My Lords, it gives me great pleasure to move this Motion, focusing on an area in which I have a long and abiding interest, as most people know. I declare my interests, which are twofold: first, as an ex-apprentice, and secondly, as the only apprenticeship ambassador in the House of Lords, I think.
The objective of the apprenticeship levy is agreed by everyone: we want more good-quality apprenticeships. When the Government announced their intention to create 3 million apprenticeships in the parliamentary period up to 2020, a number of us expressed the view that the number of apprenticeships was not the most important thing for the Government to focus on; to paraphrase that old saying, never mind the width—we want to feel the quality of the apprenticeships. We have been proved right. It does not give me pleasure to say that. Most Governments have had a go at forming policies on skills and apprenticeships. We have had some success but some things have not gone so well. When Tony Blair announced that his three priorities were “education, education, education”, and decided that it would be a good idea, given the knowledge economy, for 50% of young people to go to university, that was good in itself; it certainly had an impact on social mobility. If it had a negative impact, it was by somehow implying that if you did not go to university, you were not quite up to the mark. That was not the intention but it shows how difficult it is to get policy right.
On quality, we had the Richards review—an important review that found, perhaps unsurprisingly, that some things that were badged as apprenticeships were only for six months and of poor quality. He rightly recommended a minimum level of 12 months—I would query whether even that is long enough—with 20% off-the-job training.
That is some of the background. When it started, employers viewed the apprenticeship levy with a bit of suspicion. Would it be just a payroll tax, or would it do what we wanted it to do: drive up the level of interest among employers and make them understand the importance of contributing towards training and apprenticeships? If nothing else, it focused their minds. If an employer’s yearly pay bill was £3 million, 0.5% of that was their apprenticeship levy. Soon, the finance department was nudging HR and saying, “What are you doing with it, where is it going?” In that respect, it was good.
However, when it started, it was disappointing inasmuch as the number of starts was much lower than we expected and lower than in previous years before the levy. That has improved and the Government argued, rightly, that would take time to bed in but it still has some worrying aspects, which I will cover later. The Sutton Trust made an interesting comment: never mind looking just at the number of starts—you also need to keep your eye on the number of completions. It is a bit worrying that 32% of apprenticeships were not completed; I think that that was in 2017. We will never drive that up to 100%; I remember that when we in the previous Labour Government started looking at this, the figure was pathetic. Completions were down to about 27% and we drove to that up to about 72% of a much smaller number. I welcome the Minister’s response on what he is doing to ensure quality control. That is question number one, which it will be important for the Minister to address.
My Lords, I congratulate the noble Lord, Lord Young of Norwood Green, on securing this debate. It is especially timely, as it enables me to develop points I made in Tuesday’s debate on the Augar report, when I addressed apprenticeships, and enables my noble friend Lord Younger to say what he had intended to say in that debate, having run out of time just as he was about to comment on apprenticeships.
I declare my interest as an academic and as chair of the Higher Education Commission, which draws together people from business, academia and Parliament. Our most recent report, launched in January, was entitled Degree Apprenticeships: Up to Standard? We took evidence from sector leaders, as well as a wide range of higher-education organisations and employers, including IBM, Boots and BAE Systems. The importance of apprenticeships was reflected in the turnout for the launch of the report—there was standing room only—with our recommendations clearly resonating with those attending. The need for action is also clear from the briefings we have received for today’s debate from the Local Government Association and the Sutton Trust.
As we found, there is widespread recognition of the value of apprenticeships. I quote Sir Chris Husbands, vice-chancellor of Sheffield Hallam University:
“An education system fit for the twenty-first century … must ensure the acquisition of both academic and technical skills… Students need that. The nation needs that”.
In short, the benefit is not confined to those taking apprenticeships. It benefits the economy and enriches society.
The problem, as the noble Lord has said, is with provision. There are difficulties especially, but by no means exclusively, for SMEs and disadvantaged students. The system of delivering apprenticeships is unduly crowded and lacking in flexibility and efficient co-ordination. We heard criticism of the Education and Skills Funding Agency’s procurement process, with many high-quality education institutions, across all levels of apprenticeship, not receiving funding to meet the needs of SMEs. The current funding regime is not fit for purpose. Under that regime we have a patchwork quilt of provision.
My Lords, I declare my interest as an officer in the APPG on Apprenticeships. I apologise for my voice today.
In a rhetorical flourish in 2015, David Cameron announced that the Conservative Government had set a target to support 3 million new apprenticeship starts by 2020. As the noble Lord, Lord Young, alluded to, that was building on a process that had already started, not least with the Richard review, which was commissioned by the coalition and set out a strong rationale for increasing the number of quality, well-managed apprenticeships. With that, and with my colleague Vince Cable in BIS, there was a flourishing of support for apprenticeships, with over 2 million new ones created between 2010 and 2015. Under the subsequent Government, the structure for delivering those changed and that is part of what the House is debating today. I congratulate the noble Lord, Lord Young, on securing this debate. It is a pleasure to follow the noble Lord, Lord Norton. Much of what I am going to say—probably with less authority—rings true with the preceding speech.
