UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 505-ii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INNOVATION, UNIVERSITIES, SCIENCE AND SKILLS COMMITTEE

(INNOVATION, UNIVERSITIES, SCIENCE AND SKILLS SUB-COMMITTEE

ON AFTER LEITCH: IMPLEMENTING SKILLS AND TRAINING POLICIES)

 

AFTER LEITCH: IMPLEMENTING SKILLS AND TRAINING POLICIES

 

 

Wednesday 4 June 2008

MICK FLETCHER, PROFESSOR ALISON FULLER, PROFESSOR ALISON WOLF and PROFESSOR LORNA UNWIN

DR PHILIP WRIGHT, MS LEE HOPLEY, MATTHEW JAFFA

and GRAHAM SCHUHMACHER

Evidence heard in Public Questions 65 - 171

 

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Oral Evidence

Taken before the Innovation, Universities, Science and Skills Committee

(Innovation, Universities, Science and Skills Sub-Committee on After Leitch: Implementing

Skills and Training Policies)

on Wednesday 4 June 2008

Members present

Mr Phil Willis, in the Chair

Dr Roberta Blackman-Woods

Mr Tim Boswell

Dr Brian Iddon

Mr Gordon Marsden

Ian Stewart

Dr Desmond Turner

________________

Witnesses: Mick Fletcher, Educational Consultant; Professor Alison Fuller, Professor of Education and Work, School of Education University of Southampton; Professor Alison Wolf, Sir Roy Griffiths Professor of Public Sector Management, Department of Management, King's College London; and Professor Lorna Unwin, Faculty of Policy and Society, Institute of Education, University of London, gave evidence.

 

Chairman: Good morning and welcome to our first panel of witnesses at this the Innovation, Universities, Science and Skills Sub-Committee looking at "After Leitch: Implementing Skills and Training Policies." This is our second oral evidence session. We held our first in Leeds as we launched our inquiry. We are delighted to have with us this morning Mick Fletcher, education consultant; Professor Alison Fuller, Head of Post-Compulsory Education and Training at the Research Centre at the University of Southampton; Professor Lorna Unwin, Professor of Vocational Education at the Institute of Education; and lastly Professor Alison Wolf, the Sir Roy Griffiths Professor of Public Sector Management at King's College London.

Mr Boswell: On a point of order, Mr Chairman, at this point could I declare to the committee my interest as a member of the Skills Commission, non-remunerated, but it does mean that I know quite well as colleagues at least two of our witnesses.

Mr Marsden: Mr Chairman, could I do likewise?

Chairman: Are there any other declarations of interest before we start?

Ian Stewart: I would like to be able to say that!

Q65 Chairman: Could I start with you, Professor Wolf, and ask you this? We have heard a lot about if someone has more skills, they automatically cause more productivity. What do you think the relationship is between skills and productivity and are we over-egging the pudding?

Professor Wolf: I think there clearly is a relationship between skills and productivity but it is a misconception to believe that you can create an increase in productivity by taking a supply‑driven approach to skills development. I think that the major problem we have had with skills policy now for several decades is the continued belief that the way to develop the skill base of this economy is to have a highly active government policy of feeding skills in rather than having a policy that genuinely responds to developments in the economy and makes it easy for the demand for skills to be realised.

Q66 Chairman: Is Leitch wrong then in that proposition? It appears to us that the dominant factor within the Leitch recommendations is that skills equals productivity.

Professor Wolf: I think it is the dominant thing in Leitch. You are feeding me a line because obviously I have been a critic of the Leitch report. I have been a critic of the Leitch report in exactly the way that I have outlined. Although it constantly talks about a demand-led approach, it is actually an additional ratcheting up of what is effectively a centrally-planned, supply-driven approach to skills. It talks on every second page about world-class skills and demand-led systems, but when you actually look at what it is proposing, what it is proposing is more targets and additional levels of government direction. As I said, of course you cannot have high productivity without skills but they have to be the right skills. I simply cannot believe that the system set up by Leitch and by predecessor reports and policies can possibly deliver that

Q67 Mr Boswell: As a sub-question and making it even more complex, and the Chairman has invited you to comment on skills equals productivity: what about qualifications equals skills equals productivity?

Professor Wolf: Yes, absolutely; for some reason, they have become adult attainments in Leitch rather than qualifications. I am not quite sure why that is. Again, the same thing; again it seems to me that we have become extraordinarily hung up on qualifications. The enticing thing about qualifications is that they can be counted; they are really easy to count. It is really hard to count skills; it is very easy to count certificates. Because of that and because qualifications can have an important role, they have been terrifyingly seductive I think to policy makers. They allow you to feel you have a really easily counted and scrutinisable (if that word exists) currency in which to deal and you have not. One of the things that we are now getting an increasingly unanswerable accumulation of evidence on is that some qualifications do indeed seem to increase people's productivity, as shown by increases in their wages, and many others just do not. There may be a lot of reasons for this but it is indubitably demonstrated that you cannot automatically assume that just because somebody has another qualification, they become more productive.

Q68 Chairman: Briefly, do each of you agree that the analysis that Leitch has made for our skills needs by 2020 is right? Is that challenge right and are his solutions right, in your view, Professor Unwin?

Professor Unwin: It is not clear what the evidence base was for the targets. One of the problems is that there is a separation in Leitch between the targets, which are the supply side part of the report, and any analysis in terms of what is happening in real workplaces and whether employers will make use of qualifications and the connection between what is in the qualifications and the skills needed in the workplace. I think there is a disconnect between the supply side part of Leitch and issues in the economy, a lot of which are to do with the way in which work is organised, the way in which businesses are run. Certainly the findings from the research that Alison Fuller and I, with Alan Felstead at Cardiff University, have been doing for the last four years across about 12 different occupational sectors are that what employers across the public and private sector need is serious support with how to design workforce development. That is missing from Leitch.

Q69 Chairman: You have been mentioned in dispatches there, Professor Fuller. What puzzles me in terms of the research base for Leitch is this. Sandy Leitch did not just pick these targets off the wall. He must have had some evidence to back up the targets which we set and which the Government has accepted with the addition of the new level 3 targets.

Professor Fuller: I think there is evidence about what qualification levels exist, primarily through the Labour Force Survey, which are very well established and there is a long track record of that survey being around. That then enables some cross-national comparisons to take place, which I think are often the stimulus for the setting of the higher targets. The motivation for the targets comes from this analysis that we started off with, which is skills equal productivity.

Q70 Chairman: And in your view they do not?

Professor Fuller: I think the point made about qualifications is extremely important. If you look at Scotland, for example, they have by and large a higher qualified workforce and young people and their productivity levels are lower. There is clearly not a straightforward read‑across. If we go back to much older work which was done by the national institutes, by Sig Price and colleagues, they started off talking about the relationship between skills and productivity and trying to find ways of measuring it through their research. They came up with the best estimate of a 25 or 30 per cent link between skills and productivity and education and productivity. There was this big gap, the sorts of things that Lorna was talking about, relating to what actually goes on in the workplace.

Q71 Chairman: If Leitch is right - and for argument's sake let us say that he is - and we meet all the targets he proposed and to which the Government has added, will we, by 2020, have achieved our objective of being in the premier league for productivity?

Mr Fletcher: It is a moving target, is it not? In one sense, the role of targets - and Leitch uses the word - is to set an ambition. To that extent, I am generous enough to believe that although the link between skills and productivity, or the link between qualifications and skills, is contestable, it is relatively harmless to set ambitions. Where I think Leitch really falls apart is on the link between those ambitions and the mechanisms he proposes, particularly in respect of the further education sector. Although there is some contested evidence about skills and productivity being linked, they are not totally divorced, whereas the link from saying "therefore we need to have all further education monies for adults routed through Train to Gain and skill accounts" is based, firstly, on a caricature of the existing system that it is very difficult to recognise and, secondly, some completely unfounded assertions about the nature of these new mechanisms and what they will bring about.

Q72 Chairman: In terms of the targets then, Mick, do you feel that they are appropriate and are they achievable?

Mr Fletcher: The difficulty with targets is that if we debate them at a strategic level, they can be quite sensible, but down the line they tend to be abused. There are people who believe their jobs depend on them hitting the target, even if it means missing the point.

Q73 Chairman: What a cynical thing to say! There is this chain, is there not, which is skills equals productivity, and we have talked about that; there is also the assumption that qualifications equals skills equals productivity. Do you think that there is that direct link as Professor Wolf questioned between qualifications and skills?

Mr Fletcher: I share the reservations of fellow panellists on this. I think Leitch depends in many ways on over-simplifying a complex issue. If the outcome of that is to get a sensible focus on increasing skills, then I think it would be better than harmless. The danger is that it distorts the system into chasing skills and chasing qualifications at the expense of improving productivity. Can I give you an example of this? Take Train to Gain as an example, a flagship policy. I talk, in going round the country, to a lot of college principals and college staff. What they say to me about Train to Gain is: "There is not very much money in it, therefore the way in which we can engage is to find people who are skilled in their jobs but lack a qualification and we assess them."

Q74 Mr Boswell: The lower the value added, the better for them is almost what you are saying?

Mr Fletcher: Yes. The system is stacked in that way, and it is worse than that. Again, college principals have said to me, "What we know we have to do", because they are nothing if not loyal and responsive, "is to replace many of our teachers with assessors so that we can do this more cheaply". At the end of the day, three or four years downstream, when we have found all those people who are skilled but not qualified and labelled them, which may do them a little bit of good but not a great deal, we will find we have a bigger task then of training people who need training, which certainly would benefit them and benefit their employers, but we may well have disposed of many of the teachers who would have done that.

Q75 Chairman: This is getting more depressing by the minute! The purpose of this inquiry is really to add value to this process and to question the assumptions within the Leitch report that this is the way forward. I think we all have an investment in making sure that we do upskill the nation, however we describe skills. I wonder if any of you could give me a better measure for skills in the workplace. What is a better measure other than qualifications? I find it difficult to be able to find one.

