Welcome to the fifth of our 'SLIM Comments', a series of quarterly newsletters aiming to give you a little more depth on the key issues of the day and in particular to explore them from a South West perspective.

Following our highly successful conference earlier this summer, we will be exploring Regional Skills Partnerships (RSPs) in some detail, particularly what is planned for our own South West RSP – the South West Enterprise and Skills Alliance (SWESA). Drawing on the keynote contributions to our recent conference "Regional Skills Partnerships in a Global Economy" we examine some of the debates about where the priorities of our RSP should lie.

On behalf of SLIM, may I say that I hope you continue to find this new service useful and interesting and that we can continue to assist you in your work.

Regards

Edition 5
14 September 2005

Previous editions

1. Regional Skills Partnerships – progress to date
2. Challenges facing the regions in a new global economy

1. Regional Skills Partnerships – progress to date

What are the origins of Regional Skills Partnerships?

England's Regional Skills Partnerships (RSPs) were announced in the Skills Strategy White Paper (21st Century Skills: Realising our Potential) in July 2003. Their announcement was very much in line with suggestions to the Skills Strategy consultation calling for a new impetus to develop a more robust regional partnership approach on skills and one that had more of a demand-led focus. For example the TUC's submission stated:

'the social partners should be actively engaged in governance at (the regional level) to provide the opportunity for skills policy to be developed in a consensual way that takes account of the strengths of trade unions as social partners and employee representatives.'

In 2001, each RDA had been asked by government to take the lead in producing a Framework for Regional Employment and Skills Action (FRESA) in order to address the skills and employment needs of employers and individuals in each region.

The Skills Strategy White Paper argued that while the FRESA partnerships gave a good platform on which to build, there remained concerns that the 'integrating mechanisms are not yet strong enough at regional and local level to ensure the closeness of collaboration that is needed'. The Government invited the RDAs to lead the new Regional Skills Partnerships, which must involve all the key Government agencies operating in the region and also representatives of employers and employees.

However, the White Paper also stated that the Government would ‘not prescribe a particular form of partnership in the regions’ and to a large extent this has meant that some organisations, previously excluded from such bodies, have had to negotiate the specifics of their representation on the new partnerships.

The Skills Strategy White Paper also contained a range of new measures to extend the regionalisation of skills funding and the remit of agencies operating at the regional and local levels to formulate and deliver skills provision. This approach builds on a range of government policies in this area, such as the introduction of pilots in 2003 to test out the impact of pooling RDA and local LSC 'skills budgets' and promoting joint working on skills between the RDA and local LSCs in each region.

There are also a number of pilots testing out measures to improve regional coordination and management of business support services, which play a key role in linking employers with skills provision.

The impetus to build a regional skills infrastructure has continued since the publication of the Skills Strategy White Paper in July 2003. At the beginning of 2004 the LSC established a new regional management structure with the appointment of new Regional Directors. This new structure allows the LSC to drive forward its work in the regions and develop its relationships with key partners at a regional level.

In June 2004 a Concordat on Future Working between RDAs and the LSC was agreed. The purpose of this Concordat is to set out the 'principles which will govern the future working between RDAs and the LSC within Regional Skills Partnerships'. It has been agreed between the RDAs, the LSC, the DfES and the DTI in consultation with other partners. The key principle of the concordat is to:

"maximise regional productivity and economic development, and thereby promote social inclusion, through supplying the skills, training and business support which best meets the current and future needs of employers in the region".

With the 2005 white paper, expectations of each RSP were further clarified:

• "…should be the vehicle for ensuring that all the adult skills, business support, labour market and productivity services available at regional, local and sectoral level are mobilised to support regional priorities" (RSP Specification)
• "…ensure that the strategy for supply of skills, training, business support and labour market services is planned, managed and delivered in a coherent, collaborative way which reflects the priorities set out in the Regional Economic Strategies" (LSC/RDA Concordat)
• "…join up complementary services so that they are delivered to employers in an integrated way. They can ensure that skills are deployed effectively in support of more ambitious business development strategies" (Skills White Paper 2005)

Progress with the development of the RSPs

RSPs have now been in place for almost a year so how are things shaping up? Prospectuses submitted by the RSPs set out how they are going to meet a number of key objectives, including setting out the collective vision of skills for the region and how all the RSP partners have a shared commitment to achieve this.

