�

The mobile economy

The authorsAndrew Haldenby is Reform’s Director.

Helen Rainbow is a Senior Researcher at Reform.

Laurie Thraves is Reform’s Education Researcher.

Elizabeth Truss is Reform’s Deputy Director.

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The mobile economy

ReformReform is an independent, non-party think tank whose mission is to set out a better way to deliver public services and economic prosperity.

We believe that by reforming the public sector, increasing investment and extending choice, high quality services can be made available for everyone.

Our vision is of a Britain with 21st Century healthcare, high standards in schools, a modern and efficient transport system, safe streets, and a free, dynamic and competitive economy.

�

The mobile economy

Andrew HaldenbyHelen RainbowLaurie ThravesElizabeth Truss

November 2008

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The mobile economy

Contents

Executive summary 5

1 A missed opportunity 6

2 The education maze 9

3 The central failure 14

4 Lost in the maze 21

5 The mobile economy 25

6 The path to the mobile economy 28

References 34

Appendix one 38

Appendix two 39

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The mobile economy

Executive summary

Self-flagellation about Britain’s skill shortage has become a regular pastime for politicians and business organisations. And it is certainly true that in an increasingly competitive global market the UK has been found wanting. Britain’s students are less likely to study high value courses. Professional scrutiny of qualifications is patchy. Many students are studying the wrong courses at the wrong level and skills shortages have emerged in critical areas.

The Government’s response to these failings has been to create a centralised skill delivery model for post-compulsory education (soon to be 18+). If Britain’s productivity was dictated by the number of skills bodies it had, it would be the world leader. There are at least four Government departments involved together with twenty nine quangos and numerous initiatives and plans. The result is an unwieldly education maze.

The maze has created individuals, institutions and employers more used to being spoon-fed than self motivated. Brought up on “teaching to the test”, students can lack the meta-skills – initiative, teamworking, capability –required in the fast moving world of modern business. Compared to other countries, fewer British students choose courses that bring the highest financial returns (such as engineering, medicine, law and mathematics). While government tries to deliver ready-made high skilled employees, employers actually have to carry out remedial work for a failing school system. New opportunities such as informal internships are monopolised by those with inside knowledge and financial resources. Higher and further education institutions are strait-jacketed, punished if they recruit too few or too many students and given little incentive to innovate or manage costs.

The education maze has not stifled all of the private sector contribution to training. Employers outspend government on training by four to one (£38 billion to £10 billion per year). The labour market puts a premium on higher skills. The introduction of tuition fees has started to drive greater take-up of high value courses such as mathematics and science. International evidence shows that higher tuition fees, together with a student support package, increase participation. Employer accredited qualifications have risen in number and some professions have created credible brands.

However, for individuals to maximise their talents, these trends need to be radically accelerated. The key change is reallocate the £9.6 billion currently spent by government on teaching and capital to students, through an Individual Education Account. This would be worth £13,000 for every 18 year old. The account could be spent on higher or further education, training and apprenticeships – abolishing the fractious debate about academic versus vocational education that has been running for decades. Apprenticeships and workplace qualifications should be accredited only by employers or their representatives. Educational institutions would be free to set their own salaries, degree contents and fees and new entrants would be allowed to contest the market, both home and abroad.

The consequences would be that:

> Other business sectors would follow the example of law, accountancy and medicine and create world-leading professional qualifications. For example, a Chartered Institute of Plumbing would seek statutory approval and set a standard for high quality plumbing apprenticeships and qualifications.

> Individuals would enjoy the same level of information about education and training as restaurant goers or car purchasers.

> Exports of education and training would rise. Higher education in particular should become a key growth sector in global markets.

> Educational institutions – particularly further education colleges but also universities – would develop a new vigour and confidence.

> Labour markets would become more flexible as training becomes more accessible.

> Most importantly, the best education and training opportunities would no longer be monopolised by people from advantaged backgrounds. This reform programme would contribute greatly to the Government’s forthcoming White Paper on social mobility, as well as supporting a mobile economy.

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The mobile economy

�A missed opportunity

The future international competitiveness of the UK demands a higher-skilled workforce. People rather than natural resources are becoming the key driver of economic performance in the face of global competition. Technological change, in particular, places a greater premium on well-developed skills. Unskilled individuals will be increasingly disadvantaged in the labour market and less able to share in future economic growth.

Skills shortages have already emerged in some areas. Graduates in shortage subjects enjoy a substantial lifetime earnings premium. Despite this economic incentive, young people are poor at pursuing education and training in high-value areas. In particular, young people from the lowest socio-economic groups are unlikely to make decisions that will bring them the maximum economic benefit. Britain is in danger of missing a vital opportunity to compete in the global marketplace for skills.

British students are poor at following high value education optionsLack of information and a top-down approach has resulted in a failure to signal to individuals where their talents would be best placed. In both the academic and vocational sectors many students are not opting for education options that will have the best outcomes in terms of future career prospects.

In higher education, UK students are poor at following high-value degree options. The chart below (Figure 1) shows that the highest earning subject is medicine with a lifetime earning premium of £340,315 (compared to two A-levels). This is followed by degrees in the physical and environmental sciences, mathematics, computer science and engineering. These subjects attract lifetime earning premiums of around £240,000. Arts and humanities students gain the least with a lifetime earning premium of £34,494 and £51,549 respectively.1

Figure �: Gross additional lifetime earnings by degree subject compared to two or more A-LevelsSource: Pooled Labour Force Survey �000-�00�; Price Waterhouse Coopers

� UniversitiesUK(2007),The Economic Benefits of a Degree.

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The mobile economy

As Figure 2, shows, the number of students taking these options is low in comparison to other groups of Organisation for Economic Co-operation and Development (OECD) countries. The UK produces the lowest percentage of graduates in engineering, law and health (which includes medicine and dentistry) compared to other groups of OECD countries. Only 6.2 per cent of UK graduates study engineering: this compares to 15 per cent in Continental Europe and 12.9 per cent in Eastern Europe. The UK produces the second lowest number in science, mathematics and computing at 9.4 per cent of total graduates. This compares to 10.4 per cent in Asia. The only area of high-economic value where the UK does perform well is in business and administration.

Figure �: Degrees awarded by field of education as a percentage of total degrees awardedSource: OECD Stats Extract �00�, Dataset: Graduates by field of education

Law Socialand Humanities Businessand Science, Health Engineering, behavioural andarts administration mathematics and manufacturing sciences2 andcomputing welfare3 andconstruction

Americas� 2.9 ��.9 �3.� 20.� 8.9 �5.6 9.�

Asia5 6.2 6.7 �0.2 20.6 �0.� ��.9 �0.9

ContinentalEurope �.8 6.7 �2.� �6.5 �0.6 �3 �5.0

EasternEurope 5.� 9.� �2.7 �6.3 ��.0 �5.3 �2.9

Scandinavia �.5 9.7 �0.9 ��.2 9.� �5.5 ��.9

UnitedKingdom 2.3 �2.� �5.6 2�.6 9.0 9.8 6.2

In vocational education, many people study low-level qualifications that have little or no wage return. Centre for Economic Performance (CEP) research shows that less able students who study for vocational qualifications often end up with qualifications that do not benefit them in the labour market.6

Vocational qualifications have a limited benefit for individuals who left school without any qualifications at all. Men who leave school with no qualifications but subsequently acquire a Level 3 (equivalent to A-level) vocational qualification are 10 per cent more likely to be employed than their unqualified counterparts, but still earn considerably less than students who gained Level 3 academic qualifications whilst at school.�

Poor students are less likely to choose high value optionsStudents from the lowest socio-economic group are less well-equipped to make good decisions about their education. Students from a poor background are less likely to apply to highly selective universities, despite the financial benefits.8 Research commissioned by the Sutton Trust found that 68 per cent of young people from poorer backgrounds believed that there was no difference between institutions. Only 38 per cent of more advantaged pupils did not recognise the distinction.9 Sutton Trust research indicates that disadvantaged students are less likely to receive high-quality advice and guidance on application and admissions than their more advantaged peers.10

2 Psychology,sociology,politicalscienceandeconomics.3 Medicine,nursing,dentalservices,medicaltechnology,therapy,pharmacy,childcareandsocialwork.� Canada,Mexico,USA.5 Australia,Japan,KoreaandNewZealand.6 CentreforEconomicPerformance(2006),Human Resources, the Labour Market and Economic Performance.7 CentreforEconomicPerformance(200�),The Impact of Vocational Qualifications on the Labour Market Outcomes of Low-Achieving

School-Leavers.8 CEPresearchshowsthatgraduatesfromuniversitiesinthetop25percentofinstitutionscanexpecttoearn�0-�6percent

morethantheircounterpartsinthebottom25percent.Graduatesfromsecond-quarteruniversitieswillearn5-7percentmore.CentreforEconomicPerformance(2008),Are the Top Universities Worth Paying For?

9 www.suttontrust.com.�0 TheSuttonTrust(2008),Increasing Higher Education Participation amongst Disadvantaged Young People and Schools in Poor Communities.

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The mobile economy

Not enough higher-level skillsThe current system is failing to produce skills at the right level. The Leitch Review prioritised improving basic skills levels in the belief that more people will find employment.11 Graham Hoyle, Chief Executive of the Association of Learning Providers, has warned that this risks preparing learners for low-skilled Level 2 (GCSE Grade A*-C standard) opportunities that are receding.12

Many businesses demand higher level skills. For instance, the development of Level 3 skills has been a particular priority for manufacturers. In 2006, KPMG identified the upskilling of the current manufacturing workforce as an urgent priority. 13 Despite government initiatives in the intervening period, such as the introduction of the National Skills Academy for Manufacturing, the Confederation of British Industry (CBI) reports that 60 per cent of manufacturers are still not confident that there are sufficient skilled people to fulfil future skills needs.14

There are too few graduates, not too manyReports that there are “too many graduates” are common. However, despite huge increases in student numbers, there has been very little impact on the market premium for graduates. This indicates that demand for graduates is far from saturated.15 OECD research shows that graduates who left UK universities a decade ago earn �� per cent more than non-graduates. 16 Not all graduates enter graduate-level jobs and the benefit of a degree may not be felt immediately.1� However, large increases in the number of graduates in OECD countries have not tended to dilute earnings or cause a rise in graduate unemployment.18

The expansion of tertiary education tends to benefit the entire workforce. Between 1995 and 2004, France, Ireland and Korea had the fastest growth in tertiary attainment. These countries experienced slight or negative growth in unemployment. Germany, the Czech Republic and the Slovak Republic had low or no growth in tertiary attainment. In these countries, a substantial increase in unemployment occurred.19

Realisation of the broad economic benefits has prompted government efforts to increase the number of individuals going to university. The key driver is a target for 50 per cent of young people aged 1� to 30 to participate in higher education by 2010. This target is unlikely to be met, with the proportion attending higher education in 2006-0� at 39.8 per cent, down from a peak of 42.5 per cent in 2005-06.20 This demonstrates the weakness of an arbitrary target in improving performance. Neither is the target of 50 per cent in itself very aspirational: it is low in comparison to the number of individuals currently attending higher education in comparative economies.21 It also takes responsibility away from individuals for assessing the likely return of the course on offer.

