Examination of Witnesses (Questions 133
- 139)
TUESDAY 16 JANUARY 2007
CBI
Q133 Chairman: Gentlemen, welcome
to this evidence session on a variety of inquiries relating to
the future of UK manufacturing. We are very grateful to you for
coming. Before we go into the specific sections of the questioning,
may I ask you a general question? One of the things we have seen
in the evidence and in all the public comment is that one of the
issues facing manufacturing is its image and reputation as a sector
in decline, which deters people from joining it, and also, I think
a lack of understanding about what manufacturing actually is,
what people mean by manufacturing in Britain now. What is UK manufacturing?
Mr McCafferty:
I think that is a very difficult question to answer in very specific
ways because manufacturing is in a state of constant and very
rapid evolution. I would say that manufacturing, as we understood
it 10 or maybe 20 years ago, is no longer an adequate definition
for manufacturing today. Certainly the case then was to focus
very much on what we would call the assembly or production element
of manufacturing. If you read the definitions included in the
Office for National Statistics' versions of manufacturing, how
they then classified and categorised economic activity in this
country, it is very much focused on that transformation of raw
materials into products. I think that clearly still is an important
part of manufacturing but modern manufacturing is much wider and
we would want to suggest that the assembly or production part
of manufacturing is in some cases only one small part of what
a modern manufacturing company does. The Institute for Manufacturing
at Cambridge, doing some work for the CBI and the DTI jointly,
came up with a notion that manufacturing is transforming ideas
into physical products that customers want and that, of course,
embodies everything from research and development through design
and marketing, the assembly, after-sales service: very complex
and technical logistical problems through to fully serviced-based
activities. We need to look at manufacturing very much as a spectrum
of activity rather than concentrating on the traditional assembly
part.
Q134 Chairman: The spectrum of activity
is actually part of a wider spectrum encompassing the service
entity?
Mr McCafferty: Very much so, and
the distinction between what we traditional understand as a manufacturing
industry or manufacturing company and a service company is becoming
more and more blurred. I can cite a number of examples—Rolls-Royce
Aero Engines being an obvious one—where in fact what is
deemed to be a manufacturing company creates as much value in
its service activities as it does in traditional manufacturing.
Chairman: That is a very helpful answer
and, unless my colleagues want to pick up on that, it is a very
helpful scene-setter and I am grateful for it. We will now turn
to skills.
Q135 Anne Moffat: What skills are
most in demand, how have those demands changed over the years
and where is the shortage?
Mr McCafferty: Perhaps I can give
you just a very brief overview and then I will defer to my colleague,
who is the expert on this area. CBI members would say that there
are two areas of specific skill shortages in the economy at a
generic level. The first is of what you might call basic skills;
those of school leavers in terms of numeracy and literacy. The
second would be very high-level skills in what we term the STEM
subjects: science, technology, engineering and maths. Those are
the two areas where, across the board, there are significant skill
shortages reported to us. I would suggest that in terms of certain
specific industries, there have been very much more specifically
defined skill shortages, but I will rest with those two key areas
to start with.
Mr Thompson: In terms of adding
to that, across the economy, as Ian McCafferty has said, our two
priorities are on basic skills and on the STEM issues and that
impacts particularly perhaps on manufacturing as well. The other
area where we get increasing levels of long-term concern from
our members is on management and leadership skills. Again, this
could well be an issue in manufacturing, just as it is for other
sectors. If you look at some of the survey data that we collect
and collected last year, management and leadership was probably
third in terms of order of priority of training to date but it
was first in terms of employers' order of priority for training
going forward. That is another area where I would add to the two
headline concerns that Ian outlined.
Q136 Anne Moffat: Do you find there
is a difference region to region and sector to sector or is that
just general?
Mr Thompson: What we would find,
in terms of shortages, is that there are particular pockets in
terms of shortages and that can be regional; it could be sectoral.
The issues that we are talking about here as our major concerns
are actually economy-wide. At the basic skills level, there are
problems right across the economy: STEM subjects across the education
system, across the university system and across the economy, although
particularly affecting manufacturing there is a problem. I think
studies such as the Porter report and certainly survey data that
we have collected show that the concerns on management and leadership
are economy-wide as well.
Q137 Mr Binley: My particular concern
is based on the relationship between the private sector and government
in terms of provision of skills. I get the impression as a businessman
that the private sector does not do anywhere near enough to help
itself, quite frankly. Your evidence provided an overview of changing
skill demands in the areas in which your organisation sees skills
provision as insufficient—and you have already touched on
those in the previous question—but it offered very little
comment on how successfully or otherwise employers and government
were responding to these challenges. I am back to that bit about
the involvement of the private sector. I hear a lot of moaning
about what the Government is or is not doing, but I do not hear
very much about what we in the private sector can do. Would you
say that the Government and employers are moving in the right
direction on skills issues or have I given you the hint as to
where I would like to see your effort addressed?
Mr Thompson: That is a valid question.
