Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 189 - 199)

TUESDAY 16 JANUARY 2007

AMICUS

  Q187  Chairman: Gentlemen, thank you very much for coming. We are running about 10 minutes late but that is not bad for the volume of information that we have to get through. We are very grateful to you for your written evidence to us. As I always do, can I ask you to begin by identifying yourselves.

  Mr Simpson: I am Derek Simpson, General Secretary of Amicus, and on my right is Roger Jeary, our Director of Research.

  Chairman: Thank you. We are going to try, in accordance with your wishes as well, to concentrate most of our time on skills, quite a lot on public procurement and perhaps we might briefly have a relatively economical use of time on the UKTI section of our inquiry, that is probably how it will work in practice.

  Q188  Anne Moffat: I have read your recommendations about skills and your report, the report is very well written and easy to read. I have also read the press release that you sent out, the part where you said taxpayers were being mugged on skills. I want to know what you mean by that or have you covered that by giving us the recommendations in terms of what we should be doing about skills. The concern that I have got is that if we are being mugged on skills and you have got some very good ideas about where we go, you are also saying that the skills industry is being given greater priority than the manufacturing industry. Does that not mean that there is a conflict there? I do not quite grasp that.

  Mr Simpson: The language is interesting and I think there is a conflict. I think I have to start the answer by suggesting that our concern is that manufacturing has been given a lower priority in the skills industry, the education industry, compared to, say, the arts less than the manufacturing subjects. I think that follows from the fact that our impression is that somewhere along the line the UK Government or governments, not just the current one, has given up on manufacturing because of the belief that we cannot compete on manufacturing and price. We have just heard Ian McCafferty say that quality and price are amongst things that can be mutually exclusive. By the way, "you get what you pay for" is another good point. If price is important then none of our industries will be in existence shortly with local manufacturers in charge because we cannot compete on price. How does that link to this comment about being mugged down in skills? The answer we are told, and not least of all by my very good friend, Gordon Brown, who regularly tells me this, is that we need a high-skilled workforce so that we can concentrate on the new creation of manufacturing and production skills, science and so on. Why we say "mugged" is because none of the programmes that are in place can possibly achieve that. The best are aimed at NVQ level two. Most of industry would tell you that they want at least NVQ level three as almost a starting point and some of that was reflected in what Ian was saying earlier, that it is what comes to industry, but, of course, that is education rather than what happens in training. What happens in training is that it is not the aim to achieve the kind of levels of skill that will be needed to compete in the event of a complete collapse of our manufacturing industry, which is what is actually happening and has been happening for some time except people do not want to own up to it.

  Q189  Anne Moffat: If we got it right and we focused more on higher education rather than further education, just on the points that you made about the highest level of qualification in terms of the skill base, then would that sort out the problem of manufacturing or at least one of the problems that we have with manufacturing?

  Mr Simpson: It would certainly help. I am not overly an expert in this. I used to be a governor of a local college in Sheffield, I know what the dynamics are, it is cheaper and easier and more attractive to train hairdressers than to train engineering craftsmen. It takes less resources to put in and you can turn them around quicker, bums on seats, the funding regime meant that was what the academics looked at and you got the results. It is much more difficult to get the results in the more science-based subjects so teachers are under pressure to produce good results, increased A-level results but, of course, it is easier to do that in soft subjects, it is harder to do it in maths, science and technology. The whole system is driven to lean away from manufacturing and against the background that people are not going to demand manufacturing training because the manufacturing industry to the average person in the street is rapidly disappearing down the plughole so why would they want to be trained for an industry in which they may have no future prospects of employment. The whole thing fits together nicely and China happens to be very conveniently coming along and doing it all much cheaper, so why bother. That is what the fundamental problem is.

  Q190  Miss Kirkbride: That follows on to my question about the high value-added approach and what we can do to get that more embedded in the system. Do you think that the National Skills Council and the Leitch report, if it is implemented, is going to make a difference to exactly the scenario that you set out?

  Mr Simpson: I have got déja" vu of being sat watching Question Time looking at you because I think I have seen you on that programme.

  Mr Hoyle: She has her hair more done up here!

  Chairman: She was attacking hairdressers earlier.

  Q191  Mr Hoyle: She has some make-up on.

