UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 471-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE THE

INNOVATION, UNIVERSITIES, SCIENCE AND SKILLS COMMITTEE

 

 

THE LEITCH REVIEW OF SKILLS

 

 

Monday 28 April 2008

LORD LEITCH and LOUISE TILBURY

Evidence heard in Public Questions 1 - 84

 

 

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Oral Evidence

Taken before the Innovation, Universities, Science and Skills Committee

on Monday 28 April 2008

Members present

Dr Roberta Blackman-Woods

Dr Brian Iddon

Mr Gordon Marsden

Ian Stewart

Mr Phil Willis

Mr Rob Wilson

 

In the absence of the Chairman, Mr Marsden was called to the Chair

________________

Witnesses: Lord Leitch, a Member of the House of Lords, and Louise Tilbury, Former leader, Leitch Review team, gave evidence.

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 global sedation 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 in 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 4 per cent 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 per cent 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 per cent 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, and 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 the 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.

Q20 Ian Stewart: But how will your targets assist in that?

Lord Leitch: Targets do not necessarily assist but they can help you, for example, in terms of the output. The output might be in getting a job, so I think they would help in those areas. One of the key areas here would be one of the Sector Skills Councils in developing for a particular sector the skills that they need, but there are other skills. If you look at NEETs, how many NEETs have we got today? 200,000? There is this big potential underclass that I worry about of some of those softer skills, concerning getting up in the morning, having the discipline to go and work, the discipline to go for an interview, and we have to do something centrally for those sorts of areas. So it is a combination of, for instance, Sector Skills Councils and something nationally to deliver those sorts of areas. You need them both.

Q21 Ian Stewart: We have developed some non traditional approaches, bite-sized learning or other less traditional routes. Do you think that the targets based on qualifications may discourage the development and use of those non traditional approaches?

Lord Leitch: What sort of things do you mean by "non traditional"?

Q22 Ian Stewart: Well, the bite-sized learning approach, which is outside the qualifications scheme of things.

Lord Leitch: No, I do not. I think employers having more of a role, more of a voice in developing skills which are economically valuable makes that more flexible. You are giving more power to the employers, the Sector Skills Councils, to develop those sorts of skills that are absolutely right with more flexibility, more focus and more measurement in those sorts of skills, and I think we have that.

Q23 Ian Stewart: Sandy, in the past you have been pressed on ELQs, but before we ease into that, does the setting of targets for the proportion of the population at particular levels of skills attainment have a detrimental effect on those who wish to re-skill rather than up-skill, and what is there in your report to assist those who need to re-skill?

Lord Leitch: Setting of targets is a vexed question. A lot of people have asked me whether target setting makes any difference; I think you have to have targets. A business has to know where it is heading, and to do that you need to start with what you are aiming to do, so I think targets are important. But we set off starting by saying you have to have a vision, and the vision has to be world class and skills by 2020, and we mean by that to upper quartile in the OECD. Then you have to translate that into what does that mean, and you have to have objectives, and we have very clear objectives in terms of basic skills, intermediate skills and higher level skills, and there are numbers in there, and I think you have to have those to help you achieve your vision. Then you have the specific recommendations, which drive you to achieve those objectives. So I think that is a very logical, very pragmatic way of running targets, but "targets" as a word has fallen into a bit of disrepute, I think, and I think that is exactly the way to run it.

Q24 Ian Stewart: When you say that there is a presumption that a person will train and gain new skills to achieve a particular job, and that will help drive innovation, what about those people who because of the nature of industry these days have to change their existing skills for new skills? They also make a contribution, do they not?

Lord Leitch: Yes. Absolutely.

Q25 Ian Stewart: So at that point the question is if, as government policy, we are running for a flexible labour market in the type of world that you have described, why do you think a government would not wish to support people who retrain or train for new skills?