Professor Wolf: It is very hard to measure them directly but I do think that the focus on productivity is the correct one. It is nearly impossible to disentangle things because the skills that you require are related to the investments that you are making, which are related to interests in the marketplace and in the products you are producing and so on. It does seem to me that if you are greatly increasing your expenditure on skills at the expense of, say, general adult education and you re not getting any visible increase in productivity as a result, then you can conclude that something has gone rather wrong with your policy. I also think you can look - and this comes back to a very particular bit of skills policy which I hope you are going to pay a great deal of attention to - at the skills of young people. Again, it does seem to me that we have a good indication of whether we are getting education and skills policy right when look at unemployment rates among young people. If we are not making a big impact there and if we are continuing to find that young, British or English people (I am not quite sure what the remit of this committee is on skills) are being pushed out of the labour market in favour particularly of immigrants, then there is something wrong with our skills policy. That should not be happening. In an economy like ours, we should not have large levels of youth unemployment. It should not be happening. We do know that it is skills-related. For example, the work of Steve Nickell, who is currently Warden of Nuffield College, is really very convincing on this, that there really is a skills element in youth unemployment and in the fragility of their employment. I have to say that I am less friendly towards targets than Mick Fletcher. It seems to me that one of the places where they have done real damage interestingly is at the apprenticeship level. It means that LSCs that really do have to meet targets to do their job have the strong incentive to go towards large-scale providers who are not really producing what I would call a real apprenticeship as compared to small employers who might be able to produce one or two. If we are in anecdote territory, I had an email yesterday from a friend of mine who runs a rather successful printers up in the north. He is about to move a great chunk of his work to Poland. He said part of this is because of the classic cost questions but part of it is because he finds the current structure for taking on apprentices so difficult to cope with if you are a small or medium employer that he has basically decided to give up on it. That is just one employer and one anecdote, but it seems to me to underline the dangers of this target-driven process in which if you are a hard working LSC bureaucrat, you just have to meet the targets; it is your job to do that.

Q76 Ian Stewart: I need to declare an interest here, Chairman, in that I was for 20 years a Transport and General Workers' Union full-time officer in the North West before coming here. In that role I initiated in 1990 the first European-funded social partnership vocational training programme in the food industry. When we had Professor Leitch before us, I asked him why in the documentation the trade unions had been almost airbrushed out. We are conscious that the partnership described within his work is government, employers and individuals. Of course he then defended that by explaining all the areas that the trade unions were involved in, but they were not mentioned anywhere. What is your view about that?

Professor Wolf: Clearly the unions are represented in varying degrees in different parts of the structure. I think unions are incredibly important in workplace training, less to do with young people because that comes in a sense at the juncture between school and going on, but coming to the workplace today, that is absolutely fundamental. We have been doing some research - we will not report the results for a while but they are not going to conflict with anything I have said, unfortunately - on the impact of government-funded workplace training in a range of companies. We have come across companies where there were ULRs (union learning reps). I think they are incredibly important because people who are in employment know their union rep; it is a trusted intermediary. One cannot underestimate the degree to which as human beings we trust people we know. I do not mean that we should not have on‑line databases; I do not mean you should not have government advice bureaux and all the rest of it. Basically, you trust the people and those you know have your interests at heart. One of the things I would like to praise this Government for is the union learning rep programme. Most of what I have said has been critical but that one is not. In a non-unionised company it would have to be some other form of employee representative. I think they are incredibly important. Not that long ago in a previous inquiry before all the committees were reorganised, in one of these rooms in a committee they interviewed a really impressive learning rep who I have never forgotten. I thought she was fabulous. I had this depressing feeling that if she was trying to put together the programme that she described this year, she would find it harder than what she had before because a lot of it would not meet the targets. I think they are fantastically important.

Q77 Ian Stewart: I want to talk now about the responsibility for skills and the demand-led system. This question is to all of you. Do you agree with the allocation of responsibility for training between government, employers and individuals as expounded by Leitch? What needs to change to make that system work?

Professor Unwin: I thought it was interesting when you said the trade unions have been airbrushed out of the story. The other people in a sense that have been airbrushed out are the education and training professionals. Social partnerships in other European countries would have both the trade unions and the education and training professionals as part of the social partnership. We need to look really closely at that because if we only rely on employers and individuals and the state agencies, then that is a problem. The way in which skills are developed is done by a much broader coalition that includes the trainers and the people in the workplace. It is not just a kind of supply/demand very technical process. We need bring back the actual professional side of it. This is another area where I think your inquiry might want to look: we need to look very carefully at the workforce development and the conditions of the vocational education and training professionals in this country.

Q78 Ian Stewart: There are two interesting aspects to this. To this day there is no definition accepted in this country as to what social partnership, which is a European concept, is. In my view, that is not too good. My second point is that there is a lack of recognition that vocational training is a bargaining issue in places where trade unions are recognised and they form that bridge between the employer and further and higher education. Trade unions can play that role. What do you understand by a demand-led education and training system and to what extent is the system currently not demand-led.

Professor Fuller: There are various ways to answer that. One aspect of it is that if you look at the education system and universities, then they are responding to demand from students, from individuals, their customers. When you see expansion of particular courses, for example, that is in response to demand from people who want to do them. There are aspects of demand which come into the system already that are not to do just with this notion of employers being the only people who are allowed to be demand led. The other thing that I would like to say about individuals - and Leitch particularly focuses on adults - is that we know very little about what ordinary adults aspire to or want in relation to training and qualifications. Until now, and this is perhaps an opportunity that Leitch opens up, there have not really been in the purview of public policy people who were in work, who were getting on with things, who are not part of disadvantaged groups and so on. Leitch assumes that this group will be there to be harvested to help them meet the 40 per cent plus target of level 4s. If we look at the labour force survey again, we know that there is a great pool of people who already have level 3 as their highest, six million, and who could be scooped into that net to help reach the target. We know very little in terms of qualitative research.

Q79 Ian Stewart: What is it that stands in the way of employers and individuals articulating their needs?

Professor Fuller: One is a willingness to listen to what employers and adults are actually saying. We have just done some recent research at Southampton where we precisely looked at that group of adults with level 3. They say they are very interested in learning and training, in the development of their jobs and in quality improvements that could go into that. They are not necessarily interested in qualifications for their own sake. These are people who are already reasonably well established in the labour market and are able to assess the kinds of opportunities that might be being pushed at them. They are not interested, quite frankly, in qualifications or credentials for their own sake. They are interested in development, learning, and working with their employers. They would be interested in more guidance. They do not know very much and the adult guidance service that is suggested in Leitch, which is coming on stream and in association with Job Centre Plus, I think is problematic because that is not coming into where those adults are and talking to them in the way that Professor Wolf described the union learning reps doing. I think there is a lot that could be done to develop that evidence base which would be very helpful.

Mr Fletcher: On the points made by the last two speakers about demand led, there is a very instructive contrast between the way in which public policy is currently evolving in respect of higher education and further education. In higher education, policy is about building and maintaining strong, stable, independent institutions that are partners in the policy formulation process and they engage in a market with individuals and employers. If a university does not offer courses that people want to do, then it does not stay around very long. Further education used to be substantially like that. In the name of the demand-led system, we are moving further away from it; we are moving towards a system where increasingly we design at the centre what it is that we think people need and we provide it for them through a variety of intermediaries. The role of providers, colleges, is downplayed; even the word provider I think is instructive in this respect. The model is much more like the one that obtains in the world of Job Centre Plus, for instance, where we designed various new deals at the centre and they are then delivered through a brokerage service by a range of competing and dispensable providers. I think that is what worries me most about what is going on in respect of Leitch implementation, the view that our provider infrastructure, and particularly our colleges, is made up simply of disposable providers to be cast aside if they do not deliver this week's version of policy.

Q80 Chairman: That is right, is it not? Leitch has made it clear that it wants a demand-led system with employers at the centre of it; employers will decide what skills they will need; and colleges have either got to provide those skills in a responsive 24/7 mode or they will go elsewhere? That is right, is it not?

Mr Fletcher: I have no problems with that and I suspect none of the colleges around the country have problems with that. The difficulty is that in the name of an employer-driven system, employers can choose what they want as long as it helps meet Treasury targets and as long as it allies with what a sector skills council has agreed, and as long as it fits in no doubt down-stream with some reasonably based plan that comes from an RDA or a regional employment partnership. It is a heavily constrained choice.

Q81 Ian Stewart: That is interesting because that leads me nicely on to what I had in my mind, which is: should the state plan and fund post-level 2 training?

Mr Fletcher: I think the state should make clear what its priorities are. At the strategic level it is very difficult to fault what Government is doing. It is saying that we need to place more emphasise on people who do not have their foot on the ladder rather than people who are already part-way up. I cannot fault that at all. What is difficult is that if you try to drive this thing from the centre, it simply does not work, as we found out in eastern Europe over the latter part of the 20th century. Central direction is not a very efficient way of managing complex systems.

Q82 Mr Marsden: Alison Fuller, can I come back to you? What you were saying is very interesting about your research and what people think about the impact on their jobs. I wanted to ask you this, and possibly Mick might want briefly to comment on it as well. We have had a lot of evidence and there is a lot of talk out there about soft skills, enabling skills, call it what you like. There is also a lot of talk about on-the-job training. Government gives a lot of support to the idea of on-the-job training and a more modular approach to constructing things like apprenticeships, et cetera. Do the frameworks that Leitch proposes in terms of demand-led give enough space for building and constructing those sorts of variations?

Professor Fuller: I think they give space but they do to actually provide support and capacity-building mechanisms to enable them to happen.

Q83 Mr Marsden: Or cash?

