EXAMINATION
OF WITNESSES
(QUESTIONS 440-452)
CBI
4 NOVEMBER 2008
Q440 CHAIRMAN:
When will that report do you think?
MR
CRIDLAND: We
are reporting in the spring of 2009.
Q441 CHAIRMAN:
Do you think the current economic slowdown will deter some businesses
from developing the links they ought to develop, or will it encourage
them or incentivise them to try to get ahead of their competitors?
MR
CRIDLAND: Every
cloud has a silver lining. I have talked to chief executives of
small and large CBI members, who are very focused on making sure
that they can take advantage of the upturn when it comes; so the
answer has to be "Yes and no". Yes, there will be companies
that are now knocking on the doors of universities because they
want to make investments to move forward. What is short at the
moment is capital. One of the debates we are having with DIUS
is about their model of co-funding of business and universities.
Increasingly they are looking for the expansion of British higher
education—which is something we support, as I have said
in the evidence—to be co-funded by business. We do not have
a philosophical problem with that, but it comes back to whether
the universities are responsive enough. I cannot imagine that
the current economic climate is going to make it easy for business
to find extra money to support things which, two or three years
ago, would have been funded out of the taxpayer.
Q442 CHAIRMAN:
Or, in the case of smaller businesses, the management time.
MR
CRIDLAND: Indeed.
Q443 CHAIRMAN:
During this inquiry we have heard evidence that management is
one of its weaknesses in large parts of British industry. In evidence
just now, the TUC has said that middle management quite often
failed in larger organisations. NESTA have said that small, family-run
businesses often do not have the experienced management understanding
to take their products and services on to the next stage. Do you
think there is more that needs to be done to encourage managers
to look to the long term and to understand their own inadequacies
and to seek training to correct it?
MR
CRIDLAND: I
think that there is a certain inevitability in small firms facing
management challenges as they grow. One has to be careful with
anecdote, but I think there is reality in the classic example
that you have an inventor or a marketeer who has an idea, develops
a business, and suddenly they are employing 15 people and they
are facing challenges of growth that they have never had to think
about before. Then they have to decide whether to bring in professional
management, whether to concentrate on the thing they are good
at, or whether to try to do everything. I think that there is
a certain inevitability in that. I also think that we have to
be very careful when we look at the issues of the leadership and
management of business not to fall into the trap we fall into
with training. We look at training in small businesses and say,
"Ah, well, small businesses don't spend money on training
providers. They don't train to qualifications to the same degree
as large companies. So small firms don't train". I think
that is a false assumption. Small firms train in a different way.
They train on the job; they train experientially, bringing on
people, sitting by the person who has the skills. Again, it is
not captured in the Government's metrics. A lot of that is true
with small firms' leadership. Yes, we need to do more to help
small firms with leadership and management, but the answer is
not to tell them that their own managers have to have MBAs. There
is a scheme that the Learning and Skills Council runs on small
firms' leadership and management, which has been very popular
with small businesses. One of the things we asked John Denham
to do with his most recent help to small businesses, and he responded,
was to transfer some funding that was not being used on Train
to Gain to increase the budget available for small firms on leadership
and management. The reason that scheme works is because it is
very flexible. Directly answering your broader question, "Is
there a problem with management in British industry?" I think
the academic evidence and the anecdotal evidence suggests that
we have more to do, particularly at supervisory and management
levels.
Q444 CHAIRMAN:
In university-business links, is intellectual property a difficulty
sometimes in the relationship? Supplementary to that, to what
extent does intellectual property matter these days in a fast-moving
market, where getting a product to market is more important than
protecting its IP?
MR
CRIDLAND: I
think business would argue that in a globalised economy IP has
become even more important. It is certainly very much more prominent
in the CBI's agenda than it would have been, say, three years
ago. That is because of your high-value challenge. If you are
going to move up the ladder of high value and you have the Chinese
and the Indians chasing you up that ladder, it matters hugely
whether you can protect the thing that differentiates you from
your East Asian competitor. In relation to universities, I would
suggest that we have turned the corner. This was a major problem
but, again, if I refer to my esteemed boss Mr Lambert, I think
that the Lambert model contracts that he introduced are working
well. There cannot be any one-size-fits-all approach to IP between
an industrial collaborator and a university. It is horses for
courses. It depends who has brought in the biggest equity. I think
that there is now a much more harmonious approach, where universities
and industrial companies are using the model contracts to divvy
up what is the best way to take that project forward.
CHAIRMAN: There
are two remaining areas of questions to get through: procurement
and skills. Nothing small.
