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Finally, we have decided to simplify the organisational clutter of public bodies delivering skills policy. We welcome the recommendation of the UK Commission for Employment and Skills to reduce the number of separate publicly funded agencies by over 30 and will work with them and others to make this happen. Our new model will make the regional development agencies responsible for leading the regional skills strategy in each area, working in partnership with local authorities and others.

This skills strategy shares its fundamental challenge with our recent higher education framework. They must equip our people to prosper in a globalised knowledge economy. They must contribute to our return to sustained and sustainable growth. The goal of this strategy is a skills system defined not simply by targets based on achieved qualifications, but by "real world" outcomes: relevant, quality skills with real market value. It will be driven by the realities of a changing global economy and by demand from the British businesses and individuals who have to prosper in that economy. The clearer that demand is, the better the system will work.

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Our expectations of business will rise. We will strengthen the role of employer-led sector skills councils and business-led regional development agencies in shaping an excellent supply of courses and training designed in direct response to local and national employer needs. But we will also expect businesses to make a greater contribution to the funding of skills training for their workforce. We need a culture in which all employers take the view that the skills of their staff are one of the best investments they can make. Our ambition is that, thanks in large part to the innovations in this strategy, three-quarters of people should participate in higher education or complete an advanced apprenticeship or equivalent technician-level course by the age of 30.

This strategy empowers the further education system above all to compete to meet the needs of businesses and learners. That will put further education where it belongs; right at the heart of the knowledge economy and at the heart of our recovery and our future prosperity. I commend the Statement to the House.

3.50 pm

Lord Hunt of Wirral: My Lords, I draw attention to my interests as declared in the Register, in particular to my role as non-executive chairman of McDonald's Education Company. I thank the First Secretary of State, the Secretary of State for Business, Innovation and Skills and the President of the Council for his Statement on the Government's intentions regarding skills, and for his clear recognition that investment in skills is a vital part of rebuilding this damaged economy and aiding recovery for our country.

Skills, of course, are also a means of addressing social inequalities; they can act as the magic bullet to create improved social mobility. Only yesterday, in a remarkable speech honouring the memory of that fine journalist, Hugo Young, David Cameron pointed out that,

We had been led to expect renewed ministerial commitment to skills after a spokesman from the noble Lord's department, who spoke on Saturday night and was reported in the Observer on Sunday, said that:

"The skills sector has received record investment in recent years and we will shortly be publishing the skills strategy setting out our long-term plans for investment in skills to contribute to the future growth and success of the UK economy".

After such a build-up, was that really it?

In the DBERR paper New Industry, New Jobs, published in April this year, one senses the influence of the First Secretary of State-he is fond of new titles, too-when he remarked that:

"We have maintained investment in the UK's infrastructure and public services, vital for families and for businesses. Underlying these decisions is a core judgment that despite the tough times, it is better to keep investing in growth and jobs so as to speed recovery and build the manufacturing and services we need for the future".

In the light of such reassuring words it might have seemed to the more trusting among us that we had little to fear and much cause for optimism. Yet, despite these warm words promising investment and concentration

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on skills, we were informed about some documents at the weekend which appear to adumbrate a gaping chasm between the Government's rhetoric on skills and their intentions on delivery.

Last Sunday, the Observer obtained papers which showed that, rather than commitment to the skills sector, the Government appear to be planning dramatic cuts, including cuts to front-line services. Skills, too, are falling victim to the Government's economic mismanagement. Apparently, preparations are currently being made for some £340 million of what are euphemistically termed "efficiency savings" in 2010-11. The First Secretary of State owes us an explanation. These cuts are planned for services on which the Government had specifically said they intended to focus. Exactly what are the noble Lord and his ministerial team planning?

We see, for example, investment for apprentices over 25 may well be cut by 10 per cent, in an area in which the Government have specifically promised to concentrate investment. We also learn that the number of career development loans will be halved and that £25 million may well be cut out of the new Adult Advancement and Careers Service. These areas are vital for adults wanting to re-skill or develop skills in order to maintain employment in a difficult economic climate. Something does not quite tally. It appears that this country is in danger of believing in reassuring promises which are not backed up by real commitment and investment. We are told, and it has just been repeated, that the Government have recognised their commitment to skills, but the facts do not back it up.

