David Willetts

The business and outsourced services industry is a major force in the UK economy across the private as well as the public sector. Policymakers of all political parties are deeply interested in what you do and how you do it. As your role expands in the public sector, so you will come under greater media scrutiny as well as political scrutiny.

Navigating these difficult waters means the same thing for every industry faced with these challenges - you need to have an effective industry body. Over recent months, the BSA has been increasingly at the forefront of that work for your industry.

I know they have a good team in place working on your behalf. That is a good thing for you the industry and a good thing for us here in Westminster - both sides need an open and informative relationship with healthy lines of communication, a good dialogue and reliable information. And I personally have appreciated the opportunity to meet with some of the major employers in the BSA who have practical experience of skills issues as you recruit and train many people.

It is a pleasure to have this opportunity to deliver your inaugural lecture. It is a good opportunity to draw out the important links between your industry and some of the big issues in our society today. I want to review what has happened over the last decade and then sketch out a Conservative view about how we can work together to improve skills, training, education and as a consequence improve social mobility and employment prospects. In fact it improves our well-being and I would like to start with that.

Well-being

There is a lively debate going on about what makes us happy. You might think only economists could make quite such heavy weather of it. But at least they are coming up with empirical evidence. One theme which emerges from the Left is that inequality matters. People care where they are compared with other people. This often becomes an argument about tax and income. But if you look at the evidence, it is more subtle than that. What matters is the value that other people attach to what you do. This is how Adam Smith puts it in his Theory of the Moral Sentiments:

what are the advantages which we propose to gain by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all advantages which we propose to derive from it.

The millions of people working in the sectors you represent are entitled to such attention from us. Offices do not just get cleaned by some natural process, any more than school meals cook themselves or rubbish makes its own way to the recycling facility.

The jobs you do are crucial to our economy and our quality of life. Cleaning, catering, security - these are essentials which it is easy to take for granted, but which you notice immediately if they are not done well. Your industries and the people working in them are the ones that keep our economy and society going. And, I have to say, they keep Parliament going too - the washroom outside my office is looked after every day by a BSA member.

As we Conservatives rediscover the importance of the local community, so we are also rediscovering the importance of the people who serve that community by keeping it going. It is hard to imagine a worthwhile community where the streets are not kept clean or security is not protected. Your members sustain our communities. And you and your employees are entitled to greater recognition than you have always had in the past. This is how we should see contracting out - not just as a matter of economic efficiency, important though that is, but also as creating new service industries and careers for individuals that deserve recognition in their own right.

The spread of contracting out has led to big changes in our economy over the past twenty-five years. Contracting out was initially seen as contributing to economic efficiency: it enabled companies to focus on what they were good at and to buy in other services from outside. And it required a new skill too, good buying, which the public sector still needs to do better - we must hope the Julius review will lead to improvements here. Contracting out has made a crucial contribution to the performance of public and private sectors.

But it can contribute to something else which is not sufficiently recognised and from which we can learn wider lessons. The change in industrial structure whereby more key services are contracted out and provided by your members gives room for new careers which can themselves be fulfilling and rewarding. Starting as a cook or a cleaner was never going to be the way to get to the top of a financial services company or a manufacturing firm. But you created new companies where that career path is now possible. You should be able to start as a cleaner or a cook and, if you want it and can do it, move right through an organisation to the top.

You have provided a route through to promotion and job development. And you have done that by ensuring talents are recognised - and by investment in skills. This makes you relevant to one of the liveliest debates in British politics today: how education and skills can promote opportunity and social mobility in our country.

Social Mobility

This is something Gordon Brown talks about at every possible occasion. A few weeks ago, he called for:

a new common purpose that our generation can forge together, a new meritocracy, a new wave of upward social mobility, that instead of unlocking just some of the talent of some of the people, must in this generation unlock all of the talents, of all of the people.

Gordon Brown wants social mobility to be the focus of his Government. Indeed for over a decade he has been in control of the key levers that help shape it. But while he talks about it, you deliver it. I want to reflect on what we can learn from you. That means identifying what has gone wrong and more importantly understanding why. As so often with this Government, they have good intentions and lots of money spent but not much delivered.

The usual starting point for these discussions is early years and schooling. Quite right too. Our recent Childhood Review identified a crucial lack of opportunities for children, and a catastrophic loss of public space. We live in a society where weight at birth is a strong predictor of how many years you will stay in education. We obviously need to do more about the earliest years. And Michael Gove has highlighted the way in which educational inequality is getting worse under Labour. That is why it is so important to have more good schools.