Many noble Lords will talk about quality, but I will talk about numbers because that 3 million is the rod which the Government have set themselves to be beaten with. I am grateful to the Association of Employment and Learning Providers for its data. I apologise for going into some detail on the figures, but I want to put them on record. If there are any discrepancies, perhaps the Minister can write to noble Lords about them. In short, the overall start numbers are down significantly from the position we were in before the levy started. This is particularly true for non-levy payers and for apprentices aged under 25. This probably relates to the point made by the noble Lord, Lord Norton. In March 2019, intermediate—level 2—apprenticeships were down 2% on March 2018, and down 67% from March 2017, which was before the levy. For advanced—level 3—apprenticeships there was an increase of 7% between 2018 and 2019 but that too was down, by nearly 49% on 2017. Higher-level apprenticeships are up 35% on 2018 but still down on 2017. It is clear that the target of 3 million that the Government set themselves is now unattainable. Will the Minister confirm that the target has been scrapped and that we can concentrate—as the noble Lord, Lord Young, wisely said—on the quality of what we are delivering rather than the quantity?
3:31 pm
The Lord Bishop of Carlisle
My Lords, I too am most grateful to the noble Lord, Lord Young, for bringing this very important subject to our attention. Like him and both the noble Lords who have spoken, I do not suppose that anybody would argue against the value of apprenticeships, or the principles that undergird the apprenticeship levy. Indeed, the Church of England is a very strong supporter of both, as well as a significant contributor to the levy. If that is an interest, I am glad to declare it. We are keen to play our part in improving skills and increasing productivity throughout the UK workforce, as well as providing more opportunities for young people to find worthwhile employment.
In the earlier debate today we were reminded of the very significant connection between just such worthwhile employment and mental well-being. However, like the noble Lords who have already spoken, we do not believe that the process is yet as effective as it might be for achieving those laudable ends. I shall briefly mention four issues.
One of the main problems appears to be the speed at which the regulator is able to respond to the development of new standards. Our own church minister apprenticeship standard is one example. The standard itself, which has been in development since 2017, has been approved, but written confirmation of what is known as its endpoint assessment has still to arrive. There are also some outstanding questions about the allocation of its funding band. We understand that the Church of England is not the only so-called trailblazer to have experienced long delays while attempting to introduce new standards. To that end we all welcome a recent speech by the Apprenticeships and Skills Minister, Anne Milton, on exactly this issue.
Closely connected with the problem of speed is that of apprenticeship levy spending. The rules governing access to levy funds have been criticised, not least already this afternoon, as overcomplex and inflexible. Due largely to the sorts of delays I have mentioned, it is estimated that nationally, large employers, including the Church of England, are in effect losing as much as £12 million a month. We welcome the extension of the maximum levy fund payment from 10% to 25% for what are known as organisations and stakeholders in supply chains, which for us in the Church of England translates as parishes and dioceses, but at the same time we would appreciate a rather more realistic approach to the way such payments can be accessed.
A third matter of concern—it was raised by the noble Lord, Lord Young, in his introductory remarks—relates to the need for provision at levels 2 and 3; in particular, for those young people who are just starting out in their careers and trying to find a place on the apprenticeship ladder. We have already heard various statistics, but since the apprenticeship levy was introduced there has been a 42% decline in the number of level 2 apprenticeships. This is not helped the formation of a clear apprenticeship pathway. As the House of Commons Public Accounts Committee has pointed out, it risks leaving behind people with lower skills and those from more disadvantaged communities. What is more, the recently published Augar review, which has been referenced already, called for,
My Lords, I welcome this debate because we are talking about the future of at least half of all our young people. For those who do not go to university, apprenticeship has always been the main route to a skill. It has also been the biggest source of social mobility in our country, but unfortunately in the 1970s and 1980s both our main political parties switched their focus to full-time education and apprenticeship nearly died in this country. Fortunately, things have changed, largely due to the Labour Government’s apprenticeships Act 2009, which followed a landmark report from the Economic Affairs Committee of this House. Apprenticeship is now eminently respectable, but still nothing like as available as it needs to be; nor is it sufficiently coherent.
I start with one of the most shameful facts that I have become aware of in recent years. Some 37% of our 18 year-olds are not in full-time education or workplace learning. It is an unbelievable figure and the background against which we are talking now. I want to talk in a long-term sense about what kind of system we need to build over the next five to 10 years to deal with the problem of the other half of our young people. We obviously have to offer them as clear a route through apprenticeship as we now offer the other half through university. Every young person knows how the university route works: if you qualify at one level you are, de facto, guaranteed a place at the next level up, and there is a unified and relatively simple system of making applications at each stage, including to university.
Consider the contrast with the apprenticeship route, which is as labyrinthine and unclear as could possibly be dreamed up—probably even more so. The opportunities come and go from year to year, with constant changes of funding and no unified application system. We have to create an apprenticeship route by which any young person who qualifies at one level can expect to find a place at the next level up, just as is the case if they go down the university route. There needs to be, as with the university route, a de facto guarantee of a place at the next level up as you go through the system.
