Speech To ITO Federation Thank you for inviting me to speak with you this morning. As you know, having been involved in the esta

Thank you for inviting me to speak with you this morning. As you know, having been involved in the establishment of the ITO system I have a keen interest in its success.

First a little background. The concept of Industry Training Organisations was very important in developing the dynamic economy this Government was determined to build.

The first piece of legislation passed by the National government in 1991, the Employment Contracts Act, was designed to stop the burgeoning numbers of jobs being lost because of the hopelessly inflexible labour market. New Zealand had made a decision to operate in and compete with the rest of the world - our success depended on it - and it was crucial we allowed businesses and workers to make arrangements to work in that environment.

With the Employment Contracts Act in place, the basic economic framework of this government was complete:

an open, internationally competitive economy
prudent fiscal policy and debt repayment (to be legislated for in the Fiscal Responsibility Act)
flexible labour markets
price stability
a low-rate broad-based tax system.

From the time the ECA legislation was passed, up until this year when the Asian crisis hit New Zealand, our economy expanded by 37% and we had constant job growth.

Up until the start of this year 270,000 jobs were created.

That is exactly the result we wanted. But the new jobs, the jobs created in the 1990s, are not the same as those that were lost in the second half of the 1980s.

New skills are required. Obviously, so were new methods of learning.

Apprenticeships were a sound system of training which provided in-depth knowledge of craft skills, but they weren't going to provide the portability or breadth of skills required as we looked ahead. We had to move away from the trade-based apprenticeship system that went with the old economy and old industry-wide labour market structure and move instead to a system that met the needs of trainees, and the businesses who will employ them, in the modern world.

Six years after the Industry Training Act 1992, which established the ITOs, we have just that. A voluntary, industry-led strategy providing a credible alternative route to qualifications via the workplace. This is particularly important for those who learn best by 'doing'.

The success of the skill programme is best demonstrated by the huge across-the-board increase in the number of New Zealanders now involved in industry training.

In September, 47,907 employees had structured training agreements with their employers under training arrangements administered by 52 ITOs. These are impressive gains in scope and numbers and reveal that the system is functioning well.

This is the highest number of industry trainees in New Zealand since records began. In June 1991, by comparison, there were 18,159 apprenticeships and 2,061 Primary Industry Cadets, for a total of 20,220.

Trainees in new industry training areas represent 29% of the total, compared to 14% in the year to 30 June 1997. There is now a major expansion of industry training into sectors such as seafood, food and beverage, electricity supply and contracting.

Women currently represent 19% of all industry trainees in employment and there are also encouraging signs in terms of Maori participation. The jump in Maori industry trainee figures of 63% in the year to June compared very favourably to the 43% overall increase.

Maori now make up 16.44% of all industry trainees compared to 9% of the total labour force. Much of this growth has occurred in industries to where Maori have traditionally gravitated, such as forestry and construction, although there has been a marked increase in industries with new industry training arrangements, such as seafood processing and electricity supply.

I will now run through a few issues of vital interest to ITOs.

Industry Training Measurement System A pilot comprehensive performance measurement system will go ahead next year. The results once fully implemented should enable key stakeholders - the Government, Government agencies, employer organisations, and others - to assess the results of industry training and the performance of ITOs across a range of indicators.

Government Funding of Industry Training Current subsidy arrangements for industry training were devised when the industry training strategy was very new. There was a paucity of information on costs and no data was available on results achieved.

Skill New Zealand is currently investigating modifications to these arrangements to get an element of the funding attached to the actual results achieved by trainees. ITOs could then decide how best to use Government and private sector resources to achieve these results.

Cabinet decisions would be required to give effect to such policy changes and full implementation might be attained in 2001.

The Industry Training Fund (ITF) Although the Government's contribution to the ITF in dollar terms has steadily increased over the years as industry training has expanded, (to $63,158,601 for the 1999 calendar year) its average cost per Standard Training Measure (STM) is decreasing. ITOs have adjusted their economies of scale, switched to greater provision of on-job training, and contracted from a variety of off-job training providers by tender.

The Industry Training Development Fund (ITDF) Now that the number of ITOs appears to have reached its peak, the ITDF allocation is gradually being reduced to the extent that funding will be used primarily in the amalgamation and consolidation process. Allocations for 1998/99 and 1999/00 are $1,202,000 (GST inclusive) and $50,000 (GST inclusive), respectively.

Skill New Zealand With the development of the industry training market still rather uneven, with different industries and regions at varying stages, Skill New Zealand‘s role is to help fill in the gaps where the market is not yet developed - usually inhabited by small and medium-sized enterprises.