The wrong skills for the economyThere is substantial evidence that the top down approach is not producing the right skills for the economy. The CBI estimates that by 2014, ��5,000 roles will have been created that require higher-level science, technology, engineering and maths skills (STEM). 58 per cent of businesses are already reporting problems recruiting STEM graduates. The proportion of physics, chemistry and engineering students has fallen from 16 per cent to 11.5 per cent over the last decade.22 The UK skills shortage is increasingly being plugged by recruitment of well-qualified foreign workers. The Government has been, for instance, required to relax work permit regulations for 2� different electricity engineering generation jobs because of recruitment difficulties.23

�� HMTreasury(2006),Leitch Review of Skills: Final Report.�2 HouseofCommons(2006),MinutesofevidencetakenbeforetheWorkandPensionsCommittee,22November.�3 HouseofCommons(2007),MinutesofevidencetakenbeforetheTradeandIndustryCommittee,2�April.�� ConfederationofBritishIndustry(2008),Stepping Higher.�5 The Observer(2008),“Universitiesfacedegreerevolution”,9November.�6 OECD(2007),Education at a Glance 2007.�7 TheSundayTimes(2008),Sunday Times University Guide.�8 OECD(2007),Education at a Glance 2007.�9 Ibid.20 NationalAuditOffice(2008),Widening Participation in Higher Education.2� OECD(2007),Education at a Glance 2007.22 ConfederationofBritishIndustry(2008),Higher Education Task Force: Key Facts 1.23 BBC News(2008),“Workpermitruleseased”,�0June.

A missed opportunity�

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The mobile economy

�The education maze

The Government’s desire to improve skills has led to the creation of a large and complex web of agencies at both the national, regional and local level. This seems to reflect a belief that Britain’s poor overall performance in this sector can be remedied by the constant creation of new initiatives and programmes.

At present the education system is overseen by four government departments, 29 non-departmental public bodies (quangos) and a multitude of individual programmes. The total amount of money being put in to the education and skills system is around £66 billion. The total for the education and training sector post-18 is around £19 billion. 24

Successive ministers have recognised this complexity and rhetoric continues to suggest moves towards simplification and a reduction in bureaucracy.25 This however is counteracted by continuing announcements of new agencies and programmes to add to the “education maze”. The system is in constant flux, as alongside new bodies, the roles and remits of existing ones are constantly under review.

In the last six months there have been a number of announcements of new bodies, initiatives and programmes. These include the announcement of the creation of an Adult Advancement and Careers Service, a construction task force, a student leadership project, the Sciencewise Expert Resource Centre for Public Dialogue in Science and Innovation and the evolution of the Learning and Skills Council (LSC) into two new bodies.26

The diagram overleaf demonstrates the complexity of the system, and the complex funding and regulatory relationships between bodies. The bold lines represent funding streams and the dotted lines represent regulatory relationships. Information on the role of all of these different agencies is included in Appendix Two.

2� Reformcalculations.25 Denham,J.(2008),“Strategicskills:rightskills,rightplace,righttime”,SpeechatCentrepoint,DIUSSpeeches,2�October.Hesaid:

“TodaytheypublishtheirfirstproposalstosimplifytheskillssysteminEngland–inthefirstinstancemakingthesystemsimplerforemployerstouse.Theseideasofsimplificationalsomeanmakingthesystemmoreresponsive,andtheirproposalsarereflectedinwhatIwillsaytoday.”

26 www.dius.gov.uk.

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The education maze�

��

The mobile economy

A collection of government departmentsAn increasing number of government departments are active in skills delivery. At present, the Department for Children, Schools and Families (DCSF), the Department for Innovation, Universities and Skills (DIUS), the Department of Work and Pensions (DWP) and the Department for Business Enterprise and Regulatory Reform (BERR) all play a role.

The separation in 200� of the Department of Education and Skills into the DCSF and DIUS added to this already complex picture. Notionally DSCF is responsible for the majority of pre-18 education activity while DIUS covers activity post-18.2� These two bodies provide the majority of funding post-18.

DCSF and DIUS are responsible for disseminating the majority of education funding, some is delivered direct to individual education providers, but the majority is channelled through sometimes multiple layers of quangos and programmes.

A proliferation of quangosFor vocational training the largest quango is the LSC which channels funding for all education post-16 not covered by universities, including workplace programmes such as Train to Gain. 28 This body is an exemplar of the constant flux in the system. It was formed in 2001, taking over the roles of the former Further Education Funding Council and Training and Enterprise Councils. The LSC has presided over a burgeoning landscape of initiatives and providers. In July 2008, the UK Commission on Employability and Skills (UKCES) estimated that the Government operates 101 different skills initiatives.29 In October, the LSC announced four new National Skills Academies (bringing the total to 16).

The LSC is now set to be replaced by two new bodies in 2010, the Young People’s Learning Agency and the Skills Funding Agency. For young people the majority of the functions of the LSC will be given to local authorities. The Young People’s Learning Agency will deal with issues at a national level. The Skills Agency will be responsible for adults, with resources focused through programmes such as Train to Gain and the new skills accounts. These two new agencies will work with 168 local authorities in “sub-regional” clusters.30

For academic education government funding for universities is channelled through the Higher Education Funding Council for England (HEFCE), Research Councils and the Student Loans Company (SLC). HEFCE administer block teaching and research grants to universities, while research councils provide research funding for specific projects, and the SLC administers student loans and grants.

A mass of regulatorsA number of quangos have a role in regulating the education sector. Each education provider is subject to regulation from a number of separate bodies. This is well-demonstrated by FE. In 2006, The Foster Review identified 1� different regulatory bodies. Although some have been superseded, 13 still remain.31 These include bodies such as Ofsted, the LSC, Sector Skills Councils, HEFCE and local authorities.

Universities are self-governing, autonomous institutions, and are responsible for maintaining their own standards. They do, however also have their own regulating body, the Quality Assurance Agency (QAA), which was set up in 199� to “safeguard the public interest in sound standards of higher education”.32 Universities have their performance regularly measured by other bodies, such as HEFCE, their largest source of funding. Universities are given their degree awarding powers by statute on recommendation of the QAA. Other professional bodies also receive their authorisation by statute.

27 www.hero.ac.uk.28 TraintoGaindisseminatesfundingthroughemployerswhowishtoupskilltheirworkforces.29 TheGuardian(2008),“Neitherherenorthere”,�July.30 DepartmentforChildren,SchoolsandFamilies(2008),Raising Expectations: Enabling the System to Deliver.3� DepartmentforEducationandSkills(2006),Realising the Potential: A Review of the Future Role of Further Education Colleges.32 www.qaa.ac.uk.

The education maze�

��

The mobile economy

A multitude of Sector Skills CouncilsThe first Sectors Skills Councils were created in 2003. There are 25 Sector Skills Councils at present although all their licenses are set to be reviewed over the next 12 months.33 Their role is to provide employer leadership to meet their sector’s skills and business needs. There are 24 different Sector Skills Councils as shown in the table below.

Figure �: Sector Skills Councils by industrySource: www.sscalliance.org

Sector Skill Councils Industries covered

AssetSkills Property,housing,facilitiesmanagement,cleaningandparking

Cogent Chemicalspharmaceuticals,oilandgas,nuclear,petroleumandpolymer

CreativeandCulturalSkills Advertising,crafts,culturalheritage,design,music,performing,literaryandvisualarts

EnergyandUtilitySkills Electricity,gas,wastemanagementandwater

E-SkillsUK ITandtelecoms

FinancialServicesSkillsCouncil Financialservices,accountancyandfinance

GoSkills Passengertransport

GovernmentSkills Centralgovernment

Improve Foodanddrinkmanufacturing

InstituteofMotorIndustry+AutomotiveSkills Automotiveretail

Lantra Environmentalandland-based

LifelongLearningUK Lifelonglearning

People�(st) Hospitality,leisure,travelandtourism

ProskillsUK Processandmanufacturing

SEMTA Science,engineeringandmanufacturingtechnologies

Skillsfast-UK Fashionandtextiles

SkillsforCareandDevelopment Socialcare,childrenandyoungpeople’sworkforces

SkillsforHealth Health

SkillsforJustice Justice

SkillsforLogistics Logistics

SkillsActive Activeleisureandlearning

Skillset Creativemedia

SkillsmartRetail Retail

SummitSkills Buildingservicesengineering

33 www.ukces.org.uk.

The education maze�

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The mobile economy

A spawning of local quangosQuangos exist at a multitude of levels and can often generate new sub-organisations. On a regional level, Regional Development Agencies (RDA) play a role, alongside Regional Learning and Skills Councils, in contributing to skills training. The London Development Agency in particular has overall responsibility for skills. It works through the London Employment and Skills Taskforce for 2012, the London Skills for Life Strategy and the London Skills and Employment Board.

In larger cities, Skills and Employment Boards have been established to help ensure that training reflects the local labour market. These bodies bring together representatives from local authorities, the LSC, Regional Development Agencies and Job Centre Plus.

The growth of the middle manDue to the sheer complexity of the system a group of “middlemen” have emerged to help employers, individuals and institutions navigate the system. These middle-men include skills brokers, careers advisors and service providers.

Skills brokers help businesses source employee training. Encouraged by the Leitch Review, their role has expanded.34 In manufacturing, for instance, KPMG found that nine types of bodies provided “skills brokerage”.35 This number is ever increasing: the most recent addition is the National Skills Academy for Manufacturing.

Another group on the chart are government sponsored careers and jobs advisory services, such as Connexions, an advisory service for young people. At present the information on the value of different types of education and careers post-18 is hard to access, a fact that will be demonstrated in the following chapters, questioning the effectiveness of these services at present. Since April 2008, local authorities have been given responsibility for delivering local Connexions services. Connexions Direct operates the national on-line and phone service.

Aside from the standard education providers – schools, further education colleges and universities – there are a number of other providers delivering training and education services direct to individuals. These include organisations such as the University for Industry (UFI) which is responsible for Learndirect. Learndirect delivers a range of adult learning in both local centres and online. Other service providers include Jobcentre Plus which provides a range of services to get individuals off welfare and into work.

3� HMTreasury(2006),Leitch Review of Skills: Final Report.35 HouseofCommons(2007),MinutesofevidencetakenbeforetheTradeandIndustryCommittee,2�April.

The education maze�

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The mobile economy

�The central failure

UK skills policy is the last outpost of the post-War national economic planning effort. As government ownership of industry has receded over the last thirty years (at least until recent events), so its direction of skills and training has intensified. The “white heat” of technological progress has cooled into the rigid structure of a national training bureaucracy.

The aim of public service reform thinking over the last decade has been to deregulate and decentralise. But policy on skills and post-compulsory education has moved in the opposite direction. A range of new bodies have been created to regulate further education and higher education institutions. These institutions have become demoralised, despite sustained taxpayer-funded spending increases.

Where deregulation has occurred – for example, the introduction of limited tuition fees in higher education – the results have been highly successful.

Manpower planning is obsoleteModern developed countries’ economies are based on services and high value-added industries. Increasing openness to global competition means that competitive pressures are felt at all levels and a more skilled workforce will be required. The temptation of government is to plan for these skills, typically as part of an overall strategy to improve productivity. But a basic fact is that accurate forecasts on future skills needs are so difficult as to be, in practice, impossible. This was recognised by the Leitch Review itself, which stated that “no one can accurately predict future demand for particular skill types”.36

In the UK, skills policy has become akin to an obsession for successive governments. They have seen the improvement of skills as the key driver of improved productivity, which will in turn lead to higher growth. The result has been an attempt to plan the UK’s skills needs at a national level, as part of wider government efforts to improve the UK economy.

The evidence suggests that this approach is profoundly flawed. Most simply, as the economist Alison Wolf has argued, skills are not a proxy for productivity – there is no simple relationship between extra expenditure on skills and higher output.3� The UK economic renaissance in the 1980s and 1990s, for example, was not based on a transformation in education and skills, but in a shift in the balance of economic output and labour towards higher productivity activities.

The effectiveness of government intervention is questionable. Alison Wolf has shown that there is no evidence of higher earnings among individuals who have passed low level qualifications (Levels 1 and 2) that have been the key objectives of the Department of Education (in its various guises). Wolf concluded that the skills advocated by government have simply not been in demand in the labour market.38

Local not nationalNational skills planning fails to take account of the localised nature of the UK labour market, which has low labour mobility compared to the US and Europe. The US Census found that that 18 per cent of the moving population moved for a work-related reason.39 EU citizens move for work-related reasons at a rate of 15 per cent.40 This compares to only 13 per cent of moving Britons.

