Craft Skills

HL Deb 15 July 2002 vol 637 cc1033-48

7.28 p.m.

Baroness Sharp of Guildford

rose to ask Her Majesty's Government what they intend to do about the shortages in the number of people being trained in craft skills such as plumbing, electrical and gas fitting, despite the efforts of the Learning and Skills Council.

The noble Baroness said: My Lords, a number of my colleagues have asked whether a bad plumbing experience stimulated me to ask for this debate. The answer is no. The debate was stimulated by a discussion with my very reliable plumber. He is approaching 60 and considering retirement but does not know who will take over his business. His son, who followed him into the profession, has set up his own business and has no reason to carry on his father's business. Over the past 15 years he has not taken on any apprentices. He had done so previously but had given up because it cost too much money and involved far too much paperwork. He said: Everybody I know is in the same boat. We are all of us between 55 and 65. We are all looking to retire. I don't know who's going to take over". I considered this an interesting issue. I have raised it with a number of other people, including the Worshipful Company of Plumbers, which provided me with a good deal of' information. I have talked about the matter with further education college people.

I was interested because, in my studies as an economist, I have constantly been worried about the British economy's low level of productivity. Over the years I have associated that very much with Britain's education system and, in particular, with the lack of qualifications. At one point I was concerned about the low number of people undertaking degrees. I felt that Britain lagged behind other countries. Of course we have caught up rapidly.

It emerged strongly from the National Skills Taskforce work led by Chris Humphries, now director of City and Guilds Institute, that the major skill shortages in Britain are not at degree level, but at NVQ levels III and IV, which is the apprenticeship level. What is now called the advanced modern apprenticeship is a level II qualification, and HND and HNC are level IV qualifications, or foundation degree, which leads on to a degree level qualification. But the shortages are in those specific craft skills. The problem has, if anything, been exacerbated. In 1979 we trained in the region of 374,000 apprentices; we now train only about 200,000.

Two recent publications from Her Majesty's Government have helped me in my research, a publication entitled Government Supported Work Based Learning for Young People in England issued on 20th June and Participation in Education, Training and Employment by 16–18 year olds, which appeared on 27th June.

Of approximately 2 million young people in the 16 to 18 year-old cohort, 75 per cent, or 1.5 million, are in education and training of some kind or another; 55 per cent are in full-time education; 8 per cent are in government-supported training; and only 5 per cent are in employer-supported training, described by Sir John Cassels, in his modern apprenticeship report, as the ideal form. Seven per cent are in other forms of education and training. That leaves roughly 25 per cent of the age group participating in no education or training at all. Interestingly enough, the statistic has not changed since 1991.

Of those 2 million young people, approximately 250,000 are in work-based education or training. Less than half—only 119,000—are pursuing the advanced modern apprenticeships, the level III qualification; 85,000 are pursuing the level II, which is the foundation modern apprenticeship; and 44,000 are engaged in other work-based training.

Therefore, it looks as though we are a considerable way off Cassels's target. In total, we have about 12 per cent—250,000—actually in work-based education and training. Cassels's target was that 25 per cent of the age cohort should be in work-based apprenticeships of one kind or another. We have only 12 per cent—6 per cent of whom are in the advanced modern apprenticeships. Even if one includes the foundation modern apprenticeships, the figure is only 9 per cent. So we are a long way off the target.

If one delves further into the figures, of the 119,000 pursuing the level III qualifications only half—49 per cent—achieve the qualification. Approximately 30,000 young people complete the apprenticeships each year at level III. One must remember that this 119,000 is spread over the three years. That is 5 per cent of the age cohort. We double that if we include the level II qualification.

In the construction industry and some other areas the shortage problem is particularly great. The Employers Skill Survey, which backed up the National Skills Taskforce, reported: Skill shortage vacancies for craft, sales and operatives are most likely to have serious impact on current performance [in the construction industry]. In particular, respondents indicated that around 53 per cent of skill-shortage vacancies for craft workers led to a loss of business. The construction sector was most likely to respond that it anticipated future recruitment problems … Around 50 per cent of establishments in the construction sector reported that they anticipated recruitment problems". So the construction industry is perhaps a particularly bad example.

