Select Committee on Work and Pensions Minutes of Evidence


Examination of Witnesses (Questions 380 - 399)

WEDNESDAY 13 DECEMBER 2006

LORD LEITCH, MS LOUISE TILBURY AND MR STEPHEN EVANS

  Q380  Jenny Willott: One of the things that the report said was that the increase in the proportion of high skilled workers is leading to increased demand for less skilled workers as well, for example in hospitality and so on. It seems slightly counterbalanced, but it seems likely that there will continue to be a demand—even if it is a smaller demand—for unskilled workers and for those in casual jobs as well. What role do you see that sort of employment playing in enabling people with lower levels of skills to leave the benefits system and to get back into work?

  Lord Leitch: I think it is very important indeed. There will always be a need for jobs at the low skill level but you need to make sure that they have the right skills and the right sort of skills to deliver those jobs. But you will always need jobs, and if you look at care homes and how care homes have increased dramatically there will always be those sorts of jobs which are needed in this country today. Can I go a bit wider at the moment in terms that you talk about high level jobs?

  Q381  Jenny Willott: I might rein you back in if you go too wide, but feel free.

  Lord Leitch: One of the issues that we talked about when we were doing this study was what sort of society do we need or do we want in the UK going forward? If you look at the spectrum of skills, at the high level is where you have your innovation, your leadership, your entrepreneurship, your management, and that is where you get the driver and the creator of wealth at the high level. So you need those high level skills to deliver that. You need intermediate skills to deliver day in day out that sort of output. Low level skills you need to do the jobs that I have just been talking about. I remember that there was one discussion we had with a think-tank, and it said, "Just concentrate on the high skills, just look at levels 4, 5, 6 and 7 and that would make Britain a great economy going forward and the country would be much richer. Just leave the other parts alone." We said that that is completely wrong because what sort of society do we want? We do not want a society where the gap between the haves and the have-nots widens. So what we want is a society where we do concentrate—and I said earlier, there is no panacea—where it is a priority at every single level, at the higher level skills where we need more of those level 4s, 5, 6s and 7s to deliver that economic prosperity, and we need people at intermediate skills to deliver day in day out and you need people at low level skills. The benefit there is the social benefit and there is also a benefit of those people coming off welfare and moving into work, which is a huge benefit for our society in costs' terms as well. So, in terms of people's lives it is important and in terms of the economy it is important.

  Q382  Jenny Willott: To go to a slightly different area now I just want to ask a question or two about migration. In your report you said, specifically looking at migration from the accession countries, that it has had little or no impact on wages or claimant unemployment. Other memoranda that we have for this inquiry, for example from the LGA, raised concerns about migration. The LGA has suggested that employers are more likely to choose healthy, highly skilled people from accession countries rather than those, for example, who have been on benefits for a long time and who are furthest from the job market. What impact do you think that migration has had and what impact do you think it will have on the number of jobs available specifically to low skilled workers in the UK as well as more generally to the wider labour market?

  Lord Leitch: We have examined this and all the evidence that we have looked at shows that immigration is good for the economy, it has a positive effect on the economy and does not have an adverse effect on employment rates. All the current analysis we have looked at tells us that. Of course, there is a perception at the individual level that it makes it more competitive, and I can understand that. I think the best way to cope with that is through skills. They are the answer, to upskill people or to give people the skills so they can compete. What we are seeing from the research is that immigration takes the domestic jobs which are not being filled and our conclusion was that immigration is good for economy and it does not affect employment rates. Where there is a perception, the best thing we can do for individuals who are competing, because on a one-to-one basis it might happen that you are competing with somebody who is better skilled from Poland, is to give people the right skills for the jobs. It comes back to the priority of skills.

  Q383  Justine Greening: In terms of future prospects for low-skilled British workers, you are suggesting that the future prospects are not to be trying to compete in the low-skilled areas?

  Lord Leitch: No, no, to have the right skills. What you are trying to do is to match the skills you need for the job. What we are saying going forward is the skill levels required even at the basic level will increase. What we have got to do is take that community in our society and improve those skills so they can compete for those jobs at the basic level.

  Q384  Justine Greening: How up-to-date is the evidence that you had on unemployment rates and employment rates and so on? Is that very up-to-date and does it take into account the most recent flows in migration to the UK?

  Lord Leitch: It does. I will turn to my colleague Stephen, how recent was that data?

  Mr Evans: I think most of the studies look up until mid-2006, so it is quite recent.