Low earning employees are particularly unlikely to move for economic reasons. ONS statistics for 1991-2000 showed that 3.4 per cent of people with a degree-level qualification moved home for employment reasons. Only 0.2 per cent of people with no formal qualifications moved for this reason.41 The “knowledge economy” is highly centralised on London and the South East. Consequently, demand for higher-level science and technology skills is extremely localised.42

36 HMTreasury(2006),Leitch Review of Skills: Final Report.37 Wolf,A.(2002),Does Education Matter? Myths About Education and Economic Growth.“Inthefieldofskills,[thereis]noconclusive

proofofasimple,directcausallinkatfirmleveltoinvestmentinskills.”38 Wolf,A.,Jenkins,A.andVignoles,A.(2006),“Certifyingtheworkforce:economicimperativeorfailedsocialpolicy?”,Journal of

Education Policy,Vol.2�,No.5,September2006.39 Thedos,B.(2006),Geographic Mobility and Geographic Labour Mobility in the United States.�0 USDepartmentofLabour(2002),Labour Markets in the 21st Century: Skills and Mobility.�� OfficeofNationalStatistics(2003),Migration within Britain for Job Reasons.�2 LocalFutures(2006),State of the Nation 2006.

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Not a British modelIn pursuit of a better training system, British eyes have typically turned to Continental countries – in particular Germany – where workplace training for students aged over 16 is organised at the industry level. However, the structure of the UK and German economies are very different. The German model is inappropriate here.

The German model suits an economy characterised by social partnership. Germany has a strong linkage between its educational and occupational system. In contrast, the UK has a weak linkage between education and employment.43 Collective bargaining covers more than 80 per cent of German workers.44 This compares to only 28 per cent in the UK (and only 1� per cent of private sector workers).45

The dominant actors in the British labour market are market forces rather than regulations.46 The interaction of market forces makes job mobility higher than in the German case and collective bargaining less widespread. Figures collated by the ONS show that, in 2000, 82 per cent of employees in the EU were in the same job as 12 months ago. This compares with �8 per cent of UK workers. The US has the highest level of mobility at 6� per cent.4� In Germany, as John Buchanan of the University of Sydney has observed, “powerful employer associations circulate information, monitor company training performance and impose sanctions on opportunistic employers who ‘free-load’ by denying access to other services provided by the association”.48

Individual firms play a far more prominent role in the UK. Firm-specific skills are a key element in determining success and career progression in labour markets characterised by less centralisation and a low level of job classification. In such countries, internal markets dominate. Employers tend to fill vacancies for unqualified jobs with workers from outside the firm. Vacancies for more qualified positions are filled internally. Conversely, in centralised markets transferable rather than firm specific skills are most important.49 Training at the level of the firm is consequently more successful in the UK.

Failure to acknowledge the prominent role of firms in delivering skills training has resulted in government paying for training that would have taken place anyway. The Government’s flagship programme Train to Gain was meant to target “hard to reach” employers and employees but studies have shown this not to be the case. An Institute of Fiscal Studies (IFS) report on the pilot phase of the programme suggested that only 10-15 per cent of firms would not have provided training in the absence of government funding. It approximated that the dead weight cost of the programme was extremely high at around 85-90 per cent.50

Subordinated institutionsDespite the lack of evidence, successive governments have subordinated institutions and individual students in the desire to reach the “promised land” of a highly skilled workforce. The thrust of policy since the late 1980s has been to bring educational institutions within a national structure, so that they contribute to national education objectives framed by government. The creation of the National Education and Training Targets in 1991 – covering both children’s education and adult skills – was a decisive step in this process. These targets have been amended several times and now exist in the form of the Public Service Agreements agreed by the Treasury with the DCSF and DIUS. A complex panoply of organisations have been created, as demonstrated in Chapter Two, to lead education institutions towards these objectives.

�3 Pavlopoulos,DandFouarge,D(2006),“Escapingthelowpaytrap:dolabourmarketentrantsstandachance?”,Munich Personal RePEc Archive.

�� Ibid.�5 DepartmentofTradeandIndustry(2007),Trade Union Membership 2006.�6 Pavlopoulos,DandFouarge,D(2006),“Escapingthelowpaytrap:dolabourmarketentrantsstandachance?”,Munich Personal

RePEc Archive.�7 OfficeofNationalStatistics(2003),Job Mobility and Job Tenure in the UK.�8 Buchanan,J.,Evesson,J.,Briggs,C(2002)Renewing the Capacity for Skill Formation: The Challenge for Victorian Manufacturing.�9 Pavlopoulos,DandFouarge,D(2006),Escapingthelowpaytrap:dolabourmarketentrantsstandachance?”,Munich Personal

RePEc Archive.50 TheInstituteofFiscalStudies(2005),The Impact of the Employer Training Pilots on the Take-up of Training Among Employers

and Employees.

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Command and controlThe initial intention of the policy was to make institutions more accountable for their use of resources. It was part of the efforts of the 198� Government to increase the output of public services following a decade of spending increases.51 But it was the wrong kind of accountability, which made government the customer rather than the student. It heralded an era of command and control.

For non-compulsory education, further education colleges face the greatest level of intervention and oversight. This reflects a number of other features of the education and skills system, notably the repetitive remodeling of vocational education (see below). It also reflects the basic approach of the last twenty years – that non-academic skills represent a market failure. CEP has noted that vocational qualifications are often a dead-end for learners. A third of vocational students are on courses that could not possibly lead to higher education.52

Regulation has been a key contributor to the failure to improve post-compulsory education. The 2005 Further Education White Paper identified the extent of regulation in the sector – and the “strategic confusion” between two of the regulators, the LSC and the Department for Education and Skills – as key reasons for its grave underperformance.53

Higher education is subject to a heavy degree of regulation. The provision of funds by HEFCE is used as a lever by government to achieve certain kinds of behaviour. Its strategic aims give it a remit across all of the activities of a university: widening participation and fair access, learning and teaching, research, and the contribution of higher education to economy and society.54

Market distortionThe limit on student numbers imposed on institutions by HEFCE is particularly damaging as it prevents the expansion of popular universities and courses. In practice this means that popular institutions have an incentive to raise their prices rather than increase sales. While this may support or increase the revenues of institutions, it has a negative consequence that is more important: it places them in a comfort zone in which they don’t have to think entrepreneurially. The obvious comparison is between Oxbridge and the Ivy League universities. As discussed in Chapter Four, Oxford and Cambridge have taken decades to follow the much more aggressive, and successful, fundraising strategies of their US counterparts.

Another damaging consequence of HEFCE funding is that it provides an artificial boost for unpopular, and sometimes more expensive, courses. HEFCE, and not demand from students, determines the number of places available. This prevents popular courses from expanding and ensures the survival of less popular courses. To ensure courses remain full, institutions have dropped entry requirements for unpopular degrees and raised them for more popular courses. Successful candidates for history courses, for instance, achieve an average UCAS tariff of 304. In contrast, the average tariff score for engineering degrees was 238.55

The freedom of institutions to design degree courses is increasingly constrained. Since 2000, the QAA has specified the level of achievement for different degree courses in 54 published benchmarks. These specify the nature and extent of a subject and provide guidance on its teaching, learning and assessment. In a series of bullet points, the generic and subject-specific knowledge and skills that are expected of students are also specified.56

Other government constraints have restricted the ability of institutions to improve their situations. The most obvious of these is the existence of the cap on tuition fees. Other constraints relate to the tax system. For example, US institutions are able to obtain tax relief on so-called “planned giving” vehicles.5�

5� ForsimilarmovesintheNHSandlocalgovernment,seeCampbell-Smith,D.(2008),Follow the Money – The Audit Commission, Public Money and the Management of Public Services, 1983-2008.

52 CentreforEconomicPerformance(2003),Finding Our Way: Vocational Education in England.53 DepartmentforEducationandSkills(2005),Realising the Potential – A Review of the Future Role of Further Education Colleges.

ThesummaryoftheWhitePapermadethefollowingpoints:“TheFEsystemhassufferedfromtoomanyinitiatives…Thereisstrategicconfusionaboutroles,especiallybetweentheLearningandSkillsCouncilandtheDepartmentforEducationandSkills…Withingovernment,thedisadvantaged‘middlechild’experienceofFEbetweenschoolsandHEneedstoberepaired…[nationalpolicyneedstodeliver]lesscentralisationandmovestowardsgreaterself-regulation.”

5� www.hefce.ac.uk.55 www.ucas.ac.uk;Reform calculations56 www.qaa.ac.uk.57 DepartmentforEducationandSkills(200�),Increasing Voluntary Giving to Higher Education.

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The mobile economy

Uncompetitive remunerationThe existence of national pay scales places a further constraint on universities and colleges. Most staff employed within higher education are paid according to the position of their posts on a national salary scale of 51 pay points. Currently, pay received at each salary scale point is reviewed annually through negotiations between the HE institutions and staff trade unions. Each union negotiates on behalf of its own members. The Universities’ and Colleges’ Employers Association (UCEA) facilitates these talks, and mediates between employers and each union until a figure has been agreed. It is up to each institution to place its employees’ posts on the relevant salary scale at the right grading.58

Pay for FE lecturers is lower than for school teachers. The most recent estimate from the Universities and Colleges Union puts this disparity at 6 per cent. In London, the pay gap is estimated to be 10 per cent.59 There is a substantial gulf in the professional status of teachers and lecturers. In particular, FE lecturers do not require qualified teacher status. Low pay and esteem has contributed to a looming recruitment crisis. A recent study by the Learning and Skills Network found that half of lecturers plan to leave the sector within five years.60

Entrenched vocational “second tier” status The desire to create “parity of esteem” for the “vocational route” from education into employment has been one of the most counterproductive areas of policy under successive governments. The aim of policy has been clear: to create a qualification or qualifications that command respect among young people and employers. But the reality has been a series of artificial qualifications, generated by bureaucrats not employers, that have proved transitory. The response of governments to the failure of a qualification has been to replace it with a rebadged version. Policy has followed a repetitive cycle in which each turn has, unsurprisingly, brought little improvement.

Reforms to the bureaucracy of training have had little impact and have only served to complicate the education maze further. Students opting for a non-academic route are presented with the most complex range of options. Research by CEP has found that young people, parents and employers no longer have a clear vision of what vocational education entails.61 The GCSE, A-level and higher education route is comparatively clearer.

Internships are the new apprenticeshipsStudies have noted that vocational education systems such as apprenticeships tend to have strong, country-specific historical roots.62 In Britain, apprenticeships have become social indicators with an element of snobbery. In contrast, the German “dual-system” has a long history and is not perceived as somehow distinctive from other forms of education.

Today’s apprenticeships provide a restricted amount of the practical experience that is crucial to enhancing an individual’s employability. A recent study found that apprenticeships were too rigidly focused on qualification outcomes and constrained by central direction. It concluded that apprentices are being offered little more than functional skills qualifications and an NVQ.63 These basic qualifications provide little benefit in the jobs market.

In contrast, internships in the service-sector provide an increasingly well-defined route into employment. A recent survey found that nearly half of employers offered a fifth of their interns a permanent position.64 Unpaid internships are particularly important in the media and politics. A recent National Union of Journalists survey found that just over half did internships after graduation. The majority were unpaid.65

The emphasis placed on unpaid internships creates an unfair bias towards those who have the financial backing to work for free. As Lee Elliott Major, research director of the Sutton Trust has observed, such placements are largely based in London and place a substantial cost-burden on individuals. While this is not direct discrimination, “the system works to deter people without family in the south-east, or who aren’t rich and connected”.66

58 www.hero.ac.uk.59 www.ucu.org.uk.60 LearningandSkillsNetwork(2008),FE Colleges: The Frontline Under Pressure?6� CentreforEconomicPerformance(2003),Finding Our Way: Vocational Education in England.62 ScottishExecutive(2005),Research on Approaches to Public Funding and Development of Tertiary Education within Selected

OECD Nations.63 Unwin,L.,Fuller,A.(2008),Towards Expansive Apprenticeships.6� AssociationofGraduateRecruiters(2007),AGR Graduate Recruitment Survey 2007: Summer Review.65 NationalUnionofJournalists(2008),NUJ Work Experience Survey.66 SuttonTrust(2006),The Educational Backgrounds of Leading Journalists.

