Further Education Colleges: Greater Manchester

Debate between Mike Kane and Liz McInnes

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.