was not that; it is this: whatis going to improve matters in that White Paper?

Mr Bell: On that point, as thenew Permanent Secretary, I have already got a reputation for being a bit of apedant when it comes to the apostrophes and other things.

Q49 Mr Mitchell:This is a pedant revolution then!

Mr Bell: On your second point,the first thing we would say is that what the White Paper lays out is whatstill needs to be done. Nobody butnobody should be complacent about what improvements are still required in oureducation system. There are lots ofthings that one could say, but one particular point that I would make is theopportunity for those schools serving a wide variety of communities that aredoing a really good job in ensuring that youngsters get to those basic levelsand beyond, given the opportunity to work alongside other schools that areperhaps not quite so successful. Thereis a very real sense in which the White Paper is about raising standards andhelping the more successful schools in all sorts of areas to improve thestandards in other schools. The otherthing is that there is an opportunity for businesses and others with aninterest in education potentially to work with schools in setting up trusts sothat that expertise, that employer's expertise in some cases, can then be usedto influence the shape and the content of the curriculum.

Q50 Mr Mitchell:Can I move on to colleges and specifically to the institute in Grimsby where wehave a very go-ahead principal, Daniel Khan, who is doing great work andconsulting very closely with industry. He tells me, and I have written to you about it, and certainly I havewritten to the Humberside Learning and Skills Council - and you will probablyremember it because it was probably an abusive letter - that while wanting toget people up to level two, you have actually cut the funding for courses whichare very heavily concentrated in the Grimsby Institute for level one and forthe foundation courses. He tells methat there has been a reduction of about 2,000 places. That seems absolutely barmy! How the hell can you get people to level twoif you are not providing the funding to get them through foundation courses andlevel one? It is a particularly bignumber in Grimsby.

Mr Haysom: I know Grimsby verywell and I know Mr Khan very well. Having lived and worked in Grimsby, I understand the challenges thatthere are in that community. You canrest assured that we have not done what Mr Khan is describing, which is toremove provision which will now enable people to move to level one. We have made very, very sure that we areprotecting provision which is going to help the learner to progress frompre-entry levels to level one, level two and so on. A discussion has been going on for some time with that particularcollege about the nature of some provision which does not count towards any kindof qualifications.

Q51 MrMitchell: I would query that because he is not going to tell me thatyou have reduced funding or that he has not got the funding to get peoplethrough if he has.

Mr Haysom: Forgive me, I am not saying thatfunding for adults has not reduced in that college. What I am saying is that the discussions are about reducingfunding which does not contribute to any kind of qualification. We can discuss this further outside. I recall the letter; I replied to theletter; the letter was not too abusive!

Q52 MrMitchell: Okay. Just onefinal question, there is a complex array of structures here. I did not realise how many structures therewere involved in skills and training and how difficult it is for employers,particularly smaller employers, to choose who to deliver them. Would we not have done better to adopt thevery simple structure they have in Germany, where skills and training at workoverlap to a large degree and there is continuous provision for both skills andliteracy in education, because the structure is so well accepted and so strongand so simple? We have made it toocomplicated, in other words.

Mr Bell: As I said perhaps in response to theearliest question from the Chairman, I think we can always look to make thesystem simpler, and there is probably more to do on that. What I would say about the connectionbetween training for skills and, in a sense, basic education is that more andmore of that is happening with the moves to improve and change 14 to 19education. It is precisely the pointabout the reforms 14‑plus so that young people in a school working,perhaps sometimes in the local college, sometimes in the local workplace, willbe able to pursue a particular kind of diploma. I actually think we are moving to a system which will give manymore young people the opportunity to combine their statutory education up tothe age of 16 with a more vocationally orientated kind of education. All the evidence from the pilots where14-plus young people are going into colleges suggests that there is a hugeappetite amongst thousands and thousands of young people to get a morepractically orientated, more vocationally orientated curriculum, so I thinkthere is a great opportunity there to exploit all of that interest and enthusiasm.

Mr Mitchell: Thankyou.

Chairman: SadiqKhan?

Q53 MrKhan: Can I follow up the line of enquiry that Mr Mitchell began,albeit in a non‑pedant manner, and say that I am also concerned. I have an equally good FE college, SouthThames College, with an equally good Principal, Sue Rimmer, and one of theconcerns she has is that because we are in London we have a disproportionatelyhigh number of ESL students who need pre-entry level access courses that willlead to them having level two qualifications and the Sword of Damocles hangingover her head is that ESL funding (which has not been cut this year) could becut in the next year or two because of the priorities to diverting moneytowards qualifications and in particular to level two.