Lord Leitch: The Government does want to support those. In our report we talk about 70 per cent of the working age population by 2020 already having left compulsory education, so to have people with the skills you need you cannot rely on a flow of young people coming through, and the flow of young people is going to reduce by 2020, so a key part of this is retraining the work force. A critical focus, for example, of Sector Skills Councils will be on retraining, changing people's skills, improving their skills, driving that forward. I do not want to come on to ELQ yet but it is a main thrust of what we are saying and what is in the report. On graduate numbers, our objective is to exceed 40 per cent by 2020 - and when I say "exceed" 40 per cent will not be enough in 2020, and it is not just level 4 but it is level 5 and above, so we have to drive all this forward by that time, and the only way we can do that is by focusing on the stock of people in work, and that is the strong message from the report.

Mr Marsden: The balance between re-skilling and up-skilling was one of the issues swirling around the ELQ debate, and we would like to press you a little on this.

Q26 Mr Wilson: How does cutting 100 million from the ELQ budget help re-skilling?

Lord Leitch: My job in this review was to do this extensive comprehensive analysis and then make the recommendations. I never thought I would continue to oversee the implementation. Indeed, my review was not an implementation blue print; it did not cover everything, and if we had it would have been a lot bigger and much longer. So we did not cover every single aspect of the skills agendas. Indeed, I always said it was my job to deliver the recommendations; it is then the Government's job with the Commission for Employment and Skills to oversee the success of that journey. I know there has been a lot of talk about ELQs, and we recommend 40 per cent and above at 2020 and increasing the flow of young people, but that is not enough; we have to up-skill the stock. There are 6 million people at level 3 in this country, and they are potentially the candidates to move to the next level. That next level might not be a qualification but it could be a graduate level skill that we are looking at so it is important to get to that, and that is going to be a real focus for Sector Skills Councils. But I cannot really comment on the detailed arguments because I do not know the arguments.

The Committee suspended from 4.55 pm to 5.05 pm for a division in the House.

Q27 Mr Wilson: Your answer was pretty noncommittal --

Lord Leitch: I had not finished!

Q28 Mr Marsden: Could I say at the risk of irritation that it would be helpful if the answers could be a little briefer.

Lord Leitch: Fine. We did not specifically cover ELQs, though I think the principle is we do have to prioritise, but we need to watch out for unintended consequences.

Q29 Mr Wilson: The automatic reaction to that is do you feel that what has happened to ELQs may have some unintended consequences?

Lord Leitch: I do not know enough of the detail, genuinely.

Q30 Mr Wilson: Because you have said that any changes in funding streams and mechanisms must be effectively managed so that the excellent work of institutions such as Open University is not undermined. You are probably aware that Professor Latchford from Birkbeck College and the Open University are very exercised about the impact these cuts are going to have on part-time students and, in particular, women returners to the work force. Surely you can see there is going to be a huge impact on these people as a result of these cuts?

Lord Leitch: What I have not done in the last 18 months is get involved in detailed implementation. I do not think that is right, that is a job for the Government. It has to prioritise, it has to make tough decisions, and so genuinely I have not been involved in that. Open University and Birkbeck have written to me to ask for my views and I have not given them one; I do not think it is right. If you are going to give a proper, educated view you have to look into the whole topic and what was said and done, and I have not done that.

Mr Wilson: In that case I will step back, if we cannot get a view from you.

Q31 Dr Blackman-Woods: Lord Leitch, I think a lot of the analysis in your report on future skills needs is very helpful, but can you tell us how robust you think the modelling is, and what your analysis of the current and future skills picture is based on?

Lord Leitch: I am very confident on the analysis because that is looking at what was on now and I think we had some of the best brains - Harvard University and Sheffield University - helping us, and people from the Treasury and EWP. Modelling, of course, is the future and you need assumptions for that, but I think I am confident enough of the models we have made to justify the recommendations. We have tapped into the best brains here and it is sound. In terms of the modelling where I am confident is working back from the ambition to be upper quartile. These are the things you need to do so I am very confident on that. And, by the way, the Commission for Employment and Skills is currently independently looking at our models to verify those.

Q32 Dr Blackman-Woods: So it might be helpful for us to come back at some stage in the future and look at those again, is that what you are suggesting?