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If in doubt create a new qualificationSince the late 1980s, the key tool used by governments to solve the perceived lack of training has been the creation of a new qualification. The questions of the quality of teaching or the attitude of teachers and students – arguably more important – have taken a distant second place. Policy has also ignored the existing and well-regarded qualifications offered by organisations such as City and Guilds or BTEC.

Each of these new qualifications have been found to contain grave flaws. National Vocational Qualifications were introduced in 1986 as a means of recording competency in the workplace. While more than two million NVQs have been awarded, they have not supplanted other vocational qualifications, as was the intention.6� In addition, concerns have been raised by employers and trainers that they record a candidate’s ability to follow instructions rather than display actual competence. The statements of competence provided by candidates are also open to fraud.68

The concern that NVQs did not actually measure candidates’ competence led to the creation of the General National Vocational Qualification in 1992. This aimed to combine tests of competency with elements of academic teaching. The GNVQ did not ever acquire currency amongst young people. Secretary of State for Education and Skills, David Blunkett announced the replacement of GNVQs in 2000, and they were completely withdrawn in 200�. One academic has argued that while GNVQs were supposed to be employer-led, in fact they were designed by government agencies, removing their legitimacy:

“Unfortunately, the complex and hugely demanding design of the GNVQs set them on a course for self-destruction. Like NVQs, but unlike any of the other public examinations in the UK, the GNVQ was designed from scratch entirely by government agencies, in this case NCVQ [the National Council for Vocational Qualifications], who were inspired by a particular assessment philosophy …. The result was an administrative nightmare, with teachers spending up to 20 hours a work on the assessment of the award …. What the history of GNVQs does demonstrate, once again, is the progressive nationalisation of assessment and examination policy, and direct day by day involvement of Ministers in decisions.” 69

The relative failure of the GNVQ has given rise to the vocational diploma, which is being introduced in the current academic year. At times Ministers have suggested that the diploma will become the replacement for all post-16 qualifications.�0 That ambition has now been downgraded, amid concern over the quality and uptake of the qualification. The diploma is following the same cycle as the NVQ and GNVQ.

67 Costello,M.,Roe,P.andWiseman,J.,(2006),Perceptions and Use of NVQs: A Survey of Employers in England,DepartmentforEducationandSkills.“NorhasNVQachieveditsoriginalobjectivestosupplantexistingqualificationsandtobecomethemajorsystembywhichvocationalskillsarecertificatedinEngland:oursurveysuggeststhat,intheyearpriortosurvey,27percentofemployerstrainedatleastoneemployeetowardsanon-NVQqualificationbutonly�6percenttrainedatleastoneemployeetowardsNVQ.Thesurveyalsosuggeststhatthisdisproportioninfavourofemployersofferingnon-NVQqualificationsiscarriedthroughintonumbersofindividualsworkingtowardsthedifferinggroupsofqualification.AfurtherindicationofNVQ’sinabilitytosupplantexistingqualificationsisthathalfofallworkforcesareestimatedtocontainno-onewhoholdsanNVQ.Whenweaskedemployerstodescribethenon-NVQqualificationsandNVQstowardswhichtheyhadtrainedwefoundenormouscomplexityinbothcases.ItappearsthatnotonlyhasNVQnot,asintended,reducedtheimmensearrayofexistingqualifications,buthasaddeditsownsubstantialcomplexitytothatarray.”

68 Ibid.“Someofthe‘traditional’academiccriticismsofNVQwerealsomade–thatitisn’tsufficientlyrigorous,thatitistoocomplicatedandbureaucratic,andthatitlacksatrueformofexamination.”

69 Aldrich,R.(2002),A Century of Education.70 DepartmentforChildren,SchoolsandFamilies(2007),“Diplomascouldbecomequalificationofchoiceforyoungpeople”,DCSFPress

Release,23October.EdBalls,theSecretaryofStateforChildren,SchoolsandFamilies,said:“IfDiplomasaresuccessfullyintroducedandaredeliveringthemixthatemployersanduniversitiesvalue,theycouldbecomethequalificationofchoiceforyoungpeople.”

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Some qualifications are more equal than othersThe result of excessive political control is that vocational qualifications have continued to have a lower status than their academic counterparts. Rather than allowing them to find their value in the market for employment, the Government has frequently demonstrated that it wants to peg them to a particular level. In the UK, vocational education is often seen as an alternative to academic subjects for less-able pupils. This is not the case abroad.�1

In 2003, under Sir Mike Tomlinson, a group of employers, schools and universities proposed a common framework covering both academic and vocational choices (including more stretching academic questions than the current A-level offers). In the run-up to the 2005 General Election, Ruth Kelly, then Secretary of State for Education and Skills, announced that A-levels would continue as a separate qualification and that there would not be a new, overarching framework. This signalled that the Government wanted the A-level to have a higher status. It also showed that the Government wanted to retain control over the qualifications system in the last resort. �2

The myth of employer-led bodiesSector Skills Councils, introduced to address the deficit of employer involvement in education and training policy, get mixed reviews from employers. Conversations with business leaders found that their presence is “patchy”.�3 A 2005 CBI survey provides support for this point. It found that just over half of businesses had had contact with their Sector Skills Councils. However, only one in six had received useful information.�4 Overall, employers say that some of the research they produce is useful, as are the qualifications frameworks and skills passports, but this varies considerably between Sector Skills Councils. The Leitch Review presented a similarly mixed picture. Evidence of improving performance was undermined by deficiencies in performance management and ineffective leadership.�5

Sector Skills Councils sometimes duplicate roles that trade and professional bodies take on. In sectors such as financial services, for instance, a number of bodies already exist that provide effective guidance on career progression and professional development. In other cases, Sector Skill Councils perform a useful function where there is not a strong employer presence. However, they are in danger of becoming another bureaucratic arm of government.

The fundamental flaw behind the Sector Skill Council model is that it does not reflect the UK skills market. Meta (or transferable) skills, such as teamworking, effective communication and adaptability, are becoming increasingly important to employers. They are vital in the modern labour market as employees are increasingly required to move between quite different projects and roles.�6 These skills transcend specific areas or disciplines and consequently cross-cut the work of Sector Skill Councils.

Skills are increasingly transferable across industries. IT experts, for instance, are required in creative industries, catering and transport. In addition, because the UK model places a high value on firm-specific training, skills that are broad enough to be credited across an entire industry may not suit the needs of a particular company. Indeed, employers will often favour a qualification supplied by a vendor in their supply chain or another company.

7� CentreforEconomicPerformance(2003),Finding Our Way: Vocational Education in England.72 TheConservativePartyhassentthesamesignals.Forexample,inMarch2008,MichaelGovesaid:“It’svitalthatthediplomasarehigh

quality.It’sequallyimportantthatA-levelssurvive.EdBallshasagainduckedthechancetoguaranteehewillkeepthisgoldstandardqualification.”BBCNews(2008),“Heads’toughwarningonDiploma”,7March.

73 Reformconsultedwithanumberofemployersinformallyabouttheirrole.7� ConfederationofBritishIndustry(2005),Employment Trends Survey.75 Leitch,S.(2006),Leitch Review of Skills,HMTreasury,DIUS.76 Dillon,C.andHodgkinson,L.(2002),Key Skills: Making Connections Between HE and the Workplace,CentreforOutcomeBased

Education.

The central failure�

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The mobile economy

Crowding out individual investmentHistorically Britain has had a very poor record of individual investment in education and training and low participation in higher education. However recent policy changes such as the introduction of student loans in 1991-92 and tuition fees in 1998-99 and various learner accounts have helped to begin to redress this balance, with Britain’s participation levels in higher education rising above average OECD levels. The graduation rate for first degree programmes is 39 per cent (the OECD average is 3� per cent). This figure has increased from 3� per cent in 2000.��

There is, however, a continuing backlash from forces within and without education to prevent individuals from making a full and rational choice about their own future. A fierce debate continues about tuition fees for higher education which are still capped at £3,145 per year. The fee structure for FE is even more centrally controlled with students generally not making a contribution at present. In 2006, �6 per cent of learners in further education paid no fees.�8

Politicians have been highly critical of “Mickey Mouse” courses.�9 But who bears the Mickey Mouse cost? At present it is largely the taxpayer. If individuals bore more of the cost of training, they would take greater care over the content of their courses. HEFCE has suggested, for instance, that the introduction of top-up fees in 2006 has stimulated interest in physics, maths, engineering and chemistry, which as demonstrated in Chapter One all have very high financial returns to the students.80

A culture of misinformation Much government information about education and training system is misleading. The reason is that government’s role is conflicted; it is both a producer of education and skills and a regulator of it.

The existence of national targets, based on numbers of passes, creates an incentive for government and institutions to manipulate results. To take just one instance, the Department for Education (in various guises) denied for years that A-level standards were not falling, in the face of the strongest independent academic evidence.81 The transfer of the regulatory role of the Qualifications and Curriculum Agency to a genuinely independent body acknowledges the need for more objective oversight.

In their attempts to create “parity of esteem” between qualifications, government agencies have sought to argue that all qualifications at the same level have equal value (for example, different A-levels or different degrees). In many cases its regulators have been complicit in this. For instance, the QAA’s ratings of academic standards have only three options (“confidence”, “limited confidence and “no confidence”) so that it appears that nearly all institutions are of reliable quality.82 These facts are simply bogus. The losers from this misinformation are those students who attend courses of a lower quality than the Government would have them believe.

77 OECD(2008),Education at a Glance 2008: OECD Briefing Note for the UK.78 LearningandSkillsDevelopmentAgency(2006),Paying For Learning.79 The Guardian(2003),“‘Mickeymouse’coursesjibeangersstudents”,��January.80 The Independent (2008),“Top-upfees‘generatinginterestinscience’”,22October. 8� Tymms,P.,Coe,R.,andMerrell,C.(2005),Standards in English Schools: Changes Since 1997 and the Impact of Government Policies

and Initiatives.82 QualityAssuranceAgencyforHigherEducation(2008),qaa.ac.uk.

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�Lost in the maze

The impact of the education maze and its complex array of decision making bodies is to disempower the individual; education and training no longer rests on the principle of personal responsibility. A prospective student is now dependent on the decisions of a huge range of bureaucrats simply to further his or her own learning. The increasing complexity of the system causes the greatest harm to the least advantaged who, lacking insider knowledge or independent means, are most likely to accept the claims of government uncritically.

Removing individual involvement and decisions from the process has the danger of undermining the values of successful tertiary education: personal discipline, curiosity, independence of thought and hard work. It has helped to create a something for nothing culture that gives the impression that success can be achieved without hard work (or even talent). The culture is also a product of conflicting cultural ideas, stemming from psychology (the idea that education’s value lies in increasing the “self-esteem” of students) and politics (for example economic planning).

One result is the growth of spoon-fed generation that wants to receive education passively and without effort. This generation prefers the X Factor to A grades. Another is a demoralised education and training profession, reduced to the role of technicians rather than educators. A third is an overbearing government machinery that presides over weaker students, employers and institutions.

In the absence of motivated individuals, the pressure on government will inevitably grow. This will include pressure for greater resources which, in current circumstances, the Government is ill-placed to meet.83

Clearly some adults and teachers embrace the right values in education. But they are not representative of the UK’s education culture as a whole and are swimming against a tide of greater centralisation and obfuscation. This division in educational values widens divides in British society and contributes to the problem of static social mobility which has become a central political issue.

