Welcome Financing of Further Professional Training: The UK Approach 10 November 2006 Presented to CEI Human Resources Development Forum by David Greer

Skills in England 01

Employers ignore skills shortages at their peril 12 million workers have reading age of children MPs warn of harm from low skills Skills wanting Skills initiatives put employers in control

Skills shortages continue to have a negative impact on UK productivity and competitiveness in the face of fast-growing economies – China, India, Brazil. 16% of Employers in England claim to have staff with skills deficiencies according to The UK National Employers Skills Survey Over 5 million people of working age in the UK have no qualification at all. Skills gaps cost employers £10 billion in lost revenue each year. The big picture

The UK is the fifth largest economy in the world but its prosperity has been constrained by its relatively low skills base. –Over one third of adults in the UK do not have basic school- leaving qualification – double the proportion of Canada and Germany (Leitch Interim Report 2005). How do we compare?

The UK is under increasing threat from international competitors. –The UK continues to have relatively poor productivity performance. Output per hour worked is almost 30 per cent higher in France and more than 10 per cent higher in Germany and the US than it is the UK (Leitch Interim Report 2005). World class status is a challenging target. –However, if we are to achieve our present ambitious targets we will move up the league table. How do we compare?

UK Government Response: ‘Skills for the 21 st Century’ (2003) 02

‘We believe it is right in principle that those who benefit most financially should also contribute to the cost, while protecting the interests of those who need most help and cannot afford to pay. The Government should be clear about our priorities, so that we can focus public funds where they will achieve most benefit, particularly in raising national competitiveness and creating sustainable employment.’ ‘Skills for the 21 st Century’ (2003)

‘We want to encourage the development of skills right across the board. Supporting the development of higher level skills and qualifications is every bit as important in a knowledge economy as helping those with no or low skills. Many of our skills deficits are at those higher levels.’

‘Skills for the 21 st Century’ (2003) ‘So the strategy must provide a framework which encourages such investment. But that is different from deciding who pays for it. The state cannot pay for everything. So in deciding the right focus for allocating public funds, we must take account of where there are market failures which block investment in skills, as distinct from where the rates of return to individuals and their employers make it fair to expect them to contribute to the costs of their own learning.’

‘Skills for the 21 st Century’ (2003) ‘On this basis, our priorities in using public funds are: –The introduction of an entitlement to free learning for adults without qualifications, to help them gain a full level 2 skills foundation for employability. This extends the existing priority of improving adults basic skills in literacy, language and numeracy. –Supporting those who are developing their qualifications to a higher level in technician, advanced craft and associate professional skills, particularly where those meet sectoral and regional skills priorities.’ –Supporting those who are re-skilling for new careers, and those preparing to return to the labour market, again particularly where that meets sectoral and regional skills priorities.’

‘Skills for the 21 st Century’ (2003) ‘On average, those with level 3 qualifications and above have higher incomes and are more likely to receive training at work for free. Moreover, adults in the UK contribute relatively little to the costs of their own learning when compared with other countries. In an OECD study, 19 per cent of British individuals undertook education and training that they had paid for, compared to 29 per cent in the US, and 37 per cent across the 11 OECD countries in the study.’

What progress have we made? 1 million more people with literacy and numeracy qualifications Those economically active with no qualifications almost halved Record number of apprentices - across more sectors Skills Academies – leadership and investment by major companies Level 2 Entitlement introduced

What progress have we made? New qualifications owned by business e.g. IT and ‘Lean Manufacturing’ Management and Leadership Programmes for 21,000 MDs in SMEs Employer investment in training reaches £33 Billion per annum

UK Government Response: ‘Getting on in business, getting on at work’ (2005) 03

‘The reforms in this White Paper, implemented as part of the Skills Strategy, are designed to deliver for employers a framework for skills and training with the following key elements: A commitment to deliver publicly-funded skills training in a way that is directly led by the needs of employers, as our contribution to a national partnership which promotes higher levels of investment and commitment in training by employers.’ ‘Getting on in business, getting on at work’ (2005)

‘More people with the right skills and qualifications to be effective and productive at work, through the reform of education and training for both young people and adults. That will cover skills at every level from functional literacy, language and numeracy, to technician, advanced craft, skilled trade and associate professional skills at Level 3, Apprenticeships, and through to higher education.’ ‘Training designed and delivered in a way that best meets employers’ needs, through the implementation of the National Employer Training Programme (Train to Gain)’ ‘Getting on in business, getting on at work’ (2005)

‘The Government is committed to using the funds and powers at our disposal to ensure a much more demand-led approach to training, driven directly by customer needs. To that end, we will invest public funds, focused on the main market failures at national, regional and sectoral levels. We will set the strategic framework and will secure quality assurance and necessary infrastructure. Above all we will provide leadership for the alliance of partners that is needed to change our national culture in valuing skills.’ ‘Getting on in business, getting on at work’ (2005)