Professor Fuller: Yes, or cash and the resources are weak and need developing in a variety of ways. Many employers that Lorna and I went to in our Learning as Work project had either no training department or a very small one and in the past had had larger ones. Various aspects of the way businesses have evolved and the way functions have been contracted out mean that that capacity is extremely fragmented and ageing.

Q84 Mr Marsden: And presumably worse in SMEs?

Professor Fuller: Yes, by and large.

Mr Fletcher: I think the problem is particularly acute in SMEs. I can give an example from an area I have been working in closely in the last few months around the delivery of Skills for Life through Train to Gain. The evidence suggests that you need about 180 hours of study to get from one level to another under Skills for Life Literacy or Numeracy. That is not all teaching but if you assume it is 90 hours teaching and 90 hours private study, it is three hours a week for 30 weeks. If you go into an SME and you only have one employee, the Train to Gain funding allows you to give about seven or eight hours support, that is all. If you can group people into groups of 10, then that is fine; you can get up to 70 or 80 hours. If you are trying to do this on an individualised basis in an SME, the money is simply not there. I honestly cannot see how it could ever be there on that model.

Professor Wolf: You could give the individual the opportunity to go and spend the money where they wanted to, which they do not have at the moment.

Q85 Mr Marsden: Such as a voucher system?

Professor Wolf: Yes, or something like that. The word voucher always immediately has these dreadful connotations.

Q86 Mr Marsden: That is because of what has happened to it in the past.

Professor Wolf: Can I just point out that in effect that is exactly what we operate within higher education. The individual 18-year-old or 21-year-old, or whoever, effectively, if they come and apply to one of our institutions and we accept them, we then receive money for them.

Professor Unwin: The huge difference, Alison, is that the 18 or 19-year-old applying to university will have had all the guidance, will know that their qualifications are going to be accepted. The universities provide lots of information, et cetera. If we are talking about vouchers for adults, either in work or out of work, we will need a pretty good system. Many adults and young people out there do not know where to go because it is a complex system and in many cases their employers will not be encouraging to them to seek.

Q87 Chairman: The solution here is that in the autumn in the Queen's Speech there will be a Bill which will give employees the right to request training, and that will resolve the matter, will it not?

Professor Unwin: You are saying that with a very twinkly look in your eye!

Professor Wolf: Can I come in here? I very rarely disagree strongly with Lorna but on this occasion I do. I get very angry with this assumption that adults who do not have degrees are not capable of knowing what they want or finding it. That is essentially the implication, that Government policy is that 18-year-olds are able to make informed decisions and adults are not. Let me finish.

Professor Unwin: The 18-year-olds are supported. That is my point. We do not support adults in the way we support 18-year-olds who have A levels. We do not support young people who do not have A levels in the way we support the ones with A levels.

Q88 Dr Turner: You have torn Leitch apart fairly effectively, but the fact is that the Government swallowed Leitch. Has it made any difference on the ground yet?

Professor Wolf: To what - to the way that the system works? Yes, it is now giving up to deliver the Leitch target.

Q89 Dr Turner: In terms of giving people skills?

Professor Wolf: Not obviously, no.

Mr Fletcher: There are so many changes on the ground you can see in terms of processes. As I mentioned before, colleges of further education are making very radical changes to their plans, more or less willingly, to deliver programmes in the way in which Leitch has said. I think we will also see increases in the number of people who gain qualifications of particular types. That then takes us back to whether or not that will do them any good. I have difficulty in seeing how simply labelling people who are skilled but not qualified is going to help them a very great deal.

Q90 Dr Turner: Of course education and skills is not the only area which the Government has sought to manage and government management tends to be a succession of reforms, initiatives, et cetera, some of which conflict. Do you think that there has been too much upheaval and not enough action to go; in other words, as in the health service where they have hardly finished trying to suggest one reform and the next one is coming down the tracks? Do you think that it has been over-complicated?

Professor Wolf: I certainly think it has been over-complicated. It is one of the great puzzles of British history; perhaps you can say it proves that skills do not matter all that much, although I think they do. We have had a major inquiry into skills every few years since 1860 literally and we constantly reform it; we constantly change it. In the process, we have ended up with a situation where employers are spending far less within further education on skills training than they were before all of this started. We do not seem to be making any huge progress in terms of productivity; we are undermining our institutions. Having said that, I think what we have now is not satisfactory, I can hardly say that therefore we should nonetheless leave it all alone in order to have stability. Yes, we dig it up all the time.

Mr Fletcher: I think it is an important distinction to make, though, in that the foment of reform is not everywhere; it is only in certain places. If you look at the funding consultations that came out around January 2007, the Government published one that said: in respect of higher education, the stability of institutional finances is a major priority. It said exactly the same for schools, that stability of institutional budgets is a priority. In respect of further education, it said: We recognise that these changes like Train to Gain will bring about instability, et cetera, but this is a price worth paying. I think that tells you something. There is a carelessness in government policy with regard to provision for, let us say, the lower 50 per cent of the population.

Q91 Dr Turner: Do you not feel that in fact if you left it to institutions and professions to evolve themselves in response to changing demands, they might do better than being re‑managed and re-badged from the top down?

Professor Fuller: I think that may well be true. There is still an ambiguity of purpose at the heart of this, which has probably been well represented by the confusion about apprenticeships. Apprenticeships at the moment are positioned, if you like, as the third alternative, the third route, after A levels and the new diplomas which have been promoted very heavily to young people. Apprenticeships are in a sense at the heart of skill formation and have been since skills were needed historically. If apprenticeships are not clearly positioned as desirable and well-resourced with lots of information and capacity around providing training and so on, then it gives the lie to the purpose of these things. If I were a young person trying to make choices at 15 and 16, the likelihood is that I would know nothing about apprenticeship, other than it was perhaps something for people who are not going to go very far in the world. You see that through the way that the equivalencies are mapped out in terms of the value that is ascribed to the types of qualifications people get in apprenticeship. If you complete an advanced apprenticeship, which is presented as a level 3, it will not get you into a bachelor's degree, for example.

Professor Fuller: The 'what it is for' question I think is still not clear.

Q92 Dr Turner: It will get you a job as a junior technician perhaps.

Professor Unwin: I think your point about leaving it to the professionals is an important one. What we need to have much more of is trust in the professionals and the institutions, many of whom, particularly the further education colleges, have outlived initiative after initiative and have seen agencies come and go. Certainly the best ones have always worked locally with employers, with the communities. I think the focus was much more on the capacity within those institutions to work out how best at local and regional level to organise the provision of education and training.

Q93 Chairman: But employers know best, not colleges.

Professor Unwin: Employers at local level will work with their colleges and employers who know best that they need the professionals to work with them.

Mr Fletcher: I do not think any of us are saying this should be completely hands off and the government should walk away and it will all be marvellous. It is clearly right for the Government to have priorities. At the strategic level it is very difficult to argue with the priorities the Government has chosen. The problem is in the nature of the dialogue and the nature of the control that it seeks to exercise. A system in higher education is one where the Government makes its priorities clear but when it sets its policy statement out to HEFCE it is considered with the institutions. There is a dialogue and a debate whereas within the further education sector, in the world of training providers, it is simply command from the centre: you shall do this. It is very instructive to read the two grant letters from the Secretary of State, the one that he sends to HEFCE and the one that he sends to the LSC, The language will simply describe the essence of the difference.

Q94 Dr Turner: Is there an element of, if you like, social distinction here? The Government recognises the seniority of the status of universities so it will kow-tow and recognise them, but FE colleges, oh well, they will do as they are told? Is this what you think is happening?

Mr Fletcher: I think there is a very large element of that. If you read the HEFCE letter, it says: we invite you to consider this proposal. With the LSC grant letter, they do not talk to institutions; they talk to the LSC - the LSC must, the LSC must. I think I counted 29 "musts" in four pages, and that was not counting the euphemisms.

Chairman: We have got that point.

Q95 Dr Turner: Coming to my next point, what do you think is the best kind of regional level for delivery of progress? Is that at regional or sub-regional level? How do you think the infrastructure should be delivered on the ground? Have we got it right anywhere?

Professor Wolf: I think that the FE college is an important institution and it is the level at which decisions should be made. I do not think you need all these structures above it. Going back to the point that came up before about how local colleges can talk to employers and indeed to local unions, they can and they do still when they are able to and they used to a great deal more than they do now. I do not know whether you have anybody coming in front of the committee who was, for example, an FE principal 10 or 20 years ago. I hope you have because if you can talk to them about it, they will be able to describe to you the differences. I really do not think we need a regional level. That is just another layer of bureaucracy which is not helpful. What you want to do is get down to the level where individuals are responding to the local market and making their own decisions within the context of where they live and where they are operating. I think the FE college is an important and fundamentally necessary institution for all the reasons that Mick has put up. You have got to have institutional continuity in this area.

Q96 Dr Turner: You do not, for instance, really see a role for the LSC?

Professor Wolf: No, I do not actually, except in the same sense as HEFCE. By the way, I do not think the universities are left alone quite as much as Mick implies but the difference is very clear. You do need a funding agency and you need a funding agency partly when Government has a major priority and it wants to change the system but you do not need the level of micro-management, which is not management by the LSC in an independent sense; the LSC is an arm of Whitehall and it does this. I do not think you need it.

Q97 Chairman: Do you all agree with that statement that Professor Wolf has made?

Professor Unwin: I think I do generally agree with it. I think you could do a lot more, though. I agree that you do not want a whole lot of layers above the local institutional level. You could do a lot more, though, at local and possibly even regional level to invest in and support employer associations, group training associations, so that it is not just the FE college as an institution but there are other institutional parts of the fabric.

Q98 Dr Turner: Ad hoc networks?

Professor Unwin: Yes, and those could be invested in to enable them to work in the partnership way we were talking about earlier.

Q99 Dr Turner: Do you see any role in there for RDAs?

