Oral evidence: The Productivity Plan, HC 466-iiTuesday 20 October 2015

Oral evidence, 20 October 2015.

Witnesses

Peter Horrocks, Vice‑Chancellor, The Open University, Mike Dawe, Group Board Member, City and Guilds, Harvey Young, Chairman, National Consortium of Colleges and Providers, and Professor Dave Phoenix OBE, Chair, Million+ and Vice‑Chancellor, London South Bank University, gave evidence.

Chair

Good morning, gentlemen. Welcome to our Committee. Could I begin by asking you to introduce yourselves and say where you are from?

Peter Horrocks

Peter Horrocks. I am Vice‑Chancellor of the Open University.

Mike Dawe

I am Mike Dawe, Managing Director of City and Guilds International and a Group Board member.

Harvey Young

I am Harvey Young. I am the Chairman of the National Consortium of Colleges and Providers.

Professor Phoenix

Dave Phoenix. I am Vice‑Chancellor of London South Bank University, but also Chair of Million+, representing around 20 modern universities.

Chair

We on the Committee are very keen to add value and we want the Government to add value as well. Do you think the Government’s Productivity Plan adds value and will achieve an improvement in productivity?

Peter Horrocks

It is clearly important to have a focus on productivity with the new Government putting forward a series of proposals and, in relation to the area that I am sure this group of witnesses will be most interested in, the focus on a highly skilled workforce absolutely needs to be central. We heard that from the previous witnesses from business. The question for us is whether that focus is appropriately achieved and, in particular, the references that we just heard, the importance of quality in relation to apprenticeships, high‑level skills, whether there is sufficient focus on that and whether there is sufficient support for the modes of study that can most achieve rapid improvements in productivity. The Open University would like to draw attention to the significant fall in part‑time study in recent years, and the importance of part‑time study as being a really effective and rapid way of being able to influence productivity in the workplace amongst employees who are focused on improving themselves, the hardworking people who need support through policy to be able to influence immediate improvements in productivity, and that is where we think there is a particular lack within the plan as presented.

Mike Dawe

Answer: yes, we do. A few things to add: while having apprenticeships as the epicentre of building a skills policy is good, it is not enough in its own right. In particular, we are interested in careers advice and guidance, broadening opportunities for vocational starts to various other audiences. Something around adult learning as well—so improving the chances for people in adult learning to move their careers forward, particularly good examples are in leadership and management. Most significantly, though, it is the long‑term stability of policy. We did some research about a year ago now when we were looking at the impact of policy changes on our company and our industry. What we were looking for was the difference between good policy and bad policy, but in the end the most important thing that we came up with was the importance of longevity and the ability to be able to follow policy over a period of time. With those additions, we would say a pretty firm “yes”, this is a strong addition to the productivity debate.

Harvey Young

I would echo what Mike said. From our point of view, the Productivity Plan fails to mention how crucial basic skills are to increasing productivity and this is despite the fact that English and Maths is a stated Government priority. Supporting adults with their literacy and numeracy is absolutely critical to improving productivity. If I can give you, by way of context, an example, one of our members was recently contacted by a large distribution company that was suffering from a downturn in business and profitability, high staff turnover and low staff morale. They worked out that this was because the staff were lacking in literacy and numeracy skills, not just in the warehouse and the distribution side of the business where they suspected it, but right throughout their offices as well, which was a bit of a surprise to them. We went into the business and delivered a 12‑week programme in the workplace around the needs of the business, which has had a transformative effect. They have seen real improvements in efficiency and productivity, so much so that they have asked us to continue with an ongoing programme of support for their staff. Right across the country, businesses are being held back by poor basic skills. I know the CBI did some research, which said that 50%‑plus of employees currently demonstrate a noticeable weakness in literacy and numeracy. To try to put that into context, crudely—I appreciate constituency sizes vary—if I divide that number by the number of constituencies there are, it means that each member of the Committee has 23,000 working adults in his or her constituency who require English and Maths support. We really feel that the Productivity Plan has to reflect the importance of this.

Professor Phoenix

I would echo a range of things colleagues have said. The Productivity Plan is an excellent start. It has been long overdue that a similar plan or something along this vein has been assembled. I would make two points, though. The first is that, from an educational perspective, it falls into the trap of compartmentalising education into different categories, which reflects some of the comments that have come earlier, rather than looking at how education can be joined up in a more holistic manner and recognising the contributions different parts make. The second point is, if I was giving feedback if it was a student essay, I would say there could be more research done to understand the context of what already exists. For example, there is a great deal of focus on new and exciting things that could be done, but there is a great deal of good activity in the sector in the colleges and universities already. For example, in sponsored education, there are currently around 10% of students who are already sponsored; about 100,000, or 5%, sponsored by business on existing programmes of study. That market could be significantly enhanced. It does not necessarily just need lots of new additions; we need to invest also in some of the strands that exist. It is an excellent start and a good step forward.

Chair

Peter, I was interested in the comments that you made to us in your opening remarks about modes of study—and I am paraphrasing here—that can best achieve the most optimum improvements in productivity. Dave, I may be at risk of compartmentalising here, but if you have a pound of public money, in order to get the biggest bang for your buck in improving productivity, in your opinion, where should you put that pound?

Professor Phoenix

That is a good question. If I was focusing specifically on productivity, one of the key areas to look at would be part‑time. We know that a vast majority of the people we need for future work are already in work, so a lot of the questions are around not just bringing new people into the marketplace but how we are re‑skilling people in the marketplace for new jobs that will exist in the future. If you look at that category of students, numbers generally have dropped, and that reflects two things. First, for those who wish to enter the sector on part‑time study, maybe who are not currently in work or do not have access to funds, the funding regime is not as supportive as for full‑time. You cannot, for example, access the maintenance loans and other support that full‑time students can access, and the repayment regime for part‑time students is more severe than for full‑time students; in many cases, you start paying back, if you are in work, before you have even completed the course. There is a need to look at how you can support people using the grant funding. The other aspect of part‑time funding, as I said, is if you look at London South Bank, for example, about one‑third of our students are sponsored. Of that number, around about half—about 3,500—are paid for by employers or sponsors. One of the challenges we often have is trying to encourage SMEs to engage, because they do not have the scale of workforce and the resource to necessarily free up that capacity. Interestingly, of that 3,500 students who are doing part‑time study with us, there are about 1,000 employers who support those and the vast majority are SMEs with one or two students. What they tell me would make the biggest difference to them would be getting, for example, some kind of credit, some kind of compensation or some kind of support to help them free up their staff for that training. So looking at the support to get people into part‑time and looking at support for SMEs and micro businesses to release staff to part‑time study would be helpful.