My Lords, I too congratulate the noble Lord, Lord Young of Norwood Green, with his notable commitment to apprenticeships, on obtaining this debate and introducing it so comprehensively. It is a timely follow-on from Tuesday’s debate on the Augar review; on both occasions I have had the pleasure of following the noble Lord, Lord Layard.
Thinking about today’s debate, I have been asking myself: what is the apprenticeship levy for, what is it intended to achieve, and for whom? There seemed to be rather a lot of possible answers. It can be a means to promote personal development and social mobility by providing opportunities for individuals, including those from disadvantaged backgrounds, to gain new employment-related skills. That might have been part of the rationale for setting the rather arbitrary target of 3 million apprenticeship starts. However, is it, or should it be, mainly aimed at younger people entering the jobs market for the first time, as the noble Lord, Lord Layard, suggested, or should it be about enabling people of all ages and experience to enhance their skills and move to a new level in their career?
The Government might say that the levy is focused on meeting the skills needs of employers, so they, or the market, should decide what apprenticeships should be available, and how they should be spread between attracting new job market entrants and upskilling existing employees. The Augar report suggests that the levy should help to address national objectives for tackling issues such as productivity and competitiveness, and therefore align with the Government’s industrial strategy. But many employers, including levy-payers in the devolved nations, and others who cannot use their payments to take on apprentices, such as the employers of temporary and contract workers, who are members of the Recruitment & Employment Confederation, may look at the levy just as a sort of hypothecated tax, designed to raise money to help pay for the Government’s skills-related policy initiatives but with no direct benefits for them. The levy does indeed begin to seem like a perfect policy for Boris Johnson, seeking to be all things to all people.
My Lords, I start by thanking the noble Lord, Lord Young of Norwood Green, for securing this debate. Education is the engine behind social mobility. It provides opportunity and unlocks the potential that often resides unknown within people, particularly the young, across the country and can equip them with the tools to lift them out of poverty.
We are fortunate to live in a country that can boast some of the world’s largest pools of untapped raw potential and underutilised talent. Unfortunately, we have for too long not recognised how we can best draw out the full potential of our young people. I fear that we have moved to a one-size-fits-all approach, channelling generations of schoolchildren through the machinery of our university system, saddling them with debt and often failing to meet the needs that their talents genuinely deserve. I have no desire to disparage our university system, a system that is the envy of much of the world, but I want to illuminate the truth that it is not the best way to meet the needs of many of our young people. I have long advocated an alternative that can run parallel to the university system, offering opportunities to people whose skills and interests are not necessarily suited to university. It is a fact that people learn through different methods, and it is only sensible to reflect this in our education system.
The apprenticeship model is a genuine alternative to the university system, often proving far more suitable to the needs of both young people and business. That is why I welcomed the 2015 announcement by the then Prime Minister David Cameron that the Government would support 3 million new apprentice starts by 2020. This system offers the chance to many young people to learn practical skills and unlock their full potential, giving them the tools they need to improve their lives and the lives of their families. We must show young people that apprenticeships are an equally worthwhile option that will lead to long-term employment. That said, I share the view of the noble Lord, Lord Young, that we need to ensure the quality of the brand.
4:01 pm
Lord Pendry (Lab)
My Lords, the House should be indebted to my noble friend Lord Young for giving us the opportunity to take another look at the apprenticeship levy scheme since its inception in 2017 and the pressing need for greater workplace opportunities for our young people.
I declare an interest in this debate: I began my working life as an apprentice in an electrical engineering firm, ironically here in Westminster. I have therefore known at first hand some of the benefits of apprenticeships as a means for young people to gain skills and experience in the workplace. My apprenticeship was coupled with two years’ national service in the Royal Air Force—another invaluable experience. The skills and discipline I acquired in those experiences stood me in good stead for another apprenticeship here in Parliament: being elected to the House of Commons and later ennobled in this place.
It is clear that we need carefully considered government support for apprenticeships to give opportunities to as many young people as possible, and the introduction of the apprenticeship levy by the Government in 2017 was, of course, a welcome start. To be fair to the Government, they have already recognised the need for some adaptions to that legislation. I particularly welcome the reduction in the amount that small firms have to contribute to the scheme, from 10% to 5%, so that smaller businesses are more supported.
But the scheme still needs to address many further issues. I am sure noble Lords, like me, have had expressed to them the concerns of the Recruitment & Employer Confederation that around 1 million temporary workers are locked out of the scheme. This leaves us in a position where large numbers of firms paying in to the levy and employing temporary workers are not able to use any of that money each year—a particular issue for sectors with acute labour shortages, such as our caring sector and others. The decline in the numbers of level 2 apprenticeship starts under the scheme in favour of higher-level managerial apprenticeships is also somewhat concerning, as is the drop in the quality of apprenticeships which we saw highlighted in the Augar review.
