Examination of Witnesses (Questions 1-19)
LORD LEITCH
AND LOUISE
TILBURY
28 APRIL 2008
Q1 Mr Marsden: Good afternoon. Can I
welcome everybody here to this one-off session with Lord Leitch
and Louise Tilbury to discuss the Leitch Review of Skills.
This is a one-off session, but it may be of interest to those
not already aware of it that the Innovation, University, Science
and Skills Committee is intending shortly to begin hearings post-Leitch,
where we are going to be looking particularly at some of the issues
to do with regional skills implementation. It is a great pleasure
to have you here this afternoon, Lord Leitch, and also Louise
Tilbury, who is the former leader of the Leitch Review team. We
have a good cross-section of our colleagues here. Mr Willis has
asked me to take the chair for this afternoon, so I hope I get
a good skills mark! If I could just kick off, Sandy, your report
fell into two sections; there was an interim report and then the
final report which came out in December 2006, and like all reports
there was an enormous amount of comment on it and also a lot of
subsequent government activity, just looking down the list at
various papers and what-have-you. What would you say distinguished
your review from previous attempts to analysis and improve the
United Kingdom skills workforce in the United Kingdom, and what
are the specific reasons why you think your review will make a
difference when previous reviews in the past perhaps have not?
Lord Leitch: Thank you, Chairman.
I am very pleased to be here this afternoon. I am very sorry I
could not attend the Committee on the last meeting because of
a family bereavement, and I am sorry if that caused you any inconvenience.
I welcome the fact you are looking at this "after Leitch"
and very happy that you are focusing on such a critical area.
In the past there have been very many useful studies into skills,
but there are certain features which did distinguish us. One was
the width and the depth of the study; second was the duration
of the study and, third, the emphasis on the study. We had a very
wide remit; we were to look at the optimum mix of skills to maximise
economic prosperity, productivity and social welfare through to
the year 2020, and that was right across the United Kingdom, covering
the four nations. There was also a very deep analysis looking
at comparator countries, and we spent quite a lot of time in the
interim analysis looking elsewhere, raising our head above the
parapet and seeing what was being done. We visited the United
States, Canada, Scandinavia, India and China and did a lot of
desk research. On duration, we looked at the burning issues of
today like globalisation, and then took a look forward 15 years
to 2020, to the medium term, and I think the other point was emphasis.
This time there was a strong focus on the needs of the economy,
and there I think my experience as a businessman helped. My background
is from financial services. When I retired three years ago I was
running 20,000 people in 17 countries across the world, and I
think that brought a dimension of practical experience looking
at economic requirement for skills. In answer to your question
"What difference did we make?" I think the difference
was that we did make a difference. We spent a lot of time influencing
and consulting; we had great input from a whole series of contributors,
gaining agreement right across the United Kingdom. Gaining agreement
was critically important, and we tried to make the study as apolitical
as we possibly could. We raised and defined the agenda and then
in the summer of 2007 that agenda and those recommendations became
government policy, and that was the difference we made. If I may
say so, the message from our report was very stark, very clear,
and was really a wake-up call for the United Kingdom to say that
our productivity here is mediocre; the lack of skills is a major
factor in that mediocre productivity; we have some serious social
issues to confront such as social mobility, child poverty, employment
rates with ethnic minorities, and skills affect all of those.
The global economy, we illustrated, was changing rapidly and that
was impacting United Kingdom competitiveness, making it harder
for the United Kingdom to compete. Saying that, the visits were
very interesting; I remember one particular visit to the United
States where we met very eminent strategists and thinkers, and
they saw what was happening today as a simmering crisis for the
developed world, and I think we brought that to the fore. Basically
we were saying that to be a world leader in prosperity you need
to be a world leader in skills, and that affects both the economic
prosperity of a nation and also the social issues that face any
nation. That is really why we feel we made a difference.