A total of 202 enterprises, which Skill New Zealand has worked with at some time in the past, have gone ahead and developed systematic training in the workplace.

Government funding of industry training When the Skill New Zealand concept was first introduced the Government was very keen to give industry a leadership role in the development and production of industry training. We believed industry training should be owned by industry because industry are best placed to know what training is needed and how it should be provided.

This approach sets it apart from the Government's approach in other areas of tertiary education. In the formal tertiary sector of tertiary education there are distinctly different dynamics and incentives operating on the main players. One of the key differences between the two is the key role of employers in the provision of industry training.

The existence of 'on-job' training enables trainees to gain skills through the transfer of knowledge from employers in a practical work environment. These skills may be difficult or impossible to obtain in a more formal education setting. On-job training can also be a more cost effective alternative than off job training for all parties.

This key difference explains in large part the different approach to the public funding of industry training as compared to the EFTS system. The Government is keen to maintain the viability of the two systems.

As the new resourcing arrangements for the formal tertiary sector take hold, it will be important to monitor the impact of this on ITOs and industry training in general. One strategy to consider is whether to integrate the 'off-job' training element of industry training more closely into the EFTS system. Any move in this direction will need to take into account the particular characteristics of the industry environment that set it apart from the formal education and training sector.

Tertiary Strategy

I know you have a keen interest in the review of our tertiary education system, which was initiated through the release of the Government's tertiary review Green Paper in September 1997. The tertiary sector overall needs to be positioned for the future, the same way our industry training needed to adapt.

The tertiary review has centred on supporting the sector's increasing focus on students and their needs. The broad medium-term direction for tertiary policy is to create a sector that:

has the capacity to meet the diverse and changing needs of students, employers and the wider society;
assures students and taxpayers about the quality and international standing of publicly funded qualifications, teaching and research; and
encourages a focus on long-run educational and financial success.

The Tertiary Review White Paper, which will be released soon, will outline policies for resourcing, quality assurance, financial viability arrangements, the funding of research, and governance and accountability arrangements for publicly owned education institutions.

While not wanting to pre-empt the release of the White Paper, I'll outline the key areas of resourcing and qualifications that have relevance to ITOs.

A number of changes to resourcing policies, designed to create more student choice, will be included in the paper. Many of these were announced in last May's budget. They aim to motivate the sector to better meet the needs of students including those under-represented in tertiary education such as Maori. They also aim to give students and tertiary providers' greater certainty about the level of taxpayer support so that they can plan effectively, and to create a fairer resourcing environment for students and providers.

Briefly the key resourcing decisions are as follows:

Through the Universal Tertiary Tuition Allowance the Government will subsidise all domestic students who enrol in approved courses, with the number of students subsidised at each provider based on actual enrolments.

From 2000 all domestic student studying enrolled in approved courses at private tertiary providers will be subsidised on the same basis as students at public institutions.

The Government will increase overall spending on tertiary tuition subsidies by $155 million over the next three years. This will bring the total Government spend on tuition subsidies in 1999 to over $1.2 billion. And the total amount allocated for tuition subsidies will be adjusted automatically to reflect changes in participation.

The changes will strengthen the incentives on providers to attract new students. In doing so it will challenge providers to better meet students' and employers' needs, and focus on improving value for money by placing further pressure on providers to contain their costs.

In addition, subsidising all students on quality courses no matter where they study will create a fairer and more equitable support of students across the sector.

As a consequence ITOs are likely to face greater competition for their services. For instance, if ITOs didn't provide quality services,

firms and trainees may increasingly choose to deal directly with tertiary providers for their training needs. This will provide a healthy check and balance on the relevance and cost-effectiveness of ITO services.

The Tertiary Review White Paper along with announcements expected to be made shortly on the review of qualifications for 16-19 year olds will form the cornerstones of New Zealand's qualifications policy.

The aim will be to create a comprehensive qualifications system for school and post-school learning that will make qualifications easier to understand, and will assist the recognition of students' achievements across all subjects and at all levels, from secondary school to university. The policy will cover all areas where learning takes place, including learning based in the workplace.

Qualifications policy, of which the NQF is an integral part, has been the subject of a review which commenced with the release of the Qualifications Green Paper in June 1997. When it undertook to review tertiary education more broadly, the Government delayed making decisions about qualifications and the NQF to ensure that a coherent policy position would be achieved.

With the tertiary review now completed, the remaining decisions about qualifications and the NQF are expected early in the new year.