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World Class Skills 2020

February 8, 2007

World Class Skills 2020

Mr. Mark Field (Cities of London and Westminster) (Con): I thank the Minister for his report?I well understand the hard work that he puts into the subject. He knows that I have served on the advisory committee of the London School of Commerce for the past two years, and higher education issues and international concerns, on which I shall speak later, have come to the fore.

As the hon. Member for Bristol, West (Stephen Williams) pointed out, there is little doubt that vocational training has for far too long been a Cinderella item on the education and skills agenda.

The Government are right to identify that fact and to create a vision for the next decade or so. I support the fact that the Leitch report pays significant attention to the role that further education must play in remedying the skills deficit. There is little doubt, however, that we urgently need to up our game.

The biggest risk posed by globalisation is that it will leave many people in its wake. However, the Minister got it absolutely right when he discussed challenges and opportunities, rather than focusing only on risks, or considering the subject in a downbeat manner. He was absolutely right, too, to identify the fact that we are seeing not just the outsourcing but increasingly the offshoring of ever more skilled roles to India and to China in particular. Hundreds of thousands of computer science students graduate in China and India every year, and there is a rather miserable comparison to be made with the 3,500 computer science students who graduated in the last full year in the UK.

I have been to India, China, Bangladesh and Kuala Lumpur to observe their education systems at first hand, and I have seen tremendous growth areas. We have great benefits in this country: we have a relatively skilled work force?we must not be complacent about that?and we have the great advantage of the English language, which is the world language of business and continues to provide us with tremendous advantages. However, as my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) pointed out, those advantages must extend to all parts of the community. There is a big risk to social cohesion, and I shall say more about that later in relation to immigration. However, we do not want to discourage very skilled people from coming to this country. Indeed, here in London we have some of the most skilled people not only in investment banking, but in a number of professional fields.

Equally, part and parcel of life in a cosmopolitan and globally focused country is the fact that unskilled workers come here for a short period, whether as seasonal labourers or as young people wishing to take advantage of life in London for a year or two before returning home. However, that aspect of globalisation gives rise to some important concerns about social cohesion that are especially applicable to London. At the same time, the UK is wedded to a European model of high benefits and increasing employment regulation, with a 35 or 48-hour week that would make many people laugh. I would have supported the Government if they had retained our opt-out of the social chapter, but they have done good work and I hope that they continue to do so to ensure that employers have the flexibility to make the working week as long as possible. In India or China, people regard the prospect of being allowed to work for only 48 hours a week as laughable. It is certainly by no means the norm, and we will lose enormous opportunities and our place in the world economy in the decades ahead if we do not become more flexible.

Employment regulation will be the legacy of the Chancellor of the Exchequer, but like most micro-economic meddling, it takes a decade or so to work through the system, so only in the decades ahead will we experience the precise disadvantages of the thinking behind that policy. In the general debate about education and skills, too much attention is paid to schools or universities. Education should not be regarded as ending at age 16 or in one’s early 20s. I entirely agree with the hon. Member for Bristol, West: it is easy to be derisive about so-called trendy degrees such as media studies, and the real challenge is to make such courses robust and relevant, ensuring that there is greater employer involvement.

The creative industries, alongside financial services, and the energy, tourism and hospitality industries, are vital to this country. Some of the most important, cutting-edge employers in the computer games industry are based in Soho in my constituency. It is?and in the years ahead it will continue to be?an enormous industry, even though it had not even been heard of 10 years ago. [Interruption.] Does the hon. Member for Huddersfield (Mr. Sheerman) wish to intervene?

Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): No.

Mr. Field: I thought that the hon. Gentleman might be a great player of computer games. We must remember that that field will provide job opportunities in future. That is not to say that we should deride the teaching of physics, chemistry and other robustly academic subjects at university, but we must look to a more flexible employment future. Less attention should be paid to whether 35, 40, 42 or 50 per cent. of young people go to university and much more to the need for lifelong learning and adult education, as my hon. Friend the Member for South Holland and The Deepings said. Indeed, as the hon. Member for Bristol, West pointed out, almost with disappointment, 42 per cent. of the current cohort of 18 to 19-year-olds wish to go to university, and that percentage has remained the same for the past few years.

Stephen Williams Will the hon. Gentleman give way?

Mr. Field: If I may, I shall quickly make this point. I am concerned that many young people are making a decision based partly on finance, but also on the robustness of the courses that are on offer. In many ways, the explosion in the growth of university education over the past decade and a half or so has meant, as is the case in other spheres, that quality has gone out of the window, and has been sacrificed for the sake of quantity. Many youngsters make an intelligent economic, market-based decision, because they believe that they would gain more by going into full-time employment than by taking a university course.

