Written evidence from the UK Commission
for Employment and Skills
1. EXECUTIVE
SUMMARY
1.1 The role of the UK Commission for Employment
and Skills is to provide independent advice to the highest levels
of Government on the steps required to achieve world class standing
in employment and skills by 2020. In this regard we undertake
core labour market, research and policy analysis every year to
track progress in the skills and employment system and offer advice
about areas for improvements. We are committed to maximising UK
economic competitiveness and individual opportunity through world
class employment and skills.
1.2 There is clear evidence of significant gaps
and inequalities in productivity, employment and skills and overcome
inequalities that exist between and within different spatial areas
in England. Local Enterprise Partnerships (LEPs), if well designed
and implemented, could play a key role in helping to rebalance
the economy through the effective engagement of all local private
and public sector stakeholders in collaborative action on local
level economic development and targeted action to support sustainable
economic growth, job creation and the availability of a more highly
skilled workforce.
1.3 Whilst much has been written of inequalities
between the UK nations and English regions, the gaps and inequalities
within regions are significantly greater than those between them.
A critical early requirement will be to agree the appropriate
boundaries for effective local action—what might be called
the "functional area" of an LEP. Real economies and
labour markets are rarely regional (except perhaps in major conurbations
like Greater London) and are normally larger than single local
authorities. We offer some views on this.
1.4 Sustainable economic development depends
on ensuring that the skills of the labour market are matched to
the needs and future opportunities for economic growth offered
by existing and emerging industries. We therefore strongly recommend
that LEPs focus on enhancing both the demand for, and the supply
of, skills in the local economy; on driving up business ambition
and growth as well as ensuring that skills supply improves to
meet that demand.
1.5 We offer a strategic framework to inform
planning, drive action and assess progress on skills, employment
and economic growth, helping to guide and shape action that will
positively improve both demand for and supply of skills.
1.6 Local industries and businesses will
be key players in local economic development, both in driving
up local economic growth, and helping develop the workforce for
the future. Strong employer commitment, and thus genuine employer
engagement and authority, will be a critical requirement for successful
LEPs.
1.7 We welcome the opportunity to contribute
to the Select Committee enquiry into the role and operation of
Local Enterprise Partnerships and set our evidence and recommendations
below.
2. DEFINING THE
CHALLENGE
The evidence—the need for local action
2.1 One of Government's overriding goals
is to stimulate sustainable economic growth and prosperity. Prosperity
ultimately depends on how many people are in work (employment
rate) and the value that they produce when in work (productivity
rate). This is true for national economies and local economies
alike. Improving the skills base of the economy plays a crucial
role in boosting productivity, employment and international competitiveness
and exploiting new opportunities in high value-added activities.
The key policy interest in raising skill levels therefore does
not lie in the intrinsic value of skills themselves, but because
skills have a crucial role in (i) raising employment and productivity
and (ii) in addressing inequalities in society. In the future
we need to prepare for a renewed economy and develop a talented
workforce equipped with the skills a successful economy needs
to grow and prosper.
2.2 The UK Commission holds a wealth of evidence
detailing the employment, skills and productivity differences
which persist sub-nationally and which highlight inequalities
between different localities and social groups. Poverty and income
inequality prevails across the whole UK and there are substantial
variations in employment, skills and productivity at community,
sub-regional and regional levels. And in too many cases, the gaps
between north and south, between communities, cities and regions
are diverging rather than converging. Annex 1 shows the top ten
and bottom ten productivity, employment and skill areas in England.
2.3 Most striking in each category is the
gap between the top and bottom. For instance, more than half of
people in Inner London—West (53%) have at least a Level
4 qualification versus around one in seven of those from Stoke-on
Trent (14.5%). Just 6% of those in Oxfordshire have no qualifications,
rising to almost one-quarter of those from Stoke-on-Trent (23.4%).
