Further Education Colleges: Greater Manchester

Mike Kane Excerpts

Wednesday 15th June 2016 Westminster Hall

[Mike Kane (Wythenshawe and Sale East) (Lab)]

I beg to move,

That this House has considered further education colleges and skills in Greater Manchester.

It is a pleasure to serve under your chairmanship, Ms Ryan. May I beg your indulgence and that of other Members? As this debate is about Greater Manchester, we should pause for just a second to reflect that today is the 20th anniversary of the devastating IRA bomb in our city. I remember exactly where I was that day: I was loading my bike on to a car in Northenden, five miles away, and I still heard and felt the blast. I was one of the first civilians to be allowed through the cordon by the security services that week to see the impact at first hand. There were 200 people injured and £1 billion-worth of damage, and 1,000 business properties were wrecked. I pay tribute to the then Prime Minister, John Major, who stood side by side with the Labour authority at the time and—it is worth putting on the record—with the European Union, which pumped tens of millions of pounds into the regeneration of our great city, which started its great renaissance back then.

Greater Manchester is a city region of 2.7 million people and the fastest-growing metropolitan economy outside Greater London. The GM economy has great assets in health and life sciences, finance and professional services, as well as the creative and digital sectors, but there are considerable challenges with employment inequality and regeneration, about which there is wide consensus between stakeholders. Greater Manchester is at the forefront of moves to devolve central Government powers in England, which reflects the strong governance in its combined authority. Although it faces some challenges, the college sector in Greater Manchester also has considerable strengths. There are 21 colleges in the Greater Manchester region: 10 further education colleges and 11 sixth-form colleges.

I want to preface my remarks today by talking about skills in Greater Manchester, productivity and the link between productivity and pay. Finally, I shall discuss in detail the current area review, which is ongoing and hopes to report back in June. In GM, the education, skills and work system is currently characterised by the fact that 40% of children who enter school are not school-ready. Some 47% of young people in GM are leaving school without English and Maths GCSEs. We have a long-standing issue with low skill levels in our working-age population. Qualifications are an imperfect proxy for skill: nevertheless, Greater Manchester has enduring skills gaps at both the bottom and the top end of the skills spectrum. In GM, 33% of the 16 to 64-year-old resident population had at least a level 4 qualification in 2015, compared with 37% across the UK.

However, it is important to remember that there are larger differences within the GM districts than between GM and the rest of the country. For example, 48.4% of Trafford residents hold a level 4 qualification or above, compared with 25% in Rochdale—my hon. Friend the Member for Rochdale (Simon Danczuk) is here today—where there is huge inequality in educational attainment. Last year, 10% of 16 to 64-year-old GM residents did not have any qualifications at all, compared with 8.8% across the UK. In part, skills difficulties in GM owe something to historical problems with schools in the city region. In GM as a whole, in the past academic year 55% of pupils obtained five GCSEs at grades A* to C, including maths and English, which compares with the English state-funded average of 57.3%. Again, there are large differences within districts in GM.

The Greater Manchester city region has been a long-standing and emphatic supporter of apprenticeships. The districts that comprise Greater Manchester co-ordinate a strategic approach to apprenticeships through the apprenticeship hub. Of just under 30,000 apprenticeship starts last year, 27% were for 16 to 18-year-olds, 29% were for 19 to 24-year-olds and 42% were for those aged 25 and older. By level, 64% of starts are at the intermediate level, just over a third are advanced and 2% are at the higher level.

Analysis of job growth and economic forecasting suggest that the strongest job growth will be at level 4. Meanwhile, only a small minority of starts in the further education system are at that level, so there is an active debate about supply and demand mismatching. Employers in several key sectors report difficulties in recruiting the skills they need, and any MP who visits factories, workshops or other places of work in their constituency will hear that from the managing directors of those companies. In my constituency alone, I have recently been speaking to HellermannTyton, Manchester Airport and Endress+Hauser, and they have all highlighted that.