At a time when help to skill and to re-skill is needed most urgently, this is disappointing, damaging and inadequate. Of course, we welcome some of the proposals announced today. In particular, we welcome any measures that will improve flexibility in training and bring greater focus on individuals and their specific needs. As the First Secretary of State is no doubt aware, proposals moving in a very similar direction were set out in the Conservative Party's excellent Get Britain Working. I would offer to send the Secretary of State a copy of this report but, as he has included several of the proposals in his Statement, it would appear that he is already aware of it.

I am delighted to see in his place the noble Lord, Lord Leitch, who published an excellent report in December 2006. However, we have been waiting three years for a clear plan of action in response to that excellent report. I am not sure what today's Statement adds to the document entitled World Class Skills, which was published in July 2007 by the then Department for Innovation, Universities and Skills and which was notoriously high on aspiration but low on detail. We have just had official figures from DBIS; statistical first release shows that in the fourth quarter of the academic year 2008-09, the number of young people starting new apprenticeships was 36 per cent lower than at the same time last year. Between October 2008 and October 2009, the number of new apprentices has fallen by 20,000. I hope that the First Secretary of State will acknowledge that those statistics demonstrate a very worrying trend.

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It does not help that this Statement is being rushed out on the day before the House is prorogued at the end of the Session, following hard on the heels of the higher education funding review and framework. The Government have delayed their response to the challenge set by the excellent Leitch review too long, and incalculable damage has resulted. In the three years that we have been waiting, we have seen the number of 18 to 24 year-olds not in education, employment or training-the so-called NEETs-rise to a record 835,000. We have seen unemployment figures soar across the board. On this of all days, it is surely poignant but also appalling and unacceptable that we should contemplate now the possibility of another lost generation of young people.

Some of these recommendations are welcome. As I say, they are ones that we recommended. Others should be subject to serious examination and scrutiny, but overall they are too little and too late.

Finally, does the noble Lord acknowledge that the very real figure that has been published today is the one relating to the number of young people out of work? Despite the sort of commitments being laid out here today as an attempt to deflect attention from those figures, and the all-too-real impending cuts to the skills sector, it will take more than smoke and mirrors to build a world-class high value-added skill-based economy here in the UK. I hope that the noble Lord understands why this Statement leaves me full of misgivings.

3.58 pm

Baroness Sharp of Guildford: My Lords, from these Benches I also welcome the Statement and I thank the Minister for giving it to us. We share with the Minister the view that the role and importance of vocational skills have been consistently underplayed in this country and that more needs to be done to persuade young people-and older people-of the value of such training, particularly the value of progression within vocational training. We are delighted to see the emphasis on the higher-level technician, from foundation to degree level, emphasised in the Statement. As a member of the Skills Commission, which published earlier this year its inquiry into progression from apprenticeships, I fully endorse and appreciate that. It is vital that these young people are given aspirations to higher levels of training.

We also welcome the creation of the 35,000 new apprenticeship places for 19 to 25 year-olds, particularly for the advanced apprenticeships to level 3 and, I hope, level 4. We support the creation of university technical schools that the Government have begun to back through the academy programme, which mirror the German technical high schools. That is an area we need to explore further and we shall look with interest at how those schools progress. In particular, we enthusiastically endorse the re-emergence of individual skills accounts although we have some questions that I will put to the Minister about those.

I have a number of questions about the Statement. In the first place, as the noble Lord, Lord Hunt mentioned, it comes at the same time as rumours of a substantial cut in skills funding. The rumour is of a

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cut of £340 million in the skills budget, of which £100 million would be cuts in various quangos, including such bodies as the Learning and Skills Improvement Service. Some £250 million will come from the skills budget itself. Will the Minister tell us a little more about those cuts? In the Statement he said:

"We will not abandon our promise of basic skills for all",

but are the Government cutting the basic skills programme for numeracy and literacy?

What about the ring-fenced or safeguarded adult learning budget of £210 million? There are rumours that that will be cut yet it is an essential part of the broader provision of adult education services in this country. It is the remnant of what was a much larger programme at one point and it has been under threat for a long time. His right honourable friend in the other place, Mr Denham, earlier this year granted a reprieve and regarded it as a safeguarded budget, but what has happened to that budget?