2.4 The table in Annex 1 also demonstrates
a concentration of areas at the extremes of each category, showing
a tendency for areas to appear in more than one top or bottom
10 grouping. For example, Oxfordshire is present in all four of
the top ten categories, while Inner London—West is present
in three of them. In contrast, East Merseyside appears in all
four of the bottom ten categories, while Stoke-on-Trent, Blackpool,
Liverpool and Blackburn with Darwen all appear in two.
2.5 The complex challenges we face, and
which LEPs could help to address, are not only raising productivity,
employment and skills at the UK level, but also simultaneously
narrowing the gaps between different social groups and communities
to reduce inequity and strengthen social cohesion. This needs
a shared responsibility for investment and support from employers,
individuals, and communities, as well as central government, to
transform local opportunity.
The approach to localism
2.6 In the light of this evidence, the UK
Commission has, in our policy advice[104]
over the last year to the UK governments, been making a strong
case for local responsibility and action for economic development
and skills.[105]
Most economies and labour markets are local, operating at the
level of major towns or cities and in some cases city regions;
tackling the challenges we outline above will require creating
a strong multi-stakeholder Local Enterprise Partnership that can
deliver effective and appropriate local action within the context
of national industrial and economic policy.
2.7 A critical first requirement for any
LEP will therefore be to be clear about the geography of defining
its area of functional responsibility. Each LEP should cover an
area that can be plausibly demonstrated to an inter-connected
economy and labour market with local coherence and integrity.
An LEP's functional area could constitute a region, economic,
or labour market area, a city or city region, significant urban
conurbation or other bounded locality where economic growth and
skills can best be delivered.[106]
It is important, however, that such a functional area is substantial
enough to be able to act across both skills supply and demand
and consider links with broader industrial and employment policy
areas.
2.8 In order to help shape the efficacy
of LEPs, the UK Commission is currently engaged with on-going
research and analysis in this area, including two projects with
the Local Employment and Economic Development Directorate in the
Organisation for Economic Co-operation and Development (OECD)
which are investigating, and which we will be pleased to share
with the Committee when complete:
— the engagement patterns of smaller employers
in learning and what role there is for policy instruments to encourage
continuous development and more optimum levels of learning at
the local level; and
— the means to upgrade the demand for labour
and skills within local economies and by so doing to raise competitiveness
and the quality of work locally.
3. THE ROLE
OF LOCAL
ENTERPRISE PARTNERSHIPS
ON SKILLS
3.1 We outline below the types of role we
LEPs should undertake if they are to be effective in coordinating
the development of labour force skills for local economic development.
3.2 Above all else, the functions of LEPs
should seek to support the operation an effective and sustainable
market for skills. The current system is a mixture of both a market
led approach (through the choices employers and individuals make
directly on purchasing training, skill development or employment
services) and a more "planning-led" approach (where
employers and other interest groups are invited to voice their
needs to central government agencies with a view to influencing
the system and the way public money is spent).
3.3 The UK Commission believes that local
economies should be driven by the demands of individuals and employers
(ie customer choices) and should trust providers to respond to
labour market needs informed by timely high quality intelligence.
In short, the best way to empower employers is to create a truly
demand-led skills system that responds to their needs as businesses
and creators of local employment. We discuss these factors in
more detail below. Emerging coalition government policy clearly
supports a more community-focused and market driven skills system,
and LEPs can thus play a key role in supporting the effective
operation of that local market.
3.4 We believe LEPs can achieves this by
two broad approaches:
— Providing effective strategic leadership
at the local level on economic and employment growth, and skills
development.
— Enabling and nudging employers, individuals
and learning providers to work more effectively together to improve
business performance and employment growth through the effective
enhancement and deployment of skills.
STRATEGIC LEADERSHIP/ADVISORY
ROLE
3.5 This strategic/advisory role for LEPs
is seen to be crucial for three key reasons: coordination and
collaboration of partners, developing local intelligence and ensuring
a holistic approach.
