John Healey – 2003 Speech to the Association of Colleges Conference

The speech made by John Healey, the then Economic Secretary to the Treasury, on 12 November 2003.

Thank you for inviting me to join you at your conference.

I know I am the first Treasury Minister to speak to this conference, but then this is the first Association of Colleges conference exploring the theme of the wider economic, not just educational, role of colleges.

I know some in the sector feared the new skills strategy launched in summer would downplay or diminish the importance of colleges to what the Chancellor has described as the “national effort for skills”.

The special contribution of colleges

There are indeed some very significant challenges for FE, particularly in raising and responding to demand, which I will return to.

But on the contrary, this drive to inspire and develop the workforce of the future – and today – will not succeed unless colleges make more, not less, of a contribution.

I am also a fan of Further Education. FE is unique, offering a breadth of learning to a range of learners which no other part of the education and training system comes close to matching.

This year the LSC is funding nearly 6 million learners in post-16 education and training – of which 3.9 million are in FE. You offer special opportunity and support for many who may not find a place elsewhere in the education system – only half of 16 year-olds going into FE have good GCSEs, compared to more than three quarters entering school sixth forms; 2 in every 5 students entering higher education do so via FE colleges; and over 27% of your FE learners are drawn from the 15% most disadvantaged areas in our country. In the area I represent as a Member of Parliament in South Yorkshire, 45% of all our FE learners are from the 15% most disadvantaged areas.

This is one reason why general further education is so important to a Labour government.

Skills are a government spending priority

But I’ve always argued that learning and skills are much more than a matter just of education.

When one fifth of Britain’s productivity gap with Germany is due to our skills deficit – then skills are a central economic concern.

When people with poor literacy and numeracy are up to five times more likely to be unemployed or out of the labour market altogether – then skills are a mainstream employment challenge.

When failures and barriers in the training market discourage employers from developing their workforce – then skills are a major enterprise policy.

And when those who are part time, poorly paid or already poorly qualified are less likely to get training at work – then skills are a serious equality issue as well.

Starkly put, the UK economy will not maximise its long-term growth or jobs potential – and UK society cannot be inclusive – if over a third of the workforce have few or no skills and qualifications.

When I first got the job of Adult Skills Minister in May 2001, I went into the tea room at the Commons, and another MP came up to me. “I hear you’ve got a Ministerial job” he said, excitedly. “Yes I have.” I replied, just as excitedly. “What is it?” “Minister for Adult Skills.” At that point I saw his eyes glaze over, and he was looking over my shoulder for someone else to talk to.

We have come a long way since then, and skills, learning and workforce development are more central to much of what government is doing, and what we aim to do for the economy, public services, employment, business support and individual citizens.

That’s why the preparation of the national skills strategy launched this summer, which was so well led by Ivan Lewis at the Department for Education and Skills, drew heavily also on input from the Department of Trade and Industry, the Department of Work and Pensions, and the Treasury.

Investment in further education

You know the total planned investment in FE via the LSC was £4.4 billion last year. You know it is £5.2 billion next year, rising to £5.6 billion in 2005-6.

So, I hope you see this 19% real terms rise over the current spending review period as a major commitment to, and a mark of confidence in, the further education sector.

It is confirmation that you have a central part to play in helping us in government achieve economic and social, as well as educational goals.

Investment priorities

However, and you might expect me to say this as a Treasury Minister, with powerful competing demands on the public finances, a central issue is not only how much the Government invests, but how we determine what we prioritise for spending, and where we expect a greater contribution from other sources.

I’ve mentioned that over a third of our workforce – 8.3 million adults – have poor skills and qualifications. This compares with under 20% in Germany, and around 10% in the United States.

Failures and barriers in learning market

Now, some of the critical UK skills demands are at higher levels. But the returns from learning beyond level 2 become much clearer and much more direct, both to individuals and employers.

It is right therefore, I believe, to demand a different balance of investment between individual, employer and state for such learning.

This economic rationale, if you like, reinforces the basic fairness case that has led Government to target our intervention on basic and level two skills.