Professor Unwin: No,

Professor Wolf: No.

Q100 Dr Turner: All right. We will carry on with the demolition. Can you think of any good examples where attempts to put into practice the Leitch agenda are actually working and where there is some best practice that other people can take note of?

Mr Fletcher: One of the things that question illustrates is our impatience to see change in things which take a very long time to come about. I mentioned, in response to an earlier question, that what we can see on the ground are institutions changing their processes and their practices. We can predict the sorts of things that will happen downstream, but it is early to see an impact upon learners and an impact on productivity from changes that Leitch stimulated only a couple of years ago. In terms of positive outcomes, I am trying very hard to think of any: some greater impetus towards workplace delivery where appropriate, although I think it is over-stated, some greater emphasis on lower level qualifications at level 2 and Skills for Life as opposed to higher level where the system might naturally drift, but I have to say at the moment I think the negative impact of the consequences following Leitch greatly outweigh the positive ones I can see.

Q101 Dr Turner: Finally, we do enjoy devolution within the UK, so Leitch is not being rammed down the throats of the Scots, the Welsh or the Ulstermen. Where do you think the skills agenda works best?

Professor Wolf: I do not know enough about Wales. I know they have a brand-new policy coming through, and it would be very interesting to find out about it, and on which they did enormously thorough work. It is always hard to know whether it will be as good in practice as it sounds on paper. I do know quite a lot about Scotland and they basically operate a system which is not unlike the one which preceded our current target-driven one. It is basically a bit like the one we ran under the FEFC to be honest. I completely agree with Alison that it has not delivered productivity, but that in a sense is because that is only one part of the equation and Scotland has other problems. I think that the way they are funding FE in Scotland is perfectly sensible and basically copied from the system we dumped.

Mr Fletcher: I think that analysis is right. Scotland is the most different. It is able to be more different and the system there is more like the one of treating institutions as partners that I was commending earlier. In Wales it is very difficult to separate this from English policy and the English labour market, et cetera. I think they are attempting to modify some of the excesses of Leitch-influenced policy.

Q102 Chairman: You just do not like change, do you?

Mr Fletcher: I think change needs to be careful and considered rather than precipitate.

Q103 Ian Stewart: You should have said: yes, but positive change! I will need to try to run through this section relatively quickly. I apologise for that. This is to all of you. How will the establishment of the UK Commission for Employment Skills and the break-up of the Learning and Skills Council system do you think improve the relationship between employers and the education and training supply chain? Will it improve it?

Professor Wolf: Who knows?

Professor Unwin: Certainly many of the employers that Alison Fuller and I talk to do not have a clue that some of these agencies exist anyway, so the fact that you are now about to replace them with new ones is probably irrelevant. It is quite interesting when you go into lots of workplace, as we do, that you do mini tutorials, a bit like a pub quiz, to try to bring them up to date on what the latest agencies are.

Q104 Mr Marsden: You have to be a real anorak to do that!

Professor Unwin: The fact that is that the SSDA now no longer exists and we have the UK Employment and Skills Commission. A lot of people out there would not know the difference.

Q105 Ian Stewart: The answer is we do not know if it is going to improve things?

Professor Unwin: We have no idea. It is far too early to say. I think it is tinkering in the upstairs office.

Mr Fletcher: Could I just put in a good word for the learning and skills councils? I think they could have done a good job had they been left alone. The present break-up and reformulation of them will simply impede things. It may be the inevitable consequence of the machinery of government changes. There will be another period of turmoil in which they concentrate on their own reorganisation rather than doing the job.

Professor Unwin: I would agree with that.

Q106 Ian Stewart: Can I ask Alison Wolf this question? I am interested in this distinction between training for gain and learning for life. You have been doing some work around these issues. Can you tell us: in the light of your research - and I do accept it is not yet fully out - can you see the programme being reformed or is it beyond that?

Professor Wolf: Obviously I need to be really succinct here. It relates to the fact that I dumped on Lorna. I think that a lot of adults in the workplace have very clear ideas about what they want to learn and about why they want to learn it and they are not particularly interested in qualifications. I think that with the right structures, and that would include helping to institutionalise positions in the workplace where people could go for advice and information, you could create a very effective system for enabling people in the workplace to access learning and to learn the things they want to learn. Truly I do not believe that the current system is it. What we have been looking at is Skills for Life that was channelled in with a limit on the number of hours to get the certificate and now is being attached to Train to Gain. It is extraordinarily wasteful and it does not work, but I do think that these are people who very often do know what they want. The ones who are motivated are the ones who learn and stay with it. It means that when you go with the grain you have a lot of people out there who could truly benefit from the vast amounts of money that in my personal opinion we are wasting sticking certificates on.

Q107 Ian Stewart: That is really interesting. Do you think there is an inherent contradiction between the structures of Train to Gain and the nature of courses and training that employers want - short, sharp courses and not necessarily leading to qualifications, for example?

Professor Wolf: Yes, I do, and there is also an inherent conflict between that and what individual learners want. Can I just say one other thing that is borne out by both our research and research in the United States? The interesting thing is that when employers become involved in workplace learning courses as opposed to being offered Train to Gain certification for nothing, they are very rarely trying to fill short-term skill gaps. They are almost always much more far-sighted themselves. They are interested in developing their workforce for the long term; they are interested in showing their workforce that they care about them; and that they do not want to just treat them as something to be shelled off tomorrow. That is something that is absolutely consistent.

Q108 Ian Stewart: Can I turn to Professors Fuller and Unwin for this question? The Government has placed a lot of emphasis on apprenticeships, and quite rightly. I am conscious, for example, Lorna, that you have questioned the distinction between a genuine apprenticeship system and placements. How hopeful are both of you that the National Apprenticeship Service is going to be effective? What could be done to tackle gender equality issues in relation to apprenticeships?

Professor Fuller: One of the things that Lorna and I are arguing for is a different approach to managing apprenticeship which is much less top-down and based more on this apprenticeship partnership model At the moment, essentially the new developments around apprenticeship, which I think we are very positive about in terms of the aspiration, are undermined by the top‑down implementation. The Apprenticeship Service seems to us to be a missed opportunity for generating a shared vision and approach to expanding apprenticeship and making it a more meaningful part of the vocational education and training system.

Professor Unwin: The Apprenticeship Service's main role is yet again to deliver the starts and completions. If you read the government document that came out recently, the definition of quality is still around trying to raise the number of completions. Clearly you want all apprentices to complete and to gain their qualifications but completion, again against highly driven targets, does not necessarily mean you drive up the quality of the learning experience of the apprentices. We would argue that the Apprenticeship Service is an opportunity if it is dedicated and you have people with real expertise in apprenticeship. People like Stephen Gardner at the LSC have been doing a great job. He is a former apprentice. He understands apprenticeship. We need a dedicated team of apprenticeship specialists to drive up the quality of the experience on the ground.

Q109 Mr Boswell: We have not heard much this morning about the sector skills councils. Is there any significance in that being a dog that has not barked this morning? Do they have an important role? Is some reason for the reticence to discuss them the fact that they are uneven in performance and, if they are, could that be rectified?

Professor Fuller: They certainly are uneven in performance. The sector skills councils grew out of the previous incarnation, which was based on a smaller grouping of sectors. The idea was to develop a stronger and more powerful agency with more capacity for sectors that were perhaps carrying more weight. I think that unevenness has not been dissipated by them just becoming bigger, and in some ways they are perhaps weakened by the amount of different sorts of sectors that they are now trying to represent. What happens in our experience is that a few employers become involved and have a voice, but the vast majority are not engaged, probably do not know about them and the relevance to them and the ability to make a difference to them is not really apparent.

Mr Fletcher: I think Sector Skills Councils are clearly variable in performance and some are not very well-known, but they could be of benefit if they focused on the demand side, on raising and describing demand from employers. The danger is that they will drift towards being part of a planning apparatus and seeking to justify their existence by trying to manage the flow of public money to other institutions and then they just become part of the bureaucratic ---

Q110 Ian Stewart: Ministers have certainly always said that it is very important that there is a business voice to articulate the needs of that particular sector.

Mr Fletcher: It is difficult to see some of them as employer-led bodies. In a sense, a real employer-led body could not just be disbanded and reformed by Government at will, could it? You cannot imagine them saying, "We're going to disband the CBI and the Institute of Directors because they overlap and we'll reform them", that is nonsense.

Professor Wolf: I agree totally with the last bit of what Mick said, but I also think the SSCs have been a victim of what a friend of mine calls the "neatness agenda", the idea that everything should be about the same size and should be covered. If they were really going to reflect the structure of the economy then some of them would be big and some of them would be small, there would be a mix and it would be much more organic.

Q111 Dr Blackman-Woods: This is a point of clarification, Professor Wolf. I was not quite clear when you were making the point about work-based learning whether you were saying that people did not want qualifications from the workplace in terms of their learning or whether they did not like the qualifications that were on offer. I just was not clear what you were saying.

Professor Wolf: It could be both. It was really because we have been doing some research going into a large number of workplaces and talking to people who have been on government-funded courses. I am certainly not saying no adults want qualifications, it depends what they are for, but at the moment government funding comes with qualifications attached. Sometimes the people concerned have things that they would like to learn and they do not care whether they get a qualification or not; in other cases they might want a qualification different from the one that is being offered and we can go into the equivalent level qualification thing. Qualifications are an important part of any education and training system but they are by no means necessary at all points in it.

Q112 Mr Marsden: Alison Wolf, two things, whether we like them or not. It is undoubtedly the case that , as a result of Leitch, demand-led principle will increase in higher education. It is also a fact that the teaching of higher education via further education colleges is increasing and will increase. It is about ten to 12 per cent at the moment. Given that those are facts, how is that going to affect the relationship between FE and HE?