Mr Haysom: I can perhaps answer part of that andDavid would probably wish to pick up on the wider question. As you rightly say, there has been noreduction in funding for ESL work. ESLrepresents a very large proportion of the budget in London, for pretty obviousreasons. One of the things that we haveto be very clear about is that that money is actually delivering forindividuals, for employers, and so on. So the work that we are involved in doing is making sure that as much ofthat provision as is sensible leads towards qualifications which are going tohelp those individuals.

Mr Bell: I think the only rather obvious pointfor me to make is that with increasing mobility of labour and peoples acrossEurope and across the world we cannot do anything other than continue to ensurethat people are given a good basic grounding in language when they come intothe country.

Q54 MrKhan: No cuts with the ESL funding then?

Mr Bell: As Mark said, we will want to ensurethat we get the best return on what we are doing but there are certainly noplans to reduce any specific funding for ESL.

Q55 MrKhan: Good. Can I just putthe legacy into its correct context. Ifyou have a large number of adult people between 18 and 25 who are long‑termemployed with the lowest skills base, then it is correct that the priorityshould be towards funding up to level two so they can be employable and beuseful to an employer?

Mr Haysom: Absolutely, yes.

Q56 MrKhan: So it is not necessarily a recent phenomenon that is theproblem; it is the longer term legacy?

Mr Bell: If I might say, Mr Khan, it is justworth reminding ourselves of the scale of the task. There are 6.4 million adults in the workforce at the momentwithout level two qualifications and I think the rather sobering thought isthat whilst we should have that priority there is an enormous amount that weare going to have to do to ensure that many, many of those adults get thatbaseline of qualification.

Q57 MrKhan: That was my point because Mr Mitchell touched upon theproblems and the paper talks about a figure of around 6% of employers having askills shortage vacancy level. What must the position have been, say, forexample, ten years ago if that is the case now?

Mr Haysom: In terms of skills shortages, we donot have that information.

Q58 MrKhan: If you were to hazard a guess, is the curve going upwards ordownwards?

Mr Haysom: There is no curve at the moment, it isa straight line, and that is worrying. I have a slight difficulty with the 6% number. The number that I had through the major survey that we do is 4%,and it has been stuck at 4% for four years now, so there is an issue there.

Q59 MrKhan: You cannot go back beyond then?

Mr Haysom: I do not have any data going backbeyond then.

Mr Bell: I can check if the Department has but Ido not know offhand.

Q60 MrKhan: I would be very interested in those figures, please. The other thing is this issue aboutincentivising for employers level three training and Mr Bell talked aboutemployees being more assertive, but is not one of the problems that employersare concerned that a skilled employee may use the skills that he or she hasinherited and go to a new employer?

Mr Haysom: That is something that I hear oftenand my answer to that is always my own experience in running companies, whichis the more you train people they more you retain them, so they actually stayin the workplace, and there is an awful lot of evidence to support that. It is one of the things that we have to doin terms of getting past the barrier of understanding, and again it is probablypart of the work of brokers to do that.

Q61 MrKhan: You have led me on to another theme that has been topical overthe last couple of days, with major speeches being made by aspiring politiciansabout productivity and about the argument that productivity in this country islow in comparison to cousins overseas. Is one of the reasons for productivity not being as high as it should bethe lower skills base that Mr Bell talked about which is the legacy that wetalked about?

Mr Haysom: I am not sure about aspiring politicians but I can answer thequestion as far as is there a direct link between low skills and lowproductivity. Yes, there is and theReport actually refers to that, and I think previous reports that we havelooked at in the last month or so have also made that link.

Mr Bell: Certainly the Leitch Report highlightsthat point very explicitly. If you lookat economic output and growth it depended both on the number of people who arein work as well as how productive they are. We do better on the former than we do on the latter and that is spelledout very clearly in the Leitch Report on Skills.

Q62 MrKhan: That is what puzzled me because you would have thought thegood employers Ms Ussher talked about would understand that there are greaterfinancial rewards and greater productivity with having a more skilledworkforce.

Mr Haysom: Yes, and there is a very strongcorrelation between size of companies and propensity to train, so the largercompanies will train, by and large. Once you get past about 100 employees, something like 75% of companiessay that they train, so the issue here is that huge number of very smallcompanies, and that is the challenge that we have getting through to them. It is a particular kind of challenge.

