Can FE and HE meet the needs of business and the economy? *


By 2010, the UK economy will have generated at least 1½ million extra high-skilled jobs. But will we have sufficient numbers of highly skilled people to fill them? Although the Government has committed itself to 50% participation for higher education by the end of the decade, it has offered only limited insights into its strategy to achieve this. In particular, it remains unclear how responsive the further and higher education system is to labour market signals.

At the “front-end” of the education system, the Government’s ambition to reform and improve the country’s schools is beginning to show results. The number of 11 year olds reaching expected levels in English and maths has improved by 10 and 12 percentage points respectively since 1998. There are now 50% of 16 year-olds getting 5 or more GCSEs at grades A* to C compared to 46% in 1997. Gaps in attainment between prosperous and poor areas of the country have narrowed. There are more school teachers than at any time in the last 2 decades and fewer schools judged to be failing.

By contrast, the Government’s ambitions post-16 are still struggling. The Government has set short and long term targets for participation that stretch across the spectrum of learning from higher education – to achieve 50% participation – to Modern Apprenticeships – where 28% of young people are expected to train for a vocational qualification. But the target for 85% of all 19 year olds achieving a level 2 qualification is some 10 percentage points adrift whilst the most recent trends have seen overall 16-19 participation rates tailing off – and at 74% is one of the lowest in any developed country. At 74%, the UK lags behind the USA (83%), France (91%) and Germany (92%).

However, the debate is not simply confined to total numbers. It is also about the nature of learning. Increasingly it is argued that post-16 education and training lacks a sufficiently sharp focus on business relevance and economic impact.

Post 16 learning has to be placed in the context of the Government's principal long-term economic goals which is to increase the rate of productivity growth and close Britain’s “productivity gap” with other competitor countries. The main economic drivers that will help to achieve this are identified as:

Employers and most vocational learning institutions already share a clear vision that the primary goal is to enhance individuals’ labour market prospects. Amongst institutions responsible for vocation learning it is recognised that:

However, vocational learning continues to enjoy less prestige and value compared to academic qualifications and institutions – despite clear messages from Government that the curriculum and content of further and higher education needs to be better connected with businesss needs.

The critical question is how to bind economic necessity more closely into the curriculum and culture of further and higher education supply institutions – and in doing so, help to raise participation levels.

Recent policy development

Where are the most acute skill shortages and how are employers managing? One answer is, from abroad. Britain has maintained tight control over immigration for more than two decades. Yet the country now admits up to 145,000 people a year to alleviate pressure on vacancies in areas of acute skill shortage. The number of work permits issued has more than doubled since 1997 and reflects a growing range of industry sectors and occupations that face profound recruitment difficulties – in addition to providing international firms with a system to manage the internal movement of highly mobile staff.

The skill shortage list reflects a failure to supply professionals in some of the most highly trained occupations – and a clear failure of supply institutions to read market signals. Occupations include:

Demand for these types of skills is certain to grow. Projections of jobs growth in the period to 2010 indicate a sharp increase in occupations requiring level 3 and 4 qualifications. With the labour force expected to increase by 2.3 million jobs, two thirds of all growth is likely to be in Professional occupations and in Associate Professional and Technical occupations. The openings in greatest demand are expected to be in health and social care, science and technology, legal and business services, ICT, design and media. Already, data from the labour Force Survey shows that ¼ of all jobs in the economy are being filled by people with a level 4 qualification or higher.

What is currently being done to fill these current and future skill shortages?

Reforming 14-19 choices

The 2002 White Paper “Extending opportunities, raising standards” identifies 2 critical problems: firstly, the historic neglect of vocational education; and secondly, the decision point that occurs at age 16 when young people divide between those who stay in learning and those who leave. The two are connected and the White Paper proposes a more flexible and responsive curriculum combined with better delivery of technical and vocational skills. It also proposes:

As a result, young people should have a less biased choice between:

The White Paper also recognises that there needs to be clear vocational pathways into higher education. However, as its main drivers for change it simply suggests variations to area inspections and to the reporting of vocational learning achievement in school and college performance tables.

However, the critical “bridge” between age 16 and HE entry is fraught. Learner maintenance and tuition fees are heavily skewed towards HE provision with a gap in support arrangements between school and HE learning. The introduction of EMAs has started to address the financial disincentives to remaining in learning after 16, but the signals are still wrong. Although policy is beginning to recognise the desirability of “entitlement” to level 2 – and eventually level 3 – the financial levers are not in place.

Secondly, are FE and HE configured correctly to respond to policy and economic developments?