Lord Leitch: I think it is always worth revisiting. Basically, I did a study and I thought it was very important to have an assessment and continuously to review and keep this in the front of my mind, and that is what the Commission will be doing. So yes, you should be constantly looking at it, looking at competition in the world, seeing where we have to make adjustments and seeing if our progress is good enough.

Q33 Dr Blackman-Woods: Nevertheless your report does say it is very difficult to model for 15 years in the future, so would your conclusion be that it is worth modelling for 15 years in the future, or is it only worth doing that in a very general way?

Lord Leitch: I said one of the principles was to adapt and respond. When I first started this study I thought we could take a skill type, model it through to the future and say: This is how many of this you need by the year 2020. I soon realised that history tells you you always get that wrong, so you have to build a system that adapts and responds to what employers need, what society needs, and to drive forward those demand-led, adapt-and-respond fundamental issues for the strategy.

Q34 Dr Blackman-Woods: I have heard a number of people comment in relation to your report that what you did was suggest that in the future there would be very little demand for low-skilled employment in the United Kingdom. The figure that is usually used is about 600,000 being needed, down from about 3.6 million today. Could you say whether you think that is a fair conclusion to make from your report, or whether you were just simply outlining for the future what skills qualifications would be, rather than what they should be?

Lord Leitch: There will be less low-skilled jobs in the future. That is the statement from that.

Q35 Dr Blackman-Woods: And do you think it is fair? Because I have heard a number of ministers saying that based on your report it is likely that the demand for those with low-skilled occupations will be much, much lower for the future than at the moment?

Lord Leitch: I think that is right, and the consequence from that that we should give those people who do not have these basic skills a chance to acquire them, and that is a fundamental point, a social point and an economic one.

Q36 Dr Blackman-Woods: We have already discussed targets and whether they are useful or not. However, we would all accept that the targets set in your report and subsequently added to by Government are quite challenging. Do you think they are realistic, given that we are 12 years away now from 2020? Are they going to be met?

Lord Leitch: I earnestly hope they are going to be met. I think they are realistic because, remember, there are countries in the world who are Quartile 1 in skills and we are not, so these are attainable, achievable. I think we have to achieve them. There are competitive countries out there. I think for the fifth largest nation in the world where we are is unacceptable. Some countries have made fantastic progress - countries like South Korea, Australia, France - and some countries are catching up like Spain, Portugal, Brazil, and I think the consequences of not delivering are severe - severe at different sections of the work force but also for the economy and for individual groupings. So the targets are realistic but they need a lot of commitment and action to deliver them.

Q37 Dr Blackman-Woods: And do you think we would be helped in terms of delivering the targets if a greater role was taken by regions, or even at a sub regional level? Do you think RDAs, for example, have a strong enough role in terms of delivering?

Lord Leitch: I think there is a balance between RDAs and cities, as I mentioned earlier. To be absolutely clear, there is national, sectoral and local. For example, with RDA, if you are in Cornwall, you would not have many city structures there because it is not big enough, but if you are in Sheffield - and what they are doing in Sheffield is incredibly impressive - you could argue you did not need to do much more to bring employment and skills together. So there is a jigsaw here, and I would say I would be flexible on the local delivery of the jigsaw.

Q38 Dr Blackman-Woods: But should RDAs have a clear role in setting targets for their region, and doing sector-specific targets?

Lord Leitch: To be honest, I am not sure what the sub-national review said. I have not followed that. Do you know?

Q39 Dr Blackman-Woods: Yes. It gave a role to poor local authorities.

Lord Leitch: But not regionals?

Q40 Dr Blackman-Woods: Yes.

Lord Leitch: I think there is a role for regionals when you have a big land mass and few cities. That seems logical to me.

Mr Marsden: We move on now to where you recommend in your report a new partnership between government employers and individuals in taking action on skills and training, so we are going to be asking a set of questions about the demand-led system and responsibility for skills.

Q41 Mr Willis: First, I was very interested in your analysis here of the way forward, particularly at higher level skills, level 4 and above. You made it clear that you feel that employers and the employee or the student should provide the main bulk in terms of the funding of those qualifications and the gaining of skills at higher levels, is that correct?

Lord Leitch: For the additional funding?