But early years cannot be the whole story. We need new opportunities as we go through life. Even if you have a raw deal early on, you should still be able to turn your life around. But the unfairness is so outrageous that we cannot just wait for a new generation to come through. We have to help teenagers and adults now.

A healthy corrective to early years determinism is what the neuro-scientists are now telling us about teenagers. Think of Kevin the teenager as the brain rebooting - or at least installing new software. There is a great opportunity to get teenagers back on track which we are failing to seize. And not just teenagers either. There are people in middle age and beyond whose talents and interests are still waiting to be disovered by a job or an educational opportunity they never had when they were younger. The challenge of providing new opportunities for over 16s is the key task for the Department I shadow. As a country, we need to do better.

What has been happening to the jobs market?

The story of jobs and training over the past ten years is a series of extraordinary paradoxes. Let me try to make sense of what has been going on. When it comes to young people the Government wants to focus on the modest increase in the number of young people staying on for education or training. The percentage of young people aged 16 to 18 in full-time education has grown from 56 per cent in 1997 to 61 per cent in 2006.

But at the same time there has been a shocking increase in the number of young people not in education, employment or training, the so-called Neets. The proportion of 16 to 18 year olds who are Neets has grown from 8 per cent to 10 per cent since 1997.

What has been going on? How can the number of young people in full-time education and the number out of it both have increased? One explanation is that the number of young people in jobs and work-based training has fallen from 36 per cent to 29 per cent. So the real problem is the decline in work-based training - that is what is driving the rise in Neets.

NEETs

Let us look more widely at the large number of Neets, right up to the age of 25.

• In 1997, there were 170,000 NEETs aged 16 and 17 and 930,000 NEETs aged 18 to 24 - 1.1 million young people in total.
• Today, those numbers are higher, not lower: there are now 200,000 NEETs aged 16 and 17 and 1.0 million NEETs aged 18 to 24 - a total of 1.2 million.

Would anyone, even Labour’s harshest critic, have forecast that after ten years of the New Deal, there would be more young people disconnected from education, jobs and training than before they started?

Within this total there has also been a particularly dramatic increase in the number of young men who are Neets. This is a really serious problem. The real problem is teenage boys and young men. The number of males aged 16 to 24 who are Neets has gone up from 450,000 to 550,000, an increase of more than 20 per cent since 1997.

Why? The problems faced by young males are not a natural disaster, but a man-made one. There is no reason why our country should settle for these shocking figures. There is no immutable law that makes inactivity a fact of life for young adults. It is not. Bad policy has a crucial responsibility. To understand that let me tell you story of a visit I made last year to a fantastic youth project in Keighley. They took teenagers off the streets who were disenchanted with education. Let me describe their approach. They had a motorbike repair garage with two or three experienced mechanics who knew all about repairing bikes. There were always a few bikes there for the young guys to mess around with. Or they could bring in their own bikes to work out how to fix them. And it was open from early morning to the evening so you could always drop in - these youngsters had such chaotic lives that you had to let them come and go quite freely. It was really helping them get off the streets.

They were undoubtedly helping these youths who would otherwise have been hanging out on a street corner or worse. But they were not getting straight onto a conventional route for a qualification. That meant there was very little public funding available for the project, which was almost entirely dependent on charitable funds. That project, which had brought down the number of NEETs in Keighley, closed last year. This was not some random accident. It was a consequence of deliberate Government policy. They could not access sufficient funds from the Learning and Skills Council because they did not meet the Government’s criteria.

The Government says young people need qualifications. So they fund courses to get them a vocational qualification in motorbike repair. Through the Learning and Skills Council, the Government is saying to disengaged youngsters, ‘If you turn up regularly at 10.50 on Tuesday mornings at a place that looks rather like the school you have been truanting from for the past two years and sit behind a desk, you can get a qualification.’ But if the young people were capable of that they would not have had a problem in the first place.

Of course, there is some funding to help Neets get back on track, but it is impatient money which requires they be on a course within a few weeks and for some that is to expect too much too fast. That means no one takes on the difficult cases which are unlikely to meet the requirements for funding. So what I conclude is this. The Government’s preoccupation with funding skills measured by paper qualifications is a key reason why the problem of Neets is actually getting worse.

