Education and Employment Opportunities

Baroness Sharp of Guildford Excerpts

Thursday 22nd October 2015 Lords Chamber

[Baroness Sharp of Guildford (LD)]

My Lords, I have particular cause to thank the noble Baroness, Lady Stedman-Scott, for organising this debate. I had hoped to speak in the apprenticeship debate last week, but I had prior commitments that meant I could not. I am therefore very pleased indeed that this debate, which to some extent picks up some of the same issues, is taking place. I need to declare several interests. I am a patron of the 157 Group of large FE colleges. I am an honorary fellow of the City & Guilds of London Institute and of Birkbeck College.

I began my career back in the 1960s when I was a young assistant lecturer at the London School of Economics. At the time there was a technique known as growth accounting, which looked at where economic growth comes from, given the three factors of production that economists identified: land, labour and capital. With land not being regarded as an expandable resource, on the whole growth was accounted for by the increase in the population—of labour supply—and the increase in capital supplies in terms of investment. When they looked at the growth figures, they came up with what they called the “unexplained increment” in economic growth. This was put down on the one hand to technical progress and on the other to education—improvements in the capabilities of the labour force.

Those two elements have to some extent dominated my interests since then. I went on from the London School of Economics to play a part during the late 1970s in Neddy—the National Economic Development Office. Subsequently, I went to the Science Policy Research Unit in the University of Sussex, where I did a lot of work on research and development, and the role of research and development in promoting growth. I came to this House in 1998. Since then, education has dominated my interests, particularly further and higher education.

Going back to those days in Neddy, though, my job in the early 1980s was a very interesting one—a project looking at where Britain would be going in the 1990s. We called it the 1990s project. At the time, we identified an important trend. We had begun to see the disappearance of manufacturing industry in Britain. The textile, shoe and television industries were disappearing to what were then called the newly industrialising countries, such as South Korea and Taiwan.

What became increasingly apparent in our work—this picks up a phrase used by the noble Baroness, Lady Fookes—was the fact that Britain had to live by brain rather than brawn and that it would be very necessary to expand education generally. In those days only about 12% of the age cohort went to university. On the one hand it was about expanding higher education—one saw through the 1980s, particularly at the end of the 1980s, under the noble Lord, Lord Baker, when he was Secretary of State for Education, this very rapid expansion of the higher education sector—but we also recognised that skills were vital. We began a series of surveys of skills. I remember an OECD study that identified that Britain had an unduly high proportion of those with no skills and low skills. In particular, we lacked the intermediate skills—the HNDs and HNCs, the technician-level skills—that we needed.

Roll forward to the present day and we still have very considerable skills shortages. The total number employed in the UK is 31 million. As the noble Lord, Lord Blencathra, said, that is the highest number of people employed in this country ever. Of those, 23 million are in full-time employment and 8 million in part-time employment. Some 26 million are employed by other people and 5 million are self-employed. Self-employment and part-time employment have increased over the last two decades, even though, as the noble Lord, Lord Blencathra, suggested, it has decreased slightly in the last few years.

This is very interesting in itself: the shape of the labour market has become increasingly what some people call the “hourglass economy”. The top of the hourglass reflects the fast growth of high-skill, high-pay professional and managerial occupations, particularly those where skills are combined with technical and engineering capabilities. The bottom of the hourglass also reflects fast-growing areas of employment, but ones which are generally the low-skill, low-pay service sectors associated with personal care—children and older people, healthcare and healthy living—and the hospitality industry: restaurants, fast food, hotels and tourism.

The big change has been the drastic reduction in middle-range, blue collar management and clerical occupations. While these changes have in part been driven by technology, they also reflect globalisation and the push for more flexible labour markets. In turn, flexible labour markets have led to an increase in subcontracting in both public and private sectors, more self-employment and the rise of the zero-hours culture. Skills shortages mean that the expansion of the high-pay, high-skill sector has been accompanied by relatively higher pay, while the low-skill, low-pay sectors, although expanding in numbers, have seen little or no increase in their relative pay.

The general advice now given to young people is, not surprisingly, to aim for the high-skill high-pay occupations at the top end of the hourglass. This gold route—five GCSEs at grades A to C, A-levels and on to university—is now followed by almost 50% of the cohort of school leavers. But what of the other slightly more than 50%? Much noise is made about apprenticeships, but in fact only 6% of those school leavers go into apprenticeships. Some of the rest go straight into jobs with A-levels or their equivalent vocational qualification of BTEC, while others pursue jobs with lower-level GCSEs and vocational options.

Training on the job is the main source of training for these young people. Since 2011 the majority of apprenticeships have gone to those already employed. Most are not, as the public image of apprenticeships suggests, in sectors such as construction and engineering. As the noble Lord, Lord Young, said, the majority have actually been in sectors such as care, hospitality and business administration—those low-pay, low-skill jobs in the lower half of the hourglass. And most of these have been one-year apprenticeships, leading to a level 2 qualification—equivalent to GCSE with five A to C grades. Government pressure means that employers are shifting to providing longer apprenticeships of two or three years leading to a level 3 qualification—equivalent to an A-level—but this has yet to take effect.

The big skills shortages are at the technician level—the HND level—and we are not meeting them. The UK therefore ends up with a large number of young people going into the low-skill, low-pay sectors, receiving little by way of further training and with very little opportunity to develop a career pathway and upgrade their skills. It is hardly surprising that of every four people who were in low-paid jobs 10 years ago, three are still in low-paid jobs today.

The other side of the coin is that the UK, in comparison with our competitors, is well supplied with graduates—but we continue to suffer chronic shortages of those with intermediate and technician-level skills. The CBI recently reported that nearly 60% of employers—not just horticulturists and the arborealists—are worried that their operations will suffer because they cannot recruit people with the technical skills required.

Over the next 10 years, some 12 million of the UK’s 31 million workforce are due to retire, while the number of those emerging from the education system—approximately 600,000 a year—will total only 7 million. Many of those due to retire may stay in work longer, but this only serves to emphasise how important it is that there should be a route by which those already in work can upgrade their skills or retrain, in order to meet the country’s skills needs. Otherwise the trend, which is already apparent in UK industry, of filling those crucial vacancies with skilled workers trained overseas will become the norm. Meanwhile, many of those leaving school with relatively low skills will be locked into the low-skill, low-pay sector.

The scandal is that, just when we need to provide progression routes for upgrading skills, it is becoming more and more apparent that the Government are closing down those opportunities. The only game in town is apprenticeships. Outside apprenticeships, the adult skills budget has already been cut by 11% since 2013 and is scheduled for a further cut of 24% over the next two years. The traditional pathway for individuals wishing to retrain and acquire higher level skills—HNDs, HNCs and foundation degrees taken part-time at a further education college—has all but collapsed, while fees have trebled. Although loans are available, the terms are much less favourable than for degree-level students—and many mature students, already encumbered with mortgages or high rents, balk at the increased indebtedness. So if you cannot persuade an employer to fund you through a higher-level apprenticeship, there is very little you can do.

Alison Wolf—the noble Baroness, Lady Wolf, as she now is—in her latest publication, Heading for the Precipice: Can Further and Higher Education Policies be Sustained?, concludes that the result of current policies—I must confess that these are coalition policies as well as the policies of the current Government—is that:

“In post-19 education, we are producing vanishingly small numbers of higher technician level qualifications, while massively increasing the output of generalist bachelors degrees and low-level vocational qualifications”.

This as an immensely short-sighted policy and I hope that the Government will do something about it.