Q42 Mr Willis: Yes.

Lord Leitch: One of the principles was that those who benefit most should invest most.

Q43 Mr Willis: We have a simple calculation that, between now and 2020, we have to move from a position where roughly 39 per cent of people are going to university to where 50 per cent going to university in the 18-30 group. We also have to get to a situation where roughly one in four people have a qualification at level 4 and above to a situation where four out of ten have a qualification. That is a big challenge and will require a huge expansion of higher education and skills training above level 4. Do we agree that that is the starting point of this discussion?

Lord Leitch: I agree.

Q44 Mr Willis: In which case your argument is that, because you see employers and the employee or the individual as being the main beneficiaries, that expansion will be funded by those two groups?

Lord Leitch: Yes.

Q45 Mr Willis: What earthly evidence have you to support that?

Lord Leitch: What "earthly" evidence?

Q46 Mr Willis: Yes. Where is the evidence to support that? These were just calculations that were made without any evidence, were they not?

Lord Leitch: No, we had evidence here. You are right about the expansion and you are right about the increased investment we need to make in higher education. At the moment the United Kingdom invests 1.1 per cent of GDP in higher education, the United States 2.9 per cent, South Korea 2.6 per cent, Australia 2.5 per cent, Scandinavia 2.5 per cent, so clearly there is a shift to take place here, but those investments are a mixture of public and private and I think our view was that, looking at what the State invests in other countries carefully it did not seem right that the State should invest dramatically more when there are key advantages to that. For example, take employers. We think there is a very significant opportunity for employers to co-invest in improving the qualifications of the existing stock.

Q47 Mr Willis: But employers are not stupid, are they - at least I hope you are not saying they are. Why have they not come to that conclusion? Because if their employees are more productive then there is more profit and they can have bigger Ferraris or Ford Focuses?

Lord Leitch: Of course they are not stupid, and employers in this country have done a very good job, by and large, for training, but one third do no training.

Q48 Mr Willis: But where is the quantum leap going to come? Where is your evidence to say that suddenly, because Sandy Leitch has produced this report and the Government says "Halleluiah", all employers are saying "Where can we get the latest higher education training? Where can we fund it?"

Lord Leitch: Can I go back an hour, when I said there is no panacea? Employers are not going to wake up and say "This is the way we are going to do it". This is a journey and there are many steps. I can give you an example which I think is a beacon of what we can do. There is a Sector Skills Councils called e-skills, the IT industries of the United Kingdom. They got together and they said "We need more graduates with a curriculum that suits our businesses". So they got together, pooled their resources and their expertise and are working with a variety of universities, and have designed particular graduate courses for them that they can have for new people and for existing recruits. They partially fund these, and I think this is the way forward for significant more investment.

Q49 Mr Willis: How many other national Sector Skills Councils are doing the same?

Lord Leitch: When you have change you have to start with a leader on change, and I think this is a great opportunity. We also have Tesco's, Royal Bank of Scotland, Flybe and Network Rail all looking to do these co-investments. If this is done properly it is the right way forward. Research happens in other countries in the world and if it happens in other countries in the world we should be showing that it can happen here, so I feel very confident we can deliver this, if we get the right leadership.

Q50 Mr Willis: In the Sector Skills Councils, or where?

Lord Leitch: Can I talk about Sector Skills Councils?

Q51 Mr Marsden: Yes.

Lord Leitch: I started off liking the concept of Sector Skills Councils but not so much the delivery. I saw one third doing well, one third badly and one third unproven, and I thought "Goodness gracious". Conceptually it is the right approach, and I think one of the areas missing on the two thirds neutral or negative was about strong leadership in getting employers to come together. Like in many areas in life it is about somebody being the champion and showing the way, so that is why we call for the reformation and the re-licensing of Sector Skills Councils.

Q52 Mr Willis: Let's hope you are right and the Sector Skills Councils all become incredibly dynamic bodies that take their employers into the trenches and buy into all these extra skills. Let's assume that is right. It has never happened before but let's assume it happens on this occasion.

Lord Leitch: Yes.