Basic skills for adults are vital – and the fact that between April 2001 and July 2003, nearly half a million adults improved their literacy and numeracy levels – three quarters of them through FE – is a tribute to the colleges and other providers who have responded to the Skills for Life challenge. In my view, our Skills for Life targets are the toughest anywhere in the education field. Since April 2001, more than 3 million learning opportunities have been provided – but we don’t count these against the target. 1.85 million learners have completed literacy, numeracy and language courses – but we don’t count these against the target. We only measure and score a learner who is tested and achieves a qualification above the level they started. And if they go on to achieve level 1 after entry qualification, or level 2 after level 1, we only count them once against this target.

Now if literacy and numeracy are essential “skills for life”, level 2 is increasingly seen as the base level for successful participation in the labour market. And if the UK is to realise and sustain full employment, and if we are to increase rates of productivity gain, we must achieve the policy goal of fully-funded, flexible opportunities for every adult to learn to level 2.

Beyond this, the Government is ready to consider extra backing where specific level 3 skills shortages are confirmed, but evidence shows that employers are much more likely to invest in training for staff who already have level 2 skills, and that such staff are also more likely to seek or continue training on their own initiative.

But we also know that there are other real barriers to the efficient functioning of the learning market.

For staff, securing the necessary time out from work for learning can be hard. For employers, the cost of allowing their employees time off for training may be prohibitive, particularly for smaller firms.

This is why we launched the programme of Employer Training Pilots, in 6 English LSC areas, then extended this to 12 in the 2003 Budget. So that, in addition to entirely free level 2 training provision and advice, employers that give staff leave to learn in return receive costs compensation from Government – geared especially to support small companies.

The results of the first evaluation are due shortly but early indications are very encouraging. At the end of the first 12 months of the six pilots, our first year targets had been hit with around 3,500 employers and 17,000 employees signed up. Moreover, 70% of these firms employed fewer than 50 people, and 40% had never had any contact with public agencies or funding before.

Importance of demand

I am glad that Alan Johnson was able to speak to you yesterday and underline the challenges of supply-side reform in further education – raising standards, improving accountability, reducing bureaucracy, developing all staff and also meeting what he called the challenge of college leadership.

But in our drive to improve skills, the demand-side is equally important. Raising the UK’s performance on skills requires concerted and coordinated effort from all stakeholders – a strong theme throughout the new national skills strategy.

Government must play its part to deal with market failures, and also to support individuals and employers in their efforts to increase skill levels.

Employers must take responsibility for the training and development of all their staff to meet the needs of their business or organisation.

Individuals must take responsibility for their own personal career development, and be prepared to learn and relearn new skills.

And from all three sources, we must increase levels of demand for, and investment in, learning.

Further education supply and employer demand

We must also, of course, ensure that the system of provision responds better to the particular needs of local employers and local economies.

There are, I know from my time in DfES and my work in the Treasury, some exceptional examples of demand-led provision across the country. But too often the department, learning centre, college or other provider is just that – “exceptional”.

This was a major reason for the programme of Centres of Vocational Excellence which establish firm links between employers and high quality learning providers to tackle priority skills demands in their area – a programme which has now established 250 COVEs in a little over two years.

This was also part of the rationale behind our Employer Training Pilots.

However, the broader drive for closer links between learning providers and employer lies, of course, in the system for planning and funding provision, led by the LSC, but increasingly aligned with RDAs, Business Link and Sector Skills Councils’ strategies.

As LSCs gain greater funding freedoms and flexibility – and as we devolve 3-year budget planning through the system – there is an important opportunity for colleges to be more active participants in this system, rather than passive recipients of funding decisions made elsewhere.

Perhaps I caricature colleges as “victims”?

But when – as the AoC recognises in this conference theme – there is a policy imperative for learning providers to respond to the demands of local labour markets and local economies, it’s reasonable to ask:

Why have colleges only collected £44m in fees from employers, against a total budget of £4.4 billion last year?

Why have so few employers chosen colleges to provide learning in the Employer Training Pilots?

Why are college corporations often the last choice for an employer who wants to serve on a local community body?

There is certainly more that colleges can do to design courses, develop facilities and deliver learning in ways which meet the demands of local employers and the local economy.

The AoC’s support – and the substance of this annual conference – are important steps in this direction.

In Government we look forward to working with you and your members in FE, to tackle this challenge.