Mr Haysom: I can perhaps answer part of that and David would probably wish to pick up on the wider question. As you rightly say, there has been no reduction in funding for ESL work. ESL represents a very large proportion of the budget in London, for pretty obvious reasons. One of the things that we have to be very clear about is that that money is actually delivering for individuals, for employers, and so on. So the work that we are involved in doing is making sure that as much of that provision as is sensible leads towards qualifications which are going to help those individuals.

Mr Bell: I think the only rather obvious point for me to make is that with increasing mobility of labour and peoples across Europe and across the world we cannot do anything other than continue to ensure that people are given a good basic grounding in language when they come into the country.

Q54 Mr Khan: No cuts with the ESL funding then?

Mr Bell: As Mark said, we will want to ensure that we get the best return on what we are doing but there are certainly no plans to reduce any specific funding for ESL.

Q55 Mr Khan: Good. Can I just put the legacy into its correct context. If you have a large number of adult people between 18 and 25 who are long‑term employed with the lowest skills base, then it is correct that the priority should be towards funding up to level two so they can be employable and be useful to an employer?

Mr Haysom: Absolutely, yes.

Q56 Mr Khan: So it is not necessarily a recent phenomenon that is the problem; it is the longer term legacy?

Mr Bell: If I might say, Mr Khan, it is just worth reminding ourselves of the scale of the task. There are 6.4 million adults in the workforce at the moment without level two qualifications and I think the rather sobering thought is that whilst we should have that priority there is an enormous amount that we are going to have to do to ensure that many, many of those adults get that baseline of qualification.

Q57 Mr Khan: That was my point because Mr Mitchell touched upon the problems and the paper talks about a figure of around 6% of employers having a skills shortage vacancy level. What must the position have been, say, for example, ten years ago if that is the case now?

Mr Haysom: In terms of skills shortages, we do not have that information.

Q58 Mr Khan: If you were to hazard a guess, is the curve going upwards or downwards?

Mr Haysom: There is no curve at the moment, it is a straight line, and that is worrying. I have a slight difficulty with the 6% number. The number that I had through the major survey that we do is 4%, and it has been stuck at 4% for four years now, so there is an issue there.

Q59 Mr Khan: You cannot go back beyond then?

Mr Haysom: I do not have any data going back beyond then.

Mr Bell: I can check if the Department has but I do not know offhand.

Q60 Mr Khan: I would be very interested in those figures, please. The other thing is this issue about incentivising for employers level three training and Mr Bell talked about employees being more assertive, but is not one of the problems that employers are concerned that a skilled employee may use the skills that he or she has inherited and go to a new employer?

Mr Haysom: That is something that I hear often and my answer to that is always my own experience in running companies, which is the more you train people they more you retain them, so they actually stay in the workplace, and there is an awful lot of evidence to support that. It is one of the things that we have to do in terms of getting past the barrier of understanding, and again it is probably part of the work of brokers to do that.

Q61 Mr Khan: You have led me on to another theme that has been topical over the last couple of days, with major speeches being made by aspiring politicians about productivity and about the argument that productivity in this country is low in comparison to cousins overseas. Is one of the reasons for productivity not being as high as it should be the lower skills base that Mr Bell talked about which is the legacy that we talked about?

Mr Haysom: I am not sure about aspiring politicians but I can answer the question as far as is there a direct link between low skills and low productivity. Yes, there is and the Report actually refers to that, and I think previous reports that we have looked at in the last month or so have also made that link.

Mr Bell: Certainly the Leitch Report highlights that point very explicitly. If you look at economic output and growth it depended both on the number of people who are in work as well as how productive they are. We do better on the former than we do on the latter and that is spelled out very clearly in the Leitch Report on Skills.

Q62 Mr Khan: That is what puzzled me because you would have thought the good employers Ms Ussher talked about would understand that there are greater financial rewards and greater productivity with having a more skilled workforce.

Mr Haysom: Yes, and there is a very strong correlation between size of companies and propensity to train, so the larger companies will train, by and large. Once you get past about 100 employees, something like 75% of companies say that they train, so the issue here is that huge number of very small companies, and that is the challenge that we have getting through to them. It is a particular kind of challenge.

Q63 Mr Khan: Sure, but if you go to page 31 one of the examples the Chairman gave was the tax breaks reported in the FT but also page 31 gives examples of financial incentives employers would want, which includes tax breaks. Can I just ask what work you are doing to make the arguments you are making ‑ benefits to employers in level three training and all the rest of it - especially to the smaller ones?

Mr Bell: In general terms certainly for the second stage of the Leitch Review of Skills we have asked Sandy Leitch to address that point specifically. I would also, in a sense, spell out exactly what you have said; the case for investing in skills development, what is the business case to be made. It is an interesting point, is it not? You opened that line of questioning by suggesting that surely good employers would just get it; it would be self-evidently obvious to them. Yes it might be, but there is still a case to be made. I think actually one of the more serious questions is do we all 'get it' for the future because, undoubtedly, there is increasing productivity and the high levels of investment at levels three and above in places like India, China and so on, that is the really big question mark.

Q64 Mr Khan: Time really is flying and you have led me on to my last question (although I have got many more). It is a question in two parts. The first part is can you give us an idea of international comparisons vis-à-vis investment by government and employers into training? The second part of that question is you have talked about the massive, fantastic investment by this Government, but can I just ask you what sort of level of further investment you think we would need to address the skills gap?

Mr Bell: On your first point, I am not sure of the detail in relation to what other governments put in, but we know from the data that skill levels at levels two and three lag behind even our European competitors.

Q65 Mr Khan: The paper only mentions Germany and the US.

Mr Bell: Absolutely, but I think your specific question was what is other governments' investment.

Q66 Mr Khan: Exactly.

Mr Bell: I do not have that to hand but, again, we could get that information for you. As far as the future is concerned, I think it is very hard to put a number on it.

Q67 Mr Khan: You accept that record levels are being invested now in level two training?

Mr Bell: There is certainly much more and it is going to continue to rise in level two training, absolutely, and the data is there to support that. One of the important issues that will come out of the Leitch Report, again in part two, is that we asked Leitch to look at what the likely skills gaps will be as we head towards 2020. In other words, not just where the gaps are at the moment but where the gaps are going to be in the future. We can get a reasonable feel for that. In general terms we know that areas of the economy where lower skills are required are likely to shrink whereas areas with levels of higher skill demand are likely to rise. We have asked Leitch to lay out particularly those areas where growth is required. The big issue all the time is not just worry about today but worry about tomorrow and how we are going to be competitive. Those countries - India, China, Brazil, wherever - are investing massively in this because they see that is where the world economy is going ‑ high level investment in high level skills.

Mr Haysom: Very quickly just to add to that, that is certainly the challenge, as David has outlined, but there is a challenge that runs alongside that at the same time, which is that of replacement skills for the more traditional industries as the workforce retires during that period, so we have got that double challenge that goes on all the time. It is a big demographic challenge that goes on all the time.