Tag: Speeches

Below is the text of the speech made by Vince Cable, the Secretary of State for Business, Innovation and Skills, at Cambridge University on 23rd April 2014.

Cambridge contains many happy memories for me. It was here, more than 50 years ago, that I got to try my hand at acting and debating, where I first took an interest in politics and where – in hindsight – I sealed my fate by switching from natural sciences to studying economics.

Unusually for those times – in fact, it remains unusual today – I arrived in Cambridge with a decent idea of the direction my life might have taken had I gone to college rather than university. That wasn’t because of any advice I received at school, but because my father was a factory worker turned college lecturer who taught building trades. He cared deeply about his work – and about the value of training – but he also felt deep frustration about his own thwarted educational ambitions.

My subject this evening is the proper relationship between higher and further education. It arises from an awareness of the continuing gulf between the 2 systems, whether in terms of funding, of perceived esteem, of adequate pathways for students between the 2, of practical collaboration between HE and FE, or in terms of awareness among young people, their teachers and their parents.

As it happens, my launch point into this subject is a speech delivered by a hero of mine while I was a student at Fitzwilliam all those years ago. Tony Crosland’s vision of social democracy, set out in ‘The Future of Socialism’, inspired my early political life – and still does, in certain respects. In April 1965, Crosland – then Secretary of State for Education and Science – spoke at Woolwich Polytechnic on the need for ‘coordinating principles and…a general conception of objectives’ for HE and FE. What’s remarkable about that speech is how much of it continues to be relevant.

Crosland advocates a dual system of HE and FE, each with separate funding – as opposed to a unitary one in which universities sit at the top of an institutional ladder. Separation is necessary, he argues, because the ever increasing demand for vocational training cannot be fully met by universities, because a single hierarchical model inevitably diminishes the standards and self-assurance of colleges, and because FE must have capacity to be directly responsive to local and social needs.

He also focuses on the idea of polytechnics – a small number of new institutions with a clear purpose to concentrate on higher level skills, address the needs of industry and enjoy strong links to universities. His main warning resonates as much now as it did then:

We shall not survive in this world if we in Britain alone down-grade the non-university professional and technical sector. No other country in the Western world does so… Let us now move away from our snobbish caste-ridden hierarchical obsession with university status.

Almost 50 years since Crosland, then, we have similar concerns. For all the changes made over the decades in between – changes to our education systems, changes to how the world operates compared to the post-war era – many of the fundamental debates are also similar: about the importance of skills to sustainable economic growth, about the value of education to individual prosperity and wellbeing.

In particular, few people today would dissent from Crosland’s summary of what makes FE different and valuable: its “tradition of service to industry, business and the professions”; its delivery of training and qualifications required by the “all-important” technicians and managers in the UK workforce; and its courses for students supplementing their existing education or making up for missed opportunities earlier in their lives. “There are immense fields of talent and aspiration here,” he concluded. “Common justice and social need combine to demand that they should be harvested.”

It is worth briefly recalling what happened following those earlier political interventions on skills. The response to Cherwell’s warning was the creation of Colleges of Advanced Technology, like Aston, Loughborough and Surrey – conceived to rival the likes of Zurich, Charlottenburg and MIT. The CATs were absorbed by the university system in 1961, amid concerns that they lacked access to capital and were unable to recruit the best staff while falling under local authority funding. Crosland’s polytechnics, meanwhile, were incorporated as universities under the 1992 Act – Woolwich becoming the University of Greenwich – a nationalisation prompted by aversion to the same local government as much as for reasons of education or industrial policy.

Now, through the CATs and the polytechnics we gained some excellent universities, which brought with them genuine links to business, employer-designed degrees and strong research profiles. The polys, in particular, were pioneers in areas like sandwich courses – as Crosland noted – as well as modular courses, and they developed highly-regarded degrees in such professional disciplines as engineering, law and architecture.

But in gaining these universities, we lost something. Our post-secondary education has become distorted. The OECD concluded that our post-secondary vocational sub-degree sector is small by international standards – probably well under 10% of the youth cohort, compared to a third of young people elsewhere. In the US, more than 20% of the workforce have a post-secondary certificate or an associate degree as their highest qualification. In Austria and German, sub-degree provision accounts for around 50% of the cohort. In South Korea, one-third of the youth cohort enters junior college on 2-year programmes of higher vocational training. Elsewhere, countries with low volumes have sought to address the problem. Sweden, for example, trebled its numbers in higher VET programmes between 2001 and 2011.

We in England are out on a limb here – because, even Scotland has higher numbers gaining Higher National qualifications relative to bachelor degrees. It is unlikely that we have got things right and everyone else is wrong. The OECD identified a growing demand for post-secondary qualifications involving less than a bachelor’s degree. This is true for our labour market too. Employers in key sectors such as engineering and IT consistently tell me that they need workers with strong technical knowledge and skills – an area where the polytechnics excelled.