Q445 MR
OATEN: You have hinted at procurement
in nearly every answer and clearly you have a lot to say about
it. My sense is that the way that business has to go through so
many hoops to win any contracts off local government, health authorities,
or government at a national scale, is virtually impossible. Your
evidence suggests that lots of people have been put off doing
this. What is the problem? What are the key issues?
MR
CRIDLAND: I
would concur with that. I would suggest that there are three things.
The first is skills. Procurement skills are still inadequate.
That is not an easy problem to solve, for the reasons I gave earlier.
We have many thousands of procurement officers across the full
range of the public sector, but there is a need to up-skill them
and to give them that wider perspective. Because there is a skills
problem, they change their minds far too often, on both small
and large procurements—so changing the specification halfway
through. We introduced competitive dialogue to try to help the
private sector work with the public sector. That has worked well,
but one of the downsides of the competitive dialogue is that we
now have examples where, as a result of a company putting on the
table some of its IP to help the public sector, the public sector
has then suspended the procurement, changed the specification
and tried to get a better deal from other tenders. There is a
skills issue and a cultural issue, therefore. I think that there
is a lack of consistency. That would be my second major point.
The Government would accept that it needs frameworks for public
procurement. I sit on the council of the Learning and Skills Council,
which spends hundreds of millions on FE college capital budgets.
It is a nonsense for every FE college to design its extension
or its new college in a different way, just as it is for Building
Schools for the Future; just as it is for hospital trusts. It
is quite appropriate for government to have frameworks to prevent
people reinventing the wheel, but those frameworks are not consistently
applied across government. There has been more progress with frameworks
in central government than there has been with my final point,
which is local government. To be fair to central government, they
cannot require local government to co-operate in a particular
way, but they can encourage local government to adopt those frameworks.
That is particularly important to Britain's small businesses,
because Britain's small businesses are much more likely to procure
from a local council or a local hospital or a local school than
they are from a central government department. Until we crack
consistent procurement from local government, we will not be helping
the majority of Britain's businesses to take advantage of public
procurement and innovation.
Q446 MR
OATEN: I agree entirely with what
you have said, but the TUC was saying to us half an hour or so
ago that they wanted to see built into more of the tenders, more
of the procurement process, requirements that if a company is
going to bid they have to do more training; they have to demonstrate
that they have done a whole range of social policies. Are you
comfortable with that?
MR
CRIDLAND: In
part. I think we have accepted that, as part of appropriate use
of taxpayers' money, it is legitimate of government to request
people who wish to sell services to government to promote certain
broad, strategic government policies. Low carbon would be a very
good example, or innovation. I think that we have to be careful
when we are asking companies to do things that would get in the
way of effective business practice. To be fair, we have felt,
for example, that the Equality Bill falls the right side of that
line; that government has found a way of promoting equalities,
which is an important and legitimate public policy issue, within
procurement without stepping over the line. However, it is where
you draw the line. The TUC are right to say that European public
procurement directives do not prevent the inclusion of social
or environmental clauses. What we are looking for here is more
effective access to public procurement by small businesses and
more effective change in business practice on innovation, low
carbon, and treating the workforce fairly. We do not want to put
in the way, if I may use the word, "bureaucratic" requirements
which actually remove the incentive of small businesses for trying
to get public procurement. It is that dreadful word "balance",
therefore.
Q447 MISS
KIRKBRIDE: You mentioned earlier
that the so-called figures on training done by employers are not
fair, inasmuch as they are different forms of training, not all
of which gets documented. What do you think should be done on
the training agenda? Should more of it be compulsory on employers?
MR
CRIDLAND: There
are two things we urgently need with the training agenda. We need
it to become demand-led. The two customers in the market—the
individual employee and the employer who is often funding that
training—need to be able to buy what they want when they
want it. We have had a traditional system whereby the funding
has gone directly to colleges and the colleges have then predicted
and provided. The best of Britain's colleges can rise to that
challenge. The best of Britain's colleges do not need any help
from the CBI to run courses that small businesses want, at the
end of a shift, in the middle of a weekend, on the company's premises.
That is what I mean by a demand-led system. To be fair, they are
moving towards a demand-led system, but there is a way to go.
