WHAT DO WE MEAN BY SKILLS?

1. WHAT DO WE MEAN BY SKILLS? When we refer to skills we consider five broad areas: Employability skills – the foundation skills and behaviours necessary for people to find and succeed in work. An important issue for the “NEET”- Not in Employment, Education or Training - agenda. A big issue for employers General work skills – skills that people need to do their jobs. A big issue when considering productivity Up-skilling – important for an individual’s increased competency in current and future jobs, adaptability, personal motivation, commitment and responding to technology changes or regulation Re-skilling – training part of the workforce to either help individuals get a job post redundancy, or a choice by employers to respond to new business opportunities or challenges eg the Green Agenda or to deal with economic shocks Leadership and Management skills – skills needed to manage people and resources in the workplace. Evidence shows that this is a big issue for business improvement and capability

2. Productivity Employment WHY IMPROVE SKILLS? Skills contribute to a wide range of desirable outcomes: Economic objectives Social objectives Skills Personal and family well-being Stronger communities Greater social mobility Sustainable Growth Greater social inclusion

3. WHY IMPROVE SKILLS? (2) They enable people to attain and progress in work • People with higher level skills are more likely to be employed… and less likely to be unemployed1 • Low skilled adults who improve their numeracy skills between ages 21 and 34 are more likely to have their own home, savings and less likely to be on benefits than those who do not improve their skills2 1 Labour Force Survey, 2009 Q4 - Q4 2010 data will be released in a new Supplementary Table to the Post-16 Education and Skills Statistical First Release on 31 January and Q4 2011 data will be released at the end of March 2 Bynner & Parsons (2006) ‘New Light on Literacy and Numeracy; Results of the Literacy and Numeracy Assessment in the Age 34 Follow-up of the 1970 Cohort Study’. National Research and Development Centre for adult literacy and numeracy.

4. 1993 No quals 2008 1993 2008 Other quals 1993 GCSE 2008 1993 A Level or Eq. 2008 1993 HE 2008 1993 Degree or Eq. 2008 0% 20% 40% 60% 80% 100% Employment Unemployment Inactivity Human side of these problems • Those with poor skills are [1]:- • More likely to be in prison • More likely to be in debt • More likely to be unemployed • More likely to be unwell and have mental health problems • More likely to have a child who can’t read at 9 • More likely to be involved with or have to be supported by the State • Are less likely to vote • Are less likely to own their own homes • Are less likely to take up a community role such as school governor • Are less likely to hear their child read • Will never normally earn more £14,000 Those with no qualifications are on average 37ppt less likely to be in employment than those with HE [1] Centre for Research on the Wider Benefits of Learning, Research Brief, October 2006

5. WHY IMPROVE SKILLS? (3) We fall behind our key competitors at Level 2 and above With 74% of the working age population qualified to Level 2 and above, the UK is close to the OECD average (of 73 per cent). This has remained stable over time - in 2011 we are ranked 19th out of 33 OECD countries and in 1998 we were ranked 19th out of 29 OECD countries, although only 60% of our working age population was qualified to that level.

6. WHY IMPROVE SKILLS? (4) At Level 4+ and above the UK’s relative position is strong, butwe are still below the top quartile, which may impact on our future competiveness with emerging economies With 37% of the working age population qualified to Level 4 or above, the UK lies above the OECD average (of 30%) and is ranked 9th out of 34 countries. In 1998 we were ranked 12th out of 29 with only 24% qualified to that level (although this is an improvement due to a change in the methodology we use in the UK to calculate L4+ qualifications, we cannot assume that this is a genuine improvement).

7. Skills deliver benefits to individuals, employers and the wider economy • Evidence suggests that skills deliver benefits to: • Individuals: In the form of higher wages and improved employment prospects • Average hourly wages are £17.53 for those qualified to L4+, £10.68 for those qualified to L2 and £8.88 for those with no qualifications • Employment rates are 84% for those qualified to L4+, 68% for those qualified to L2 and 47% for those with no qualifications • Employers: In the form of increased profits and competitiveness. For example: • NIESR matched-plant studies show how lower levels of skills in the UK workforce led to lower output per employee • 77% of employers believe apprenticeships make them more competitive; 76% say that they provide higher overall productivityii • The Wider Economy: For example, firms operating in high skill areas tend to have higher productivity than firms with a similar skill profile, but operating in a low skill areaiii • Skills accounted for around one fifth of UK Gross Value Added (GVA) growth from 1997-2007iv WHY IMPROVE SKILLS? (5) i Labour Force Survey 2011 Q2; ii Findings summarised at http://www.apprenticeships.org.uk/Employers/The-benefits.aspx iii Galindo-Rueda & Haskel (2005) ‘Skills, workforce characteristics and firm-level productivity: Evidence from the matched ABI/Employer Skills Survey’ iv Groningen Growth and Development Centre, EU KLEMS

8. Full funding for literacy and numeracy courses for all adults aged 19+, and first Level 2 and 3 qualifications for those aged 19 to 24 and the unemployed. Full funding for 16-18 Apprenticeships; co-funding for 19+ Apprenticeships. From 2013, adults aged 24+ will be able to access loans to fund L3 and above skills. Additional support for leadership and management skills. But the Skills Strategy “Skills for Sustainable Growth” set out a model designed to give business more power and responsibility, not just to define the vocational skills needs of different sectors, but also to develop new ways to meet them, e.g. supported by: - Growth and Innovation Fund- Employer Ownership Pilots, up to £250m over 2 years of public investment for training and Apprenticeships channelled directly to business to give employers real purchasing power in the skills market. THE SKILLS “OFFER”