Am I right in thinking that, as far as the department is concerned, there is a switch of this money from further education to higher education? The projection of funding in the annual report 2008-09 for what was DIUS indicated that, whereas the higher education budget would actually increase by some £300 million, the further education budget would be dropping from £300 million. Is that what we are now seeing? Is that actually because the Government have overshot in terms of projecting university numbers and underestimated numbers in vocational training?

The Minister talks about a dramatic reduction in the number of public bodies in this area following the UKCES report. I was delighted to hear that, but we have just passed the Apprenticeships, Skills, Children and Learning Bill, which trebles the number of quangos in the apprenticeship area, so it seems odd that the Government are now talking about a reduction. I notice in the UKCES report that among those that were questioned were the RDAs. However, since the Minister is reinforcing the RDAs I take it that they are not going to be culled, so which bodies will be? It has been mentioned that there will be a concentration of the sector skills councils. Is it really sensible for there to be an amalgamation just after those councils have been through a process of reaccreditation and where the industry and employers are happy with the representation that they have?

The Minister talked about a more strategic approach to skills in particular areas such as advanced manufacturing, low-carbon technologies, digital technologies and bioscience, but I remind him that cultural and creative skills is the fastest-growing area in this country. It now contributes 11 per cent to GDP and its growth rate is 9 per cent. There are many jobs in this area that cannot be filled by universities such as Bournemouth University, which has specialist programmes in this particular area. Is he considering putting the emphasis on this area as well?

It is excellent to hear that skills accounts are going forward, but what form will they take? The Minister spoke of trebling the number of public and private institutions that will accept credits. Which institutions are these, what form will the accounts take and how will they be credited?

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Finally, the Minister talks in paragraph 20 about the FE sector providing world-class skills. Will he congratulate the team who went to WorldSkills at Calgary this year and came back with eight gold medals, seven silver medals and five bronze medals? WorldSkills is scheduled to take place in the UK in 2011, when we will hope to match our success at the Olympics the following year.

Lord Mandelson: My Lords, I straight away join the noble Baroness in congratulating the team at Calgary-she is right to draw attention to their success. I thank her in particular for the welcome that she has given to the new skills strategy and the way in which she at least has addressed the proposals contained in the strategy, rather than offering what I hope the noble Lord, Lord Hunt, does not mind me saying was a broad-brush, rhetorical dismissal of what the Government are announcing today. I hope that it was not because I failed to give him the Statement sufficiently in advance for him to read it. If that is the case, I will remonstrate with my private office.

I also say to the noble Baroness that we have no intention of reducing the fund that we are making available for training unemployed people and any other needy and vulnerable groups in society, including those with learning difficulties and disabilities. We recognise the important part that informal adult learning plays in society and we will continue to support informal adult learning opportunities for vulnerable, low-skilled adults.

The noble Baroness and the noble Lord, Lord, Hunt, should not, I am glad to say, get carried away by anything they read in the Sunday newspapers. The savings target referred to in the rather hyped piece of virtual journalism was made clear by the Government in April at the time of the Budget, and in May in a public letter from my predecessor, John Denham, to the Learning and Skills Council. In implementing the changes, there will be no reduction in apprenticeship numbers or provision for needy and vulnerable groups in society. In fact, those are increasing. The noble Baroness and the noble Lord should not worry. We will fund the commitments that we are announcing today by progressively refocusing money from lower priorities.

I say to the noble Baroness that I am responsible for 19-plus provision. That is the context in which we are talking about sweeping away what I call the cluttered landscape of public bodies that are responsible for delivering our skills. The noble Baroness asked about cultural and creative skills. In many respects these are quality, value-adding skills that are essential for many of the new jobs that are being created in growing sectors of our economy. Where these are linked to employers' and businesses' demand for skills, we would like to see the number of those courses increased.

In respect of skills accounts, the information that the noble Baroness asked for is in the Statement. Our desire is to see public money following individual choice and going to courses and institutions that are providing the very skills and training that are needed and demanded by people.

I return to the questions of the noble Lord, Lord Hunt. We are certainly not abandoning the ambition in the proposals set out by my noble friend Lord Leitch

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that we should be a world leader in skills through the creation of a truly demand-led system and that we should integrate employment and skills services. We are on course to meet, or nearly meet, most of our interim targets for 2011, based on my noble friend's report, but we are behind on higher level 3. We need to do better there if we are to sustain recovery and return to growth. This historic gap in intermediate skills has led us to expand advanced apprenticeships as part of creating a modern technician class.

