Select Committee on European Union Minutes of Evidence

Memorandum from the Department for Education and Skills


  1.  The Department is conscious of the importance of entrepreneurship to the UK's economic well being and it works closely with the Department for Trade and Industry (DTI), the Department for Work and Pensions (DWP) and other Departments and agencies such as the Learning and Skills Council (LSC), Small Business Service (SBS) and Regional Development Agencies (RDAs), to ensure public investment supports a productive and competitive economy. The policies, initiatives and programmes discussed below are mutually supportive and in many cases delivered jointly.

  2.  In June this year the Government will publish a national Skills Strategy and Delivery Plan. The Strategy will set a wide-ranging agenda for raising skill levels amongst young people and adults, working closely with employers to ensure their skill needs are met. The skills strategy supports the Government's programme for reform to target historic weaknesses in the five key drivers of productivity performance (set out in The Chancellor's Pre-Budget Report of November 2002). In addition to boosting the skills of the workforce, they include:

    —  Promoting enterprise to help new businesses to start up, and established businesses to develop.

    —  Supporting science and innovation to use the potential of new technologies and to develop more efficient ways of working.

    —  Strengthening the competition regime to encourage firms to innovate in order to minimise costs and deliver better quality goods and services.

    —  Encouraging investment to improve the stock of physical capital in all sectors.

  3.  On 26 March Charles Clarke published a progress report on the Skills Strategy along with underlying evidence to support the strategy. The strategy addresses many of the concerns of the European Union's Green Paper. The strategy supports a coordinated approach to entrepreneurship policy and links with associated strategies such as the DTI's strategies for start-ups and innovation. It is designed to deliver improved business development and growth and encourage entrepreneurship. It will support innovation by ensuring the availability of skilled qualified people in the right disciplines. (The progress report and underlying evidence can be addressed at


  4.  We understand the Committee intends to focus on the "for profit technology based sector". The department's policies are aimed to improve performance across all sectors including the technology based sectors. They are responsive to the Strategy Unit's report on workforce development (In Demand—Adult Skills in the 21st Century) and extensive consultations on 14-19 education, Further Education and Higher Education and sector skills and productivity. The ultimate goal is to create a system of education and training that meets both the needs of employers for business success and the needs of individuals for employability and progression in the labour market. Specific initiatives which will impact on for profit technology based sectors are:

    —  Sector Skills Council—The Government with advice for the Sector Skills Development Agency is putting in place a network of strong strategic employer-led bodies to speak for employers and determine the skills that will be needed for world class business performance. This will include the needs of both entrepreneurs and intrapreneurs. Charles Clarke has just (8 April) announced the first two full five year licenses for ESkills UK, which includes IT, telecoms and call centres, and SEMTA (the Science, Engineering and Manufacturing Technologies Alliance) which is a major player in the technology sector. Amongst five trailblazer (provisionally licensed) SSCs are the petrochemical and textile and clothing sectors.

    —  Higher Education Innovation Fund (HEIF)—The Government is continuing and increasing investment to commercialise the results of research and improve the links between HE and business as set out in the HE White Paper. HEIF funding enables institutions to develop their capacity to work with employers on skills issues, promotes enterprise in institutions, provides seedcom funding for commercialisation of new technologies and enables the creation of "spin-out" companies. HEIF is funded by DTI and DfES in partnership. The next round of HEIF will consolidate the support currently provided by the Higher Education Reach-Out to Business and the Community fund (HEROBC) as well as the DTI funded initiatives, Universities Challenge and Science Enterprise Challenge. It will fund reach-out from HE to business and explicitly focus on broadening funding to less research-intensive institutions. HEIF will be worth £90 million by 2005-06. Within HEIF, around 20 Knowledge Exchanges will be created—institutions on consortia which will focus on the type of work less research-intensive organisation can do to transfer knowledge and to develop relevant skills. There will be £10 million a year for Knowledge Exchanges by 2005-06.


