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As a nation, government, employers, trade unions and individuals all need to raise their sights and commit themselves to a greater ambition for skills. For employers, I recommended a skills pledge to offer training to all employees who do not have basic or level 2 skills. Employers will be able to access this, at no cost, through the Train to Gain programme. More than 150 employers with a total of 1.7 million employees have already signed up to the skills pledge. This is astonishing progress, and we have a great champion for this initiative in Sir Digby Jones. But if the rate of improvement is insufficient by 2010, the Government should introduce a statutory entitlement to workplace training in consultation with employers and trade unions. In general, however, I am against compulsion, and I hope that this will not be necessary.

Just as employers must raise their sights, so too must individuals. Just think how much wasted talent there is, and how much innovation and creativity is stifled by a lack of skills. We have not only an economic imperative but a moral requirement to do better. We need to build a stronger culture of learning and embed aspiration across the land—in every school, in every family and in every workplace. We must start with a nationwide campaign to raise that awareness, backed up by easily accessible and focused careers advice. We all know that too many low-skilled people are out of work. We urgently need to place skills at the heart of welfare to work programmes. At present, our skills and employment systems often have conflicting priorities. Both should be united behind a single aim of sustainable employment and progression. Only then can we avoid hundreds of thousands of people being trapped in an endless revolving door between work and welfare.

In conclusion, this review took me two years to complete—it felt like 10—and it has been difficult to do it justice in something like 14 minutes. In essence, in tomorrow’s global economy, I strongly believe that skills will be the key lever within our control for improving both economic performance and social

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justice. By working together we can rise to the challenge and make our workforce one of the best in the world. The more I have immersed myself in this incredibly complex subject, the more passionate I feel about the importance and the value of skills. They are vital if we are to maintain and improve our prosperity. The economic prize is absolutely huge, but the real prize is altogether even richer and deeper. It is about pride, fairness and quality of life for everyone in the UK. Let me tell you, investment in people is quite simply the best investment we will ever make. I beg to move for Papers.

11.51 am

Lord Hunt of Wirral: My Lords, I congratulate the noble Lord, Lord Leitch, first, on his historic report and, secondly, on his uniquely authoritative and excellent speech opening this key debate. He has demonstrated remarkable foresight by choosing today of all days to initiate this debate. Even as this debate progresses, a new Prime Minister is choosing a new ministerial team, one of whom, Alistair Darling, said on the “Today” programme this morning that skills would be the top priority for this administration. That undertaking is to be welcomed with open arms and, I hope, an open mind. The Leitch report sets the agenda for the wider skills debate, setting out not only the problems of the here and now but also a clear prescription for the future. What is clear in the report and in this debate, from what the noble Lord said, is that everyone has to play their part—employers, employees, schools and colleges, and the state itself.

Some time ago I had the privilege of serving with my noble friends Lord Forsyth and Lord Henley in the Department for Employment in what was then seen as the third economic department. We had similar debates and conversations, and I know that many observers will feel that this debate about skills and how to improve them is never-ending. What is certainly never-ending is the need to keep ahead of the game by investing in people. New technology makes new demands and requires new skills of us all. When I had the privilege of launching the modern apprenticeships scheme, with the assistance of the TUC and the CBI, there were no website designers. That is now a major, exportable industry, characterised by high levels of skills and high value-added. As the Leitch report puts it,

I want to focus on financial services. I declare my interests as set out in the register, in particular as deputy president of the Chartered Insurance Institute. The United Kingdom truly excels in financial services and the sector is a major revenue earner for this country. The UK insurance industry is the third largest in the world and employs about one-third of a million people. The 90,000 members of the CII cover retail financial services, general insurance, and life and pensions. The institute is a leading professional body providing training and qualifications in the sector in the UK, giving it a unique vantage point in this debate.

At the CII, we want to champion the need for increased professionalism in the sector. Professionalism

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and skills are, by definition, two sides of the same coin. The UK cannot afford to rest on its laurels, for nothing is sacred or guaranteed in the modern business world. As the wave of recent outsourcing demonstrates, emerging markets are already competing, and the noble Lord rightly mentioned India and China.