I turn to the plumbing, electrical and gas-fitting industries. Roughly 15,500 young people are pursuing level II qualifications, but only 3,500 are pursuing level III qualifications. If one remembers that only 50 per cent achieve those qualifications and that the 3,500 is spread over three years, one is looking in the region of 600 a year achieving level III qualifications in these three broad areas. That is pitiful.

I have a number of questions. First, why are the Government putting so much emphasis on the 50 per cent participation rate in universities when it is clear that there are real and urgent skills gaps in the craft and skills area?

Secondly, what impact do the Government see the new educational maintenance allowances having? Are they not likely to encourage more young people to stay on at school in full-time education being pushed towards A-levels, the academic qualifications, rather than vocational qualifications? Is there not a danger that we shall still miss the buck on these academic qualifications?

Thirdly, where is the incentive to undertake work-based learning? If one takes the engineering and manufacturing sector, the average cost of training an apprentice—leaving aside the employer cost—is between £13,000 and £16,000 a year. Yet the LSC is only paying £6,000 to £7,000 a year. The total cost of training an apprentice in this sector is almost £50,000 a year. Therefore, what is the incentive to the employer? One must add to that the bureaucracy, the sheer amount of paper to which my plumber referred.

Lastly, when will the Government recognise that there must be an incentive to pursue qualifications? There must be some mechanism to stop cowboys entering the industry. Although only 50 per cent achieve the advanced modern apprenticeships, there is a 100 per cent take-up in terms of employment. In other words, one can get employment whether or not one has the qualification.

Those in the industry are constantly undercut by cowboy operators. It costs a good deal to obtain high-level qualifications. It costs roughly £50,000 to train an apprentice. One then has ongoing costs in order to maintain that level of qualifications. I have a letter from a plumber in Norfolk who reckons that it costs him £3,500 every year just to maintain his qualifications. He cannot charge more than £15 an hour for his services because the cowboys come in and undercut him. Should we not be thinking in terms of operating not only on the supply side, in terms of training people, but also on the demand side, in terms of some form of registration? I put it to the Government that the minimum might be to ask trading standards officers to keep a register of those local traders—plumbers, carpenters and so on—who have the requisite qualifications.

The Consumers' Association and the CAB, receive the largest number of complaints about the cowboys, about the rogue traders. I, as a consumer, would really like to be able to telephone someone to ask if they could give me the name of someone with the requisite qualifications.

These are important issues. I hope that the Minister will have some answers to my questions.

7.39 p.m.

Lord Dearing

My Lords, I look forward to hearing the Minister's answers. I congratulate the noble Baroness on introducing this debate and on concentrating on apprenticeships. I looked at the book of Lamentations on the state of Israel in my Bible; it contains seven pages. I can trace the lamentations on the state of technical and vocational education in this country back at least to the Paris exhibition of 1867, at which we won only 10 per cent of the prizes. In 1924, Ramsay MacDonald said that development of technical education was the greatest need of this country. As the noble Baroness said, it still is.

About 20 reports on the subject were produced in the century up to 1969, and others subsequently, but apprenticeships, which were the core of technical skills training, reached their nadir during the 1970s and 1980s, when they practically disappeared. Despite their growth during the past four years, to which the Chancellor referred in his Statement this afternoon, the Cassels report says of apprenticeships that they are, marginal to national life". Why? Because they have been "inconsistently delivered", "poorly managed" and, poorly known about and understood". As the noble Baroness said, half of those who start out on the track do not finish it.

I congratulate the Government on having the wisdom to appoint John Cassels to chair the committee to make recommendations, which it did last September. He has much experience and good sense. As I understand it, the Government have had the equal sense to accept the substance of his recommendations. But I should like to offer a few thoughts on the matter.

The Cassels recommendations are based on three elements in the kit of a successful apprenticeship: first, the "can-do" skills in the national vocational qualification; secondly, what NVQs were long criticised for lacking, promoting the understanding of those skills through a technical certificate; and the key skills of English—or communications, as the report calls it—and of numeracy, so that apprentices can continue to update their skills.

That is excellent, but it is getting a touch complex. I urge the Government to ensure that those three important principles are articulated so that they cohere rather than are disjointed. In particular, I suggest that to motivate young people to master standards of literacy and numeracy, they should be integrated into the technical certificate, so that young people can see them in context as relevant to what they are doing, rather than being a boring, irrelevant add-on. So my first piece of advice is to articulate apprenticeships: simplify them and run two schemes into one.