  Mr Simpson: I am not that conversant with the Leitch report, but everybody quotes these things. I have read a little of it and some of the highlights. What I think at the moment is there is a lot of people involved in this exercise of trying to answer the question about skills. There are many quangos, I am told by my piece of paper that there are 17 quangos. I heard someone say earlier on there were many more bodies looking at skills. It seems to me that there is an argument to bring some of this, for want of a better word, bureaucracy down. I would be more concerned if they were addressing the real questions and I do not think people are addressing the real questions. In fact, the people who know what the real questions are are trying very hard not to let the rest of us address them. What are we training skills for? I remember, again from experience, the attempt to increase the number of graduates and university places. That resulted in the university graduates standing in dole queues because there were no jobs for them. It is wonderful to talk about skills, training and all the rest but, again, as I keep asking my very good friend Gordon Brown when we have got all of these high skills which, of course, the plan will not produce, where are we going to employ them; because they might be tied together with the argument about how do you tackle the problem of globalisation and its impact on industries like manufacturing, which I believe is still key to our economy, and what are we doing different from, say, for example, France, Germany and Italy and these were matters that you mentioned earlier. You need to ask why is the rate of decline in manufacturing double in the UK that it is in France. When you look at questions of procurement, you have got to ask yourself the question, why is it that Germany, France and Italy are much more focused on trying to maintain their industries in spite of China. You have got to ask yourself the question why has the German heavy manufacturing industry got a positive and growing positive trade balance with China whereas we have not in that industry because we lost that industry through the lack of the approach that is needed. These are the questions that nobody is asking because we are asking things that do not lead anywhere. Let us get lots of skilled people through, where are we going to position them? The answer is unless you have got the other side of the equation in place, it is going to result in the same effect where we are going to have highly qualified people and no jobs.

  Q192  Miss Kirkbride: I would love to go down all those roads but the Chairman will pull me to order because I think my colleagues are going to ask about that. I thought your first remark was quite fascinating about why we do want more hairdressers. Given that there is manufacturing out there and given that whenever you go to an employer they talk about skills and all of this, why are the employers not demanding more engineering skills and all of these things that actually count in industry and what can we do to make the system deliver?

  Mr Simpson: I think the first thing that I would say to that is that manufacturing employers are different from many other employers. Their real interest at the end of the day is to produce a product for the shareholders; and skills training, particularly in higher skills, is very expensive. They are not prepared to do it. What they say is why do you not provide it. The object is to increase taxation to pay for that. At the end of the day the only system that will work is that the State will provide education up to a certain level, people will go into industry and then the training is possibly supported by the State, but also by the employer. That will not happen unless there is a statutory training limit, it did not happen in engineering and as soon as the Engineering Industry Training Board system was cancelled, training virtually collapsed in the engineering industry. Employers are happy to let employees do the training and then poach the result. It is classic, it is not a criticism, it is what happens, and if I were in business I would probably do exactly the same thing. It is not a political point it is just a fact of life. If you want to produce a profit, let me say in fairness, some more forward thinking employers will recognise that a highly skilled workforce will produce profit so training is in fact a good investment for them. Unfortunately, that is only some and it is certainly not the majority.

  Q193  Miss Kirkbride: Do we assume from your previous answer that the Germans, the Italians and the French have a compulsory training method and that is why it works for them and not for us?

  Mr Simpson: I am not entirely sure what the training regimes are in those countries but the other driving force there would be if you link it to the procurement, there is a push. Lindsay mentioned Alstrom and Alstrom was a very good company. I know, and still it is true, that there is not a French train built outside France, there is not a German train built outside Germany and there is not an Italian train built outside Italy, and yet, we, as the second largest user in Europe, are almost down to our last train builder. That is a driving force that will require, whether it is by state or employer, the workforce to build the trains in Germany, to build the trains in France and to build them in Italy. We do not require people to build them and we wonder why our training systems do not work or are not in existence, the answer is apparent. You know what they say about any business or any organisation, follow the money. Follow the money, that is where the answer is, follow the money, and when you do that you see what a number of these things are, you drive down to the bottom line. We have not got training programmes and we are not successfully addressing it because in relation to this—and I do not know what we are doing in the service industry, I am not commenting on that, it is manufacturing—we just are not competing.

  Q194  Chairman: I would like to ask what you mean by a clear skills matrix and career map for specific workers, what that means in practice, who would deliver it?

  Mr Simpson: I probably said it but whoever wrote it will answer.

  Mr Jeary: I think what we are addressing there is looking at skills not just what is needed now but what is needed in the future. Clearly what industry may do, and we heard a lot about it from the previous witnesses, is train people on the job to do the job they are employed to do at that time, yet we live in a completely changing environment the whole time within individual factories, within sectors of manufacturing and across manufacturing as a whole. What we are talking about is looking at building up skills, matrices which attach to sectors which attach to individual companies and which attach to individual employees within those companies so that we have a programme of skill training which is needed to equip those people not only to be able to do the job they are currently doing but to do new jobs and to encompass change within those sectors and those industries. Who would do that? It has to be a combination. Clearly, initially we are looking at the employer and the individuals and the trade unions in the workplace to work together to formulate training plans or training agreements in that workplace which take account of the immediate and future needs as far as that industry is concerned. There is a role for the national skills academies as they come on-stream and the sector skills council working together, if we are stuck with both, and there is a question mark as to how many of these organisations you do need to apparently do much of the same thing it seems to me, but certainly having a body which has an overview for a sector or for manufacturing as a whole to look at the ongoing needs of skills training as well as the immediate needs is an essential part of maintaining a manufacturing base which is competitive within the UK.