Whilst all have been established in accordance with the prospectus they submitted, there has remained a need to clarify the RSP roles and responsibilities and the core partner contributions to support these responsibilities. In particular, with the development of the first four Sector Skills Agreements, the Sector Skills Councils (SSCs) wished to better understand the RSP responsibilities with a view to agreeing how best the Skills for Business Network (SfBN) should effectively engage with RSPs.

It is important to remember that developments are at the formative stage, nor is there a great deal of regional funding. So they key question is how RSPs are going to add value to what the core partners do?

Planning and funding are areas where RSPs can exert influence. However, this won't be easy as RSPs are not legal entities and cannot therefore be accountable bodies. They have instead to rely on the spirit of partnership and a hefty dose of persuasion.

Anne Jones Presentation, RSP Conference, June 2005

Interestingly the priorities to emerge from the RSPs across the country show a great deal of commonality: leadership and management; skills brokerage; increasing the proportion of the workforce reaching level 3; and, supporting the disadvantaged are high on the agendas of all RSPs. This is not surprising, given that these reflect national priorities identified in the skills strategy. Nevertheless, it raises the critical question of whether the priorities truly reflect individual regional priorities rather than yet again, more centralist imperatives.

What about the South West?

In the South West we have the SWESA –

“The South West Enterprise and Skills Alliance which brings together employers and businesses, public funders of training, training providers and groups representing individual needs. It is the one partnership that joins the entire business and learning community with a common goal - matching individual skills to employer needs in South West England.”

Whilst on the face of it the region has what can be defined as a healthy labour market, it also faces challenges. The South West region is characterised by a low value economy, with low wages and low productivity. There are a number of important sectors of our economy experiencing difficulties in finding the right skills and training to meet their needs. South West employers report problems and experience confusion when attempting to access training and business support.

The region is also failing to meet nationally defined targets in respect of improving levels of literacy and numeracy skills. Many young people and graduates leave the region to further their careers, resulting in a net outflow of talent from the South West. The region needs to respond to these challenges by:
• Creating dynamism and adaptability in the labour market
• Repositioning target businesses and sectors in higher value markets
• Integrating skills into the wider business development agenda.
• Raising demand for higher level skills.
• Expanding the labour market by engaging those who are currently excluded.
• Developing training provision to make it more appropriate, timely and flexible to meet employer and learner needs.

Who is on the SWESA?

Well, quite frankly… who isn’t. Representation within the broad Alliance at present comes from: ACAS (Advisory, Conciliation and Arbitration Service), Association of Colleges, Association of Learning Providers, Confederation of British Industry, Connexions, Engineering Employers Federation (EEF), Equality South West, Federation of Small Businesses, Government Office for the South West (GOSW), Higher Education Association for South West England (HERDA SW), Higher Education Funding Council for England (HEFCE), Jobcentre Plus, Learning and Skills Council (LSC), Learning and Skills Development Agency, National Institute of Adult Continuing Education (NIACE), National Union of Students (NUS), Nextstep/IAG, Quality South West Ltd, Regional Infrastructure for SociaI Enterprise, Sector Skills Development Agency, Skills for Business Network, Skills for Health , South West Business Support (SWBS), South West Forum , South West Local Government Association (SWLGA), South West of England Regional Development Agency, South West Regional Assembly (SWRA), Sub Regional Partnerships – Cornwall and Isles of Scilly Economic Forum, The South West Trades Union Congress (SW TUC),Third Age Employment Network, UFI/learndirect, UK Trade & Investment.

Whilst membership of the SWESA Board is more restricted and demand focused with partners from:

Confederation of British Industry, Engineering Employers Federation (EEF), Federation of Small Businesses, Higher Education Association for South West England (HERDA SW) / Higher Education Funding Council for England (HEFCE), Jobcentre Plus, Learning and Skills Council (LSC), Skills for Business Network (representing SSCs), Skills for Health
South West Business Support (SWBS), Small Business Service / Business Link, South West Local Government Association (SWLGA), South West of England Regional Development Agency, The South West Trades Union Congress (SW TUC).

You can find details for the representative and the role of each organisation at:
http://www.southwestskillsstrategy.info/partners.asp

What are the current SWESA Priorities?