Mr. Sheerman: Will the hon. Gentleman give way?

Mr. Field: I shall give way first to the hon. Member for Bristol, West.

Stephen Williams: First, I would like to clarify the fact that the 42 per cent. participation rate applies to18 to 30-year-olds; it does not refer just to school leavers. Secondly, the hon. Gentleman is quite right that people make an economic decision. They do so partly because they fear the amount of debt that they will accumulate on graduation, as a result of living costs and the £9,000-worth of fees that they have to pay for most courses. I know many people who would have benefited from, and whose lives would have been transformed by, higher education, but who decided instead to leave school at 18 with good A-levels and go into banking or whatever. They will earn good money, but their lives will be quite different because of the decision, imposed on them by the Government, to avoid extra debt.

Mr. Field: I shall put my life in my hands and give way to the Chairman of the Select Committee on Education and Skills.

Mr. Sheerman: I thought that the hon. Gentleman was making rather a good speech until he spoke about a diminution in quality in certain university courses. One often hears that, usually from a certain former chief inspector of schools writing in the back pages of The Sunday Times, but what really irritates me is the fact that people never say which universities or which courses they are talking about. I have not found any such universities or courses, and I think that there has been a change. People may decide that university is not for them, which is a wise choice if it is not right for them at the time. However, I do not appreciate an attack on the quality of courses in universities when there is no evidence of any diminution in quality.

Mr. Field: Without giving away particulars, I had a speaking engagement at University college, London last week, and a professor from a university in the north of England made a point about the explosion in student numbers in the past 10 years. He had been an academic at that university for 25 years or so, but he reckoned that there was a significant diminution in numbers. That may be an isolated case, but it was brought to my attention. Perhaps I could discuss the details with the hon. Gentleman in private, but I would prefer not to do so in the Chamber.

Mr. Sheerman: No, it must be on the record. I am sorry, but this is a serious matter. We have an important quality assurance system in this country and I am satisfied with the quality that it ensures. That kind of over-dinner whispering in people’s ears is very damaging to the higher education sector. I think that the hon. Gentleman is talking about Oxford, because he knows it well. If, however, he is talking about universities in the north of England, I challenge him to say so on the record because I am a north of England MP and I do not believe that there is one element of truth in what he said.

Mr. Field: The hon. Gentleman has made his point very robustly. I shall resist the temptation to take up his challenge, but I accept that the quality assurance system is strong and robust. It needs to be, given the importance of the education system?particularly the higher education system?as a great export further afield.

The reality, however, is that many people who do not go to university will embrace five, or perhaps six, careers during a working life that may extend into their 70s, given the fact that the retirement age is likely to rise. If we are not adaptable, our work force will not be able to survive in a world that demands high value-added, high-resolution outcomes, especially in manufacturing. I was relieved to hear what the Minister had to say about proposals to deal with the fact that the unskilled work force will diminish by about 75 to 80 per cent. in the period we are discussing. Clearly, we must work with some urgency to ensure that the most vulnerable in society are not left behind.

I do not believe that there is anything wrong with a high-wage economy, but those wages must be earned in a globally competitive market. It is very important that training is not simply regarded as either the Government’s domain or as something on which they have all the answers. We must provide robust training, the content of which must largely be dictated by employers and prospective employers. I hope that you will forgive me, Mr. Hancock, for addressing issues that are slightly closer to home. In London, the signs are a little less promising, and the Minister will be aware that the effect of the skills gap on the most vulnerable members of the indigenous population is quite stark. There has been an influx of thousands of Poles, Lithuanians and others from the A8 countries during the past three years. Those people have worked extremely hard and made a tremendous contribution to our country, both economically and in other ways, by undertaking skilled and semi-skilled jobs, particularly in construction, tourism, catering and hospitality. In London, however, unemployment is at 8.7 per cent., and it is rising. Indeed, that level is the highest of any region in the country. London’s unemployed are often functionally unemployable, and they lack the skills, application and the aptitude to hold down jobs. As for the Olympics in 2012, it is, I fear, wishful thinking to expect that there will be a bonanza of construction work for local workers in the poorest parts of the east end, as has been recognised by Sir Robin Wales, the elected Labour mayor of the borough of Newham. We have to ensure that the skills are there so that workers have both the aptitude and application necessary to hold down a job.