In the form that it was introduced, however, the levy has proved problematic in a number of areas, and as outlined by my noble friend Lord Young, after two years of the scheme this is a good time to look afresh at what changes need to be made. Over the past two years, the disappointing numbers of apprenticeship starts under the scheme has only continued, particularly among smaller and medium-sized firms, and the proportion of levy funds accessed by employers has been lower than expected. As even the Education Secretary himself admitted, the Government are subsequently not on track to meet their target of creating 3 million apprenticeships by 2020. The noble Lord, Lord Fox, also commented on that in agreement.
4:08 pm
20 of 41 shown
I remember commenting on a number of occasions on the key role of training providers in the scheme. I expressed some concern when, at one point, it seemed that anybody could set themselves up as a training provider. I was told, “Don’t worry about that—Ofsted will be around”. I said, “Yes, but have you seen the periodicity of Ofsted inspections? They are every three years”. As a training provider, I could function for three years below the radar while providing poor quality—and some did. Some bigger ones went bankrupt as well. We have a better system now, with a register of training providers, but I cannot stress enough to the Minister the importance of ensuring that those providers are of a high quality. After all, they are the first port of call for employers; if their experience of training providers is that they are of poor quality—I am still getting some feedback—that tends to create a negative approach. Remember that with apprenticeships, when we talk about quality, it is a matter of not only what you deliver but the perception of what is out there. It is about the perception of employers, parents and potential apprentices, whether the younger or the adult ones. The quality of the brand is key if we are serious about improving the long-term role of apprenticeships.
I listened with interest to some of the debate on the Augar report, which I welcome because it stresses the importance of apprenticeships. The report points out that if 50% go to higher education, what about the other 50%? It is not as though there is no crying demand for skills in this country: whole swathes of industry are desperate for more skilled people. That may be in the construction industry or, as I learned recently—much to my surprise and real disappointment —in nursing, which is struggling to meet its target of 1,000 apprenticeships because, it was found, the funding arrangements made it really difficult. I do not necessarily expect the Minister to have the answer on that but, again, I welcome his commitment to look at the situation. We know about the demand for nursing so I cannot help feeling that the response, “That’s okay: we’ll rob other countries overseas, which are desperately in need of those qualified people, and use them”, is wrong. This should be a matter of our own respect: we ought to train and recruit these people ourselves.
The levy expenditure has, needless to say, been a matter of some interest to employers. For the past six months or so, people, myself included, have been going around saying, “If the average employer has claimed back only 15% of what they paid into the levy, there’s a large surplus, so what will happen to it? Will it just go back to the Treasury?” It took until a month or so ago for me to hear definitively from the National Apprenticeship Service that there was no surplus any longer because of the expenditure from the couple of years that preceded the levy on the existing frameworks and standards. If anything, it is likely that we have overspent. In a report to the Public Accounts Committee, the Education and Skills Funding Agency admitted that it would have to go back and renegotiate. From an employer point of view, that is a matter for worry when they were initially assured by the Government, “If you pay into the apprenticeship levy, you’ll be able to draw it out again”. It is quite a complicated formula when you go into it; I will not attempt to do so now.
I want to raise some further points, including on the question of higher and lower skills. In looking at the statistics, we found that the level 2s and level 3s have dropped quite significantly, while there has been a huge increase in the take-up at a higher level. I have nothing against that but when we find out the cost of those higher-level qualifications—some employers are using the levy to fund MBAs and so on—people are beginning to ask themselves, “Where do we want to focus apprenticeship funding?” I certainly think it vital not to neglect the level 2s and level 3s. They are a core area for young people, who will hopefully start their careers. We know that every young person who we can engage in an apprenticeship and remove from the terrible situation of being not in education, employment or training—who is horribly classified as a NEET—is a success story. It gives them a career opportunity that can set them off for life. I welcome the Minister’s views on this important issue.
I said in previous debates that the levy will not work unless we move the dial on SME take-up. If we do not manage to get a significant number of small and medium-sized employers to take up apprenticeships, the levy will have failed; large employers will give you only so many, so it is vital. The Government have tried to address that by saying that large employers can take 20% of their levy funds and help employers in their supply chain. Larger employers are telling me, “That’s all very well but I can’t just throw that money at them. It has to be managed, which takes time, and there is no allowance for that”. Another comment I have had is about functional skills. Employers say to me, “I’ve got young people who are potentially good at apprenticeships but I have to spend time in getting their English, maths and IT skills up to standard so that I know that they will complete an apprenticeship successfully”. Again, I welcome comments from the Minister on that issue.
There was also a bit of a hiccup, if that is the right word, in starting the levy in that it depended on the Institute for Apprenticeships and its trailblazer groups to determine the apprenticeship standards. It got off to a bit of a slow start, but it has improved significantly and the feedback is now better—except that employers say to me, “Over a two to three-year period, those standards will become a bit dated and I’ll need to amend them”. Trying to amend a standard is a difficult process; they are saying that there is not enough flexibility there. One retail employer with a lot of small stores also told me that it could recruit 500 more apprentices but has a problem in its small stores: if it releases an individual for one day a week, it needs to find some way to cover them but does not have that surplus capacity. That is another problem area.