My second piece of advice to government is: stay with it. The whole history of education is one of well-intentioned initiatives, followed by government saying, "Oh dear, we had better start again". In my experience of the field, it takes at least 10 years for employers to cotton on to the latest initiative. I repeat: stay with the Cassels initiative. I noticed that the Chancellor commits himself in his Statement only to the next couple of years and the expansion to 300,000. There is nothing about the vision as far as 2010 as in the Cassels report. We have a vision for higher education for 2010. What about skills education? Why not a commitment to that too?

My third piece of advice is: bear in mind that the learning and skills councils have only just been set up. The national training organisations are in the process of being replaced by new bodies—sector skills associations. They are finding their way forward. With those two organisations finding their way forward, we need to involve employers. Unless the Government consider matters carefully with those new bodies, they will come a cropper and the intention to have a powerful launch will be met with loud and continuing complaints that we have muffed it.

My fourth point is: do not be too proud to pilot new ideas before launching them. Again, history shows that we need enthusiasm, commitment, resolution and action. A bit of piloting when what is being done is new, rather than a continuation, will pay dividends.

My next point is: we need strong promotion. One complaint of Cassels is that apprenticeships are poorly understood. As the noble Baroness said, only 5 or 6 per cent of apprenticeships take place on employers' premises. That shows how little they are known. We really must put money behind promotion and stay with it.

If I may say so, the stock in trade of this House is having been around a while and having a bit of experience. Perhaps officials would be well advised to spend half an hour reading the relevant chapter of Professor Alison Woolf's recent book, published last month, entitled, "Does Education Matter?"—the chapter on vocational education. She makes it clear that if initiatives are government-led—institution-led—rather than employer-led, they will fail. We must ensure that line employers, rather than personnel departments, are in the lead. I remember the cost of employers not being in the lead with regard to NVQs.

It is said that any fool can learn from his own mistakes. Let us hope that the Government have the wisdom to learn from mine.

7.46 p.m.

Lord Trefgarne

My Lords, I, too, am grateful to the noble Baroness, Lady Sharp, for raising this critical issue today. It is an area about which I know that she feels passionately and she made many interesting points. Doubtless the Minister has made a careful note of each and every one of them, and we shall hear his answers shortly. I shall not ask quite so many questions, but I, too, hope for an answer.

The noble Lord, Lord Dearing, referred most interestingly to the need for simple and basic qualifications. The first qualification is so often important. I think that I have previously told the story of when I was in a factory in Plymouth presenting NVQs to the workforce. Towards the end of the ceremony, a level 1 NVQ in warehouse keeping, I think it was, was announced. An old lady came forward—I was told that she was 64. It was the first qualification that she had received in her life. She had tears streaming down her face as she stood in front of me. I must confess that I had tears too.

I shall make only a short intervention. As your Lordships may know, I am chairman of the Engineering and Marine Training Authority, which was until recently the national training organisation for the engineering manufacture sector. The Government are now replacing NTOs with sector skills councils and we hope that our bid to be the sector skills council for the technology, engineering and science sectors will soon be approved.

On previous occasions, I have ventured to bring to your Lordships' attention some of the difficulties that industry in general faces in addressing skills shortages. The responsibility for bridging the skills gap lies with both employers and government and they must work in partnership in addressing the need to raise skills levels in industry. Where employers devote resources to enhancing the skills base of their employees, in general, they are doing a good job. Small firms, in particular, have come to understand that their workforce is their most important resource and that investment in people is the key to their future business success.

For a sector such as engineering, which is already one of the most highly trained, it is still essential, especially in difficult times, that training is encouraged so that staff are prepared fully to exploit the future. But we need to do more to encourage employers, especially smaller firms, to engage in training staff. Initiatives such as "learndirect" go some way to address the problem faced especially by small and medium-sized enterprises in releasing key staff from the workforce, but there is also a need—and here the onus is on the providers—to deliver training in a manner that is more appropriate to employers.

