House of Commons - Education and Skills

Select Committee on Education and Skills Written Evidence

Memorandum submitted by the CBI

1. The CBI is pleased to submit evidence to the Education and Skills Select Committee. Employers believe that education and skills must remain at the top of the Government's agenda. As Lord Leitch makes clear in his recent review of future skills needs, the UK has a long way to go in improving its skills profile if it is to remain competitive over the next 20 years. Employers recognise that we have no other choice but to improve our skills base.

2. The issues covered in this inquiry are wide-ranging, so this response will focus on the following key areas:

— basic skills remains the UK's key weakness—but there is no room for complacency at other levels

— Government skills policy is going in the right direction but needs to better deliver to employer needs

— many employers find the current publicly-funded system confusing—the "alphabet soup" needs streamlining

— involving employers on skills requires a differentiated approach

— recognising the importance of Apprenticeships

— qualifications must be simplified and focus on economically valuable skills.

BASIC SKILLS REMAINS THE UK'S KEY WEAKNESS—BUT THERE IS NO ROOM FOR COMPLACENCY AT OTHER LEVELS

3. As Lord Leitch outlines in his review, the UK's skills profile is very much a patchwork quilt:

Basic skills remain the biggest problem

4. Too many school leavers enter the labour market without basic employability skills—45% of employers believe school leavers lack basic literacy skills and 44% are dissatisfied with their numeracy skills.[1] Around one fifth of the workforce lack the numeracy and literacy skills expected of an 11-year-old. The impact on businesses and the economy is huge—low basic skills cost the economy £10 billion a year.

Intermediate skills are poor compared to key competitors but may reflect low numbers with qualifications rather than actual skill levels

5. CBI members report that many employees are competent at Level 3, but lack formal qualifications. In Germany for example, 74% of the workforce is qualified to Level 3, compared to just 37% in the UK. The UK ranks 20th across the 30 countries of the OECD for its intermediate skills levels. However, this may be because other countries are more successful in turning competency into qualifications.

Higher level skills are good—but we cannot be complacent

6. Graduates lack the generic employability skills employers need and Science Technology Engineering and Maths (STEM) skills are becoming weak, where they have previously been a source of strength. The numbers with degree level qualifications has been growing and we now compare well with Germany and France—if less well with Japan and USA.

Leadership, management and supervisory skills are weaker than employers would like

7. While there are many world class UK firms—of all sizes and in all sectors—a succession of reports including Porter have drawn attention to this as an area of weakness. CBI surveys show that employers believe that effective people management is key to influencing present—and future—competitiveness. Employers recognise they need to make better use of multi-skilled teams and expect this to be a more important factor in the future, but they see increased management skills as a key HR priority.

GOVERNMENT SKILLS POLICY IS GOING IN THE RIGHT DIRECTION BUT NEEDS TO BETTER DELIVER TO EMPLOYER NEEDS

Government targets should be more flexible

8. Employers have generally been very supportive of the Train to Gain approach. More would get involved if employee eligibility could be made more flexible. Currently, employees already holding a Level 2 qualification are not eligible even though it may be out of date or irrelevant—a woodworking CSE for example—and may not mean that the employee has adequate numeracy and literacy skills. Some individuals, who would have benefited from vocational qualifications are not eligible.

Funding structures need to focus on provision that is responsive to employer need

9. The scale of Government investment in workforce training is substantial: in 2005, the Government spent £3 billion on adult skills, with a further £161 million spent on basic skills through the Train to Gain programme targeted at adult workers who do not have a Level 2 qualification. The FE sector as a whole receives £5bn a year from Government.

10. Most publicly-funded training is delivered by FE colleges but CBI surveys show that private providers are better able to meet employers' needs in most aspects of provision. Only half of employers (51%) rated the overall responsiveness of colleges as at least satisfactory, according to the 2006 CBI Employment Trends Survey—while 72% of firms were satisfied with private providers' responsiveness to their needs.

11. While there are examples of excellence in terms of colleges providing employers with high quality tailored training, many more are needed if the fully responsive system required to underpin a globally competitive economy is to be created. The Foster report recognised this, calling on FE colleges to improve their services to employers. The CBI will be preparing a report in 2007 to bring out best practice on employer/college collaboration and to provide advice and guidance for colleges and employers on how to work together to extend best practice.

12. The CBI believes that Government should go further and end ring-fenced funding for colleges. This would improve quality in the sector and ensure employers have access to the best providers, regardless of whether they are publicly or privately run.

Improving the UK skills profile is a shared responsibility

13. Of course raising the UK's skills base is not just a matter for Government or for employers. The CBI believes that responsibility for learning and skills is a shared responsibility between employers, employees and the Government:

— employers are responsible for the training and development of their employees to meet business needs and where possible they should assist in their employees' long term development

— employees are responsible for their own development and employability beyond the needs of their current employment but they may need support and encouragement to develop this level of responsibility

— Government is responsible for the education and training of young people and should ensure they are employable and are equipped with good numeracy and literacy skills. It should deal with market failure and support organisations with little capacity to train, and those individuals without basic numeracy and literacy skills. It must ensure that delivery of state funded training is efficient and effective.

