Examination of Witnesses (Questions 140
- 159)
TUESDAY 16 JANUARY 2007
CBI
Q140 Chairman: We will move on to
that later. Could you respond briefly to that?
Mr Thompson: It was going to be
my final remark because it is the most important bit. The fourth
part is making sure that the system has the full involvement of
employers in that system. We think that Lord Leitch's proposal
to streamline the system and make very clear that it is employers
who are at the heart of the sector skills councils can actually
re-energise the system. The short answer to your question as to
whether the sector skills councils are delivering is that the
jury is out. There are some SSCs where there is very heavy employer
involvement and they are working incredibly well; e-Skills in
the IT sector would be a prime example. There are other sector
skills councils where employers do not feel engaged and that is
why they are not getting involved.
Q141 Chairman: Does Leitch do enough
to simplify the system? It is a very bureaucratic and complex
system at present.
Mr Thompson: It is yet to be seen
exactly how the Government will react to Leitch. I think Leitch
provides a backbone to the system that we would fully support.
The new commission at the top is led by business people with a
focus on economically valuable skills and sector skills reporting
directly into that to get this business focus and to have some
level of regional focus so that we are getting the expertise that
is on the ground at a regional level filtering into the system.
That is a backbone to the system that we think will work. As a
consequence of that, we think there will be a need for streamlining,
but that needs to be worked through. It is too early for the CBI,
before we have consulted our members, to talk about how that would
be done.
Q142 Chairman: You would agree that
the UK's skills provision is a pretty crowded landscape at present?
Mr Thompson: Yes. There are 49
bodies.
Q143 Chairman: Do we need a National
Skills Envoy in the landscape?
Mr Thompson: In terms of a skills
envoy, and we are talking in particular here about Sir Digby Jones,
with regard to the Treasury's response, we would say that there
is a credible role for somebody to go out there and, in Digby's
own words, bang the drum for skills and make sure that people
are engaging. We are very confident that the vast majority of
CBI members are investing in their workforce skills and trying
their best to become engaged in the system, but a whole lot more
needs to be done. If we can have somebody out there who is providing
exemplars and persuading people of the economic benefits of investing
in training and engaging, that is all the better for the economy.
Q144 Chairman: What skills does that
envoy need?
Mr Thompson: This is an area where
we have not necessarily consulted our members and talked to them
about what exactly the skills envoy should look like.
Chairman: I do not care what he looks
like; it is what he is going to do that interests me.
Mr Hoyle: It may be a she.
Q145 Chairman: When the appointment
is made it may be a she.
Mr Thompson: I can guarantee to
you that our members would say that they would have to have a
very passionate commitment to skills, both from the side of the
employers but also from the side of individuals, and they would
have to have a very strong knowledge of what constitutes economically
valuable skills, what the skill needs of the economy are, and
how to leverage action from the Government on the other side.
From our point of view, Sir Digby ticks all those boxes.
Q146 Roger Berry: I shall resist
the temptation of going further down that particular road! You
rightly talk about the customers in terms of employers, although
obviously employees are customers as well. As you say in your
submission to the committee, employers are in a difficult position.
Large manufacturers, for example, can relate to the education
system in a way that smaller industries cannot, and to greater
effect. You do make the point about smaller manufacturers lacking
the resources to engage with the education system but you do not
want to say what the policy implications of that are. What is
the CBI's view? Is it that more effort should be targeted towards
smaller employers or smaller firms?
Mr Thompson: There are a few points
there. Firstly, there is some anecdotal evidence that small employers
are slightly more likely to be disengaged in the benefits of training.
I think what we would lead on to conclude from that would be that
more of the resource in persuading employers of the benefits of
training should be focused at the smaller end because there is
more evidence of both their commitment but also the costs associated
with training for small firms being disproportionately higher
than for larger firms. Our policy response to that and the proposal
that we have been pushing very strongly over the last 12 months
certainly is that there is a lot of evidence that if you go into
a small firm proactively and give them a skills needs analysis
or a skills health check, however you want to term it, if you
sit down with the employer and say, "Let us have a look at
your skills needs and the competencies and experience and capabilities
of your workforce" and then describe to the small employer
where the gaps are, where the shortages are, and then marry the
employer with the training provider who can provide that training,
then you get a coherent policy response to this challenge. There
is precedent within government policy and there is something called
the Small Firms Initiative that was carried out during Investors
in People. That had about 90% additionality, so 90% of the training
investment that occurred off the back of that scheme was additional
training and only about 10% was deadweight. If you look at something
like the Employer Training Pilot, the precedent to Train to Gain,
deadweight was a much more significant issue. We would say that
that was a coherent policy response.