A review of the apprenticeship levy is taking place, which is good. Like all large schemes, it needs reviewing. To say that the review is secret is probably an exaggeration but there is not enough transparency, let me put it that way. I keep hearing, “I am a large employer of apprentices. Why have I not been formally involved in this review?” I make a plea to the Minister, as I welcome his comments on the importance of involving employers in that process. That is important to retain their confidence.
We are asking a lot of employers: we are asking them to participate not only in the apprenticeship levy—do not get me wrong, they ought to do so because they should understand the importance of training the next generation; I am not letting them off the hook—but in T-levels, which are a fundamental change to qualifications where each participant requires 45 days of work experience a year. Some employers say to me, “What am I expected to do? Do you want me to concentrate on apprenticeships or deal with T-levels?” It is not all negative, and I do not want it to be perceived that way, but that is another problem.
I will end on what I said earlier about the importance of perception. I still see schools not giving their pupils the right careers guidance. They do not encourage employers to come in. We know that the Baker amendment made that a compulsion so, again, I welcome the Minister’s response on that. I am grateful for this opportunity to air what I regard as one of the most important subjects and challenges facing us. I beg to move.
Our evidence showed that the artificial separation of levy and non-levy providers, coupled with a botched non-levy procurement process, has resulted in a lack of providers, particularly for SMEs. Among our principal findings was that, of 51 approved degree apprenticeship standards, almost half had no providers that are delivering to SMEs. There are problems also with the length of degree apprenticeships, the absence of stop-off points and the inflexibility of design, as the noble Lord touched on, which may result in a mismatch between provision and future skills needs.
The losers are not just SMEs, but students in areas of educational and economic disadvantage. We identified what we referred to as “apprenticeship cold spots”. We found that an aspiring apprentice from Norfolk, compared to someone from Hammersmith and Fulham, has to travel, on average, 12 times as far for the nearest apprenticeship opportunities. We concluded that what is particularly needed are stable funding arrangements, streamlined administrative procedures for the approval of degree apprenticeships and longer-term policy stability. There is also a need, as the Sutton Trust has noted, for pupils to receive advice on apprenticeships.
Among our recommendations are: creating equal access for SMEs by permitting HE institutions already delivering degree apprenticeships to big businesses to deliver for small businesses; creating a more agile bureaucracy and rationalising what are presently costly and repetitive processes for employers and providers; and speeding up the process for approving standards. We also favour offering additional financial support for prospective degree apprentices from cold spots and disadvantaged backgrounds. As I said in the debate on Tuesday, I very much welcome the Augar committee’s recommendation for a body of work that examines the challenges that are preventing SMEs taking up opportunities for degree apprenticeships. This very much mirrors our recommendation for such a review.
It is possible to make changes to render the system more flexible, integrated and quicker, and to do so without great cost. Indeed, in economic terms, the nation would be a clear beneficiary. Does my noble friend agree with the analysis I have offered, and could he say what the Government are doing to achieve these goals? I had a meeting not so long ago with the Minister for Apprenticeships, Anne Milton, so I know the Government are alert to the issues. It would be helpful to have a progress report on what is being done. The rewards, to students, to business—not least to small businesses—and to the economy are substantial.
The Motion refers to,
“the case for the effective delivery of workplace opportunities for young people”.
That includes apprenticeships but, in my view, can be taken more broadly. There is value in not seeing the delivery of workplace opportunities as confined to apprenticeships. It is important to recognise that such opportunities benefit students taking courses in HE and FE. In Tuesday’s debate, I referred to the value of experience-based learning. Having the opportunity to do a work experience placement as part of a degree course helps to build confidence as well as develop skills that employers want. Linking study with a placement facilitates understanding, as well as opening up opportunities of which the student may not previously have been aware. It prepares the student for life after graduation. That is all to the good and something we should be encouraging across HE and FE. There is a much greater recognition of its value than before, but we need to press further for recognition of its worth and status. If anything, it should be the norm and not the exception. I would welcome my noble friend’s endorsement of that view and invite him to comment on the work experience opportunities offered within government. How extensive are those opportunities and are there plans to extend them?
Like the noble Lord, Lord Young, I finish by returning to the point about advice. As the Augar review stresses, good information, advice and guidance are crucial for anyone seeking impartial advice about jobs, careers, routes of learning and qualifications. It argues that careers support is still underfunded and that schools should be held to account for their statutory responsibility to provide information, advice and guidance. For prospective students to take up apprenticeships, or degree courses with embedded work experience opportunities, they need to know about them. What plans are there to supplement the careers strategy and enable prospective students—from wherever they are drawn—to make informed choices? Does the Minister agree that failing to invest in providing such guidance is a false economy, the losers being not only the students but the nation, which needs the workforce necessary for a virile economy and a vibrant society?
