Speech to Industry Training Federation Annual Conference

Good afternoon, thank you for opportunity to speak at your conference today.

Since I spoke to you last year the New Zealand economy has been steadily rebuilding out of the GFC. Our economy is almost two-and-a-half per cent larger than it was this time last year, and the Christchurch rebuild continues to ramp up.  According to the March quarter Household Labour Force Survey 10,800 more people are employed in construction in Canterbury than this time last year, and the reality is we have just begun.

These remain very challenging economic times for the world.  Europe is going through a financial crisis that could last a generation.  The US economy continues to struggle to get off the mat.  That creates real risks for New Zealand.

However there are opportunities too. Asia’s emerging economies continue to grow in strength – I think the developments in Asia represent an economic opportunity that New Zealand hasn’t seen in my lifetime.  The challenge for all Kiwis will be whether we are prepared to get out of our own way to take advantage of that opportunity.

The tougher world today means it is more important than ever for New Zealand to provide a competitive platform from which Kiwi businesses can succeed in the wider world.

The Government’s Business Growth Agenda is all about providing that platform, by ensuring kiwi businesses have access to the six key ingredients they need to be successful:  Capital, innovation, natural resources, access to markets, the necessary public infrastructure, and of course, access to a skilled workforce.

And it is the last of those, skilled workers, that is the focus of today, and the focus of industry training. 

Government-funded industry training is all about a partnership with employers to lift the skills of the New Zealand workforce.

It’s about providing workers with measurable skills and qualifications that benefit BOTH the employer AND the wider New Zealand economy – by giving the employee transferable skills that will be with them throughout their working lives.

Therefore it is not about small bites of health and safety training, or orientation to a new job. Those remain the responsibility of the responsible employer.

Taxpayer-funded industry training occurs when both employers and taxpayers benefit in lifting each worker to a measurably higher level of skill and opportunity.

Done well, it is a crucially important form of training.  It can improve the literacy and numeracy of workers, lift their education to a higher level, and all while they are working and earning an income.

With this in mind, it is worth reviewing the challenges the training industry has faced in recent times, the progress that has been made, and the next steps the Government is taking.

Industry Training Changes to Date
In the 10 years to 2010 Government funding for ITOs almost trebled. Unfortunately funding increases were not matched with sufficient accountability for the funding.

In 2010, the TEC found that 100,000 people, or 44 per cent of all "trainees" funded in 2008 and 2009 did not earn a single credit, even though the ITOs were being paid their training subsidies.

The TEC conducted a series of ITO audits, and as a result of those audits, in May 2011 the TEC recovered up to $4.3 million from 18 ITOs which had claimed more funds than they were entitled to in 2009, based on numbers of trainees and the status of trainees.

The money recovered related to funding claimed for trainees where there was no clear record of eligibility for government funding. These include issues where trainees had not actually been engaged in training, incomplete or missing training agreements, trainees who had ceased their involvement in training or employment, and 11 trainees who were deceased.

The TEC then made a series of operational policy changes, many of which you will be familiar with, to shift the focus from signing people up for training to credit and qualification achievement.

Can I stress that while some of the issues in the ITO sector were unique; the need for accountability for performance was present right across the vocational training sector, and across tertiary education more generally.

Encouragement by the Government of the day to focus on how many people were signed up for tertiary education, rather than the results obtained, meant a whole heap of wasted enrolments.  We have as a government have overseen a move to a results focus right across the tertiary sector – because it is results that determine the skill levels of the workforce, not intentions.

I am pleased with the progress we have all made in industry training so far.

In 2008, the ITO sector had an average weighted programme completion rate of 35 per cent and credit achievement rate of 46 per cent.

The preliminary 2011 data shows that programme completions have now jumped up to 64 per cent and the credit achievement rate to 70 per cent – this is a very encouraging  improvement.

We need to lock that performance in and continue to improve it to make a strong contribution to the Government’s Better Public Services Targets to lift education and employment outcomes for New Zealanders.

Minister Parata and I recently announced two Better Public Service targets for education.  These are to lift the number of 18 year olds with NCEA Level 2 to 85 per cent ; and to lift the number of 25 to 34 year olds with a level 4 qualification or above to 55 per cent , both within five years.

Both targets are very ambitious.  For example, under our current improved settings, it is expected that around 45,000 people will have achieved a Level 4 or higher qualification in the target age group over the next five years.  If we are to achieve the Level Four target, we will need to graduate another 7,750 on top of that.  That challenge tends to focus the mind.

These are crucially important targets.  Our economy is going to need more skilled workers, and for these individuals, a level four or higher qualification is a passport to higher earnings for them and their families right through their working lives.  

Literacy and Numeracy
Another area where there has been big progress is in the work to improve literacy and numeracy skills in the workforce.

In 2008 there were fewer than 15,000 adult learners accessing courses with literacy and numeracy included in them.