The city region is taking active steps to encourage more provision at level 4, including investing in apprenticeships and supporting the concept of an institute of technology in Greater Manchester. If I may be so bold, I really think that the agenda our current mayoral candidates should be talking about is how we close the gap in the Manchester economy. We spend roughly £23 billion on public services and we raise roughly £18 billion. The first job of any new Mayor will be to break even—to bridge that gap—so that we can become more powerful as a conurbation.

The skills challenge is not simply on the supply side, however; there are also issues relating to skills utilisation. For example, in recent years the number of graduates has risen faster than the number of graduate jobs in the local economy, in spite of Media City, the growth of Spinningfields as a financial district and the growth of parts of central Manchester as an agglomeration of law firms. Demand for skills is also likely to be constrained by the business models of GM employers. I am loth to criticise employers, but it is clear that many in the city region pursue low-cost, low-value, low-skill business models to a greater extent than is the norm in the UK. That has to change.

Let me move on to productivity. Labour productivity in Greater Manchester is lower than the UK average. In 2014 gross value added per job in GM was £39,000; in the UK it was £45,000. There are productivity gaps between GM and the UK in all the main sectors, with the notable exception of manufacturing, where GM has an advantage. The largest productivity gaps are in the knowledge-intensive sectors, including financial and professional services and property. In my recent discussions with Accenture, the company was very clear that the Greater Manchester economy lacks digital skills, which will be one of the largest growth areas in years to come. The low-productivity sectors account for a growing share of jobs; in 2000 they represented 35% of employment, but by 2014 the proportion was 40%. Overall, GM has a £10.4 billion productivity gap with the rest of the country.

Low pay is a significant problem in Greater Manchester. Nearly a quarter of jobs in GM pay less than the living wage. In some districts, such as Oldham and Rochdale, the proportion is around 30%.

[Liz McInnes (Heywood and Middleton) (Lab)]

Will my hon. Friend give way?

[Mike Kane]

I would be glad to give way; it has been a long stretch.

[Liz McInnes]

I am grateful for my hon. Friend’s gratitude—I can see that he is flagging a little. He makes a very good point about areas that get less than the living wage. My constituency is the second-worst in the north-west for constituents not being paid the living wage, which 40% of my constituents do not get.

[Mike Kane]

I could not agree more. The key thing is that it is a complicated mix of skills, qualifications and pay. I do not want to turn this into a row with the Government, but Opposition Members do not believe that the national living wage is the actual living wage, as defined by the Living Wage Foundation. As I said earlier, we need employers to invest in technology and the skills of their workforce, so that people can move up from cleaner to chief executive in all the companies in the conurbation.

Greater Manchester wages are still recovering from the effects of the recession. There has been a decline of living standards in Greater Manchester, where they have fallen faster than elsewhere in the UK. Average hourly pay in 2014 was below that of 2002. In 2004 workers earned £11.62 on average for every hour they worked. By 2014 that was £11. Since 2009 wages have fallen by 10%, and last year inflation-adjusted annual median pay was more than £1,200 a year less than the UK average. Low-paying sectors account for 36% of all jobs in GM’s total employment market of 1.2 million jobs, and some 400,000 people work in those sectors. Approximately 130,000 women and 90,000 men were low paid in 2014. Men’s wages declined most during and after the recession, leading to a shrinking of the gender pay gap due to that levelling down. By 2014, after adjusting for inflation, men earned, on average, £12.92 an hour and women earned just £10.37—a 25% differential. Well over half of young people under 25 are low paid.

The national programme of post-16 reviews was announced in July 2015 and will run for almost two years until summer 2017. There will be 41 reviews in total, covering all parts of England. The University and College Union has raised a number of serious concerns about the Government’s area-based review programme, both in general terms and specifically in relation to Greater Manchester. Currently the net liabilities of the post-16 sector are estimated to be £1.5 billion and there are around 80 colleges in discussions about mergers. Over the past five years, funding has fallen by nearly a third in key areas such as adult education. If we add inflation-based costs, colleges need to make efficiency improvements of around 40% to 50%. At the same time, the general trend is that quality is worsening, according to Ofsted, which is a damning indictment of the Government’s record in the sector.