In a number of areas, technical skills shortages threatens to constrain growth. Our economy requires 830,000 new engineers over the next 8 years – purely to replace workers reaching retirement. The same thing is happening in the nuclear industry, where more than two-thirds of skilled workers are set to retire in the next decade. And in IT, more than two-thirds of employers report a lack of software engineers, which is hindering product development.

So clearly, there has been a hollowing out of our post-secondary provision.

Make no mistake. Our HE system is a great success, the engine behind the most productive research base in the G8. Despite growing competition, the UK still ranks first or second globally at research in most disciplines. UK HE output was more than £73 billion in 2011 to 2012, providing more than 750,000 full-time jobs. This equates to 2.8% of GDP – up from 2.3% in 2007 to 2008. Thanks to the funding reforms introduced, university finances have been put on a stable long-term footing – meaning increased resources for teaching and increased support for students from disadvantaged backgrounds. I have been particularly pleased to see applications from people from disadvantaged backgrounds reach record levels, and for English 18-year-olds in general, despite the declining demographics of that group, as well as recovery in the past year in applications from mature students.

There’s also much to be proud of in FE. We are on target to support 2 million apprentices over this Parliament. Colleges currently educate around 177,000 students at higher levels – offering many people the chance to live and study locally, and on a flexible, part-time basis. And, in a major success for our international education strategy, UK education providers have just won 4 contracts worth £850 million to establish 12 technical and vocational training colleges in Saudi Arabia. There is also plenty of innovative provision: the construction school at Hull college, which I visited last year, whose apprentices refurbish derelict housing to provide accommodation for families on low incomes; the Aviation Academy at Leeds Bradford International Airport, offering qualifications from Level 2 diplomas to a BSc in air transport management; Gateshead College’s simulated work facility located on-site at Nissan.

When I came into office in 2010, the one specific spending cut already pencilled in was for FE and training. While it didn’t make us popular, our decision to reform HE funding has not only strengthened the position of universities but – just as important, it freed up resources to support priority areas in FE such as basic skills and apprenticeships. We have also invested in the FE estate to the tune of almost £1.7 billion, enabling over 1,000 constructions and refurbishment projects across the country worth over £2.5 billion.

Nevertheless, serious weaknesses remain. High-level vocational training has fallen through the gap between our HE and FE systems, as I’ve already highlighted; relative to other countries, we are way behind where we need to be. Beyond that, it has to be said that funding for colleges, unlike that for universities, has shrunk. Allocations to colleges will have fallen by nearly a fifth in real terms by the end of this Parliament, while learner numbers have stayed near constant. Moreover, our further education system has become concentrated at low levels of training. For adults, the FE that government supports is geared more to addressing failures of the school system than meeting the requirements of employers. In such circumstances, it is far harder to, in Crosland’s words, “achieve the diversity in higher education which contemporary society needs.” Nor can we sensibly hope to achieve greater parity of esteem between HE and FE if students in the respective systems don’t enjoy parity in terms of resources.

So what should we do? I want to suggest a number of ways forward – some new, others already in train.

First, we need to fill that high-level vocational gap. Today, I want to set out the vision for a new generation of National Colleges: specialised institutions, acting as national centres of expertise, in key areas of the economy. They will be employer-focused, and combine academic knowledge with practical application.

We have already announced funding for 2 of these institutions. One is associated with High Speed 2, and will meet the needs of this major project as well as the wider rail industry. The other is the training facility – receiving £18 million of public investment – that’s destined for the Manufacturing Technology Centre in Coventry, where apprentices will get to qualify as incorporated engineers, there will opportunities for international secondments and progression to full degrees, and engineering graduates will earn chartered status.

In the near future, we will be publishing a National Colleges launch document, where we will invite employers in other key sectors to approach us with their ideas. Where there is evidence of a shortage in higher vocational skills, and employers are willing to invest time and resources to address it, then the government will invest alongside you. We want to hear from interested employers and we aim to announce the next set of National Colleges by the end of the year.

A second means to tackle the shortage of higher vocational skills is already available. Higher apprenticeships are an important solution to the sub-degree gap, and there are already some superb schemes, for which entry is as competitive as getting into Cambridge. Rolls Royce higher apprenticeships in engineering, for instance, take nearly 4 years and include degrees from the University of Warwick. Apprentices at Jaguar Land Rover can expect to be earning around £32,000 by the time they finish their course; they also collect a Warwick degree.

The kind of programme, including a sponsored degree, has huge advantages both for employers (who gain staff with theoretical as well as practical knowledge tailored to their specific needs) and for individuals (who gain a career-focused degree, earn good money while they study and graduate free without student loans).

Previous governments did not support this route effectively. Higher apprenticeship funding is difficult to claim and poorly administered. We are changing that by routing funding directly to employers, enabling them to purchase training for degree-level apprenticeships. In future, such apprenticeships can include full undergraduate and masters degrees, funded through employer and government co-investment.