Four key priorities have been identified for the Alliance. They are to:
• Develop a simple business brokerage system to meet the skills needs of employers and businesses
• Raise demand for, and develop, management and leadership skills
• Improve literacy, language and numeracy
• Develop joint planning to ensure training is more appropriate, timely and flexible
Activity is carried out by 'Task and Finish Groups' who bring together the skills of individual specialists drawn from among the partner organisations.
A central team provides support services to all other parts of SWESA and has responsibility for delivering the programme set by the Board, Alliance and Task Groups. Whilst the Director has been in post for a few months, the team in its entirety is very new and they are actively building links with stakeholders in the region.

Where can I find out more?

Your SWESA Team can be contacted at:

Steve Lydon, Director
Telephone: 01823 226029
Email: steve.lydon@lsc.gov.uk

2. Challenges facing the regions in a new global economy

The recent conference "Regional Skills Partnerships in a Global Economy" (further information and copies of presentations can be found on http://www.swslim.org.uk/regionalskillsconference/), attracted a wide audience of partners involved in RSPs across the UK, together with an impressive list of academics researching the field and policy makers from national, regional and local organisations. Organized by SLIM on behalf of the ESRC and the Association of Regional Observatories (ARO), the conference sought to bring together academics and policy makers to debate the critical issues facing RSPs, as they strive to develop strong regions in the face of a changing global economy.

A critical issue is how important skills really are in terms of our position in the global economy? And here opinions differ. In this section we look at the contributions from the two keynote speakers at the conference.

Skills, skills and more skills

Chris Humphries, Director General of City and Guilds and formerly chairman of the Government's National Skills Task Force, addressed the conference on the subject of the "Winners and losers – the health of the UK’s labour market".

Chris highlighted a series of global changes in the last 10 years that are going to have lasting changes on the UK and global labour market. Not least was his reference to the work of Thomas Friedman's, "The World is Flat" which presents a stark reality of the new global economic context in which we are now operating.

These changes have particular implications for occupations and therefore skills requirements, including: greater requirement for higher qualification levels; fuzzy skill sets; greater customer facing activity; and, leadership and management as key employability skills. Yet a fundamental concern exists about the speed of response of the education delivery system to these fundamental changes.

A critical issue for western economies is also the changing age profile of the UK population and its likely impact upon the UK workforce and its needs for skilled labour. Up to 2020 the workforce age profile will become inverted with a greater number of people aged 40-60 than aged 16-25.

Employment growth is currently outstripping the number of young people projected to join the workforce in the future, so focus must be on how to improve the skills of those currently in the workforce. Additional sources of labour can clearly come from the unemployed, those not currently in employment, or from immigrant workers.

Chris also highlighted the changes in the industrial base and in occupations. He started by acknowledging that some of the changes taking place are difficult to track. Changes such as outsourcing are not accurately reflected in the industry sector data we have access to. For instance the gearing (additional industries which a sector has links or impact upon) is not reflected in current industry sector data, such that on average manufacturing firms have direct impacts upon 4.5 other firms, whilst services impact on average with 1.5 firms.

Neither does occupational data reflect the growing blurring of boundaries between job descriptions, and it does not necessarily reflect well the skills levels or requirements of the jobs it purports to represent. Replacement demand to 2012 is not adequately reflected in the presentation of projected occupational trends. Up to 2012, 13.5 million jobs will require replacement. Key areas of replacement demand are already reporting skills gaps – skilled trades and associate professional and technical occupations.

Chris concluded that on the basis of this evidence the focus of our education system is misplaced. Currently, employers report skills shortages in skilled trades and associate professional and technical occupations, and technical and practical skills shortages predominate. Capital investment sectors – construction, manufacturing, and agriculture predominate as those sectors experiencing greatest skills shortages. Yet, the UK education system is primarily benchmarked against school and university outcomes rather than vocationally related ones, in spite of what the evidence seems to be telling us.

This raises questions about whether policy makers truly understand what the economy needs. Projections suggest that new jobs will require higher qualification levels such that by 2010 80 per cent of new jobs will require level 3+ qualifications. However, replacement jobs requiring unchanged levels of qualifications out number new jobs by 5 to 1. In the US there is much greater emphasis upon Level 3 work related training than upon graduate training. Does the UK economy really need ever-larger numbers of graduates?

The implications of this for the workforce is that individuals will increasingly have to compete globally on attitude and skills levels, industries will compete on value addition and responsiveness, and nations will compete on the quality of their education systems.