The review in Greater Manchester started in September 2015 and is now reaching a conclusion. The core aim of post-16 area-based reviews is to ensure that colleges are in a stronger position to deal with the challenges they face in the future, making them more financially sustainable and better placed to provide the education and training needed in their local economies and communities. The July 2015 policy statement on the area-based reviews set out the expectation that they will lead to fewer, larger colleges. The draft proposals would create a number of new groupings in the further education sector: a group in the north comprising Bolton College, the University of Bolton and Bury College; a group in the east comprising Stockport, Oldham and Tameside Colleges; and a group in the centre that would include the Manchester College and Trafford College, along with a number of other training partners. There are also FE colleges that are yet to declare any alignment.

A significant flaw in the review process has been the exclusion of 11-to-18 schools and university technical colleges from discussions about the future structure of 16-to-19 education in the city region. Although there are good logistical reasons for managing a review process with a limited number of institutions, there are more than 50 schools with sixth-form colleges in GM, educating more than 8,000 young people. Some of those sixth forms have very small numbers and may not be financially sustainable at current and future funding rates.

There is also a problem with the banking system. One of the key barriers to implementing change in GM is the banks’ attitude to the sector. They insist on charging colleges with contractual break clauses for their loans when merging with other colleges. Those fees can amount to more than £1 million, which restricts viable colleges from coming together for the benefit of Greater Manchester. Does the Minister believe that colleges will have to divert funds from community development to cover those fees? The Department for Business, Innovation and Skills and the Treasury have set aside a figure for restructuring the FE sector nationally, which is rumoured to be in the region of £500 million. In GM it is being described as funding that will be available only as loans and not as one-off grants. Viable colleges will not want to saddle themselves with debt from the merger with another college.

So what needs to be done? It is clear that Greater Manchester needs to make progress in tackling the large number of people in the workforce without qualifications, as well as attainment at age 16 and higher level skills development. The area-based review and devolution of the adult education budget will help, but in the main they are focused on the 19-plus skills system. Much of the funding is spent on tackling the lack of achievement by age 16. The combined authority would like further powers over the 0-to-19 skills system, rather than its existing powers over the 19-plus skills system alone. Work is under way to put in place a memorandum of understanding with the Department for Education to ensure that its commissioning of provision is aligned with Greater Manchester’s needs and that decisions taken in one part of the system are consistent with those that we are making in the 19-plus part of the system, which will be a devolved matter.

The skills system is confusing for many people and the quality of advice and guidance on careers and education is variable. The Sainsbury review of pathways, which is due to be published shortly, could be significant in helping to clarify that. However, we need to recognise that current Government policy is that skills at level 3 and above are the responsibility of employers and individuals via adult learner loans. Such loans are currently available only for full qualifications, but many people and employers want and need specific short courses to gain employment or tackle skills shortages. Research has shown that 40% of digital and creative companies in Greater Manchester have lost business due to skills shortages. Targeted short courses, for example in social media, could help to solve some of those issues. Greater Manchester is therefore working with BIS as part of the devolution deal to examine the potential for flexibility in adult learning loans. It would be great to hear the Minister’s views on that.

We need to increase employer engagement in the skills system. We know, as local MPs, that there is a huge mismatch. There are some great examples, but there is a lack of consistency across Greater Manchester. We have to work with employer groups to get the message out about investment in skills and to get their input into the provision that GM needs to meet its future needs. We need better modelling of workforce requirements, so that we can train our young people for the jobs of the future. The apprenticeship levy is an opportunity to drive higher level skills development for new recruits to GM companies and to upskill the existing workforce, which will drive higher levels of productivity in GM firms. Greater Manchester has made the case to the Government for greater involvement in the apprenticeship levy implementation. It should also be noted that the devolved Administrations in Scotland and Wales have far greater control over the way in which the levy is spent. The area-based review will help shape an important part of the infrastructure that GM needs to develop future skills, but it only will be part of the solution.

