 Can we you all appreciate why tensions in Europe are dominating the news... ...is these certainly taking up an awful lot of my time at the moment? But while we wait for some sort of resolution from the eurozone crisis... ...we can't take our eyes off the domestic economy or domestic politics. In fact international problems in my view only make it more important... ...that we address some of the underlying issues that are in our control, in our economy. If the crisis in the euro zone has shown one thing, it's that we're over-reliant upon those currently damaged and distressed markets. Insulating ourselves from external shocks like this will never be completely possible, but we can mitigate the effects by targeting trade with the fast-growing emerging economies around the world, by focusing on our areas of competitive advantage, by finding ways to be more productive, innovative and nimble, and in particular, and this is a theme I have been pursuing because I think it's been a bit of the Cinderella to debate, I think we need to focus more on the needs of our fast-growing, medium-sized businesses in supply chains within the mix of our economy. That's the bread and butter of what we can do, but it's a problem isn't it? The problem is every other country in the world looking for growth is doing the same thing. They're all looking at their sources of competitive advantage and they're certainly all chasing the emerging middle classes of the next tranche of economies in Latin America, Africa and Asia. So doing the right thing won't necessarily be sufficient. So I think we've constantly got to be looking for differentiators, areas where we have an extra competitive advantage, or looking at the debits on the balance sheet which we need to transfer into credits, potential achilli heel to our economic performance that we need to make sure don't bring us down. And I think the labour market and the importance of the labour market to our business model is a critical credit on the balance sheet which mustn't be allowed to be a debit. That flexible, highly skilled and motivated labour force. When I talk to big international investors who've come to the UK over the last few years, they generally see it as a plus. They'll tell me that that highly skilled, highly motivated, flexible labour force is one of the reasons why they like investing in the UK. But I don't think that should give us grounds for complacency because those of us who know the granularity of this labour market in more detail know that it's like the old adage. When we're good, we're very, very good, and when we're bad, we're awful. We do have some weaknesses in our labour market, particularly in the tale of less well skilled, less well positioned individuals who find it harder to find their place in a rapidly developing knowledge-based economy because the key thing there for me is how rapidly times are changing. The rising tide of global competition is altering what we mean by higher skilled. The balance of jobs available at different levels is shifting and shifting quite rapidly. And it's no surprise to me that in the recent rather encouraging labour market data, the encouraging bit of the labour market data is the amount of job creation, but wait for it, in the more highly skilled sectors. And that's the big challenge. I think it means we need to support particularly our young people along a more difficult path than many of us have travelled. And it means we need to do this more effectively than we've managed to do it in the past. A long tail of those far from the labour market is not a new issue. It's not a unique issue to the UK, but it's an issue in my judgment whose time has come. And the fact that with all the other business priorities that we have on our desks, so many of you are willing to give up time to talk about it this morning, I think supports the judgment that it's an issue whose time has come. As we rebalance the economy away from government and consumer spending towards business investment and trade, we need to address both unemployment and the more difficult topic of inactivity. We simply can't afford to continue having almost 6 million people on some form of out-of-work benefit when we're suffering skill shortages in other parts of the economy. But the bit of that 6 million I'm going to prioritise this morning because I believe it has to be the priority in a world of hard choices is the nearly a million young people who fall into that group of inactivity. Taking the whole of that group, the direct costs and the opportunity costs are simply too great. And we know what policy mix will need to tackle it. It's a mix of measures on welfare, on education, on labour market reform. We know what we need to do is just a lot more difficult to make it work and have traction. Now I'll touch on all of these today. First talking about how we react to the immediate crisis, how we support today's 14 to 24-year-olds with making their way in the world, and second how we address the long-term problems of our society and school system that lead to this drift inactivity. Before I do, however, given I'm going to focus mainly on young people, let me just say this, none of my comments should be perceived as talking down the young generation. In fact, I want to make quite the opposite point. I think today's young generation are highly impressive, and I think we ask a lot more of our young people in making their way in the world than was certainly the case in my and many of our generation. So it's not about saying young people aren't what they used to be. Young people are phenomenally streetwise, and therefore if they can't find their way through this complex fog into the labour market, there's something we are getting wrong, not necessarily the default answer that there's something they're getting wrong. The challenges, as I see it, isn't primarily about them, then it's about us. They're making choices from as