Q53 Mr Willis: As far as universities are concerned, and to some extent colleges but particularly universities, we have had university tradition which is basically about university autonomy, about it being, if you like, a supply-side system. You are suggesting in your report, and the Government has accepted, that we are now going to have a demand-led system within Higher Education 2, with employers, given that you already have briefed that this expansion will come via employers, through the Sector Skills Councils making demands on higher education institutions to produce the sorts of courses and products which they want. Will that not change the whole nature of our higher education institutions in the same way as Train to Gain is potentially likely to change - I am not saying for good or bad - the nature of our further education institutions?

Lord Leitch: Yes, it will alter the balance, but may I say that the most successful development of university courses in recent years has been MBAs, which are not supply driven but are also demand led. This is what industry is requiring, and they have been fantastically successful. So your example that universities are only supply-driven is not correct.

Q54 Mr Willis: But the majority, of course, are supply driven.

Lord Leitch: But it is the evolution here.

Q55 Mr Willis: But that is what you see happening?

Lord Leitch: Yes, but, if you look, there are degrees in architecture, engineering and all these things. This is not about being supply driven; this is about being demand driven as well. We need these graduates in these subjects. There are degrees in law, medicine; this is not just learning for learning's sake but learning for a profession. For instance, Richard Lambert did a report three or four years ago and he was basically saying there is a mismatch of needs in our society, and university must engage much more with employers, and I think the forward universities are doing exactly that. Business has found it difficult to engage with universities, and they must find it easy to engage with universities. There is real employer concern, and what we have now is changing. We are at a turning point.

Q56 Mr Willis: So we are going to have a Benthamite, utilitarian approach to higher education in the future?

Lord Leitch: No, that is not fair. It is not utilitarian; it is about a flexible approach that is demand-led.

Q57 Mr Willis: Well, let's park that one as well. The other big driver for this is, in fact, money. At the moment 90 per cent of all funding in higher education to support students goes on three year, full-time undergraduates; 10 per cent goes on part-time. The whole essence of the development that you see in your report is about part-time students really delivering in the work place, students who are earning as well as learning at the same time. Why did you not as one of your conclusions and recommendations ask for a shift of resources so that you are incentivising and supporting people up-skilling from level 3 to 4, and, indeed, from level 4 onwards? Why was there not a change in the support mechanism recommended so that part-time students in particular got the sorts of incentives that full-time students get, which would have done probably more to incentivise this, rather than making employers compulsorily have to pay for training?

Lord Leitch: There was a recommendation to allocate part of the HEFCE budget towards this, if my memory is correct.

Q58 Mr Marsden: Would you like to elaborate?

Lord Leitch: There is a reference that we should take part of the HEFCE budget and allocate it to more level 4 qualifications in the work place. Shall we come back to that?

Mr Marsden: Yes.

Q59 Ian Stewart: Are trade unions valuable partners in the development and delivery of learning and skills?

Lord Leitch: Very much so.

Q60 Ian Stewart: Why, then, have they been all but airbrushed out of all the documentation?

Lord Leitch: I do not think they have at all. Right from the top we saw the establishment of the Commission of Employment and Skills having Brendan Barber on the Commission. We say this is going to be employer-led; it is also going to have a Director General of the CBI and the TUC leader, so it is not airbrushed at all. It is in there very clearly; there are many mentions of union learning reps who have done fantastic work here. I went to speak to the TUC Congress in Brighton and consulted with them and Frances O'Grady, I spent many hours with them, so they have been a critical part of what we are doing, and are very important.

Q61 Ian Stewart: You have just mentioned what was being perceived as a very important development of trade union learning reps, now 18,000 across the country. Would you see a potential for those learning reps becoming involved in the delivery of vocational training and skills?

Lord Leitch: What do you mean?

Q62 Ian Stewart: Being trained in the work place?

Lord Leitch: I think some of them do at the moment. If I remember, I went to a further education college in the north of England and there were union learning reps teaching, so it does happen at the present time.

Q63 Ian Stewart: Was there a recognition that there is a movement out of colleges, the brick buildings, to the delivery of training for skills in the work place itself?