This is an essential step to making higher apprenticeships the norm rather than a niche in the overall skills programme – making it as plausible to complete a degree via an apprenticeship as to go to university for 3 years. This is a huge opportunity for universities, who think of their customers in terms of employers as well as individuals. Doing so can attract significant investment, as well as introducing cutting-edge practice into their degree programmes – as Warwick has done.

Third, we need to trust FE institutions more. In overseas vocational systems, colleges have the power, like UK universities, to devise their own programmes and award their own qualifications. But in England, colleges are obliged to teach curricula handed to them by external awarding bodies, leaving little room to tailor provision to the needs of students or of their potential (or actual) employers. We need colleges with the power to decide what to teach and how. National Colleges will be able to do precisely that – setting the standards for their own qualifications, which other colleges will also be able to offer.

We want excellent existing colleges to set their own qualifications too – and to be able to validate the programmes of their peers. For example, Sir Tim Wilson recommended that when the opportunity to legislate arises, we should allow colleges with foundation degree awarding powers to accredit other foundation degree programmes. I agree with him.

This improving agenda cannot be restricted just to the higher levels of FE. Crosland was absolutely right when he insisted that “common justice and social need combine to demand” that the talents and aspirations of all students be nurtured and advanced, whether they seek professional careers, middle manager roles or to develop more basic skills. The Education and Training Foundation is a new body created and led by the sector itself to raise standards across the sector. It will be supporting implementation of the recommendations of Frank McLoughlin and his Commission on Adult Vocational Teaching and Learning. They include making sure that vocational programmes involve meaningful work placements and that there is proper employer representation on the governing bodies of colleges and training providers. We have also introduced a range of interventions to address poor quality, including a stronger process led by the FE Commissioner to ensure that rapid and robust action is taken to remedy poor performance in FE.

I should add, in passing, that we will not compromise on quality in HE either – where, for example, we are requiring all alternative providers to have existing courses independently assured and their management and financial sustainability scrutinised. As recipients of public funding via their students, we have also asked alternative providers to join HESA and provide information on what they provide for those students.

Next, we recognise that unlike HE students, FE students are not eligible for maintenance loans and grants. FE students normally study close to home, reliant on parental support and/or substantial amounts of paid part-time work. In many cases, parental support is limited; FE students typically come from low-income backgrounds. But, as FE becomes more specialised, we may need to think about provision for students studying for high level qualifications who may need to relocate to be close to national centres of expertise. This, along with the other points I have raised today, is an area that I think will require further investigation in the future.

Fifth, we need colleges and universities to work more closely together: to facilitate progression between FE and HE; to provide a coherent educational offer locally; to work with Local Enterprise Partnerships so that their growth plans can proceed with the skills elements in place. I know that this happens here and there. City and Islington College has strong progression pathways enabling students to go on to prestigious degrees, including medicine. Coventry University has set up Coventry University College, focused on sub-degree provision. Teesside is also ahead of the game, with a partnership between Teesside University and the Tees Valley further education colleges of some 20 years’ standing. It guarantees FE students a place on a degree programme once they’ve completed an Access to Higher Education Diploma. The Tees Valley LEP is now establishing a specialist STEM centre with the university and Middlesbrough College, supported by a £6.5 million grant from the Skills Funding Agency. I want to see far more initiatives of this kind arising from local recognition of local need.

Sixth, and finally, I come back to the slippery issue of esteem. Our stated goal is for people to regard academic and vocational routes to higher educational attainment as equally valid – and for higher level qualifications, academic and vocational to be of equal prestige. This will continue to be an uphill battle. I recently heard of a school’s astonishment when it learnt that one of its pupils opted to undertake a degree level apprenticeship at a leading employer rather than go to Oxbridge.

We urgently need balanced careers advice, with schools as conscious and supportive of vocational opportunities as academic ones. There’s still a lingering view in this country that apprenticeships are for people who don’t make it to university. This is wrong, and is would be met with bewilderment in other countries. We should be clear that there are degree- and masters- level apprenticeships, which are just as rigorous as degrees studied in the traditional way – and deliver equally good (or better) career prospects.

The Department for Education is developing a common application portal so that 16-year-olds can see to see the full range of options available to them. Similarly, if we are to have credible, high-level vocational programmes – which are a legitimate and equally prestigious alternative to the traditional undergraduate route – older school leavers should be able to consider them alongside university options. We already have a well-recognised and effective system for applying to university through UCAS, which operates independently of government. What is less well known is that UCAS also acts as a portal for candidates applying to study Higher National Certificates and Higher National Diplomas, including at FE Colleges. I have asked my department to work with UCAS to examine the scope for integrating higher level apprenticeships into their services.

In sum, this is a challenge where we must be both determined and patient. Over time, as the funding changes I’ve outlined boost the volume of higher apprenticeships sufficiently for them to become mainstream, they – and other options – should be seen as an increasingly attractive rival to the university degree.