Q63 MrKhan: Sure, but if you go to page 31 one of the examples theChairman gave was the tax breaks reported in the FT but also page 31 gives examples of financial incentivesemployers would want, which includes tax breaks. Can I just ask what work you are doing to make the arguments youare making ‑ benefits to employers in level three training and all therest of it - especially to the smaller ones?

Mr Bell: In general terms certainly for thesecond stage of the Leitch Review of Skills we have asked Sandy Leitch toaddress that point specifically. Iwould also, in a sense, spell out exactly what you have said; the case forinvesting in skills development, what is the business case to be made. It is an interesting point, is it not? You opened that line of questioning bysuggesting that surely good employers would just get it; it would beself-evidently obvious to them. Yes itmight be, but there is still a case to be made. I think actually one of the more serious questions is do we all'get it' for the future because, undoubtedly, there is increasing productivityand the high levels of investment at levels three and above in places likeIndia, China and so on, that is the really big question mark.

Q64 Mr Khan: Time really is flying and youhave led me on to my last question (although I have got many more). It is a question in two parts. The first part is can you give us an idea ofinternational comparisons vis-ŕ-vis investment by government and employers intotraining? The second part of thatquestion is you have talked about the massive, fantastic investment by thisGovernment, but can I just ask you what sort of level of further investment youthink we would need to address the skills gap?

Mr Bell: On your first point, I am not sure ofthe detail in relation to what other governments put in, but we know from thedata that skill levels at levels two and three lag behind even our Europeancompetitors.

Q65 MrKhan: The paper only mentions Germany and the US.

Mr Bell: Absolutely, but I think your specificquestion was what is other governments' investment.

Q66 MrKhan: Exactly.

Mr Bell: I do not have that to hand but, again,we could get that information for you. As far as the future is concerned, I think it is very hard to put anumber on it.

Q67 MrKhan: You accept that record levels are being invested now in leveltwo training?

Mr Bell: There is certainly much more and it isgoing to continue to rise in level two training, absolutely, and the data isthere to support that. One of theimportant issues that will come out of the Leitch Report, again in part two, isthat we asked Leitch to look at what the likely skills gaps will be as we headtowards 2020. In other words, not justwhere the gaps are at the moment but where the gaps are going to be in thefuture. We can get a reasonable feelfor that. In general terms we know thatareas of the economy where lower skills are required are likely to shrinkwhereas areas with levels of higher skill demand are likely to rise. We have asked Leitch to lay out particularlythose areas where growth is required. The big issue all the time is not just worry about today but worry abouttomorrow and how we are going to be competitive. Those countries - India, China, Brazil, wherever - are investingmassively in this because they see that is where the world economy is going ‑high level investment in high level skills.

Mr Haysom: Very quickly just to add to that, thatis certainly the challenge, as David has outlined, but there is a challengethat runs alongside that at the same time, which is that of replacement skillsfor the more traditional industries as the workforce retires during thatperiod, so we have got that double challenge that goes on all the time. It is a big demographic challenge that goeson all the time.

Mr Khan: Thank you.

Chairman: Richard Bacon?

Q68 MrBacon: Mr Bell, could I ask you a bit more about getting employersto accept the idea of supporting level two training. It follows on from what Mr Mitchell was asking. Plainly they have to give up time andeffort, but currently level two training is provided free so they are nothaving to give up money, other than the absence of the employee (which isobviously a cost). Is there any part ofyour provision of level two training which either now or in future has about itan expectation that they are going to be paying for level two training or isthe commitment still there that level two training should be free?

Mr Bell: There is commitment in the short termand probably into the medium term that it will be there, but, do not forget, itis not just about giving the person the training, there is a wage compensationdimension to this as well, so we are making it easier, if I can put it thatway, for employers to ensure that their employees have level two training,making sure the training is available and offering a degree of wagecompensation. If you want me to commenton the detail of that.

Q69 MrBacon: That is what I am interested in. Are you expecting employers to contribute to the cost in terms ofpaying out money for level two training?

Mr Haysom: No, absolutely not, and the train2gainprogramme nationally as the training programme rolls out speaks very clearlyabout free level two and we will be continuing as part of that ---

Q70 MrBacon: For precisely the reasons Mr Mitchell said, that employerswould be very reluctant otherwise.

Mr Haysom: Absolutely, and the Report makes thatclear. Just to draw out this point onwage compensation, we will be continuing to pilot and test wage compensationfor the next two years as part of that scheme.

Q71 MrBacon: So it is mainly a case of persuading employers to allow theiremployees to take time out to go and do this rather than a real financialcost?