  Q385  Justine Greening: There is no evidence, given that the numbers are increasing, that there is any change in the situation?

  Mr Evans: Not yet.

  Lord Leitch: That is why we say "current" analysis.

  Justine Greening: That is why I was asking the question. Thank you very much.

  Q386  John Penrose: I just wanted to take you back to your previous answers about the mix of skills that is important. I think you were saying that Level 2 and below is vital but all the other higher levels of skills are also essential if we are to get the sort of increases in employment and economic performance that we are after. As you know, this Committee is starting with the question about how the Government should get to the 80% employment target that it has set itself. Most of the evidence we have seen so far says that people without a qualification of at least Level 2 are suffering from a very, very major employment disadvantage. I was intrigued that you were saying that yes that is a disadvantage but we have also got to have all the other higher level skills as well. I am concerned that your emphasis, which is including the higher level skills, is rather different from the Government's emphasis which is saying if you have not got a very low level of skills as a starting point you are completely up the creek, and therefore they are focusing very heavily, based on that data, on Level 2 and below.

  Lord Leitch: I do not think the Government is focusing exclusively on basic skills. It is very interested in intermediate skills and higher education at the same time. What we are recommending in the report is an increase in the number of apprenticeships to 500,000, for example, by 2020. We have consulted extensively with Government and they are very interested in that. They are also very interested in higher education. At the present time we spend 1.1% of GDP on higher education in the UK. The United States of America spends 2.9%; South Korea spends 2.6%; Scandinavia spends 2.5%, so there are issues at the higher level as well. I am absolutely convinced that we do need those Levels 4, 5 and 6, and we set out very clearly in the stretching objectives that we have the good performance on attainment rates at higher education. It has moved from 21% in 1994 to 29% today. We are saying it should exceed 40% by 2020. That is a tall order but we need to go further than that to be really world-class. This is a major change that is going to need different mechanisms and more funding than we have at the present time to make the UK economically prosperous. I think I am saying there should not be one focus on what we are looking at here. It should be a focus on prosperity, driven at the top, delivered at the intermediate, and also the services for lower people and social justice basic skills should be provided for all. That is a priority for Government.

  Q387  John Penrose: That is very clear, thank you. Just in terms of the distance that has therefore got to be travelled from where we are today, I would be interested in your view. I am a governor of my local FE college and we are extremely worried about this. There is a concern—and I think it is a national one, I just happen to have the local data from my particular constituency—over the recent cuts in the level of places at an FE colleges for courses at Level 3 and above for people over 25, so plum in the middle of the adult skills area that your report is focusing on and focusing on traditional routes of people who have always relied on FE colleges to get back into the job market, so mums returning to work classically after starting a family, people who have been made redundant in mid-life, people who are approaching retirement, particularly as the retirement age rises who will still need to remain in employment into their early and mid-60s. Those groups have always traditionally turned to FE colleges and the like in order to reskill and keep their skills up-to-date for the employment market. If you are saying that skills at Level 3 and above are going to continue to be important, at the moment the funding is going the opposite way. Does that not mean that a huge change in direction is going to be required because at the moment the momentum is opposite to the one which you are arguing very persuasively needs to be there?

  Lord Leitch: It depends who is paying. There is a balance of responsibility which we have set out. You are absolutely right, at the basic levels the Government has an obligation to provide everyone with a basic platform of skills. At the intermediate level, where there is a good private return to individuals, there is also a responsibility on Government to act as a catalyst. We have said that the expenditure should be roughly 50-50 and we will come on to say how we are going to get more expenditure from employers into this. At the top end at the higher education levels—this is for the increased attainment by the way—it should be very much employers and individuals funding for that increased ambition. That is where we are looking. Apprenticeships are interesting. If you speak to employers, they are very keen to have more apprenticeships. Apprenticeships fell in the 1970s to about 75,000. I think that was wrong as a strategic move in terms of what the UK needed on intermediate skills. It then rose again to 175,000 and today it is 250,000. The completion rate for apprenticeships has improved enormously in recent years. What do you think the completion rate is today?

  Q388  John Penrose: Tell us.

  Lord Leitch: 55%, and that is up from 35% two years ago, so employers would say they want more apprenticeships but it should be economically valuable skills and less bureaucratic. The solution to that is through sector skills councils focusing on the vocational skills at intermediate level, planning them collectively, identifying where the skills gaps are, and then there will be much greater incentive (if you reduce the bureaucracy) for those employers to invest in those intermediate skills. That is the route that I see for more funding to come in at the intermediate level.