Sadly, within our insurance industry today, only one employee in eight holds some form of insurance qualification. We must urgently improve on this. That requires us to invest in the current workforce and not just focus on the future one. Professional bodies such as the CII are already championing the need for employers to invest in their talent through continuous professional development. Just this week the FSA brought out a discussion paper on the retail distribution review, and at the heart of that paper is the need for the industry to ratchet up its levels of qualifications and professionalism. Otherwise, too many people within this great industry will be in serious danger of finding themselves stranded with adequate skills at best, skills that have not been and will not be refreshed. Firms and individuals must address this challenge.

Professional bodies such as the CII are developing innovative ways to work with employers in identifying market trends and supporting skills best practice. We have developed a series of faculties within our membership to help focus on particular sectors and their needs, identifying specific skills requirements as well as skills shortages ahead of time. This helps to ensure that the CII’s services are employer-led. But if the Leitch proposals are to gain momentum, and I believe it is vital that they must, there has to be a concentration on economically valuable skills. This in turn demands a focus on skills that are highly relevant to the needs of employers. Who trains wins.

11.56 am

Lord Newby: My Lords, I, too, congratulate the noble Lord, Lord Leitch, on securing this debate and thank him for giving us a chance to consider his report. I suspect that very few Members of your Lordships’ House would disagree with the analysis in the report and the setting, as the noble Lord does, of ambitious targets for skills attainment levels by 2020 surely makes eminent sense. As a nation, we should be ashamed of our current level of skills. To have over a fifth of the adult population functionally innumerate is a disgrace, as is having 15 per cent functionally illiterate. To have more than a sixth of our school leavers unable to read, write or add up properly is a pretty grim indictment of our education system.

In his report, the noble Lord places a high priority on the role of employers in driving forward the skills revolution. While I have considerable sympathy with that approach, we must be honest about its limitations as well as its potential. The problem of relying on employers to take more responsibility for setting and implementing policy on skills, and for increasing their own skills investment, is pretty well known. The first problem is senior management commitment. To be effective and if they are really going to work well, the sector skills councils require the best people in the industry to participate in them.

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But all too often the best people in the industry feel that they are too busy running their own firms to be prepared to devote time to working for the industry as a whole. Having drafted the development plan for what became the City and Inner London North Training and Enterprise Council in the early 1990s, I know that the majority of big City firms treated the whole exercise with disdain, and simply did not have anything to do with it. I do not think that those attitudes have completely disappeared.

The second problem is that of funding. Small firms have limited resources and capacity to undertake significant amounts of basic or professional training for their staff. At the other end of the scale, the best firms, particularly those in parts of the service sector, often have little difficulty in recruiting good people because everyone in the industry wants to work for them. They can always hire in expertise. So even though they can and do grumble about overall skills levels, they can feel relatively insulated from the problems. That often leaves those in the middle—the medium-sized and medium performing—which have real difficulty in recruiting staff and probably need to do the most to upskill the staff they have. Is it realistic to expect them to bear the principal burden for skills training on their own? I think not.

On basic skills, it is certainly the case that employers look to government, not themselves, to pay. On apprenticeships, Yorkshire Forward has stated that,

This is a problem. If we are to meet the targets of the noble Lord, Lord Leitch, we will need a strong partnership between the private sector, the education sector and the Government, with each partner doing the things it does best, or which only it can do.

So far the position is patchy, although in some sectors we are seeing real progress. The design industry, for example, has recently produced a report, High-Level Skills for Higher Value, which examines how the industry can produce the people it requires to thrive in a business which is being rapidly reshaped by technology, globalisation and environmental concerns. Design is a very successful industry, with large and growing exports and a world-class reputation. Design and technology is a very popular subject at school, and yet the report describes how there is no nationally sustained professional development for design and technology teachers and how education is not connected to current design practice. So children learning D&T are not being taught relevant things. Equally, college and university students are not being taught the professional skills required by employers in the design industry.

The report states that within design companies there is,

And this is a very successful sector. The report goes on to make a series of practical suggestions about how to promote teacher development, how to

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improve links between colleges, universities and design companies, and the need for a UK design academy to establish industry standards and provide intelligence for future skills development.