The second thing is that we need a radical simplification of training
initiatives. The alphabet soup of initiatives, which is something
that the independent Commission on Employment and Skills chaired
by Sir Michael Rake is looking at, is a complete off-put to most
businesses, large and small. The amount of public funding available
is often not worth the effort. If we want more companies to take
on apprentices, if we want more companies to train to Level 2,
Level 3 NVQs, to go that extra mile and give the person a qualification—which
may be important to the individual but is not necessarily critical
at a key moment in time to the business—we need to make
it easy for the company. At the moment we do not make it easy
for the company. The complexity of the system has led to more
companies internalising their training and saying, "I'm sorry,
Government, it's all too much of a fog". So demand-led and
radical simplicity, and then I think that we will bring the company
training agenda and the public training agenda back into alignment.
We have lost that.
Q448 MISS
KIRKBRIDE: Will that be enough,
if we did what you have just said, to make a radical difference
to our skills base in the next decade or so? Is that enough on
its own to ramp up the UK skill base in general?
MR
CRIDLAND: There
are a whole range of initiatives that we are involved in, which
go beyond that. We have fundamental problems with careers advice
and guidance, which comes back to some of the questions you asked
me about manufacturing and the importance of manufacturing, working
in small businesses rather than a big corporate bank. Young people
do not always appreciate the need to invest in their own future
and get the skills they need to develop their careers. I think
there is a huge need to find ways of incentivising individuals,
particularly adults who have never done anything since they left
school at 16, to invest in their future. We think that it is worth
having another crack at Individual Learning Accounts, putting
money into the hands of the middle-aged man who needs to re-skill,
to fill the last 20 years of his career. I know that had problems
when it was last piloted. I would therefore look at a whole range
of measure. Essentially, however, for every pound that the Government
spends on training, the private sector is spending at least ten.
It is right that the private sector should do that. This is not
an area the public taxpayer should subsidise. I think that it
is essentially a volunteer army, not a conscript army. I have
not seen any proposals for statutory intervention which, to me,
pass the test of motivating and incentivising rather than requiring.
I do not think that most businesses, large or small, need lessons
from any of us about the need for training. They know that, to
remain in business and to remain competitive, people are now so
vital to their industrial competitiveness and that, when somebody
in India or China can do that job at one-twentieth of the labour
cost, they will train. I do believe therefore that the measures
we have just discussed are the right ones to put more oil on the
cogs, but I do not think that we need to rebuild the engine.
Q449 MISS
KIRKBRIDE: What about STEM subjects?
What should be done with regard to getting more of those?
MR
CRIDLAND: STEM
subjects are absolutely vital to the high value-added economy.
It has been going wrong for 20 years. It has been going wrong
for many of the reasons I have said: the lack of careers advice
and guidance; the fact that we messed up the secondary education
curriculum. I think that dual-award science did not provide a
basis for those with scientific ability to do single-subject science
and end up being science graduates. We are now beginning to see
a turn-round in those figures. I give credit to the Government
and the higher education system and schools for the recent turn-round;
but we are turning round 20 years of decline, and so we have to
get more people into maths, physics, chemistry and biology. Extra
measures that we need? We believe that young people should be
automatically opted in to single-subject science at the age of
14, with the choice to opt out. They cannot be made to do the
subject. It is a bit like pensions: if you opt somebody in, the
inertia effect means that lots of people do the subject. At the
moment they have to make a conscious choice to do science subjects.
That will create a deal of flow that goes right the way through
sixth forms, universities and into industry and back into teaching.
We also believe that we should give bursaries to people to study
science subjects. We have to incentivise them to do so.
Q450 CHAIRMAN:
Bursaries at what level?
MR
CRIDLAND: Bursaries
at the undergraduate level.
Q451 CHAIRMAN:
And further education, FE?
MR
CRIDLAND: Yes,
potentially, particularly with foundation degrees, at further
education level too. Queen's University Belfast, over the last
year, has been paying an extra £1,000 bursary to people who
do science subjects. We think that this is necessary in the current
situation.
Q452 MISS
KIRKBRIDE: Who pays for that bursary?
MR
CRIDLAND: I
think that it is out of their own pocket. Ultimately there is
public funding involved, clearly, but it is not a government scheme
it is a university decision. There is still a problem, sadly,
with the quality of laboratories, teaching facilities, both in
schools and in colleges of further education. You cannot expect
people to get excited about STEM subjects if the facilities available
are out of date.
CHAIRMAN: I
am afraid that we are out of time. To be fair to the FSB we must
not go on any longer. May I express a personal pleasure that you
have highlighted careers education. You also used the phrase "creating
learner demand" in your evidence. I think that careers advice
is one of the crucial components of creating learner demand and
therefore in driving the system bottom-up and not top-down—which
is a much healthier way for a system to be driven. Thank you very
much indeed, Mr Cridland.
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