  5.  Currently the following funding support offered by the Department (through the LSC and HEFCE) will be of assistance to entrepreneurs and help encourage entrepreneurial attitudes. It complements a wide range of offerings by DTI, SBS and DWP (through the New Deal).

    —  Modern Apprenticeships are aimed to prepare young people for an economy based on high level skills including sectors with high levels of self-employment and business start-ups. Graduate apprenticeships integrate study at degree level with structured work based learning. Foundation degrees designed by employers for employers are expected to account for the bulk of HE expansion. They will be a major contribution to generating the technical skills essential to innovation and enterprise.

    —  New Entrepreneur Scholarships (currently a pilot programme managed by LSC) help potential entrepreneurs from deprived areas access business management skills and turn their business ideas into reality.

    —  The Investors in People Standard (£30 million has been allocated to promote the standard with small firms). A new management and leadership option has just been added to the standard.

  Employer Training Pilots may also be helpful. They are intended to increase the skills base of the workforce at basic skills and level 2. Employers in the pilot areas can access support (from a £130 million budget) for training to support business objectives. Small firms receive higher levels of support.

  6.  As part of the Skills Strategy the funding of adult learning is under review. The needs of small business are central to this review and we will be examining ways to channel funding to small businesses in ways that are useful to them. The LSC is consulting separately on the scope for developing an approach to funding adult learning and employer engagement on the basis of local plans. Potentially, it could allow more local discretion for colleges and training providers to judge how best to spend available funds to meet local needs, including wider range of business development support for local employers.

Are objectives of programmes well specified/are costs and benefits identified/which programmes are most effective?

  7.  These issues are discussed in the Annex.


  8.  The Skills Strategy discussed above is a comprehensive approach to improving workforce skills, which will aid entrepreneurs through its business focus. Workforce development is essential to releasing creativity and innovation; tackling the large numbers of low skilled workers (including basic skills) and the lack of investment in training by small firms. As recognised in the Strategy Unit report improved management and leadership capability is a prerequisite of to better workforce development.

Management and leadership

  9.  The Council for Excellence in Management and Leadership (CEML) in its report "Management and Leadership: Raising our Game" has helped to clarify the causes and extent of the gaps in management and leadership skills. The problem is complex, and must be addressed both through action to improve the supply of management and leadership training, and action to raise the standards that all employers expect of their managers and leaders. CEML's SME Working Group published its own report "Joining Entrepreneurs in their World" focussed on the needs of entrepreneurs. The Government has announced that it will establish a high level Panel to advise on management and leadership issues.

  10.  A joint DfES/DTI Unit has been established to coordinate action on leadership and management across Government. It is currently focussing on:

    —  how to create clearer pathway through the formal learning and qualifications system for those seeking to develop their management skills;

    —  how to encourage informal learning through coaching, mentoring and networks between SMEs, and helping, particularly, SME owner-managers, to build networks which can develop their skills through advice from peers and mentors on dealing with real world business problems, rather than through formal training programmes; and

    —  a "no wrong doors" approach to providing small firms with access to the information and training they need to grow their businesses.

Promoting entrepreneurship

  11.  Following Sir Howard Davies review last year of Enterprise in Education the Government is introducing an entitlement to enterprise education for all young people at Key Stage 4 of the National Curriculum. Opportunities for work-related learning are being reformed. It will be a compulsory part of the revised curriculum for 14-16 year olds which will be introduced from September 2004. A separate DfES project is underway to review how education in early years, schools, further education and higher education can contribute to developing the generic skills sought by employers. £5 million is being made available in 2003-04 and £10 million in 2004-05 to pilot approached to enterprise. In 2005-06 £60 million will be available for the full roll out of the programme.

  12.  As announced in the Budget, to complement the Davies enterprise experience and foster an entrepreneurial culture it is intended to pilot full time Enterprise Advisers across 1,000 secondary schools in deprived areas at a cost of £6 million in 2003-04 and £10 million in 2004-05. This will be resourced from the LSC budget and accessed by heads through the Education Business Links consortia. Invitations for schools to express interest in becoming enterprise pathfinders will be issued from September 2003. Detail are on the Departmental website.