Interestingly, as has been alluded to, higher-level courses, including MBA degrees, accounted for 12.8% of workplace training starts in the first year. That is more than twice what was going on before the levy started. Management apprenticeships were the most popular, with 28,000 starts in 2017-18. This probably caught the Government by surprise. Was this what the Government were expecting, or has it been a surprise? This matters, because of money. These are expensive apprenticeships and there is a sense that non-levy payers are having the opportunity for apprenticeships drained by these highly expensive schemes which are coming through. It seems that funding for non-levy paying SME employers is running out and has been capped, with no funding to support any future growth between April 2019 and March 2020. Can the Minister fill in the dynamics of this?
As the noble Lord, Lord Young, alluded to, there is an overall lack of published data and transparency around this. Let us not forget that the levy is a contribution by business and industry to the Treasury. Industry deserves a transparent report on how the money is being spent and the plans for spending it in future. Perhaps the Minister can add some transparency to this issue. There have been authoritative reports that the Government have been mulling over an increase in the levy from 0.5% to 1%. Will the Minister use this opportunity to refute that? Given the current state of the scheme, to increase the levy would be adding petrol to a smouldering fire.
The spirit of this debate should be that there is universal good will towards making it work. The Government still have a lot of work to do to get industry to understand what is going on. The British Chambers of Commerce found that 23% of levy-paying firms still had no understanding of how the levy works and how to access funds. The Chartered Management Institute and British Chambers of Commerce called for the levy to be reformed. The House of Commons Education Committee has recommended the implementation of pilots. I will come back to that point. I spoke to people at today’s Make UK reception, where the main theme was that the scheme is too complicated and not flexible enough to be used. When the Government are considering their review, flexibility and simplicity have to be at its heart.
As a good example of flexibility, I was pleased to see today’s announcement of the ScreenSkills pilot. It has been almost impossible for firms that have short-term contracts to run apprenticeships. This pilot is very small, including only 25 people, but it is a good example because the creative and media industry is important to this country but is not currently using anywhere near the amount that it contributes to the scheme because of the nature of its contracts. I welcome that pilot, but we need others and other imaginative ways of adding flexibility and, perhaps, as other noble Lords have hinted, broadening the sorts of things that the levy can be used for. I will come back to that point.
Lifting the tight restrictions and adding flexibility is important for dealing with the issues of cold spots, which has been mentioned, and social inclusion, which is another important area. We need to make sure that we are not just putting the money into places where apprenticeships are already strong, and not just supporting companies in already strong industries. That tends to be the way this levy works.
We want to put vocational education, at whatever age, right at the heart of the political agenda. Every party understands that, with the challenges facing the country, we have to get that right. It should be a cross-party exercise. The economy is evolving and we need new skills. For that reason, the Liberal Democrats would seek to expand the scope of the apprenticeship levy to a wider skills and training levy to add flexibility that works. While keeping the contribution at 0.5%, we would use the cash raised, not just for apprenticeships, but for a wider training programme. However, we would allow companies to do that only if they had an acknowledged and accredited apprenticeship scheme as well, because we would not want all this money to fly out. The starting point would be that a company would have to have an apprenticeship scheme before it could use some other unclaimed money for that process. We would also ensure that 25% of the funds raised would go into a social mobility fund, which we would use to feed into the regions and the cold spots and to make sure that we have diverse apprenticeships.
It is a great shame that the apprenticeship levy has been implemented in a complicated and poor way. We need to make sure, together, that we can get it right. There is a review, but drastic changes need to take place and there is no time to lose.
“an efficient distribution of Level 3, 4 and 5 provision within reasonable travel-to-learn areas”.
That has particular resonance for those of us who live, as I do, in the more rural parts of England. I would be grateful to know from the Minister what plans Her Majesty’s Government may have for tackling the provision of lower-end apprenticeships, especially in the more remote and sparsely populated regions of this country.
Finally, as we have already been reminded, especially by the noble Lord, Lord Fox, I am aware that the original target of 3 million new starts by 2020 will not now be reached. I appreciate the new emphasis that has been placed on quality rather than quantity. Of course, quality is tremendously important, but that does not mean that numbers no longer matter. It would be good to know what sort of figure the Minister might regard as a suitable replacement target.
I shall talk briefly about what the guarantee would be. First, it would concentrate on the level 3 apprenticeship. I propose a two-part guarantee: there should be a guarantee to any young person who satisfies some conditions of entry to a first level 3 apprenticeship. The conditions would be either five good GCSEs, including maths or English, or another level 2 qualification, or—this is important for universal access—a pre-apprenticeship certificate. The other bit of the guarantee has to be a free place on a pre-apprenticeship course.
In the 2009 apprenticeships Act, entitlements of this kind were given legal force, but these clauses were repealed by the coalition Government. I am not saying that we should reinstate legal entitlements, but we should have entitlements in our mind as a basis for all future planning of provision. As I argued in our debate on Tuesday, the way to guarantee an entitlement is to provide uncapped per capita funding for all the places needed. All apprentices in training with an approved provider should receive automatic per capita funding, on some tariff basis of course.
However, we cannot be sure that even that would generate enough places, because the employers have to be on board. We also need somebody making a major effort to find enough apprenticeship places. We know that there is currently massive excess demand for apprenticeship places, with many more people trying to find an apprenticeship than the number of apprenticeships that get started. That is why we have a National Apprenticeship Service. It is surely its job to deliver that kind of guarantee and find the places.