Started in schoolsThe creation of this culture starts in schools. The imposition of the National Curriculum from 1989, increased modularisation and more regular testing has resulted in individuals being less engaged in their own learning. For instance, a National Foundation for Educational Research survey found that learners tend to have a narrow view of the curriculum, focused on assessment and “getting grades”. Students appreciate greater choice, breadth and range where it is offered (for instance at GCSE options).84 It has also demoralised many teachers who have felt that the excitement of education – the sense of a journey of intellectual discovery – has been lost.85

Narrowing of the curriculum has restricted space for innovation and real comprehension of subjects. Reform has discussed this point previously in relation to modularisation in mathematics.86 A comparative study found that the top achieving countries have a progressive, coherent curriculum of increasing complexity.8� Modular syllabuses, by contrast, encourage students to see mathematics as a series of discrete units.

Transmission to colleges and universitiesLearners entering further education are less motivated. Evidence from CEP on vocational education indicates that teaching style and curriculum rigidity in schools are leading to significant levels of dissatisfaction and under-achievement. This has undermined the motivation of students and made a substantial proportion of young people reluctant to engage in further training.88

83 JohnDenham,theSecretaryofStateforInnovation,UniversitiesandSkills,wasrecentlyrequiredtorevisethecommitmenttoprovidefinancialsupporttomiddle-incomefamilies.Onlystudentsfromfamilieswithanincomeofbelow£50,020willnowbeeligibleforfinancialsupportthisyear.Thishasbeenreducedfromthe£60,000limitsetbygovernmentinJune2007.The Guardian(2008),“Grantsfor‘middle-income’studentstobecut”,29October.

8� NationalFoundationforEducationsResearch(2006),Pupils’ experiences and perspectives of the national curriculum and assessment.85 SeediscussioninTice,R.(2008),Academies – a model education,Reform.86 Kounine,L.,Marks,J.andTruss,E.(2008),The Value of Mathematics, Reform.87 Cogan,L.,Houang,R.andSchmidt,W.(2002),A Coherent Curriculum: The Case for Mathematics, American Education,TheAmerican

FederationofTeachers. 88 CentreforEconomicPerformance(2006),Human Resources, the Labour Market and Economic Performance.

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Students in higher education require an increasing amount of support. In 2004, the Times Higher Education Supplement found that 80 per cent of young lecturers felt that students expected more help than they would have received themselves as undergraduates.89 More recently, popular demand has prompted UCAS to allow parents to act as their children’s representatives in handling university applications.90

Impact on the workplaceStudents entering the employment market often lack motivation and initiative. Susan Anderson, the CBI’s head of education, said that its surveys had found that companies ranked employability skills as the most important factor when recruiting graduates, ahead of degree subject.91 An Association of Graduate Recruiters survey suggests that graduates are not meeting this demand.92 Over half of employers were concerned about poor communication and writing skills. More than a quarter were worried about numeracy skills. 43 per cent identified a lack of leadership abilities.

This problem is not restricted to the UK. A report by the National Leadership Council for Liberal Education and America’s Promise (LEAP) and the Association of American Colleges and Universities shows that 63 per cent of employers say college graduates lack essential skills to succeed in today’s global economy. �0 per cent want greater emphasis on critical and analytical reasoning, as well as creativity and innovation.93

Lost institutionsBritain’s educational institutions were once and still remain in some cases, the pride of the world. The Times Higher Education World University rankings in 2008 placed four English Universities in its top 10 – Cambridge, Oxford, Imperial and UCL.94 An international table produced by the Institute of Higher Education, Shanghai Jiao Tong University, has Oxford and Cambridge in the top 10. It puts Imperial at 23 and UCL at 25.95

The UK is the second most popular destination for international students. 12 per cent of international students study in the UK (22 per cent in USA).96 A 200� survey found that 95 per cent of 11,000 prospective higher education students from more than 100 countries rated the UK as an attractive or very attractive place to study. This compares with 93 per cent for the US.9� However, the reality of studying in the UK does not always live up to expectations. A recent report found that overseas students, who pay higher fees, report markedly less satisfaction than home students. Misleading prospectuses and poor value for money were identified as an important cause of this dissatisfaction.98

A complacent elite Britain’s top universities are losing ground to some of their overseas counterparts. The number of British students applying to Harvard increased from 19� in 2001 to 290 in 2006. Applications to Yale increased from �4 in 199� to 234 in 2006.99 An important draw is the Ivy League’s generous bursaries. UK students attending Harvard with a family income of less than £30,000 have all tuition fees, accommodation, living expenses and flights paid. Those with family earnings of £30,000-£90,000 contribute between 4 and 10 per cent of their income towards costs. Flexible governance is also important. Professor Yves Mény, President of the European University Institute, has identified the responsiveness of the leading universities in the United States as the key to their success.100

89 Times Higher Education Supplement(200�),“Under-�0sbemoanspoon-fedstudents”,�6September.90 BBCNews(2008),“Pushyparentscanactasagents”,�9August.9� The Times (2008),“Teachstudentsbasic‘peopleandcommunicationsskills’,businesstellsuniversities”,�8September.Andersonsaid

that:“Thereisdissatisfactionwithsoftskills,communicationskillsandself-management.Thesearegenericskillsweexpecteverygraduatetohave.Thereareproblemsherebuttheyshouldberelativelyeasytofix.”

92 AssociationofGraduateRecruiters(2008),AGR Graduate Recruitment Survey 2008: Summer Review. 93 AssociationofAmericanCollegesandUniversities(2007),College Learning for the New Global Century.9� TimesHigherEducationSupplement(2008),World University Rankings. 95 ShanghaiJiaoTongUniversity(2007),Academic Ranking of World Universities.96 OECD(2007),Education at a Glance: Briefing Note for the UK.97 I-GraduateInternationalGraduateInsightGroup(2007),StudentPulse: Summary of Results.98 HigherEducationPolicyInstitute(2006),The Academic Experience of Students in English Universities.99 The Times(2007),“IvyLeaguegenerosityisluringbrightestawayfromOxbridge”,2�December.�00 HigherEducationPolicyInstitute(2008),The Bologna Process and the UK’s International Student Market.

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Bad resource managementOxbridge has failed to maximise its endowment base, after years of chasing funding from central government. Yale radically restructured its endowment policy in the mid-1980s. As a result, it increased the value of the fund from £2 billion to £8 billion over 15 years.101 The generosity of alumni has been crucial in this growth. David Swenson, Yale’s Chief Investment Officer, has estimated that without private gifts the value of the university’s endowment would only be around one-third of its current value.102

This generosity is not a given. Alison Richard, Vice-Chancellor of the University of Cambridge, says that American universities have worked to create a giving culture over a 30-year period.103 Oxbridge is now playing catch-up in this regard but has a lot of lost ground to make up. Even if Oxford’s recent high-profile bid to raise £1.25 billion is successful, its endowment will still be dwarfed by Harvard’s.

Figure �: Endowment valuesSource: US Department of Education, National Center for Education Statistics (�00�); Oxford University (�00�), White Paper on University Governance; Cambridge University. Exchange rate applied £�=USD �.�

University Endowment (�00�)

Harvard £�6.�billion

Yale £�0.0billion

MIT £�.6billion

Oxford £2.8billion

Cambridge £2.7billion

A disdain for businessThe UK’s elite universities are failing to adapt to cope with demands, particularly from employers, for greater flexibility. Cambridge University, for example, does not offer conventional sandwich courses.104 New and private universities are more innovative. Buckingham University, a private institution, has created two-year degrees. A number of more recently founded universities are competing with the long-established elite and producing highly sought after graduates. The technology company Logica has good links with Winchester University. Similarly, Sheffield Hallam University offers a foundation degree in partnership with Network Rail.105

Mid ranking stagnationMid-ranking universities could perform better on both the national and international stage. There is, however, substantial pressure to admit more students and lower standards. Figures complied by The Daily Telegraph for 19 Russell Group universities (including Oxford, Cambridge, Imperial and UCL) found that 63 per cent use contextual information as part of their admissions process. A quarter of these institutions consider postcodes and whether an applicant has been in care. Three quarters look at average school achievement.106

Lecturers are under increasing pressure to award more favourable degree results. Figures from the Higher Education Statistics Agency show that the number of first class degrees awarded has doubled from 16,�08 in 1998 to 36,645 in 2008. In the same time, the number of undergraduates has increased by just 40 per cent.10� Former Chairman of the Academic Council at the University of London, Professor Geoffrey Alderman, has blamed this on league tables which tend to reward higher proportions of firsts and upper seconds.108

�0� The Times (200�),“BursarsblamedfordebtcrisisatOxford”,8June.�02 Acharya,S.andDimson,E.(2007),Endowment Asset Management: Investment Strategies in Oxford and Cambridge. �03 Bloomberg(2005),“CambridgeandOxfordAdoptUSMethodstoWinAlumniDonations”,30November.�0� UniversityofCambridgeCareersService(2008),careers.cam.ac.uk.�05 ConfederationofBritishIndustry(2008),Stepping Higher.�06 The Daily Telegraph(2008),“RussellGroupofeliteuniversitiesadmissionscriteria”,22August.�07 HigherEducationStatisticsAgency(2008),hesa.ac.uk.�08 The Independent (2008),“Lecturerspressedtoboostdegreeresults”,�7June.

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As students face the prospect of spending more on their education they are going to expect greater value from their universities. A 2006 survey showed that 41 per cent per cent of students who were dissatisfied with their university experience cited academic reasons: a much higher proportion than expressed disappointment with other aspects of university life. In particular, a strong link was identified between very low levels of scheduled teaching and high levels of dissatisfaction.109

Cinderella institutionsFE colleges have been increasingly neglected by government. The impressive 2005 White Paper on further education described the sector as a “disadvantaged ‘middle child’ between schools and HE”.110 Because of the dominating role that government has assumed over vocational education in recent years, further education colleges lack confidence and respect in the eyes of end users.

Colleges also lack autonomy. As the White Paper noted, “It is little wonder that FE colleges feel confused and under-valued. They rejoice in the extent (and complexity) of their potential offering to learners, but find that the offer that they are able to make is influenced considerably by the funding flavour of the day.” The summary of the White Paper concluded with a call for a “progressive enhancement in FE’s standing and esteem in the nation’s eyes.”111

Expectant employersBritish employers are good investors in education and training. Government spends considerably less (£10 billion) than employers on training and skills (£38 billion). 112 Employers are often required to make-up for the shortcoming of the education system. The CBI reports that 2� per cent of employers provide remedial literacy training. A further 23 per cent provide remedial numeracy support.113 Tesco Chief Executive, Sir Terry Leahy, has said that employers are being required to “act as a bandage or a sticking plaster for the failures of some parts of our education system. Too many children have been leaving school after 11 or 13 years of compulsory education without the basic skills to get on in life and hold down a job.”114

There is, however, a growing expectation that government will step in to provide ready trained workers. This is a conflation of justified concern that basic education is not being delivered with a desire to have the “finished product” in the workplace. The largest “satisfaction-gap” between business needs and young graduate capabilities seems to be around commercial awareness and soft skills such as communication and teamworking.115

Employers have an important role to play here. Work experience is in general perceived as a good way to acquire soft skills. However, while many employers offer work experience, not enough is being made of these placements. A CBI survey found that over 60 per cent of employers did not include objective setting or debriefing sessions as part of their programmes.116

�09 HigherEducationPolicyInstitute(2006),The Academic Experience of Students in English Universities.��0 DepartmentforEducationandSkills(2006), Realising the Potential: A Review of the Future Role of Further Education Colleges.

“Withingovernment,thedisadvantaged‘middlechild’experienceofFEbetweenschoolsandHEneedstoberepaired.”��� DepartmentforEducationandSkills(2006), Realising the Potential: A Review of the Future Role of Further Education Colleges.��2 TraintoGain(2008),traintogain.gov.uk.��3 ConfederationofBritishIndustry(2008),Taking Stock: CBI Education and Skills Survey 2008.��� The Daily Telegraph (2007), “SirTerryLeahycriticisesworker’sbasicskills”,�3September.��5 ConfederationofBritishIndustry(2008),Higher Education Task Force: Key Facts 1.��6 ConfederationofBritishIndustry(2007),Time Well Spent.