Mr Haysom: Yes, and what happens within that isto look at flexible ways of doing that so it does not disrupt business in thenormal course of things. So what we arelooking for is to provide training at times which really do suit business andthat can mean doing training at some very, very unsocial hours. Some of our providers are turning up andtraining night shifts on the site rather than expecting people to trot off to alocal college when it suits the college.

Q72 MrBacon: I have employers in my constituency who say that althoughthey have got workers who are excellent, sometimes now the inability to read ahealth and safety document before you sign it is an issue, and they also havegreat employees who are reliable and skilled and I imagine they would mostly beinterested if they knew that it was free, which brings me on to my nextquestion because on page 21 it says that 66% are unaware of the entitlement tofree level two training. How long haslevel two training for free been available?

Mr Haysom: I think the really interestingstatistic there is that 34% are aware of it because what we have not ‑‑‑

Q73 MrBacon: Mr Haysom, with respect, if I had asked you the question "Onthis page in your opinion which is the really interesting statistic?" then Iwould have expected the answer you gave. The question I asked was: how long has the entitlement to free level twotraining been available?

Mr Haysom: Well, it has not, which is the point Iam just trying to make to you.

Q74 MrBacon: It has not.

Mr Haysom: We are in a transition year at themoment and we are about to roll it out as part of the whole ‑‑‑

Q75 MrBacon: It is available now?

Mr Haysom: We had a pilot in two regions, theNorth East and the South East, some learning from that, and this year there isa transition towards doing the whole roll-out, two parts.

Q76 MrBacon: So for employers who want level two training now, is itavailable to me free or does it depend where I am geographically?

Mr Haysom: With employer training pilots it doesto an extent depend where you are geographically. When we roll out the whole programme as of April, and thenAugust, it will be available everywhere.

Q77 MrBacon: By September this year it should be availableeverywhere?

Mr Haysom: Yes.

Q78 MrBacon: And you have presumably got a marketing plan in place?

Mr Haysom: Absolutely, that is the way it works,and that is why I said to you that it is more interesting perhaps to think that34% do know about it as an entitlement already.

Q79 MrBacon: Can you tell me how many brokers you are going to need?

Mr Haysom: I cannot recall that number off thetop of my head.

Q80 MrBacon: How many, roughly? You must have some idea. Howmuch is it going to cost?

Mr Haysom: It is going to cost Ł30‑oddmillion a year.

Q81 MrBacon: For the brokers?

Mr Haysom: For the brokers, yes.

Q82 MrBacon: But you do not know how many there will be?

Mr Haysom: Forgive me, I do not have that.

Q83 MrBacon: Is it possible that you can write to the Committee?

Mr Haysom: I can do that, certainly.

Q84 MrBacon: This concept of brokers interests me a lot. You mentioned earlier that you wished thatevery college was like East Berkshire, or perhaps that was Mr Bell who saidthat, but plainly you would like every FE to be extremely good. They are not equally good. Is there some truth in the idea that if allFEs were equally good you would not be needing to go down this brokerage route?

Mr Haysom: I think that is an interestingargument.

Q85 MrBacon: Is it not the case that a good college should be going outinto ‑-- I will read you the section about Berkshire that is in figure12. It said, and I quote: "Business co‑ordinatershave visited all employers in the sector to find out what they like aboutcollege provision and what they would change." Should a really good FE not be doing that with its employers as a matterof course, and the good ones are doing that, are they not?

Mr Haysom: I do not think any college can visitevery single employer in the community they serve so, as I started to say, Ithink it is an interesting argument. AsI would have gone on to say, I am not sure how practical that really wouldbe. I think you can still understandthe need for intermediaries such as a broker.

Mr Bell: Can I maybe justcomment on that, Mr Bacon. Somebodyreferred to it earlier and it is on page 26 in 2.2 in relation to whatemployers want. "Private trainingcompanies have a number of advantages over further education colleges." In a sense, even if colleges were uniformlyexcellent in providing what they provided, I do not think they could provideeverything that employers might want.

Q86 MrBacon: No indeed, and on page 11 it refers to the fact that 60% ofcolleges use private consultants already.

Mr Bell: Absolutely, so I think there will alwaysbe this ‑‑‑

Q87 MrBacon: Private consultants, but these are not the brokers you aretalking about, who are going to be paid for by taxpayers, are they not?

Mr Haysom: That is right, yes.

