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The noble Lord, Lord Leitch, made employee demand the key part of his report, and I agree. We will have to look seriously at that. People are not queueing down the street demanding higher skill levels. Parents fight to get their children into good schools, but employees without adequate skills are not screaming that someone should upgrade their skills. That has been a problem as well.

We do not talk about rewarding higher skill levels with higher wages and a different salary structure; neither do our media pay sufficient attention to skills. How often do you read about a skills event on the front page of a newspaper? We have had a very good week in which we discussed reports on the link between social class and educational attainment in schools, but where is the national debate on skill levels? Where was John Humphrys? Did the “Today” programme go round every morning for a week looking at the lack of skills and what can be done? The media have a role in leading the national debate.

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Our efforts so far have lacked consistency. We do not have a language to discuss skills. How many people in the street know what a level 2 or a level 4 is, let alone what an old level 4 was only one year ago? The noble Lord, Lord Leitch, equated a level 2 to five good GCSEs. He did so because he knew that we understand that language. If we are to persuade employees to demand a certain skill level and employers to provide it, we need a national language for a national debate. We cannot do much about that. However, there is a national language in the rest of the education system. Whatever their skill level and previous educational experiences, people know what GCSEs, A-levels and degrees are. We have to stop changing the language and try to develop the conversation with the nation.

This is an excellent report. It gives us our best chance in a long time of taking the debate forward. Several things should happen alongside it. First, it needs the resources. Organisations in the skills sector should not have to fight each other for resources. At the moment, sector skills councils are arguing with learning and skills councils about the resources they need. We must also be prepared to use compulsion if a voluntary approach does not work. We must value economically viable skills but understand that the way into learning for some people is to do things that may not be economically viable. We must keep the structure simple. We must also make this the last report which we have to produce to set us on the road to becoming a nation that is strong in skills, strong in social justice and economically strong.

12.17 pm

Lord Sheikh: My Lords, I congratulate the noble Lord, Lord Leitch, on his presentation today and his excellent report. I should like to talk about the skills issue in the sector in which I have worked all my life, insurance and financial services. I have been very actively involved in training and the improvement of standards in my industry. I have held senior positions with the Chartered Insurance Institute and the British Insurance Brokers’ Association. I have also been a visiting lecturer on insurance subjects.

We have a very successful and world-class insurance and financial services industry which brings considerable benefits to this country. We need, however, to look ahead to keep our premier position. We cannot assume in these fast-moving, globalised financial markets that the UK’s pre-eminence will be maintained. Improved skills are a vital component in ensuring that this competitive advantage remains.

Over the past four months I have visited India, the United Arab Emirates and Bahrain to look at their insurance and financial services markets, and I believe that we should be more involved in those countries. The Leitch report offers a vision of the future which shows that the UK risks facing a skills deficit in the context of international competition.

My concern is that a belief in the excellence of the UK financial services industry makes it easy to assume that all in the financial services skills world is rosy. A recent survey of its members undertaken by the Chartered Insurance Institute (CII), a leading

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professional body with more than 90,000 members within the financial services and insurance sector, sheds an interesting but rather worrying light on the issue of skills.

The CII survey found that 71 per cent of financial services employers perceive a shortage of technical skills while 63 per cent also believe that the demand for professional qualifications will increase over the next five years. More worryingly, 46 per cent of the CII’s members thought that new entrants were not as well equipped as entrants a decade ago, and 55 per cent of respondents felt that, unless action is taken to address this, the UK will fall back by 2020. This concern should be put in context. The same survey showed that awareness of the issues facing the sector is high—90 per cent believe that there is a direct correlation between the level of investment in training and the profitability of a company, and 94 per cent of employers agree that technical skills are critical in maintaining the competitiveness of UK financial services providers.

I take comfort from that last statistic; there is recognition of the future danger. The key thing is to ensure that the education needs of the industry, both in training of new entrants and in continuing professional development throughout careers, are identified and met by the industry in consultation with educational bodies, trade associations, employers and individuals themselves. That is the task ahead.

I cite the CII survey identifying the problem. It is gratifying to see that the CII is developing imaginative solutions. For example, the CII’s Faculty of Broking, in association with the British Insurance Brokers’ Association and a leading insurance company, has developed the concept of a broker academy which provides a one-stop-shop providing training, education and professional qualifications.