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�The mobile economy

In order to compete effectively and create a truly mobile economy, Britain needs to drastically simplify and change the flow of information and funding in the education maze. Any student or employee should be able to understand the operation of the qualifications and job market. Well-informed individuals can then take decisions for themselves, wresting power from unelected bodies and quangos.

Where this bottom up approach has been used overseas, there has been notable success. It has generated some of the highest participation rates in tertiary education. It has helped create skills in the most beneficial areas for the economy. International examples include the collaborative and highly effective US college system, where the further education system works closely with universities. Effective student support systems, that complement higher fees, are also in place in the USA and Australia.

Some similar measures have been introduced in the UK. These have proved more effective than top-down measure in improving the performance of the system. The expansion of higher education, the introduction of tuition fees and the increasing certification of companies as accredited trainers and suppliers of education have all been positive developments. The UK already has some strong professional bodies that produce sought-after qualifications tailored to employers needs.

These positive examples should underpin a new approach to tertiary education and skills based on sound evidence of what works: significant individual financial contribution, a well structured student loan system, a plurality of independent institutions and employer accredited qualifications.

Significant individual financial contributionThere is considerable evidence that greater individual contributions to education are linked to higher participation and more rational decision-making based on the value of returns from courses.

The table below shows that higher fees are linked to higher levels of participation. It does not present a full picture as data was not available for all of the countries but strong conclusions can be drawn. Specifically the countries that charge the highest fees in the OECD, Australia, United States and Korea, have some of the highest rates of participation in university education at 84, 64 and 59 per cent respectively. 11�

��7 OECD(2008),Education at a Glance 2008.

Figure �: Participation rates and tuition fees in universities in OECD countriesSource: OECD (�00�), Education at a glance �00�.Key Countries Annual participation rate in

universities (per cent) (�00�)Average tuition fees charged by universities

(in equivalent USD) (�00�-0�)

Publicly funded institutions

Privately funded institutionsAustralia 8� 3,855 7,�52Poland 78 0 2,7�0NewZealand 72 2,67� 2,67�Norway 67 5,300 n/aUnitedStates 6� 5,027 �8,60�Denmark 59 0 n/aKorea 59 3,883 7,�06Netherlands 58 �,6�6 n/aUnitedKingdom 57 �,859 �,737Italy 55 �,0�7 3,520Japan �5 3,920 6,��7Spain �3 795 -Austria �0 837 -Germany 35 - -Turkey 3� 276 ��,�30France - 325 -

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In the table, the UK lags behind in terms of levels of fees. However, it should be noted that the figures are from 2005 (before the rise in tuition fees). Taking this into account, England has made positive moves forward in increasing the financial responsibility that students have. As shown in Chapter three, this has already resulted in more students choosing high value courses. But there is further to go. For example, in the US the average annual tuition fee for out-of-state students to attend a public university in 200�-08 was £9,244. For private universities, it was £13,1�3.118

When individuals invest in education they have an incentive to ensure that their courses are high quality. This principle also applies in vocational and work-based training. For instance, the qualification offered by the Chartered Institute of Personnel Management (CIPM) has gained popularity in a relatively short space of time. Its popularity is due to the competitive advantage it offers when advancing within the field of human resources. The credibility of their qualifications is linked to the CIPM gaining chartered status in 2000.119

Increased personal responsibility for investment in education and training will also drive a market for better information on which courses are most valuable to employers and institutions. It creates an incentive for individuals to find out more about the quality and market value of the course that they are undertaking.

A well structured system of student supportThe second element of a system with greater individual contributions is the ability to access student support. The OECD finds that systems with low fees and poorly developed student support have lower levels of participation in comparison to systems that have high fees and well developed student support systems.120

Research by CentreForum found that countries with high fees and well-developed student support systems had higher levels of participation amongst students with lower incomes than the UK. It found that the participation rate among the lower income quartile is 50 per cent in the US, 30 per cent in Australia, but just 1� per cent in the UK.121

The student loans system currently offers good access to finance for individuals attending university for the first time. However, it has a less well-developed system for student support for further and higher education beyond a first degree.

The current career development loans system provides a basis for development but needs to be expanded further. At present, the loans are offered through a partnership of the LSC and three high street banks. They enable individuals to borrow anything between £300 and £8,000 to help fund up to two years of learning (or up to three years if the course includes one year of relevant practical work experience). The Government through the LSC pays the interest on the loan while individuals are learning and for one month after they have stopped training. The loan covers a wide range of accredited courses.122

Plurality of independent education institutionsWhere tertiary education sectors have a range of institutions – both from the state and private sector, with freedom to set their own fees and standards – this has been shown to generate better outcomes. The OECD has suggested that the strength and international prestige of the United States’ education system lies in its large, diverse and highly competitive higher education system.123 The prestigious Ivy League is made up entirely of private universities. Private for-profit companies, such as Laureate and Kaplan, also enjoy a substantial market-share. Many state universities are also highly regarded.

Contestability has led to faster development of the higher-education sector and greater innovation, particularly in developing markets. In India, 30 per cent of higher education is provided by private foundations. Neil Kemp, adviser to the UK-India Education and Research Initiative, has observed that this expansion has been vital to keeping pace with soaring demand levels.124 At present, the UK model lacks this diversity. There are no profit-making universities and only one private institution exists, Buckingham.

At present, in Britain, plurality exists in its most advanced form at the nursery education level. Every three and four year old is currently entitled to 12.5 hours of care for 38 weeks of the year. This entitlement can be

��8 Times Higher Education Supplement (2008),thes.co.uk.Assumedexchangerate£�is$�.8.Originalamountswere$�6,6�0and$23,7�2.��9 PersonnelToday(2008),personneltoday.com.�20 OECD(2008) Education at a glance 2008.�2� Astle,J.(2006)Open universities: A funding strategy for higher education, CentreForum.�22 AnevaluationbytheLSCfoundthattheschemehasrelativelyhighlevelsofsatisfaction,providinganopportunityforsometolearnwho

otherwisewouldn’thavedone.CDLachieveapproximately�5,000successfulapplicationseveryyear,totalinganaverageofaround£70.LearningandSkillsCouncil(2008),Evaluation of the Career Development loans scheme.

�23 OECD(2005),Education at a Glance 2005.�2� The Independent(2008),“FromMalaysiatoMayfair:Theforeignuniversitythatissendingoutshiversinthehighereducationworld”,20March.

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taken up at a range of settings, including those run by private providers.125 Consequently, funding for nurseries follows parental demand to a reasonable extent. Puzzingly, post-18 learners have less say in how funding is distributed. In further education, for instance, the majority of income comes from funding council grants (81 per cent in 2004-05). Only 10 per cent of funding came from fees.126

More individually led funding and less top-down control should lead to greater collaboration between colleges and universities. For example, in the US community colleges provide two-year post-18 qualifications called associate’s degrees. In addition to being a qualification in their own right, these cover the core curriculum requirements of an undergraduate programme. The system is well integrated: 22-25 per cent of community college students go on to complete a full-undergraduate degree at a higher education institution.12� The introduction of two-year foundation degrees in the UK has not, however, led to similar integration. Competition for ring-fenced government funding has led both universities and colleges to offer the new qualifications. In 2004-05, 46 per cent of foundation degrees were delivered by higher education institutions.128

Employer accredited trainingEmployer accredited rather than government sponsored training and apprenticeships have consistently proved to have the highest value in the employment market. In her major review, Professor Alison Wolf found that there have been no earnings gains from the low level qualifications that have been the key objective of government policy. In contrast, “employer-designed and employer-organised training generally does lead to wage gains for recipients.”129 The resources are also in place for greater leadership from industry; the Government’s total tertiary budget (£10bn) is dwarfed by the amount spent by employers (£38bn) on training.130 The growing market for both meta-skills and very specific, transient skills mean that returns will only increase to employer accredited training.

In some areas, employer ownership has produced highly effective regulation and qualifications structures. Professions, such as law and accounting, have self-regulated extremely successfully (albeit with statutory backing). The ICAEW has produced a range of highly regarded professional accounting qualifications which are essential to gaining chartered status. In law, the Solicitors Regulation Authority (SRA) is accountable for the work of individual solicitors and firms and has established a reputation for rigour. However, the monopoly over accreditation of law institutions means that this model needs to be treated with caution. In gas-fitting, CORGI has succeeded in establishing a brand that many consumers know and understand.

Increasing collaboration between universities and business will also strengthen the development of well regarded qualifications. An example is the Rail Engineering Foundation Degree offered by Sheffield Hallam University in partnership with Network Rail which has gained wide acceptance across the industry. Major private companies, including Balfour Beatty and Jarvis, place students on the programme.131

Increasingly, high-value training is either firm-specific or general rather than being industry wide. As discussed in Chapter Three, employers place an increasing emphasis on “meta” or transferable skills such as teamworking. Spending time in the work place is generally regarded as a good way of developing these soft skills. The large number of graduates undertaking unpaid internships indicates that learning about business processes, leadership and general business techniques is a high-value activity that delivers benefit in the labour market.132

At the other extreme, fast moving skills need to be picked up quickly at a grass roots level, as these opportunities move fast. The increasing development of the market for vendor qualifications across different industries is another example of this. In industries such as IT, companies such as Microsoft and IBM have produced their own sets of qualifications which are used widely both within and outside the sector. These certify a range of IT skills from the specific to the more general.133 In the food industry the supermarket chain Sainsbury’s has recently been accredited by the awarding body EDI to provide a range of GCSE equivalent qualifications for its employees, following the example of other food companies such as McDonald’s.134

�25 Directgov(2008),direct.gov.uk.�26 DepartmentforEducationandSkills(2006),Further Education: Raising Skills, Improving Life Chances: Technical Supplement

to the White Paper.�27 Eggleston,L.andLaanan,F.(200�),“MakingtheTransitiontotheSeniorInstitution”,New Directions for Community Colleges,

Summer���,p.87-97.�28 HEFCE(2007),Foundation Degrees: Key statistics 2001-02 to 2006-07.�29 Jenkins,A.,Wolf,A.andVignoles,A.(2006),“Certifyingtheworkforce:economicimperativeorfailedsocialpolicy?”,

Journal of Education Policy,Vol.2�,No.5,September2006.�30 TraintoGain(2008),traintogain.gov.uk.�3� ConfederationofBritishIndustry(2008),Stepping Higher.�32 �5.8percentof2�2companiessurveyedbytheAssociationofGraduateRecruitersemployedunpaidinterns.

AssociationofGraduateRecruiters(2008),AGR Graduate Recruitment Survey 2008.�33 MicrosoftTechNet(2008),technet.microsoft.com.�3� Sainsbury’s(2008),sainburys.co.uk.

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�The path to a mobile economy

Radical decisions, such as the introduction of tuition fees, show that it is possible to get education and skills policy right. The Government is due to review top-up fees in higher education in 2009. That debate will be of greatest value if it covers a wider package of reform to the whole of adult education, skills and training.

Taken together, the recommendations below are a practical description of that wider reform. They would derive much greater value for the public funds currently spent on skills and education. They would aid the economic recovery by increasing both the quantity and quality of training in the economy.

