Features: May 25th, 2007

Getting Scotland Skilled For Economic Growth

By Charlene O’Connor

The recent appointment of Sir Digby Jones, former head of the CBI, as UK skills envoy underlined the fundamental importance of aligning the provision of skills with the immediate and long-term demands of employers. Scotland’s own industry-driven approach to skills and learning is already helping the nation to tackle the productivity challenges of the coming decades. But to secure the maximum economic impact from the significant public investment, we must go even further in ensuring front line delivery of training activity is both high quality and highly targeted. Rather than simply asking what training providers are able to offer, we must develop a more detailed understanding of businesses’ needs, then challenge the training market to match these with a targeted, efficient product. So, what are the next steps Scotland must take and how can we strengthen those crucial links between employers, the public sector and trainers?

Inter-connected bottom lines

The implications of the Treasury’s recent Leitch Review, which put skills development at the heart of economic success, have been heard loud and clear in Scotland, where this debate has rightly taken centre stage. According to Leitch, skills development is one of five inter-related pillars supporting economic growth, alongside enterprise, innovation, competition and investment. As each of these elements are intrinsically linked, the detail of training delivery must also be viewed in this wider economic context.

There is undoubtedly a key role for the state here, with its focus on the long-term interests of the wider economy, its financial and other resources and, where necessary, its power to affect structural change. Allied to this, public spending on skills and training must also, by definition, play its part in achieving broader goals. We have a role in tackling social exclusion and fighting inequality, as well as our place in the wider education system and demonstrating a measurable positive impact on GDP. On top of delivering against these highly interconnected bottom lines, we are answerable to the entire community, for many millions of pounds of public money.

Skill challenges

As a first step, it is important to examine carefully the full range of skills-related challenges faced by employers, to determine where intervention would be beneficial and what form it should take.

First, skills gaps occur in any situation where an employer deems an employee to be not fully proficient at their job and about one in every 12 workers falls into this category. Many of these skills gaps are predictable, transitory and – as new employees learn the ropes or complete their induction – will quickly disappear in the normal course of business. Indeed, about half of employers with skills gaps report these have arisen for positive reasons, such as the introduction of new products or working practices.

The skills most commonly lacking in employees are softer core skills, such as planning and organising, customer handling skills, problem solving and team working. Skills gaps disproportionately affect those occupations which generally require lower levels of skills and qualifications. Workers in these occupations are also less likely to receive training.

A potentially more serious challenge arises where an employer has a vacancy which is hard to fill, because applicants lack the necessary skills, qualifications and experience. Such skill shortages are not especially prevalent, equating to around one per cent of the total demand for labour.

It is also worth noting there are other reasons why some vacancies might be hard to fill, such as the nature of the job on offer or the perceived attitude, personality and motivation of applicants. Supply and demand for specific skills are broadly matched in Scotland. Of course, there remain certain geographies, or certain sectors at specific times, where imbalances occur. The training and skills market cannot always gear up to meet short term peaks and troughs brought about by new opportunities.

We can, however, ensure the framework for procuring and delivering skills and training is firmly connected to the business community, as well as being sufficiently flexible to meet medium and long-term needs.

In Scotland, skills shortages and skills gaps are measured by means of a large-scale survey of employers, undertaken every other year by Futureskills Scotland. The most recent survey, conducted in 2006, covered around 6,300 employers in will be published in the near future. There are currently more than 40,000 people of all ages engaged in Scottish Enterprise’s four major training programmes: Modern Apprenticeships (MA), Skillseekers, Get Ready for Work and Training for Work. In the MA programme alone, 14,000 employers are working in partnership with us to give individuals the vocational skills and experience they need.

But economic impact doesn’t just boil down to the volume of trainees. As part of the ongoing dialogue with our partners in industry, another recent survey, looking specifically at the effectiveness of the national MA programme, found 78 per cent of participating employers recognised a direct beneficial effect on staff productivity. In addition, 90 per cent of employers said they value the qualification, 86 per cent confirmed staff are more skilled and 80 per cent found workers understand their jobs better.

As gratifying as such figures are, we are acutely aware the labour market remains highly dynamic and that what works today is unlikely to serve Scotland’s needs in ten years’ time. We must be ready to adapt, seizing opportunities to make public money work harder and seeking out new efficiencies in procurement and delivery.

Skills training tender

To this end, Scottish Enterprise has embarked on a fundamental reappraisal of its current training procurement arrangements. Have consulted directly with businesses about their need for skilled employees – now and in the future – we have produced a comprehensive picture of demand at a local and national level. This “Development Demand Statement” will now form the basis of a robust, fair and competitive process, in which Scottish Enterprise’s entire £100 million annual skills and training budget will be put out to tender.

By putting into practice our total commitment to a demand-led procurement strategy, training providers will need to move into skills gaps and shortages, identified by sector and region, if they are to benefit from public spending. Though this mechanism, Scotland will reap the benefits of a far more responsive and efficient system, focused on maintaining that all-important link between public strategy and the needs of industry.

Charlene O’Connor is senior director, skills and learning, with Scottish Enterprise.