Professor Wolf: It is very hard to know. I actually think that we should be allowing FE to do far more of what community colleges in the United States do, which is to deliver HE, but not in the Leitch sense of demand-led, in my sense of demand-led. I think we can and should see a blurring. The current complete distinction between the two is wrong and hopefully not maintainable. However, if the result of that is that HE goes in the direction that FE is going at the moment, that would be a complete and total catastrophe. I am extremely uncertain what is going to happen about this demand-led bit of Leitch. It is true that the only source of additional funding for higher education at the moment is for degrees that are supposedly going to be contributed to by employers, well we will see, and which are of the Leitch description. This is very different from the model which has been fuelling, I would have to say, the extraordinary success of British universities in the last decade. It is a completely new approach. I am trying to keep an open mind, I really am.

Q113 Mr Marsden: I am going to have to cut you off because I want to bring Alison and Lorna in because Brian wants to ask a different question from me. It could be said, unkindly, that some British universities have been much better at dealing with demand-led and local needs and sub-regional needs, even if you do not think that is a good structure, than others. Do you agree with what Alison has basically said that it is too early to tell? Are there elements of the situation that I described in terms of the increase in HE and FE and the increase in the demand-led principle in HE that concern you or worry you, or you rejoice over?

Professor Unwin: I think one of the things that is interesting about the HE sector is how heterogeneous it is. Part of the demand-led success of HE has also been that we have got a huge range of institutions that are incredibly diverse.

Q114 Mr Marsden: Does that mean you are going to get very different responses and success rates in response to Leitch from them?

Professor Unwin: Yes, indeed. It is interesting that some of the post-1992 universities are responding to employer needs at a local level in some of the ways that we were talking about earlier that we would want to see encouraged. I think if there could be closer partnerships with FE colleges and HE then you could really start to see the expertise of the professionals in the colleges that would lift their opportunities and their capacity.

Q115 Mr Marsden: I am tempted to ask where the Foundation Degrees come in here, but we have not got time.

Professor Unwin: I think it would also be a major boost for apprenticeship, for Level 3 apprenticeship, if that was positioned at the FE/HE interface.

Professor Fuller: There is a project being led by Gareth Parry and Ann-Marie Bathmaker which is specifically focusing on the FE/HE interface which is coming out with some incredibly interesting and rich results.

Q116 Mr Marsden: Sorry, where was that?

Professor Fuller: Gareth Parry is at Sheffield and Ann-Marie Bathmaker is at the University of West England. One of the findings that they have come across is that in some cases there are these very constructive partnerships developing between FE and HE colleges in a locality and progression pathways being articulated and so on for top-ups in higher education for courses that have started at FE level. On the other hand, there are also new competitions emerging between universities which are competing for similar kinds of students to the FE colleges and as the FE colleges become more confident and able to deliver higher education in FE and develop their reputations, they are less likely to want to let them go and themselves moving on to wanting to deliver the whole of the Bachelor's degree. There are new rivalries developing at local levels and I am not sure how helpful those are. It is an emerging picture.

Q117 Dr Iddon: Why do we not just be honest with ourselves and say that demand-led HE is really a polytechnic, like the technische Hochscules in Germany? Why do we not create the polytechnics? I used to teach in one which became a university, and as it became a university it gave up all the part-time teaching, the day release stuff, the evening teaching, the Saturday morning teaching, and became just like any other university, and we lost that ability to put people into the local firms. Why do we not just return to polytechnics, is that not what you are arguing for?

Professor Wolf: I do not think you can recreate things that have gone. The demand-led HE that I understood Mr Marsden was talking about is a very specific set of proposals which are not like the old polytechnics because they are far more designed by government, they come with very specific requirements, they have got a particular bit of the HEFCE pot, they are very much part of Leitch. There are real questions to be asked about how best higher education in its broadest sense, and in my view that includes FE based programmes, can respond to the particular requirements of industry. Industry does not always want a highly specific degree, it quite often wants a general one. For better or worse, and many other countries have not done this, we have now gone irretrievably for a single sector. I do not think we can recreate that binary system. Many other countries have hung on to it, but I do not think we can go back.

Q118 Dr Iddon: I want to develop this argument a lot, but we cannot. I must tackle Mick Fletcher. You suggested that we create an Adult Skills and Higher Education Funding Council to bring FE and HE under one. I suggest to you that it would be a hugely bureaucratic structure.

Mr Fletcher: It would be bureaucratic if it tried to do the planning role that LSC has had thrust upon it. If, on the other hand, it undertook the much more lighter touch funding role that HEFCE undertakes or, indeed, those bodies that funded the polytechnics under a previous incarnation, then it would be manageable. The benefit is it would draw attention to some of the real inequities that run right through the middle of our system that are most visible when you compare the treatment of FE and HE.

Q119 Dr Iddon: Are you suggesting in this model paying all the staff on the same spine?

Mr Fletcher: No, I am not suggesting we get into that degree of management at the centre at all. I am simply suggesting that the principles that govern the way we fund institutions and the way we give financial support to individual students should be thought through consistently across the piece. I would not want to row back very far from the independence that FE and HE institutions now have.

Q120 Dr Iddon: Do you think any government would be prepared to fund your model because I can see all the staff wanting to be paid the same, I can see the students wanting the same grants? Are you not dreaming a bit here?

Mr Fletcher: I am not sure that would be a consequence.

Chairman: We will leave that hanging in the air. Can I just say you have been the most fantastic panel this morning and we have thoroughly enjoyed having you. We have certainly overrun significantly. I know you have all been very frustrated, you have wanted to get in on some of the questions and give us bigger answers, if there is anything you want to tell us then please feel free to write to us and we will be happy to receive it. Can I thank you all very, very much indeed for your presence this morning.


Memoranda submitted by Association of the British Pharmaceutical Industry, Engineering Employers Federation, Federation of Small Businesses and Rolls-Royce

 

Examination of Witnesses

Witnesses: Dr Philip Wright, Director of Science and Technology, Association of the British Pharmaceutical Industry; Ms Lee Hopley, Senior Economist, Engineering Employers Federation; Matthew Jaffa, Skills Policy Adviser, Federation of Small Businesses; and Graham Schuhmacher, Head of Learning Services, Rolls-Royce plc, gave evidence.

Q121 Chairman: We welcome our second panel today. We have Mr Graham Schuhmacher, Head of Learning Services at Rolls-Royce plc, welcome to you, Graham. Dr Philip Wright, the Director of Science and Technology at the Association of the British Pharmaceutical Industry, welcome to you. Matthew Jaffa, the Policy Adviser for the Federation of Small Businesses, welcome, Matthew. Second appearance within a very short time, Lee Hopley, the Senior Economist at the Engineering Employers Federation. Thank you all. I am sorry for starting this session somewhat late. Starting with you, Lee, the engineering sector is a very, very big, powerful and important sector, how would you characterise the skills challenge for your sector?

Ms Hopley: I think it is the fact that in recent years the sector really has evolved quite rapidly and that clearly has implications for the skills requirements of the businesses within it. If you look at the change of the occupational profile of manufacturing over the past ten years there has been a clear shift from low-skilled to higher skilled occupations and that trend is set to continue. It has implications for how intermediate and higher level skills are delivered and the level of understanding of providers as to what those skill requirements will be, not just in terms of qualifications but also the softer skills the previous panel was talking about.

Q122 Chairman: Matthew, I well remember being hounded out of the conference hall at your annual conference in Harrogate when I dared to suggest that businessmen could be made rather than born because I think 95 per cent of the people thought that entrepreneurs were born like that. What are the skills needs of your sector?

Mr Jaffa: From the employability side it is the needs of the softer employability skills, those life skills that are absolutely critical. I do not know if it was an FSB survey but there was a survey that stated only 20 per cent of employers were looking for actual graduates and degree level candidates, but 95 per cent were looking for those softer employability skills. It is that ability to walk through the door on the first day, hit the ground running, coming in with a fresh approach, looking determined, a willingness to learn that employers are really looking for.

Q123 Chairman: So Alan Sugar has got it right?

Mr Jaffa: Oh, spot on!

Q124 Chairman: Graham, what is your company looking for?

Mr Schuhmacher: I think the challenges are we have got an age profile problem like most of our sector of two-thirds over 45 and one-third under 45, so the apprenticeship Level 3, Level 4, technician level, is a serious concern to us and the number of people doing stem subjects in university and then coming into engineering as opposed to going into consultancy firms. That basic core skill and competency of a company like ours is the biggest concern with the age profile being the most worrying one.

Q125 Chairman: And pharmaceuticals?

Dr Wright: The key for us is that historically the UK has been very strong in terms of the core skills and core capability that has really allowed us to be a world leader in terms of R&D investment and development of new medicines. I think it is fair to say that over the last four to five years our members have increasingly stated that there are real issues and skills deficits in two senses. One is around the core capabilities of school leavers, graduates and higher degree level leavers in terms of their mathematics, numeracy and practical capabilities. Secondly, there are core discipline deficits as well in terms of the capabilities, for example, of pre-clinical pharmacologists, and all of those disciplines which are absolutely essential. Basically, the skills that many universities and others are supplying to us today are not competing globally where in the past we used to compete with, and indeed exceed, many of the other skills provisions around the world.

Q126 Chairman: Leitch has got a blueprint, the government has accepted that blueprint, but as far as the pharmaceutical industry is concerned is that going to deliver on the skills agenda that you have just described? Are we going to get those changes?

Dr Wright: Leitch has some real positive opportunities. The issues for us are two-fold. One is around making sure we can impart those skills further down the track throughout the education system. I am not quite sure how Leitch will actually support that. However, I do think there are some opportunities in terms of improving local connection and local responsiveness to industry needs. I will give you a couple of examples. One is for around HND and HNC or BTEC provision and Foundation Degree provision, for example in biology and chemistry, a number of companies are having to send their employees quite a long way out of their own region to get the level of provision that they want. The second area is very much around animal technicians. We have been working with other suppliers, Sector Skills Councils and others, for probably three to four years on this and getting a responsive, positive outcome from that has been very difficult. We are just now beginning to see the delivery of a plan that may actually start addressing these technical and skills capabilities, but it has taken a long time. I hope that Leitch, if it has a positive impact, will be about local delivery and providing greater clarity and coherence.