The mobile economy

ResearchCouncils

SchoolsCity TechnologyColleges

Sixth Forms FEColleges

Approvedapprenticeships

AwardingBodies

Academies

DCSFOfsted

HEFCE

NCSL

End users (employers, employees, students)Individual education accounts – value = £9.5bn or £12,000 per 18 year old

HMT

Socialentrepreneurs

Trainingcompanies

Getting adults back into toemployment

market

Focus oncompetitionpolicy not

skills

Students

Organisations accredited to provide training

Pre-18 – not covered in recommendations

DWP BERRDIUS

Employers Professionalbodies

Tradebodies

Local businessorganisations

Universities

Viastudents

SLC

Key

HMT HerMajesty’sTreasuryDCSF DepartmentforChildren,

SchoolsandFamiliesDIUS DepartmentforInnovation,

UniversitiesandSkillsDWP DepartmentforWork

andPensionsBERR DepartmentforBusiness,

EnterpriseandRegulatoryReform

BECTA BritishEducationalCommunicationsandTechnologyAgency

QCA QualificationsandCurriculumAuthority

TDA TrainingandDevelopmentAgencyforSchools

LSC LearningandSkillsCouncilLSIS TheLearningandSkills

ImprovementService

HEFCE HigherEducationFunding

CouncilforEnglandSLC StudentLoansCompanyUKCES UKCommissionfor

Employment&SkillsRDA RegionalDevelopment

AgencyNIACE NationalInstituteofAdult

ContinuingEducationNES NationalEmployerServiceQAA QualityAssuranceAgencyOffa TheOfficeforFairAccessHEPI TheHigherEducation

PolicyInstituteSSCs SectorSkillsCouncilsNCSL NationalCollegefor

SchoolLeadershipUfi UniversityforIndustry

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� Establish Individual Education Accounts for all �� year oldsThe critical element of creating a mobile training and skills system is the individual. As demonstrated in Chapter 5, the more individuals invest (with the necessary support framework), the more participation and productivity increases. Tuition fees embody the principle that individuals can use control of funding to take greater control of their education and training. The current plans for skills accounts are based on the same principle. They amount to a voucher for adult education; they will be highly beneficial. 135

Other countries are implementing similar reforms. In Canada, parents can take out Registered Education Savings Plans (RESP) which enable tax free saving for a child’s future education. The Canadian Government adds up to $200 on the first $500 saved annually, and up to $400 on the next $2,000. The maximum lifetime grant that the federal government can give the child is $�,200. The child can use the money for full-time or part-time studies in an apprenticeship program, trade school, college, or university. A separate programme – the Canada Learning Bond – can increase the amount available for families on low incomes.

This is the right kind of reform for the UK. The role of Government should be to:

> Refocus the funding of £4,300 per year for every 19, 20 and 21 year old (a total of £9.6 billion per year – see Appendix One) to an Individual Education Account. 136

> Provide each person with an Individual Education Account at birth, on the model of the Child Trust Funds. This would act as a focus for saving and family gifts towards the costs of education later in life.

> The academic year they are 19, 20 and 21, each individual would receive £4,300 to spend on registered education and training providers, including those overseas. This should cover the full costs of further education and most higher education and training. It should make a considerable contribution towards more expensive courses.

> This account could be spent on any accredited course or training, whether that is towards a degree, further education course, apprenticeship or internship. It would end the false split between academic, vocational and professional education by allowing the student to weigh up the personal value to them of the various options.

> The Accounts would not be not time limited; the funds within them could be kept for educational purposes later in life.

This critical reform should be accompanied by the following measures:

Widen loan availabilityThe existing student support scheme has helped the growth in university attendance. It should continue subject to the following changes:

> Improve customer service by transferring functions of the SLC to individual banks.

> Expand and consolidate Student Loans and Career Development Loans so that they can be taken out to support cost of living when working as an apprentice, intern or studying a vocational or professional course. In 2006-0�, only 13,502 Career Development Loans were issued,13� compared to 880,�00 Student Loans in 2005-06.138

> Review subsidy in the light of the increased cost to the taxpayer that would result from greater uptake. A recent estimate by Nicholas Barr of the LSE put the cost at £1.2 billion per year.139

�35 Thecurrentmodelforskillsaccountswillseefundingforadultlearningchanneledthroughthemintheformofavoucher.Theaimisfor£500millionoffundingtobechanneledthroughthemby20�0-��and£�.5billionby20�5.Thefundingwillfocusonentitlementtofirstleveltwoandlevelthreequalifications.

�36 Therewillbe2,2�0,000�9-2�yearoldsin20�0,theagegroupthatengageinthemajorityofeducationandtraining.£9.6billionisannuallyspentonteachingandcapitalgrantsfor�8-25yearoldsinhigherandfurthereducationchanneledthrougharangeofbodiesasdetailedinchaptertwoincludingHEFCEandtheLSC.Thefiguresassumethatstudentsreceivethreeyearsoffundingfortertiaryeducationbetweentheageof�8and25.

�37 Hansard(2007),Col.�05W,8October2007.�38 StudentLoansCompany(2008),slc.co.uk.�39 Barr,N.(2003),“FinancinghighereducationintheUK:The2003WhitePaper”,HouseofCommonsEducationandSkillsCommittee,

Post-�6StudentSupport,Session2002-03.

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Continue entitlements to learning for unqualified adult learners and first degreesAll unqualified adult learners would still be entitled to free tuition to gain a full Level 2 qualification at any age, and a full Level 3 qualification up to the age of 25.140 Anyone who has not previously taken advantage of tertiary education would also be entitled to take out an Individual Education Account, as they are currently entitled to access student support.

On current participation approximately £900 million that would be taken up by those entitled to education funding post 25.141 The Adult Learning grant would continue to be administered to help low income learners, but would be administered through DIUS instead of a non-departmental public body.

End public funding for taught post graduate coursesIn this model, taught postgraduate courses would not receive public support. The economic value of these courses to individuals is much more uncertain; the individual should bear the risk. Postgraduate research students of high quality will continue to receive publicly-funded research grants.

� Give education institutions independence and allow plurality of providersFor UK institutions to follow the examples of the best international competitors, they need genuine independence. They need to be able to control their revenues and their costs, and to set their own missions. Universities and colleges should reassert their historic role as centres of knowledge and deliverers of education. In practice that means independent decision-making over fees, student numbers, curriculum, and staffing and capital investment. This would entail:

> Removing the cap on tuition fees in the 2009 fees review.

> Abolishing national pay bargaining for lecturers and other staff.

> Abolishing the QAA and its functions to regulate courses.

> Make HEFCE purely responsible for allocating research grants, not teaching grants and remove powers over student numbers at institutions.

> Allow new universities and colleges to enter sector from state, private or voluntary sector provided they accord with DIUS standards. New providers of education could range from existing private education providers such as the Laureate group to charities.

> Expand universities role in leading academic standards by leading school examination boards and accrediting colleges. The FE sector would have an incentive to further work with local universities to obtain course accreditation.

> Abolish subsidies for costly courses. That will create a powerful incentive for universities to change the design of courses in order to reduce costs, demonstrate value for money to students and increase employer engagement. Clearly advances in communications technology will support this change.

� Give accreditation for skills and apprenticeships entirely to industryIndustry and its affiliates should take the lead in developing and accrediting professional and vocational qualifications. Attempts to do this historically has resulted in the arbitrary government selection of “industries” which may or may not represent a coherent set of skills requirements. Thus employers are made to fit the Government model and are forced to change their requirements to suit it.

Instead a much more flexible system is required where employers can take action either individually or collectively, to establish credible training brands or to purchase training from other accredited providers. This collaboration could take the form of trade bodies, local chambers of commerce, professional organisations or social entrepreneurs. It will vary from profession to profession, industry to industry and trade to trade. There evidence of a number of organisations and employers beginning to take on this responsibility which need to be built on and expanded. Given the huge disparity between what employers (£38 billion) and government (£10 billion) it is clear where the leadership should lie.

��0 DirectGov(2008),direct.gov.uk.��� Thisincludesthepercentageofover25stakingfirstdegreesandtheirfirstfullLevel2qualification.

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Key recommendations include:

> Expanding government’s role of accrediting employer bodies and employers providing qualifications and apprenticeships/internships. Those bodies would then be able to produce registered qualifications. A wider group of bodies could be encouraged to fulfil this role including trade and professional bodies, employers, social entrepreneurs, private training companies and local employer organisations.

> Abolishing government’s role of setting up new qualifications and apprenticeships. These create confusion amongst students, a conflict of interest for government as regulator and provider and crowd out industry activities.

> Abandon attempts to chase “hard to reach employers”. Training should be delivered where it is economically efficient to do so, which as a general rule will lead to the majority being undertaken in large corporations who have the funds and the resources available.

> Apprenticeships and internships can be accredited by industry and industry bodies. As demonstrated in Chapter Five this is likely to lead to the formal recognition of new work based forms of learning such as internships. The internship has taken over from the apprenticeship for many employers providing essential training and experience to enter many competitive fields. The value gained by individuals who participate is far higher than that gained from participating in current largely classroom based apprenticeships.

Government will retain a role in accrediting learning institutions, taking back some responsibility for this from current quangos due to simplification of the system. However over time as the mobile economy develops much of this accrediting will fall to universities and employer-led bodies, who themselves have gained chartered status.

� Abandon all national skills plans and targetsA key principle of reform is that government’s role should change from being a manager to a regulator. This means that it should abandon its efforts to plan skills at a national and local level.

The corollary of the fourth recommendation is that government should abolish its targets for skills achievement and university access. The most important targets to be abolished are the Public Service Agreement targets of DIUS and DCFS relevant to this area.142

This is consistent with the trend of public services policy in recent years. Following the “command and control” approach of the early part of this decade, Ministers have sought to reorient government away from provision and towards funding and regulation. The areas of greatest success have been the city academy programme referred to above, and the introduction of private hospital operators into the National Health Service.

� Make employers and institutions pay for bodies they want to keepSome of the supervisory institutions in the education maze are delivering real value. Others are not. The key test is whether or not employers and institutions are prepared to pay for them. If organisations such as Sector Skills Councils are valued then institutions and employers will be able to purchase services from them.

The government agencies that monitor the achievement of skills, qualifications and university outcomes and access can be abolished. Their function will be replaced by providers of information to consumers (see below).

��2 DepartmentforInnovation,UniversitiesandSkills(2007), Autumn Performance Report 2007.“DfESPSA�3:Increasethenumberofadultswiththeskillsrequiredforemployabilityandprogressiontohigherlevelsoftrainingthrough:improvingthebasicskilllevelsof2.25millionadultsbetweenthelaunchofSkillsforLifein200�and20�0,withamilestoneof�.5millionin2007(element�);andreducingbyatleast�0percentthenumberofadultsintheworkforcewholackNVQ2orequivalentqualificationsby20�0.Workingtowardsthis,onemillionadultsintheworkforcetoachieveLevel2between2003and2006.(element2).DfESPSA��:By20�0,increaseparticipationinhighereducationtowards50percentofthoseaged�8to30andalsomakesignificantprogressyear-on-yeartowardsfairaccessandbeardownonratesofnon-completion”,DepartmentforEducationandSkills(200�),Public Service Agreement Targets (2005-2008).

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� Provide transparent information In a much more open economy of education and skills, independent information is vital. Central government has proved itself an unreliable navigator; its information on the value of qualifications has been biased and misleading.

At the local level, local authorities may decide to provide information on local labour markets, as part of their responsibilities for economic regeneration. Profit-making institutions would also be expected to compete with them.

� Develop a five year transition programmeChanging a heavily centrally controlled system to one that responds to market mechanisms is fraught with problems. Therefore it will take a period of time to implement this system.

The first step should be to abolish all national targets and curriculum controls. Existing qualifications and apprenticeships will still be offered. However, individual learners will be free to select courses and programmes that they anticipate will have the greatest benefit for them. Some less popular qualifications and apprenticeships may gradually disappear.

The funding moves should be made more gradually. Implement the Individual Education Accounts scheme gradually over five years. During this time the amount in the Individual Education Accounts would increase while the HEFCE grants declined. The same would happen for FE colleges and other institutions with government grants gradually being replaced by income from individual learner accounts. This would enable them to adjust to the new regime while retaining a guarantee of a certain level of funding. It would also enable them to time to adjust their fee level to the right level for the market.

The apparatus of the Sector Skills Councils and the LSC should be devolved to other bodies where desired. Where there is no demand it should be abandoned. Government agencies will continue to have a strong role in accrediting but over time this will change as more other bodies take on this role.

Consequences of reform

A shift to professional statusThe world-leading status of many UK professional qualifications would be repeated across other business sectors. Consumers have the same confidence in plumbers and decorators as they do in solicitors or accountants.

