John Hayes (Shadow Minister, Innovation, Universities and Skills; South Holland & The Deepings, Conservative)

I beg to move amendment 107, in clause 79, page 48, line 27, at end insert—

‘(e) requiring the Chief Executive to secure that the person designated under subsection (1) is responsive to employers’ needs in relation to the provision of apprenticeships.’.

Christopher Chope (Christchurch, Conservative)

With this it will be convenient to discuss the following: clause stand part.

New clause 8—Payments to employers—

‘(1) The Chief Executive of Skills Funding shall ensure that—

(a) all employers who take on an apprentice within a recognised apprenticeships framework are paid directly by the Chief Executive of Skills Funding;

(b) funding for apprentices is paid out in one sum at the beginning of the apprenticeship framework; and

(c) another sum is paid out upon completion.  

(2) The Chief Executive of Skills Funding shall ensure that—

(a) any company with between 1 and 250 employees that subsequently takes on a full-time apprentice within a recognised apprenticeship framework should be paid a direct bonus on the learner’s completion of the full apprenticeship framework;

(b) the bonus stipulated is paid in one sum upon completion of the full apprenticeship framework; and

(c) a consultation process with small to medium companies engaged in fields related to science, engineering, technology and mathematics is undertaken with reference to the size of the financial incentive for these sectors.

(3) The Chief Executive of Skills Funding shall—

(a) ensure that funds shall be provided for group training associations to provide apprenticeship training;

(b) ensure that funding is paid to employers involved in the establishment of group training associations;

(c) encourage employers who already operate successful apprenticeship schemes to support group training associations.’.

John Hayes (Shadow Minister, Innovation, Universities and Skills; South Holland & The Deepings, Conservative)

We have seen off the Under-Secretary of State and the Minister is back to discuss clause 79 and amendment 107.

Clause 79 allows the Secretary of State to direct the chief executive of Skills Funding to designate a person to carry out apprenticeship functions on behalf of the chief executive. As we heard a few moments ago, the Government expect that the person designated will be the chief executive of the National Apprenticeship Service. We also heard that the NAS will be a discrete service within the Skills Funding Agency, which we now learn is not an agency at all. The chief executive of the National Apprenticeship Service will undertake apprenticeship functions, including the duty to give places to young people on apprenticeship schemes. Subsection (5) sets out the apprenticeship functions that will be carried out under this clause. The clause allows the Secretary of State to define and regulate the relationship between the two postholders and to set out the functions on which the chief executive of the NAS or any other designated person will be required to report to the Secretary of State. As we heard a few moments ago, Secretary of State refers here to the Secretaries of State of both Departments.

Amendment 107 is relatively straightforward and I will therefore speak briefly to it. However, I am afraid that I will speak at some length about new clause 8, which is a pivotal clause in our estimation because it sets out an entirely different set of views on how the matters should be managed. The Minister will note that our amendment is devised to ensure that the design of the National Apprenticeship Service enables the Government to fulfil its pledge of world-class apprenticeships that provide high quality employer places and build support for more employer ownership of apprenticeships. His objection to earlier amendments, the purpose of which was to ensure greater employer involvement in building their frameworks and so better deliver apprenticeships, was that they were too bureaucratic. No such claim could be made about amendment 107. It merely seeks to ensure that the NAS does what it is supposed to do, building an effective apprenticeship service and having an apprenticeship brand that is alert to and responds to employer need.

I spoke previously about the Lords Economic Affairs Committee, and its “Apprenticeships: a key route to skills” paper. The noble Members of that eminent body concluded:

“The Government has given individual employers too little involvement in how apprenticeships are run, rendering them little more than passive partners. Employers need to be at the centre of apprenticeship provision. Within five years, all Government funding for apprenticeships should go directly to employers, rather than through training providers as happens today.”

The Innovation, Universities and Skills Committee on the draft Apprenticeships Bill, which preceded this Bill, reaffirmed concerns about employer engagement in the apprenticeship system. My hon. Friend the Member for Daventry (Mr. Boswell) questioned the CBI witness who gave evidence to that Committee. When he asked about employer engagement, particularly about the prescriptive model that he perceived as the likely product of the Government policy and the NAS, the CBI witness replied:

“I think that is a concern”.

The Minister’s hon. Friend, the Member for Brigg and Goole (Mr. Cawsey), asked whether the system was likely to be a success and the CBI witness replied:

“In terms of whether it will be a success, it really has to focus on helping employers reduce the time they spend on bureaucracy, encouraging more young people of all abilities to take an apprenticeship.”

We understand that the Bill will prevent funding flowing directly to employers, advancing it instead through the intermediary of the NAS. At the very least we should ensure that the service itself is responsive to employer need. That is the minimum that employers require and apprentices deserve, hence our amendment.