3.6 Coordination and collaboration of
partners. The added value of LEPs will be in their ability
to bring together key players, and hence experts, operating in
the local area, in the public, private and voluntary and third
sectors, together. They will create a unique and vital opportunity
for government departments, local authorities, business leaders
and educational institutions, working collaboratively, to review
and take an overview of the challenges locally, reflect on key
local developments and opportunities, identify what barriers might
exist and how they can offer support and add value, working through
the local infrastructure. It is not about substituting or competing
with existing local services but facilitating integrated and collaborative
actions and/or decisions locally. By so doing, they seek to help
all stakeholders work together on their common goal of enhancing
local economic development.
3.7 LEPs should work within the existing
structures and local architecture to add value by coordinating
local all key actors, and their roles in this regard could include:
— Offering a strategic overview and coordination
of initiatives amongst local actors.
— Promoting the importance of skills and
workforce development.
— Fostering entrepreneurship and innovation
locally.
— Galvanising interest, support and commitment
amongst important local leaders.
— Helping to overcome fragmentation in
local jurisdictions, facilitate collaborative efforts to overcome
barriers, and optimise local service delivery so that it gets
to the customers who need it most.
— Providing coherence with other local
strategies (planning, housing, transport, education etc).
3.8 Intelligence role. To facilitate
their collaboration and coordination role, LEPs need to have a
sound understanding and timely analysis of current needs in the
local labour market, and industry-informed scenarios of potential
future opportunities, challenges and needs.
3.9 All labour markets are complex and dynamic,
and the centrally controlled mechanisms for the adaptation of
supply can often be slow and out of touch with local needs. Therefore,
local economies should be driven by individuals, employers and
education and training providers taking decisions related to emerging
local demand, not by the central planning of the skills or jobs
needed (now and in the future). This requires that the decisions
of local actors are well informed, and based on robust and accurate
labour market information (LMI) and assessments.
3.10 It is important to consider who will
be responsible for Labour Market Information at LEP level (previously
this was undertaken by the Regional Development Agencies). Further
consideration needs to be given to the fact that currently, common
LMI collection disagreggates data according to regions and local
authorities. This may have significant implications for LEPs whose
appropriate functional may not neatly coincide with current regional
or local authority boundaries.
3.11 History would suggest that, left to
their own devices, local agencies tend to conduct their own research
and analysis in different ways, leading to differences in understanding
of local labour markets and processing of LMI; costly and ineffective
undertaking or commissioning of research; and data which is incompatible,
making comparisons between areas invalid.
3.12 The UK Commission already manages the
collection of key LMI at the national level, and coordinates the
work of SSCs to ensure such data reflects real and emerging industry
trends:
— Information for local areas is gathered
centrally, analysed on a common basis and made available to those
local areas. The UK Commission's Almanac is an example of this.[107]
— Guidance is generated on collecting comparable
and common LMI, for example as per the LMI Common Framework for
Sector Skills Councils, developed by the UK Commission.
3.13 The Commission will work with ONS and
relevant government departments to ensure that centrally collected
data can be disaggregated and matched to the emerging functional
areas of new LEPs as quickly as possible, and will work closely
with LEPs to help maximise their use of data to drive the local
skills market.[108]
3.14 A holistic approach to the employment
and skills agenda. In our Ambition 2020 assessment, the UK
Commission has argued that the UK must seek to address both employer
ambition, innovation, leadership and demand for skills alongside
work to transform the relevance and mix of skills supply to better
match that demand. Driving both demand and supply concurrently
requires different approaches delivered in a coordinated way,
and we have set out in Annex 2 a strategic framework that we believe
sets out the key elements of supply and demand which can be the
focus of LEP work (in the context of national economic and industrial
policy. Matching demand with supply will help address productivity,
employment and inequality; mismatches can cause skills shortages
and gaps, over-qualification and under-utilisation of skills,
unemployment and an over-dependence on migration.