I have previously drawn your Lordships' attention to the value of the modern apprenticeship framework and the significant impact that it has had on the number of people entering industry. Looking specifically at the engineering sector, the recruitment needs of the engineering industry require about 33,000 modern apprentices to be in training at any one time. In 1994, the number in training was about 8,000. Today it is 22,000, of whom 18,000 are in England, 1,500 in Wales and perhaps 2,000 in Scotland. So while we have not reached the required number, we are moving in the right direction.

In making that point, I have referred to the variations in the funding of modern apprenticeship programmes recently been put into place by the Learning and Skills Council. A young person aged 16 to 18 attracts the full national rate for a modern apprenticeship. But for those employers who train people over the age of 19 years, the funding available is only 56 per cent of the national rate. It is not available at all for 25-plus year-olds, except in Wales; and it is people aged 19 and above who the industry is particularly keen to attract.

Of course, the engineering industry continues to take its concerns about these arrangements directly to the Learning and Skills Council, but I would urge the Government to press on the LSC the need for a rethink of this policy. Other very serious developments include the future funding arrangements for higher national diplomas, higher national certificates and NVQ level 4 qualifications. It is my understanding that financial support from the Learning and Skills Council for those qualifications has been dropped. That will have serious consequences for attracting technicians into the industry, where there is a strong need to do so. I also believe that it will have an impact on increasing entry into higher education from modern apprenticeship programmes because the vast majority of higher education applications that come from technicians are from those with HNC, HND or NVQ level 4 qualifications.

I know that the Minister will realise that this need for progression from apprenticeship into higher education was a strong recommendation of last year's report by Sir John Cassels on the future of modern apprenticeships, to which the noble Lord, Lord Dearing, referred. I urge the Government to press the LSC to reconsider this decision.

7.52 p.m.

Lord Layard

My Lords, the debate could not be more timely. A shortage of non-graduate skills is staring us in the face. What is good is that we also have a Chancellor who, as he showed this afternoon, is willing to do something about it. The question is, what? What is the system we are trying to build? At present we have a system—if it is a system at all—that no one understands, bequeathed by the previous Conservative government. If one thinks of the people who really matter, none of them understands it. Children, parents, schoolteachers, careers teachers, careers officers and employers all do not understand it.

One has to think afresh about how we create out of this situation, through building on it, a coherent strategy for producing the non-graduate skills we seriously lack. There is always the danger that we will look in all directions and continue to do this, that and the other. That will not work; it failed over the past 10 years. We saw that so far as there was a concentration on building up full-time vocational education, it did not produce a major increase in skills. The time has come to recognise that the central part of the strategy must be apprenticeship.

I give three reasons: first, young people like apprenticeship best. A survey showed that students taking modern apprenticeship liked the experience more than students studying full-time for vocational qualifications. That is not surprising; they are being paid and can see the relevance of what they are learning. If we want to engage the one third—at least—of young people who currently stop learning at 16, it is inconceivable that we could do so on a large scale except by that method.

That sounds like dumbing down, but I now want to make the opposite point. Until the big expansion of higher education and sixth forms in the 1960s and 1970s, most children from poor homes who got to the top rose by the apprenticeship route. They often then went on to degree level work. It was madness to close down that route in the belief that somehow the expansion of full-time education had replaced it. Sometimes the astonishment expressed that the social class mix in higher education has not changed shows the naivety of people who believed that that would be the only central instrument for expansion of opportunities. As we know, social mobility has fallen in recent decades. That is not unconnected with the closing down of that route.

Secondly, employers like apprenticeship. It is often said that British employers will not support apprenticeship—that was said in the earlier debates on this topic. But interesting research carried out for the Cassels committee shows that they were not asked. It turned out that even among large employers, only one third had ever been asked to take on a modern apprenticeship.

Thirdly, apprenticeship in those countries that rely mainly on it for non-graduate skills works extremely well. I am talking not only of Germany but also of Denmark and the Netherlands. Those countries have been more successful in controlling youth unemployment than countries such as France or the United States which have relied more on the full-time route.

It is not simply a matter of full-time versus part-time, because in the countries that use apprenticeship the age of entry has been going up. It is typically now 17 or 18. The issue is not one of premature selection but of how we can get people effectively into work with a relevant skill. If one asks how we are doing, modern apprenticeship was re-established under the previous government; an excellent step, but as we know, the quality is often poor and the quantity too small. To deal with both quality and quantity will require a major leadership effort from the top, as with the New Deal, but that is even more difficult.