Given the short time available, I would like to say a few words about the eastern part of my constituency. The City of London corporation has provided me with a brief for this debate, detailing some of its concerns. As the Minister is aware, the City has a very proud record of looking eastwards towards the deprived boroughs that are its neighbours, such as Tower Hamlets, Hackney, Newham and Islington. London’s leading role as an international financial centre is widely recognised, and the City has always thrived on internationalism. In fairness, it thrived on it before the first world war, but for many years afterwards internationalism seemed to go away. It was tax regulation in the early 1960s in the USA that largely led to the emergence of the eurobond and eurodollar market, and internationalisation was reinforced by the big bang 21 years ago.

Of the estimated 450 authorised banking groups in the capital, the City is currently home to 255 from abroad. The square mile generates over $1,100 billion in foreign exchange turnover each day?about a third of the global share?and it is the world’s leading market for international insurance. Indeed, it is recognised as such by the Treasury. As someone who represents the City of London, I am relieved about that, because 10 years ago, many people in London feared that a Labour Government would mean problems for the City. I am not suggesting that it has all been plain sailing, but credit must go where it is due, and the Treasury has a pretty good record in the City of London. Some regulatory measures have not been enforced, although the story is not entirely positive. More importantly, by allowing non-domiciled individuals to remain here to work, we have ensured that there has not been a flight of capital. Indeed, regulation and tax from abroad have been of great benefit. The Sarbanes-Oxley arrangements in the United States during the past five years caused great damage to New York as a financial capital, and London has been the chief beneficiary.

Part of the continuing appeal of London to foreign companies is its cosmopolitan status. Frankfurt and Tokyo, for example, are primarily marketplaces for domestic participants, in which foreign players are, perhaps unwillingly at times, granted access. London, and to a lesser extent New York, are characterised by foreign nationals trading with each other. The City is essentially a large international marketplace responding to the need of Governments and companies in Europe and throughout the world to borrow and raise capital. In November 2005, the City of London corporation published research into competitive advantage, which was based upon a number of surveys of professionals in the financial services industry in more than 20 countries. They were asked about the key components of competitive advantage and asked to rank the world’s major financial centres against those criteria, thereby providing a detailed overview of practitioners’ perceptions of London’s position. That research ranked skilled personnel as the most important factor in the competitiveness of an international financial centre.

The provision of leading-edge education and training services in the UK is central to maintaining our reputation, and it is the key to the development of the professional competences that will sustain London’s position in future. Although London’s dominance in the UK economy brings certain problems with it, there is no doubt that without a strong City of London, this country would face grave financial concerns. Our training and education services are internationally recognised as providing career opportunities in financial and professional services, both in London and the UK as a whole.

The City of London has a growing interest in the skills agenda, which will help it to maintain its leading position. It recognises that for the financial and business sector to prosper, skills are of the utmost importance at graduate and non-graduate levels. Recent research published by the City of London corporation highlights issues of importance and makes a number of key recommendations. The “Skills in the City” report noted a number of key areas for intervention, including the need to raise employers’ awareness and their perception of vocational qualifications; improve basic skill levels; enhance students’ ability to perform successfully at interviews and selection days; and enhance opportunities for employers to improve the levels of local recruitment. Those are some of the soft skills to which my hon. Friend the Member for South Holland and The Deepings referred. Soft they may be, but they are none the less important, as they must be developed not only by youngsters, but by people throughout their working lives if they wish to pursue another career.

At the other end of the spectrum, the corporation focused on the graduate skills needed in the financial and related business sector, as it is aware that recruitment is an international activity and some jobs attract high achievers from other EU countries and further afield. University and higher education institutions are a key pillar of the knowledge economy, and they provide the dynamic for innovation through research and development. As world class business competes in the City, the best universities, too, compete in a global marketplace. Separate research conducted by the Financial Services Skills Council highlighted a number of recommendations for higher education institutions and City-type employers, including the need for greater co-ordination between sectors if future discussion of graduate skills is to be productive. It suggested that without that co-ordination, broad dialogue would not improve and that interaction would remain limited to pockets of effectiveness.

We need better employer co-ordination of existing and prospective higher education institution relationships. If the higher education sector is to remain strong in this country, we must recognise that it operates in a globally competitive marketplace. Undergraduates?and, perhaps more importantly, their parents, who pay the fees?will increasingly look at education from a much more global perspective. It is a matter of concern that some 18-year-olds in this country are leaving school to do a first degree in the United States of America, rather than going to one our best universities. By contrast, our top universities are still enormous draws for some of the brighter students in India, China and elsewhere. One hopes that that will continue, but we should not be complacent.