Q147 Roger Berry: Who is it precisely
that should be sitting down with the smaller firms?
Mr Thompson: In the current framework
in future plans, we would say that the Train to Gain brokers should
have a specific target, which they have already, to target what
we would term hard to reach employers and within that hard to
reach target, emphasis or priority, small firms would be captured.
I should also say that another way of engaging small firms, in
particular owner managers, is to use leadership and management
training as a lever into the company. There is evidence that if
you provide leadership and management training to owner managers
of small firms, they get benefits; they see the benefits of training,
and they are much more likely to invest in training down the road
in a much greater way for their workforce than is needed for them.
Q148 Roger Berry: You make the point
that it is often lack of resources that prevents smaller employers
from engaging in the necessary training. Some of these resources
clearly are financial. How do you believe that problem should
be addressed? Should we be providing less financial support for
larger employers and shifting that to smaller employers?
Mr Thompson: If we can find bespoke
training so that the small employers can see the return on investment
in that training, then that should be incentive enough. With something
like the Small Firms Initiative through Investors in People, we
are talking here about £1,000 per employer. These are not
huge figures, they are significant across the public purse; per
employer, they are not huge figures. If we can marry the employer
with the best training provider, then we minimise some of the
other economic costs and barriers. Yes, per unit cost for a small
employer, the economies of scale are much lower for small employers
than they are for large firms, but taking a person off site to
do the training has a bigger impact on small firms than it does
for large firms. If you can find training providers that do the
training on site, on the job, then you are getting a better rate
of return and a better level of engagement with the small firm.
Q149 Judy Mallaber: I was struck
by a recent article in which one of my local companies, Rolls-Royce,
are saying that they are having to recruit half of their key staff
overseas, in Germany and other European countries, not necessarily
for immediate graduate skills but at a more skilled level: engineers
and procurement executives. Some of the difficulties they quoted
were mirrored in quite a lot of the written evidence that we have
had from other witnesses as well, particularly that manufacturing
is not seen as a prestigious or a secure career necessarily, and
also that it is just not being promoted by universities, schools
and government as an attractive career opportunity. Do you think
that manufacturing is disadvantaged by its public perception?
Mr McCafferty: I think the answer
to that is "yes". I sit on the Manufacturing Forum and
this has been a preoccupation of that forum now for a year or
two, to the extent that we are now trying to set up a media centre
which can perhaps counter some of the negative image of manufacturing,
not only in schools but in the wider press as well. It goes back
to some extent to my first answer, which is to say that manufacturing
is seen very much embedded in the old days, that it is an industry
involving oily rags rather than necessarily high technology and
it does not have the image of being exciting, forward looking
and secure. I think that is all wrong. Certainly where CBI members
have developed individual links with local colleges and local
schools, where they are providing information at a local level
to school leavers and those coming through the school system,
there has been a noticeable change in emphasis, but this needs
to be ramped up to a much higher level. I do think the image of
manufacturing needs to be improved.
Q150 Judy Mallaber: What is the CBI
doing to get your members to go out and bang the drum?
Mr McCafferty: We encourage them
on an individual basis to form links, informally as well as formally,
with local schools and colleges, to try to provide where possible
careers advice, to provide work experience and so on and so forth.
This is not always easy because, these days, of some of the regulation
that restricts the ability of those under 14 and 16 to visit certain
industrial plants but, to the extent that we are allowed to do
that, we are encouraging them on an individual basis to do so,
as well, as I say, as working through the Manufacturing Forum,
a body of which I am a member, which brings together through the
auspices of the DTI different members of the manufacturing community.
We are trying through this new manufacturing centre, as it were,
which is designed to create some good news stories, to portray
the successes of manufacturing as well as the inevitable stories
that hit the press which perhaps have a more negative view.
Q151 Judy Mallaber: Is there a role
for government in that?
Mr McCafferty: To the extent that
the DTI has sponsored and continues to champion the Manufacturing
Forum, I think there is a role. I think there is possibly a role
for government in terms, as Anthony has already mentioned, of
careers advice inside schools. I think the Government does have
a role in terms of the structure of the education system and the
structure of the curriculum and in particular how important careers
advice is within secondary schools to help promote that, yes.
Q152 Judy Mallaber: Does the work
that you do equally involve images of young women getting involved
in industry? We are certainly losing half the potential talent
pool at the moment.
Mr McCafferty: We do try and I
think it is an issue and certainly the image centre that the Manufacturing
Forum is setting up is concerned to try to make sure that industry
has access to all skills, and that therefore includes both male
and female, as well as all sectors of society.
Q153 Mr Clapham: Mr McCafferty, it
is always good to make international comparisons. In your submission
you compare Germany and France with the United Kingdom with the
indication that they are doing much better in dealing with the
skills issue. What is it that France and Germany are doing that
we are not doing?