My purpose here is most certainly not to shift attention away from higher education in this country. Our system is outstanding, and I want as many people to benefit from it as possible, once they have the appropriate qualifications. We have lifted number controls on universities, because it is good for individual opportunity and it is good for growth. But by tackling the sub-degree gap, by improving funding mechanisms, by changing popular attitudes, we can broaden choice for people and for the businesses who need capable staff.

Our HE and FE systems both have critical roles. Over the past half century, though, we have been more in thrall to the admirable vision of Lionel Robbins than we have to the equally pertinent vision of Tony Crosland. HE has grown in scale and prestige far ahead of FE, with adverse consequences. It is time to create the conditions whereby HE and FE can both fulfil their respective missions for the people of this country, and better combine to achieve shared national goals.

Below is the text of the speech made by Vince Cable, the Secretary of State for Business, Innovation and Skills, at the opening of the Catapult Centre for Offshore Renewable Energy Technology on 13th March 2014.

I am delighted to be back in Glasgow. And to be able to combine my job as Secretary of State – formally opening the Catapult Centre for Offshore Renewable Energy Technology at Strathclyde – with a visit to the university where I taught economics 4 decades ago, and to which I owe a great deal.

I am also here, in my UK ministerial role, to listen to and also represent the views of business. And since I am in Scotland I will engage with the issue of independence. Whatever view we might take on this issue, the question of existing political and economic arrangements is casting a blight over business investment and jobs at a time when the UK is seeking to build on the signs of recovery.

When I was at this university, I divided my working time between teaching and research (and, also, a large amount of time helping to run the city in the Labour council group). My research earned me a PhD, but it was somewhat esoteric and was probably only ever read by a handful of people. Nevertheless, putting aside the fancy equations which I introduced in order to impress the thesis examiners, I was dealing with a subject highly relevant today: the economics of integration. Indeed, we are now dealing with the economics of disintegration.

Before I address that issue it is worth mentioning that I was financed then, as most university researchers are today, by a UK research council. Scottish research universities receive about 13% of the total pot, which is a reflection of the high quality of research conducted here: way beyond Scotland’s 8% share of the UK population. I don’t know how many academics in Scotland have registered that this money would not be there after independence.

The exam question I set myself then was: what are the benefits and costs of integrating countries through regional common markets or similar arrangements? At the time, the early success of the European Union was inspiring countries in other parts of the world to copy its example – in Africa, Asia, the Middle East and Latin America, where I chose my case studies. The big lesson in hindsight is that economic integration has proved much harder than the theory suggested and has made little progress, with the exception of the North American Free Trade Area. The European model of integration has proved almost unique and is far too easily taken for granted.

Much the same applies to union between states of the kind achieved between England and Scotland in 1707 and maintained since. A good pub quiz question is: which countries have successfully and voluntarily merged since the Second World War? Tanganyika and Zanzibar? Perhaps. German reunification? But many multinational states have fractured: Pakistan, Yugoslavia, the Soviet Union, the United Arab Republic, Ethiopia, Sudan and Czechoslovakia. With the exception of the last, break up was violent or followed by violence. Please don’t take that as a warning about the UK. Yet experience does tell us that, in economies and politics as well as in relationships, divorce is invariably messy and painful and can be vicious. There are inevitable quarrels about borders, the allocation of oil and other natural resources, assets and debts, population movements and new citizenship definitions, rights and obligations. We should not underestimate the extent of goodwill required to achieve a velvet divorce. History teaches us that it is easier to break countries apart than to unify them – and the UK is an unusual and, I believe, a rather precious creation.

The central issue which my own research addressed was how to maintain regional (or national) integration in the face of persistent inequalities and imbalances. There is a theory of agglomeration, or ‘growth poles’, which suggests that, in the absence of strong corrective action, integration can lead to the polarisation of benefits. The European Union has been successful in narrowing such imbalances – labour migration being one important mechanism – though the current experience of some South European Eurozone countries vis-à-vis Germany may test that claim to destruction. And at a national level, a combination of regional policy, transfer payments and devolved government is recognised to be necessary to keep centrifugal forces in check.

There is an argument to the effect that London and the South East of England act as a destabilising source of imbalance in the UK. I have described London as a big suction machine. While this may be an issue between parts of North and South of England, it is not, however, obviously an issue between England and Scotland since Scotland has an employment rate of 73%, the highest country within the UK, and output per capita has been close to the UK average since the 1990s.

Ironically the issue of Scottish independence has surfaced as the economies have been converging, not diverging. There was a better basis for arguing that Scotland, especially the area formerly known as Clydesdale, experienced structural, disadvantage a generation ago. This was essentially the case I argued in the Red Papers for Scotland (edited by Gordon Brown), in which I contributed a piece arguing for radical devolution including home rule, an idea which was deeply unfashionable at the time. One creative outcome was a proposal which was worked up by a group of us – Glasgow University academics and politicians – which became the blueprint for the Scottish Development Agency, now Scottish Enterprise. It has served Scotland well over more than 3 decades, operating within the UK under different governments.