I shall speak more freely about new clause 8, which sets out an alternative vision for rejuvenating apprenticeships, and that lies at the heart of Conservative thinking. We know that the current system is imperfect—I use the word with moderation, because others have been more critical. The chairman of BT, Sir Michael Rake, who is also chairman of the Commission for Employment and Skills, said that he has met no one who does not believe that the system is incredibly over-complex, and that it is ridiculous in cost of delivery, effectiveness and so on. That is a damning criticism from the man who has been appointed to chair the commission, so my comments, by comparison, are extraordinarily understated and moderate.

We know that the average public funding for an apprenticeship is around £3,750 per annum. We believe that it would be best if the payment were simplified into a single stream of money going direct to employers.

Jim Knight (Minister of State (Schools and Learners), Department for Children, Schools and Families; South Dorset, Labour)

Will the hon. Gentleman give way?

John Hayes (Shadow Minister, Innovation, Universities and Skills; South Holland & The Deepings, Conservative)

I want to make some progress, so that we can move on, but I will then happily give way. Otherwise, you will accuse me of delaying the Committee unduly, and I do not want to do that.

Christopher Chope (Christchurch, Conservative)

I would not consider doing that, Mr. Hayes.

John Hayes (Shadow Minister, Innovation, Universities and Skills; South Holland & The Deepings, Conservative)

You would certainly never do that, Mr. Chope, but the Minister might, because he can be mischievous.

The recent House of Lords Select Committee on Economic Affairs supports that simpler funding model and says:

“We believe that handing the money directly to employers not only provides companies with a greater incentive to provide apprenticeships but can also help to reduce red tape as well.”

Conservatives understand that a commitment to train an apprentice involves a financial risk for employers. At base level, it takes time for an apprentice to start to make a financial contribution to the business. Under the current funding system, support for off-site training leading to national vocational qualifications and technical skills is paid month by month, with some of the money held back to ensure higher completion rates, so it takes employers a long time to see any real return on their investment.

The difficulty is not for large corporates, which can absorb the costs, but for small businesses it is a major disincentive; but it is through small businesses that we will rejuvenate the apprenticeship system from the bottom up. The House of Lords Select Committee report “Apprenticeship: a key route to skill”, to which I referred, says:

“In the case of apprenticeship funding, the administrative chain separating policy from practice on the ground is a long and, we would argue, dysfunctional one.”

The Bill is unlikely to improve that situation, as John Lucas of the British Chambers of Commerce made clear in his evidence, which I shall speak about, having first given way to the Minister.

Jim Knight (Minister of State (Schools and Learners), Department for Children, Schools and Families; South Dorset, Labour)

I am grateful for the hon. Gentleman’s indulgence. He is extremely patient. He mentioned the average funding for apprenticeship places. Is his party committed to sustaining that level of funding per place at our projected volume?

John Hayes (Shadow Minister, Innovation, Universities and Skills; South Holland & The Deepings, Conservative)

We have no plans to do so, as the Minister will know if he reads “Building Skills, Transforming Lives: A training and apprenticeships revolution”, which should be his bible, because it is the Conservative party’s green paper on opportunity and skills. It makes it clear that we intend to create 100,000 new apprenticeships, to pay money directly to employers, and to create an apprenticeship bonus, which I shall speak about in a few minutes. We have no intention of reducing the level of funding for apprenticeships. Our funding plans, which the Minister questions, include a bonus for each apprentice taken on by small and medium-sized enterprises to encourage them, because we know that SMEs have a vital role to play if we are to produce a step change in the number of employer-based apprenticeships. Proportionate costs to smaller businesses taking on apprenticeships are much greater than for larger companies. In a recent CBI survey, 29 per cent. of firms cited a lack of in-house capacity as the reason for not getting involved in apprenticeships. We want to change that through our SME bonus. The Federation of Small Businesses pointed out in the consultation for the draft Apprenticeships Bill that according to labour force surveys, 69 per cent. of all apprenticeships take place in small businesses but, it said, an inherent problem for businesses with fewer than 10 employees remains the cost to businesses of  training their apprentices. Subsection (2)(c) of new clause 8 refers to consultation with SMEs in the science, technology, engineering and mathematics sector. Many experts regard STEM business as key to our future, as British firms increasingly need to compete in a high-skill, high-value world economy and as competition from emerging nations puts further downward pressure on labour costs. The STEM sector has a high proportion of SMEs and its ability to train people will be crucial.

