At the start of her negotiations with the Treasury, she has indicated that her department's budget for training the unemployed for new jobs is to be cut. Her comments come ahead of figures this week that will show the 26th consecutive monthly increase in unemployment, which is climbing inexorably towards three million. The immediate social impact of such financial rigour will be serious, but the effect on the economic engine on which much else depends is potentially more dangerous.
Britain might be having considerable difficulty coping with the economic downturn, but industry will have an even bigger problem dealing with a recovery. Neither government nor the private sector seems to be playing its part.
The Government's contention that vocational training has held up remarkably well seems to be based on a combination of wish-fulfilment and a poverty of ambition. The 'training revolution' sought by politicians of every party, and promised by Conservative ministers, is simply not happening. Comments by training organisations and major manufacturers show there is little doubt that even the most modest economic recovery will reveal chronic shortages.
Indeed, some firms are already suffering from recruitment problems. A shortage of skilled labour will limit the ability of companies to exploit expanding markets and as a result Britain could lose out not only to our continental neighbours but also to the emerging economies of the Pacific basin.
An unpublished report by the Confederation of British Industry gives a graphic impression of the scale of the problem. Employers reckon that more than half the people now seeking jobs lack work experience and suitable skills. More than one in three companies say job-seekers lack motivation, qualifications or basic skills. A 'significant' rise in shortages is predicted, with one in five firms expecting recruitment problems over the next 12 months.
Although recovery may still be a distant gleem in the eyes of optimists, companies in the West Midlands are already experiencing shortfalls. In its latest quarterly economic survey, the Birmingham Chamber of Commerce and Industry found that 44 per cent of manufacturing companies attempting to recruit were encountering problems. The figure is considerably lower than the 70-80 per cent seen before the recession but is rising from a low of 24 per cent in the three months to last September.
While some companies are already looking in vain for skilled people, it seems that during the recession most firms have been reluctant to take on school-leavers and 'train them up'. Those who fail to find jobs are meant to be guaranteed a place on the state-financed Youth Training scheme, but, according to the Labour Party, as many as 55,000 cannot find suitable courses and under government rules about 11,000 are refused social security benefit.
Those who enter Youth Training do not necessarily receive quality training, partly because of a reduction in government funding and partly because companies faced with a steep drop in profitability and a need to shed staff are unwilling to take them on to give them work experience. The number of apprentice-level trainees taken on by companies has also slipped, which means that in three years' time we will be 'back to square one'.
If industry can be blamed for failing to invest in future manpower, so can the Government. In 1989, one of the more ambitious pledges by Norman Fowler (now Sir Norman, chairman of the Conservative Party) was that by this year Training and Enterprise Councils (TECs) would ensure that all adult employees would be taking part in company training and 'developmental' activity. The promise has not been kept.
He promised a 'training revolution'. Out would go the tripartite Manpower Services Commission and the bureaucratic training boards with their statutory right to collect a levy on company payrolls. In would come the 'voluntarist' Training and Enterprise Council system under which local, employer-led committees would encourage training by companies and disburse pounds 2bn of government money, largely aimed at the unemployed.
Certainly, the first part of his strategy has been accomplished. The Engineering Industry Training Board, for example, has been transformed into the Engineering Training Authority (Entra). Its duties largely involve regulation and the provision of training at three centres. There is now no compulsion on firms in this critical sector to devote any resources to training or to take any notice of Entra. Officials of the authority estimated last week that the number of apprentice-level trainees starting their courses this year would be 20-30 per cent down on last year.
At first, the Government's 'voluntarist' approach appeared to be succeeding. The speed with which the TECs were established may have been virtually without precedent, but more recently the signals have been less encouraging. The Group of Ten TEC chairs, known as G10, who represent the network and are overwhelmingly supporters of the Government, are becoming restless. The most difficult problem is the culture clash between civil servants and business people used to fast footwork. Some TEC board members also feel that dealing with the jobless, rather than those in employment, is a form of social work for which they are not particularly suited. Further, they believe that the pounds 853m spent on Youth Training and pounds 807m on Employment Training for the long-term unemployed leaves little scope for other initiatives.
Although Mrs Shephard promised them greater flexibility at the annual conference of TECs in Birmingham last week, some board members are sceptical. Many would prefer to concentrate on promoting training among employers and the employed.
While it has been careful to avoid public clashes with ministers, a confidential submission by G10 to Mrs Shephard after the election could not have been more strongly worded. Referring to links with the Government, the memo says: 'Unless there is a major reform of relationships without delay, the thousand businessmen (on TEC boards) will simply walk away. There will be no mass protest, but the effectiveness will drain away into the sand of inertia.'
G10 said the whole TEC structure was 'poised on a knife-edge'. The relationship between the Government and TEC boards was in jeopardy and it spoke of 'confusion and exasperation' at the proliferation of initiatives from the Treasury, Home Office and the Departments of Employment, Education and Science and Trade and Industry. Despite the diplomatic platitudes uttered by some TEC leaders in Birmingham, a further reduction in budgets will do nothing to boost morale.
Concern has also been expressed at the most senior levels in Whitehall. In an internal memorandum recently, Sir Geoffrey Holland, permanent secretary at the Department of Employment, ventured that the whole TEC system was 'fragile' and although morale was not beyond repair, enthusiasm seemed to have been dented. Sir Geoffrey indicated that the quality of some TEC boards left a lot to be desired. He said that greater effort was needed by TECs to reward companies with a proven commitment to training. He also envisaged considerable difficulty in meeting ambitious national training targets, to which the Government only recently has attached its imprimatur.
So while the reliance by previous governments on the Manpower Services Commission and statutory training levies failed to bring about the much-needed revolution in training and was replaced, the more recent reliance on 'voluntarism' seems to have performed little better and, in some senses, worse.
Yet ministers continue to claim that their policies are succeeding. They point out that the offical Labour Force Survey published this spring shows the number of adults receiving job-related training is 75 per cent higher than it was in spring 1984. In fact, it has risen from only 9 per cent to 15 per cent.
They fail to say that the total for 1991 is 5 per cent below that for 1990 and that there has been little improvement since 1986-87. The Government also points to the CBI's quarterly industrial trends survey and the Department of Employment's Skill Needs in Britain 1991 research. Both, however, deal with future plans, rather than numbers currently in training.
Clearly, all this has profound implications for Britain's capacity to profit from a recovery. It could also result in something the Government seems to fear most of all. In a relatively small pool of skilled labour, companies will need to offer high wages. Bigger pay packets mean higher inflation.
The Government has set its ideological face against the kind of regime envisaged by the Labour Party election manifesto, in which companies that did not train their workers were effectively made to pay a tax on their pay bill. Even a tax break for those who invest in their employees seems to be politically unacceptable.
Perhaps Mrs Shephard might be prepared to look again at the suggestion of Sir Bryan Nicholson, chairman of the Post Office and a leading light at the CBI. He would like ministers to give industry a two-year deadline to get its act together over training 16- to 19-year-olds. If business fails to act, then it would become unlawful to employ a young person without offering training.
At least that would address Mrs Shephard's concern over the fate of school-leavers and send a signal to industry that the Government is serious about the need for a 'training revolution'.
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