[Ann Coffey (Stockport) (Lab)]

It is a pleasure to see you in the Chair, Ms Ryan. I congratulate my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) on getting this important debate for Greater Manchester. The decisions made in the review will have far-reaching consequences for young people and employers in the region. He gave an excellent and comprehensive outline of some of the issues that we need to tackle.

In my contribution, I will refer first to the excellent report prepared by Councillor Andy Sorton, who represents one of the priority 1 areas in Stockport—the Brinnington and Central ward. “Educational Attainment in Priority 1 Areas” was produced in July 2015. In his foreword, he sums up the problem:

“Recent GCSE results showed a substantial drop in attainment for secondary school children in priority areas. Attainment in the Central Area of my ward fell from a low base of 36% attaining 5 A*-Cs in 2012-13 to only 14.3% in 2013-2014, a drop of 21.7%. In Brinnington this drop was 43.2% to 20.9%, a 22.3% fall. To contextualise this, performance in Stockport was, on average, 58.4%.”

The latest available figures, for 2014-15, show an improvement on that 36% attaining five A* to Cs in Central, but in the Brinnington area there was a further fall back to 15.3 %, a drop of 6 % on the previous year. Average attainment for the borough was 58.3%, similar to the previous year. Those are shocking statistics.

Stockport is a borough of contrasts, with areas among the 1% most and 1% least deprived in England. The “State of the Nation 2014” report, in a summary of the overall progress being made across the north-west, commented:

“38 per cent of poor children fail to achieve the expected level in reading, writing and maths at age 11: this varies from 32 per cent in Halton to 48 per cent in Stockport.”

Interestingly, of the four secondary schools with the highest number of students from priority 1 areas, when looking at English and maths GCSE results, only disadvantaged pupils at Stockport Academy performed well when compared with their peers by Ofsted. Stockport Academy was built under the Building Schools for the Future initiative of the previous Labour Government, recognising that issue of inequality of attainment for children in poorer areas.

There are further statistics, such as the December 2014 ones on 16 to 18-year-olds classified as NEET—not in education, employment or training—which suggest that 11% of young people from priority 1 areas fall into that category. The comparable figure for the rest of the borough is 4%. Also, 18% of 18-year-olds in priority 1 areas are not in education, employment or training. On absences, pupils from priority 1 areas are almost three times more likely to have an unauthorised absence from school than pupils from outside the areas. Also, 12.4% of all pupils from priority 1 areas were recorded as “persistent absentees” in the 2013-14 school year. That is more than twice the average rate across Stockport, which stood at 6.1 %. The unemployment benefit claimant rate in priority 1 areas is three times the average for the borough. We all know the lifetime effect of failure in the education system for young people and their families.

In an October 2015 letter sent to Greater Manchester MPs, David Collins, the Further Education Commissioner, and Peter Mucklow, the Sixth Form College Commissioner, announced the area review of post-16 education and training institutions. The letter stated:

“This is an important opportunity to shape the provision for learners and employers in the Greater Manchester area and to ensure clear, high quality professional and technical routes to employment, alongside robust academic routes, and better responsiveness to local employer needs delivered by strong, high status, and where relevant specialist, institutions.”

I agree.

I also agree that savings could be made by amalgamation, with consequent administrative changes, such as the sharing of human resources and payroll, or by looking at duplication of course offers, provided that no young people are disadvantaged by travelling costs. There could also be an argument for having one principal for all the colleges. The area review, however, must also address that issue of inequality of attainment in secondary schools, and the response of the post-16 sector to that.

In the area review, I want to see proposals for further education that will engage young people, such as those in Brinnington, because the challenges are huge. If young people have lost interest at school and have stopped attending, how will that change when they reach 16? How will their educational attainment be improved by a further education offer when they have already failed in the secondary system? At the very least, the offer that Stockport College or colleges in other areas make must be local, and attendance must be affordable for the young people and their families. They must believe that what is on offer will make a difference to their life, that it is something they want to do, and that they will get a job, or self-employment, from it.