early as the age of 13 that they will define what they'll be able to do for the rest of their lives. It's clear to me that employer concerns about some young people not achieving the right mists of basic and employability skills demonstrate there's a need to focus on the system that lets them down, from poor careers advice to failing to inspire, guide, and support them. It's particularly important we do more to help those young people being let down in the parts of the country where unemployment is high, skill levels are lower, and dependence on public sector spending has led to a weaker private sector seedbed, not exclusively in the north and the west, but more typically the further you get away, at least from the affluent parts of this city. And in particular it's a painful truth that young people will always do better where they have stronger parental role models. Now it's a big ask to a business community to say how much responsibility can we take for some of the weaknesses in the social fabric. But I think we do need to ask how we pick up that button and ensure that every young person has the guidance they need to make the most of their natural talents. Easy stuff to talk about in broad brush terms. Now I mentioned there are two parts to this, the short term and the long term. In approaching the short term I think to be honest there's three groups of people we need to think about. First there are those who have the ambition and actually have a good start on having the skills but because of the economic situation there simply aren't jobs. How do we keep those people motivated and enthused when doors simply get closed in their face? Second there are those who certainly have the ambition but lack the basic employability skills they need to realise them. They need a lot of help but they're halfway there. And third there are those who never develop the ambition in the first place often because of those socioeconomic factors such as intergenerational worklessness. For the first group the skilled job hungry young people well self-evidently it's a return to growth which is the major thing we can do to help them. I think there are things we can do to minimise the disadvantages they face. Hard choices like not putting up the youth minimum wage I think are pretty important and getting right some of the choices we make which we may think are mainly about education issues but actually have an immediate impact on the labour market. I still struggle with why it's a good idea to scrub work experience for 14 to 16 year olds. I struggle to understand why it's a good cost saving to lose capacity in careers advice particularly at this moment in the economic cycle. Now return to growth alone won't help these people who need more skills my second group for them to road to the labour market is bumpier and it's a little harder to find sustainable work as well as the right support from the state these young people will benefit from any opportunity to learn on the job be it through apprenticeships or studying for a degree or a college course part time. Be it frankly work experience and one of the frustrating things I've had to deal with since Christmas in the first half of this year is the way the work experience debate spiralled into a negative when frankly it should be seen as a positive. Again the advice challenge is substantial for this group. Now I think there are some good things happening apprenticeships and peer apprenticeship programmes are key they have to be good quality in CBI we look forward to engaging with the Richard review on that we also have to provide them on scale and overall I think we have a good news story here more and more people are studying for apprenticeships more companies are offering high quality training that helps people build lifelong skills in trades last year there were nearly half a million apprenticeship starts as many of you will know 63% higher than the previous year and as long as we keep the focus on quality as well as quantity that must be a success story business already invests huge amounts of time and money in apprenticeships we already talked to some of the companies in this room who are very active in that market and I think the apprenticeship wage subsidy introduced alongside the youth contract not talking specifically of the youth contract I'm talking about the 1500 pounds apprenticeship subsidy for every additional new hire I think should help tip the balance towards taking on more young people into that exciting opportunity but there are problems too for too many of our apprenticeship starts are at the higher level and these are sorry too few of our apprenticeship starts are at the higher level and these are much the most valuable route so I welcome last Friday's announcement of 4 000 new hire apprenticeships to be funded from the 25 million that the government announced and set aside in the budget but the other challenge for me is not cash cost but the swathes of bureaucracy accreditation assessment assessment and inspection frankly if you're asking a private sector employer to get involved in apprenticeships for the first time the notion that they'll be treated a bit like me as a school governor has to accept my school will be treated with an off-study inspection ain't the best way to signal that we want a business partnership into a friendship we hope the halt review will give us a pathway to addressing some of these issues of bureaucracy in particular through improved local brokerage to SMEs most pressingly of all however let me just come briefly to my third group the ones who have a lack of ambition as well as a lack of skill the hardest to reach now the work programme and the youth contract can play a role in helping them offering intensive support where previously I think they've fallen between cracks business wants to be part of this not out of some sense of corporate and social responsibility we want to be