The FE sector

Since 1992, FE colleges have seen a dramatic increase in the number of enrolments driven by a free-for-all funding system that has introduced competition between institutions. The FE sector (in England) boosted its student numbers by over 40% between 1994/5 and the latest year. Almost all the growth was amongst learners aged 19+, mainly engaged in part-time modes of study with much growth in level 1 and 2 qualifications. This is a commendable track record that attests to a sector that has been highly responsive to the funding regime and to demand for learners at the lower end of the skills spectrum.

However, since the early 1990s, the growth in prevocational courses has not been accompanied by any significant increase in the numbers of young people or adults acquiring level 3 qualifications, particularly at intermediate level or in technician skills. At levels 2 and 3, the FE sector has seen a drift towards more academic forms of learning and assessment with a subsequent loss of vocational teaching capacity.

Policy has begun to respond and four developments are already beginning to change the FE sector (in England primarily).

Success for All: Reforming Further Education and Training – a DfES consultation exercise to "accelerate the pace of reform" in post-16 learning. Its strategy to "raise quality, meet employers’ needs and improve choice" includes a “fundamental review” of post-16 provision by every local LSC paving the way for "new institutions, wider choice for learners and better training for local businesses";

Launching the consultation, the Secretary of State called for "an end to the drift and lack of mission in FE and training" with learning made more "responsive to local employers and communities". She criticised a "history of weak accountability" in the learning and skills sector which has allowed "too many colleges to coast for too long". Every provider should "focus on their strengths and avoid duplication." The DfES subsequently announced a £43m package to:

Centres for Vocational Excellence (COVEs) – partly drawing on a successful model developed in the Republic of Ireland where specialist Institutes of Technology were formed in the 1980s and geared towards the country’s priority emergent high-skill industry sectors. The LSC is currently developing a nationally co-ordinated network of specialist centres of vocational expertise – that has been extended beyond the FE sector to work-based training organisations including private and voluntary providers, employer-based providers and group training associations. COVEs are expected to be underpinned by strong business and industry collaboration and – as a condition of recognition – must demonstrate their ability to meet the current and future skills needs of employers at local, regional and national levels and in specific employment sectors. By 2004, the LSC plans to recognize over 200 college-based CoVEs and a further 50 CoVEs amongst non-FE training providers. A ring-fenced budget of more than £150 million is likely to be allocated with typically £½ million available to each COVE over a 3 year period.

For these centres to prove effective and different, the critical success tests should include:

Similar “Networks of Excellence” are being established in Wales that focus on “sound preparation for employment” and the economy’s changing needs, in particular developing higher level skills and progression into work.

A Public Service Agreement announced in the 2002 Treasury Spending Review – offers a 1% real increase in core FE funding combined with greater devolved responsibility, 3-year funding and other financial flexibilities. However, the settlement imposes performance targets on institutions – particularly a measure of their engagement with employers.

A fundamental review of funding for adult learning is underway within the DfES and due to report in Summer 2003 with the explicit aim of “looking at better incentives” and how to encourage institutions “to be more responsive to employer needs”.

Regionally “pooled” spending of LSC and RDA skills funding. With three-year funding due in future years, the Treasury has indicated that colleges will be expected to plan their provision on a longer-term basis and align their plans “with local strategic priorities and employer needs”. Pilots are being prepared in 3 regions with the RDAs and local LSCs pooling adult skills funding in accordance with agreed skill needs. With all regions currently finalising “FRESA” plans – alongside Jobcentre Plus, employer organisations and other regional players – it is expected that pooled funds will be allocated on the basis of agreed regional plans.

Higher education

The Higher Education sector is undergoing a period of significant change as it becomes more commercially driven and influenced by business. The emphasis on research activity, sponsorship, specific funding streams and a stronger focus on institutions’ regional economic needs are amongst the primary drivers for greater engagement with employer and business needs. The HE sector is not homogenous however and different patterns of employer engagement tend to correspond with the historic origins of different waves of institutions:

It is important to recognise that the traditional boundary between further and higher education is becoming increasingly blurred as

Consequently, a growing proportion of “university” institutions carry-forward a strongly vocational mix of learning alongside established business and employer connections.

The Government has re-iterated that HE is “central to the development of a highly skilled workforce” and is pursuing two main objectives: to widen access to higher education, and to improve the standards and responsiveness to demand of teaching and research.

Three key policy measures are currently being promoted:

Specific strategic funding – Higher Education funding bodies across the UK now promote interaction between HE institutions with business and community. In England and Northern Ireland there are the Higher Education Reach-Out to Business and the Community scheme, and UK-wide initiatives such as University Challenge and Science Enterprise Challenge and the HE Innovation Fund. In parallel, in Scotland a new Knowledge Transfer Grant has been introduced by the Scottish Higher Education Funding Council, Education and Learning Wales also has its own programmes, such as the Higher Education Economic Development Fund, whilst in Northern Ireland there is a series of specific projects developed between the two universities and government bodies.  In the current year (2002-03) total HE funding in England is £5,076m of which teaching funds comprise 64% of expenditure, research 19% and specific initiatives form the remaining 17%. Approximately £58m (1% of all funding) is allocated to Business and Community. In addition, for the period 2001-05, allocations of £78m have been made from the HE Innovation Fund (a DTI/OST initiative).