For nations, this has particular policy implications. Hence in the UK schools will need to provide for 100% of young people, not just the 50% they serve well now. Vocational and academic education need investment on an equal footing, and the 'who pays' problem requires a tripartite solution between government, individuals and employers.

However, there are clear barriers to achievement of this: academic bias against vocational qualifications; limited portability of skills; poaching rather than training; and, failure to engage adults with lifelong learning.

On the other hand

Professor Ken Mayhew, Director, ESRC Centre on Skills Knowledge and Organisational Performance (SKOPE) talked about the role of skills in relation to Corporate Performance and Competitiveness.

He highlighted the fact that significant references across Government, particularly HM Treasury and DTI, are made to productivity and competitiveness. But what do these terms really mean, particularly focused upon macro economic perspectives, an organisational perspective, and a policy perspective?

A focus on competitiveness in policy documents has tended to be quite limited as UK policy statements constantly seek comparison on productivity measures, pronounced as a component of competitiveness, with only a select few countries, namely France, Germany, and the US used to illustrate 'how far we are behind and how much needs to be done'.

Ken argued that much of the policy debate within the UK is founded on a simple uni-causal relationship between the need to improve skill levels and hence improve UK competitiveness. Ken argued against this and then sought to outline why.

If we look at productivity in terms of output per hour and the average growth rates for different leading economies we start to see a slightly different picture than that selectively presented in many policy documents.

Figures from 1950 – 1979 show that average annual growth rates per annum for output per hour stood at:

Figures for 2003 show:

Does the UK rate in 2003 compared with 1950-1979 figures suggests there is a problem with the UK supply side?

Even trends between 1995-2003 show further issues:

Ken urged us not to forget the impact of the demand side of the economy. It is problematic to suggest that the trends illustrated above demonstrate the need to improve skills levels. Whilst not denying their importance, Ken identified that the most important contributor to productivity gains is physical capital investment, but also highlighted the importance of definitions and measures of productivity used. Hence we may have a misinterpreted picture of the competitiveness of the UK economy.

In policy terms there has been a general shift away from traditional views of international trade theory that are static and focused upon price and non-price (quality of goods, timeliness of delivery) competitiveness to a more dynamic focus upon low unit cost or high value added route.

Since the 1950s, UK producers have generally been poor at non-price competitiveness. US economists Thurow and Reich have pushed the high value added route as an imperative for developed economies as a mechanism to ensure a more equitable distribution of benefits. However, UK analysis of the ability of the UK economy to follow this route is interpreted as a skills problem because international audits seem to show us lagging behind.

However Ken argued that it is important to interpret the results of these audits appropriately as they are showing that UK employers demands for skills are lower than employers in competitor countries, not necessarily that we have worse skill levels than them. Policy suggests that UK firms are producing lower specification goods and services, but there is no conclusive evidence that this actually happening. Product specifications are always changing. We also have plenty of examples of high specification goods and services being produced by low skill economies. Perhaps this is the new skills agenda for the global economy?

Other than at basic skill levels, there is limited evidence to show a link between skills improvement, economic performance and organisational performance. So whilst skills play a part Ken argued that it is capital expenditure continues to be shown as the key driver. On this basis, the supply of skills is a necessary but not an imperative for productivity growth.

If this is the case then there are a number of implications for national and regional skills policy.

Should expenditure on the education system more adequately reflect skills policy to produce more vocationally trained individuals? How do we encourage UK firms to take the high value added route and thus increase their demands for higher level skills? What role might there be for public sector leverage – how much can the public sector influence through its own procurement procedures to increase the demand for higher level skills? Is there a role for protectionism to encourage global firms to adopt more high value added activities? At a regional level how much policy discretion do RSPs and their partners have and what level of influence do they have over companies in their region?

What do you think?

So skills are important but they are not the whole picture. Indeed the issue may be more about raising the demand for skills than problems with supply. That is why in the South West a great deal of focus has been placed on issues such as skills brokerage and strategies aimed at working with employers to raise their demand for skills. Putting this into practice is another thing.

These are big questions and they need continued debate. So what do you think? Let us know.

Dr Andrew Dean
SLIM
Marchmont Observatory
University of Exeter
St Lukes Campus
Exeter, EX1 2LU

01392 264925
a.dean@exeter.ac.uk