Let me say a little about who these are for—the question of age and level. The prime purpose of any apprenticeship system has always been to introduce young non-graduates into the world of work. We must keep our focus on that. It is absolutely incredible that 40% of apprentices now are over 25. This is a complete distortion of the fundamental concept of an apprenticeship system. The priority must be those aged under 25, and it must be, above all, for people not interested in going to university. They should be the priority groups. I suggest that at least 70% not of places but of funding should go to level 2 and 3 apprentices aged under 25: that is, no more than 30% should go to levels 4 and 5, and levels 6 and above should be funded by loans, just like all other degree courses. The Department for Education is in a position to impose these restrictions, and it should do so. I would welcome the Minister’s comments on restoring the apprenticeship system to its original purpose.
I will now move on to the application process. It is very difficult to get an apprenticeship, much more so than to get into a university, because there is no unified application system. We need one; it could be run by UCAS. A would-be apprentice would make a single application which would then get passed on from the centre to the local branch of the National Apprenticeship Service. It would then do a rough matching of a number of applicants to each vacancy and send those potential applicants to the businesses offering those vacancies, which then choose among them using their own further testing and interviews.
If we had a single application process, it would of course deal with the problem, as already discussed, of schools. Schools would have to operate that application system, just like they operate UCAS; they would have to tell people how to apply for an apprenticeship, if that is what they want, just as they have to tell them how to apply to a university. It would also help us in an operational way around the problem of information.
I end with a comment on the economics of the T-level, raised by an earlier speaker. We have been doing some research at the London School of Economics on the earnings gain that young people of a given type receive by going either into an apprenticeship or to a college to get the same level of qualification. The apprentices are earning 20% more than the people who take the full-time route. The apprenticeship route is the gold-standard way of getting a skill, because your learning is directly related to what you are doing at work.
Full-time education with a work placement is completely different. The employer is not so interested and does not have the same incentive to bring you on. That must be the explanation of the huge economic effectiveness of the apprenticeship system. Where there is any conflict, as there might be between supporting T-levels and apprenticeships, my vote is for apprenticeships.
We are discussing one of the weakest aspects of our whole national life. It is interesting to note that at 15 our students do as well in maths, science and literacy as those in France and Germany, but by the ages of 20 to 25 the bottom third or half have dropped right behind. This is the basic weakness in our social and economic system. Once young people have left school, we simply abandon a third or more of them. We have to do better and must do it soon.
Therefore, my first point—with apologies to noble Lords, including the Minister, who heard me say something similar on Tuesday—is that it is hard to answer questions about how well the levy is working, and how it should be adapted and improved, in the absence of a clear strategic framework setting out what it does and does not seek to achieve, and how its effectiveness should be assessed.
Next, I will outline some issues with how the levy is working, to which I hope the Minister may give some answers, particularly as he has heard many of the same issues raised by many of the speakers in the debate already.
First, there is the question of flexibility, about which so many employers and indeed so many of your Lordships have expressed concern. The uses to which levy funds may be put are tightly defined, as is the amount that can be shared with other businesses in the employer’s supply chain—although the increase from 10% to 25% is welcome. The Augar review suggests that apprenticeships at level 6 and above, including degree apprenticeships, should be available only to apprentices who have not previously undertaken a publicly supported degree. This might help to address concerns that not enough levy funding is going to young people, especially 16 to 19 year-olds. There are suggestions, including from the noble Lord, Lord Fox, that the levy should be redesignated as a skills and training levy, and made eligible to be spent on a wider range of skills development needs, not just apprenticeships. There are also issues about the processes involved in setting up apprenticeships: the lack of transparency in standard-setting; problems with end-point assessments, as the right reverend Prelate mentioned; and the amount of bureaucracy involved, which is off-putting to smaller firms interested in offering apprenticeships.
Other issues relate to funding. Not many levy-paying employers manage to use all their levy funds to provide apprenticeships. However, in trying to do so, they tend to focus on upskilling existing employees, and on higher-level, higher-value apprenticeships. Meanwhile it appears that the funding available for non-levy payers, which comes directly from government funds, supplemented by unspent levy funds, if there are any, shows signs of drying up. How much funding does the Minister anticipate will be available to support apprenticeships offered by non-levy paying employers, and what will happen when that money runs out?
In Tuesday’s debate, I raised the issue of making it easier for SMEs to take on apprentices. Specific mechanisms are needed for this purpose, such as apprenticeship training associations. I also hear that independent training providers, which provide much of the training for SME apprenticeships, are starting to worry about the financial risks involved in that route and are thinking about shifting their focus to larger employers, where their funding is more secure. I hope the Minister will be able to say something today—he ran out of time on Tuesday—about government plans for supporting SME apprenticeships. Perhaps he could tell us how the Government are working with the devolved Administrations and regional bodies to ensure that apprenticeship policies across all four nations are complementary rather than conflicting, and that they all contribute to the skills and workforce resilience needs of the UK as a whole.