Chair

This is a very important point. The Committee took evidence last week from a couple of entrepreneurs, and we probed on how relevant the Productivity Plan was to them. They were saying often it was a day‑to‑day thing in order to keep your head above the water. What is the answer to that issue to help improve productivity? Can I just push you further, if I may, Dave? Some sort of voucher or tax credit scheme in order to free up, but how would that work in practice if you are running a business with, say, 10 employees? You need everybody with all hands to the pump. How does that help?

Professor Phoenix

It depends how small you go with the business. There are challenges from the business side. I was speaking to the CEO of Crofton Design last week. That business has about 50 people, so it is not a micro business but it is still reasonably small. They send and have sent their staff to us on a part‑time basis for a number of years. What they told me was the reason they do that is because, within engineering, they find that those students they are sending to us who are being educated during the period of work tend to stay with them for around seven to eight years, whereas when they have recruited people directly, post‑degree, who are already qualified, they have tended to stay for about two years. Although they are quite a small company, they have found that it is worth their investment in training to retain staff. Interestingly, if you go and speak to the students from that company, what they are saying is, for them, they get a better return because they are already in employment, so while they are studying they are getting a salary, which means that their lifetime gain is better. In addition, most of those are getting Chartered Engineer status by the time they are 24 or 25. If they do a degree first, they are not getting Chartered Engineer status until around 28. This area of sponsored education is really important. It is under‑appreciated, not just by Government but within the UK and there is more we can do within the university sector to help promote it. I think it needs more support from Government to also help promote it and to work with the SMEs and the micro businesses to find out how some form of tax credit or support system could function. Of the 100,000 students that I said were currently studying on sponsored education, the interesting thing is the vast majority of that 100,000 come through the Open University or eight modern universities, so you have a lot more capacity within the sector to expand that market.

Chair

Thank you for that. Harvey, may I return to that question of, if you had a pound, where you would spend it?

Harvey Young

I am absolutely going to spend it on basic skills, and I will explain why. The Productivity Plan is obviously about building something special for this country, and it is about taking us to a point in 2030 where we are world leaders. If you are going to build anything, the most important thing is to get the foundations right, and basic skills are the skills that underpin absolutely everything else that follows. If we do not get that right, we might as well be building on quicksand. In 2013, the OECD reported that we are currently ranked, out of the 24 most developed nations, 21st for numeracy and 22nd for literacy. This cannot be an acceptable state of affairs for our country and it certainly is not going to help us reach the productivity targets we have. As a very quick win, we should be looking to task ourselves to at least get into the top third of that. That may seem like an ambitious target, but it is no more ambitious than the target the Government have set for themselves in the Productivity Plan.

Mike Dawe

It is split between longer-term and shorter-term investment, so the answer probably changes according to your exact policy goals, but we are seeing that adult learning can get some pretty immediate gains. You have people who already understand the world of work, already understand their industry and are well connected. Keeping them up to date is an extremely good way of using cash, but we are also seeing a very good response to training, and an understanding that improving leadership and management cadre in our companies has a pretty immediate impact on productivity or the things that look a lot like productivity—the measures are quite hard to get underneath. Of course, in the longer term, you do need to be employing or taking on and engaging the next generation. Apprenticeships are great. They do include work on the basic skills, but alongside that they have more technical input. Apprenticeships have a double effect. They are not only looking after the long‑term productivity of our various industries but they are also dealing with youth unemployment, which is pretty poor at the moment. Going back to what I was saying, though, you cannot just spend money on apprenticeships. Apprenticeships are only going to get us a few percentage points improvement in the areas that we need of productivity and unemployment. We do need to broaden out access to the same variety of training and education so it is accessible in different ways, preferably also looking at younger people even than those who access apprenticeships, so people at 14 and 15 having access to more vocational content as a part of their schooling, so they feel more connected to the world of work and are more able to make choices when it comes time to decide which careers they want. I am afraid it is split and probably, over time, the pound would have to be spent proportionately according to the policy goal.

Peter Horrocks

I would like to take it into part‑time but also to distance-learning. However, I would say that that investment does not need to be a very costly one, because by using the loan book and removing some of the discriminations against certain modes of study that currently exist, by making sure that part‑timers, in particular, are able to be supported we know that they start paying back sooner. They are already earning, so they are often above the earnings threshold in relation to paying back their student loans. We understand that BIS officials have recently calculated the so‑called “RAB charge”—the repayment rate in relation to a comparison between full‑time and part‑time—and that part‑timers come out as being a more cost‑effective bet in terms of the use of the student loan book. That money will get paid back, so making loans available to people who have done previous degrees is a particularly cost‑effective and rapid way of being able to support people to do shorter courses. To the point about SMEs that cannot release people for very long, if institutional credits could be supported by the student loan book, by modules and courses provided by high‑quality HE providers, it would provide the very rapid skills intervention, for instance, in relation to the digital economy that we heard about from EE. As Dave said, making maintenance loans available and then removing discriminations, which are currently in the consultation, around postgraduate loans, where the over‑29s and distance-learners would not be able to access those loans. There is a series of discriminations against certain forms of study, which also disproportionately affects women, disabled students, and people from disadvantaged backgrounds, who are more inclined to come forward for part‑time study. By removing those discriminations there can be some highly cost‑effective and very rapid interventions in favour of productivity.

Peter Kyle

I want to talk in a bit more detail about the skills agenda, but I would also like to, after such a good introductory session, ask a couple of follow‑up questions. Mike, you talked about the importance of long‑term stability in policymaking. Are there any policies in recent years or further back that have been scrapped because of the need for innovations or new policies that you feel should still be in existence?

Mike Dawe

Yes. I have been working in City and Guilds for 18 years, so I have seen many things come and go and we were very supportive of a qualifications framework, which was highly unitised. It allowed people to access it in various ways. It was regulated slightly oddly but it worked. The changes in regulations have meant that many of the investments we have made over the last five years have either been scrapped or are now not expected to meet their return. I suppose one of the most dramatic ones I can remember of the relatively recent past was diplomas. It was a good idea in concept, but there were some problems with execution. Rather than deal with those they were entirely scrapped, and we had a very large investment in diplomas that we wholly lost, it was written off. We are a relatively small company in the part of the economy that we are talking about here, but we are now a smaller company than we could have been if that had carried on. We are more wary of investment than we might have been if we had seen that occur and if you multiply that across the entire sector, you do get a picture of an industry that perhaps has suffered from reverses and changes. I have to say it is in contrast to my own particular area. I look after our business overseas, so I have a more academic view of the UK environment and we use the learning from the UK. The quality of debate in the UK around education and learning is simply superb and we manage to export that, if not sometimes the learning itself—the training programmes themselves—and other countries are making use of our lessons. They are putting in place very long‑term investment plans. We work with Saudi Arabia, South Africa, China and India very significantly and you would recognise some of the policies that they are implementing, and there is every expectation that they will be able to create an environment that people will then invest into for 10 or 20 years. That is what we lack.