Another identified area of specific need is the vital area of insurance claims, a specialist discipline which is often neglected. The CII has established a research project to look at the future of claims, and this will identify the skills that practitioners will need.

The Leitch report talks a lot about employer-led solutions, a direction which I strongly support. This can be done by an organisation setting up a structured programme for the staff which includes classroom and on-the-job training, mentoring and appropriate appraisals. Every encouragement and assistance should be given to staff to study for professional examinations. Excellent courses are available from the Chartered Insurance Institute and the British Insurance Brokers’ Association.

In addition to improving and maintaining our expertise in London we need to build and promote better skills in other parts of the country and establish regional centres of excellence which will give us breadth of expertise.

Lastly, there are major challenges across all sectors in the UK in facing up to the fierce blast of international competition and skills. Improving skills can play a vital part in ensuring that UK business is flexible and has adequate capability to face the future with confidence and with a highly skilled, flexible and confident workforce. I hope that this debate will play a useful part in setting us down that road.

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12.25 pm

Lord Cotter: My Lords, thanks go to the noble Lord, Lord Leitch, for this excellent report and for initiating today’s debate. I want to speak particularly about giving opportunities to young people entering the workplace, especially those who find the transition from school to work daunting.

Much is made, rightly, of university education but it does not suit everyone, so there is a real need for training and, in particular, apprenticeships. There has been a significant improvement in the quality of apprenticeships, rising from 42 per cent being of high quality, as mentioned in the 2006 report, to 88 per cent in 2007. That is important, as it is that this fact is publicised so that both young people and employers are aware of the acceptability and quality of apprenticeships.

However, there is a significant problem concerning the completion rate of apprenticeships, which remains at only 40 per cent. Last week, the Minister, in answer to a question of mine, accepted that there is concern over completion. He said that he is addressing that, which is encouraging; nevertheless, we have a problem.

I feel—modestly, I hope—that a second point that I made has relevance. I asked the Minister whether he would consider some form of recognition for apprenticeships, such as a diploma or something of that nature. I have been notified by the Association of Colleges that a diploma will be introduced next year. It will recognise technical expertise and the value of skills within one-year courses on subjects such as construction, health and IT. However, there is still no formal recognition of the completion of apprenticeship schemes, which usually last for two years.

What I am getting at is that apprenticeships should be recognised as a high achievement and that, in itself, would encourage more young people to stick the course so that they could feel proud of what they had achieved. Therefore, in talking about apprenticeships, we are trying to address the need that we have as a country to give our young people a real future. On the one hand, there is the need about which we have seen a lot in the media recently, such as that of young white boys and men who underachieve. We also often hear about young black and particular ethnic groups who have difficulty in achieving and struggle to find their niche. Many in society have that problem. Therefore, a practical and efficient alternative needs to be provided.

A key failure in the present education system is the lack of advice and guidance that young people are given regarding the alternatives to higher education and the apprenticeship system. Careers staff do not always offer adequate or positive advice and guidance early enough to people for whom a vocational education route might be more appropriate.

There is also the significant problem of the number of apprenticeships offered to people between the ages of 16 and 18. Many traders are unwilling to take on young adults who have just left school after completing their GCSEs due, sadly, to health and safety considerations but also simply because, rightly or wrongly, they believe that they are too young mentally to enter the workplace.

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Therefore, many young adults face doing menial jobs such as labouring until a company is prepared to take them on. What do the Government propose to do to overcome that sort of problem?

There is a key financial problem in the current apprenticeship programme. It is attractive to young people to take a modern apprenticeship, as there is an income, although it is the minimum wage. The income is attractive but it should not be the basis of the apprenticeship.

There is also no commitment in financial terms for the student to complete, other than the qualifications themselves, and many apprentices are not paid for their day release, for example, to complete the college course. This is a key factor why there is such a low completion rate, with apprentices leaving before they are qualified for higher-paying occupations. The original scheme offered apprentices a bonus on completion. If they were reintroduced it may influence apprentices to complete their courses.