Q88 MrBacon: Just thinking about the word 'brokers', if you look at mostspheres of life brokers spring up naturally. Whether it is inter dealer brokers or estate agents or insurancebrokers, they find people who want to buy things and they find people who wantto sell things and they put them together. You do not need somebody at the centre to come along and say, "Let therebe some brokers." The attempts ofGovernment to do this have not really been universally successful. Have you heard of the Consultancy BrokerageService?

Mr Haysom: Have I heard of a consultancy ‑‑‑

Q89 MrBacon: No, it is called the Consultancy Brokerage Service; have youheard of it?

Mr Haysom: No, I have not.

Q90 MrBacon: It was a DTI programme which closed in 1994-05 aftersquandering about Ł2.5 billion. Theindustry said at the time it would not work and it would be a waste of money,which is exactly what it was. The DfEStried the Individual Learning Account which was another method of findingtrainers, a different kind of scheme but nonetheless one that went horriblywrong. What is it about finding thesebrokers that is going to be different and better?

Mr Haysom: As I have tried to explain earlier,this is not something that we just dreamt up and we are rushing out to do. We have been working on this for a number ofyears now so we have accumulated an awful lot of experience.

Q91 Mr Bacon: Is it ‑‑‑

Mr Haysom: It is terribly difficult to finish asentence at the moment. From thatexperience we do have confidence in the ability of this system to work.

Q92 MrBacon: Is it not the case that the best arrangement that could existis a very close working relationship on an on‑going basis between thelocal college and the employers in its area? You would not want to be justified in having a fear that having a brokerin the middle just creates an extra link in the communication chain and may endup slowing things down rather than improving communication.

Mr Haysom: I do not think there is any suggestionat all that where there is an existing relationship between an employer and acollege that we want to get in the way of that, so I am used to speaking toyou, I now have to speak to David so that he can speak to you; that is not theidea at all. The idea is that we buildnew, long-term relationships and we target the work of the brokers to thosehard-to-reach people that we have all been talking about today.

Q93 Mr Bacon: And presumably thosehard-to-reach areas where the FEs are doing a less good job to some extent?

Mr Haysom: There are some sectors that are verydifficult and some sectors that we need to work harder on than others.

Q94 MrBacon: Is it also true geographically that some are ‑‑‑

Mr Haysom: Absolutely, and you will recall fromour agenda for change that what we have said very clearly is that there aresome very, very good examples - and we have seen some of them in here and Icould quote a number of others ‑ of colleges working incredibly well withemployers, but that is not universally the case and we need to really up thegame across the whole of the sector. That point was made very clearly by the recent Foster Report as well,and I am sure will be emphasised again by the Leitch Report when it concludes.

Q95 MrBacon: If you have got a college that has got very good linksalready, it is not necessarily the case that they would be required to go downthis brokerage route?

Mr Haysom: As I say, we are not looking todisturb relationships. That would notbe part of the rationale at all.

Mr Bacon: Thank you, Chairman.

Chairman: Thank you, Mr Bacon. And the best of luck for your wedding on Saturday. I shall be representing the Committee atthis great occasion.

Q96 MrBacon: I did not have a broker by the way!

Mr Haysom: And you must allow her to answer!

Mr Bacon: I am lucky if I can get a word inactually!

Q97 AngelaBrowning: I wonder, Mr Haysom, if I could come back to you on onepoint and that was when I asked you about the reduction or the removal of thefunding in FE colleges for people with disabilities and the courses that theyhave been on developing generic skills rather than qualifications at the end, Iperhaps should have been more specific when I talked about people with learningdisabilities. It is that group that Iam talking about and that I think was what Mr Mitchell was talking to you aboutand you did concede there that, yes, the funding is not there any longer ifthey are not going to get a qualification at the end. Is that the case because that is certainly the experience we havehad in Devon?

Mr Haysom: What we have tried to do - and this is why individual cases needto be looked at individually ‑ is to create a sensible map of provisionacross any area, so that no learner is excluded and that is so much part ofwhat we are about. So if people havegot examples of learners being excluded because of that I need to know about itand, rest assured, I will investigate it fully. What tends to happen, from experience of looking at these thingspreviously, is that a provider may have stopped delivering a certain type ofprovision but for whatever reasons, because we have not made funding available,because they have decided they want to divert activity somewhere else, that isin the knowledge that another provider is going to pick up that responsibility.