However, I have come to bring these issues up to date, not reminisce. There has been an exchange of reports by the UK and Scottish governments on the potential consequences of Scottish independence. I don’t just want to rehash the arguments but point to evidence on some of the main issues which have surfaced: the viability of continued monetary union; the likely trajectory of Scotland’s public finances; and the economic value to Scotland and the rest of the UK of the UK Single Market.

The issue of currency union is proving to be critical and the debate has been given non-partisan clarity by the Governor of the Bank of England. There are three currency options open to an independent Scotland; sterlingisation, adopting the euro and having an independent currency. However, the Scottish Government continues to propose the option of forming a sterling currency union.

Governor Carney has spelt out the essential preconditions for a successful, continued currency. It requires both high degrees of banking and fiscal integration of the sort we have now but that independence would fracture. An integrated financial sector requires a banking union such that any Scottish-based bank would have to be subject to UK-level financial regulation. Even then, UK tax payers would be exposed to external (Scottish) financial risks.

A further condition is fiscal integration, both to underpin the banking union and to mitigate the risk of Scotland borrowing in sterling at low interest rates and accumulating debt leading to default. Were Scotland to find itself with large debt and high interest rates, markets would doubt the durability of union, leading to politically challenging austerity or break up. The Eurozone crisis is a cautionary tale about the conditions required for successful monetary union which have a direct bearing on Scotland.

To meet these conditions would mean that Scottish independence would be highly circumscribed. Moreover, the UK government, including my colleague the Chief Secretary to the Treasury and the Shadow Chancellor have made it clear that it would not wish to be part of such a currency union with the risks and obligations involved. In the event of independence there will not be a currency union. The only way to keep the UK pound is to stay in the UK – that is part of the choice that people in Scotland are being asked to make. And this fact requires the campaigners for independence to have a plan b.

One possible plan b is a variant of monetary union which does not require the active cooperation of the continuing UK: so called ‘dollarization’. Several countries – Panama, El Salvador and Ecuador – have adopted the US dollar as their currency, as did Argentina before the arrangements collapsed. Hong Kong operates a currency board, which is similar to dollarization. Angus Armstrong has done some analysis of the option of sterlingisation for Scotland within the UK. He identifies the key challenge as the ability to offer lender of last resort facilities to financial institutions. Hong Kong does so to some degree but has fiscal reserves (accumulated surpluses) of 30% of GDP and $300 billion of foreign exchange reserves. Denmark has an analogous arrangement in relation to the Euro, as does Montenegro; but they do not have a significant banking sector.

Scotland, in contrast, would almost certainly start life as an independent country with a substantially more challenging financial position. It is simply not in a position to offer a credible facility and this applies in particular to Scottish banks which have assets totalling around 1,250% of an independent Scotland’s GDP The jibe about a small country with a big bank attached has practical consequences. The inevitable consequence, now being openly talked about, is that large financial institutions would decamp to the continuing UK. Leaving foreign banks operating on a branch basis and losing Scotland its invisible earnings from financial services. The recent comments from Standard Life and Alliance Trust predicting an exit from Scotland suggests that they have come to the same conclusion. Just as worrying is the fact that RBS and Lloyds (which incorporates the Bank of Scotland) have had to enter Scottish independence in their risk registers.

Academic analysis of the currency union options leads to the clear conclusion – spelt out by Armstrong and Ebell – that a separate currency for an independent Scotland could be the best option. But this would inevitably lead to a disruption of trade and capital flows within the British Isles and a long term divergence between Scotland and the continuing UK.

The second, associated issue relates to the fiscal challenges of an independent Scotland. Here, we need good analysis which takes us beyond the simple caricatures of public debate. In that debate, Alex Salmond argues that freed of the yoke of the UK, and with a freedom to utilise 90% of North Sea oil revenue, Scotland could become a new Norway: a land of milk and honey with Scandinavian public services and American taxes. The opposite caricature is that Scotland has been shielded from fiscal reality by the munificence of tax payers in the English Home Counties (via the Barnett formula) and is living beyond its means.

The future fiscal position of an independent Scotland hinges on 2 main uncertainties. The first relates to oil and gas revenues. These depend primarily on price, which is volatile and over which the Scottish Government has no control, and volumes which can be influenced positively by a favourable tax regime for exploration and production – though at the expense of short-term revenue. The reality is that the North Sea oilfields are way past their production peak and will deplete further over future decades. Forty years ago, “It’s Scotland’s oil” was quite an attractive slogan. But we are not living 40 years ago and the balance of advantage has changed. Costs are rising in more challenging deep water drilling and in accessing residual deposits in depleted fields.