Lastly, in response to the noble Lord, he played on today's unemployment figures, particularly those relating to young people. Of course, any figures of that kind are disappointing and a cause for concern, but unemployment among 16 to 24 year-olds has not hit the 1 million that many people predicted; it is broadly-I repeat, broadly-unchanged. This is due not least to the guarantee offered by the Government to all 18 to 24 year-olds. The figures show a significant increase in the number of young people in full-time education, which indicates that the Government's guarantee is working.

As for the noble Lord's commendation of Mr David Cameron's "remarkable" speech last night, the last time that we heard a Conservative Leader of the Opposition pronouncing that government is the source of all our problems in our economy and society, and that the way to cut poverty and unemployment in Britain was to cut back government, poverty and unemployment soared to record levels after Mrs Thatcher came into office. I do not think-once bitten, twice shy-that anyone will be wanting to follow the advice and contents of Mr Cameron's "remarkable" speech.

4.13 pm

Lord Baker of Dorking: My Lords, I was about to welcome what the Secretary of State said, apart from the last few sentences. I welcome the Statement. I wish only that it could have been made five or six years ago. If it had, today the Government would not have to announce an unemployment rate among young people of 19.8 per cent. In particular, I welcome the Government's support for university technical colleges, which is the type of school that I and Ron Dearing, before he died, had been promoting. Technical and skills training must start at the age of 14. That is the key element for turning us into a skills-based economy. These colleges are for 14 to 18 year-olds.

Finally, the past 25 years has been a golden age for further education, under both his Government-I recognise what has been spent-and the previous Conservative Government. However, the handbrake is on in further education; many fine colleges, such as Lewisham College, cannot expand. In the noble Lord's talks with the Chancellor-it is rumoured that the Chancellor listens to him-can he ensure that in the expenditure programme for the next two years the budgets and programmes for FE are not cut?

Lord Mandelson: I am grateful to the noble Lord for his remarks. I know that the Chancellor of the Exchequer is personally and strongly committed to skills training and the FE sector. I am absolutely sure that he will do everything he can to protect these sectors.

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The noble Lord and the late Lord Dearing have championed university technical colleges. I am determined for the Government to do what they can to support their creation. They will offer new opportunities for 14 to 19 year-olds to undertake vocational and applied study. That is important because, as the noble Lord has argued, 14 is the age at which to capture young people's interest in continuing vocational education in many cases and not 16 and beyond. It is also important to ensure good progression, where it is desired, from university technical colleges to other routes of study, including advanced apprenticeships and foundation degrees.

Lord Morris of Handsworth: My Lords, I join those who have welcomed the Statement. I speak with a declared interest as chancellor of one of the universities that has an active policy of seamless transfer from technical colleges. Having spent most of my life in the manufacturing sector, I welcome the Statement's recognition that our training and skills must continue to evolve to meet the challenges of the new industries; for example, the carbon technical sector, as we seek to ensure that our environment is protected. It is a new sector that demands new skills and sets new challenges, and we need the training to deliver it.

It is important to ensure that our skills base as it evolves is ready to deliver transferable skills, because transferability is a key element in maintaining skills to meet tomorrow's challenges. Will the Secretary of State and the department consider encouraging employers to have annual skills audits so that we can keep abreast of the demands involved?

What progress, if any, is being made to unblock the capital budgets of the technical colleges, which are raring to move forward so that we can deliver on the aspirations and needs of our economy and secure Britain's competitiveness?

Lord Mandelson: I thank my noble friend for his encouragement and for what he said about the value of training and the need for investment in skills by government and employers alike, especially transferable skills. That will be one of the key features of the new technician class of advanced apprentices that we are seeking to promote. I take my noble friend's point about the need for capital expenditure. We are always seeking to unblock and increase this, even at times of constraint in public finance. It is right, as my noble friend emphasised, for the Government to focus support on the areas of the economy that will provide future growth and jobs. It is not about picking winners and losers, but about developing the skills that we need for the economy to succeed. It is about equipping people with the skills that they need in the key, high-potential areas of the future so that, just as my noble friend said, Britain remains competitive and the people participating in that success are able to command the sort of well paid jobs to which they aspire.

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