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Lord Lea of Crondall: My Lords, before the noble Baroness sits down, perhaps I may clarify something she said. It may be relevant to the debate. Is it not appropriate to do so?

Lord Davies of Oldham: My Lords, it is a timed debate. There is a list of speakers.

4.58 p.m.

Baroness Gibson of Market Rasen: My Lords, I thank the noble Lord, Lord Dearing, for initiating the debate. Perhaps I may mention in particular how pleased I am that he spoke about the challenges from France and Germany. That is pertinent to my contribution.

I want to give a flavour of the 15th report from Sub-Committee F of the Select Committee on the European Union of which I am a member. The report is called Working in Europe: Access for all. Sub-Committee F covers social affairs, education and home affairs and is ably chaired by the noble Baroness, Lady Harris of Richmond. The report's findings have implications for government resources. One of the European Community's key objectives is the abolition of obstacles to freedom of movement of workers between member states. Free movement within the Union is a right of EU citizens, added by the Maastricht Treaty and reiterated in the Charter of Fundamental Rights of the European Union.

While some steps have been taken to secure the free movement of workers, there is no doubt that barriers remain which inhibit the mobility of movement; and it is upon those that Sub-Committee F commented. The Commission has said clearly in the past that it aims to ensure that European labour markets are efficient, open and accessible to all and to deliver full employment in a dynamic, competitive, knowledge-based economy. It was against that background, therefore, that Sub-Committee F carried out its deliberations.

During the course of our studies, we looked at the level of easy access to employment—what is described as geographical mobility—in the EU, examining this against other elements of a flexible labour market. We examined the perceived barriers to geographical mobility and considered movement between jobs—occupational mobility—in depth. We considered the need to improve people's level of basic skills, the provision of life-long learning and the recognition of both informal and non-formal learning. We considered also the availability of information open to those who wish to be mobile.

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As we hope that the report will be discussed at length in this Chamber at a future date, I shall concentrate my remarks on only two of the findings and recommendations of this wide-ranging report. The first crucial finding was that 20 per cent—one in five—of UK workers lack the basic education to compete in the rapidly changing European labour market. That is a devastating figure. It is therefore vital that the Government place emphasis on life-long learning if such workers are to survive in the modern labour market. There must be free access not only to basic skills but to other forms of help for all our people, irrespective of age.

If the UK workforce is to compete with others in Europe, the Government's priorities must be: to ensure that all workers have basic skills, and that all are able to improve the skills that they have gained; to ensure further progress on national recognition of qualifications between states; and to ensure a concentration on language skills. In that context, the lack of language skills caused the sub-committee a great deal of concern, which resulted in a call by the committee for a development of the national curriculum so that the first foreign language can be taught in our schools to all pupils from the age of eight at the latest.

I now turn to the second finding to which I wish to draw your Lordships' attention. It is the lack of any systematic data on individual perceptions and experiences of geographical mobility. We do not know to what extent the geographical mobility of workforces in the EU is artificially restricted by barriers. There are no data on which we can rely to find this out. Witness after witness reporting to the sub-committee—from a wide range of national and international organisations—admitted that that was the case.

We know that for some the barrier is the lack of education and skills; for others, it may be a question of housing, or of their children's schooling; or it may be the difficulty that partners experience in getting a job in a new country. We know that all these are factors; but we do not know which are the most important. Unless we can gain more information in this crucial area, we cannot hope to overcome these barriers.

I conclude, therefore, by asking my noble friend questions on two points pertinent to our findings. First, will she share with the House the Government's latest thinking on the teaching of foreign languages in schools and in particular at what age the Government encourage such teaching to start? Secondly, bearing in mind that policy continues to be drafted and negotiated despite the absence of significant statistical information in this area, do the Government have plans to rectify that for the future?

5.4 p.m.

Lord Browne of Madingley: My Lords, I am indebted to the noble Lord, Lord Dearing, for initiating this debate. This is an important subject.

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I shall concentrate on universities. My direct knowledge is of Cambridge and of Stanford in the United States, but I speak as the chief executive of a company which employs more than 50,000 graduates world-wide.