Peter Kyle

That is incredibly helpful. In fact, you have made a very powerful case about the impact of fast policy turnover in terms of productivity directly related to the Productivity Plan. Both you and Harvey, I believe, mentioned the need for higher‑level apprenticeships. When we had the Secretary of State here last week giving evidence, he talked quite a lot about his target of reaching three million apprenticeships, but he refused to talk about a target or even an aspiration for the number of higher‑level apprenticeships. All of you are invited to answer this. Harvey, I know you referenced the need for higher‑level apprenticeships, so you might want to kick off.

Harvey Young

Actually, it was not me.

Peter Kyle

Was it not? Sorry. It was you; okay, go ahead.

Professor Phoenix

What it comes back to as well is a lot of work that modern universities are doing around sponsored education working with business. They are already engaged quite heavily in a range of trailblazer programmes looking at degree‑level apprenticeships. There are two points to be made here. The first is—and inroads are starting to be made on this—the interface with what we call Level 3, which is the A‑Level range, and “Level 4”, which is first‑year degree, is reasonably arbitrary, to be honest. A lot of it has been developed over years based on the way the education system was set up. Look at the regulatory framework around that, so that institutions can be more creative around delivery of courses that combine Level 3, 4 and 5, which needs to be taken forward to try to enable us to deliver these qualifications more effectively.

Peter Kyle

Would you put a number on the number of Level 3 and 4 apprenticeships we should be aspiring to as a nation?

Professor Phoenix

I think the question to ask there is to go out and talk to different companies and see what the demand is, because with all these qualifications there has to be a demand‑led element; it should not all be pushed. There are sections currently of the plans that miss key areas of industry. For example, the creative industry, which is one of our fastest growing areas, gets very little coverage at all. Now, 70% of the workforce there has come through modern universities and a lot of that has been on part‑time study and traditional modes of study. As Peter said earlier, many of those people have come through, some on full‑time degrees, but many on a range of qualifications right the way up through to postgraduate, but they may often select to do perhaps a HNC first. They do a year’s qualification and then they come back and top that up to a HND, and then they come back and top that up to a degree and then a PG. This is the point I was making earlier about not trying to be too compartmentalist, but to try to look more holistically at the progression routes and the horizontal as well as vertical requirements. When we do that, we need to try to make sure that we are working with industry, with employers and professions to ask them and provide them what they need, but it does not necessarily always have to be badged just as an apprenticeship. The key thing is not to have volume measures, but to have measures of quality.

Peter Horrocks

I would suggest it is not about having a target for particular levels, but going with what the Government have said is the basis of the apprenticeship scheme, which is that it is employer‑determined. We heard earlier on from Mr Harris from Rolls‑Royce saying that there should not be a cap on how much should be spent on each apprenticeship. I think the role of Government is to ensure that there is the right level of quality, to make sure there are no abuses in relation to the new apprenticeship scheme and then to go with what employers are looking for. The evidence shows that employers, especially in the most rapidly advancing and potentially productive parts of the economy, are looking for higher‑level skills and I would suggest there should not be any impediment on that through caps; then the market and what the skills requirements are will determine the level to which the apprenticeships are offered.

Peter Kyle

In recent years, we have been going in the wrong direction with quality. We have been doing far too many very low‑quality apprenticeships and the number of high‑level ones has been falling.

Peter Horrocks

Yes, and there are two things about quality. Clearly there needs to be quality in relation to the basic skills that Harvey has been talking about. We must be clear about what we are saying. It is about quality in relation to making sure that standards are achieved at whatever level we are talking about, and then making sure that what employers need and what the workforce requires is the basis of how the money flows and to make sure that the providers, whether in formal education or through other providers, are providing what is needed.

Mike Dawe

Just to support the point, using the word “quality”, I think it is more appropriate to use it in terms of whether or not the apprenticeship, at whatever level, meets the standard. My only addition to it would be to say that already we have a target of 3 million apprenticeships. There is a danger that people chase those numbers and subvert quality. The danger is already real enough without imposing further targets around it. So, it is about quality in terms of meeting the standards, but also I would add on top of that it is probably a regulator or Government’s job to make sure that, to use a US term, those apprenticeships and qualifications are portable and stackable—in other words, that people can get an apprenticeship here and a job somewhere else and that they can progress.

Peter Kyle

The targets are just one tool for driving up numbers in something.

Mike Dawe

Absolutely. It is a good tool.

Peter Kyle

Exactly. My point is it is a good tool. If you are not going to set a target and you four are not willing to put a number on how many you want to—

Harvey Young

The target is in the wrong place, in my opinion. The target should not be so much about starts; it should be about what we are trying to achieve at the end. Everyone is focused on how many starts we put on in apprenticeships, but nobody is looking at what the success rates of the apprenticeship programme are. As we currently stand, one‑third of all starts are not successfully completed, and that is a quality issue. It is not so much about what level we are at. There is a big deal about we have to be prescriptive about what employers want and we have to make sure we are delivering good programmes at whatever level they are required, but we have to make sure we are focused on what our endgame is.

Peter Kyle

I think one thing we all agree on is we are not going to get numbers for Level 3 and 4 apprenticeships going up by accident. What do you think Government can do, concisely, to drive numbers up then, if they are not going to use a target?

Harvey Young

In the higher‑level apprenticeships it is going to be driven by employers. As Dave said earlier, the trailblazer programme is all about employers coming to the table and saying, “This is what we need for our industry.” That is the only thing that will drive it up—demand.

Professor Phoenix

Just to emphasise as well that apprenticeships done properly and with high quality are a good tool for us in terms of productivity, but they are not the only tool. In terms of higher education frameworks and other frameworks we have, for many employers, especially small ones that maybe do not have the capacity to oversee the work‑based elements, working with university and college providers to design tailored programmes in existing frameworks helps assure the quality, provides access to qualifications that are portable and builds in employer needs and work‑based experience. I think we need to broaden the focus in terms of the range of qualifications.