The Scottish government is using very optimistic scenarios in which oil and gas prices are sufficiently strong to maintain fiscal stability post independence, at least in the short term, and the Scottish Government has unsurprisingly promoted them. However, that does not mean they are likely, let alone credible, and there are independent estimates of oil revenues by the IFS and the OBR which are significantly more pessimistic. McLaren and Armstrong conclude that plausible projections of North Sea oil related tax are less than the likely Barnett transfer and that the proposed oil fund is “unaffordable” with spending cuts required instead. Yesterday’s Government Expenditure and Revenue Scotland statistics showed the Scottish fiscal position now weaker than the rest of the UK, and oil and gas revenues are set to fall in the coming years.

The fiscal position is also complicated by the demographics of Scotland, which has a smaller working age population as Scotland ages faster.

Taking all the long-term structural factors together, Crawford and Tetlow at the IFS conclude that an independent Scotland would need to make permanent tax rises or spending cuts of over 4% per year to deal with these challenges, compared with 0.8% for the UK as a whole.

The third area of concern relates to the benefit of the British single market. This takes me back to the benefits of integration and the corresponding costs of disintegration. The benefits include freedom to trade in general and in particular for Scottish companies which sell 70% of their exports to the rest of the UK; the benefit of common standards and regulation and tax in reducing business costs; the benefits of scale and network externalities from shared services (road, rail, aviation, the Royal Mail, the Post Office Network) for some of which – like mail delivery – Scotland enjoys substantial cross-subsidy. Last week the Western link interconnector was launched, cementing Britain’s internal energy market, to the considerable advantage of Scotland’s renewable sector. And, or course, the UK Green Investment Bank is head-quartered in Scotland, based in Edinburgh.

The obvious question is: what is the counterfactual? No doubt many business functions could go on as before. We do not know, and that in itself is a source of uncertainty. The Scottish Government’s wish to create its own regulatory system; the commitment to renationalise Royal Mail in Scotland; potential problems with diverging VAT rates and a separate currency: all will reduce transactions and the benefit of integration. Some of the divergence would be limited by common adherence to EU Single Market rules, but the terms on which Scotland may be able to negotiate its way back into the EU remain unclear.

The most well known example of this effect is trade between the US and Canada. The research shows that after controlling for the effects of differences in regional incomes and distance between the various regions in the two countries, Canadian provinces traded around more with each other than with US states of a similar size and proximity.

All of these factors, taken together, suggest significant business costs, or at least uncertainties, around the economics of Scotland’s independence – with corresponding implications for jobs. What, however, matters more than politicians’ interpretations of the evidence is the reaction from business. A growing list are now stating their intention to consider relocating from Scotland in the event of independence: financial services companies worried about future regulatory safeguards (Standard Life, the Alliance Trust in Dundee); multinational companies concerned about the costs of maintaining separate head office operations and the business environment more generally (BP and Shell); Clydeside military shipbuilding; Scottish companies concerned about the overall impact on investment and competitiveness like Aggreko and the Weir Group, which first spoke up two years ago. Some business surveys suggest that a third or more of firms may consider moving, and 65% of FTSE 100 companies have been negative about the impact of independence on business.

I recognise that the decision, at the end of the day, involves emotional issues as well as rational calculation of gain and loss. There is a deep pride here and it is foolish for critics of independence to suggest that Scotland could not survive on its own and manage its own affairs. And having lived here, I am well aware of Scotland’s sense of national pride and identity – though this has been amply expressed through law, education, culture and sport within the UK. I discovered when I lived here that there were few more lonely experiences than being an Englishman on the terraces at Hampden Park during an England versus Scotland football international (now, sadly, discontinued). All the same, I don’t want to see Scotland leave the UK family.

But there is also a steady growth in what I call ‘multiple identity’: people who are entirely comfortable as – say – Glaswegians, Scots, British and Europeans. I look at my own family. I have 2 Scottish children, born here; a Scottish step daughter and 3 step grandchildren; a large family of Indian in-laws of various nationalities; 2 separate families of Hungarian in laws, 1 from Dundee; and a dozen or so nieces and nephews of mostly mixed parentage. The era of exclusive identity is over.

Below is the text of the speech made by Vince Cable, the Business Secretary, at the Mansion House in London on 6th March 2014.

My Lord Mayor, ladies and gentlemen, it is a pleasure to speak once again to this distinguished and important annual gathering. Some of you may not regard that as a bonus, but even those of you who aren’t fans of mine will, I hope, acknowledge the merits of stability and of continuity in carrying through some pretty radical reforms.

Coalition achievements

And there have been massive challenges. In the wake of the financial crisis, BIS has had to do a lot more with a lot less – 28% less, to be precise. When I and my team came into the department, it had undergone 4 name changes in 3 years and its future was in doubt.

But in 4 years we have carried through, successfully:

– a massive reform of university finance

– revived and dramatically expanded apprenticeships

– redrawn the landscape for local growth and business support

– intervened on a large scale to address the critical problems of business finance through the British Business Bank, start up loans, the Green Investment Bank, supply chain finance, the Regional Growth Fund and a new vehicle for export finance

– floated Royal Mail and modernised the Post Office

– rolled out German-style innovation centres, Catapults, to bring the best of British science into business applications

– established effective shareholder control over executive pay

– modernised intellectual property law

– pursued radical deregulation

– created an industrial strategy designed to create a long-term framework for public- private partnership in key sectors like motor vehicles, aerospace, creative industries and energy.