  13.  Graduate entrepreneurship will also be encouraged. As the Chancellor also announced the Government is considering establishing a National Council for Graduate Entrepreneurship. The Council would engage career advisers, academics, institutions and relevant organisations to promote self employment as a career option for graduates.

Science, Technology, Engineering and Maths

  14.  These skills are critical to innovation and product development. Sir Gareth Roberts conducted a review last year, which made a number of recommendations about improvements to rewards and training for science, technology and engineering research staff in universities. These are now being implemented with support from the extra funds allocated for science in the 2002 Spending Review. A separate inquiry into the teaching of mathematics in schools and colleges is currently being undertaken by Professor Adrian Smith. The inquiry is considering not only teaching and curriculum issues, but also the requirements of employers and the factors which determine the extent of further study of mathematics after the end of compulsory schooling.

Regional Coordination

  15.  RDAs have brought together a range of partners—LLSCs, TUC, CBI, local government, GOs, Jobcentre Plus, sector bodies, small business organisations and others with an interest in skills and employment to create FRESAs (Frameworks for Regional Employment and Skills Action) which are agreed regional action plans setting out joint priorities and based on shared labour market intelligence. FRESAs are now in place in all regions and have been widely welcomed as an example of joined up government which has brought together a range of agencies to create a common plan.

  16.  Regional Adult Skills Pilots have also been set up to look at ways of pooling and coordinating adult skills funding between RDAs and LLSCs. They will explore radical and innovative ways of engaging with employers and help to identify obstacles to flexible and responsive delivery which might exist within current systems and frameworks. These pilots along with (DTI led) RDA/SBS pilots to improve Business Link services should enhance the coherence of services being offered to employers and to enable the various agencies involved to become more responsive to the needs of employers at regional and local level. Taken together these measures should signpost ways to facilitate innovation and entrepreneurship.

April 2003


Are objectives of programmes well specified/are costs and benefits identified/which programmes are most effective?

  1.  We believe the programmes above are well specified and the Department regularly evaluates and reviews its activities. Comprehensive analysis of programmes is not practicable within the confines of this paper. The purposes of the programmes are of course much wider than promoting entrepreneurship and there is detailed information about them in research reports and on the DfES website.

  2.  The underlying evidence to the Skills Strategy Report ( supports the case for investment in skills to improve competitiveness and encourage enterprise and innovation. In particular, evidence from the case studies of the 1999 Employers Skill Survey suggests a link between skill shortages and gaps at managerial and professional levels and entrepreneurial activity. The Synthesis of this research[1]showed that:

    —  skills gaps at the higher occupational levels are related to a failure to drive the business forward;

    —  skills gaps at the managerial and professional level were associated with the lack of skills required for new product development;

    —  there is a scarcity of professional and managerial staff to manage the processes involved in driving product market change; and

    —  maintaining a position in relatively high value-added markets requires change to be anticipated and managed; this in turn leads to on-going demand for managerial and professional staff in most sectors.

  3.  The only Departmental initiative specifically designed to support entrepreneurs, the New Entrepreneur Scholarship pilot scheme, has been independently evaluated. The evaluation took a positive view of the scheme (the report will be published shortly) and judged the cost/benefit balance to be favourable. For technical reasons it was not possible to complete a formal cost benefit analysis. It is planned to continue and further evaluate the scheme through 2003-04.


  4.  There are no easily identifiable studies which allow comparison between the relevant DfES programmes and equivalent programmes in other countries in terms of their effect on entrepreneurship. At a more general level Professor Michael Porter in a report for DTI[2]argues that the key sources of competitive disadvantage in the UK are low investment in capital assets and innovation, competing less on unique value, and lower use of modern management techniques. He found that where management skills were lacking, they were amongst lower and middle management.

1   Hogarth, T and Wilson, R (2001) Skills Matter: A Synthesis of Research on the Extent, Causes and Implications of Skills Deficiencies Department for Education and Skills, Nottingham. Back

2   Porter (2003) unpublished. Back

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