The particular issue at present, which will focus efforts, is the question of the target for opportunities. It has been discussed before by the noble Lord, Lord Dearing. We must have a target for those not going to higher education and it must make sense, be easily understood and pictured, and offer a route into work earning; all the things those young people want. It must be the kind of target that can be set before someone of 13 or 14 as attainable if they work reasonably hard, and that will motivate and satisfy them. It must be the chance of an apprenticeship.

The present figure according to the Government for entry of a cohort into modern apprenticeship at one or other level is 22 per cent. The spending review states it should be 28 per cent by 2004, and for 2010—as has been said—the Cassels committee, of which I was a member, has proposed 35 per cent; perhaps we may call it a third. If the Prime Minister is looking for a target that will fire up young people, it cannot be, as it says in the spending review, a wider vocational target. It has to be something concrete; a target for apprenticeship.

We can have other wider vocational targets, but for heaven's sake let us have the apprenticeship target proposed by the Cassels report; a target that is exciting, simple, concrete, that can fire our youth and be talked about in the pub.

7.59 p.m.

Baroness Hamwee

My Lords, I am sure we have all had had plumbing experiences, even if it was not that that prompted my noble friend. Craftsmen and builders seem to need no tuition in the art of teeth-sucking and acerbic comments on the work of their predecessors. I realise also that they probably need some training in the art, or science, of meteorology, because there always seems to be a problem with the weather, fine or wet, hot or cold.

More seriously, they need training in management skills, in addition to the skills that have been mentioned in the debate. We need more than just a reduction in red tape. By temperament, those who follow such careers are unlikely to want to deal with paperwork—such is my experience. If people are to operate small or medium-sized businesses—even tiny businesses—they must be able to do the paperwork. On a broader level, they need project management skills. The skills needed to run substantial projects seem to be almost wholly lacking in this country.

I recognise that, tonight, I am among an illustrious group of educationists. The question that occurred to me when my noble friend said that she would ask her Unstarred Question was whether the construction industry could cope with the infrastructure that the country needs. I speak from a London perspective, and my figures show that London needs almost 32,000 more homes every year, in order to meet existing need and the forecast extra demand, which is thought to involve expansion equivalent to the size of the city of Leeds over the next 15 years. London is a stark example, but the problem applies elsewhere, if to a lesser extent. In London and elsewhere, we need an improved transport infrastructure. As well as major provision, such as CrossRail in London, we need less headline-grabbing projects. Housing and transport must be developed in tandem in order for our economy to work.

I heard the noble Lord, Lord Hanningfield, on the "Today" programme this morning. He spoke, from an Essex perspective, about the Chancellor's expected announcement about spending on housing. What he said amounted to something like, "Not in Essex, without the transport". I have a more positive view, but the point that he made was important.

There are—properly—ambitious targets for development on brownfield land. The remediation of contaminated land or more small-scale rehabilitation of second-hand buildings seems likely to require greater skills than are required for work on a nice, unsullied site. If we are to accommodate sustainable growth, that is hugely important.

As we have heard, the future is not bright. Recent figures show that the average age of people working in the industry is getting higher. Had she had time, my noble friend would have asked why the Learning and Skills Council appears to discriminate against the over-19s. The industry wants to encourage 19 to 24 year-olds into apprenticeship, but funding for that group is 56 per cent of that for those aged from 16 to 18. For those over 26, there is no funding.

My noble friend mentioned the cost of maintaining qualifications. I was struck by the huge annual cost of maintaining qualifications, which enables people to charge £15 an hour. My professional background is as a solicitor, and I recognise the cost of maintaining qualifications. My profession can charge a great deal more than that to cope with such costs. Over the past five years, the numbers in university courses in building, construction and civil engineering are clown by about 50 per cent. We are all aware of the stories of recruitment from overseas and the twice-yearly salary increases, measures designed to keep the industry going.

My noble friend also raised the issue of status and the ideal of a work-based apprenticeship. In Germany, those who teach apprentices are called Meister, and a similar qualification here would do much to indicate the value placed on skills-based qualifications. It is telling that average earnings in the construction industry grew faster than in the economy as a whole. That was not because of the price of materials.

