John Denham - Address to Association of Colleges Conference

Good afternoon. I would like to start where the video ended by congratulating you for Colleges Week. There have been at least 150 events - everything from business breakfasts with local employers, such as the one I attended at the College of North East London, to open days and skills challenges such as Gordon Ramsey or Jamie Oliver style cook-alongs. Well established but no less important are events like the attended the awards ceremony held by my local college, City College in Southampton, at St Mary's Stadium.

If you looked across the ingenuity and diversity of the events I think they were representative of the ingenuity and diversity of colleges themselves. It was a mark of the way colleges have regenerated themselves over the past few years and frankly long overdue!

Ever since I came into the job I've wanted to promote a simple idea. Every college is an asset to its community, serving local people, communities and employers. As leaders of your colleges you are also leaders in the community, promoting social inclusion and enabling people to develop the skills they need to progress in work and life.

As I have said in the past, we don't give the LSC a specific budget to give to you for tackling gun and knife crime. But it's you we turn to when we are working to improve community cohesion, to give people choices and to improve their life chances.

Every local community includes businesses, public services and the people who work for both of them. Colleges help people get qualifications to get jobs and then to get better jobs. And they help local employers grow the skills they need, making communities stronger.

Your work is fundamental to many of our ambitions across Government. You will be an important part of our agenda to make Britain a fairer and a better society. Improving social mobility is a key ambition for us and the Government will be publishing a white paper drawing together the work of many departments in a few weeks time. I know that you have always been committed to this agenda, may see it as shorthand for describing what you do.

Social mobility is measured by increased life chances and increased income. In the last five years over 5 million learners have been helped to read and write. 2 and a quarter million adults have got their first qualification in literacy or numeracy. In Train to Gain, 43% of people who have taken qualifications have reported receiving pay rises, 30% a promotion and 4 out of 5 want to carry on learning.

People's lives are dramatically improved by their learning. But so too are those of their children. For every adult that improves their skills we are able to see increased ambitions, higher achievement and better incomes for their children. That's why social mobility is so important and why FE colleges are so fundamental to making it happen.

Response to Economic Downturn

Colleges also drive economic development and regeneration. You all know the seriousness of the economic challenges that your communities face. So now more than ever, investment and faith in the role of FE colleges is hugely important. As Government we have shown strong and decisive leadership to get families and businesses through the downturn by providing real and serious help, whilst investing for the future. Our every instinct is to be on the side of hard-working families, and on the side of those who will take advantage of opportunities to get on, to improve their and their families' lives. So the role of colleges in our plans could not be more important.

Our investment in colleges over the last 10 years - with new buildings rising up in every part of the country - has paid dividends and will continue to do so. The Prime Minister has said, in response to our critics, that this Government fixed the roof while the sun was shining. In the case of many FE colleges, we fixed every other part of the building too.

Colleges' contribution to society and the economy isn't merely anecdotal - your research, published last week, showed that those who have studied at colleges in the past 15 years contributed about £28 billion in added income in 2006/07. Alongside there are reported savings to the NHS and lower takeup of benefits. That research showed that for every pound invested by the Government in colleges, the taxpayer will see a return on investment of £1.70.

All of this is a far cry from the early 1990s when there wasn't a single penny available from the Government for FE capital spending. By 1997, the National Audit Office were criticising the state of many FE buildings in which it was unfit to teach or to learn. (Excised political content)

Government Investment Strategy / LSC Grant Letter 09-10

Capital investment is typical of the good settlements that colleges have come to expect in recent years. Today I can confirm - in line with commitments made last year - the overall budget for the LSC will increase to over £12.1 billion in the next financial year - an increase of more than £500 million.

I intend to direct this investment towards people and businesses that need it most at this time.

Funding for adult learning will increase to over £3.3 billion. This is £130m more than for the current financial year and is expected to support over 3 million adult learners;

The extra support for small businesses through Train to Gain increases that budget to £925m - 16 % or £130m above the budget for this year.

Total Government investment for apprenticeships will increase to over £1 billion, £360m of which will be directed to apprenticeships for adults aged 19 and over

Investment in young people's participation in learning will rise to almost £6.7 billion in 2009-10 - an increase of nearly 5% compared with 2008-09.

With this enormous investment comes, though, a responsibility to use every pound as effectively and efficiently as possible. The evidence suggests, inevitably, that colleges vary in the efficient use of public money. Benchmarking data is available and, over the coming year, you can expect greater encouragement to move towards the standard of the top-performing colleges.