From that perspective, no one can doubt the value of a university education for individuals in developing not just professional skills but also the ability to learn, to question and to develop ideas in co-operation with others. Equally, no one can doubt the economic value of universities. America's strength in the world now owes an enormous amount to sustained investment in higher education. As the work of Richard Levin at Yale and others has shown, the best universities have created new industries and have driven improvements in human capital and productivity. The investment that we make now in our universities and the way in which that investment is directed will shape the fortunes of this country for decades to come.

Globalisation has brought competition—for the best brains and for the research funding which follows quality. British universities have many strengths, but we are slipping behind in ways which, if not corrected, will damage our long-term economic prospects.

The level of funding for universities here is well below that of the best universities in the world, perhaps by a factor of four. Additional funding is needed, but that is not sufficient. Existing and new money should be invested in accordance with four simple principles.

First, we must invest in focus and merit. We have to devote a greater proportion of any available funding to world-leading research, because in the end the most powerful research is work which extends human knowledge. So we need a wider scale of assessment, and one which recognises that the most creative research often comes from co-operation across disciplinary boundaries. The current assessment system does not differentiate sufficiently between the adequate and the best, particularly when almost half of all research is rated as five or five star.

With merit will come differentiation. That is the second principle. Institutions need to be able to define their own missions. Research is not the only function of universities. The quality of teaching must also be enhanced if the expansion of access is to be worth while. As education becomes a global activity, the proven ability to teach will be an immense source of competitive advantage for British institutions. In the end, that ability can be judged only by the users, and I strongly support the introduction of open and published assessments by students.

The third principle is proper funding. If we are asking universities to undertake world-leading research, or to teach an ever growing number of students, each task should be properly funded. If, as many argue, funding should follow the student, and the research teams, their budgets should cover the costs of maintaining the university as an institution. The backlog of capital spending should also be met.

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Funding should recognise the need to reward the best academics at world-class levels—openly—as a signal to others to pursue academic careers.

The fourth principle is governance—which underpins everything else. If universities themselves are asking for the right to increase fees and if they are accepting the responsibility that goes with that—to ensure that access is available on the basis of merit rather than the ability to pay—governance is essential. Opaque and antique systems will not produce the necessary trust.

We have to apply to universities the basic principles of governance—external oversight; clarity of roles and responsibilities; accountability against defined objectives; and professional management. The four principles of focus, differentiation, proper funding and good governance are all important and inextricably linked. If they can be achieved, we can change the competitive order.

The ranking of universities across the world is not immutable. The ranking of the top universities in the United States changes all the time. In this country over the past 20 years we have seen the rise of highly successful universities such as Warwick, which did not exist about 40 years ago. Like the noble Lord, Lord Dearing, I believe that in the next 20 years we shall see the development of the great universities of China and other countries to a global level. The international movement of academics and students will become the norm.

We can compete and we can lead in research on focused areas of expertise and in teaching. However, to compete we must change. We have to increase funding, but we must also use that funding with greater care. These decisions will shape where we stand in that competitive race and they will shape our future as a nation.

5.11 p.m.

Baroness Howe of Idlicote: My Lords, I, too, join in heaping paeans of praise on the head of my noble friend Lord Dearing for raising this subject at this time. One thing is crystal clear from the debate. Despite the Budget's tax increases, there is unlikely to be enough public money to meet all the Government's—and your Lordships'—ambitious plans for education. However, resources can imply more than financial funding. I shall explore the potential of other resources that could also be mobilised.

I congratulate the Government on the priority given to education and, despite criticisms, on some achievements. They have rightly put more emphasis on and provided more money for nursery education and the recruitment and training of teachers, although still not enough. Nor is sufficient given for salaries.

The Government have also emphasised the need to attract more young people into higher and further education. I agree with everything that has been said about the need on the further education side, particularly for those from deprived backgrounds. However, concern is growing as to whether the

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resources deployed are delivering value for money. The Government should note two recurring criticisms: of the bureaucratic workload being imposed on those at the grass roots by the constant changes, and of the Government's reluctance to delegate sufficiently to where the action takes place.

Like others, I feel a particular concern about universities. I declare an interest as vice-chairman of the Open University council and a governor of the LSE. We still await the results of the Government's inquiry into student financing, but ahead of that we know that students, especially those from deprived backgrounds, are increasingly concerned about their mounting debts. Another major concern that we have heard a lot about today is that university salaries are down comparatively, as the noble Lord, Lord Moser, stressed. They are far higher in other countries, particularly the United States. Scarce UK teaching and research talent is inevitably being attracted overseas.