part of it because the case for action is compelling for the long-term help partly of the economy but equally importantly the fabric of society as I said earlier people are our differentiator and that's where we need to invest and the critical point here that we know but I think it bears repetition this is not a consequence of the recession it's been exacerbated by what happened in 2008 9 but youth unemployment has been rising depressingly and sustainably since 2004 so it's clear that a return to growth alone will not be enough to tackle the underlying causes particularly for that third group not having people with the right skills and attitudes means that unemployment is able to blight lives we're talking of a youth cohort who will work longer than we will need to work we're talking of a youth cohort who could easily be looking at 55 years of working life yet we hobble them with the scarring effects of unemployment in their first five years imbalances between regions of the country mount up further the costs of those millions of people out of work running to billions of pounds of benefit every year look at the last month's borrowing figures probably the biggest reason why the borrowing levels outpace the market was the downturn in economic growth and the immediate impact that has on the benefit bill the result is short divides between the haves and the have nots across generational lines as employers we can and should in my judgment step up and give all that we can to help young people have the chance that they deserve for government helping employers make the business case is important that's why the youth contract which I worked on in the latter part of last year with the DPM strikes the right balance recognising the work each employer is doing for the wider community and more than giving back the national insurance that an employer would pay in giving that young person a chance into employment so the challenge is making it simple for firms to be involved this is an area where the youth contract in my judgment needs to be made more successful I know it's early days but many employers phoning the helpline in the early days of the youth contract didn't receive the help that they needed that's certainly what my SMEs have been saying to me and it's just a fact of life we talk about the alphabet suit of initiatives which we layer one on top of another to help young people I'm paid to understand these things and help CBI member companies I struggle to keep up there are 47 different employer employment initiatives for employers in England alone which offer funding and support for businesses taking on and training young unemployed people busy firms need the process to be easier now business will step up but we need help if ever there was a case for not being able to see the wood for the trees this is it confusion dilutes well intention policies and the impact they should have and we can't have our young people being denied life changing opportunities particularly important as I've said for small firms so let's cut through the bureaucracy let's have a single portal for employers who want to get involved with well brief staff able to point firms in the right direction through their understanding of the suite of initiatives product knowledge one phone number one website that gives firms the information they need to make a difference the goal should be to increase take up of all the options on the table particularly the work program by offering a service that's right for business first time and I'm glad we'll be hearing later from transport transport for London about the progress the six prime providers here in the capital have made in delivering a simple effective interaction across all three of my groups of young people I've highlighted the challenge of advice which I think is a critical part of getting this right seems increasingly clear to me that there's a pretty big role for business that straddles the short term issues I've been talking about and the longer term challenges we face with raising ambition for all young people I think this means giving practical examples of young people to young people of why school matters like the fantastic new visitor centre at national grid's London power tunnels project I think this shows what can be achieved and importantly gives young people access to young employees working on a phenomenally interesting project like that people they can relate to means opening a route to better advice and workplace understanding that our young people need at especially at a time when I've already suggested the investment in schools careers advice has been going backwards by engaging with schools I think firms can help young people appreciate the choices and the possibilities that the future holds the STEM ambassador scheme science technology engineering mass as you'll know which puts people in the field into schools to talk about the real world has blazed a trail in what I think we need to do more of it's one we hope that the new inspiring the future initiative on school visits will help expand across more sectors and finally and most importantly it means business supporting schools on delivery by addressing the school's self identified need not presuming that we know where a school is looking for help business in the community's business class program leads in this field and I know Paul Dreschler from weights will talk about this in a few minutes embedding business school links like these is essential and there's much progress being made the challenge now is to get every school connected we need scale this was a thinking that lay behind the idea of local facilitators in the cbi's action for jobs report last november that ken mcmeacon of gregs led for the cbi and which we have a progress report table today the little a five booklet the idea is not to duplicate the exist excellent programs that I've mentioned but to create a network