Time is against me. I should like to mention some of the initiatives that are taking place. I assume that my noble friend is not asking what the Government will impose—neither of us wants the Government to impose anything—but what they intend. I hope that we will hear some good news from the Minister.

8.5 p.m.

Baroness Blatch

My Lords, I thank the noble Baroness, Lady Sharp of Guildford, not just for bringing the issue before the House but for the passion with which she has spoken on the matter every time that she has had the opportunity. As always with such debates, time is a problem. Therefore, we can scratch only the surface of a debate that deserves a great deal more time.

Our concern about the shortage of people trained in craft skills—especially plumbing and electrical and gas fitting—will strike a chord with many people in the country. Skills shortages extend throughout industry. For example, the construction industry, which has just been referred to, estimates that the sector requires at least another 74,000 people each year up to 2005, simply to fill the gap. Last October, in collaboration with the construction industry, the Department for Work and Pensions launched an initiative with the aim of training and placing 1,000 New Deal workers as electricians, plumbers and bricklayers. However, that scratches only the surface of what is needed. To fill that gap of 74,000, the New Deal attracts only 2,500 people each year into the construction sector. There was yet another initiative, designed to turn single parents into gas fitters, with the intention of creating 4,500 jobs in the energy sector. Will the Minister tell us the extent to which that scheme has been successful? What percentage of the target has been achieved?

The Department for Education and Skills and the Department of Trade and Industry also published details of a joint venture to encourage, more than a quarter of young people to enter modern apprenticeships before they are 22 years old by 2004". That quotation came from a press release issued by the Department for Education and Skills on 29th November last year. Last November, 213,000 16 to 19 year-olds were undertaking modern apprenticeships. Since that was announced, the Learning and Skills Development Agency has published a study saying that the quality of training has fallen, particularly since April 2001. I support my noble friend Lord Trefgarne in congratulating the Engineering and Marine Training Authority on the work that it does to further the skills and training agenda. I also encourage the Minister to respond positively to the point made by the noble Baroness, Lady Hamwee, about the funding of modern apprenticeships, which appears to discriminate against those aged over 19.

Interestingly, the voluntary sector has had some success with many young people who have found difficult the traditional route through education to training, particularly those who have been disaffected and have shown great reluctance to become involved. For example, UK Skills, based at the offices of the Prince's Trust, presides over many shows and competitions designed to encourage the taking up of skills training. Other examples include Quaker Social Action and the Look Ahead Housing and Care Association, which have trained unemployed and formerly homeless people in basic skills such as plumbing, carpentry and painting. Yet, despite all that is going on, statistics from the Department for Education and Skills show that overall participation in training and employment by young people has declined and that any improvements have been slight.

Although the proportion of 16 to 18 year-olds in full-time education has increased marginally since 1997—by 0.4 per cent—the number of people in government-supported training and employment-funded training has decreased. Between 1997 and 1998, the number of young people starting work-based learning programmes also decreased by 11,000.

I agree wholeheartedly with the noble Lord, Lord Layard, who called for greater consultation with employers on skills training and greater promotion of such training. That is needed. I know that there is concern about the level of consultation on such matters.

If we look ahead to the outcome of the consultation paper on provision for 14 to 19 year-olds, we can see that work-related training will be costly. The Association of Colleges, the Secondary Heads Association and the National Association of Head Teachers all estimate that a further £372 million will be required. Not only will additional funds be needed for equipment and teaching resources, for example, but also we need a sea change in the staffing situation within our schools and colleges. We know that there are problems of recruitment and retention with regard to science teachers. Furthermore, the underpinning subjects that support the practical and vocational subjects will require more teachers and lecturers of science, maths and technology.

Perhaps I may say en passant that, with hindsight, one of the greatest errors was not to have developed technical education post war. We can all look back and regret that. It has been partly rectified by the introduction of the national curriculum, assessment and testing, the introduction of science and technology into the primary curriculum, the development of vocational qualifications and the introduction of city technology colleges and specialist schools. But we know that there is more to do. Here I echo a point made by the noble Lord, Lord Dearing. The gap lies in the underpinning knowledge that supports vocational training. If that were to be rectified, then a great deal of progress could be made.