Last year I said that I wanted you to work more closely with JobcentrePlus - and that's still a priority. James Purnell and I are working together so that we can better integrate the employment and skills systems so that people can get into and get on in work.

There will be joint commissioning of employment and skills programmes here in the West Midlands, in Greater Manchester and in London too.

Together with DWP, we recently announced that £100m European Social Fund money has been allocated to help people who are losing their jobs, to get new skills and back into work. FE colleges will be able to bid for this shortly.

But we need to do more. Many people are worried about losing their jobs and many have already done so. This must be something we address through all of our resources not just through additional programmes around the margins.

When someone is facing redundancy or, often these days, they are let go at the end of a contract, they need to know that colleges will be there to help them with advice and support as well as education and training. I want to free up mainstream capacity and funds from within the system so that you are able to help. Several of you have told me that we should make funding more flexible and that we should cut back on the need for the unemployed to have to get specific qualifications.

So what we will do is to explore with colleges and providers ways in which budgets can be used flexibly within key priorities where the learning programme delivers sustainable employment. This will include exploring ways the funding approach can reward college or providers where they are able to demonstrate helping learners into work. This could be keeping the newly unemployed in touch with work through structured work experience and providing them with tailored programmes that lead to sustainable employment. These programmes would not necessarily have to lead to a target bearing qualification in the first instance but it would be expected that the learner would continue training through Train to Gain when they have moved into employment

Today more than ever, we need to be creative and flexible when thinking about delivering training under challenging conditions. For example, some companies are moving down to a four day week - an ideal opportunity to work with them to provide training on the fifth day, to improve the productivity of the company.

I'm sure you have many other creative ideas about how to offer a service that fits your local circumstances. At an FE seminar last week, I heard ideas from colleges on how to provide meaningful activity to those not in work. People also talked about opening up college facilities to entrepreneurs and encouraging some learners into teaching. There were so many good ideas that I have now asked the AoC to lead on producing a guide for the sector that brings the ideas together.

Now look, we cannot wait for every initiative to come from the centre or be endorsed by ministers. Nor should colleges wait to get permission to be involved in these activities.

As the Department for Innovation, as well as for Universities and Colleges, we are keen to encourage genuine frontline innovation, created by you not imposed from above.

Innovation does not always have to involve brand new ideas - I expect Colleges to look to others and to adapt existing knowledge or technology where you think it might suit your local circumstances. I want you to ask 'What can we do in our community to help? How can we organise provision and bring in local employers? What's working elsewhere that would work here?"

We have been looking at models like Westminster College setting up a Group Training Association. Based on the successful Australian apprenticeship scheme, they intend to recruit a large number of apprentices who are then made available as a flexible workforce to employers and other 'host companies'. It's a model particularly attractive to small employers concerned about future order books or the risk involved in taking on a new worker.

Colleges and Train to Gain

Train to Gain must help colleges to be innovative in the ways that they deliver training. We're increasing the budget to over £1bn that will support over 1 million learners by 2010-11. Train to Gain is flexible and lends itself to local innovation. We shouldn't just see it as a service to employers; it's much more than that.

Train to Gain will remain our flagship policy for delivering adult skills and I want 100% of colleges to be fully engaged in it. My sense is that most colleges are engaged with Train to Gain with high or increasing levels of commitment to it. Some, however, have still not entirely accepted the direction of travel and perhaps would prefer it to go away. I do want to say to those colleges - Train to Gain is not going away. In fact it's still growing and developing, as Plan for Growth acknowledged.

I do recognise, though, that Train to Gain represents a radical change in the way funding is secured and training is delivered. That takes some getting used to. So today I'm setting aside £30 million to boost colleges' capacity to use Train to Gain. That £30m will help colleges to raise capacity to work with more employers - and make best use of the £350m package of support for SMEs. But there is a real sense that this is a 'last chance' transformation fund. There will not be an endless string of chances to commit to Train to Gain.

Both now and in the future, Train to Gain can help keep the economy strong and communities too. Imagine what might damage might be done if we abandoned Train to Gain (excised political content). Cutting Train to Gain would mean scrapping millions of people's life chances.

Now is the ideal time for colleges to make the same case to business, and to make best use of the new £350m package to help companies get through the tougher economic climate. That extra £350m is targeted at SMEs, the businesses most vulnerable in the economic downturn.