Only time will tell how useful these interventions have been, but I don’t think we can be faulted for lack of vigour or commitment.

By achieving so much, we have also demonstrated that parties can work together in the national interest. I don’t pull my punches in public debate – nor do some of my Conservative colleagues. But when we come into work, we do so as a team to deliver results for business and for the country.

We have a recovery – a private-sector-led recovery – which vindicates the difficult decisions we have had to make. The question now is whether this recovery is balanced and sustainable.

Business lending

I see two main dangers. The first I have spoken about at each of these annual events: the continuing problems for business, especially small and medium-sized companies, caused by restrictions on access to finance in the wake of the banking crisis. Net lending to SMEs from banks involved in the 1-year extension to Funding for Lending declined by £1.3 billion in between the second and fourth quarters last year, and yet net lending to households from the banks increased by £16 billion over that period. This is utterly perverse. The mortgage surge is fuelling a housing price boom in London and the South East; the SME lending squeeze is impeding recovery in business investment, exports and in the productive, real economy. Fortunately, the Governor of the Bank of England is alert to the house price danger, and I am confident that action will be taken to stop another damaging property bubble. On SME lending, I am confident that refocusing the Funding for Lending Scheme onto business lending, and the measures we are taking via increased competition and Business Bank funding will bear fruit: promoting new challenger banks and new kinds of lending like crowd funding, and creating incentives for risk capital. So, there is still a serious problem on business lending, but it has been recognised.

Skills

Let me focus instead on my other worry: skills. It has long been accepted that Britain has a skills problem: shortages of engineers, computer scientists, people in the building trades and specialists of all kinds. A distorted finance-based boom sucked too many of our best mathematicians and engineers into investment banking. The recession has made the problem worse by making some valuable skills redundant. There are far too many badly needed craftsmen driving taxis or selling insurance.

I want to major on this subject tonight partly because I am sharing speaking duties with Sir Mike Rake. Under Mike, the apprenticeship programme at BT has become one of the most prestigious and sought-after training schemes anywhere. It proves that when practical training is delivered in the right way, the latent snobbery surrounding academic versus vocational simply evaporates. I hope and trust you all noticed that this is National Apprenticeship Week.

Skills and training has too often been a boring, bland subject dominated by worthy anoraks. No longer. The young people leaving school this year can expect to be in the labour market for another 50 years. How do we equip them with the skills that will enable them to thrive over a half century? As well as the longevity of working life, consider the technological changes they are bound to encounter over that time.

There are some big and controversial dividing lines, and I want to confront them this evening.

Careers advice

The first is the poor quality of schools careers advice. In a CBI survey of young people last November, 93% said that they lacked the necessary information to make informed choices – highlighting a particular problem with inadequate or non-existent advice on vocational options; just 26% were told about apprenticeships, only 17% on vocational qualifications.

Successive governments have failed to grasp this issue properly. Teachers are overwhelmingly graduates. They know about the world of GCSEs, A Levels universities and UCAS points – and will invariably point clever and highly motivated children in that direction. Too few schools understand or value vocational skills qualifications or the needs of teenagers looking for work or work experience and lacking work readiness: the 60% who don’t go to university. Many schools simply ignore careers advice altogether. This must change. I want to see more projects like the brilliant Job Junction being piloted in Burnley and the Black Country borough of Sandwell – where mock job centres are established in collaboration with local business, advertising and explaining real jobs in schools and promoting awareness of a wide variety of vocational careers. I also welcomed Nick Clegg’s speech last week supporting tougher Ofsted scrutiny of schools’ performance on careers guidance.

Protecting further education and training

We must also address the level of government support for vocational education and training, and the further and adult education sector. Every conversation I have in government on spending priorities starts with the line, “Do you want to take money from universities and undergraduates or from training and further education to achieve your spending cuts?” It is a horribly 1-sided debate. Almost all the mandarins are graduates – mostly Russell Group graduates. So are cabinet ministers, MPs, journalists and TV producers, business chiefs and – I suspect – most people in this room. Top people who started their careers on the shop floor tend to be treated as anthropological curiosities – like tribesmen discovered in the Amazonian rain forest. I only know about that exotic world because my father was a factory worker turned FE college lecturer who taught building trades – and cared passionately about training.

When I came into office, the one specific spending cut already pencilled in was for FE and training. I am proud of the fact that I and my ministerial team resisted the easy option and reformed university financing instead. It didn’t make us popular on the streets, but it has strengthened HE and, just as important, freed up resources to support apprenticeships and training in general. As a result, the Prime Minister was able to say on Tuesday that we are on target to support two million apprentices over this Parliament.