In 2010 that figure had risen to 36,000 and this year 122,000 adults are expected to take courses with embedded literacy and numeracy programmes.

This has come about because of the Government’s drive to embed literacy and numeracy in nearly all foundation-level tertiary education.  Foundation learning is just that, and it is important that we provide foundation and second chance learners with the basic skills that equip them, not just for their workday, but so they can fully participate in modern life.

Targeted Review of Qualifications
Another key work stream is the drive to simplify the New Zealand qualification system at Levels One to Six, for the benefit of learners, and employers.

The Targeted Review of Qualifications, being led by NZQA, has already reduced the number of qualifications at levels one to six from 4,600 to 3,500 and are on track to get down to 1,200 qualifications by the end of 2014.

The number of qualifications that were on the register was excessive for a nation of our size. For example, in hairdressing, we have reduced the number of qualifications from 67 down to eight.

I am getting positive feedback from employers about the progress of this work.  It’s not easy – as it involves leaving vested interests at the door and focusing on the skills someone will have when they achieve a qualification, not the path taken to get there.

However, it’s crucial if we are to get a qualification system which is easier to navigate for learners and employers; a truly seamless qualification system where learners can get recognised for the learning they do in different parts of the system as they build towards their qualification.

I would like to pass on my appreciation to all of those who have committed time, effort and resources to this process.

By the end of 2014, I expect that our qualifications system will be simple, clear and easy to understand.

But there is more we can do to strengthen New Zealand’s vocational education system.

Industry Training Review and future direction
As you know, following on from the TEC’s operational changes to the industry training system, I have had the Ministry of Education conduct a policy review of the system to see whether it can be further improved.

I have been particularly concerned to resolve the conflict that exists between the strategic role ITOs have been traditionally asked to play in leading the training system, and the operational role they have as one part of the training system.

Today I am releasing a consultation document that articulates proposed changes following last year’s Industry Training Review.

The goal of the changes is to ensure that industry training organisations are focussed on the tasks employers most value, and that artificial barriers are removed between ITOs and off-job providers, so that learners can migrate seamlessly at low cost between the two methods of learning, predominantly on-job or predominantly off-job training.

First, I would like to announce that I will be proposing that ITOs will focus on two of their three current mandated roles: to support employers and trainees to succeed in industry training; and to continue in their roles as standard setters to ensure qualifications reflect the skills industry needs.

I’m proposing the skills leadership role will become the primary responsibility of industries themselves, who will communicate the skills needs of their industry direct to TEC and the Ministry of Business Innovation and Employment, as many already do.

ITOs will continue to have input into skills planning for industry, alongside tertiary providers that also have knowledge and understanding of skills needs and skills training.

The consultation document also proposes to amalgamate all apprenticeships into Modern Apprenticeships so that all trainees receive the same level of support regardless of age.

The Government will also be looking at reviewing the funding rate for industry training and apprenticeships. We are prepared to pay more per trainee for a more productive system if that is warranted, provided the total cost fits inside the total current appropriation.

The Education Ministry is also seeking feedback on whether the co-ordination fee for Modern Apprenticeships should be built into the funding rate.

In the consultation document we are asking key questions about how to make vocational education and training easy to navigate.

This includes ways to recognise employment and continuing education as positive outcomes for tertiary providers and ITOs respectively; ensuring learning can be transferrable; ensuring prior learning is recognised, and ensuring there is consistency in the skills and competencies trainees have when they achieve their qualification regardless of the pathway they choose.

Achieving this will give employers a much greater level of confidence in our qualification and in our vocational education and training system generally.

ITO Mergers
One of the themes has been a great deal of overlap between ITOs working in the same industry.

It is clear that we need a smaller number of larger ITOs that are able to successfully meet the needs of their key stakeholders – employers and trainees. 

This structural preference has been signalled previously, and I have been pleased with the mergers that have occurred to date.

I know a lot of you have undertaken due diligence into mergers and are waiting for the results of this review before progressing.  I urge you to continue down this track.

The suggested structural change is not change for change’s sake.  I think we can all acknowledge that the new focus on performance places much greater responsibility on ITOs for results, performance, and reporting, and will require ITOs of scale that can deliver on Governments and taxpayers stronger performance expectations.

Consultation Process
The consultation document will be out for six weeks and I encourage you and your organisations to read it closely and give feedback to the Ministry of Education as there are some detailed design questions to be addressed.

Summary
The proposed policy changes to industry training will assist in developing an integrated VET system that removes the disincentives for off-job and on-job trainers to work together, it will encourage further development of the apprenticeship system, and it will help lock in and further improve results for learners and their employers.

That’s crucial – because the challenging world we live in today means our businesses are going to have to be more competitive to succeed on the world stage.

Materially lifting the skills of the New Zealand workforce is one crucial way in which the Government and ITOs can assist with that challenge and help create a stronger, faster-growing economy, for the benefit of all New Zealanders.