Lord Leitch: By union learning reps, or generally?

Q64 Ian Stewart: Generally.

Lord Leitch: Yes, absolutely. That is the thrust of what we are saying. It should be work place training, and we have to push that forward. Absolutely.

Q65 Ian Stewart: Would you think that the development of trade union learning reps as deliverers of training in the work place would get good development?

Lord Leitch: Yes. I think that could help.

Q66 Dr Iddon: Looking at the three institutional levels that you mentioned, national, sectoral and local delivery, it appeared to me that you did not want to perturb the existing organisations too much. For example, with the Learning and Skills Council, you wanted them streamlined and, in fact, they have been abolished. Are you disappointed about that? And we have the new Skills Funding Agency.

Lord Leitch: Certainly they should be streamlined, and the rationale for that was because there was a very dramatic change in that they would no longer be doing central planning of courses, but we felt we still needed a body to do things like Train to Gain, apprenticeships, to manage the funding, so we thought there was a dramatic streamlining needing to take place. Now, the change which has gone on seems to me to mirror the machinery of government change with DIUS coming in, and I think that is a sensible move. So I am not disappointed at all.

Q67 Dr Iddon: Bearing in mind that change, do you consider that the institutional reforms advocated in your review stand up to your own principles which are three - flexibility, simplification and continuity?

Lord Leitch: If you look at the organisational map of skills in the United Kingdom it is astonishingly complex, and I think we made this point to try and simplify things. The changes which are being made are relevant, and the big change organisationally is no central planning by the LSC, that changes fundamentally, and the move to demand led. All these changes absolutely live up to the principles we set out.

Q68 Dr Iddon: The creation of the United Kingdom Commission for Employment and Skills and the continuation of the Sector Skills Councils under your proposals is obviously central to achievement of the United Kingdom's ambitions in this area, but it relies, as you have been saying all along in this interview on employers coming on board now. Employers have been one of the unknown quantities in the past; we have not always got them on board, have we? Do you think it will be any better in future with the new institutional reforms?

Lord Leitch: I am very confident it should be better in the future but this is a journey and there is a lot of work to be done. As I said, one third of employers do no training whatsoever; we have some brilliant employers and brilliant training that is done; many employers are not happy with their fee qualifications that are coming through, and we have the opportunity to give the employers a stronger voice in driving economically valuable qualifications so, yes, all the changes we are putting in will drive that forward. Can I just say that if you look at the stakeholders here, you have government, employers and individuals, and no one stakeholder can do this on their own. It has to be a partnership between the three, so you need employers in there who are government-committed driving this forward, and you need individuals driving this forward, and I feel very strongly on individuals that there is got to be a change in culture in this country about seeing the value of learning, and that may be a generational thing to happen but it will be very difficult to achieve. Unless we start it, we have no chance of achieving it and improving it, and the recommendations we made in this report in terms of awareness, national careers service, in terms of joining-up employment and skills, which to me is fundamentally important - all these things have to happen. So it has to be the state, the employer and the individual working in partnership to drive this forward.

Q69 Dr Iddon: But the companies you mentioned earlier, and we could mention Rolls Royce, all the big companies of course, have future profits which depend upon working with the United Kingdom commission. But what about the smaller companies, the ones that are locally based, the small medium-sized enterprises? Are they going to come along with this new plan?

Lord Leitch: I think Train to Gain is a massive opportunity for smaller companies. I remember, I went to see a small printing company in south east London, the first company I had been to on Train to Gain, and the individuals I talked to had never done any training before, and the bosses of the company suddenly had their eyes opened about the benefit that this could bring to them. They had a broker come in and assess what their company needed and they were over the moon about the results, and I think we can drive that forward for the smaller companies. We recommended to put a grant in for management training also for the small and medium enterprises. I feel very strongly about management as a skill, and if those smaller companies could develop more of that it would transform their performance. So Train to Gain has a fundamental role to play but, of course, it is difficult for a small company with a limited budget which says they cannot afford to spare someone to go off and train because they cannot see the return. It is about persuading them, showing them, influencing them, and helping them to see a return.