Enabling/Nudging role
3.15 LEPs should have a strategic enabling
role too. Whilst, in our view, they should not be planners, they
can and should be "nudgers", supporting and enhancing
local services and encouraging certain actions. For instance,
well presented, strategic advice supported with high quality economic
and labour market intelligence can play a valuable role, by providing
insights on how well markets are working, where developments are
taking place, how demand and supply trends are evolving and where
they are well aligned or not. This can encourage individuals and
employers to act in certain ways. As a recent European Commission
report noted, "The assessment and anticipation of skills
and labour market needs is seen as a key instrument for the efficient
functioning of labour markets and the mobility of labour within
the EU".[109]
Importantly we do not anticipate that LEPs will directly control
significant funding.
3.16 Again, LEPs should not to duplicate
the roles of other bodies or local actors. They should work within
the existing structures and local architecture to add value, such
as:
— Monitoring overall trends and developments
in the local economy and progress.
— Presenting and disseminating labour market
intelligence and giving advice.
— Providing advocacy for employer investment
in skills.
— Providing an effective employer voice
and facilitating business ambassadors.
— Facilitating employer networks and local
partnerships to stimulate growth.[110]
4. DESIGN PRINCIPLES
4.1 Whilst we do not attempt any prescription
as to what specifically the formal structures, remit and governance
arrangements of LEPs should be, in this section we set out some
key design principles which we firmly believe should form their
foundations. Our propositions draw on our own evidence and experience;
lessons learned by the National Employment Panel which set up
a network of Employer Coalitions[111]
(city level boards of business people working with the system
to improve it); and OECD work reviewing the role of development
agencies.
(a) Decentralised
4.2 Engaging key local businesses and a
broad coalition of other local stakeholders is an essential step
in decentralisation and will enable better coordination of resources
and agencies locally and the creation of more seamless opportunities
and initiatives that are truly responsive to local need.
(b) The whole system should be market
driven
4.3 The fundamental role of LEPs should
be ensuring that the system locally operates effectively through
employers, individuals, institutions and providers making more
informed decisions. Accurate and timely intelligence acts as a
signal to local actors, empowering them. This also requires that
local institutions and providers engaged in the work of the LEP,
and are held accountable and then trusted to get provision right.
(c) Employers should have a strong
leadership role in LEPs
4.4 Business is a key player in local economic
development. It is essential that business sees skills as vital
to achieving economic growth and long-term competiveness and makes
a sustainable investment. It is therefore imperative that LEPs
achieve robust and constructive relationships between their public
and private partners and that strong links are made with business
groups in the locality. The National Employment Panel reported
that engaged and empowered employers will bring the following
benefits:
— Strategic and operational know-how.
— Ability to challenge poor performance.
— Influence in the wider business community.
— They can affectively articulate the business
case for equality.
(d) Held accountable for producing
outcomes, not for operating processes.
4.5 Ensuring local actors have the flexibility
they need to contribute to local circumstances and needs, means
that any central agenda setting or oversight cannot be prescriptive.
This will require a focus on outcomes rather than process.
5. HOW SHOULD
LOCAL ENTERPRISE
PARTNERSHIPS BE
SET UP?
5.1 We perceive a number of issues to consider
in the establishment of LEPs:
(a) Purpose and mission
5.2 While it makes sense for the specific
aims and objectives of LEPs to be articulated locally to ensure
they align with and benefit their area, a clearly understood and
shared mission and rationale remain essential. Central to this
is clearly articulating the business and public sector input into
LEPs.
(b) Determining the "functional
area" for the LEP, and its leadership
5.3 We discussed some aspects of how the
"functional area" of a LEP might be determined in paragraph
2.7 above—the OECD argues for a region, economic, or labour
market area, a city or city region, significant conurbation or
other localities where skills can best be delivered.[112]
It is important, however, that such a functional area is substantial
enough to be able to act across both skills supply and demand
and consider links with broader industrial and employment policy
areas. A potential risk that must be avoided is that some areas
of low population and employment, such as rural areas, fall into
a "policy gap" and are ineffective or given a lower
priority.
5.4 Stakeholders will also need to agree
how the LEP established, structured and led will be led, with
the respective roles of local authorities, employers, learning
providers and the voluntary sector clearly defined and understood.