I have deliberately concentrated today on apprenticeships and the need for them to be of high quality and to be recognised as such. Trade and engineering-focused apprenticeships are traditionally what is spoken of, and still today are vital, but they are not the only apprenticeship route. I was very encouraged to read how the SkillsActive organisation has drawn attention to the apprenticeships in sports and recreation, health and fitness and outside occupations, my point being that this is an expanding area. Young people need to be aware that those apprenticeships are available for employment that they will often find attractive, inspiring and perhaps even enjoyable. It is hoped that there will soon be one young apprenticeship partnership in sport scheme in every county in the country. Can the Minister ensure that that will happen?

I hope that as a result of the debate here today we can see a real raising in the status for skill training, and real progress of the appreciation by business and young people, in particular of the worth of being trained for the job.

12.31 pm

Lord Dearing: My Lords, in a book published 17 years ago, Sir John Cassels, a chairman of the Manpower Services Commission, wrote that,

uncompetitive because in relation to our competitors it was underskilled and undereducated. He did not limit his comments to blue-collar workers; he related them to our senior managers whom he found on average were much less highly qualified than those of our competitors. He said that 24 per cent of our senior managers had a degree, compared with, if I remember rightly, 62 per cent in Germany, 65 per cent in France and 84 per cent in the United States and Japan. He made similar criticisms of the training of our managers.

In an excellent report, the noble Lord, Lord Leitch, said that we have made progress, but to quote his own words back to him,

I think he said “desperately weak” today—“by international standards”.

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We have progressed but not enough. The tragedy is that at the Paris Exhibition of 1871 the writing was plainly on the wall. This heralded the appointment of one committee after another telling us that we had fallen behind in terms of the skills of our workmen, our proprietors and our managers. The conclusion which I derive is that daunting though the targets of the noble Lord, Lord Leitch, are, we must accept them, welcome them and realise that to achieve them we need a new culture—a brilliant leadership as never before; otherwise in 130 years’ time we shall have another Cassels-type report saying the same again.

My second conclusion is that if we are to achieve this, we must have coherence, organisational simplicity and continuity in our organisations, otherwise there is no hope that our managers and our workpeople will know how to access the system and use it. That is something that we do not have, so we must change radically, as the noble Lord, Lord Leitch, recognises in his report. I have an example, which I know about because for a time I was chairman of what is best known as learndirect. One of the proposals in the report is that learndirect should be merged with the next steps organisations, under the well recognised learndirect brand, which is known by 80 per cent of the population. Under such a merged service, we can provide people with an expert skills check and expert advice on how best to meet their skills needs. The aim is to make it simple and to make it coherent, using the well known learndirect inquiry line, the web and face-to-face interviews, supported by an excellent information system. That has to be right up to date. Here is an example of how to provide that simplicity, coherence and effectiveness that we need across the whole scene.

Another recommendation is that we must simplify the whole run of qualifications. I wrote a report on this in 1997, which perhaps somebody will read one day. One of the noble Lord’s most challenging targets is that we must reduce to 5 per cent those without basic skills in literacy and numeracy. That is immensely challenging because we cannot tell them what to do, so we really need to think how to do that. There is one area where we have them under our thumb—in school. Let us begin by committing ourselves to achieving only 5 per cent—less, if possible—of those leaving school without the basic equipment in the English language, both oral and written, and mathematics—or as I prefer to say, sums. Let us resolve to do that.

Since I am in the schools world, I shall make another point. If we are to change the culture, as the noble Baroness, Lady Morris, says we will have to do, we must secure a revolution in our attitude to technical education. The Government’s plans for the 14 new specialised diplomas have that kind of thing in mind. Whatever the intent, we shall not achieve the ambition of getting our able people involved unless they are attracted by the cachet of excellent teaching, buildings and equipment, and the close involvement in both the system and the institutions of employers and workpeople. I would argue that we need such academies in every town and city to provide that kind of banner of excellence for technical education.

Finally, I turn to the target of 40 per cent achieving a level 4. Yes, that is another stretchy one—it goes

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from 29 per cent to 40 per cent by 2020. The noble Lord says that there needs to be a revolution in some of the values and practices of higher education. Yes, but let us not go for a simple model for higher education, and remember the FE colleges. If we are to achieve that target, it will be through people at work in part-time learning. We have to rethink the issue, including the funding of part-time learning and learning accounts.