  Q389  John Penrose: Can I just push you on that. Can we take an example of, let us say, a young parent in their early 30s trying to get back into the workplace having spent the last five or six years out of a job looking after a young family. At the moment they sign up for an FE course and the money will be there for them to do a Level 3 course, let us say. What is going to happen in future because these people may not have a lot of money?

  Lord Leitch: Are they out of work?

  Q390  John Penrose: Yes, they are out of work, they are just trying to get back into the workplace. Their skills are five or six years away from the workplace at the moment so they are trying to reskill into something else. Where are they going to find the money to do this course in future compared to last year?

  Lord Leitch: They will have an individual learner account which will take them part of the way. That probably is a solution and Stephen is writing me an answer here! Thank you for reminding me. At the moment FE colleges have loans that can be given to people in these circumstances. However, it is not transparent and you cannot see what the funding is. It is not clear before you undertake the course. They are very much discretionary, and we are saying we want to create a Skills Development Fund which will be operated by the Careers Service in Jobcentre Plus, so your couple or as individuals would go along to Jobcentre Plus and they would have their skills health check, which I think would be a good thing; by the way, done in a non-threatening way because many people do not like to be diagnosed in this way. We travelled extensively and one of the things I saw and I remember I liked very much was in Sweden where they had these health checks for mature people and they were done in the most non-threatening, easy way so you are not frightened and scared of being tested. This couple would go along, have this skills diagnoses and then the adviser would tell them what funding is available to them as individuals to go to a college, and there is money available for that at the present time. We are going to shift that from the learning and skills council to be done in the Careers Service so that would be done there.

  Q391  John Penrose: Can I just press you a bit more on that. So this example of someone trying to re-enter the workplace; they have got an individual learning account and they get a loan, so they have got to go into debt in order to improve their skills?

  Lord Leitch: They get an individual learner account which will take them up to a certain level which will be Level 2 and then they can have a loan which will allow them to go further.

  Q392  John Penrose: If they have got Level 2 and they need to refresh their skills because they are not employable because they have been out of the workplace for seven years, what you are saying is that they then have to go into debt in order to get better skills in order to become employable?

  Lord Leitch: I think that is the only way forward. What are you saying, Stephen? There is a grant and a loan. It is a partial solution.

  Q393  John Penrose: I am just concerned that this does not sound like it is a very easily opened doorway which is going to encourage people to refresh their skills if they are over 25 and out of work.

  Lord Leitch: Can I say I do not think we have all the detailed answers. What we have set out in our report is a very comprehensive analysis, a very clear view of the vision, the strategy, the objectives, and the principles. What it is not is a detailed blueprint for implementation, so we do not have all the answers and I think that is something we will have to look at.

  Q394  Chairman: Can I make a request, if somebody could send us a note on the interaction between the learner account, the loan and the grant.

  Lord Leitch: Yes certainly, we can do that.

  John Penrose: That is important.

  Q395  Mrs Humble: Lord Leitch, the area that John Penrose has just opened up is an area that I want to question you on a little later, but I just want to follow up on one of your answers about employers expressing eagerness for more apprenticeships. One of the problems that I have in my constituency, and I am sure must be replicated elsewhere, is where we have very small employers—and a lot of craftsmen fall into this category—a one-man band who is an electrician and a plumber or there might be him and somebody else, who are very reluctant to take apprenticeships. A lot of people in that position are now older as well and they will be retiring soon and so younger people who want to become apprentices in that sort of area are finding it very, very difficult to get the work placements. Is it a specific group of employers which has approached you and where did these very, very small microemployers fit into the scenario of apprenticeships that you outlined?

  Lord Leitch: I think what we are saying is yes maybe there is something that has to be done on the design of apprenticeship courses. Maybe some of them are too long or too complicated and they should be done in a more unitised way. I think this is where we say the role of the sector skills council would come in. The sector skills councils represent the whole industry and will identify collectively the skills gaps and the needs and will then input to the design of courses. We are also saying for the sector skills councils their performance should be judged on maybe harder-edged targets in delivering things like apprenticeships, and also apprenticeships across a range of large and small employers. So I think the design of the apprenticeship course is crucial in what you are saying and maybe what we have not got is enough demand-led in the position that you are talking about. It would be the sector skills council which would come in.