Peter Kyle

I have one specific question to Peter, about adult education. I know that the Open University has had a huge impact on throwing open higher education to mature students over the years. I know that numbers of mature students going to university across the board have been plummeting in recent years. Another trend in recent times has been the number of adults taking apprenticeships has been going up and it is an unknown fact, broadly, that now more than 50% of apprentices are over 24; they are not going to young people. I wonder if you could just give a little commentary about the impact of policy in recent years on access to education for mature students, adults and the role that apprenticeships are playing, whether it is positive or negative, in that.

Peter Horrocks

Thinking about it from a higher education point of view first, before coming to apprenticeships, clearly one of the things that has been a success and maybe one that people were surprised at was that there was not a significant deterioration in the number of younger people who are coming to higher education. However, for older people, they appear to have been put off by two things. One is the change in the rules, which meant that loans are not available for those who have already studied for a degree. That is something in terms of the re‑skilling and the productivity agenda that, if that could be changed more comprehensively than has been the case so far, would mean lots more people would be able to get that re‑skilling. The second change was the increase in tuition fees and that put older people off, because they appear to be significantly more debt-averse. In terms of cost‑effective ways of addressing that, one is being able to use the loan book more flexibly in the ways that I have suggested in relation to ELQ, in relation to shorter modules, in relation to postgraduate loans and in relation to maintenance loans. That is a comprehensive set of cost‑effective measures to be able to address the significant fall, which is a 55% fall in the number of people starting part‑time study between 2010-11 and now. That is the thing that most needs to be addressed. In relation to the apprenticeship agenda, there are some extra older students and learners who are taking apprenticeships. Making sure that the apprenticeship levy is directed in the way that we have been talking about to ensure that employers can direct it towards quality and, where they want to, towards higher‑level qualifications will help replace some of the lost employer sponsorship that Dave Phoenix from Million+ has been talking about.

Chair

I am very conscious to get other Members in, but I would ask you, if you could, to just answer this question on apprenticeships briefly. The Government have prioritised apprenticeships, but it has been clear from the panel that apprenticeships are not the full answer. What could the Government have done that would have improved productivity and be included in the Productivity Plan that could have achieved better outcomes rather than just the sole fixation on apprenticeships ?

Peter Horrocks

By having the range of funding policies to support the variety of modes that we are discussing. We now have a focus on conventional study largely for 18‑year‑olds through HE and a funding system that is focused on that and then a particular target around apprenticeships. There are many other requirements, especially for adult learners, for mature learners and for part‑time students and the range of funding policies needs to be more comprehensive and more joined-up to provide pathways between the different modes of study that we are talking about. In particular, the focus needs to be making sure that the funding regime through the student loan book is available to those students who are not the conventional students of university, but the people who are already in the workplace whose improvement in their skills will immediately feed through into improved productivity.

Chair

I am keen to move on, but if you want to come back to that, please do so.

Richard Fuller

In the Productivity Plan we talk about the importance of exports and, in particular, we say we need them in the service sector and to developing countries. You are in the service sector. What do you think you can contribute to exports and how can the Government make it easier for you to do so?

Mike Dawe

There are quite a few UK companies investing overseas. They are trying to find skilled labour overseas and, in fact, we work with several organisations, from Tesco to BAE Systems, as they try to build up their skilled labour in other parts of the world. The way in which we design our qualifications today is centred on the UK, and I do not think gives enough weight to the importance of those qualifications overseas. I would broaden that out beyond just companies trying to invest overseas and to find markets overseas. It also includes organisations that are trying to emulate or to join the global labour market and see the United Kingdom as an example of an education system that can allow them to do that. Again, an improved approach to the way in which we regulate our qualifications in particular, but there are other things, would help us to export our expertise.

Richard Fuller

Is there any particular measure that you would like to see?

Mike Dawe

Yes. It sounds awfully detailed, but it has a profound effect. The way in which you get a qualification onto the UK framework can be the first point at which you get a qualification that has validity overseas. The way in which we get, I suppose, our validity is, first, we understand what an employer needs, then we get our UK home country accreditation and then, with those two things, you can bulldoze your way through most of the regulatory systems of other parts of the world we try to work in. Without help in the second step, which is around getting that regulation around qualification, it is hard for us to export what we do and it is hard for us to help organisations like BAE Systems and Tesco to export what they do.

Professor Phoenix

When people talk about exports, by comparison, people often do think about things exported, but in fact education is one of our biggest exports, based on also the number of students we attract. Clearly, I could not miss the opportunity to mention the fact that we are still incredibly well regarded overseas in terms of UK higher education. One of the things we do need to look at is the current approach in terms of the way we are publicising UK higher education and whether we are open and welcoming, and the visa regime as to whether or not that is forming a barrier to those exports. To give a figure, you have roughly about £10 billion a year coming in through overseas exports to this country. It is a very significant export market in addition to the human capital enhancement.

Richard Fuller

Do you think we should take students out of the immigration targets?

Professor Phoenix

That has certainly already been recommended by at least two political parties and, in the case of the third, there are a lot of people engaged.

Richard Fuller

I am asking you, not political parties. What do you think?

Professor Phoenix

I would say yes. I do not see the logic in not doing that.

Richard Fuller

Another area that has been talked about in the Productivity Plan is management and leadership. What contribution can you make to enhancing the skillsets of management and leadership, or do you think it is all fine?

Peter Horrocks

It is a key priority. It is particularly relevant to people who already have degrees but who want to add leadership skills and who want to add new forms in relation to the digital economy as well. Digital transformation and the ability to be able to use social media and big data are all new things that have come along since people perhaps did a different kind of qualification 15 or 20 years ago. To be able to get the Student Loans Company’s support to be able to either do a further degree or to do the shorter courses that are the kinds of things that support executive education, absolutely to support the leadership skills that you are talking about—there is a huge unmet demand for that. However, the cost of courses for people who are already in work, who have mortgages and families to support, is high. There were huge numbers of people who used to come to the Open University to get exactly that kind of upskilling five to 10 years ago and that market has been severely cut back because the cost is higher, but, crucially, the loan support is not there. These are people who are prepared to invest in themselves if the Government can stand as guarantor and then they will pay back rapidly, because they will get improvements in their earnings. You are right to focus on that. That is a key area where we believe that we could make a measurable difference quite rapidly.

Mike Dawe

I do not have much to add to that. I was very wary of the question about where you would spend your pound. I think leadership and management is probably where you would get some of your fastest returns, but I was wary of that because of course you would fall off a cliff shortly afterwards. You do need to be looking into the long‑term and apprenticeships.