Q70 Dr Iddon: You have admitted that some Sector Skills Councils are a lot better than some others. How are you going to make the ones that are not good better?

Lord Leitch: I think it is the role of the Commission to do that, and I recommend that we should stand back and look at them all and evaluate their performance, and see what they have done and look at the sector skill agreements. I do not know if any of you have looked at the sector skill agreements but for the poorer performance they are so complicated and so voluminous you cannot see what they are there for, but also we have to make it easier for them because remember, Sector Skills Councils, to be fair, are a fledgling organisation and have not been going for very long, so maybe I am being a bit hard on them, but they have to have better funding. So many of them spend their time scratching around looking for ways to generate funds, they have to have enough funding to let them deliver their objectives so we have to help them too, but I think the evaluation lies with the Commission.

Q71 Dr Iddon: Finally, concerning careers advice, those of us who saw the disappearance of the old careers service in local authorities and have seen how the Connexion service concentrated on certain individuals and left others to get on with it, usually the brighter ones, have been very critical in this Committee on careers advice given to people, in schools particularly but beyond that as well. Do you think that the new universal adult careers service is going to provide better careers advice for all age ranges?

Lord Leitch: Yes, and I think its location is critically important as well in terms of being closer to Jobcentre Plus. Jobcentre Plus has done a terrific job in getting people to work; it really is outstanding. Remember, it was a very big merger between Job Centre and Benefits, it has been a difficult task, and they have delivered extremely well. What has not been happening is the integration and the join between skills and jobs. Two thirds, if I remember, of claimants after six months are recycled, so you have to ask why that is happening. Skills are a critical part of it, and having this careers service skills evaluation is fundamentally important, so it should be able to do that. But, Gordon, the point is this is a journey, and what I cannot do now is prove conclusively or with evidence that these things are going to work. I cannot do that.

Q72 Dr Blackman-Woods: Are you genuinely satisfied with the response by Government to your report?

Lord Leitch: I am very pleased with the response. I spent a lot of time consulting right across all political parties, trade unions, individuals, trade organisations and employers, and I spent a lot of time ensuring that we had something that was pragmatic and deliverable in that sense but also exciting enough and demanding enough to deliver what we needed as a nation, and I think that time was well spent. The Government have taken my agenda and recommendations and it is now government policy. If you look at the volume of material published since then it is remarkable, and just reading World Class Skills before this session, what they are coming up with as action points is a huge array of initiatives which they have to deliver, but I think they are committed, they have made investments, they are looking at Train to Gain increasing to a billion pounds in 2010, so the money is coming too. So yes, I am very pleased.

Q73 Dr Blackman-Woods: Are there any areas or recommendations that you thought they should have accepted and have not?

Lord Leitch: There are always going to be. What I have not got is the job of balancing the nation's purse. We also said in the report, if I remember, that it is up to the Government to evaluate our recommendations and look at value for money and practicality and the balance point, and there is one point where we said all funding should be demanded by 2010, and they have not gone for 2010 because they think there is a danger of jeopardising ethicologies, so they have gone a little bit later on that. But that is OK. From my very crude calculations I think they have accepted delivering about 95 per cent. You know, in many reviews you do the review and nothing happens, and here many things are happening.

Q74 Dr Blackman-Woods: What about the pace of progress towards achieving those targets, as opposed to delivering documents about how they might achieve them?

Lord Leitch: It is only nine months since they set out the policy. I think I would give them a little bit longer.

Q75 Dr Blackman-Woods: So you would not agree with Richard Lambert of CPI who said that he thought that the Government's response to the Leitch proposals was a bit lame, that the Government had pulled back from some of the bolder recommendations, and he also commented, "I think the rather leisurely way the Government is going about the Leitch proposals will make it very difficult for business to make these changes in time", so do you think that is not a sensible set of comments at this stage?

Lord Leitch: I think it is not balanced. I think he has some validity on some of the points mentioned in 2010. I think it is no way leisurely, and looking at the volume of material they have produced, it is anything but. There is an urgency, a commitment, they see that we need to raise the game and the consequences of not doing that - no, I disagree with the balance of the point. There are many good things they are doing.