Q98 AngelaBrowning: That is the reverse of what is actually happening but Iwill write to you separately on that. Just if I may, picking up on Mr Bacon's question to you about thesebrokers, my experience of when government has tried to deliver advice of anykind to businesses, particularly small businesses, it is that the same oldfaces keep coming up, in other words it is the 'old boy' network working, andthe patronage of these brokers in identifying the suppliers of the training isgoing to be enormous. You mention thatthe brokers themselves would need to be accredited. What checks and balances are you going to put in place to makesure that the people that they actually refer their clients to and commissiontraining from are not just part of the old boy network?

Mr Haysom: Rest assured, there will be very, veryrigorous checks and balances put in place. We will be monitoring all the management information that you wouldexpect us to. We will be monitoring allthe referrals. There will be a runningsatisfaction survey that goes alongside this work. You name it, we are going to be looking at it. This is a tough regime because this is avery serious issue that certainly we do want to see addressed.

Q99 MrMitchell: When you say it is looked at by area, I would justemphasise the table on page 9 which shows how backwards Yorkshire and theHumber are and therefore our need for better funding compared to other parts ofthe country which are better off in this respect. That is not my question. I was struck on Fabian Society visits to France, Germany, Austria andindeed to Sweden as well to a degree, by the important role that chambers ofcommerce play in training and in upgrading the workforce. It has been a patchwork here. The Mid Yorkshire Chamber of Commerce wasdoing a lot of training. Why were theynot more totally and more uniformly and more substantially involved in thiskind of programme? You have got so manyother agencies involved, it seems illogical not to use the chambers of commercewhich are the direct interface with industry.

Mr Haysom: We do use chambers. As you say, it is a patchy network acrossthe country in some regards. That maybe doing them a disservice for which I apologise. However, we do use them for training and they are heavilyengaged in our work in trying to understand the employer need. I cannot answer your question any more thanthat.

Q100 MrMitchell: There is not a reserved or a specified place for them; itis up to them to take it up?

Mr Haysom: They are part of the provider networkwe have in place. We do work veryclosely with them, though, in terms of understanding what it is that theirmembers are looking for.

Q101 MrBacon: I know you are going to write to the Committee in terms ofthe number of brokers, but the number Ł30 million rings a bell in my mind asthe amount that the Environment Agency finally told this Committee they weregoing to be spending on hiring agricultural inspectors. It worked out at about 900 inspectors. Ł30 million divided by 30,000 would beapproximately 1,000, divided by 50,000 would be 600, so it is presumablysomewhere of that order, between 500 and 1,000 brokers, you are going to getdepending how much they are paid. Thatis a lot of people. Like Mrs Browning Iam concerned that you will find out there 500, 600 or 700 people with the rightskills to go and do this. So if youcould send us a note specifying exactly how many you are expecting to find andexactly where you are expecting to find them, plus the cost, I would be verygrateful.

Mr Haysom: Absolutely.

Q102 Chairman:A last question from me. Would you please look at the box on page 12, Mr Bell. Employers want training that meets theirbusiness needs. It tells us thatemployers who train their staff prefer to use private providers, 88%, ratherthan further education colleges, 46%. You see that box, do you? Why is this, or another way of putting thisquestion is would it not be better to leave development and training to marketforces?

Mr Bell: I do not think you could leave itabsolutely to market forces because we want to get the combination right ofthat provided by the private providers and then the public sector particularlyhelping to provide in areas where the market does not provide. Can I make one comment, it has already beentouched on once, about the Foster Review because I think it plays directly toyour question. The Foster Review madethe point that further education colleges in many ways have had to be all thingsto all people over many years, and what Sir Andrew suggested there was thatcolleges, in a sense, should become the engine room for training people for thefuture in relation to the skills that they require, so I hope if we werelooking at such a table in the future we would not want to see furthereducation colleges doing it all, but we would want to see more employers sayingthat a further education college is a place of choice for them to go. So I think there is a real sense on the backof Foster and the Government response during the course of Foster that there ismuch to be said for colleges focusing in a very singular way on their missionto have people train with the right sort of skills, so I am optimistic that inthe future more employers will want to use further education colleges. What this masks, of course, is the hugevariation between individual colleges. Some colleges are seen at the moment as real power houses; othercolleges, frankly, are seen as an irrelevance by local employers, and oftenthose are the colleges that do not do very well when they have been held toaccount.

Q103 Chairman:Okay, thank you very much Mr Bell and Mr Haysom. That concludes our inquiry. You are spending Ł7 billion on employment‑relatedskills and we hope this process will help make business more cost-effective andhelp with business needs.

Mr Bell: Thank you very much, Chairman.