A combination of individual control of funds and employer accreditation of qualifications should allow that to happen. For example a Chartered Institute of Plumbing could seek statutory approval and set a standard for high quality plumbing apprenticeships and qualifications.

Better decisions based on better informationIndividuals would enjoy the same level of information on education and skills as restaurant goers or buyers of second hand cars. Consumer-facing organisations will come forward to tell individuals – whether via the internet or print – about the quality of courses. The internet, and in particular social networking sites, will enable the consumers of courses to publish immediate judgements at zero cost. This information could also be used by employers to assess the quality of applicants for posts.

At the same time, individuals will have better information on the overall quality and stability of educational institutions. In practice the existing corporate regulators, such as rating agencies, will include educational institutions in their surveys. Standard and Poor’s already rates several major UK institutions. Independently-produced guides, such as the Recruiters’ Guide to Courses and Campuses, are already being used by a number of well-regarded graduate employers.143

��3 TheRecruiter’sGuidetoCoursesandCampuses(2008),rgcc.org.uk.

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Greater productivityIndividuals and employers would target their efforts where the economy demands skills, not where government agencies perceive market failure. The productivity of both training and of the economy would increase.

New export revenues from education and trainingGiven the importance of skills to earnings, and the ability to deliver courses on the internet, post-compulsory education and training will be big revenue earners for countries who get it right in coming years.

A dramatic increase in the plurality and flexibility of higher and further educationIn other countries – in particular the USA – students are faced with a wonderful variety of courses at different standards and costs, offered by institutions of many different types. They are able to combine parts of courses at different institutions over time. The UK would see the same advantages. The academic papers commissioned by DIUS and published in November 2008 point toward a more flexible university sector, for example including a different academic year, greater use of two-year courses and the division of courses into “credits”.144 But similar ideas have been discussed in higher education for many years. This suggests that it is the structure of the system which needs to be changed. Flexibility needs to emerge because of the system, not despite it.

Closer links between universities, colleges and schoolsThe academy movement is already showing that self-governing educational institutions will form vertical links. Of the 82 academies currently being implemented or assessed for feasibility, 2� are sponsored by a university or further education college.145 It is a natural fit. Universities can accredit the academic qualifications that students take in colleges and schools. Colleges and schools can provide the foundation learning for university courses. Links of this kind provide the clear and easily understandable pathways for student progress that are lacking in the current system.

Renewed educational self-confidenceThe greatest beneficiaries of institutional independence would be further education colleges. As Sir Andrew Foster persuasively wrote in his White Paper on the sector, colleges have suffered from a surfeit of central direction and initiatives, resulting in low esteem and what he described as a “disadvantaged ‘middle child’ experience between schools and HE”. Their route out of disadvantage lies in self-government and self-confidence.

Higher education will also benefit. The kind of innovation that Harvard and Yale have displayed towards their endowments – in terms of both fundraising and management – would become common in the UK.

Improved labour flexibilityOne of the key reasons for the relatively strong performance of the UK economy over the last twenty five years has been flexible labour markets. The reforms outlined above should support that flexibility by focusing training on the needs of employees, in particular through a much greater use of distance learning and credit-based courses.

Increase in social equityMost importantly, educational and employment opportunities remain skewed towards better off people who are able to navigate the education maze and pay for experience – such as internships – from private funds. A fair system of funding, based on the individual, would equalise opportunity. For this reason the reforms outlined above would contribute greatly to the Government’s forthcoming White Paper on social mobility, as well as creating a mobile economy.

��� DepartmentforInnovation,UniversitiesandSkills(2008),dius.gov.uk.��5 Sevenexistingcityacademiesaresponsoredbyauniversityorfurthereducationcollege.DepartmentforChildren,SchoolsandFamilies

(2008),Current projects of the Academy programme,September.

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Appendix One

Current funding for tertiary education and training post-��

Figure �Sources: Learning and Skills Council (�00�), Annual report and accounts �00�-0�; Student Loans Company (�00�), Student support for higher education in England, academic year �00�-0�. SFR 0�/�00�; HEFCE (�00�), Funding higher education in England: how HEFCE allocates its funds.

Institution Annual spend

HEFCE (�00�-0�) £�.�bn

Ofwhich:

Teachingfunding £�.6bn

Businessandcommunityengagement(HigherEducationInnovationFund) £0.�bn

Specialfunding £0.3bn

Earmarkedcapitalfunding £0.9bn

Additionalfundingforveryhighcostandvulnerablesciencesubjects £0.03bn

Student Loans Council £0.�bn

Ofwhich:

MaintenancegrantsadministeredthroughStudentLoansCouncil £0.7bn

Total learning and skills council (�00�-0�) £�.�bn

Ofwhich:

Learningparticipation(�9+) £�.9bn

Ufi £0.2bn

Workbasedlearning £0.2bn

Traintogain £0.3bn

Personalandcommunitydevelopmentlearning £0.2bn

Learningsupport(�9+) £0.�bn

Adultskillsreform £0.2bn

Capacityandinfrastructure £0.07bn

Programmecapital £0.5bn

Qualityreform £0.2bn

Total annual funding £�0.�bn

25plusfunding £0.9bn

Total funding for ��-�� year olds £�.�bn

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Appendix Two

Glossary of terms

DepartmentforInnovation,UniversitiesandSkills(DIUS)Responsible for adult learning, further and higher education, skills, science and innovation.

DepartmentforChildren,SchoolsandFamilies(DCSF)Responsible for all issues affecting people up to the age of 19 including education.

DepartmentforWorkandPensions(DWP)Responsible for government’s welfare reform agenda; delivering support and advice to people of working age, employers, disabled people, pensioners, families and children.

DepartmentforBusiness,EnterpriseandRegulatoryReform(BERR)Responsible for company law, trade, business growth, employment law, regional economic development, and consumer law.

UKCommissionforEmployment&Skills(UKCES)The UK CES opened for business on 1 April 2008 under recommendation in Lord Leitch’s Review in 2006 and took over some of the responsibilities of the former Sector Skills Development Agency. It operates across the UK with the goal of raising the UK’s skills base, improving productivity and competitiveness, increasing employment and making a contribution to a fairer society.

LearningandSkillsCouncil(LSC)The LSC is a non-departmental public body which began work in 2001, taking over the roles of the former Further Education Funding Council and Training and Enterprise Councils for England. It is responsible for planning and funding high quality education and training for everyone in England other than those in universities.

HigherEducationFundingCouncilforEngland(HEFCE)The Higher Education Funding Council for England (HEFCE) distributes public money for teaching and research to universities and colleges.

SectorSkillsCouncils(SSCs)There are 25 Sector Skills Councils, each covering a specific sector and operating across the UK. Each is an employer-led, independent organisation, licensed by the Secretary of State for Education and Skills, in consultation with Ministers in Scotland, Wales and

Northern Ireland. Together, the Sector Skills Councils cover approximately 89 per cent of the UK workforce. Since 1 April 2008 the UK Commission for Employment and Skills has been responsible for funding, supporting and monitoring the Sector Skills Councils.

AcademiesAll-ability, state-funded schools established and managed by sponsors from a wide range of backgrounds, including high performing schools and colleges, universities, individual philanthropists, businesses, the voluntary sector, and the faith communities.

AimhigherPartnershipsThe Aimhigher programme aims to improve participation in higher education by raising the awareness, aspirations and attainment of young people from under-represented groups.

BusinessLinkNetwork(BLN)A network of not-for-profit organisations operating at a regional level. It offers a support and advice service for small businesses, providing free, impartial and comprehensive advice to businesses to help them start up and grow.

CityTechnologyColleges(CTCs)City Technology Colleges (CTCs) teach subjects of the national curriculum pre-16 with a specific focus on science and technology.

ConnexionsConnexions is government’s support service for all young people aged 13-19 in England. It also provides support up to the age of 25 for young people who have learning difficulties or disabilities.

FederationofAwardingBodies(FAB)Represents organisations that award vocational qualifications in the UK, initially formed in 2000 by the four largest vocational awarding bodies: City & Guilds; Edexcel; Oxford, Cambridge and RSA Examinations Board; and the London Chamber of Commerce and Industry Examinations Board.

JobcentrePlusA government agency, part of the Department for Work and Pensions, supporting people of working age from welfare into work, and helping employers to fill their vacancies. It provides help and advice on jobs and training for people who can work and financial help for those who cannot.

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JointCouncilforQualifications(JCQ)The JCQ consists of AQA, City & Guilds, CCEA, Edexcel, OCR, SQA and WJEC: the seven largest providers of qualifications in the UK, offering GCSE, GCE, GNVQ, AEA, entry level, vocational and vocationally-related qualifications.

TheLearningandSkillsImprovementService(LSIS)The Learning and Skills Improvement Service (LSIS), is the body dedicated to the development of the FE and skills sector. It is a sector owned body, formed from CEL and QIA to develop FE provision across the sector.

NationalCollegeforSchoolLeadership(NCSL)The National College for School Leadership (NCSL) is responsible for developing leadership in England’s 23,000 state schools.

NationalEmployerService(NES)The National Employer Service (NES) helps large companies and organisations make sense of government skills strategy, the key players involved and to understand the support available for workforce development.

NationalInstituteofAdultContinuingEducation(NIE)A non-governmental organisation to promote the study and general advancement of adult continuing education and support an increase in the total numbers of adults engaged in formal and informal learning in England and Wales.

NationalSkillsAcademies(NSA)National Skills Academies are employer-led sector-based centres of excellence with national reach delivering vocational education and skills training to young people (16-19-year-olds) and adults.

OfficeoftheQualificationsandExaminationsRegulator(Ofqual)Ofqual is the new regulator of qualifications, tests and examinations in England. Ofqual now regulates qualifications in England – work which was previously done by the Qualifications and Curriculum Authority.

OfficeforStandardsinEducation(OFSTED)A non-ministerial government department accountable to Parliament that is formally independent of government, with responsibility for the inspection in England of all schools, nursery schools, local education authorities, teacher training institutions, youth work, 16-19 education and for the regulation of early years’ childcare, including child minders.

QualificationsandCurriculumAuthority(QCA)Responsible for developing and maintaining the national curriculum, regulating the public examination system, development, delivery and administration of

high quality national tests, accrediting qualifications within the national qualifications framework and overseeing the work of the awarding bodies.

RegionalDevelopmentAgencies(RDAs)The mission of the RDAs is to spread economic prosperity and opportunity to everyone in the nine regions of England. They do this through providing strategic direction for economic development, ensuring the needs and opportunities for every region are taken into account.

ResearchCouncilsResearch Councils are the public bodies charged with investing tax payer’s money in science and research in the UK in order advance knowledge and generate new ideas which can be used to create wealth and drive improvements in quality of life.

StudentLoansCompany(SLC)The Student Loans Company (SLC) is a UK public sector organisation established to provide financial services, in terms of loans and grants, to over one million students annually, in colleges and universities across the four education systems of England, Northern Ireland, Scotland and Wales.

TrainingandDevelopmentAgencyforSchools(TDA)The TDA was formed in September 2005 from the merger of the Teacher Training Agency and the Department’s National Remodelling Team. Its remit includes: maintaining demand for initial teacher training from potential recruits through marketing and a teaching information line; inspection of training, accreditation of providers and allocation of training places; funding training for teachers, teaching assistants, school business managers and bursars; and the framework for professional and occupational standards for the school workforce.

UniversityforIndustry(UFI)Created in 1998 and funded by the LSC, UFI established learndirect, the largest e-learning network of its kind in the world, which has delivered learning to more than 2 million learners since 2000. There are three strands of the learndirect service—learndirect courses, learndirect business and learndirect advice. Around 200,000 businesses have used learndirect to improve workforce skills, and over 30 million advice sessions have been provided.

UnionLearnAims to help unions encourage lifelong learning among members. Provides details of courses and information about rep training as well as a research and strategy section.

Appendix Two