Local 'compacts' will help to meet employers' needs and should boost institutions' funds says Ron Dearing.

It was once said of Keith Joseph that for him to enter a room was of itself a statement. I can testify to that. Once, when he was the secretary of state for trade and industry and I was chairman of the Post Office, I took him into the big Royal Mail sorting office at Brighton. As he walked in, the postmen responded by walking out en masse.

Tony Benn was no less a personal statement in his years as the secretary of state for trade and industry, and in that lies the reason for one of the creative ideas of that Labour government coming to nought. Benn realised that to get Britain moving industrially we needed to get the company managers and their shop stewards at the level of the firm entering into a compact with government in which the three estates of the realm - owners, workers and government - would come together through a "planning agreement" or compact in which each would make commitments to actions to their mutual benefit. It came to nothing because to employers, Benn was a statement and their reaction was much the same as that of the postmen to Joseph.

You might now be asking what relevance this bit of history has to ÖйúAƬ. It is that we can borrow the concept of a compact involving the key players at local level - the institution, employers, students, local authorities and so on - as a vehicle for identifying the needs of each party, and how each can most effectively contribute from its own resources to the common good. We can do so with this fundamental difference from the days of Joseph and Benn: there is now no reason why they should not join together in long-term partnership.

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Indeed, they each have much to gain and nothing to lose. By coming together, they need to clear the clouds of unknowing about their aspirations, and having identified their separate needs, see how by acting in concert they can satisfy them.

One of the main recommendations of the committee of inquiry into the future of ÖйúAƬ, which reported nearly three years ago, was the creation of compacts. The committee owed this concept to Sir John Arbuthnot, vice-chancellor of Strathclyde University. It was at a time when in Scotland there was a growing realisation that the outright commitment to competition of the 1980s needed to yield to a culture of creative collaboration across the community of ÖйúAƬ. Moreover, in Scotland in particular there was a strong commitment to partnership in a much wider sense in the Scottish national interest.

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The committee developed that basic idea into proposals for a series of compacts, most particularly at the level of the institution, involving the local community, the local employers, local authorities, staff and students.

In any such compact it is essential that each party is able to identify its needs and what it can contribute. One of the problems my committee encountered was that while employers had many criticisms to make of the products of our universities, we did not find a clear consensus at national level of what specifically was needed. But at the local level this should be much easier to define, articulate and from that to proceed through a compact to action.

Inevitably in such compacts, the issue of resources will come into focus. The aspiration of government to bring participation in ÖйúAƬ to 50 per cent inescapably means a growing financial commitment by the state. Our report recognised that after graduation it was fair to ask the student to make a contribution to reflect the enhanced earnings that normally come through ÖйúAƬ. But we did not succeed in eliciting any national will to contribute more to the funding of ÖйúAƬ from industry and commerce. In saying this I acknowledge that they do make contributions, particularly to research, and there have been mean generous benefactions for which many an institution is deeply indebted.

But within the framework of a compact at local level, whether it is in relation to the traditional work of ÖйúAƬ in equipping young people to get their first degree or in the now inescapable necessity of enabling people to continue in learning throughout life for their own good and for the good of their employers, the compact provides a vehicle through which employers in seeking a response from institutions to their needs can in return be expected to make a reciprocal contribution to the increased need for resources. Perhaps not many employers read the Times ÖйúAƬ Supplement, but vice-chancellors do and I would suggest to them that in picking up the concept of the compact outlined in our report they have a means of engaging the world at work in a way that could bring a much needed dividend. Moreover, they might reasonably say to the employers that to the extent they wish to call the tune, perhaps they should dig more deeply into their pocket to pay the piper.

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Lord Dearing was chairman of the 1997 National Committee of Inquiry into ÖйúAƬ.