We want you to help employers get this with a very minimum of bureaucracy. That means relaxing Train to Gain rules to allow funding for bite-sized units of qualifications in subjects such as leadership, risk management and customer services. Things that we know that SMEs prefer - and are proven to bring quick benefits to business. And we are relaxing the rules to allow SME staff free training at level 2 whether they have reached this level or not and we're investing more in funding for staff training to level 3.

Colleges and Innovation

I have already talked about the need to innovate locally. Colleges can also step up the ways that you, like universities, can transfer their innovation and knowledge to employers. Colleges should take seriously their role in driving business innovation and gain credit for the innovative work that they already take part in.

That's why our Innovation Nation white paper earlier this year, introduced plans for a Further Education Innovation Fund. This will provide extra funding to build capability in knowledge transfer and spread good practice so that more specialist business links can be expanded.

I have really been pleased with the overwhelming response - we received more than 130 bids in July and will be announcing the results soon.

The way we rebuild our FE colleges will also help us to drive innovation and support new skills in the economy. The £2.3 billion plan to develop new low-carbon buildings for further education colleges will benefit over 150 communities around England. It will also support an industry to develop new methods and skills for sustainable construction, helping to kick start a new market.

In these difficult economic times its right to keep investing in new facilities and buildings in FE. But it is also our duty to make sure every taxpayer's pound works as hard for the country as they first worked to earn it. So when we build a great FE college, let's not just build a building. We must make sure we train the people who build the building, with more trained workers and apprentices.

Today the LSC is publishing a Building Colleges for the Future Prospectus, giving an update on this strategy. The prospectus also stresses that all contractors who access public funding must have in place a formal training plan that maximises access to training opportunities. Construction companies will be required to arrange on-site apprenticeships and work-based learning for their staff. So every pound we spend on improving buildings is also a pound spent on improving skills.

SFA

The priorities for funding that we are publishing today take us towards the time when the LSC will be replaced by new ways of delivering funding to colleges. I know that some people will always argue that now is not the time to make changes. But throughout this speech I have made it clear that we need to develop a system for funding that allows flexibility and responsiveness to employers and learners - something that many colleges have been asking for - for a long time.

I believe it is better to press ahead than to allow the confusion and uncertainty of delay. But we should also be clear that the environment for colleges and training providers will remain demanding as employers and learners become better able to make the choices that will shape the system.

Those who may have hoped that the creation of the SFA will mark a return a cosier system or one in which local authorities hold the whip hand will be disappointed.

I also know that many are also concerned that the creation of the Skills Funding Agency will hasten a decline in broader adult learning. I want to recognise and respond to those concerns. Like you here today, I share a passion for wider adult learning as well as for vocational and work-related learning.

It is true that our changes have meant the absolute number of LSC-funded courses has dropped. I and my predecessors have never made any secret or apology for our prioritisation of longer courses and for those that need learning the most. We have put more money into adult apprenticeships and longer vocational qualifications, such as those through Train to Gain.

But we must be realistic about what is really happening. We should not assume that if a course is not funded by the LSC it no longer exists. Many courses that were funded by the LSC are now paid for by employers. There are many shorter health and safety, food hygiene and ICT courses that are now rightly funded by employers and by people that can afford them. In all, there are some half a million courses delivered through FE that are not funded by the LSC.

Nor should we miss the true extent of learning in society. For example, it is true that Spanish for holidays was one of the most heavily-subsidised short courses in the past, but these courses have not disappeared. The Floodlight prospectus lists more than 1,000 in London alone. Over 2 million people regularly use UK Online centres, located in community spaces like libraries, pubs and childrens' centres.

Pensioners are often leading the way by organising their own learning. The U3A (University of the Third Age) movement is hugely popular. There were 47 new local groups established in the last year and membership has already topped 200,000.

We have recently produced a report on our Informal Adult learning findings and I'm hugely excited about work going on with CALL and with other stakeholders to work up proposals to be published in the New Year.

Let me end where I started, with colleges week. I'm grateful to each of you and especially to David Collins and Martin Doel at the AoC for supporting the idea so enthusiastically. The reason I suggested it earlier this year was because I thought simply - that FE is something worth celebrating.

I hope you can go on with it every year and proclaim loudly that every college is an asset to its community, serving local people, communities and employers. As leaders of your colleges you are not only focused on narrow educational terms but also leaders in the community, promoting social inclusion and enabling people to develop the skills they need to progress in work and life. With the challenges that we all face, this is more important than ever before. Thank you for listening.