Foundation degrees – two year work-based degree qualifications, backed by business and industry to provide the specialist technical skills that employers demand. They are intended to stimulate collaboration between business, industry and higher education – with employers closely involved in the design and review of programmes and with recognition achieved from sectoral and professional bodies. Since September 2001 over 70 courses have been launched, although the majority of Foundation degrees are in new industries or technologies with significant gaps in existing provision. Other professional qualifications, HND and HNC courses still predominate in more traditional sectors where industry recognition for courses and qualifications is well embedded. Critical to the success of Foundation degrees is the ability to acquire specific, high-level technical skills in a rigorous learning environment and to apply them in a work setting.

New Technology Institutes - 18 centres established to boost the regional supply of ICT and other high-tech skills, and the transfer of technical knowledge to local businesses. Delivered through consortia of HE institutions, FE colleges and private sector partners, they are designed to provide a range of courses from NVQ level 3, with pathways through to foundation degrees and on to degree level qualifications. They have also been established to help small and medium sized enterprises to implement new technology and business practices and to collaborate with the Small Business Service and RDAs, to identify skills gaps and to tailor NTI activity to local needs.

Key issues

FE and HE institutions are indeed responding to the demand-side of the economy. Nonetheless, many ambiguities remain. Are institutions clear about who their “customers” really are? Some insist they are faithfully responding to demand from learners whilst others align themselves unequivocally with the market signals from employers. In practice, both sides of the equation are often using poor information. Learners especially are often misinformed about future prospects – not least the relative wage premia and certainty of employment that exist between different subjects and institutions.

Much of the supply-side in FE and HE also lacks structural connections with business. At a policy level this is changing, with a substantial proportion of the LSC boards and provider management Councils being filled by people drawn from amongst employers. However, operational links are often ad hoc or driven by specific initiatives. Industry standards need to be more clearly articulated to providers and employers need to gain confidence that learning is cost-effective, delivered to recognisable standards and is sufficiently integrated with business objectives.

One critical barrier to increased participation and employer demand for skills at higher levels is the patchiness of support at or above level 2. Learner demand at this level is inhibited because the immediate returns – in wage premia – are far less pronounced than at higher levels. Low rates of progression into level 3 and 4 learning can only be improved by decisive intervention earlier in the system. Yet most of the public subsidy to learning disproportionately favours participants in higher education in fees and maintenance costs. To achieve greater participation at higher levels, public subsidy needs to be re-allocated to boost participation at lower levels first.

The divides between vocational and academic or between work-based and college-based learning have become less marked. In England and Wales, the convergence is being driven through single funding and planning bodies. Although many initiatives aim to achieve a similar blurring of boundaries between further and higher education, these are inevitably piecemeal. By contrast, the Scottish Parliament’s Enterprise and Lifelong Learning Committee has recommended the merger of the country’s FE and HE funding councils in an effort to ease the transition from compulsory schooling to acquiring higher levels of skills – especially for adults that have been out of the learning system for a long time. Potentially, this will lead to a more equitable distribution of funds – particularly in the context of Scotland’s abolition of up-front fees – and help target more disadvantaged learners and places.

In England, the LSC is already showing signs of becoming bureaucratically unwieldy, so the creation of a single post-16 sector presided over by a “super-LSC” might be logical in theory, but managerially unresponsive in practice. A single sector for England would have to contain significant regional devolution with RDAs and other regional forums taking a greater lead in determining priorities – combined with a framework of stronger national sector level arrangements. A larger, single sector will undoubtedly create complexity for supply institutions but it would present far greater coherence and logic for employers and ultimately for learners.

Lastly, the qualifications structure requires reform. The recent review of QCA called for greater responsiveness of the qualification system to the needs of the economy and employers because it fails to reflect the needs of employers – notably in technology – and is insufficiently flexible to match the pace, delivery mode and multi-disciplinary nature of demand-led vocational learning. Unitised, credit-based qualifications are a cornerstone of reform in Wales, Scotland and Northern Ireland but not in England. Perversely this is held back by a belief that part-qualifications offer learners the chance to avoid completing a full qualification. In practice, there are already high levels of drop-out from vocational learning where learners leave or re-schedule for personal or work reasons and have nothing at all to accredit their part-achievement.

* Authored by Paul Convery with assistance from Neil Costello. Both are Associate Directors of SQW, an economic development consultancy.