Harvey Young

I would say, again, it is equally as important that we make sure that our management have the right skills. Certainly the research has shown that managers themselves do not have the right basic skills and therefore are unable to recognise the problem in their staff, so for a lot of employers the English and Maths issue is a hidden problem.

Professor Phoenix

I have nothing to add.

Chris White

In terms of the Productivity Plan, I will just ask you a bit of a topical question. I was wondering what you thought of Policy Exchange’s report this week, seeing as HE and FE are both represented on the panel. Their recommendation or suggestion is that, with the Government grant, something in the region of £500 million should be shifted from HE to FE, which might address some of our skills shortage in terms of professional and technical qualifications.

Professor Phoenix

I read the report with interest. To be honest, it was a little disappointing, for two reasons. First, I think the methodology was flawed. If you look at the assumptions it was making about the money within the sector, it appears to have looked at not the cash reserves of universities but the total asset base. To realise that, you would need to get all the universities to sell everything they own in terms of buildings, equipment, etc, and realise the return that is in the account. Therefore, I think there is a flaw in the methodology in terms of the accounting. The second is, as I said at the outset, if we are really going to address not just the productivity needs but build aspiration and provide opportunity for the totality of the population, which is an essential factor for productivity, we have to realise the importance of colleges, schools and universities. It is not the answer to say, “Let’s take even more money from this group or that group.” Colleges need some investment. Universities also need some investment. It is not moving from one to the other.

Harvey Young

Regardless of the figures involved—and I think Professor Alison Wolf said this—FE is certainly the poor relation in terms of funding versus HE, but FE is the sector that is at the coalface with the existing workforce, more than any of the other sectors. If we do not support FE properly, we are missing a real trick in how we are going to support our existing workforce. It is the existing workforce that is going to drive the Productivity Plan for the foreseeable future.

Mike Dawe

We need good universities; we have good universities. It is a mistake to have dropped the funding in adult education, which is more linked to the FE sector. I wold also observe, from the work we do with other countries, they benefit hugely from bringing people into the world of learning and work much earlier than higher education. As long as you make sure the qualifications gained early are stackable—that they can progress—then you gain some very early benefits, so perhaps I would agree that the weighting is too far to HE at the moment.

Peter Horrocks

I would focus on a recommendation in the Policy Exchange report that is not about moving the money around, but is around a lifetime learning allowance and that focus on the importance of mature learners and the ability of people to be able to access appropriate funding. This is something that parts of the university sector, especially in relation to part‑time, and the FE colleges share, which is that the Student Loans Company rules and the policy decisions in relation to those are very focused on conventional 18‑year‑olds’ study. Being able to use that funding more flexibly in relation to both improving productivity and those who are in a position to be able to pay back those loans more rapidly than young leaners is a constructive focus on something that is potentially of benefit to both HE and FE.

Amanda Solloway

Going back to leadership and management, because obviously that is one of the really crucial things—and I am thinking in terms of possibly SMEs, but it could be slightly broader than that—my first question is: can you learn leadership and management skills in higher education? Given that that would enhance somebody’s ability to perform, how do you get over the time and the financial constraints of somebody who perhaps wants to improve their leadership and management and yet cannot leave their business in order to do that?

Peter Horrocks

Flexible modes of study are absolutely what are required for that kind of situation, both part‑time and also an element of distance-learning, which obviously the Open University is best known for, but many other universities and other institutions are now using. It is about making sure that the way that the learning is delivered is flexible and appropriate, not all of it done at distance, but with face‑to‑face tutorials, weekends and evening. This is exactly why these types of learners are so important to support. They are the kind of people who are prepared to make that commitment into working alongside their busy working lives and it is exactly why focusing on those sorts of people and policies that can support them will have, we believe, a disproportionate and immediate effect in terms of productivity improvements.

Mike Dawe

The only thing I would add to that, because I wholly agree with that, is that supervisory management is something that people come across quite early in their careers, and we do very little in our current education system to help people at that stage, so earlier interventions or earlier access to some of the lower‑level leadership and management disciplines would be helpful. Again, I am afraid I have seen that used very usefully in other parts of the world. In fact, it is quite surprising how little it appears in standard education in this country.

Harvey Young

I would echo both of those things. For years, further education has been working in the workplace delivering programmes around the needs of people’s businesses. It is absolutely about different modes of study and it is about not being too prescriptive about the journey, if not the destination.

Professor Phoenix

I have nothing to add.

Chair

Gentlemen, thank you very much for your time. We really appreciate it. Thank you again. Examination of Witnesses

Witnesses

Dr Ruth McKernan CBE, Chief Executive, Innovate UK, Dick Elsy, Chief Executive Officer, High Value Manufacturing Catapult, David Harbourne, Acting Chief Executive Officer, Edge Foundation, and Professor Richard Brook OBE, President, Association for Innovation, Research and Technology Organisations, gave evidence.

Chair

I will make a start early, because there is an awful lot to get through and I am really keen to hear your views. It would be useful to the Committee if you could just introduce yourselves and give us an idea of the institutions that you come from.

Dr McKernan

Ruth McKernan, Chief Executive of Innovate UK.

Dick Elsy

Dick Elsy, Chief Exec of the UK’s High Value Manufacturing Catapult.

David Harbourne

David Harbourne, Acting Chief Executive of the Edge Foundation.

Professor Brook

Richard Brook. I am President of AIRTO, which is the Association for Innovation, Research and Technology Organisations.

Chair

May I begin by asking all of you why we invest so little in research, development and innovation as a proportion of our economy in comparison with other countries?

Dr McKernan

I am not sure I am the right person to answer that question. I believe we invest well in research. Our researchers punch above weight; they do very well globally. Innovate UK helps translate that research into business. If we want to do more in terms of business and growing the economy, investing more would be an obvious answer. I do not know if I can explain why.

Chair

The reason I mention this is because the EU average is around 2.1% or 2.2%. We are around 1.6%. Are you suggesting—and maybe others can comment on this—that we are very efficient, and that when we invest we get more out of it and, therefore, that crude comparison is irrelevant because we are really successful?

Dr McKernan

We are successful, but there is a lot more behind the data than that, and others have commented on it and will comment on it. We need to measure impact but we also need to look at what we put in.

Dick Elsy

That very lean investment has been very well targeted in the pure research in our academic institutions, and the figures speak for themselves. Bang for buck, we have some of the best output in the world in terms of technological research. The thing we have been not good at is translating that research into hard manufacturing value-add, and that is where there has been a shortfall of investment. It has been plugged now by investment in the Catapult programme and, as our session will continue, I can give you plenty of evidence of that targeted investment now really beginning to show through in productivity and added value in manufacturing.