Q127 Chairman: It is not only about local delivery, is it? This is a huge, massive blueprint for skills for the future with clear targets which are going to be driven by the acquisition of qualifications.

Ms Hopley: I do not think the Leitch Review necessarily was a blueprint. It was a good summary and analysis of the current state of affairs in terms of what employers, individuals, government policy and regional policy is doing at the moment and it laid out where he thought UK plc needs to be in order to remain a competitive economy. The targets are good in the sense that they are the direction of travel that we need to be going in in order to remain competitive. We do need more highly skilled people with Level 4 qualifications. The focus on apprenticeships was very welcome, particularly from a manufacturing point of view. There is clearly an issue with those in the workforce who did not gain Level 2 qualification at school and how you bring those people's skill levels up. It had a lot of useful things to say in that respect but it was not a blueprint for reform, and that has been the challenge in how you turn those targets and aspirations into a delivery plan, and that has really taken some time.

Q128 Chairman: Matthew, do you see that there is a delivery plan? You deal with 95 per cent of Britain's small businesses.

Mr Jaffa: 99.3 actually.

Q129 Chairman: I underestimated. Are you seeing a difference as a result of the early implementation of Leitch?

Mr Jaffa: We welcomed it at the time, but so far we have not seen enough on the ground to give a definitive yes, it is working for our businesses.

Q130 Chairman: Have you seen anything?

Mr Jaffa: There have definitely been some gains with regard to Level 2 and Level 3 training levels, there is some increase there. It is the areas such as policy-wise on issues such as the Skills Pledge and the new Commission for Employment and Skills that we are working quite rigorously with. We have got concerns in particular about the Skills Pledge and areas like that dictating. At the moment it is a voluntary approach on small businesses but it is the compulsion, the burden, the more regulation that small businesses are wary of. We welcome that it has been moved back to 2014 when that idea of compulsion could come back on the agenda. For now, small businesses are a little bit concerned about the fact that they are going to be told, "You must train", when, in fact, they are.

Q131 Chairman: Graham, Rolls-Royce has always had a terrific reputation for training its workforce and it has often been regarded as an exemplar training organisation. Now, as a result of Leitch, we have got employers right at the forefront of the new training agenda. What more can Government can do, other than to say, "It's over to you guys"?

Mr Schuhmacher: I think it could do more to help the older people, people over 25 wanting to come back into apprenticeships.

Q132 Chairman: You are employing them.

Mr Schuhmacher: The ones we employ I think we look after. We have put 100 through apprenticeships in the last few years. There is a great deal more out in other companies who do not get those same opportunities or perhaps are doing jobs where there is not an opportunity to grow. There are things that perhaps Government could do to more equalise the funding between the 16-18 year apprenticeships and the over-25s. There is a levelling out we could do that would help address our sector particularly with that age profile problem I talked about earlier.

Q133 Chairman: Philip, do these targets mean anything to you and to the companies that are part of your organisation?

Dr Wright: Probably not in the sense that it actually impacts upon them in their day-to-day operations. It is also worth remembering that our companies already invest heavily in skills at a variety of different levels. We did a survey at the end of 2007 and we had 606 PhD studentships that we share and we host another 430 industrial trainees during undergraduate education. There was a survey by SEMTA which estimated that companies spend 10 million on in-house training. I think that is a huge underestimate. In truth, the issue is our companies are not just looking at the UK as well. The key is not necessarily about the targets or the bums on seats or the numbers going through the door, it is actually about the quality of the skills provision and the quality of the capability of the individuals that come out of that process. It is fair to say most of our member companies employ those at Levels 3, 4 and above, and that includes the smaller as well as the larger companies. Historically, that has been a shift partly because of the expansion of higher education but also because to get some of the skills at school leaving age you then had to go to a degree and for those you expected at degree level you then had to go to a PhD. There has been a denuding of the core capabilities. It is interesting now that our companies are starting to look again at employing school leavers and actually training them up in-house. That is an interesting trend and we are starting to look at the apprenticeships and how that would work. In terms of the targets themselves, they are not hugely relevant.

Q134 Dr Turner: I expect to get different answers to this question because you represent very different sectors. I just want to know from you how confident you are in knowing what is available in terms of the skill provision map in your respective areas. Is it excessively complicated at any level, national, regional or sub-regional? If we could start with the small businesses and then come to the big boys.

Mr Jaffa: Unfortunately, to access training for small businesses is difficult to start with. The average business has around four employees in the workforce. Getting that time off for training is the hard part. Small businesses do not have the time that a large company does to try and access the right training for their staff, so a lot of it is done in-house. With regard to your question, the new system coming in, the new agencies, another Skills Funding Agency, another Youth Learning Agency, is just another bit of bureaucracy, another bit on top for small businesses to have to work through. We were just starting to see some gains with regard to the Learning and Skills Council working in our favour doing some positive work. It is another two agencies on top of taking one away that is another issue for small businesses.

Q135 Dr Turner: Philip and Graham, I am sure your perspectives are perhaps slightly different.

Dr Wright: It is certainly true from our perspective that there is what you could call a patchwork quilt of skills support, provision and information. As I came into this we started mapping out who we engaged with and who we needed to interact with and influence to have an impact at the employee who came through the door.

Mr Boswell: Can you share that with us?

Q136 Dr Iddon: How many sheets of paper was it?

Dr Wright: It was one sheet of A4, in very small type I have to say. Just to illustrate it, we had the Funding Councils we work with, three Research Councils, four Sector Skills Councils, who seem to compete with each other rather than collaborate, the RDAs, the QCA, and we also had a number of other groups we had to work with in terms of other employers and providers at local and regional levels. It is difficult for us to know exactly, even as a large company who spend a lot of time on this, what needs to be done and to get a response. It seems to me that there is a disconnect between a lot of activity and hamster wheels being set in motion versus incentivising the provision that is needed either in terms of what the individual wants or what the country needs to deliver the competitiveness that will allow us to compete for the pharmaceutical investment for the future.

Q137 Dr Turner: Are you describing chaos?

Dr Wright: I would not describe it as "chaos", but I think a "patchwork quilt" is a good way of putting it and I am not sure all the pieces are quite joined up yet.

Mr Schuhmacher: I would agree with both comments. We did a mapping exercise a few years ago and tried to draw all the agencies we needed to work with and where the flows of money came through, and I shared that with Lee at one stage. It is really difficult. The point I make in the written comments is that difficulty is okay if it stays stable, but it is moving all the time, it is changing all the time, and that is the hard piece even for companies like ours where we have dedicated resources and we open up our facilities to work with our supply chain of small companies because they do find it impossible to work out how to do some of these things.

Q138 Dr Blackman-Woods: I think one of the things that we were expecting of Leitch was that there would be a more streamlined system for the planning and delivery of skills. Is your conclusion at the moment that that has failed and it is not more streamlined, or if it is it is just not streamlined enough and there are still far too many agencies and bodies involved in the delivery of skills?

Dr Wright: First of all, if we were starting today we would not start from where we are now, I think that is quite clear, but we are where we are and we need to take on board the lessons that we have learned. If we get something out of Leitch, seeing how the Commission for Employment and Skills can work in the re-licensing of the SSCs, making them work more coherently and in a better co-ordinated way would be very helpful. In a different area, I think the Research Councils have done it quite well with Research Councils UK. They have started to work co-operatively together on how we can make that co-operation more effective rather than competition. I think you will have seen the appendix we put into our submission which makes a mess of us knowing who to go to to help us with that skills supply. The other point to make is countries, and they are small countries necessarily but they are competing with us for investment, such as Singapore, Switzerland and other countries, are making it easier for our companies to go in and get the skills they need, not more complex. They are able to deliver the skills that they want in a more coherent way and provide a package for investment. That is one of the things we have got to start thinking about, how do we compete, because even the smaller companies are being attracted to those new economies and we need to be very wary in the future here to address that.

Q139 Dr Turner: Do you have anything to add to that, Lee?

Ms Hopley: I just wanted to agree with Philip. We are pinning quite a lot of hope on the UK Commission, that they will look at this as an early priority, the simplification of the entire infrastructure out there. We understand that it is doing that but we really want to see movement on that soon.

Q140 Dr Turner: What are your impressions about the effectiveness of the RDAs in the process? Are you at all influenced by the skills plans that they oversee?

Dr Wright: It is worth noting that we see great differences in the approach of RDAs certainly to our industry and there are some very good examples of positive relationships.

Q141 Chairman: Such as?

Dr Wright: The north west has got a very good relationship with some of the companies in that area and has been very responsive. It is fair to say that the companies up there have taken an active and proactive approach to that relationship. There are some others where we have seen some positive ideas, for example in the south east and east of England. My slight hesitation and worry is that there is a level of duplication and trying to compete with each other there as well. Somehow, what we need to do is allow them to build on the strengths or the needs of their local community while also joining them up in a more coherent structure. Other than that, apart from a few good examples, we have not been hugely impressed by the RDAs.

Q142 Dr Turner: Does everybody else concur? Yes, okay. Train to Gain seems to have some problems. What is it that you find problematic? Is it what Train to Gain has to offer or the way in which what it has to offer is being communicated?