To their considerable credit, many UK universities have responded by becoming increasingly entrepreneurial. Partnerships with other universities and with businesses are helping to provide extra resources in efforts to keep standards high. However, universities still need greater freedom to innovate. I agree entirely with the points stressed by my noble friend Lord Browne on that issue.

Has not the time come for a different approach to the funding of higher education? Should we consider something more akin to what happens in the US, perhaps involving a voucher system? Such a system has the advantage of being firmly student-centred and gives each qualified individual a basic funded voucher providing an entitlement at some stage in life to a university education. Universities would compete for students, with fewer restrictions on the numbers they could take in. They might also be allowed greater freedom to charge more for some degree courses than for others. Such a system would mean less hands-on involvement by government and the HEFCE in the affairs of universities. It would also allow universities greater freedom to raise and spend extra resources.

The Government should retain the power to set the parameters for what they believe is important. For example, they could raise the value of a voucher for a shortage subject or double its value for students from a deprived background.

Several recent debates in your Lordships' House have focused on deprived communities and the importance of spending more money on the children most at risk in the early stages of their lives in school and pre-school. The aim is that, among other benefits to society, that focus might head off at least some of the escalating cost of the grizzly alternative if they reach prison. That raises the question of identifying children at risk early enough to begin helping them and supporting their families. My experience is that teachers, social workers and the police at grass roots know exactly where early intervention is needed. I am glad to commend the Government's plans to spend more money in that area, but is the joined-up thinking

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mentioned by the noble Baroness, Lady Walmsley, yet in place in anything like the relevant number of local authorities?

As well as that, we need far greater involvement by the whole community in tackling the problem, whether by personal voluntary efforts or local businesses and employers providing support financially and through employee secondment. I heard recently of the excellent partnership initiative between London First and the Metropolitan Police.

Alas, there are growing concerns that as a society we are becoming less concerned individually to help our fellow citizens. Thankfully, there are exceptions. To their great credit, many schools and universities are playing a practical role in helping to raise the aspirations and self-esteem of the young in deprived areas. Surely it is far better to motivate talented deprived young people from an early age and, by such mentoring, enable them to qualify for university in the normal way rather than asking universities to accept them with lower qualifications, as suggested recently by one Minister.

Citizenship will become a compulsory curriculum subject in September. In a Written Answer, the Minister told me that community involvement is to be included. Following that, should we not aim to encourage everyone to contribute a period of voluntary social work to the community? That way, the habit—and the benefit to each one of us—of helping others would, one hopes, remain an active ingredient for the rest of our lives.

Whatever the merits of that idea, surely we all need to be more aware that early intervention for those most at risk can have positive results for the local community as well as nationally. A reduction in crime is one obvious and very important objective, as is the unblocking of much needed skills and abilities, which the noble Lord, Lord Dearing, was talking about, for the cultural and economic benefit of us all. A far more fulfilling life would ensue for the young whose talents would be successfully developed and steered in a more socially desirable direction.

I hope that those are some ways in which we can make more effective use of the human resources already available. I also back the many calls that we have heard for a greater percentage of GDP to be devoted to this most vital of all our investments in this country's future.

5.19 p.m.

Lord Layard: My Lords, I, too, thank the noble Lord, Lord Dearing. Like some others, I shall focus on research in universities. I begin by contrasting what we say with what we do. We say, as we certainly should, that the knowledge economy is crucial. New knowledge is the main source of human progress. Moreover, there is an extraordinary rate of return from research, averaging 50 per cent per annum in the private sector and probably even more in the university sector. It is a very important sphere, to which we pay our respects.

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In contrast, what do we do? Where are British universities in the league of the world's great research universities? As we all know, they are not where they were. The tragic fact is that all the world's top research universities—all of them—are in the United States. The world's leadership in both science and ideas is on the other side of the Atlantic, which is a deeply unhealthy situation. The only consolation for Britain is that we are better than the rest of Europe.