(c) A clear and agreed remit avoid
a mismatch of expectations amongst partners
5.5 In previous partnership structures,
the "deal" that employers have signed up to has been
ambiguous or misleading. Talk of "employer leadership",
"employer voice" and a "demand led system"
has not always translated into employers having any real influence.
This needs to be avoided as set out above.
(d) Achieving a degree of policy stability
5.6 LEPs should be designed to exist for
a significant period of time. Changes to structures every three
to four years have meant that there has been too much "down
time" while new bodies are established. When LEPs are introduced
flexibility should be built in so that they can adapt to new policies
or economic circumstances and do not have to be replaced with
new arrangements every few years. This would significantly increase
their impact and result in cost savings. The OECD has set out
realistic timeframes for sustainable impact over five to 15 years.
(e) Utilising sectoral and spatial
dimensions of economic development
5.7 It will be important to strike a genuine
balance between sectoral and spatial approaches, and engage effectively
with the key sectors and industries at the local level. The work
of Sector Skills Councils in helping anticipate industrial change
and shape standards, Apprenticeships and provision (eg through
National Skills Academies) must be understood and embraced. LEPs
should avoid duplicating activities of other organisations but
seek to capture and utilise that expertise for local benefit.
(f) Governance and accountability
5.8 Typically, such local economic development
structures are not statutorily mandated. Whilst worthwhile, partnership
working does present a range of governance issues, from concerns
about accountability and democratic deficits to conflicting priorities
and power relationships. For LEPs good governance arrangements
should apply. In addition, specific attention needs to given to
establishing accountabilities, for management and for operational
issues and for probity (particularly given their potential role
in influencing the allocation of public resources).
16 August 2010
Annex 1
GVAx* |
|
Employment |
|
Low Skill
(% with no qualifications) |
|
High Skill
(% with Level 4 + qualifications) |
|
| BEST PERFORMING AREAS
| | | |
| | |
Inner London—West | 507.1
| North and North East Somerset, South Gloucestershire
| 81.7 | Oxfordshire | 5.8
| Inner London—West | 53.4
|
| Inner London—East | 157.6
| Suffolk | 81.0 | North and North East Somerset, South Gloucestershire
| 6.1 | Brighton and Hove |
40.3 |
| Berkshire | 155.2 | Oxfordshire
| 80.9 | York | 6.8
| Inner London—East | 40.2
|
| Swindon | 150.9 | West Sussex
| 80.8 | South Nottinghamshire
| 7.2 | Surrey | 39.9
|
| Milton Keynes | 145.9 | South and West Derbyshire
| 80.7 | Surrey | 7.2
| Cambridgeshire | 38.2 |
| Peterborough | 135.2 | Hampshire
| 80.6 | Wiltshire | 7.2
| South Nottinghamshire | 37.3
|
| City of Bristol | 133.7 | North Yorkshire
| 80.5 | Inner London—West
| 7.5 | Oxfordshire | 36.3
|
| Nottingham | 130.9 | Bedfordshire CC
| 80.3 | Cambridgeshire | 7.6
| York | 36.2 |
| Oxfordshire | 121.3 | Surrey
| 80.3 | Gloucestershire | 7.6
| Outer London—West and North West |
36.2 |
| Surrey | 120.8 | Somerset
| 80.3 | Berkshire | 7.8
| Outer London—South | 35.9
|
WORST PERFORMING AREAS
| | | |
| | |
Greater Manchester North | 65.9
| Walsall and Wolverhampton | 66.6
| City of Kingston upon Hull | 18.2
| Barnsley, Doncaster and Rotherham | 19.6
|
| East Riding of Yorkshire | 65.4
| Inner London—East | 66.4
| Blackburn with Darwen | 18.7
| North Nottinghamshire | 19.5
|
| Isle of Wight | 65.4 | East Merseyside
| 66.0 | Liverpool | 19.5
| Walsall and Wolverhampton | 19.5
|
| East Merseyside | 63.2 | Blackburn with Darwen
| 65.8 | Thurrock | 19.8
| North and North East Lincolnshire | 18.8
|
| Torbay | 62.7 | South Teesside
| 65.1 | Blackpool | 19.9