Mr McCafferty: I would give you
one example and then I turn to my colleague who studies this in
a little more detail. I think the issue with Germany and France
is two-fold. One, is the issue of basic skills. I find it difficult
to believe, and it is unfortunately true, that approximately one-third
of our school leavers leave school with insufficient qualifications
in terms of literacy and numeracy, and that prevents them from
learning more technical skills within the manufacturing sector
on the job as well as perhaps then going on to re-learn new jobs
as a result of the pace of change in the industry these days.
There is no such thing as a job for life and you therefore need
the basic skills of how you learn in order then to build on an
initial career going forward. The second issue is one of apprenticeships.
I would not claim expertise in the detail of that system but certainly
my experience of French and German companies is that the systems
of apprenticeship are much more effective than those in the UK.
Mr Thompson: Building on Ian's
response, one of the big differentiators on international comparisons
is the UK's performance or perceived performance at intermediate
levels; that includes apprenticeships but all sorts of vocational
routes and training. We stand 20 out of 30 on the OECD league
table of intermediate skills. We would say that some of that is
missing the fact that employers feel that their employees are
competent to do the jobs at that level, but they just have not
received the qualifications for it. Certainly there is a lot of
evidence that countries such as France and Germany invest more
in actually qualifying people at those levels. It is not necessarily
the case that they are spending more on training. To back that
up, if you look at the international tables, employers as a percentage
of wage bill invest more in training than our international competitors.
There has to be something behind what is going on at the headline
level, at the commitment and spending level, that we are not doing
to keep up with the likes of France and Germany at these levels.
We feel that it is something around qualifications. We know that
our employees value qualifications, just as many of our members
value qualifications, and we could be doing more there. Perhaps
there is more that we can do to make sure that vocational training
is suited to the jobs, the needs of employers, just as it is to
individuals and we could be investing more money there. Certainly
for the manufacturing sector that would have a big impact.
Q154 Mr Clapham: A little earlier
we were talking about perceptions. Obviously perceptions relates
to culture. The Germans have a very long culture of qualification.
When we relate that to the answer that you have just given, Mr
Thompson, is culture also an important factor here? Does government
in France and Germany play a stronger role, a more robust role,
in ensuring that the manufacturing sector, the culture of manufacturing,
is more known in schools than, for example, here in the UK?
Mr Thompson: On the issue of the
government role, I am not sure that there is much evidence that
the role of government in skills policy, if we can take a step
back from manufacturing, has more beneficial impact in Germany
and France than it does in the UK. If you look at France where
they have training levies or rights to time off, there is a huge
focus on inputs there but no evidence at all that we are getting
better outputs, more highly qualified individuals, better investments
in training. There is lots of evidence that more highly qualified
people take the right to time off to get their qualifications
and it leaves behind lower socio-economic groups. There is lots
of evidence to suggest that firms that are not engaged in skills
investments they pay the training levies but do not go on to do
any training because they find it all too bureaucratic. To answer
your specific question on government role, I do not think there
is any evidence of the role of government in those two countries
having any greater benefit on skills outcomes in those countries.
Mr McCafferty: On a more general
basis, I do think that there is perhaps a modest difference in
the degree to which senior government ministers are active in
supporting the sector. We have certain examples where the prime
minister, the chancellor or other senior members of the cabinet
in other countries are perhaps more visible in their support of
industry at trade fairs and in terms of foreign delegations and
so on than has been recently the case in the United Kingdom. I
think that contributes to the image to manufacturing. We have
been active in discussing and lobbying the DTI and others in order
to ensure that the sector receives that sort of visible public
support—it is not necessarily support that takes a great
deal of time from busy diaries of senior cabinet ministers—and
that they can be seen to fly the flag at important occasions for
the sector.
Q155 Mr Clapham: Finally, is there
any evidence that there is, should we say, greater parity of esteem
in these two countries between vocational and academic than what
there is here in the UK?
Mr Thompson: Briefly, I think
there is less parity of esteem in the UK, from our members' perception.
I am not sure that we have the evidence to provide you of that
but I think our members' perception would be that there was less
for a whole host of different reasons. Up until recently, we have
had a much greater focus on the academic routes. I think our members
would want to see an equality of emphasis so that we get the right
people coming through to do the jobs and gain the skills that
are best for them.
Q156 Miss Kirkbride: I want to pick
something Mr McCafferty mentioned for the second time in this
interview session, which is the issue of basic skills. I am not
sure whether that has been teased out just quite enough. Basically,
I wonder why it is that in every international comparison France
and Germany can teach basic skills better so that people arrive
at work more employable in the first place. Secondly, how do we
reconcile what you are saying with what the Government is telling
us, which is that education outcomes and achievements in the UK
have never been better?