To answer it shortly, I think we have turned a corner in terms
of policy direction, but there is a huge amount to do. I will
break it down into different areas. First of all, where do the
responsibilities lie? I think there is shared responsibility across
the economy amongst employers, individuals and government; and
employers should be training their staff to do the job that they
have been recruited to do and should be helping individuals access
training that will help their long-term employability and help
them access that. Individuals have the primary responsibility
for investing and identifying their long-term training and employability
needs and the Government has to react to market failures and gaps
within the system. In terms of differentiating between different
employers, we would say there are four groups of employers. There
are those that invest heavily, who know exactly what they are
doing, are expert, world-class leaders in their field, and we
have plenty of those and many of them are in CBI membership. We
have employers who recognise the benefit of training but are not
always able to find the appropriate training or the trainer that
they find first off does not meet their need and they are turned
off. There are those employers who need a bit of cajoling, to
be frank; they need a bit of persuading. If they saw the economic
benefits of training, then they would be persuaded. Then there
is a group, and we recognise that there is a group but we would
say it is a minority, who do not necessarily recognise the benefits
of training and would not be training all the time. I would add
a caveat there. We do not believe that all employers should be
training all of the time. It has to be beneficial to the company
and beneficial to the individual to move forward over time, and
that will not always be the case. In terms of policy direction,
I would say that we are heading in the right direction. The Leitch
review is very clear that we need to be moving towards a system
that brings the customer to the heart of the system and the customer
is the employer and the individual.
Q138 Mr Binley: May I say that I
think that is very loose talk indeed. Can I make the point to
you that every company trains all the time actually; it is just
how you define training. That is one of my concerns. How should
the responsibility for skills matters be divided up between government,
employer and employees? Ought we to be changing the emphasis to
have more in-house, on-the-job training rather than the sorts
of packages that you almost pull off the shelf and give but that
really do not match up with the real needs at ground level?
Mr Thompson: In terms of answering
your first question, it is very definitely the responsibility
of employers to invest in either bespoke training courses or,
as you say and are quite right to say, day-to-day training, investing
in the person's job and making sure that they have the right tools,
knowledge and experience to do the job for which they have been
recruited to train for. I will not go through the other responsibilities
but we are clear that employees should be primarily responsible
for their long-term employability skills and the Government is
there to facilitate where there are gaps and where there are market
failures. In terms of your second question about whether we should
be shifting the emphasis, I think we have got to come up with
a system—and I think Leitch is heading in the right direction
here—where we find the best training available that matches
the needs of the employer and the individual. In very many cases,
on-the-job training, as we find in many of our surveys, is the
most effective way of training individuals, rather then sending
them off-site. Certainly, the trend of what employers want is
to be doing on-the-job training.
Q139 Mr Binley: My final question
concerns involvement really, and we are back to Leitch again.
I want to know whether the sector skills souncils are performing
a useful role. Secondly, I want to know whether the private sector
is involved as much in the administration of training as it ought
to be? I went and visited my own local skills council. I can truly
say that out of 17 members only four were genuinely from local
industry and the credentials of two of those were pretty doubtful.
That does not show a lot of commitment in a county like Northamptonshire,
and I would have wanted to see more. Is that because we are not
inviting and being inclusive in terms of involving the sector,
or is it because the sector is not playing its role in the responsible
way that it ought to be?
Mr Thompson: Can I perhaps take
that question by looking at what our concerns were before Leitch
and why we think that answers those concerns? I think Leitch does
get to the heart of this issue. Employers have had four consistent
concerns. One is that government was spending an awful lot of
taxpayers' money on training and on vocational training and employers
were not convinced that that money was being spent in the most
efficient and appropriate way. We had a qualification system that
was not focused on economically viable skills. There are close
to 6,000 vocational qualifications. I think Lord Leitch actually
found 22,500 qualifications in the UK. Employers are both confused
by that but also do not feel that their concerns are at the heart
of that or the concerns of their employees. There is a careers
advice system which, to be frank, employers feel is letting down
young people and their employees. The skills infrastructure—and
part of your question covered this—is increasingly difficult
for employers to navigate and they do not feel that they are involved
in setting the strategic direction. A large part of the most recent
skills infrastructure emphasis has been on employers being involved
in the governance rather than the strategic direction of skills
policy. Where do we think we get to with Leitch? We think that
the governing thought of Leitch is absolutely spot on. It is saying
that we need to make sure that the skills system is reviewed and
realigned so that we have the customer at the heart of the system
and we are focusing on supply side changes and not trying artificially
to manufacture demand-side changes, although there are some issues
there. We feel if we get the supply side right, we will get the
demand side right and the customer has to be the employer and
the individual. We have four big messages coming out of Leitch.
One is to end ring-fenced funding so you get the best provision
that the customer wants. For employers that would be through Train
to Gain; for individuals it could be through the new Adult Learning
Account. We have to have the customer setting the agenda, not
some funding ring-fenced to say: this is the training we want
to supply and you will have to fit into that. We need a new careers
advice system or a re-energised careers advice system that has
real specialists in there. Particularly for manufacturing, the
careers advice system does not have manufacturing specialists
or people with experience in the sector embedded in the careers
advisory system, and that could be a problem with manufacturing.
We have to allow employers to be at the heart of the qualifications
system. Part of the new, re-energised role for the sector skills
councils could be to set the strategic direction and qualifications
are at the heart of that. We are very supportive of what Lord
Leitch is saying there, but in addition we would say: give employers
the power to self-accredit some of their training. Employers themselves
might not value—
Mr Binley: You have not referred in answering
my question about the active involvement of the private sector
in helping to create a better training environment. I have given
you an example where at local level there is not that involvement.
You have not referred to that. Could you do so?
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