How did that happen? The cause was simply money and, above all, salaries. Noble Lords have quoted some facts; I shall quote one more. In 1999, the average full professor at Oxbridge and the top London colleges earned £50,000 annually. That is the same as the salary for a grade 7 Whitehall civil servant—or what used to be called a principal, although I shall use grades rather than the old terms used by the noble Lord, Lord Moser. Comparisons with the City would be infinitely more extreme. By comparison, the American universities have adjusted. The top seven American universities pay roughly double what is paid—at both junior and senior levels—by our top five or so universities. The effect on quality has been both predictable and inevitable.

I should declare an interest: I work at the London School of Economics. Although we are generally considered the best economics department, in the past 20 years we have been able to recruit only three suitable British candidates when trying to fill 40 permanent lecturer appointments. More recently, I offered a job to an idealistic young researcher who wanted to come and work with us, and I thought that he had accepted. However, he felt that he should consult four of his friends whom he considered more academic than him although not working in academia. My friend asked why they were not, and they all gave the same reply: "Don't you know that in Britain there is no future in academia?". That is a formula for national decline.

Britain is passing up a tremendous opportunity to lead Europe in building up this continent's intellectual capital. It is not too late, but our top universities are the key in this effort. There are three reasons why we should focus on the top universities. First, they give the best value for money in research, as shown by careful analysis of research output conducted by Jonathan Adams. The research shows that, compared with other departments, five-star departments produce double the research output for every pound of research funding. I believe that that justifies a highly selective approach.

Secondly, top universities are crucial for training the profession. In Britain, almost two thirds of the articles in economics, for example, are written by former PhD students from only three universities—Oxford, Cambridge and the LSE. Thirdly, I believe that the top universities are crucial to the prestige and drawing power of the whole of the profession. In living memory, however, that prestige has never been as low as it is now.

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What can be done? We have to decide first whether we want top research universities in Britain. If we do, we shall have to give them more money. As the noble Lord, Lord Browne, said, income per student in our top universities, excluding research grants, is one quarter that in the top American schools. There is simply no way in which they can compete effectively. The higher education funding councils have to be given extra money to fund the top of the system. I add parenthetically that that must be done through the funding councils rather than the research councils because it is the former that fund the salaries of the leading researchers.

I therefore propose the following. We should aim to increase funding from one quarter of the US level to one third. Although we probably could not do that, for the reasons already given, for every five-star department, we could group departments into about six faculties and then identify the best-performing universities within each faculty area. It would cost about £200 million to identify the best four, for example, and increase their income by one third. Those are the types of figures that we should be considering if we want to restore our intellectual leadership in the world. It is a smallish price to pay for enabling our country to compete effectively in the world's knowledge industry.

There are of course other claims on resources. I spend much more time thinking about and working on the problems of young people who never go to university than I do on those who do go. Much has rightly been said about that issue. However, as has also been said, our universities are living on borrowed time. The truly extraordinary fact is that since 1970—a period of 30 years—real salaries in universities have barely increased. Contrast that with what has happened in the competitive professions in the rest of the country. I have asked, but no one can think of any other occupation that has been similarly treated. We shall be practising a collective hypocrisy if we continue to praise the knowledge economy while continuing to treat our knowledge workers in such a manner. The key question is this. What do I say to the next young person who asks me whether there is indeed a future in academia?

5.27 p.m.

Lord Northbourne: My Lords, I thank the noble Lord, Lord Dearing, for initiating this debate and congratulate him on introducing it so lucidly. I shall, however, take a slightly different line. Education is not just about what happens in schools and universities. Of course properly funded schools and good, well-trained teachers are important, but so is the education, in the widest sense, that a child acquires outside school. So—most importantly of all—is the preparation of a child's mind before it goes to school.

We must not ignore the role of parents. A child in full-time education today spends about 27 per cent of its time in school. In other words, it spends about three-quarters of its waking hours outside school, the expenditure of that time—probably and hopefully—being influenced by its parents. The role of parents is

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of course even more important for pre-school children. The Government are doing a lot for pre-school education, but much more help is needed for parents in relation to the other three-quarters of the child's time, or rather more in the case of pre-school education when the child is not in school.