MANY EMPLOYERS FIND THE SYSTEM CONFUSING—THE "ALPHABET SOUP" NEEDS STREAMLINING

14. There is concern that too much of the publicly funded skills infrastructure is not meeting employers' needs. The skills system is seen by many as an "alphabet soup"—difficult to navigate, even for highly sophisticated employers. Some large firms want to deal at a national level, others find a regional or sectoral approach most helpful and SMEs often work best through sectoral or local clusters. Too many firms have had some contact with government bodies designed to support them but too few have received helpful advice or information.

Exhibit: 1—Employer views of skills organisations (%)


	Had contact	Received helpful information / advice of a general nature	Training organised through...	Don't see as useful/ relevant to my organization's training needs Learning and Skills

Council	62	36	17	7
Regional Development Agency	50	20	7	9
Business Links or equivalent	64	36	19	8
Sector Skills Council	54	22	12	7

Source: CBI Employment Trends Survey 2006.

15. Extensive consultation with CBI members has shown high levels of dissatisfaction with the skills infrastructure as a whole. Employers see the various public bodies charged with facilitating training as:

— bureaucratic—the process for accessing funding, or receiving information, is seen as overly complicated and out of tune with the way business works

— difficult to navigate—the Leitch Interim Report lists 26 "key skills bodies", demonstrating the complexity of the current system

— overlapping—the roles of bodies such as the Learning and Skills Council and Sector Skills Councils are perceived as duplicating each other.

16. Although there are some indications that matters are improving, the pace of change is slow. Many employers are expressing strong dissatisfaction that the Learning Skills Council structure, introduced eight years ago, still fails to match the service provided by Training and Enterprise Councils (TECs), which were felt to be more employer led. The CBI's Employment Trends Survey 2006 shows that 62% of employers had contact with their local LSC—but that only 36% had received useful information as a result. SMEs were least likely to receive useful information.

17. The creation of the Commission for Employment and Skills, recommended by the Leitch Review,[2] will be welcomed by employers, provided it is effectively employer-led and is not another stakeholder group. The role of the LSC will need to be clarified. Employers are concerned with outputs, not processes. CBI members are not wedded to a particular system and do not want to see another revolution in skills infrastructure, with all the upheaval that would cause. The priority for business is a comprehensive and coherent system that ensures limited public money is allocated effectively, and that the needs of employers can be accommodated, whether through an individual, sectoral, local, regional or national approach.

INVOLVING EMPLOYERS ON SKILLS REQUIRES A DIFFERENTIATED APPROACH

18. Some firms want to deal at a national level, others find a regional or sectoral approach most helpful; SMEs often work best through sectoral or local clusters. Larger employers operating on a national or international level, with sites across the UK, do not want or need contacts in every region—rather they want a single port of call nationally. The LSC has sought to address this issue with the creation of the National Employer Service. However, few large companies appear satisfied with this service and more could be done to improve it. The Leitch Review's recommendation that the National Employer Service be "reformed, expanded and re-energised"[3] to provide a better service for large employers could help in this regard. However, employers will judge the NES, and other public skills bodies, on the service they provide for businesses and their employees.

19. The sectoral approach is working in some sectors. Many sector skills councils have been effective in their early work—notably in engineering, in construction and in e-skills, which is responsible for the IT and telecoms industry. One area in which the sectoral approach could add real value is in the design of qualifications, which must be relevant to the world of work if they are to be of use to employers and students. The CBI is strongly supportive of the Leitch Review's recommendation that Sector Skills Councils, rather than the QCA, be responsible for approving qualifications.[4] This should ensure that students who qualify from SSC-approved courses have the skills employers need—as long as SSCs remain employer driven. A good example of how this approach can deliver results is given by the work of e-skills.

20. The CBI has supported the new Sector Skills Academies developed by the SSCs. The Fashion Retail Academy was established in 2005 as a trailblazer and the first three National Skills Academies were launched in October 2006 in manufacturing, construction and financial Services. Four more are preparing to launch: chemical, creative & cultural, food & drink manufacturing and hospitality.

21. CBI members in the manufacturing sector have supported the development of a "virtual academy", as it could potentially rationalise training provision and realign funding across the whole manufacturing sector. In order to be successful, a National Manufacturing Skills Academy (NMSA) must have sufficient scope to simplify training provision, and also offer appropriate specialisation to provide real value to UK manufacturers.

22. Some members are concerned that having an academy for every major sector in the economy will lead to a duplication of resources, as there is often considerable overlap between sectors in terms of skill needs. CBI members have also expressed concern about the over-complication inherent in the current skills marketplace, and it is important that the second round of bidding for NSAs does not result in uncontrolled proliferation of academies and therefore exacerbate this problem.