Ms Hopley: I think it is the latter. The Train to Gain model looks really good on paper from a national level, but it is not delivered nationally, it is delivered at the sub-national level and people's experiences of it around the country will differ. I think there is a lack of understanding of what the Train to Gain offer now is. When it was the Employer Training Pilot it was full funding for a first Level 2 qualification. With the expansion of the brokerage element of the service it is a much wider offer, so a broker should be able to work with a company in sourcing other forms of training that do not necessarily attract part of the funding package. In theory, that should solve one of the big difficulties, particularly for small and medium-sized companies, in finding information and understanding where to go and what sort of training will fit what they are trying to achieve within their business. That is the element that is not working quite as well as it could at the moment. There is no reason to say, "Train to Gain isn't working, let's think of something else". It has not been going that long and it definitely needs time to bed in. There probably needs to be more work done with the brokers in terms of developing their sector knowledge, and I understand that is starting to happen. It does need time and also better communication with employers because I do not think the message of what the complete offer is is really out there yet.

Q143 Dr Blackman-Woods: I do not know whether you heard the comments that were made by Professor Wolf from the previous panel, but she was quite scathing about Train to Gain. Would you share that assessment? Would you also share the assessment that people in employment are not necessarily looking for qualifications?

Mr Jaffa: Can I answer with a bit of positive and negative on the side of Train to Gain. I do not want it all to be total failure. On the negative side, we have discussed the issue of brokerage and in certain cases this honest information, diagnosis and brokerage service that Train to Gain should provide is not being totally geared towards small businesses and the brokers are not going in there providing a full training needs assessment within the workforce, it is literally a phone call whereas they should be going into the workplace and seeing things in action. On the positive side, we have managed to see wage contributions given through Train to Gain for those employers who have got 50 or less employees. We have worked and lobbied very hard on that and Train to Gain provides that facility so that you are compensated as a small business and you will not lose too much in terms of finances when your employees are on training.

Ms Hopley: It is a combination of the two. There are people who need specific technical qualifications for example, and that is important, but the other aspects of training which do not necessarily lead to qualifications are equally important. There sometimes seems to be this misunderstanding that employers do not cough up for these kinds of things themselves, but they do. It is in terms of sourcing the appropriate training from the right provider which is sometimes the difficulty that companies face.

Mr Schuhmacher: I think that is absolutely right. The point about full qualifications is important but bite-sized chunks are also really important on personal development and equipping people for the roles they are doing today.

Dr Blackman-Woods: That is helpful. Thank you.

Q144 Dr Turner: Matthew, SMEs have a certain amount of difficulty in handling the apprenticeship system. What proportion of SMEs are interested in apprenticeships and what particular difficulties do they experience?

Mr Jaffa: The only particular figures we have are from Labour Force Survey results that 69 per cent of all apprenticeships occur within small businesses. The main problem with apprenticeships within small businesses is the completion levels. In this country there is a good take-up of apprenticeships but, unfortunately, we do not see enough apprentices seeing the jobs through. From my meetings with the LSC discussing apprenticeships, they are looking at that completion issue. That is the main area for small businesses. They want to invest time in their employees, training is critical, but they just want to see the completion.

Q145 Dr Turner: Are there any generic reasons why the completion rates are low?

Mr Jaffa: From our understanding, it might be to do with the fact that you have got a percentage given at the start of the course and a percentage given at the completion of the course. If there was more geared towards the end of the course, the financial rewards coming towards the end, you might see a greater completion than when they are given a flat fee to start with and they think, "Great, I've got some money". Maybe the financial rewards should be geared towards the end of the process.

Q146 Dr Turner: Of course, Rolls-Royce has a slightly different picture, I am sure, but you still have concerns about the Government's planned changes towards the apprenticeship programme. Could you expand on that?

Mr Schuhmacher: The concern is around changing qualifications. Most of the concerns laid out in the paper were about the amount of change. I think I have spent around 15 years hitting my managers to understand the concept of NVQs and start to use that language and be able to describe roles in NVQ terms and the idea of now losing that and coming in with a different sort of approach makes me feel tired after a while of trying to gear up that language. We have got a few thousand managers and trying to gear up that language and change in qualifications through to them is exhausting. I remember when I first came into training it was getting them to move on from the pre-1964 HNCs. You go through waves. That is really what concerns me about changing those well-known qualifications today at a point when we want to try and expand the number.

Q147 Dr Turner: Is the concern about change itself or the nature of change?

Mr Schuhmacher: It is the nature of the change. I am not sure what we are trying to fix. In the engineering sector we have got a good apprenticeship, a long history of it, and known qualifications and the structures within the system are working towards a known framework. We are now talking about changing BTEC, NVQs, all those known reference points that people have. I have not seen real evidence to show what the gain is in making that change, doing the things that we are talking about in here.

Q148 Mr Marsden: Lee, Graham Schuhmacher in response to my colleague, Des Turner, has painted a picture, certainly in his sector, of something that has worked very, very well and why change it and all the rest of it. It is the case, is it not, in terms of the structure of apprenticeships that one of the problems in other sectors, particularly engineering, and Rolls-Royce may be exceptional in this respect, that one of the reasons that apprenticeships have not been doing the business is that in some respects the structures of them have been too inflexible and they have not reflected the actual labour market demands or company demands on the ground. Is it a reasonable thing to say that apprentice structures in the future as far as your industry is concerned, or the sectors in general, need to be more flexible?

Ms Hopley: We have not picked up huge concerns about the framework of engineering apprenticeships. There is always an argument for a bit more flexibility but, at the same time, there needs to be certainty both for the individual and the employer and what they are going to get at the end of it because chances are even if you work somewhere like Rolls-Royce you are not going to be there forever, so your next employer needs to understand what an individual is coming to them with. I am not sure that the framework of engineering apprenticeships is that much of an issue.

Q149 Mr Marsden: Let me just press you a bit on that. There is a situation here where you look at the people who are engaging with apprenticeships, and that is what you are talking about, but there is a huge number of people out there who are not engaging currently with apprenticeships and we are trying to uncover the reasons for that. There is certainly some empirical evidence and certainly the Post-16 Skills Inquiry the predecessor select committee did uncover that lack of flexibility, lack of portability of credits, if you like, within an apprenticeship scheme does hinder people taking them up. Is that something you have come across?

Ms Hopley: When you say "people", are you talking about individuals or employers?

Q150 Mr Marsden: I am talking about individuals.

Ms Hopley: I am not sure this is that applicable to our sector. It may be an issue for other sectors but, as Graham said, the engineering and manufacturing apprenticeships have been around for a while and are perhaps better understood than apprenticeships in other sectors.

Q151 Mr Marsden: There are the three of you here and in your particular sectors are the concerns that I and other people have expressed about lack of flexibility in apprenticeship structures issues for you?

Dr Wright: In the pharmaceutical industry we are relatively small in the number of apprenticeships and, of course, most of those are related to the manufacturing capability anyway and the engineering side and not necessarily in R&D or other areas. In truth, it is probably not a significant area but, having said that, with the companies starting to look increasingly at taking on board more school leavers, at least dipping their toe into the water of that, it may be an opportunity to start looking at it. Certainly transportability of skills for an individual is important.

Q152 Dr Iddon: Philip, could I just ask you who trains laboratory technicians these days and is it adequate?

Dr Wright: It is probably not adequate. Who trains them? There are probably two routes by which they come into this. A lot of companies actually subcontract out their laboratory support services, so they are often employed from local communities, and many of them have degrees nowadays whereas in the past perhaps they would not. Because of the expansion of higher education there is now a pool of skilled people who are not necessarily going to go on to the higher level but it is a route into employment within a company. They are probably being trained mostly by universities with some upskilling going on within the companies themselves. In terms of animal technicians, it is interesting because it is somewhat different. There is an awful lot of training that goes on in our contract research organisations which then provides almost a supply chain of those skills both into companies, larger pharmaceutical companies, and other CROs. In our industry as well there is a level of turnover which helps feed and support, for example, smaller biotech companies. It is critically important that there is that turnover, that there is supply from the larger companies to the smaller companies. That is not a very easy answer, there is not a clear route. It is one of the areas where we have been considering, for example, the promotion of the 14-19 Science Diploma to try and increase the practical capabilities of school leavers so they can go into companies at that level.

Q153 Mr Marsden: I would like to ask a final question about the issue of adult apprenticeships and re-skilling in general. The new Head of the Commission for Employment and Skills, Chris Humphries, is on record for banging on about the demographic gap and how important that is going to be. Graham, if I could just ask you this question. You have talked about expanding adult apprenticeships and the need to change the funding schemes between the two. In your company you do a lot of upskilling, obviously, but, given what you have said about your age range and given what we know about the demography over the next few years, are you and people in your sector doing enough about re-skilling?

Mr Schuhmacher: There are two points. We do not just take 16 year-olds onto apprenticeships, we take more and more 18 year-olds who have done A levels, and they are great students coming onto that scheme. One of our first years is 27. The idea of an apprenticeship being for 16 year-olds no longer exists. We do a lot of upskilling. Does the sector do enough? I do not think we have got that message through the sector

Q154 Mr Marsden: I am asking about re-skilling as well, people in their 30s and 40s, that sort of thing.

Mr Schuhmacher: I think that message is getting through but it is getting through slowly. I do not think it is known well enough yet.

Q155 Mr Marsden: Is that true of your sector, Lee?

Ms Hopley: I think that is a fair assessment. The increase in funding for adult apprenticeships that was announced last year was a really welcome move. This is all about awareness and companies understanding that apprenticeships are not just about 16-18 year-olds and there is funding available if you want to take on a 30 year-old. For a small business that might be really attractive because they need less supervision, they might have some experience in the industry.

Mr Marsden: Very quickly on gender, are we doing enough to attract older women into apprenticeships and re-skilling?

Chairman: Mature women.

Q156 Mr Marsden: Older!

Mr Schuhmacher: Probably not. We are working very hard to get young women coming into engineering working from age five because that is when you need to start getting that science and maths into it. It is a good point about older ladies.