I should like to speak of an even less well known problem—the educational development of children from birth to three years old. Let no one imagine that this is not an important issue or an important period in a child's life and education: it is the time when the brain is being formed. Recent research made possible by new deep scanning has given neurologists a much clearer understanding of the early development of the child's brain. At birth, on average, a child has 100 billion neurons—brain cells—which are all it will ever have, and it has already formed about 50 trillion synapses, which are the connections between the brain cells.

By the age of two the number of synapses in the average child's brain will have increased to about 1,000 trillion. The environment in which the baby develops influences the way in which these synapses develop. Some may become "hard wired" by constant use and may become difficult to dislodge later. Others, if they are not used, may atrophy or be diverted to other uses in the brain. For example, the mechanisms which trigger aggressiveness and an aggressive response are among those which are difficult to dislodge later in life. So a tendency to violence and aggression can be built into a child's brain in the first two years of its life. Conversely, if certain parts of a child's cognitive brain are not stimulated and used during the first two years, they may be difficult to build back later. Language skills which were mentioned earlier are but one example.

Both those findings are of fundamental importance to education. If we define education as it is defined in the education Acts, the healthy development of a child's brain must be a crucial element in education. I believe that education ought to be a "seamless robe" from birth to maturity and beyond. In a society which believes in human rights, surely it must be the right of every child to grow up in an environment which secures the proper and normal development of his or her brain.

The problem, of course, as with all human rights, is to know who has the duty to deliver them. Some of your Lordships will have heard the second of this year's Reith Lectures in which Professor Onora O'Neill says this:

    "democracy presupposes rights—and rights presuppose duties . . . if any of us is to have rights, others have got to have counterpart duties. The thought that nobody has rights unless others have duties is a precise logical claim".

Every child has a right to medical care. In this country it is the state which assumes that counterpart duty. The state also accepts the duty to provide education in schools for every child over the age of five. So we must ask ourselves, should the state accept the duty to provide an appropriate environment for the development of a child's brain and his emotions and social skills in the first two or three years of that child's

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life? It has to be admitted that the state has not made a very good fist of it up to now when it has had children in its care. Parents do not always make a good fist of it either.

I suggest that the answer must be a partnership between state, parents and communities. Few parents want to fail their children. I believe that there are two main reasons for failure: ignorance and circumstances. Ignorance can be cured by the right kind of education. The kind of ignorance which needs to be addressed includes the following: first, poor understanding of the real needs, emotional, mental and physical, of a young child. Some parents, especially fathers, do not realise how important they are to their child. The second is little or no experience of what a happy, supportive family is like, or of the importance of the support of a partner. The third is lack of the skills to set boundaries of acceptable behaviour through positive parenting rather than by physical and verbal abuse of the child. The fourth is lack of understanding of the positive role of play and conversation in the development of the young child's brain and, of course, unwillingness to seek help.

External adverse circumstances are susceptible to amelioration. They may include poor and inappropriate housing, especially bed-and-breakfast accommodation, poverty, unemployment, debt and the associated stresses, ill health, including mental ill health, loneliness, boredom, lack of support, addiction to drugs and alcohol, violence and, of course, the lack in some areas of the basic support facilities which the state and the local authority should supply. With all these problems the state, local authorities and communities could do more to help without intruding in any way on the liberty of parents. The Government are going some of the way to address these problems, but if we truly want all our children to have a fair chance to succeed at school and to have equal opportunity in the truest sense, there is a real need to do much more to help nought to three year-olds by helping their parents.

5.35 p.m.

Lord Bragg: My Lords, I, too, should like to join the chorus of approval in congratulating the noble Lord, Lord Dearing, on initiating such an important debate. I thank him for giving me and others the opportunity to speak to the Motion.

I want to focus my intervention on higher education. In doing so I declare an interest as Chancellor of the University of Leeds. I also want to make some remarks on behalf of Universities UK, the body that represents university vice-chancellors with whom I have been in touch on this issue and this debate.

We should be proud of the universities in this country. They teach more and more students; produce ever greater quantities of high-quality research; build up increasing links with business and local communities unheard of just a few years ago; and train the thousands of extra nurses, teachers and other professionals the country needs to improve public services. When I visit them, as do many other noble

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Lords, we find that they are bright, positive, cheerful places. We have decided—finally, it seems to me—that our future lies in our brains. I find it encouraging that the Government are now addressing the engine-room of the intellect; that is, the universities.