David Harbourne

This is not my current area of expertise, so I will keep my comment on this very brief, and it is to do with short‑termism in this economy. That afflicts both small and large businesses, which are expected to achieve a very rapid return from any new investment; that inhibits anything that takes long‑term investment.

Professor Brook

What we do, we do well and efficiently and we get a good return, but we are not doing enough of it, and that has to do with risk aversion. If we come back to the comment about capital markets and finance, finance does not have sufficient appetite for the risk that is involved to take our investment up to the benchmark level that you talked about. We can ask ourselves why that is. Whether you are a finance director of a company or a venture capitalist—and I have some background in venture capital—you are investing in people. You want to invest in people in whom you have confidence, and there is a relative shortage of people you want to invest in, in terms of their leadership qualities, skills, experience, and communication ability, and that comes back to the problem with basic skills. We need to work out what we have to do to induce capital to take more risk and to be more patient in terms of getting its return. From my experience in venture capital, investors need to get their money out at some point in the growth cycle of a company and, in doing that, it can be disruptive, because you need to bring in new investors. There are risks for the early investors, who get diluted heavily, and that can be a problem. Also, the management of the company may feel they are going to lose control of their future and I think that stunts ambition. So there is a whole series of factors to do with the capital markets that are holding back the UK’s ability to invest more in R and D.

Chair

Richard, I will stay with you but I would like comments from everybody. Given the weaknesses that we have identified, or certainly the possibility for more potential, does the Government’s Productivity Plan address that sufficiently?

Professor Brook

“No” is the direct answer. The plan is a set of measures that encourages individual companies to do what they do better and more efficiently. It is missing out on the more radical opportunities for innovation. How would we expand those inherently high productivity sectors as a proportion of the economy? How do we get supply chains to do things they are not doing, or cannot or will not do, for various reasons and how do we stimulate that to happen? It is a matter of coming back to access to finance and getting the availability of capital better matched to their needs.

David Harbourne

Within that, loan funding, in particular. There has been heavy emphasis on venture capital, and rightly so—we have all seen a growth in that, for small businesses and start‑ups, through angels, for example—but there is an established preference, on the part of many people who are developing new ideas and businesses, for loans, and there we keep coming up against the same old sticking point of where the long‑term loans are that you would find in Germany but that are not as prevalent in this country by any means.

Dick Elsy

The plan is a well‑intentioned framework. It falls short of being specific and when I say that, it clearly makes a big play on the importance of innovation. The reality born out of the plan is that we are having conversations about reductions in innovation spend through the Comprehensive Spending Review and yet, yesterday, John Cridland at the CBI was calling for doubling of Innovate’s expenditure. There is a gap between the intentions of the plan and the reality, so being specific about quantum and timing is very important. Building on the investment and patient capital bit, it is very difficult to intervene in capital markets, and what Government can do is support the risk‑taking in that space, because I do have a view that our institutional investors in the UK lack the patience and the technical literacy to invest in the mid‑ground space—the so‑called “valley of death” that was discussed before. However, instruments like the High Value Manufacturing Catapult can help them understand that risk and help the industrial client reduce the risk of the investment to make it a safer bet to invest in. We are working with the four big banks in the UK, in partnership, to address that issue, to improve the lending book for them—they want safer lending—and help the industrial players who are using our facility to take the risk out of that investment.

Dr McKernan

I would say that the Productivity Plan is very rich in lots of different aspects, which is very helpful for Innovate UK. We can build on a lot of that. It gives us a lot of direction.

Chair

Is it too rich? Does it give you indigestion?

Dr McKernan

No, not at all. The bit that I anticipated and was there was around products and growing products, but also the infrastructure aspect to it, which is very important. As you know, we have 10 Catapult centres that we fund and support, and Dick Elsy is responsible for the High Value Manufacturing Catapult, but some of our Catapult centres work on infrastructure, harder to quantify in terms of direct return on investment, but very important, as indicated in the Productivity Plan. Just a quick example: the Future Cities Catapult is working very closely with Manchester on how to align their planning information with their sewage information, their electricity supply, and the data that they will gather about where to put schools and where to put services in the future. This is a very complex piece of work. They are doing something very similar for Dubai, although of course Dubai are paying a lot more for it. That will help the infrastructure and raise the productivity in the area, so I think it is important to understand productivity is not just for an individual company and for the products they make, but also the opportunity to improve productivity across the piece in the UK. I was very pleased to see that.

Amanda Solloway

Following on from your point, Richard, and looking at investment in skills, we hear a lot about the skills mismatch, and I wonder if we have got the right people in the right jobs and to what extent you feel it should be the Government’s role to ensure this or whether it should be left to market forces.

Professor Brook

In my time looking at investment propositions, I have been very disappointed at the number that come forward with poor English, bad grammar, spelling mistakes and then an inability to communicate; that erodes confidence. There is an issue here with basic skills, and a serious job to be done in bringing basic skills up to scratch and that is something that the Government and the education system need to look at. In terms of what we do with the basic product, if you like, I think that apprenticeships for a variety of roles need to be carried out in companies, so that is where I prefer to see people learn the job. It is where I learnt the job. I think my whole career has been an apprenticeship in one way, shape or form, because I have been exposed to so many different circumstances and environments for doing business. I will make another comment: I did my postgraduate degree in the evenings and it was one of the best things I ever did, but it is very hard to find opportunities these days for people to go to night school, as it used to be, and that is a shame. However, industry does need to take on the task of giving the relevant experience to the good people who come out of the education system and give them a variety of experience in the form of an apprenticeship and progression into the kind of roles they want them to fulfil.

David Harbourne

The Government have to set the scene, particularly where people are entering the labour market for the first time and, of course, regardless of the nature of the decisions they take on secondary education, further education, apprenticeships, higher education, that ends up having an impact on the labour market. The key difficulty that we would see has been successive Governments supporting an expansion of higher education without due regard to the nature of the higher education, so that amongst young graduates now we have, according to the Office for National Statistics, 44% of recent graduates in non‑graduate employment. At the same time, we are seeing a recovery in the economy and growing shortages of skills in those areas that were touched on in an earlier session, particularly the area around Levels 4 and 5, so sub‑degree programmes. It is the question of emphasis on where the Government believe that public money should be placed or put at risk. Should it be more into further education as opposed to higher education in the next five years? I believe the answer is yes. Beyond that, I do agree that the labour market itself has a lot more that it needs to do, but my experience over a long career or working with, for example, the hotel and catering sector, is that you cannot take something that works, let us say in engineering—you had Rolls‑Royce here earlier—and say, “If it works for Rolls‑Royce, surely it would work for hotel and catering.” It does not, and we need this more nuanced approach to how we understand why it is that some employers invest substantially of their own resources whilst others do not.