I conclude by welcoming the slogan suggested by the noble Lord, Lord Hunt: “Who trains wins”. Unless we do, in 17 years’ time there will be some of us here—not me, I dare say—who will be repeating what Cassels said, so let’s train and win.

12.37 pm

Baroness Wall of New Barnet: My Lords, I am delighted to contribute to today’s debate and to join colleagues and noble Lords who have congratulated the noble Lord, Lord Leitch. He suggested that, although the report took him two years to produce, it felt like 10. For those of us who were waiting for it and its implementation, it felt like much longer than that. I agree wholeheartedly with the sentiments of the noble Lord, Lord Leitch, and his ambitions and recommendations within the report. However, I want to talk specifically about the role of sector skills councils and trade unions. I declare an interest as someone working with the Sector Skills Development Agency to encourage employers and trade unions to get involved in these bodies and to take the maximum that they can from them.

I endorse the noble Lord’s view that sector skills councils are uniquely placed to drive forward the whole skills agenda. I share his concern about the patchiness of some of them, but they are moving on in lots of ways. The longer people have, the greater effect they will bring. From experience elsewhere in the world, it is clear that a strong sectoral approach is essential if we are successfully to target the needs of employers and employees. That is crucial because, as the noble Lord, Lord Leitch, said, 70 per cent of the 2020 workforce have already finished school and are employed. Consequently, solutions to our skills problems will lie mainly in our existing workplaces, with employers and trade unions working together.

I also agree that, if sector skills councils are to deliver an enhanced role in the system, we must make sure that they are both fit for purpose and adequately resourced to do the job that we ask them to do, as the noble Lord, Lord Newby, suggested. The relicensing and refocusing process that is about to take place is important, and the newly defined role, especially in relation to qualification reform, employer engagement and investment, is essential. That is at the heart of what my noble friend Lord Leitch described, in a fantastic turn of phrase, as the “something for something deal”. It is with employers that the significant “something for something deal” comes about. We must not lose sight of that as we respond to the recommendations proposed by my noble friend Lord Leitch and I hope that the Minister will assure us when responding that the recommendations will be embraced by our Government, as I am sure they will be.

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Put simply, the deal is this: employers will engage and invest more in systems in return for more control over how the system works and what it does. The Commission for Employment and Skills, the pledge and the enhanced role for sector skills councils are the key to driving this deal. A reinforced approach to sector skills agreements can then provide the detail about how they will operate on a sector-by-sector basis. Some sectors will want to invest more in higher-level skills, such as the science and engineering employers represented by SEMTA and the IT and telecommunications sector represented by e-skills. The sector skills councils will want to deliver such a deal in very different ways in each of their sectors, and in each of the sectors they will decide that. For example, Skillset, the sector skills council for the broadcasting and audio visual industries, has developed a series of academies at universities and colleges across the UK—the noble Lord, Lord Dearing, said that that was the way forward—and there is a levy in part of that sector.

The overall point is that it sometimes seems easier and more effective to think of delivery mechanisms on a sector-by-sector basis, which often makes more sense to employers than taking solely a geographical approach, although my belief is that the two can and should be complementary—only then will they really work. In London in particular, where it is clear that sectors such as tourism and hospitality and financial services are vital, those SSCs should take an interest in how the skills and employment strategy now evolves under the guidance of the Mayor and how it fits into where they are going. I am sure that other speakers, in particular the noble Baroness, Lady Valentine, will comment on the London strategy.

We need therefore to ensure that sector skills councils have both the capacity and the resources to do the job properly. As we reorganise the system from a planned to a more demand-led approach, that should be at the centre of our plans. So much is being done by many of the sector skills councils—we have talked about patchiness—that we forget that they are quite young organisations; indeed, some have been in existence for only two years. They are also a relatively small part of the system within the entire Skills for Business network, comprising the SSDA and the 25 sector skills councils, and they receive less than £80 million of funding each year. For many of the sector skills councils, that has been a real and growing issue, and many would ask for a commitment from Government and from everyone to an increase in core funding, which equals increased accountability and practical delivery on the deal with employers around their commitment to increased investment.

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