I hope business will engage with the skills agenda. Our reforms mean that employers are now setting apprenticeship standards and shaping qualifications; yesterday we de-funded 5,000 qualifications that employers do not value. Business will soon be directly funded to buy training for their apprentices. By getting involved, business can ensure that future governments do not sacrifice investment in upcoming generations to make cosmetic short-term improvements in the public finances.

Immigration

Third, we cannot duck the issue of immigration. As industry leaders like James Dyson have pointed out, it is all very well ministers and others promising to emphasise engineering in schools, but business cannot afford to wait years for the specialists they need and which they can currently only obtain internationally. Business cannot understand why outstanding Chinese and Indian students who graduate from British universities with valuable skills can’t stay on and pursue their careers in British business.

I am well aware that this issue is politically toxic. Those of us who put our heads above the parapet and point out the positives of immigrant workers and students need a tin hat and as gas mask. And I am well aware that were it not for the freedom of speech accorded by being in a coalition government, I would long since have been despatched to an unmarked political grave for daring to say so.

I start from a fairly simple, basic economic proposition embedded in the EU Single Market: free trade: the free movement of goods, services and labour – is good. This is particularly true about the free movement of people bringing skills in demand. The scientific community understands this well. The spread of ideas across borders needs people to be able to move smoothly. But they’re not the only ones. Discussing America’s treatment of overseas students, for example, Facebook’s Mark Zuckerberg has said:

“In a knowledge economy the most important resources are the talented people we educated and attract to our country. Why do we kick out more than 40% of maths and science graduate students after educating them?”

He could have been speaking about the UK as well.

The most commonly expressed public concern is that people who come here to work somehow take away work from local workers. Net immigration rose significantly last year, but of the increase in net employment, most of it – nearly 90% – benefited UK nationals.

Somehow, many of the same people believe that migrants come here to sponge off our wonderfully generous welfare system or free ride on the NHS – presumably when they’re not working. Once again, while there will always be stories to titillate the tabloids, facts are thin on the ground – though we do know that fewer than 3% of migrants to the UK claim Jobseeker’s Allowance. There are a host of reasons to be a tourist to the UK, but its benefits system is not one of them. And we are tightening the rules.

I know this audience understands how openness fuelled our economic success historically. The City’s greatest entrepreneurs – the Rothschilds, Warburgs, Cazenoves – were immigrants. We still have a lot to offer: a strong advanced manufacturing sector, unbeatable professional business services, a higher education sector that remains the envy of the world, cutting edge science. And we have an industrial strategy that will reinforce and build on these positives. But none of these advantages can be fully exploited if we put up a sign saying ‘Closed for business’.

Getting the facts right

There are, of course, public concerns which elected politicians have to treat with respect. I don’t think anyone is arguing for unrestricted immigration – in particular of unskilled labour. There are abuses that have to be dealt with. And borders need to be properly policed. But we just have to stop treating people coming to work here as if they are a problem. We need to kill the scare stories.

A digest of evidence, the subject of some publicity over the past few days, confirms that migrants workers do not, overall, displace UK workers.

I appreciate that there are particular concerns over EU migrants, who enjoy freedom of movement. There are about 1.5 million EU migrants employed in the UK (and 2.3 million altogether), making up roughly 5% of the UK workforce. Meanwhile, around 2.2 million UK nationals live elsewhere in the EU – an important reminder that migration is far from a 1-way street. Moreover, British citizens returning to live in the UK have, on average, made up around 15% of immigration inflows over the last 5 years.

A marked reduction in immigration from the EU would mean, as the OBR have confirmed, an increase in the budget deficit and a much slower reduction in public debt. The same is true of overseas students who pay full market tuition fees, cross-subsidise British students and help to keep our universities financially viable.

Bearing down on economic migration is a clear example of a restriction on trade. In medieval times, guilds used to prevent travelling artisans from plying their trade outside their native area, with a deadening effect on competition and innovation. What was true then is true now. Bear down on immigrants, and you lose some of the most dynamic, innovative and imaginative workers in your economy. The costs are huge. In a report last year, the Centre for Economics and Business Research estimated that an EU-exit scenario with tighter migration controls would cost the country £60 billion a year at current prices.

Conclusion

I know from experience that these arguments are difficult on the doorstep, where – after years of pressure on living standards and worries about jobs and housing – immigration is deeply unpopular. But the answer I give, plagiarising my predecessor Lord Mandelson, is that I am “intensely relaxed” about people coming to work and study here and bringing necessary skills to Britain – provided that they pay their taxes and pay their way. And, actually, if you survey the public on migrants who learn English, work hard and pay taxes, you find – as the think tank British Future did in exploring attitudes to Bulgarian and Romanian migrants – that 72% believe we should welcome them.

Lower the temperature of the immigration debate, and we can create greater room to discuss the more significant, more challenging and more provocative issues around skills. That is where our long-term interests really lie.

Thank you for listening. I hope you enjoy the rest of the evening.