The funding regime has become a barrier to reaching out to these Neets. That is why, working with Chris Grayling on our welfare-to-work strategy, we are keen to ensure more supportive and more flexible schemes can access funding which does not always need to be tied to paper qualifications. Sometimes they may be run by social enterprises. But FE Colleges themselves tell me they can do far more if only they can be liberated from the straight jacket of a funding formula from the Learning and Skills Council which ties funding so narrowly to the production of paper qualifications. This is something which we are now working on with the sector.

I meet forward-thinking college principals who are deeply frustrated that they are unable to tackle some of the biggest problems in their local community because of all the conditions and restrictions which now apply to public funding. We set them free in 1992 as self-governing corporations and in the past ten years they have seen that freedom eroded. The losers are the young people in their areas who could have benefited from the work of FE Colleges but are not able to do so. It is a case study in the argument David Cameron sets out so passionately that we need to give back to local institutions the power to run their own affairs. This is not so they can then carry on their own sweet way doing whatever they want with public money. It is so that they can do a better job of meeting the needs of the local community. I believe it is fresh thinking like this which can really help tackle the problem of Neets and help deliver our ambitious proposals to get people off welfare and into work.

Apprenticeships

When I was in Japan last year, at the World Skills Challenge, I met many exceptionally able and talented young people who took a real pride in their skills as a cabinet maker or a pastry cook or a landscape gardener. Some of them had been pushed down the academic route because they had the ability for it but had decided, sometimes after years of unsatisfactory academic education, that it was just not for them. The vocational route is clearly the best choice for many. One of the dangers of the Government’s approach is that ministers lead schools to assume that you have to aim to get everyone to university if they are remotely capable of it. And, as a result, there may be people going down academic route because that is assumed to be the best, not because it is what they are best suited for. We need to do much better at vocational alternatives which are really worthwhile - and indeed so good that they are the basis for going to university later on if that is what people wish. Apprenticeships are crucial here.

But apprenticeships are another area where things are going seriously wrong. You would not believe it from what Gordon Brown claims. In 2003, Gordon Brown announced apprenticeship numbers would rise to 320,000 by 2006. Earlier this year, ministers claimed ‘the Apprenticeship programme has undergone a renaissance in the past decade’. Yet, the figures tell another story. Today, there are in total 239,100 apprentices in training. Moreover, Advanced Apprentices, which provide training at A-Level equivalent standard, have fallen in number from 125,000 in 2000/01 to 97,000 today. Imagine the outcry if there had been a 25 per cent drop in the number of people getting A-Levels, but that is what we’ve got with these classic apprenticeships.

A recent House of Lords enquiry into apprenticeships found ‘an unfortunate history of initiatives announced but not implemented and of decisions taken and then changed or reversed.’ My party warns about the perverse effects of central targets and this is a powerful example of the damage they can do. Gordon Brown promises ever more ambitious figures for apprenticeships. But real apprenticeships are not set by government diktat - they emerge from the individual decisions of employers and young people. So the only way the Government can hope to achieve its target is by funding places in colleges and calling them apprenticeships. Labour now call apprenticeships what they used to denounce as Youth Training Schemes. So we now have programme-led apprenticeships with no real employer engagement. An apprenticeship should not be a place at an FE college with a bit of work experience tacked on. There may be a need for pre-apprenticeships but they should not be confused with real apprenticeships. Gordon Brown is cheating young people by claiming they are the same.

So we need more real apprenticeships. You do not achieve that by setting artificial targets. You do that by supply-side reform - removing the barriers which currently deter many employers from offering them. There is massive pent-up demand for real apprenticeships which is not being met because of the sheer hassle and cost of setting them up and running them. So many people say to me that they wish there were more young men in particular getting training to work in, say, construction. Why do we have to import foreign workers when we have young people who are surely capable of getting trained in these trades? They are capable. And they are keen. There is plenty of evidence to show our young people want to work in construction. In 2006, there were 50,000 applications for construction apprenticeships but only 9,000 places were available. And the same is true in other industries: British Gas has 15,000 applications for 500 apprenticeships; and British Telecom faces a similar demand for its 1,000 apprenticeships. The problem is not the demand among young people; it is the capacity of the industry to supply them.