Q76 Dr Blackman-Woods: So would it be fair to conclude that you are generally optimistic about the Government achieving these targets?

Lord Leitch: Yes, I am.

Q77 Mr Marsden: Louise, you have been on the other side of the table, as it were, since this review was completed working with many of the stakeholders. Is there anything, looking at it from the other side of the fence that you think: "Gosh, I wish we were moving a bit quicker on that".

Lord Leitch: In terms of implementation?

Q78 Mr Marsden: Yes?

Lord Leitch: No. I am incredibly impressed by the speed at which the Government has picked up and gone along with the recommendations. The important thing to remember is that it is a vision for 2020 and there is a lot of reform that needs to be gone through in the very short period of time, even to 2010. In terms of organisational reform the Commission was set up from 1 April this year, and I think that is ready to go now and we will see a change again this year.

Q79 Mr Willis: Sandy, in terms of this 2020 vision, one of the big flaws in our adult training skill system over decades, not just this Government, has been the employee who finds himself in a job not only where his employer does not train him or her but also where they see the need for training themselves as an individual in order to move on, with the employer who has absolutely no incentive to invest in that employee so they will move on. Where in your report is that huge group of individuals tackled? Where do you see the advantage to them moving on between now and 2020?

Lord Leitch: I think what we have tried to say in this review is that there is an incentive also for the employer because, by and large, what we see from all the evidence is that if individuals improve their job performance improves. So what we have tried to do through the Commission, giving employers a stronger voice by sector skills, is to demonstrate that and to encourage more participation and investment from employers, and I think that will happen. At the same time, as you know, we have said in areas like basic skills there are too many employees without basic skills, and we came across this pledge that was being implemented in Wales on a voluntary basis, which was a voluntary pledge for employers to commit to give their employers training up to level 2, and we think if we do a strong exercise in promoting this we can get employers to do this on a voluntary basis. What we did say, however, is if that is insufficient by 2010 we should look at whether compulsion is the right answer for that basic level of skill that people should have.

Q80 Mr Willis: But the 6 million at level 3 is the big target group, is it not, that you really have to do something about?

Lord Leitch: Yes.

Q81 Mr Willis: Why would I, as a business man - and I am not a businessman, I am just a humble politician but if I were - want to invest money in an employee who did not affect my bottom line and who is likely to move off when they have those skills? That is the flaw that I see.

Lord Leitch: No, I do not think it is a flaw. I think employers will not do that if it is not going to impact their business but we think, by and large, giving people more skills on the job will improve their performance on the job, and that is the change we have to make. I think you are right, if employers think there is no value to me in training, they will not train, and what we want to get over is a message to more employers that there is value to them as an employer.

Q82 Mr Willis: But as an individual I want to move, I do not like his business; I do not like working for him any more. I want to move on.

Lord Leitch: If there is no value to the employers and you are going to move on, you cannot expect employers to invest.

Q83 Mr Willis: Who is going to invest in my skills, then?

Lord Leitch: The majority of people we are talking about are employees who will improve their performance through more skills, and we know that.

Q84 Mr Marsden: At that point we will have to leave it for this afternoon, but can I thank you both for coming to answer our questions this afternoon, particularly, as you say, as things have become a little rustier in the passage of time, but we are going to add to your afterlife and also the documentation by launching our own inquiry which will open on May 14 with one whole-day session in Leeds, so we hope that will be the start of further discussion. Thank you.

Lord Leitch: Can I say thank you and, finally, the more I immersed myself in this topic on skills the more passionate I became about its importance to the nation and the economic performance and prosperity of the nation, but the real prize is deeper and richer than just economic prosperity. It is about pride, fairness, quality of life, and an opportunity for everyone in this country, and it is the best investment this nation could ever make. Next to national defence it is probably the most important task and priority for this nation, because by driving economic prosperity we can then have the sort of social and welfare and health systems we need, and creating that wealth and skills is such a critical driver to allow us to do that. Thank you for your time, and I am very relieved you are doing this study.

Mr Marsden: Thank you.