The report was produced by some of the best people in the industry. I declare an interest as its chair, Jonathan Sands, is chairman of Elmwood Design, of which I am a non-executive director. There is no doubt that within that industry there is a momentum for change, but this change will be possible only if government also play their part. Within the design industry there is concern that current funding structures do not sufficiently encourage proposals for national training academies to focus on professional training practice. Given that this is an industry dominated by SMEs, it believes that there is a need for government support to enable it to take on graduates and make a contribution to the development and provision of training schemes.

To sum up, I welcome the fact that the Leitch report has thrown down the gauntlet to individuals, companies and government. I hope only that the challenge the noble Lord has now set is matched by the necessary action.

12.03 pm

Lord Low of Dalston: My Lords, I join other noble Lords in congratulating the noble Lord, Lord Leitch, on securing the debate. Most especially, I congratulate him on producing the report which is its focus. In analysis and prescription it must surely be one of the most important reports for UK public policy—indeed, for the UK—for some time. I am sure—or, at least, I hope—it lies behind the new Prime Minister’s renewed emphasis on the importance of education.

As well as the report’s one big message about the need to upskill the British workforce if Britain is to remain competitive in a rapidly changing global environment, the report has many subsidiary messages: about the need for greater investment in skills, about the importance of higher education and about the need for a great increase in the number of those undertaking apprenticeships. I want to focus briefly on one of the report’s themes which possibly has not been developed as fully as it might be in the report: the importance of skills development for those at greatest disadvantage in our society, especially disabled people, in the quest for social justice and a fairer society. Indeed, the importance of skills for improving social justice and not just productivity and economic prosperity is at the heart of the report’s terms of reference.

There is a raft of statistics, most fully summarised recently in a report by the Social Market Foundation in association with the Disability Rights Commission, to show that there is a close association between skills, employment and disability. Despite recent progress, disabled people and people with long-term health conditions still face significant disadvantage. They are far less likely to be skilled. Disabled people are half as likely as the non-disabled to have a degree and twice as likely to have no qualifications at all. Disabled people are also far less likely to be in employment

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than non-disabled people. The employment rate of disabled people and people with long-term health conditions has risen faster than average over the past decade, from 43 per cent in 1998 to over 50 per cent by 2006, but still remains some 25 percentage points below the national average.

That global picture masks significant differences in the employment opportunities of people with different types of impairment. Only one in 10 people with severe learning disabilities and two in 10 with mental health problems are in work. Disabled people and people with long-term health conditions have lower employment rates than the non-disabled population no matter what their qualification level, with the biggest impact being felt by those with low or no qualifications. However, research to isolate the impact of skills finds that a higher level of skills is associated, all other things being equal, with a higher probability of employment. Nevertheless, it is striking that disabled graduates still have a higher chance of being out of but wanting work than a non-disabled adult who has no qualifications at all.

The compound of low skills and unemployment means that disabled people and those with long-term health conditions are also more likely to be socially excluded and live in poverty. Disabled adults are twice as likely to be living in poverty as non-disabled adults. In fact, not being in employment, education or training for six months or more between the ages of 16 and 18 is the single most powerful predictor of unemployment at age 21.

Why should we be concerned about this? The easy answer is that increasing opportunities for disabled people is central to achieving national prosperity as well as equality of opportunity. The continuing skills deficit is not only a problem for disabled people: if it persists it will prevent the UK reaching its goal of world-class skills by 2020. In other words, it will be impossible to deliver world-class skills unless disabled people are better supported significantly to improve their skills.

That answer also comes from Europe. The Lisbon agenda contains an objective of an employment rate of 70 per cent by 2010 and the Commission has recognised that people with disabilities are a much underused source of labour in Europe which could contribute to overall economic growth. But I have to confess that I sometimes find that answer a bit glib. We should beware of automatic inferences of discrimination and denial of opportunity from the sort of statistics that I have quoted. Sometimes, lower levels of skill and qualification may be hard to disentangle from the disability itself. In going down the mainstream route, public policy limits its focus to those who may be easiest to employ. That makes sense in terms of raising the level of employment to make Europe the most competitive knowledge-based economy in a globalised world economy, but it may not make so much sense for a low-incidence group such as visually impaired people, many of whom are among the most vulnerable disabled people who are hardest to employ or some of those mentioned earlier with the lowest employment rates such as those with severe learning difficulties or mental health problems.