Q2 Mr Marsden: I am going to ask
in a moment Louise to give me briefly her perspective on the difference,
but could I just press you on a couple of points? You talked about
deprivation and child poverty, and also that this was, if you
like, an apolitical, very much analysis-driven report. What evidence
were you able to assemble that skills were the key to solving
problems such as deprivation and child poverty? Also, being devil's
advocate here, one of the other issues that has come up increasingly
since your report was published and which was implicit in it is
the whole issue of re-skilling as well as up-skilling, and one
of the criticisms that was made of the report at the time, and
I quote from previous Select Committee reports of the Education
and Skills Committee on page 16 skills, where Professor Ewart
Keep said: "The thing that is missing completely from Leitch
is anything to do with economic development and tying up skilling
and economic development together". Do you feel that was
a fair comment, or not?
Lord Leitch: I was going to make
a qualification giving evidence here today. It has been 18 months
since I published, so in a sense I am a bit apprehensive because
I am rusty in some of the detail, and I apologise for that. 18
months is a long time to be away. It is like doing an exam—you
are right up to the minute with all your facts for the exam but
after 18 months you have forgotten a lot. In terms of how it affects
social issues, we know there is a direct correlation between skills
and income. We know that it is harder to get a job if you do not
have skills, it is harder to get a job and to keep a job, and
there is a direct correlation between having a job and your income,
and that flows through directly to child poverty. We know social
mobility is a real issue for the United Kingdom and has not changed
much since the Second World War, and we know that the key to getting
out of that poverty trap is having the skills to get a job, and
I think we have found that conclusively. If you look at the interim
report, there are many references when we refer back to these
social issues and the impact on skills, and there are many examples.
I remember on social mobility it talked about the chances of someone
from a poorer family going to university and it is a fact that
if you are a child from a wealthier family you have six times
the chance of going to university than a child with the same ability
from a poorer family, and that is the sort of social mobility
issue we face. Also, we can look at health. People with low incomes
have more health problems than those with higher incomes, whether
they be obesity or depression. Having a job is a great force for
improving your health and your awareness. Take crime. People on
low income are more often the victims of crime and more often
the perpetrators of crime, so there is a direct correlation between
all those issues and skills. But the main focus of review was
on the economic value of skills, and that is why I rather dispute
what you say. We focused very strongly on the economic value of
skills, and we spent a huge amount of time looking at what the
economic value to the individual and the economic value to the
employer. Economically valuable skills became our mantra throughout
this whole study, and is also something that distinguished this
study. What were you doing on skills that made a difference to
the wage premium of an individual, and what did that do for the
productivity of an employer? For example, you talk about economic
skills and the correlation, and Scotland has a tremendous record
on skills, it is Quartile 1 in the world but if you look at economic
performance it is Quartile 3, so there is a disjoin between the
skills and what it is producing, and we pushed very hard to get
solutions to this. For example, there are 22,000 vocational qualifications
in the United Kingdom, and many of those add very little or no
value to the individual or to the employer, so we focused very
hard on this. In terms of economic development what we said was
that we have to give employers a more leading role in driving
this agenda through, and that was part of our recommendation.
Q3 Mr Marsden: Louise, can I ask
you specifically on what Professor Ewart Keep has said, because
he talks about tying economic development and skilling together,
and he also mentioned that the RDAs did not seem to get a great
mention in the original report, the implication being that the
regional dimensions of the skills agenda were perhaps not addressed.
Have you any overall comments or thoughts on that?
Ms Tilbury: Our perspective was
very much as Sandy said, that skills do drive economic performance,
both through the number of people in employment and also their
productivity, and the way that we defined skills was very much
not skills for their own sake or just driving qualifications but
economically valuable skills, skills that will see a benefit to
the employer and to the individual. So the economic purpose of
skills and their role in economic development was really at the
heart of our recommendations. Coming back to your question earlier
about why this report really made a difference, it is because
it came from the perspective of business and the employer, and
looked at how skills can really drive forward that change from
the business level and not from the perspective of the government,
which many previous reports had done.