Dick Elsy

We are taking a very keen interest in this space. The High Value Manufacturing Catapult develops the necessary technology and our mission is to translate that technology into industry, so inevitably it involves a degree of training. Although it was not in our remit, we are very focused on developing the technicians to go with the technology. We have identified that is a market failure in the UK, and so, with the EEF, we have developed a proposition for the National College for Advanced Manufacturing, which is principally focusing on advanced apprenticeships where there is a dreadful paucity of capability in the UK, and we are facing a looming crisis: we are developing all these great technologies but we need the people to go with it. Therefore, using the national college programme, we are attempting to fill that gap. We had Rolls‑Royce in earlier on, and those apprentices who have the appetite to go through into higher education and get a degree are some of the best qualified and rounded individuals. They are very, very valuable people to the UK economy. This focus on apprenticeships, if it is properly targeted, will lead to a rich seam of talent for the future for the industries I represent.

Dr McKernan

My response would be to say that we are moving into a future that is all about knowledge and technology base. It is a very different type of economy and we need to have the skills to match that. In a recent meeting I was at with the Automotive Council, they are 40,000 engineers light. Science, Technology, Engineering and Maths is a gap in the UK. We do not have enough people who can do really clever mathematical modelling—so‑called “machine learning”. That is going to be critical in the future. If we want to prepare ourselves for success, it is really important that we up the knowledge base of those types of STEM subjects in the UK, however we can do that.

Amanda Solloway

I heard earlier about sponsorship. I wonder if there are some other different schemes that we should be doing. Obviously, there are apprenticeships that are working, as you say, very well, but I wonder if there is something else you might recommend that we could do other than apprenticeships. Is there something you have come across?

Dr McKernan

A lot of learning comes from just trying to do the job. We give funds to small businesses, and in the data that we gather afterwards, 80% of them say that they improved their skills by trying to start and run their own business. So there is an element of just doing it—you do not know what you need to know until you are in that position—and then getting very quick and readily available help, either through peer companies, through Catapults, where we have a lot of experience or through more standardised learning. All of those are good.

Dick Elsy

Anything that bring educators and industry together, so whether it is the apprenticeships we talked about, or bringing academic institutions together, like we do, with industry, and things like the Knowledge Transfer Partnership, which places capable graduates and PhDs in industry to help them with thorny issues, and that has been incredibly successful. Any initiative to stimulate that is worthwhile.

David Harbourne

We should also always learn from what works, and that applies both here in England and also worldwide. We have a tremendous tendency in this country to look for the next new initiative and to consider that if anything that was pre‑existing is not working 100% efficiently or 100% well, there must be something deeply wrong with it. If we started with the more Canadian approach of appreciative inquiry and found out what was working well and why it was working well, you could do more of it. To me, that is the fundamental point about further education as a sector: that there is a great deal that works well in further education, but we have started from the opposite end of the spectrum and said, “There are clearly parts of it that are not working well; therefore the whole system must change.” No. Let us start by finding out what works and then do a bit more of it.

Professor Brook

I would say that the Catapults and similar organisations—and I spent part of my career in one—are a tremendously good environment in which people can learn about the different aspects of science, technology and business. In a Catapult, for example, you are exposed to the academic community; you get to learn how academics think, talk, and what is important to them. You get to learn about business and what is important to your commercial clients and what their priorities are. You get to talk to financiers, because if you are looking at bringing on new companies, you do talk to the investors, venture capitalists, banks and so forth. You also get to talk to Government and public funds, and find out what you can and cannot do with public sector support. They are a tremendously good breeding ground for people with multidisciplinary skills and the ability to communicate with different communities who all have to come together in order to get an innovation embedded in the economy.

Amanda Solloway

I notice in your submission you talked about the polytechnic pathway. Do you think that would improve productivity?

David Harbourne

That was me. Yes, I absolutely do. I came away from a visit to Switzerland quite convinced of it and then discovered that a book had been written on the very same subject last year—this one here by François Garçon, Formation: l’autre miracle Suisse, which means “Training: the other Swiss miracle”.

Amanda Solloway

Do they have that in English?

David Harbourne

They do not, unfortunately. It is a good job I can just about read French. The pathway they introduced in the late‑1990s—and the 1990s was when we transferred polytechnics into the university sector—was that they were, for all intents and purposes, inventing the polytechnic sector. They believed that, in order to compete in an international knowledge economy, they needed to improve the whole of the skills base throughout the working population, but that the way to do that would be to build on the established strength of an apprenticeship programme in order to provide paths from an apprenticeship to degree‑level qualifications, professional qualifications and then postgraduate qualifications. When I went to see that at first hand and subsequently was able to read about it, I came away absolutely convinced that what we have been lacking in this country for some time is a very clear, coherent polytechnic path that would appeal to employers, to young people, people partway through their careers and to parents in a way that the current fragmented system perhaps does not. It seems too confusing at the moment compared with universities. If we were able to recreate a polytechnic path, it would make a substantial difference to productivity and skills.

Amanda Solloway

Following on from that, can I ask all of you whether you think the Productivity Plan will impact on skills?

Dr McKernan

Yes, I think it can do. Yes, I do.

Dick Elsy

It provides a framework for stimulus. I welcome the target to get 3 million apprenticeships in process. A lot depends on the physical detail of that. There are apprenticeships and there are apprenticeships, and I described to you earlier on, that rich seam of very high quality, high value ones, that we need more of.

David Harbourne

I would echo that. I agree that as long as we get the right, high‑quality apprenticeships the Productivity Plan will work. I think the balance between further and higher education is incorrect, though, and the Productivity Plan would have been better if there was more of a focus on a vision for further education.

Professor Brook

It depends how well the plan is implemented. Personally, I think it is a set of measures. I would like to have seen some sort of roadmap as to how we get from here to there, how these measures are connected together and what the interdependencies are. Then I think we would get a better idea of whether it is working or not. I worry that it is a plan with a set of measures that, once they have been published, “Off you go and do it.”

Amanda Solloway

Moving on slightly in terms of research and development, we hear a lot about money that is needed. I wonder if that is the only thing, though. I wonder if there is something else that we need to be doing in line with the Productivity Plan. Richard, let me come to you first.

