Select Committee on Work and Pensions Minutes of Evidence


Examination of Witnesses (Questions 351 - 359)

WEDNESDAY 13 DECEMBER 2006

LORD LEITCH, MS LOUISE TILBURY AND MR STEPHEN EVANS

  Q351  Chairman: Good morning everybody and welcome to the sixth evidence session on our employment inquiry, and particularly welcome to you, Lord Leitch, and to your colleagues. This session is being broadcast; it is being taken down and used against you in evidence! If I could kick off, Lord Leitch, your report, as we all know, was published last week. What is your reaction to the initial response from Government?

  Lord Leitch: Good morning everybody. I think I am pleased with the reaction overall. We have consulted extensively over the last two years; as you probably know, we did a major call for evidence last year, and this year we have consulted extensively with both Government and key stakeholders, including the CBI, the TUC, the Learning and Skills Council and the Institute of Directors, and I am encouraged by the response. Indeed, we have received quite a remarkable degree of consensus in terms of the analysis and in terms of the key recommendations that we are advocating. So I am pleased, Chairman.

  Q352  Chairman: Good. What do you regard should be the top priorities for Sir Digby Jones in his new role as Skills Envoy? Delivering your report, presumably?

  Lord Leitch: Actually it is not delivering the whole report because, as you say, the report is extensive in terms of the number of recommendations. There are four major objectives, five principles, eight recommendations and it is a large array of change that we are saying we should deliver. I think Sir Digby Jones is an excellent appointment in terms of being a Skills Envoy. We need someone with his pedigree and his standing to help us deliver this, and specifically he will be looking at the Pledge. As you know, this is initially a voluntary Pledge that employers can deliver skills to eligible employees in the workplace up to Level 2, because this is somewhere where we want to change the percentage from moving the percentage from 69% to Level 2, up to 90% by 2020 and then move towards 95%. It is a tall challenge, a tall order, and that would be Digby Jones' main priority, to deliver that Pledge. Remember, we had a two-step process: first it is a voluntary approach, where employers will be encouraged to do this—and I think it is quite a compelling proposition for employers to do this, and I will expand if you want—but if the trajectory is not right by 2010 then we would have the statutory entitlement to training in the workplace. So I think it is a very important role and he is the right figure to do this, to be a champion, to be an evangelist for the Pledge.

  Chairman: Mark Pritchard.

  Q353  Mark Pritchard: Lord Leitch, you are quite right about Sir Digby Jones—great pedigree, great experience and no doubt he will bring a lot to this particular role. Do you think, however, that if he were successful in running for Mayor of Birmingham that that would, shall we say, diversify his skills beyond the time that he is given to do this particular job?

  Lord Leitch: No, I think this is not a full-time job for Sir Digby. I do not know how many days per week he will be allocated but I think he can certainly do more than one thing at a time. As I say, his pedigree, his standing, his style is an excellent way forward to deliver this Pledge.

  Q354  Mark Pritchard: Whilst I know that clearly this role may be a part-time role—and just to digress for a moment—do you think that running a major city like Birmingham, the UK's second city, is a part-time role?

  Lord Leitch: I am not qualified to answer that really.

  Q355  Chairman: We are obviously anticipating the 2007 Comprehensive Spending Review. Have you been given any indications that money will be there to match the programme?

  Lord Leitch: I hope that increased money will be there. I think what we are saying in the report, if you look at the analysis, is that we must invest more in skills as a nation, but we are also saying that no single entity like Government can do this on its own; it is a combined initiative with the Government, with employers and individuals all investing more, and in the report we define some principles about where the balance of responsibility should lie. For example, Government should be providing everybody with a basic platform of skills; Government should be intervening where there are market failures; Government should be giving people assistance where they need it; individuals and employers should be investing more where there are greater private returns. So really, Chairman, what we are trying to do is to say that there has to be investment from all those areas, all those stakeholders, to drive this forward. The Government has said it will increase percentage of GDP into education, and skills will be a beneficiary of that. As of now I do not know an indication of the CSR—I cannot be expected to know that at this point in time—but I am optimistic.

  Q356  Chairman: You will know from the work you have done that, sadly, many employers just opt out altogether of the training agenda. Is that market failure or is it abrogation?

  Lord Leitch: If you look at what employers do you are right, one-third of employers in the UK do no training at all, and in some sectors it is even worse—in some sectors it is 50%. But the glass is more than half full. If you look at employers in this country we have some stunning examples of brilliant employers within the United Kingdom. After all, we are the fifth largest economy in the world and that has been driven by some stunning performances in terms of employers. Many employers do invest very significantly in training to increase productivity, so we have many, many good employers driving that forward. In terms of failures, what we tend to do in the report is to say that we must be much more demand-led and that the employers should have a greater voice in defining the skill types that they need. We also say in the report that Sector Skills Councils should be reformed and re-licensed and empowered, and that is a way of engaging and increasing awareness of employers, such that they are more engaged.

  Q357  Chairman: I am sorry to put pressure on this, but that third of employers doing nothing—and I accept your point that Government needs to come in on market failure—is that third market failure or is that something where we need other mechanisms to get that third engaged?

  Lord Leitch: I think we need other mechanisms, and indeed I think that would be the rationale behind the Pledge. The Pledge we saw, by the way, is starting to be delivered very successfully in Wales, where it is a voluntary Pledge where 10% of employers are already being trained in this voluntary way. So I think the Pledge, with Sir Digby Jones at the helm pushing this forward, is a way to encourage those harder to reach employers to would do more. I think the redefining of the role of the Sector Skills Councils will engage more employers than we have at the present time. I do not know if you define that as a market failure, but I believe that these are certainly mechanisms that will help very significantly.

  Q358  Michael Jabez Foster: Could I just ask, with so many freeloaders in the employers' side of the equation, is not the answer a training levy so that everybody pays for the training?

  Lord Leitch: I do not think the answer is a training levy. We looked hard at compulsion—we looked hard at compulsion—and where I am coming from philosophically I would rather have incentivisation and encouragement and mechanisms which increase awareness of the benefits of training, because there is a direct correlation between skills, productivity, which is good for your bottom line and employment—there is a direct correlation here—and so I would rather go that route.

  Q359  Michael Jabez Foster: Why not a training levy?

  Lord Leitch: Because history tells us that it does not work. It has been tried many, many times in terms of training levies and if you force it it is shown that it does not work; if you have a working together it can work. For example, Sector Skills Councils, in some Sector Skills Councils they have an arrangement that if the majority of employers do agree on a levy they can do that, and they have done that, for example, in the Skills Sector Skills Council, and it has worked very effectively. But coming on to the widening of compulsion, there are other areas, like Licence to Practise, which is to say that you have to have a certain licence to practise, which is a compulsory one, and, again, we have looked at that and we have currently said, "No, that is not the right thing for Sector Skills Councils to edict." But Licence to Practise has worked in certain situations and I think that compulsion can be a very blunt instrument or it can be a fine instrument that can deliver, and if you look at License to Practise in the health industry, where we need to have a certain level of qualifications to work in care homes, for example, then that is a Licence to Practise. My own background is in financial services and in financial services there has been a Licence to Practise in the qualifications that you need to sell retail financial services products—you have to have a financial planning certificate. That was compulsion introduced by the Government, defined by the Government—painful for the industry at the beginning, but I believe it has been a very good thing for the industry and over time it has improved the productivity, the professionalism and the esteem. So I think that is the way we have to be; we have to be very focused—a rifle shot to say, "Where would compulsion work?" Training levies in a compulsory way do not work.


 
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