Lord Leitch: May I add to that?
I think skills are delivered at three levels—at the national
level, like the Commission for Employment and Skills; at a functional,
sectoral level, which is where you get the Sector Skills Councils
coming in; and a local level, and our recommendations, if you
recall, were about Employment and Skills Boards doing that at
a local level. Simultaneously, if I remember, there was a sub-national
review going on as to whether you should have Employment and Skills
Boards and what sort of relationship should there be between those
and the RDAs, and I remember we looked specifically at Sheffield,
for example, which was doing a fantastic job of bringing employment
and skills together at the city level, and that seemed to us to
be at the correct approach. So we recommended the Employment and
Skills Boards but, arguably, that could have been, and I think
we said this in the report, done at a city level or a regional
level.
Q4 Mr Marsden: So you were flexible
on that?
Lord Leitch: Yes, and I think
that is the right approach. It depends. If you look at London
that has sector skills within the community but it has an eight
million population, so there is a scale point in this too.
Q5 Mr Willis: Very briefly, I want
to challenge you on this basic premise in your report which says
that skills equals productivity equals economic growth on the
basis that if you look at the United States, Germany, France,
which arguably have significantly greater levels of productivity
per man hour than the United Kingdom has, without question, the
analysis of that appears to me to show greater levels of investment
in terms of all those three countries, greater levels of use of
technology, greater use of research and development, greater and
easier access to capital, particularly to growth capital at times
when businesses are emerging, and that skills is just one of a
plethora of factors which make productivity sing and dance. Yet
there is this belief that the Leitch Report has pointed us in
this direction and said that, provided we up-skill the nation,
suddenly we will be economically hugely advantaged. I do not share
that optimism. Am I wrong?
Lord Leitch: I think I agreed
with what you are saying, and I think we said skills are not the
only factor.
Q6 Mr Willis: Where is it in that
balance then?
Lord Leitch: There are many studies
and factual evidence that have a direct impact on skills, on employment,
on income, on productivity, on economic performance and, as I
said earlier, there are many social factors too but let us concentrate
on the economic ones, and there are many references again in the
interim report to where that factual evidence comes from. If you
look at economic performance, economic performance is a function
of the number of people in work and how productive they are—do
you agree?
Q7 Mr Willis: Yes.
Lord Leitch: So if you look at
employment there is a very clear correlation between skills and
employment. Increased skills means increased income; lack of skills
means difficulty in getting a job, difficulty in keeping a job.
Employment rates, for example, on ethnic minorities are fourteen
points lower. Key reason? Lack of skills, so there is a direct
correlation. If you look at globalisation and technological change
it means more and more jobs are done by other cheaper geographies
in the world. There are less jobs needing basic skills, for example;
we are seeing a shift to the service economy, we are seeing a
shift to more skilled jobs, so there is a direct correlation between
skills and employment. On productivity, skills is one of the key
drivers; it is probably the most important driver within our control,
and I think that is the case—one of the most important levers
within our control. There are other factors. Capital investment
is clearly an enormous factor in driving productivity, but access
to capital is not always that easy. Within our own control it
is easier to drive the development of skills. Skills are an incredibly
powerful lever. We know that workers with higher skills are more
productive; we know that countries with higher skills have higher
productivity, and there are many examples which illustrate this.
There was a study done three years ago by McKinsey and the London
School of Economics looking at manufacturing in the United Kingdom—as
we all know, manufacturing has reduced in size over the years,
dramatically; if I remember it was something like 14% of GDP—and
it was looking at why is manufacturing in the United Kingdom not
as productive as manufacturing in the United States. Do you know
the study?
Q8 Mr Willis: We do know the study,
but I wanted to challenge you. If you look at Sheffield, which
you mentioned earlier, the steel industry there now produces more
steel now than it did in its so-called heyday, and it does that
not because people have greater skills but because they have new
technology.