Universities UK has submitted a bill to the Government asking for about £10 billion over the next three years. It seems a huge amount but one that reflects accurately the costs of what the Government want universities to do. Without proper funding there is a danger that universities will not be in a position to achieve some of the Government's own key goals. Let me illustrate that and bring in a little local reference to the University of Leeds.

First, Leeds, like many other universities, has been innovative in widening participation policies, for example, by the use of Ogden scholarships to encourage youngsters to stay on at school from 16. There are many youngsters throughout the area which Leeds serves who simply do not and cannot stay on at school after 16. Those scholarships enable them to stay on for those two years. We have run a pilot scheme. After the first two years of the scheme, 23 out of 26 Ogden scholars achieved university places. So it can be done but it has to be properly funded. This is not a case for marginal funding. If the Government are to achieve their national aim of 30,000 new students a year over the next eight years, to get to a figure of 50 per cent, they will need to be properly funded as most of those people will come from poor homes.

Secondly, teaching quality at Leeds has been maintained, as is shown by high scores in teaching assessments. But, again, to continue to achieve those standards, funding, after years of reductions in the unit of resource, must continue to be maintained in real terms. Here I fully agree with my noble friend Lord Moser who knows far more than I do about this subject. In the settlement announced in January that was not the case. There was a small—about 1 per cent—"efficiency gain". Tight squeezes such as that can be strangulating. Art has long followed money and so does knowledge, as was pointed out by the noble Lord, Lord Layard, in his apposite remarks.

Research quality at Leeds and at many other of our universities has risen over the past five or 10 years despite great obstacles. That is shown by the 2001 research assessment exercise. If this had been fully funded for 2003, the University of Leeds would have won an additional £7.5 million. In fact, it will receive an additional £2.5 million. Again, the Comprehensive Spending Review needs to deliver funds to sustain what is a world-class research base. I agree completely with the noble Lord, Lord Dearing, when he said that the only market that we can go for now is upmarket. For that we have to have world-class research.

An excellent achievement of government policy has been the agreed future investment in scientific infrastructure worth something like £40 million to the University of Leeds over the next two to three years. But if the research budget continues to be

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underfunded, there will not be the revenue support to utilise this infrastructure. Therefore, the only benefit will go to students of irony.

Finally, the University of Leeds, like the rest of the sector, exploits its research and works with many agencies, including Yorkshire Forward, the regional development agency. The fact is that universities are now a major driving force in increasing the competitiveness of the country. They do not want to lose the momentum that has been achieved because of marginal underfunding in the spending review.

In sum, the Government are absolutely right to put education so high up the agenda. The inclusion of higher education in the Government's top 10 of their second-term priorities shows a realisation of the sector's importance. I trust that when the Chancellor announces the results of his spending review, the hopes that he has raised will be met with new funds to meet his own priorities, as well as the priorities of those working in our universities. As my noble friend Lord Puttnam said, I can think of nothing that is more important for our future.

I say yes to education, education, education. Without proper funding, that is an empty cry. With adequate funding, it is a democratic, visionary and dynamic call to arms that is of incalculable benefit for the widest agenda and future of our country.

5.40 p.m.

The Earl of Listowel: My Lords, I join other noble Lords in thanking my noble friend Lord Dearing for providing this opportunity to discuss education. I shall concentrate on the education of looked-after children. I declare an interest as patron of A Voice for the Child in Care.

The Government's target for the educational attainment of looked-after children this year is that 50 per cent of them should achieve one GCSE grade A to G. The national average is that 50 per cent of children receive at least five GCSEs of grades A to C. In Germany, 57 per cent of looked-after children achieve their Abitur, which is equivalent to a trio of good A-levels.

I shall concentrate on a smaller group—5,000 of the 55,000 looked-after children who are in residential units. They are often the most problematic children and therefore deserve special interest. For those children to achieve an adequate education, more resources are needed to develop their carers. Without stability in their home, those children will often be unable to engage in education, whether it be in a large secondary school or a small pupil referral unit. A high priority is placed on stability, but currently many of the staff in those hostels are agency staff, who come and go—who flit in and out.

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