The importance that the City attaches to skills is reflected by the lord mayor’s focus on skills as the central theme of his mayoralty, up to November 2007. He will focus on the City in particular as a centre of excellence for professional education, training and qualifications. The initiative, “City of London?City of Learning”, aims to raise awareness of the quality and portability of UK qualifications through promotional events during the year. As the Minister will be aware, 90 days of promotional events will take place beyond these shores. It is of key importance that we focus on that element of vocational and relevant employer-led training.

Stephen Williams: I am following the hon. Gentleman with interest, as I, too, have received the City of London’s briefing. It is worth mentioning?but it often does not get mentioned?that although higher education rightly boasts of its enormous contribution to this country’s invisible earnings, professional training is equally a huge invisible export earner. That training is entirely delivered by the private sector to people coming to this country to train to be lawyers, accountants, chartered surveyors and so on. The UK’s professional qualifications are valued the world over and earn a lot of money for this country through such teaching and training.

Mr. Field: I entirely endorse that point. Indeed, I said earlier that we should not see training as something on which the Government have all the answers, because in many ways providing it often comes down to employers.

An integral element of the corporation’s initiatives in the year ahead will be the development of an internet-based database that will be linked to the websites of key professional bodies, universities and training providers. That will be accessed through a range of sites, including those of Government and City institutions, and through UK missions and the work of the British Council, in which the Minister has had a strong involvement.

It is of course important to recognise that the cluster of international capital and expertise represented by the City is potentially fragile. Global businesses and their highly-skilled work forces do not necessarily have an innate loyalty to the UK. They wish to conduct business where the legal, fiscal and regulatory environment is most cost-effective for them, and where the physical infrastructure, along with the general human environment, best meets their needs. With London as its financial centre, the UK has demonstrated its capacity to attract and retain such businesses. To continue doing so there might be a requirement for public policy changes. Such changes are being discussed as part of the Chancellor of the Exchequer’s initiative on the international promotion of the City.

Thank you for allowing me to make a longer contribution to this debate than might otherwise have been possible, Mr. Hancock. The relative paucity of speakers is largely down to the weather conditions, rather than anything to do with the importance of the subject. I am glad that I had a chance to speak a little more generally, as well as to discuss aspects specific to the City of London. I appreciate that the Minister may not feel the need to make any great comment in the latter regard at this juncture, given that some specific suggestions were put forward.

Mr. Sheerman: Before the hon. Gentleman concludes, is he concerned that the City of London takes a high percentage of our brightest graduates, who are expensively educated at our universities, but who seem not to use their maths, engineering and other highly desirable skills in the public services, such as the civil service, local government and the health service? Is he worried that the City, which he represents, is taking too big a share of the great talents of our country?

Mr. Field: The hon. Gentleman makes a valid point. I graduated from Oxford university in 1987.

Mr. Sheerman: The degrees are not as good as they used to be.

Mr. Field: They were not that good in my time either, but that is another matter. In 1987, a significant proportion of the undergraduates reading engineering or mathematics went into the City, and I suspect that almost all of them do so now. That contrasted with the position only 15 or so years before, because in 1971, one seventh?14 to 15 per cent.?of Oxford undergraduates went straight into teaching.

There is no doubt that what the hon. Gentleman described is a concern. The reality is that we live in a globally competitive world. I fear that if we suggested that some of our brightest and best should not come to London, at least initially in their careers, they would go to New York, Paris, Hong Kong and further afield. That is a concern, but it is much more important that we have a successful financial services industry. Without such a thing based in the City of London, this country would be in deep trouble.

I would, however, point out that although many of our very brightest undergraduates and graduates spend a few years in the City of London, the attrition rate is quite horrific in certain professions, such as law and accountancy?the hon. Member for Bristol, West and I are both in that mode. The attrition rate is high, and many people decide in their early 30s to have a second career in the public services. The situation is not necessarily to be feared, although I well understand the reasons why, particularly in some of our important regional centres, some of the brightest and best are moving further afield.

On legal and accountancy services, there is little doubt that both Leeds and Manchester?as well, of course, as Edinburgh and Glasgow?are significant financial centres, although I appreciate that they have to contend, at least at the undergraduate level, with the prospect of losing some of the brightest and most talented individuals, who come to London in the first instance. London is a city state in many ways? even as far afield as Portsmouth, house prices are distorted by the international strength of London as a financial centre?but that issue is worthy of an entirely different debate. The Minister will perhaps wish to limit his contribution to some of the more general comments made this afternoon.