23. Not all SSCs are well developed and in any event more use should be made of regional bodies such as RDAs working with the local centres or JobcentrePlus offices, which already have good knowledge of the employment and training needs of the local labour market, particularly for the lower-skilled. There is also a role for a national level approach for generic skills where it makes little sense for each sector to develop courses in areas such as leadership or innovation.

24. Sourcing and signposting of good quality training for employers is particularly relevant for those who want to train but cannot find suitable training provision—12% of employers who do not train could not find appropriate courses, despite wanting to invest in their staff.[5]

25. The CBI is convinced that more firms need to be persuaded of the business case for training. This group of employers know that there are skills gaps and weaknesses among their employees but they do not recognise them—or do not believe that addressing them would bring business benefits. They are often smaller firms—but not exclusively so.

26. A skills needs analysis that is tailored to the individual employer, firmly linking investment in training with the bottom line, is an important tool in engaging this type of employer. This kind of bespoke analysis, carried out by an adviser with real business knowledge, can help map out the employer's training needs (both present and future). Good initiatives include:

— Investors in People is valued by employers and employees. The Investors in People (IiP) is a well-established business development tool, which has proven business benefits, linking investment in training and good employment practices with results on the bottom line. The CBI believes that firms should be given support to gain IiP accreditation.

Small Firms Initiative

— SME entrepreneurs become committed to training through the Leadership and Management Programme—The Leadership and Management Programme for SMEs designed to develop leadership and management skills was piloted allowing owner-managers of SMEs to agree with a skills broker a personal development plan up to a value of £1,000. This programme is now being "integrated" into Train to Gain, but CBI fears that the quality of the offer will lose focus and become diluted.

RECOGNISING THE IMPORTANCE OF APPRENTICESHIPS

27. The Leitch report suggests strong growth in apprenticeships in order to increase the number of Apprentices to 500,000 a year. Key to any successful Apprenticeship programme is a dedicated and highly-qualified training staff who mentor and support young people through the apprenticeship and associated self-development and team-building activities. Employers also recognise the need to involve parents in the recruitment and support of young apprentices. Many CBI members have very successful apprenticeship programmes. Anecdotal evidence indicates that more employers are looking to re-engage with apprenticeship programmes after not being involved for some years. Others are coming together under sectoral initiatives to build new programmes—and they are finding excellent FE Colleges and private providers to help them.

28. If such new initiatives are to succeed there are a number of issues that will need to be addressed:

— at present completion rates suffer because young people lack the appropriate basic skills and many are unable to adapt to the requirements and expectations of working life;

— too few understand what an apprenticeship will involved—or are ill-informed about a particular career;

— the quality, take-up and completion rate of apprenticeship programmes will improve if bureaucracy is reduced: this will also help smaller firms who need additional support as they lack the dedicated training experts that larger firms employ;

— the age threshold for apprenticeship programmes should be reviewed. Many employers would welcome taking on older apprentices but current funding rules prohibit this; and

— measures to facilitate SME participation should encourage them to collaborate with other employers in their sector or locality. Some Sector Skills Councils such as Cogent are looking to co-ordinate employers' activities on apprenticeships to make them more accessible to employers, particularly the smaller ones.

QUALIFICATIONS MUST BE SIMPLIFIED AND FOCUS ON ECONOMICALLY VALUABLE SKILL

29. While qualifications remain an acceptable measure of skills levels and are used by employers as a criteria for recruitment, they may not adequately reflect competence. It is essential that qualifications develop economically valuable skills. Research by IRS for The Competency Benchmarking Report found that competency frameworks are now used by the majority of organisations in the UK, with two thirds of larger employers with operations in the UK using competencies. The research found that employers were using competency frameworks for training and development, performance management and recruitment and selection. A competency-based approach is regarded as eslsential where technical competencies are used to inform the analysis of training needs.

30. A large proportion of the workforce with intermediate skills may not have gained further qualifications after leaving formal education—but this does not mean that they have not received any training or that their skills have not developed. For example, many companies particularly in the manufacturing sector are training their technicians to new business improvement techniques. In the case of well known respected firms, employees training with the company may not require further accreditation for the individual—as the "brand effect" will be sufficient to make these new skills portable, indeed other employers may value their skills more highly than qualifications awarded through other routes. However, the individual often values a qualification and the CBI believes that urgent action must be taken to free up the qualifications log jam.

31. CBI members say that what matters most to them when developing the skills of their workforces is raising levels of competence—providing employees with qualifications is not regarded as essential. If Government is convinced that individuals need to have their skills accredited through qualifications, public funds should be used to deliver qualifications, which are at present overly bureaucratic and costly to employers—but which have value for employees.

32. Many employers are recognised—under Investors in People—as providing excellent training tailored to business and employer need. The CBI believes that, as a matter of urgency, the accreditation of employer provided training must be addressed. For too long, the system for turning workplace training into workforce qualifications has been mired in bureaucracy. Immediate pilot programmes should be introduced to study the feasibility of fast track accreditation in sectors recognised as providing high quality training; retailing, engineering and the chemical sectors would seem excellent candidates for such pilot exercises.



© Parliamentary copyright 2007	Prepared 14 August 2007