  Q396  Mrs Humble: Except I find—and again I am speaking from personal experience—the learning and skills council works very well in my area with the local college to provide the academic side of the training, the theoretical side of the training, but there is a large demand from individuals who want to be trained, for example as plumbers, and they cannot get the work placements in order to complete their course because the people who they would be placed with are, by and large, very, very small microemployers who do not want the fuss and bother of apprentices who they see as an inconvenience to them.

  Lord Leitch: It is back to the issue we talked about earlier of portable skills and what does the employer need. I think there are two dimensions. I mentioned the sector skills councils. The other one is the Train to Gain broker. The Train to Gain brokers are engaging with those smaller employers. They are engaging with the harder to reach employers. We have seen real traction. The small example I gave you is a good example of how you can engage with the smaller employer and identify what they need and to increase their awareness. Can I just mention something by way of clarification. It is right that we focus on small employers but if you look at the composition of employers in this country, 50% are larger employers, and then you have got the public sector and SMEs, which are a vital part of our economy but we must keep it in proportion. That is the point I am making.

  Q397  Mark Pritchard: Going back to Jobcentre Plus, I think all of us will have some representation of Jobcentre Plus in our constituencies and the staff do an excellent job and are very committed public servants. Given that many of your answers have involved, it appears, an increasing role for Jobcentre Plus staff, how does that marry with the current proposals to cut quite severely the number of Jobcentre Plus staff around the country; one in two? There is always room for efficiency savings but do you agree with my view that there should be some thought for keeping Jobcentre Plus in post where unemployment is greater?

  Lord Leitch: Just repeat that last question.

  Q398  Mark Pritchard: To keep Jobcentre Plus open where unemployment is rising or significant?

  Lord Leitch: In terms of an increasing role for Jobcentre Plus, yes Jobcentre Plus have been reducing staff and they have been driving efficiencies. The merger is finished. You first do the merger and then say what is the next stage of driving efficiency. I think they are doing it really, really well. There have been changes also in Jobcentre Plus in terms of more on-line interventions, more telephone interventions, so the workload is moving a bit as well. What we are not looking for here is more work for Jobcentre Plus; it is better performance and better achievement of Jobcentre Plus. What we are seeing is that in those two-thirds of claimants who recycle we should be doing things that reduce that rate. We are saying that everybody coming in should have a skills health check at the beginning, a diagnosis, and that would be done by the Careers Service and Jobcentre Plus. Then at the six-month point there would be a check to see where you are and, if there is a skills problem, your back-to-work programme would include many more skills than at the present time. The figure at the present time is, if my memory serves me right, 11% of claimants are referred to skills programmes and I think we think that figure should be much higher, so what you are looking at is better. This might reduce the number of claimants because you are getting people into sustainable jobs. So we have had extensive discussions with the executive management of Jobcentre Plus and DWP and they are very confident they can cope with this.

  Q399  John Penrose: Just to come back round to the discussion we were having about targeted skills just now. You were very helpful in your responses to my earlier questions. Can we look at some other groups that may be suffering from disadvantage. We were talking about people with skills below Level 2 to start with. We have been trying to understand the interaction between multiple disadvantages and there are some groups who have these multiple disadvantages and you can see them very, very clearly in the figures. Have you given any thought to the way that skills may need to be delivered for specific groups that are suffering from multiple disadvantage, whether or not there are specific ways you need to change the delivery of skill for disabled people, for people of different ethnic backgrounds, for women as opposed to men, and for people who are therefore suffering from some combination of disadvantages which means that they are highly unemployable at the moment but need to get those skills to cut that particular knot of problems?

  Lord Leitch: I feel very strongly about this area. I am the Chairman of the National Employment Panel and I think they have made representations to you. I think you had a discussion with Cay Stratton here. I feel very strongly about helping disadvantaged people into work and particularly the hardest to help. What we are advocating on careers advice, awareness, all those things, will help this community and particularly the development of employment and skills boards. There we want to build on some of the successes. I know you have talked about Fair Cities. That is something I felt very strongly about—getting more ethnic minority people into work. We have got a 15% gap. Because we know that many employers do have a social conscience and by bringing these employers together in this collective way at a local level, by identifying the needs of a particular geographic unit, bringing the supply side and the demand side together with this extra help that we are giving on basic skills, with the better assessment we are giving on basic skills, we can get employers to define what they need, to look at the local problems, to co-ordinate better the help that is given, and to improve those harder to help groups. I am confident of that. In terms of have we done the detailed work below, no.


 
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