Those young people have ability and they are creative, but they are young people for whom the education system and the wider social care system have failed. They are the children of the children I worked with as a social worker; some are the children of those children. Failure will be the inheritance of their children, and they and the wider community will continue to pay a price for that.

Those issues are, of course, not within the remit of the area review, but the response to the review has to have regard to the circumstances of those young people. I will be interested to hear whether, as part of the review, any young people talked to the commissioners about their issues and how they might be engaged more in learning and developing the skills that future employers will need.

As my hon. Friend the Member for Wythenshawe and Sale East mentioned, we are going through huge changes in jobs as a result of automation. I am the co-chair of the all-party group on retail, and we are undertaking an inquiry on the effect of automation on jobs. It is clear that there will be more jobs in retail, but entry-level jobs will be not shelf-stacking, but managing the robots that stack the shelves. That will change the entry-level skills needed. We have to meet those challenges by ensuring that all young people—particularly those who are difficult to engage—have those skills.

I would like, in the area review’s reorganisation of colleges and courses, an offer of partnership working between young people and secondary schools in every locality. Without that, any reorganisation will continue to exclude young people from the opportunity to achieve something in their life by making them an offer that they cannot or will not accept.

[Mike Kane]

My hon. Friend makes a powerful point about joining up the skills system and the further education system. It is astonishing to most Labour Members, who have in general been warm supporters of devolution, that the schools sector has not been devolved. Michael Wilshaw, the chief inspector himself, has said that local politicians in Manchester and Liverpool should get more involved in improving standards in our schools. The one way in which we could do so is by having the school commissioner system devolved to the conurbations. Does she agree?

[Ann Coffey]

I absolutely agree. That is an excellent point, which I am glad my hon. Friend has made, because I was about to make it. I put that point to the FE Commissioner—indeed, I sent him a copy of that report—and he assured me that he was on the case. As my hon. Friend has just said, however, if we are to make partnerships work, we cannot have national Government in charge of one part of the partnership and local government in charge of the other. That is where there has been a history of failure in delivering social policy. On the provision of education and skills to young people, there is no longer a separate education agenda and skills agenda; they have to be integrated from quite an early age. I agree with my hon. Friend that for the partnership to work, it must all be devolved to Greater Manchester. That is my plea. I hope that we can have further discussions about how we can make the partnership work, engaging those all-important primary and secondary education systems in how the FE sector responds.

--- Later in debate ---

[The Minister for Skills (Nick Boles)]

I will be very happy to, Ms Ryan. It is a pleasure to serve under your chairmanship, and to respond to what has been a really interesting and constructive debate. I congratulate the hon. Member for Wythenshawe and Sale East (Mike Kane) on securing the debate and on approaching it in such a thoughtful and constructive fashion.

The area review is taking place in the northern powerhouse, in the Greater Manchester authority. I am sure that we would all be happy to admit that the co-operation between the Manchester authorities has been long standing and has many mothers and fathers. Nevertheless, I hope that hon. Members will recognise that on the northern powerhouse’s birth certificate the name George Osborne is there as “father”. The delivery of the vision of the northern powerhouse is what the area review and devolution of skills to the Greater Manchester combined authority are critically designed to achieve.

[Mike Kane]

The shadow Minister, my hon. Friend the Member for Blackpool South (Mr Marsden), is the historian, but I just want to point out to the Minister that it was Daniel Adamson who built the ship canal in 1860 and who coined the phrase “northern powerhouse” when he envisaged a single market from the banks of the Mersey estuary to the banks of the Humber estuary—but carry on.

[Nick Boles]

I am always happy to be corrected on a point of history; I am sure that there is room for Mr Adamson’s name on the birth certificate as well.

It is a great pleasure to respond, because normally I find in these debates that, when the fundamental purpose of the Government’s policy has been attacked, I have to spend so much time explaining and defending it that I cannot actually address any of the more detailed questions of implementation that have been raised. Today, given that there seems to be a general acceptance that, at least in principle, the area review has the potential to create a stronger and more sustainable system of further education in Greater Manchester, I hope that I can actually spend the time available addressing some of the particular points.