that helps extend their reach so so far I've looked to the immediate a young unemployed today young people from their early teens facing a tough labour market they lead us to they need us to make progress on the things I've mentioned so to summarize growth to create jobs our first priority investment in skills for the future especially through apprenticeships the second major contribution business can make support for young people in the labour market yes through a youth contract but turbo boosted by ending the confusion for employers of a myriad of schemes and finally embedding our progress in business links with schools and extending those links into areas where the private sector has so far had limited presence these are essential goals but it addresses the symptoms of a much more deep seated disease and it's to this I want to turn in my concluding comments some of the things I've talked about greater involvement of business with schools and vice versa vice versa will help but I think we need a broader more strategic debate with business at the table about why so many of our young people are not getting the support they need it's not about secondary education and the vocational paths alone it's about keeping people engaged in learning and I welcome the debate that started in the last week on the GCSE curriculum and whether it's fit for purpose where I might differ incidentally from the secretary of state it's not in the diagnosis but in the solution I think the question about the GCSE it should be a wider one if we have now as a country committed to the ambition which certainly the cbi supports to get all young people to remain in learning vocational or academic workplace school or college or training provider up to the age of 18 that we can no longer let young people seep out of learning before they've got an essential seed bed what is the purpose of a exam focus at the age of 16 rather than a learning focus at the age of 18 in truth however this is a later part of the challenge the more we've looked at what goes wrong and why so many young people fall between the cracks it takes us back to a story we know well about primary education about early years education about what happens in families before children even get into nursery classes the figures back this up and show how soon in a young person's life disadvantage can take effect by the age of three colleagues the children of graduates typically have vocabulary 12 months ahead of the children of less well educated parents by the age of five the average vocabulary test of those in the lowest income quartile is almost a year behind those in the middle quintile and by the age of 11 one child in three leaves primary school without reaching the expected standards in reading writing and maths and they don't catch up in secondary school they're not making sustained progress in all three basic aspects of their schooling and this leaves them with major problems as they try to develop their employability the problem for many of them is that the link between what they do at school and their future potential has not been made clear to them the reasons for applying themselves to do well at school are unclear the system doesn't help them key performance indicators that drive a culture of relativism that says it's okay if a certain percentage of young people don't make the grade contribute to that long tail of underachievement regulation of school leavers leaders and regulation of teachers that drives them to a tick box mentality rather than making the difference we all know they can and want to make leaves a lack of room for inspiration i've been struck in the cbi's work on education this year by how the truly inspirational teachers we meet tend to be the ones with a rebellious streak and good luck to them you have to have one to make a difference in our current education system and that needs to change we need more ambition for all we need to give young people an understanding of what they could be and the support to get there we need mentoring and positive role models for those who need help to understand what life can be there must be support for teachers who really make a difference underpinned by performance management that encourages the good performer and improves the less good and we need to have rigorous standards that stretch our children and finally i think we need an ongoing dialogue between schools and the world of work about what we want our young people to succeed in it's complex and yes more so than it was for us but there's more potential too i think the time has come for policymakers in all political parties to accept we need a long term strategy to develop the talent we need to enable us to succeed in a global economy that's why i've asked the team at the cbi to look deeper at how we school our young people and do so working with the education system not against them to complement the work we've done in the last six months on the access to the labour market and we'll be bringing our recommendations to our annual conference in november in london and i hope i've given you a flavour already of why it matters i think the education of our young people is a predictor of our future economic success it's the differentiator i talked about earlier i'm sure i haven't said anything to you today that's a surprise but the fact that this remains one of the absolute national priorities for business and government to tackle after all the summits we've had to tackle it says that we've been getting something wrong i don't think it's rocket science to tackle it but it does require a plan and effective implementation because it's the difference between the great exporter the great high-tech manufacturer and the leading world economy that we could be in the next decade or a lesser britain that the cbi is not prepared to put up with i don't think there can be any more central issue for business thank you very much