Lord Leitch: But I am also making
the point that that study said the reason why United Kingdom manufacturing
was less productive was because of a particular skill which is
management skill, and that study was conclusive in that, so my
point is absolutely right, I think.
Q9 Mr Wilson: One thing is absolutely
certain, that every decade or two we will get a panic over a crisis
in skills. What is different about the panic you are creating
compared to all the other panics we have had in the past?
Lord Leitch: I cannot really comment
on the panics in the past; I can talk about the crisis that is
going on today and I think we see it. Globalisation, technology
and demographic change is incredibly strong, and I believe passionately
that skills have to be addressed today. As I said earlier, more
and more jobs are going overseas; anything that can be digitised
can be done overseas. If you look at China and India, China the
factory of the world, India is the IT department of the world,
they are fantastic threats to our competitiveness; one hundred
years ago we had the industrial revolution, times have changed
very significantly, and these competitive threats across the world
mean that we have to change how we up-skill, otherwise we are
going to disadvantage those people with basic skills. There are
less jobs around for people with basic skills. We have moved to
a service economy, and we have to have more people at the top
end, the entrepreneurs, the technologies, the managers, the leaders,
the scientists, to drive that high value. We are a high value
economy and maybe panic is not the right word, but we have to
do something. The United Kingdom at the moment is mediocre on
productivity, it is mediocre on skills in the world, and if you
do not have the natural resources, which the United Kingdom does
not have, you have to do something about the only natural resource
which is our people.
Q10 Mr Wilson: Yes, but growth over
the past 15 or 16 years has been pretty good by European averages,
so I return to the point—what is the problem? If we are
growing at 2-3% a year and doing alright, where is the big problem
with skills? Those jobs are obviously being filled?
Lord Leitch: I think you are right,
we are coming from a position of strength. United Kingdom has
high employment but it has mediocre productivity. We have key
risk areas and people without basic skills; we have social issues,
we have seen child poverty not improve as fast as we would like;
we have seen social mobility not change; we have seen employment
opportunities for the most disadvantaged in our society improve
but not as much as we would like, so there are sectors of our
communities which are falling behind. Industries which traditionally
have been strong for us have grown, but we have to compete with
the accelerating economies of the world, with China and India
producing three million graduates a year where we produce only
a quarter of a million a year.
Q11 Mr Wilson: What evidence do you
have that skill shortages have held back United Kingdom economic
growth in the past?
Lord Leitch: We have a whole variety
of pieces of evidence. We have seen many employer surveys which
say they could have done better but for the skills shortages that
they have. For example, Ben Verwaayen, who has just retired as
chief executive of British Telecom, was telling me that British
Telecom is high value, driving technological business forward,
and that what he needs to drive his business forward is more people
at level 5 and level 6. It is harder to get those in the United
Kingdom than in Spain, and there are many examples like this where
employers are saying they need more skills of the right type to
drive their businesses forward.
Q12 Mr Wilson: But employers always
say they need more skills. Even if you gave them more skills they
would want even more, so that is not really a comprehensive answer,
is it?
Lord Leitch: I do not think they
do, actually, especially over time. Part of the problem is that
employers have not realised that skills mean higher productivity.
Q13 Mr Wilson: You talked earlier
about the international comparisons and the desk research you
have done. Tell us which countries are a good model for the United
Kingdom to emulate, and why?
Lord Leitch: You are testing my
memory here.
Q14 Mr Wilson: That is what I am trying
to do!