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There remains of course the argument about social justice. The Leitch report acknowledges the claims of social justice, but does not contain enough tough-minded argument about why we should heed its claims. Why should states put themselves out to get people into employment against the odds in an increasingly competitive environment? My answer to that question is citizenship. It is the right of every disabled person, as a citizen, that the state should use what Galbraith used to call its “countervailing power” to support them into work. This is not a difficult concept to promote under the European social model, but can the European social model survive in a more competitive Europe gearing itself up to withstand the pressures of globalisation? It may not survive completely intact, but I would argue that the kind of rights that go with citizenship have to survive if a Europe in crisis is to retain the contact with its citizens that alone can give it legitimacy.

The same goes for the United Kingdom. The prize—

Baroness Crawley: My Lords, perhaps I may ask the noble Lord to draw his remarks to a close.

Lord Low of Dalston: My Lords, I am just doing that.

The prize is greater than simply increased productivity and employment, as the Leitch report recognises. It is also about tackling poverty and inequality. As a result of low skills, the UK risks increasing inequality, deprivation and poverty. If we take to heart the prescriptions of the Leitch report, people will have a fairer chance to progress and there will be less social deprivation and positive wider impacts on health, crime and social cohesion. That is essential if people are not to be allowed to sink into an underclass of deprivation and disaffection, which is as capable of dragging our society back as any skills deficit.

12.11 pm

Baroness Morris of Yardley: My Lords, I congratulate the noble Lord, Lord Leitch, on securing the debate, although I suspect that was relatively easy compared with writing the report. I congratulate him, too, on producing a very good report which can take us forward in this crucial area.

One thing that I like about the report is that it gathers together the evidence of where we are, and noble Lords have given examples and statistics about how far behind we are falling compared with our competitor nations. The report will stand us in good stead; we will be able to refer to it as almost a bible of those statistics.

I want to give three examples where, in my previous work, I have noticed a lack of skills and the impact that that can have. When I was chair of the Children’s Workforce Development Council, there was a simple but powerful statistic that I had not realised existed. We understand the importance of working with children before age five if we are to raise the standards of every child in school. Whereas we can be pleased that 80 per cent of people who work with

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children in schools have a degree, 80 per cent of those who work in early years provision do not have a degree. That is an absolute swap-around of qualifications. Whereas a very high number of middle-class children go to university, gain degrees and progress beyond that, we have still not cracked the problem of access to higher education for children from all backgrounds. If noble Lords look at the statistics, as the Prime Minister did in his Mansion House report, they can see that we are faring worse in terms of second degrees in some professions than we did 10 or 15 years ago. So the statistics in the report represent people doing jobs without the skills and qualifications that they need and citizens not having the opportunities they ought to have.

This is a good report, but it is not as though we have not bothered to do such a report for decades. Good, honest and hard-working people have tried to crack this one before us. If we are really to make a difference now we need a far better understanding of what has prevented us making it before. That is what I want to concentrate on, rather than the report itself.

For me, there are three or four key areas. We have a national inability to treasure vocational skills. If we do not treasure those skills while children and young people are at school and get right education for those aged 14 to 19, we will not have begun at that early stage to get a throughput of skills and an appreciation that that type of skills matters.

Our national culture makes it sometimes difficult to get the skills agenda going. We are still suspicious of everybody having qualifications. If we manage to ensure that more people have higher-level qualifications, there is still a suspicion that we must have lowered the pass grade. As long as we have a national cultural problem of not believing in people’s ability to raise standards and perform at a higher level, we will not change the culture as we need to.

Noble Lords mentioned employers’ commitment to skills. Too many employers are still cutting investment in skills when the going gets tough, whereas all the evidence shows that such investment at that point makes the difference to an industry’s survival.

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