Q157 Mr Boswell: I would like to bundle my questions in the interests of time. This is really about employer representation. We will discard the remarks which were made by the earlier witnesses about rationalisation of private sector bodies. It is the way you input into this admittedly rather confusing system. Looking at major players, there are the SSCs, and some of you might like to comment on the relative merits or possibly the drivers for improvement and rationalisation in that sector. There would also be the area of self-financing. One could create a model saying, "We will take the money from the RDAs and put it into the SSCs in sectors that are important". Would that be sensible and would that dilute the employer interest if you did that? Conversely, looking at the various sector bodies here, would it be more sensible to give you the lead role in this, as it were, as the representatives of the private sector in your industries, professional employer bodies, rather than the SSCs? Have we got a lot of people there? There are the Employment and Skills Boards as well. We have to start with where we are, but how should we make your side of the structure simpler and better able to relate to government objectives?

Dr Wright: There is an opportunity to utilise employer bodies more. We have been trying it as well and we have produced a Sustaining the Skills Supply report.

Q158 Mr Boswell: In answering, can you also factor in the UK Commission for Employment and Skills as being possibly a driver to help you do this?

Dr Wright: Yes. One of the issues about this was we deliberately articulated what our skills needs were quite clearly saying what those skills were, what were the issues and what we wanted. Was it an issue about quality, number, future need, was it an undergraduate, a higher degree level? We articulated that very clearly and we are in the middle of updating that this year and we are happy to provide that to you later as it is completed.

Q159 Mr Boswell: That would be useful.

Dr Wright: We also followed that up with a number of specific requests and we have had varying responses from across Government on this. We did have a secondee from the then DTI working with us on in vivo sciences in the UK. It has been extremely difficult to get responsiveness from the Research Councils on this. We had one very simple recommendation: that there was a particular need for only 36 places per year for an MSc course, yet they were not willing to ring-fence that and support what we wanted, which was a very modest amount of investment and a very modest approach. There needs to be a level of responsiveness in the groups that are out there, whether it is evolved Sector Skills Councils working together in a more coherent way, which I think would be welcome, but if we produce reports like this, if we do not see the recommendations and impact of that going forward our companies will be increasingly jaundiced even about feeding through us in terms of their skill needs. It is getting that hook moving from us articulating it to incentivising the UK to provide those skills and somehow we need to solve that problem.

Q160 Mr Boswell: Thank you, that is really helpful.

Ms Hopley: We feel there is a role for Sector Skills Councils. The previous panel talked about their patchy performance. I think their performance management was rather a pig under the Sector Skills Development Agency and that really has to change under the Commission. Certainly the re-licensing process that the network is due to go through next year has to be very rigorous, obviously. It needs to set out and give more clarity to the SSCs as to exactly what is expected of them because some of them are running around doing peripheral activities. This leads on to whether or not they should become self-financing. The need to raise revenue has been distracting for some of them and it has taken them away from their core focus which is engaging with employers, understanding how the sector they represent is evolving and what that means for changes in skill needs rather than the top level, "We need more management skills and technical skills". That does not really help the provider network in terms of what they need to do for employers and how they need to improve their responsiveness.

Q161 Mr Boswell: I would like to draw you out on that because that is helpful. I read that as saying you need a responsible and responsive body to talk to as an employers' body. You do not need to collapse their functions into you, it is better if there are two bodies but they do have to have a lively relationship. Matthew, do you want to come in on that?

Mr Jaffa: Yes. In terms of employer representation, we do feel that Sector Skills Councils are necessary. On the make-up of the actual Sector Skills Councils we feel that the micro-business and small business interest has not been totally seen across Sector Skills Councils. From our own research, only about five or six have micro or small business representation.

Q162 Mr Boswell: It varies between them.

Mr Jaffa: It does vary on the boards themselves and a lot of it is secretariat run. With regards to funding, I disagree with the fact that we should have the funding because then you get into areas such as vested interests, which is wrong. We feel that organisations such as ourselves and the Chambers should not have that vested interest, it should be the Sector Skills Councils working and the re-licensing should ensure that there is a small business interest and maybe even a 26th Sector Skills Council, a Small Business Sector Skills Council.

Q163 Chairman: Is there not a contradiction there because inevitably the larger companies are going to be ones who are going to be able to put the resources in? Most of your small businesses will not be able to do that and, therefore, their voice will be totally squeezed out.

Mr Jaffa: That is why we would like to see areas on leadership and management courses, for instance. That particular area is across various different Sector Skills Councils whereas it should be within one. There is no need for cross-courses or cross-areas. That is why, although the rest would disagree with us, we feel a small business interest is needed within the Sector Skills Council.

Ms Hopley: Sorry, leadership and management is not a sector specific issue, it does not need a Sector Skills Council.

Q164 Mr Boswell: It does need a solution though.

Ms Hopley: Perhaps this is something for the Commission taking the overview of these generic skills issues with Sector Skills Councils focusing on the genuinely sector specific issues, of which leadership and management is not one, frankly.

Q165 Mr Boswell: Graham, do you want to come in as the exemplar?

Mr Schuhmacher: We work with SEMTA a lot and we have done in its various forms since the 1960s. I am very aware of the small businesses because it is the small businesses that provide us with a huge proportion of our parts, so it is really quite important to us that we make sure the supply chain companies, the small companies, are thought about. We work closely with our supply chain. I do think it would be better if we could get more of them into the SEMTA bodies but it is really hard to get that representation. In a way, big companies are seen to be representing themselves but in reality we all take the view that we are completely reliant on our supply chains being healthy and robust to survive and, therefore, it is in our interests that they get represented there.

Q166 Mr Marsden: If I can come to you, Graham, I thought that last point was very interesting. In my neck of the woods we have BAE Systems and they always tell me for every one job directly employed at BAE there are two or three down the line, and I assume it is a very similar thing with you and Rolls-Royce. That brings me on to the whole question about the actual mechanics of the way in which companies like your own engage with higher and further education because I think there is a very specific issue here. First of all, what is your current engagement in your own patch, your own catchment area? The second question is, what is the better approach on the whole for businesses, particularly in the new climate of demand-led in HE? Is it going to be working on a bilateral basis with individual colleges or individual universities, or is it going to be looking at it from a regional cluster basis?

Mr Schuhmacher: On the FE? Talking about Derby, I am a governor on our local college.

Q167 Mr Marsden: I saw that and that was one of the reasons why I wanted to ask you the question.

Mr Schuhmacher: Hopefully I bring something to that college in the way of engineering and education. What I have tried to do with all the colleges across the country where we operate is to bring them in as an integrated part of our delivery team on apprenticeships. The thing that we spotted ten years ago was that colleges and workplace training was starting to separate as the colleges had lecturers with less works experience in the subjects. We brought them together into our local teams and in the last two years we have started to create a national group bringing the colleges together nationally, and from Scotland, so across the UK, to operate one apprenticeship. That has had the benefit for those providers of putting that work experience and that relationship with us and getting placements in the company. In the FE sector we have been slower on doing that work than we have with the higher education groups. We have very close relationships with universities that we are doing research work with. We have universities we work with on recruitment and partnerships. I think we truly have been slow doing the same in the FE sector.

Q168 Mr Marsden: Philip, in the pharmaceutical sector, I was very interested in your response earlier to my colleague's question about RDAs and you highlighted the north west RDA which, as a Blackpool MP, I am very familiar with. It is also not without note in the north west that universities have worked quite closely together on a whole range of economic strategies. I put the question to you again, not just in terms of the north west but your industry as a whole. Assuming that there is going to be much more demand-led in HE with employers, such as your companies, what is the future? Is it more down the bilateral route or a collaborative route with groups of universities or colleges?

Dr Wright: You probably have to think about two levels of skills. There is basically the vocational support and CPD ongoing development and then there is the higher level research and engineering skills that we rely upon. At that level you can start thinking about it in two ways. One is very much the vocational technical support is a much more local network and then the other one is you cannot deliver quality at high level skills on a local sub-regional basis, it has to be a national level at least, and many of our companies are looking across Europe for those skills. If you look at it, we have mapped out some of those interactions. What concerns us, and maybe post-Leitch this will improve, is the issue around responsiveness of the local colleges and, I would say, the technical vocational universities that support more regional skills. There is still an issue about the lack of responsiveness there. It is beginning to improve. There do need to be regional strategies, but fundamentally it is quite often a good thing to have these particularly local direct relationships.

Q169 Mr Marsden: It is not a question of either/or, you have got to have both?

Dr Wright: Absolutely, that is what I was trying to get to.

Q170 Chairman: I just want to ask you one very last question. There is an assumption that this will all end in tears, the demand-led system, because employers quite frankly, and particularly small businesses, are not prepared to pay for any training. Will it all end in tears?

Ms Hopley: Hopefully not. I do not think it is that small businesses or any other businesses are not prepared to pay for training. Sometimes the problem is that they are not very good at articulating what they need and that is why Sector Skills Councils have got to get better at what they do, because that is their job. If it ends in tears there will be another review!

Dr Wright: This is a very important issue. From our perspective, industry already pays a lot in terms of skills. The sorts of skills they are being offered in areas like Singapore and the Far East, they are not being asked to pay, they are being given those skills at lower cost, more competitive. The issue is not just about creating a demand-led system but how does the UK create the pools of talent which would make us attractive and competitive in the future in terms of attracting investment, retaining investment and growing the smaller firms. Unless we have that investment, and not just demand-led, we need to have some sort strategic perspective, we talk about biosciences but we do not invest significantly in quality skills in those areas and we need to do that.

Q171 Chairman: You have got the last word, Matthew!

Mr Jaffa: I would disagree that small businesses do not train. We can remain optimistic. It can work, it is the fact that small businesses do not want to be there to be the ones who pick up the shortfall in the education system. If they are training at Level 3 and Level 4 then employers will provide the funding very happily.

Chairman: On that really positive note, and we do not want another report, Lee, other than ours of course, can I thank you all very much indeed for coming this morning.