Professor Brook

Innovation, which I think leads to productivity, because that is really the driver, largely comes about when you bring different communities together and get them to address a common problem. You have to have a carrot to get people to come together in that way, and the money is important because it does attract people to come and work together. However, you do need more than money, and you need people with the right skillsets and the right attitude and the right ambition to want to go and do something. I will say it again: the Catapults are a good breeding ground for such individuals. People can go there and they can gain the experience of all the different things you need to do in order to take an innovation and lead it through into commercialisation.

David Harbourne

I would say brokerage, because where I look at systems where there is a strong emphasis on growing apprenticeships, for example, one of the ingredients has been fair and honest brokerage that help employers to understand the training landscape, introduce them to people who wish to be apprentices, introduce them to people who can provide their training and make those dots join up. Brokerage works significantly, for example, in South Carolina, which is often mooted as a beacon of apprenticeships in the United States, though starting from a low base. Similarly in New Zealand, the re‑booting of apprenticeships there is based vary largely on not just the funding that is available but the brokerage. Certainly in a past life, I have seen that when I worked in the world of agriculture, where brokerage by what was then called the Agricultural Development and Advisory Service enabled the farming community to get honest and fair access to innovation, technology and new developments.

Dick Elsy

I very much agree with Richard on the convening power of the Catapults. The principal model is getting people together to collaborate, and you are absolutely right that there is a need for a carrot to encourage that. I am a firm believer if put bright‑minded, technical people together with a common objective, they will find a solution, provided it is a light‑touch environment devoid of politics and heavy‑handed management. They will naturally collaborate, and that is a key principle of the Catapult. One of the reasons we allow them to collaborate and get together and develop new intellectual property, which they own, is that we do get part of our funding from Government, which means that we do not need to own the intellectual property; it is for the businesses working for us. That is a critical element, because if we did not have the Government funding, we would be a pure play commercial model, our tentacles would go around that intellectual property, it would become a commercial proposition and it would freeze the whole process up. The other point I would like to make, because you asked whether we need money to do it, is the convening power of the industry forums. We have mentioned the Aerospace Growth Partnership and Automotive Council earlier today. I see the captains of industry in the UK getting together to tackle national issues, whether they are legislation issues or, indeed, things like innovation; bringing new products and technology to market for the common interest in the UK. I see great strength in those forums and would like to see continued partnership with Government, particularly with the Business, Innovation and Skills Department, keeping those links with those critically important forums. They really do work well.

Professor Brook

If I may add, the independence of the Catapults is important as well, is it not, in that businesses will come together in a neutral forum, and this brokerage can take place in an independent forum, which is not dominated by any particular commercial interest?

Dick Elsy

Yes, we are entirely sector‑agnostic.

Professor Brook

That is very important, and that independence is underpinned by your legal status and, indeed, that element of public sector support, which maintains and, if you like, guarantees that independence.

Dr McKernan

I would add a different element to that. Of course, the Catapults were spawned by Innovate UK and we fund them, but I would also add that it is really important that we fund and grow small businesses. We can train lots of people, but if they do not have growing businesses to go into, we have a challenge. For me, we need to make sure we do everything we can to make small businesses investable, because it is the medium‑sized businesses that employ people who pay taxes; that is where the economic growth is in the future. When we grow businesses, it is important to look at innovation and new technologies. Fifty percent of productivity growth has been shown to be due to innovation and one‑third attributable to changes in technology. That is where I think Innovate UK has a lot to contribute, making sure that the micro and the small can become the employers of the future.

Craig Tracey

I just want to pick up very quickly on a point that Richard made, and it follows on from a point that Harvey mentioned in a previous session. Certainly when I had my business, there was very much a focus on the basic skills. They were the most important things. Now we are moving into the digital economy and a lot of businesses I am talking to in the constituency are looking at employing on attitude. They are looking at getting people in there. I just wonder: are the basic skills still relevant in lots of modern workplaces and, if they still are, are businesses sending out the wrong message?

Professor Brook

There are a whole variety of things that give you an impression as to whether the person in front of you, who is seeking your investment, is somebody you are going to trust with your money. A lot of them are not verbal. A lot of it is to do with body language. It is the sense of whether the person has confidence in what they are doing. The professional investors I have worked with say that they can tell within a few minutes of meeting somebody whether this is going to be somebody they are going to invest in or not, or whether the CEO is the right CEO. It is a combination of attitude, as you say, having and showing the confidence in what you are doing, but showing you understand the risks at the same time, and showing that you have the right experience, so it is a set of things. I have been involved in running investment readiness programmes, which take people and a technology idea and converts them into an investible proposition, and that is about getting their head in the right place, as I put it. It is a whole variety of factors that matter.

Dick Elsy

There is nothing that can replace basic numeracy and literacy. Ruth described the type of new jobs in mathematical modelling and simulation. Those individuals are going to go nowhere if they cannot communicate the output of their results and listen to the inputs and communicate them, so basic skills are absolutely fundamental.

Chair

The final question from me: there is a complex innovation and finance ecosystem. Does the Productivity Plan enhance what is already there in order to improve productivity? If we could have a single sentence from each of you, it would be helpful to our inquiry.

Dr McKernan

There is not a single-sentence answer to that. It is a very complex ecosystem. Where there is flexibility and money in the private market we should use that to ramp up the growth of businesses, where we can. I do not think we can avoid, where we have collaborative research, where we have Catapults, using public money to seed that and ensure that we have the productivity in the businesses that we need in the future.

Dick Elsy

It is an ecosystem and we have a new instrument in an area where we have had market failure in the valley of death: it is the Catapult programme. I can say that with the High Value Manufacturing Catapult for every pound of Government funding it is already delivering £15 of manufacturing value-add in the economy. Every pound of Government funding instantly leverages £4.36 of industry and collaborative R and D, so it is acting as a magnet for investment, and it is already, after four years, delivering some hard results, so long may it continue.

David Harbourne

The challenge of the Productivity Plan is the same as any that covers more than one Government Department. Each chapter was written by a different set of people and, therefore, the delivery will be by different sets of people. Joining that together is the big challenge. If you can do that, then, yes, it will work.

Chair

You do not see any mechanisms within the plan to enable that joining up to take place.

David Harbourne

No.

Professor Brook

No, and it could do more to recognise the importance of that infrastructure.

Chair

What do you mean by that?

Professor Brook

The radical innovation and the infrastructure and the things that we have just been talking about do not appear sufficiently prominently in the plan in comparison with the other, more generic measures that are put forward. It is the roadmap. I would like to see the roadmap and that would identify what the infrastructure does and how important it is.

Chair

Thank you very much. That was very helpful. I am really grateful for your time and your input into the inquiry into the Productivity Plan. Thank you very much. Oral evidence: The Productivity Plan, HC 466-ii 2