Increased opportunities for more effective and high quality vocational education has widespread support. The benefits of a better respected vocational stream in our education system would be welcome. It would make for a more competitive workforce and would emphasise that there is more than simply an academic route to personal success and fulfilment. It would encourage many young people who currently feel disaffected to take a greater interest in school. Furthermore, it would go a long way towards increasing respect both for academic and vocational qualifications.

To achieve all this we need less gimmickry, far less complexity—another point raised by the noble Lord, Lord Dearing—greater focus and adequate support for the institutions; that is, the schools, training providers and colleges of further education to enable them to deliver the necessary programmes. Above all, we need world-class vocational institutions as much as we need world-class universities. That would go a long way towards producing first-class craft skills such as those asked for by the noble Baroness, Lady Sharp—plumbers, electricians and gas fitters—in the numbers that the country requires.

8.12 p.m.

Lord Davies of Oldham

My Lords, I, too, am grateful to the noble Baroness, Lady Sharp of Guildford, for launching the debate in such a perceptive and effective way. The debate has given us the occasion to discuss an important aspect of the national economy and the welfare of our people. I should emphasise that if in my responses to the numerous questions put to me by the noble Baroness I fail to answer some of them I shall certainly write to her. However, in the limited time we have available I shall do my best to address them all.

I agree with the noble Baroness that we must recognise that we still have real skills shortages. An underlying theme of the debate has been that too few of our young people engage in further education and training. The figure of 25 per cent of all young people not taking on further training is ridiculously high for an advanced society such as ours. We need to address ourselves specifically to skills training. I recognise that that has been identified by speakers on all sides of the House, in particular with regard to the craft skills that are so well known to homeowners. I shall draw a veil over my own experience. The builders are still in at my home and I have no wish to complicate an already difficult negotiating position.

However, we are discussing here the wider skills base rather than only those so essential to the home, a point emphasised by the noble Lord, Lord Trefgarne. We must address the skills requirements that underpin our industrial society and economy. Of course the Government recognise that skills shortages present an important challenge. The gap in productivity—lagging 30 per cent behind Germany and 55 per cent behind the United States—demonstrates that we cannot be complacent about our performance. We still have a long way to go. Indeed, the noble Baroness, Lady Sharp, clearly emphasised the main point of the debate; that is, that we need to concentrate on skill levels below graduate provision, in which we are making great strides.

The challenge of maintaining our skills base in an ever-changing world is real, but we should not overstate the present position. Even given the well-recognised gaps with regard to the provision of training, it is still the case that employment levels are high, our economic performance has been good, we have a buoyant labour market, wage inflation remains reasonably stable—well within the range viewed by the Bank of England as consistent with its inflation target—and the Industrial Trends survey from the CBI suggests that employers' concerns about skills shortages are well below recent peaks. That is not to suggest any complacency and in a moment I shall move on to detail how we intend to meet the challenges. However, we ought not to exaggerate the problems or to underestimate the progress which has been made over recent years.

The establishment of the Learning and Skills Council, which several noble Lords have been considerate enough to recognise will need time to bed down and reach its maximum effectiveness, is a sound concept. Its objectives are directed exactly towards ensuring that we have in place a sound strategy for dealing with skills shortages in our society, identifying and then meeting them.

Within that framework, it is important to recognise the crucial role played by employers. The noble Lord, Lord Dearing, began his remarks by commending the insights of a former Labour Prime Minister, Ramsay MacDonald, into our industrial skills problems. The noble Lord will forgive me for observing that only a Cross-Bencher would commend to a Labour spokesman former Prime Minister MacDonald. Nevertheless, I recognise that he demonstrated considerable insight into the matter. It is a problem that society has had to face for a very long time.

I wish to emphasise the development of the sector skills councils. The noble Lord, Lord Trefgarne, has been far too modest about his own important role in the development of the technology, engineering and science sector council, which we anticipate will be one of the first to move fully into operation. For the councils to be successful it is important that employers take the lead. The weakness of the former national training organisations lay, I believe, in the fact that they were constantly making demands on employers without actually meeting their needs. The sector skills councils are designed not only to reflect accurately employers' needs, but to be directed by them in order to discover how any shortages can best be met.