9. Freedoms and flexibility – moving to a demand led system • Policy rationale • To move to a more demand-led system, we need to free up the system to be more responsive to what individuals and employers want. • Within this system the relationship between further education and its direct customers (individuals and employers) takes primacy and is the key to securing high quality and relevant training • New policy • No top down targets with colleges and providers free to determine the learning offer they provide • An Innovation Code which enables colleges and providers to develop new programmes which meet the needs of their communities • Local Enterprise Partnerships will play an important role in linking to local businesses, understanding their needs and liaising with providers to ensure training is available. More detailed advice on vocational training and qualifications is available from Sector Skills Councils and National Skills Academies • A City Skills Fund to support effective working between colleges, providers and cities • A simplified FE and Skills System: • Simplifying landscape – closing, merging and scaling back number of intermediary organisations • Reducing bureaucracy – simpler systems and processes • Removing regulation • First class advice delivered by the National Careers Service is free to all adults to help them in their work and life

10. Apprenticeships • Apprenticeships: • Apprenticeships help employers improve productivity and give them a competitive edge, enabling them to compete globally. Employers recoup their investment within two to three years in most cases. • Apprenticeships are: • paid jobs incorporating on & off the job training and leading to nationally recognised qualifications; • open to all suitably qualified people over the age of 16; • at 3 levels: Intermediate - Level 2, Advanced (for Supervisors) - L3, and Higher (for Managers) - L4 & 5; • available in over 200 occupations. • HMG subsidies are full funding of the off-the-job training at 16-18; 50% at 19+; 40% at 25+ (... with 25% less for large employers). • Apprenticeship Frameworks, developed by Sector Skills Councils and employers, describe the content of different apprenticeships • Employers can go to the National Apprenticeship Service (NAS) for further information about recruiting an Apprentice on 08000 150 600 or www.apprenticeships.org.uk • * Source: Skills Investment Statement. 100,000 employers offer Apprenticeships in more than 160,00 locations and there are over 1,200 job roles available to apprentices* Government funding for Apprenticeships in 2011-12 is £1.4bn, and this has been increased in 2012-13 to over £1.bn, which is sufficient to train 444,000 new apprentices*

11. Apprenticeships have grown strongly despite economic challenges and significant programme changes

12. Our main priorities are to: Focus the programme more sharply where Apprenticeships bring the greatest returns and wider benefits, including targeting younger adults, new employees, higher level qualifications and particular sectors where investment will make the greatest impact. Increase the number of 16-24 year old apprentices, including by encouraging small employers not yet engaged with the programme to take on new young apprentices. Partly through the Youth Contract, we will provide up to 40,000 incentive payments. Significantly extend Higher Apprenticeships provision, including with the launch of a further opportunity for organisations to bid for funding. Take strong action to drive up standards and quality, including withdrawing funding from providers that do not meet the high standards that learners and employers demand and ensuring that providers support apprentices to achieve Level 2 in English and Maths wherever possible. A major employer-led review of apprenticeships standards will consider how the programme should adapt to meet evolving employer and learner needs. Make it easier for employers to take on an apprentice, by reducing bureaucracy, streamlining and speeding up processes and removing all additional health and safety requirements on employers. We will ensure the National Apprenticeship Service better supports the needs of small employers through more targeted advice and guidance. Apprenticeships The programme could support up to 2.4 million 19+ Apprenticeships over the spending review

13. ACCESSING THE “OFFER” Employers can access enhanced support and improved integrated information on skills from the Business Link website - http://www.businesslink.gov.uk Business Link Employers may wish to access help with how to invest in skills and training, by contacting their local FE college or training provider direct. FE Colleges Employers can find details of training providers and compare qualification success rates, learner destinations and learner and employer satisfaction ratings, through the Skills Funding Agency’s FE Choices site - http://FEChoices.skillsfundingagency.bis.gov.uk FE Choices Employers may be able to access skills support through projects run by their Sector Skills Council under the Growth & Innovation Fund or the Employer Investment Fund. UKCES works with SSCs to provide leadership to drive up employer investment in and better use of skills. Groups of employers may also be able to bid for funding to deliver skills training through the Employer Ownership Pilots. SSCs/other routes

14. ISSUES FOR SMEs Pathfinder idea emerged from a workshop in December to look at the skills issues facing SMEs - the environment they operate in; key drivers & factors that influence investment decisions & how this applies to Skills. Issues:- - Skills training not always offered by FE sector in a way that meets SMEs needs or they can access (we don’t fund company training) - Many SMEs favour on the job training rather than formalised education / qualifications - SMEs not always able to understand/articulate their needs - They lack knowledge about what support they can access or have difficulties navigating the skills system - Lack of volume / purchasing power means they are not always an attractive customer for training providers. - SMEs get information from a range of sources – local level messaging/case studies work best - Good examples of SMEs in niche sectors collectively influencing design of qualifications at local level - Leadership and Management capability in SMEs a key factor in determining ability to overcome business hurdles and capacity for growth – but less likely than larger companies to invest in leadership and management training.