I will start with the points made by the hon. Member for Wythenshawe and Sale East. As his hon. Friends have said, he gave a brilliant exposition of the skills challenges facing the Greater Manchester area. He specifically asked about concerns raised by the UCU. I want to reassure him that last week I met the union’s general secretary to discuss some of those concerns and how we can ensure that, where possible, we consult trade unions and their members on some of the ideas emerging from the area reviews. I have asked the union’s general secretary to come back with some specific ideas about how that might work. I hope that will satisfy some of the hon. Gentleman’s concerns.

The hon. Gentleman asked an important question about break clauses on bank loans—I have been asked it before in the House but have never had long enough to go into detail. I know that this has caused people some concern. We do not yet have a specific example of a college that is facing a very substantial payment that it was surprised by and that it does not want to enter into. The first point to make is that in the restructuring of bank facilities it may be, in a merger or some other kind of transaction, that the bank will have the technical right to impose certain charges. It is a matter of negotiation. They may have the right to, but if they see that the overall new construction or group is actually going to be a better borrowing risk for them, and make it more likely that they will get their money back or be able to lend more money, which is what banks are in the business of after all, then they can novate loans—to use the jargon—without break costs when the new loan is lower risk.

The critical point, which will apply not only to break clauses but to everything in a sense, is that although we will be strongly encouraging colleges to undertake the changes and mergers when that is what is recommended, ultimately that will be a decision for them. They are independent institutions and they will be able to take into account the full range of costs and benefits. There may be costs, to some extent, or bank charges, but they will need to go ahead only if the benefits of other cost savings or advantages are greater than those charges. As I said, I hope that in reality those charges will not prove to be as much of a problem as the hon. Gentleman perhaps feared.

The hon. Gentleman raised a very interesting question that we will not be able to go into in great detail now. However, I hear him and have some sympathy with his point that adult learner loans are not available for short courses. Although we have career development loans, their terms of repayment are less attractive to students than those of adult learner loans.

--- Later in debate ---

[Mike Kane (Wythenshawe and Sale East) (Lab)]

It has been good to have the time and space to debate this matter and I thank everyone who has contributed. My hon. Friend the Member for Stockport (Ann Coffey) was right to highlight inequality within boroughs and not just between boroughs, as I did in my speech. We must reflect more on that in the review process. She continues to champion the cause of carers, people in care and their further education, which she does brilliantly in this House.

I could not agree more with my hon. friend the Member for Rochdale (Simon Danczuk), or rather I sort of agree and disagree. Level 2 to level 4 skills are missing. I believe, although I do not have empirical evidence, that globalisation and the advance of technology is sucking out some jobs as we go to advanced manufacturing in our economy. We must address that. People now in their 40s and 50s who did apprenticeships when they were young are being hit hard by globalisation and sometimes blame the wrong people politically. We as politicians must all think more about that.

My hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) is right that we must have strong local colleges. They are doing amazing things in Tameside. Agglomeration and specialism are the way forward, but it must be remembered that that is easier in the south-east where there is fantastic transport. There must always be a strong local element.

My neighbour and hon. Friend the Member for Manchester, Withington (Jeff Smith) is right that there is a feeling that this is more about form than function. It must concentrate on what the outcomes are for young people rather than protecting institutions as they stand.

The shadow Minister is an historian, and he does not have to prove his Mancunian roots to me. We have been talking about this ever since Arkwright, who powered his mill in Miller Street in 1792, and the industrial revolution—I will match my hon. Friend history for history. He is right to highlight the concerns of the UCU.

It is good that the Minister is talking to the trade unions. I will take his word about the break clauses and we will try to find specific examples to help the Government work this through. I will take him up on his offer to provide ideas for learner loans. I agree with him that Theresa Grant is one of the finest local government officers in the conurbation. She is leading on this and we wish her all the very best in the review.

Question put and agreed to.