  Q195  Mr Clapham: Roger, building on that, how do we re-establish, if you like, the reputation of vocational education? Derek referred to Gordon Brown's idea of nudging the economy to the higher value end of the market, not fully taking into consideration that much of manufacturing has already disappeared, so how do we re-establish this credibility of vocational education?

  Mr Jeary: I think you have to go down to base roots again. Derek mentioned the fact that he was on a college board. I was once Chair of governors of a comprehensive school in the North-West and what you see within the education system is a total lack of understanding and knowledge of what manufacturing is all about and what modern manufacturing is all about. Also, I have to say my experience of that was not a great enthusiasm for manufacturing employers to come into the schools to share that knowledge with both the teaching staff and, more importantly, the students. You build up this notion of vocational skills in an old-fashioned way of saying that is the only right approach and manufacturing, as any of you go around modern factories will understand, could not be further from the truth. Plus, of course, you have got a wide range of jobs and functions within a manufacturing factory, it is not all about just the production side, there is the design side, there is the marketing side, there is the sales, but the whole area of manufacturing is simply not conveyed into the education system at the earliest level. The other area where I think work can be done is in the whole area of apprenticeships. Leitch has come forward with very ambitious targets in terms of apprenticeships and, fine, if we deliver those targets it would be great to see that sort of increase. Leitch also makes the point, and I think somewhat contrary to current Government thinking, that by 2020 we will still have 70% of the current workforce in employment so we have got to look at apprenticeships at adult level as well as at school level and yet we see cuts in funding for adult apprenticeships at the same time. Clearly, Government have got to look at that if they are going to adopt the Leitch proposition because we need to be able to train and develop existing workers and give them those vocational skills through apprenticeships, through foundation degrees and whatever is necessary to have the sort of workforce that is necessary to meet the overall strategy of having a high added-value, high-skilled workforce.

  Q196  Mr Clapham: You would agree and presumably, Derek, and I am thinking in terms of Amicus generally, with the Government's approach on vocational education in secondary education where, for example, in schools around Barnsley and Sheffield you have got a number of new vocational courses which would bring young people at the age of 14 on to those courses with the opportunity of being able to work with an employer, have a placement with an employer, whilst they were studying but at the same time is geared to the apprenticeship scheme. The kids, for example, at 16 or 17 who do not want to follow the apprenticeship can stay on and, say, if they are on a vocational course that is skewed towards, for example, construction, may be able to stay on and do design. Within that course you capture a number of aspirations, the girl or the boy who wants to go on to do an apprenticeship and then the kid who wants to stay on to do AS levels and go and do design, but it is all within that framework of construction vocational studies, so that would be very much what you would like to see, Derek.

  Mr Simpson: I can answer that by saying yes.

  Q197  Mr Clapham: So now what we need to do is to put pressure on Government, and particularly your friend Gordon Brown, to take cognisance that it is not just nudging the economy to the higher value end of the market and concentrating on foundation degrees, but really concentrating at secondary level on vocational studies.