Lord Leitch: Firstly, there is
no single panacea. We did not come across one country where we
said: "Do what that country does and we will be alright going
forward", but there are some examples. If I remember, community
colleges in the United States were very impressive. This is their
equivalent of further education colleges, and we saw some brilliant
examples there where they say: "Come in, do this course and
we will help you find work". I remember one near Washington
linked to Ford which had new cars and you worked on the cars and
then you got jobs in the motor industry, and they were very impressive
and focused. This is training to get you a job. If I remember
I was also very impressed in Sweden with the evaluation of mature
skills. If you were a worker in your 40s and 50s in Sweden and
you wanted an evaluation of your skills, how they stood up and
what you could do about it, you could go in in a very non-threatening
way to have this assessment, and one of our recommendations was
to bring a national careers service into Jobcentre Plus, and that
is happening. Other examples would be in Finland where continuity
is very important. In Finland skills and education is not aligned
to a government so you get great continuity of delivery, and I
have to tell you, Rob, when I first started this, I thought the
best thing we could do was to deliver what we started on skills;
we are very good at ideas but less good at delivery. In Finland,
when a government changes, they do not have the chop and change
of a new skills policy. They deliver. Those are three points which
come to mind but coming back to your earlier point, Adam Smith
in 17-whatever it was—
Q15 Mr Wilson: 1799.
Lord Leitch: Yes—talked
about the fact that the skills we teach are not good enough for
employers, so in a sense you are right, we have had that common
theme all the time. At the same time, it must not stop you from
driving to improve skills productivity, social problems in this
small competitive environment today. That is the difference.
Q16 Mr Wilson: You mentioned community
colleges. Would you suggest that we adopt a similar structure
to the United States in putting more investment into community
colleges?
Lord Leitch: Firstly, I would
say there are some excellent community colleges here. I remember
we visited one in Fife, in Scotland, it was the Lauder Technical
College, absolutely brilliant, getting 60% of its funding from
local employers doing rather similar things. We recommended that
qualifications should be driven by employers, so it would be economically
valuable skills, and then FE colleges should compete to get funding
based on those qualifications. So I would not follow automatically
the American model; I think I would follow the recommendations
we made in our report.
Mr Marsden: We are now going to move
on and look at the whole issue of the definition of skills, particularly
the knotty relationship between skills and qualifications.
Q17 Ian Stewart: In your report there
was quite an interesting criticism, almost, that the emphasis
was on qualifications, and that that appeared to be skewing policy
away from skills which were needed to help the future development
of individuals, companies, and the economy in general. Some of
the questions I have revolve around that distinction between qualifications
and skills. Do you regard skills and qualifications as one and
the same?
Lord Leitch: Sometimes. That is
a difficult question. I started off the review being very unhappy
about using qualifications, because it seemed to me it did not
incorporate wider skills, and a good example is on-the-job training
which is one of the best ways to develop your skills but it does
not flow through to a qualification. Skills in my definition means
the capability to do a task, and it can be specific or generic;
I do not think there is a perfect measure. Qualifications, though,
are a proxy for a level of capability. It is imperfect—as
I said, you have areas like on-the-job training—but it is
the only comparable measure that is widely available, available
right across the piece, available internationally. There is a
correlation between qualifications and capability but it is not
perfect, so I think it is the best we have. But you also have
to use other measures as well, and we used other measures. For
example, on basic skills such as literacy and numeracy, we used
extensively survey data, so you have to use a combination of both
and yes, I was critical of qualifications. I mentioned earlier
22,000 vocational qualifications, many of which were of no economic
value despite extensive input, so we are spending all this money
on vocational qualifications which are neither delivering value
to the individual nor to the employer. So one of the things we
said we needed to do was to rationalise those qualifications and
make them economically valuable.
Q18 Ian Stewart: You have mentioned
the use of surveys. Are there any other mechanisms or methods
of assessing the skills of an individual or even the economy?
Lord Leitch: Yes, there is testing,
obviously; there are some national testing schemes and international
testing schemes. You have to look at all the measures within our
grasp to assess where we are, and that is exactly what we did.
Q19 Ian Stewart: How will your targets,
then, assist in the development of what we now term as soft skills,
such as skills relating to innovation, team building, which may
be of more value to the economy than formal qualifications?
Lord Leitch: Soft skills are very
important, from attitude to communication to time-keeping—very
important, but very difficult to measure.
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