| Peterborough | 18.8 |
| Northumberland | 62.2 | Nottingham
| 64.8 | Birmingham | 20.7
| Luton | 18.7 |
| Blackpool | 62.1 | Leicester
| 62.8 | East Merseyside | 21.1
| East Merseyside | 18.1 |
| Durham CC | 60.8 | City of Kingston upon Hull
| 62.2 | Leicester | 22.3
| Thurrock | 16.8 |
| Sefton | 60.2 | Birmingham
| 61.5 | Walsall and Wolverhampton
| 23.3 | City of Kingston upon Hull
| 14.8 |
| Wirral | 56.4 | Liverpool
| 60.5 | Stoke-on-Trent | 23.4
| Stoke-on-Trent | 14.5 |
* Gross Value Added—the difference between the value
of the output produced by a sector or region and its intermediate
consumption. Intermediate consumption is the cost of raw materials
and other inputs that are used in the production process
Annex 2
A FRAMEWORK FOR POLICY DEVELOPMENT
Chart 9.1
UK COMMISSION FOR EMPLOYMENT AND SKILLS, AMBITION 2020,
2009 REPORT
The framework provides a conceptual "map" of the
key dimensions of the skills and employment agenda. There are
four inter-locking components of the framework.
First, the ultimate goals we seek to achieve, illustrated
at the top of the chart. Economic performance is driven by high
levels of productivity and employment and the ensuring prosperity
needs to be widely shared.
Second, the demand side (the right hand side of the diagram).
To reach these goals, we need and economy, and more employers
in more sectors and in more places, with business strategies that
seek to thrive on quality, value added, on innovation and on the
skills of their people. The jobs needed in such an economy will
be more highly skilled.
Third, the supply side (the left hand side of the diagram).
It is necessary to raise the skill levels of the workforce in
order to ensure that the economy and labour market get the skills
they need to sustain economic progress and that workers get the
jobs they want.
Fourth, (the centre of the diagram) job mismatches between
demand and supply, between the workforce required and the potential
workforce, between the skills we need and the skills we've got,
must be reduced to a minimum to enable businesses to get the workforce
they require to be successful and that workers are neither unemployed
or underemployed. Alignment and synergy between these components
of policy is crucial to maximise effectiveness and impact.
104
The UK Commission for Employment and Skills, Towards Ambition
2020: skills, Jobs, Growth, Expert Advice from the UK Commission
for Employment and Skills, October 2009. Back
105
Based on our research and evidence base, particularly, Anne Greene's
Geography Matter, UKCES Praxis paper which discusses (i) why "place"
matters and highlighted the importance of geography for individuals'
employment prospects and (ii) employment prospects and (ii) of
history in understanding the current and future fortunes of places
and thus (iii) the importance of the "localisation"
in policy interventions. Back
106
G Clark, J Huxley, D Mountford (2010) Organising Economic Development:
the role of development agencies and companies, OECD programme
on Local Economic and Employment Development. Back
107
The UK Commission for Employment and Skills online Almanac: https://almanac09.ukces.org.uk/default.aspx Back
108
The UK Commission for Employment and Skills (2009) Information
to Intelligence, A Common LMI Framework for Sector Skills Councils. Back
109
European Commission (2008) New Skills for New Jobs: Anticipating
and Matching Labour Market and Skills Needs, Commission Staff
Working Document, December 2008, Brussels. Back
110
For a discussion of the sorts of policy levers that LEPs might
deploy, see the A2020 report summary and supporting material. Back
111
C Stratton (2008) Leading Change, Changing Lives, National Employment
Panel. Back
112
G Clark, J Huxley, D Mountford (2010) Organising Economic Development:
the role of development agencies and companies, OECD programme
on Local Economic and Employment Development. Back
| 