‘Employers will have new powers to shape the design, content and delivery of training to meet their needs. In return, we look to employers to invest more in training, where there is a clear return to the employer and the learner. We look to them to engage more actively in developing and deploying skills to meet business priorities, and to articulate their needs in a way that schools, colleges, universities and training providers can understand and act on.’ ‘Getting on in business, getting on at work’ (2005)

‘We recognise that many employers already invest heavily in skills – a total of £33 billion per annum including wage costs – and are committed to investing in their people. But many firms do not express a need for skills because they pay low wages to low-skilled staff to produce low-value goods and services. Our national objectives cannot be met unless more organisations set higher value business strategies, and invest in skills to support those strategies.’ ‘Getting on in business, getting on at work’ (2005)

A new National Employer Training Programme (Train to Gain) will give employers real choice over the training they offer their employees. A new partnership with employers to support training at Level 3 and 4 in technician, advanced craft, and associate professional skills. Clear guidelines on priorities and levels of public expenditure balanced by expectations of increased business and individual contributions to the costs of training Key developments

Individuals will be helped to gain new skills and higher qualifications. Whether it be moving from welfare to work, sustaining employment, or moving out of the low-skill, low- pay trap, the system will be geared to the needs and aspirations of the individual. Information and guidance will be strengthened, qualifications reformed, and the new Level 2 entitlement introduced nationwide with the full cost of tuition met by the Government. Key developments

Reforming training supply is an essential part of creating a new, responsive system. We have many high performing colleges, universities and other training providers who work well with business and provide education and training which support individuals’ employability and career progression. However, the standards of the best must be extended to all. Key developments

Create new National Skills Academies at the apex of the skills system. Skills Academies will be employer-led and form a strong network in each sector linking Centres of Vocational Excellence with universities, training providers and specialist schools. They will raise standards across the system by fostering innovation, spreading best practice, shaping the curriculum, and improving the professional development of teachers, lecturers and trainers. Skills Academies underline our determination to transform the quality and status of vocational education and training. Key developments

TRAIN TO GAIN The National Employer Training Programme

TRAIN TO GAIN – the National Employer Training Programme DEFINITION Train to Gain is a new service to help businesses get the training they need to succeed. Train to Gain offers a new way of working with employers that uses an independent and impartial brokerage service to diagnose business and training needs, sourcing training and wider business development activities, as appropriate

TRAIN TO GAIN WILL… Be a service to employers Be Demand led Provide employers with a broker working to national standards and linked to a reformed business support service Offer access to LSC core programmes: Skills for Life, NVQ level 2 and 3 qualifications, and Apprenticeships Promote jointly funded investment in higher level skills, leadership and management support and Investors in People Provide Information and advice to employees

NEW TRAINING PROVIDER STANDARD FOR EMPLOYER RESPONSIVENESS AND VOCATIONAL EXCELLANCE PROVIDERS WILL… Have a high proportion of staff with recent experience of the industry they support Be flexible in delivering training at a time, place and pace that suits employers and their staff Build strong links with skills brokers, business advisers and other business organisations, to deliver an appropriate mix of training and business solutions Build on links with schools, Higher Education, other providers, and become central to supporting local economic development

WHAT SUCCESS LOOKS LIKE FOR EMPLOYERS Employers will rate the skills brokerage service highly in helping them overcome critical skills needs. –Level 2 and Skills for Life but also Apprenticeships, higher level skills and Management and leadership training. Training providers will deliver in ways which directly benefit the business without disrupting operations. Employers will be able to clearly identify the business benefits and progressively increase their own investment in training. Employers will be helped by Skills Brokers to access wider business advice from business brokers, and recruitment support from JobCentre plus.

WHAT SUCCESS LOOKS LIKE FOR EMPLOYEES At least 190,000 adults will start a first full Level 2 qualification in 2006/7 and greater numbers in 2007/8. Many of these will also improve their Basic Skills in the process. Many more employees will undertake other forms of training funded by their employer ranging from short courses to higher education. The personal benefits gained will encourage more employees to invest in their own training and development.

WHAT SUCCESS LOOKS LIKE FOR TRAINING PROVIDERS Excellent provision accelerated and demonstrates responsiveness to employer and learner needs through FE White Paper reforms. New economic mission for Further Education delivers productive and rewarding employment opportunities to young people and adults. Specialist providers supply world class services with world class facilities. New high quality providers enter the system bringing innovation and driving up quality through increased contestability. New providers and existing good providers openly compete for new and existing learning programmes.