  Mr Simpson: It is, and there are two sides to this. There is the side that you raise by your comments and points there, which is what we would want to do if we had a future in it because the other side of it is unless we do something about the actual future in it, it does not matter what we do, we can do the right or the wrong thing, the result will probably be exactly the same. There are two sides to it. I have to get a little plug in for the one factor that I think Government could look at when it looks at manufacturing. We see time and time again, and I am sure that this is the one that is affecting us now, when companies come to look at the investment strategies, and particularly when you are looking at new technologies, you have got two things that come from that, one, it is very expensive and, two, you generally only do it because you want to improve efficiencies and that generally means a reduction in labour. If you put those two things together and a company looks, as they do now, almost globally, but certainly pan-Europe, you would say where would a car company put down a new car plant, and Peugeot has been mentioned. Peugeot has built a plant in Slovakia. It can take advantage of the wage rates that are less than a third of the UK rate, and that is probably a good proportion considering some of the potential areas in the world that you can do this, so you have got the advantage of cheap labour. In terms of laying down plans like that, it is the other side of it. We are the most expensive place to make redundancies and reductions and the costs associated with wind-up. Those two things, will you invest, will you get cheap labour and where it is easiest to shelve, all those things mitigate against UK manufacturing. Eastern Europe, never mind China, has got the cheaper labour rates. We are the easiest and cheapest to dismiss in terms of western advanced Europe. Our rates suggest that you would not be able to compete with Eastern Europe and then when you look at the reductions we have got them in the target. That is why, for example, Peugeot, a French company, apart from its apparent un-provable, un-established (according to the Siemens director) loyalty to France nevertheless will not make Peugeot workers redundant in France when they transfer the Peugeot plant to Slovakia. The UK plant, despite it being profitable, will go because it is the balance sheet argument. This is why I say follow the money. If you do not address the economic factors none of these other answers will amount to much more than theoretical musings by all of us because they will not be the basis for whatever the result is, whether you get it right or wrong, it will not matter because there will not be any jobs. You will not have to worry about who builds cars, trains or who does this, we cannot all be design engineers. Quite frankly, the number of posts available seriously in design at the end of the day, if you think about it, would be quite limited compared with the size of the population and politically, as a government, you would have to run a country in which the bulk of the people have either no jobs or are unemployable. That would be an interesting thing and that is probably why we see the rise in the BNP and the rise of fascism and all that.

  Chairman: We are ranging quite widely for a session on training and skills. Interesting as your views are, I think perhaps I am going to bring in Roger Berry.

  Q198  Roger Berry: Despite this, we are told by the CBI that employers observe a shortage of skills across a whole range of areas. You have said that manufacturing as an industry embraces a whole range of skills, a broad spectrum of skills are required, and yet in your submission you have got a very specific statement that I would like to explore a bit further and Derek referred to it a bit earlier. You said: "At present the majority of funding is directed at FE to the detriment of higher education" and "there needs to be a significant redirection of funding", which I assume means away from FE towards higher education. What is the evidence for that? What exactly are you suggesting?

  Mr Simpson: Again, it is the direction. I think I have already referred to it. If we are saying that we cannot compete in lower areas of manufacturing, then we really have got to think about whether we can compete in the higher end and that is what I am saying. There is no good entering into further education and so on to NVQ level twos when you have got to be thinking higher than that, you have to go beyond it, that is the point in that. As regards the skills shortage, we do experience this. In construction, for example, we have complained about the importation of cheap Eastern European labour but recognise very often that without that the economy would not manage. I was across in Ireland where ironically for their somewhat massive regeneration programme. I was in Dublin, they are talking about developing the Dublin harbour and moving it 20 miles up the coast and then having a marina they have not got the people to do it because most of their people are over here doing things like getting ready for the Olympics and so on and so forth. People require skills to be brought in. That is fine, but we probably do not experience that in some parts of manufacturing. I do not know many engineering factories that have to import skilled labour from abroad but there are skills shortages. When I started on the Training and Enterprise Councils, which was "a fairly modern day start of all this business", we had the same phraseologies: hard to fill vacancies usually got turned into "skills shortages" and that usually got turned into the fact that there was not enough money to pay people to do these things. Again, if we have abandoned manufacturing, if we have allowed things like the Engineering Industry Training Board to go by the board, we are going to encounter shortages because we have not been able to turn the people out. I do not think the further education effort we have made has ever replaced proper apprenticeships in terms of what we do in the industries and many people who have gone on into technical scientific and managerial work, you will find have gone through some process similar to an apprenticeship and they have gone on in a career development because they have been in the industries and very often the best people are those who have grown up in the industry because they know what the industry is and what they are talking about. That has largely disappeared over the last 20 or 30 years. It is not surprising then that we have a period where the CBI say, "There is a skills shortage". Well, whose fault is that?

  Q199  Roger Berry: Would that not suggest more emphasis on advanced apprenticeships rather than higher education as such? Linked to that, if I might add to that, people who access training these days are usually the better educated staff and so one of the things that worries me about saying basically we should take the money from FE and put it into higher education is that it might increase that inequality in skills which is, in my view, already a problem.

  Mr Simpson: I am not going to deny your point just to try and make our point sound better, but it is two sides of the same coin. Again, what is the point in concentrating on training people for jobs that we will not have soon when the argument is we will not have them, it is unavoidable, you cannot stop globalisation, you cannot compete on certain products with China and India and places like this, so what do we do about the future. I am not denying your point, I think you are right we have not got the training right, but we will not have the industry anyway if we get it right and our argument really is—and this is the point about being mugged—here we are trying to create a training system in an environment where we will have no need for it and we are being told that the real answer is to have a training system that equips us for the higher skills and we are not doing that either.

  Chairman: In the interest of making reasonably rapidly progress, you have said that once or twice already very convincingly.


 
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