These are truly shocking figures. Imagine if there were the same frustrated demand amongst young people wanting to go to university as there is for those wanting to go into construction. Out of the 500,000 young people applying for university, only 90,000 would get places. There would be an outcry. But that is what we are doing with apprenticeships. We hear a lot about how young people lack aspiration. But that is only a part of the story. Often they have aspirations that are frustrated. No wonder many give up. And, again, there is no reason we have to settle for this. I believe in progress. Things can get better.

Your members of the BSA have briefed me on your experience of apprenticeships. The firms you represent do an excellent job in providing apprenticeships, but I am told you could do even more. And the advice I get is clear - we need to cut the costs and hassle of running apprenticeships. Employers regularly complain to me about:

• the overlapping inspection regimes;
• the difficulty of building relationships with the numerous quangos;
• the LSC’s laborious registration process for staff;
• the complicated funding structures; and
• the volume of paperwork.

One large employer told me that they have to pay for four separate certificates for each apprentice which they then have to send to their Sector Skills Council. After another charge, they are then provided with an Apprenticeship Certificate. All five certificates then have to be kept on file for six years.

We are working with employers to get a clear understanding of these barriers so that we can tear them down.

Other challenges - through the life cycle

So we have young people deterred from class-based study and so out on the streets - they are unable to take up apprenticeships. Young men are also no more likely to go to university than ten years ago - though that scandal is a subject for another day. How does all this fit together and shape the agenda of the next Conservative Government?

Think of a salmon trying to get upstream. There are waterfalls to jump up and shallows to navigate. That is rather what our educational system is like. At every stage, from who gets the high quality childcare through to who gets to our most prestigious universities, it is much tougher for youngsters from tougher backgrounds. David Cameron, Michael Gove and I are committed to ensuring that everyone has a fair chance of getting the best out of our educational system. As a Conservative I believe in aspiration and opportunity. And, of course, I also believe in something else which gets less attention nowadays. I believe that knowledge and understanding are good things in themselves. I believe that mastering a craft or a skill is inherently worthwhile and up-lifting. And I want these deep sources of human satisfaction to be accessible to as many of my fellow citizens as possible.

There is no single magical stage of the lifecycle when we can tackle all these problems. Good quality childcare matters and so does vocational training. We need more good schools and more good apprenticeships - in both cases we have frustrated demand which has to be met by reform of the supply-side. We will never give up on anyone whatever their age. We can do so much more to help a disenchanted 19-year old as well as a nine-year old with special needs. And I want to end with the most powerful example of all this - adult learners.

One of the strange features of the way we measure social mobility now is that we measure where you have go to at 30 as your final destination - that is how the evidence on the 1958 and the 1970 cohorts is compared. That is a surprisingly static view of the rest of our lives. After that, there should still be many opportunities to advance. And we overlook the ways in which people can fall back after that. That is why this Government’s approach to adult learners is so scandalous. They seem to think that if at first you don’t succeed you don’t succeed.

We often assume that downward social mobility is very unusual in Britain. But you try telling that to a woman who has taken a few years out of the labour market to try to raise her kids. Then the story is very different. It is above all women who lose out form the Government’s cuts in opportunities for adult learners.

The problems of social mobility and opportunity look rather different for men and women. For young men the challenge is to get them focussed on education and training when they are young. But if you can get to them, then they will be able to stick at it. By and large we are doing a better job of getting girls to focus on school and university. Their educational achievements are now way ahead of men. But they are then at much greater risk of falling off the ladder and suffering the frustration of not achieving the career and the earnings that their education would be expected to command. That is why it is opportunities for education returners which matter most for them.

The number of people in adult and community learning has fallen by over a quarter of a million to just 745,000 since 1997. According to new figures released last week by the National Institute for Adult and Continuing Education, learning among skilled manual workers ‘has fallen from 40 per cent to 33 per cent in a single year, reversing their participation gains of the last ten years.’ No wonder the adult learning sector is so shrinking so fast.

This is Adult Learner Week. We believe in continuing opportunities. It is why we have called for the Government to suspend its cuts in places for people going back to a course at HE so that they do not lose their opportunities. We need a new deal for adult learners.

Conclusion

At the moment the state is like a bad parent - it reflects back chaos of young people’s lives and expects results too fast. The result is that, after ten years, there are no real results at all. We have more inactive young people. We have fewer real apprenticeships. And we have less adult learning.

Instead of chaotic and impatient policies, we need stable and imaginative ones that spread education and opportunity at every stage and every age.