Progress is being made in the area, although I recognise the comment made by the noble Lord, Lord Dearing, that care must be taken over the establishment of the sector skills councils. We cannot afford a failed experiment as a result of which confidence collapses. Thus we are taking the greatest care to involve employers and all other relevant parties in the development of the sector skills councils. However, as I have said, we have already seen conspicuous success in one sector, in which the noble Lord, Lord Trefgarne, has a particular interest.

The sector skills councils have been designed to address some of the points that were made so forcefully in the course of our debate. My noble friend Lord Layard raised the question of modern apprenticeships and the targets that we should set. I agree that it is important to establish clear and realisable targets, which are sufficiently ambitious to force the pace. However, I am not sure that it is sensible to set targets for the proportion of entry into apprenticeships. It is probably better to target the outcomes; that is, the proportion of young people across the hoard who manage to achieve levels 2, 3 and 4 skills. That is exactly the strategy that the Learning and Skills Council is pursuing, and the Government today announced new targets to improve Figures and to encourage the council's ambitions and plans for this work.

The question of support for apprenticeships was raised. Apprenticeships are supported to the extent of £14,000 for an engineering AMA, which exceeds the public funding for a university undergraduate, including loans. So students are not necessarily sold short. I agree with my noble friend Lord Layard that there is a problem in regard to marketing and ma king attractive the whole area of vocational education and the opportunities it offers. That is a challenge that we need to meet, and this debate has gone some way towards meeting that challenge.

A great deal of the debate focused on the issue of the reforms necessary to modern apprenticeships. The noble Lord, Lord Trefgarne, generously identified that the numbers of modern apprenticeships in engineering have been increasing, but not at a rate sufficient to meet the needs of the economy and to reflect the opportunities that we wish to provide for our young people.

I am glad that the noble Lord, Lord Dearing, referred to the Cassels report, to which many Members of the House contributed. It is an important document and points the way forward. We are committed to investing an initial £180 million over the financial years 2001–04 to provide the necessary muscle behind the concepts of that excellent report. We have in place an action plan with the Learning and Skills Council to implement its recommendations, to ensure that all modern apprenticeships meet the highest standards and to encourage take-up by both employers and young people.

My noble friend Lord Layard emphasised that we are in danger of neglecting an important sector of society—that is, those people who have the ability to proceed along vocational routes but who are not sufficiently encouraged or motivated to pursue the strategies which are now in place to ensure successful development. The noble Lord, Lord Trefgarne, emphasised that we should have the necessary strategy in place for progression so that people who begin at one stage on the ladder do not feel that there are any barriers to prevent them achieving their full potential.

People should be able to advance according to their abilities and reach the highest level possible. We will enhance vocational education in this country once people can see a progression route and an attraction which matches the well-known chartered route through academic qualifications and higher education.

The noble Baroness, Lady Blatch, referred to further education and the role it can play. The whole House will rejoice at the 1 per cent real increase in support for further education for those colleges whose performances match up to the demanding standards of the Chancellor and the Secretary of State for Education. So real resources are being committed to a sector which has been starved of investment in the past and which needs enhancement. Again that is proof of the importance that we place on vocational development.

The noble Baroness, Lady Blatch, asked about energy aspects. We are attempting to place 4,500 people in jobs in the next three years across occupations in gas and engineering construction. Further research is under way to determine whether there are other occupations within the energy sector which should be included in the strategy. Ambition Energy was officially launched on 10th June. So far, 41 people have progressed to training in energy jobs. During the remainder of this year it is planned that a further 200 places will be available for people undertaking gas network operative training and 400 places in central heating installation. That brings us closer to some of the aspects introduced by the noble Baroness, Lady Hamwee, in regard to the needs of home owners.

In conclusion, the Government are seeking to overhaul the skills supply system in this country. We have established the LSC, which will play an important role, and in Wales the National Assembly has gone further by integrating post-16 education and skills with higher education. Business-led regional development agencies have a prime responsibility to bring about the climate in which skills and productivity become the engine of regional and local economic growth. We are introducing sector skills councils and backing them with resources.

In his Statement today the Chancellor has addressed the question of enhancing the skill levels of this country but a great deal of work has still to be done. Mention was made that in some cases we have only a three-year strategy. Once we hit the targets of the three-year strategy we can then plan for the momentum necessary to develop skill levels so that by 2010 we will be in a position to meet many of the targets essential to our nation.

[The Sitting was suspended from 8.26 to 8.28 p.m.]