Mr McCafferty: To answer the second
question first, it may be the case that educational outcomes are
improving relative to the recent past but I go back to the statistic
I quoted earlier, which is that we still find that there is a
significant cohort of school leavers who do not have the functioning
numeracy and literacy requirements of a mid-teenager, and to that
extent I think that is a serious shortcoming. It may well be that
simply the organisation of the educational sector (the teaching
methods and the teaching structure) in other countries is better
and therefore delivers high basic literacy and numeracy outcomes.
Q157 Miss Kirkbride: My final question
is: in your submission, you actually refer to the variable quality
of further education courses. Could you give us an example of
that so that we know exactly where you are coming from?
Mr Thompson: If you look at the
headline statistics, you will find that about 18% of employers—and
this is the LSC's own data, international data—engage with
their local FE college; that includes public sector bodies, by
the way. Only a tiny portion of the £33 billion of employers'
training spend is spent in FE colleges. I do not know the exact
figure but we are talking about less than 5% of that £33
billion budget. We have got to a stage now where business, certainly
private sector business, does not always see FE colleges as a
natural business partner. We have a long way to go to turn that
round. There are large numbers of great FE colleges out there.
Certainly if you look at the new 157 Group that has been set up
off the back of the FE White Paper, you get the really best colleges
there. What are they doing? They are listening to their customer.
They are listening to the local employer. They are going in and
spending time with them and saying, "How can we design a
course for you that will fit in with your needs, both in substance
but also in delivery?" The message that we get back from
our members in the surveys that we do is that sometimes the course
content is relevant; sometimes it is not. Most of the time, we
are offered the delivery of the course on a basis that does not
fit with our business needs: it takes people out of business at
the wrong time of day, they only want to do it during term time.
We have a lull during the summer period. We want to be training
people in the summer period. There are many different things both
on the course and content. I would reiterate that there are a
lot of great colleges out there. We can learn some excellent examples
from them and good case studies. We are doing some work over the
next 12 months to try and tease that out to try and make business
the natural business partner of colleges. Certainly that attitude
is not out there at the moment.
Chairman: We may come back to you for
written answers on that but we still have two remaining subjects,
and the first is on Marketing UKplc: UKTI.
Q158 Mr Wright: The UKTI strategy
suggests a significant change in direction for the organisation
towards a more focused, marketing-led approach. Do you think this
was a timely change in strategic direction for UKTI? Where do
you think it was going wrong in the first place before the changes?
Mr McCafferty: The short answer
is: yes, we do think it is a very timely change and we have welcomed
the strategy that was set out in the new UKTI document last July.
If we look at the reasons that we put forward for why we felt
that UKTI needed to re-visit its strategy, it was the balance
between promoting inward investment and promoting exports that
we felt perhaps had become unbalanced in favour of over-expenditure
and over-focus on inward investment at the expense of export support.
I think we were disappointed to see at that stage very much a
strategy where export support was concerned focusing very much
on the new to export firms to the exclusion of those that may
be recognised exporters but who could still break into new markets
or develop new products with similar help from UKTI. The balance
in terms of the skills set within UKTI where they have focused
very much on sector expertise, we would argue was perhaps at the
expense of deep understanding of the markets into which British
exporters were going, and again that balance of skills was not
necessarily the optimal. There are issues about the relationship
between UKTI at the centre and the role in trade promotion and
inward investment promotion of the RDAs. The current structure
does lend itself, as far as we can see, to a certain amount of
overlap and in some cases to an element of confusion.
Q159 Mr Wright: You mentioned earlier
when we were talking about skills that we are certainly lagging
behind the main European competitors. It is also true that, looking
at the export opportunities in growing and emerging markets—and
we have seen evidence of that certainly with China and India or
indeed in South America—we are certainly lagging behind
our main European competitors. Why do you think it is that the
UK companies seem to be less keen to develop these export opportunities
out there?
Mr McCafferty: I do not think
necessarily that UK companies are less keen to develop those export
opportunities. Certainly the recent statistics suggest that the
total proportion of our exports to China is slightly lower than
that of French exporters or of German exporters, but the statistics
are not dramatically different between the three, for example.
That may well be explained less by attitudes than simply the differences
in the product mix of exports or the nature of development in
China requiring high levels of capital goods in which in particular
Germany has a comparative advantage. I do think that within that
we have to be careful, as we move back towards focusing a little
more on export support within UKTI, that we look not only at very
obvious candidates—and there is I think an emphasis on China
and India—but we do need to make sure that the rest of the
world is not forgotten in the work that UKTI provides.
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