Last but not least in my list of issues is the continuing need for awareness raising about apprenticeships, particularly among teachers and parents—a point strongly made in the briefing from the Sutton Trust, along with a recommendation to set up a UCAS-style portal for apprenticeship applications, which I would also support and which the noble Lord, Lord Layard, also spoke about.
I look forward to the Minister’s comments on these issues. I end by mentioning the second part of today’s Motion: the case for the effective delivery of workplace opportunities for young people. The Government’s statutory guidance for schools on careers strategy requires students to have at least seven meaningful employer encounters between years 7 and 13, and at least two workplace experiences by age 18. Students on the new T-level courses, starting next year, will have to spend a minimum of 45 days on an industry placement. This will require substantial commitments of time and resources by employers.
How does the Minister expect this demand to be met? Having had the experience of providing work experience placements in my own small business, and of persuading other employers to do so, I know how challenging this can be for smaller employers, but many will have to be engaged to meet the Government’s targets. Is the Minister aware of organisations such as Speakers for Schools, and the similarly named but completely separate Founders4Schools, which are focused on arranging work experience placements at scale?
Founders4Schools runs a program called Workfinder, which has a particularly impressive and ambitious digitally driven approach, especially with fast-growing small businesses. Being digital makes for much better reporting, with greater transparency and accountability. Will the Minister explore how such initiatives can be incorporated into the Government’s plans for ensuring that the large number of workplace opportunities needed are provided and meet high quality standards? As a final thought, he might even consider whether work experience provision might itself be made eligible for levy funding. Many small businesses seem puzzled by why apprenticeships receive funding but work experience and internships do not. I very much look forward to the Minister’s response.
Businesses have also benefited from the apprenticeship programme. The challenges facing many companies in the UK are complex, but lack of productivity and the skills gap of people leaving university are among them. They have recognised that education and recruitment need modernising to meet those challenges. For those reasons, many companies have embraced the apprenticeship programme. They have found that it has improved the diversity of talent and widened the pool of applicants. This is having a significant impact on both career and social mobility within companies.
Companies have also found that people who would otherwise not have applied for opportunities in their business are using the apprenticeship programme. I am sure that noble Lords will have read the briefing that the insurance company AXA sent. The take-up of apprenticeships there has resulted in a more diverse and creative workforce, which has positively impacted the productivity of its employees.
As a country, we need more highly skilled people. Given the challenges and opportunities that lie ahead after our vote to leave the EU, we need to ensure that young people, who will be the drivers of our economy, are given the best opportunity to succeed in the workplace. Simply put, their success is our country’s success.
I recognise that the Government’s apprenticeship programme is not perfect; relatively few policies translate in practice as the finished article. However, I hope noble Lords will agree—I believe I sense this mood in the Chamber today—that the aim behind the scheme is laudable and deserves to continue. That is why I am glad that steps have been taken to improve the system, with more money invested in the programme in 2017 through the apprenticeship levy. Nevertheless, I would like to see more emphasis on how this programme can be promoted as a real alternative to university and on its potential as a mechanism for social mobility.
Noble Lords may recall that last week I asked a Question to my noble friend the Minister about how we can improve and widen careers advice in schools. The noble Lord, Lord Young, followed up with a question sharing concerns and has touched on that again today, as have other noble Lords. We are not reaching all schools in talking about apprenticeships as a real possibility to be considered by our young people. We hear that employers still complain about some schools denying access to pupils to talk about apprenticeships and other career opportunities. As the noble Lord, Lord Young, said last week and again today, that is despite the Baker amendment and previous legislation. We must ensure that all schools meet their obligations to provide full career path options to their pupils. I have said in this Chamber before that if we want to create a ladder of opportunity, rather than a missed opportunity, we need to provide better career advice in schools on apprenticeships.
It is for these reasons that I welcome today’s debate and hope that both this House and the other place will continue to strive to improve this vital gateway for social mobility and for our young people to reach their full potential.
A whole range of employers and organisations, not least the British Chambers of Commerce, pointed to the rules of the levy being too complex and rigid as a key contributing factor to this sorry state of affairs, and it stressed to us both the need for greater flexibility in the use of funds and a greater effort by the Government to increase understanding of the levy itself. It is clear that the Government should take action to prevent the levy being used to simply up-skill existing employees, and to prevent rigid target chasing resulting in increased numbers of low-quality apprenticeships.
I share the concerns of the noble Lord, Lord Aberdare, expressed in the debate on Tuesday that, as a body principally primed to regulate our state education, Ofsted may not be best placed to regulate the quality of employer and industry-driven apprenticeships. As he is the son of my predecessor at the Football Trust, whom I succeeded as chairman, it did not surprise me that the noble Lord speaks so knowledgably on this and other subjects. He and others, such as my noble friends Lord Blunkett and Lady Blackstone, spoke in Tuesday’s debate compellingly of the extent to which the Augar review highlights the great neglect of our further education that we have seen in recent times. I hope that, as such an important aspect of further education, apprenticeships and the further reforms to the levy that are needed will not be neglected by this or subsequent Governments.