When speaking of STEM businesses it is easy to focus on information systems, information technology and so on, but we should not ignore the creative and cultural sector—a big growth area in our economy—which fares very badly from the Government’s Train to Gain scheme. The Minister will be able to tell us precisely what proportion of such businesses benefit from Train to Gain, but the scheme is certainly not providing a significant contribution to training in that sector. Whereas, apprenticeships can indeed play a useful, highly valuable role in enabling Britain to continue to lead in the creative and cultural skills field. Subsection (3) of new clause 8 aims to provide funds to make it easier for employers to come together and pool their resources and talent to create their own apprenticeship schemes or group training associations. When a substantial body of employers within an industry is committed to sponsoring apprenticeships they should be encouraged and enabled to develop their own apprenticeship scheme. This is key to ensuring that employers—it could be small employers—are committed to apprenticeships. To ensure greater employer involvement in apprenticeships, funds should be provided for pilot schemes for new GTAs led by employers who already run successful apprenticeship schemes. In oral evidence to the Innovation, Universities, Science and Skills Committee on the draft Apprenticeships Bill, the British Chambers of Commerce added its support for group training associations. It said:

“The concept of a group training association will be at the heart for many small and medium sized businesses because the world of apprenticeships has changed from...where you had very large companies that were embedded in the regions that would often recruit 50, 70 or 100 apprentices at a time for both their own purposes and then for other business as well. Those have now gone. What we are looking at is a concept where one or two apprentices perhaps are being taken by a number of companies and we have effective delivery of training for those which brings in the group training association.”

Even the Government, albeit slowly though I will not say reluctantly, have recognised the potential of group training associations—their impact assessment accompanying the draft Apprenticeships Bill explained that the creation of GTAs is specifically intended to ease the administrative burden on small businesses. The Innovation, Universities, Science and Skills Committee report recommended that

“the draft Bill be revised to place a duty on the National Apprenticeship Service to facilitate the setting up of bodies such as group training associations, to assist small businesses to carry the administrative burden of setting up apprenticeships, organising training and securing financial support.”

In response, the Government stated in their special report of 2008-09, published on 12 February, that the Bill will require the chief executive of Skills Funding to secure apprenticeship training and encourage the provision of apprenticeship training among employers. These duties will be delegated to the chief executive of the National Apprenticeships Service.

The Government, I think grudgingly, have recognised that merely adding apprenticeships to those well established programmes of well respected large employers is not sufficient to make apprenticeships reasonably accessible to large numbers of people who could take up apprenticeship places in those areas of the country where there are fewer corporates. A glance at the breakdown of the number of apprenticeships in different areas shows extraordinary differences. Indeed, even across London there is an extraordinary disparity; some boroughs have very few apprenticeships—Greenwich, for example, has just 200—whereas other boroughs have 270 or 300. Some cities and towns have a small number, while others have long-established apprenticeship programmes and a large number of opportunities for young people and others. There are problems in parts of the country, and reinvigorating the system through SMEs, with the support of group training associations, will help to even out some of the variety.

In urging Members across the Committee to support new clause 8, I emphasise that I do not think that there is much difference in our ambitions for apprenticeships, but there are real differences in how we believe those ambitions are most likely to be realised. There is a disconnect between the Government and employers, which is why the new clause is vital. There was disappointment during the witness sessions from organisations such as the British Chambers of Commerce and the sector skills councils about the Government underestimating the role of employers and so understating it in the Bill. A bigger role for sector skills councils would also help to achieve our shared ambitions for apprenticeships. Their role is barely mentioned in the Bill, although I accept that it is dealt with liberally in the explanatory notes.

Because I do not want to unduly delay the Committee, I will just emphasise that the new clause would improve the Bill. It is certainly not destructive, although frankly, it does not sit terribly easily in the convoluted structure set out in the Bill, which my hon. Friend the Member for Bognor Regis and Littlehampton was so critical of a few moments ago. However, it at least goes some way towards improving the prospects of achieving the ambitions that the Government have rightly identified as essential to re-equip Britain with the skills it needs. Apprenticeships matter too much for us fail to deal with funding, support for small businesses, and the importance of group training associations and the STEM and high-tech industries. We have tabled the new clause for all of those reasons, and I am delighted to propose it on behalf of my hon. Friends.

Stephen Williams (Bristol West, Liberal Democrat)

I shall speak briefly to the amendment and the new clause as we still have a lot of ground to make up this afternoon. I have no difficulty supporting amendment 107, which states that the chief executive should be responsive to employers’ needs, however, it would be extraordinary if the chief executive was unresponsive to their needs. Although, as we established in the discussion on the previous clause, that person will be directly accountable to Ministers and so directly responsive to their targets and requirements, it is useful to make clear that the chief executive’s primary purpose is to be responsive to employers’ needs, rather than to Government targets. Perhaps, that was the intention behind the amendment.

I have general sympathy with new clause 8 because it is similar to our proposals in our policy review. The hon. Member for South Holland and The Deepings has been charged by his leader with reviewing his party’s skills policy and has already waved his document around. I performed a similar function for my party. I do not have a document with me to wave around—I have left it in the office—but I know that the ministerial Front Bench read it avidly and are, no doubt, sending circulars out to their colleagues in the country with lines of criticism.

All three parties want to encourage more people to be attracted by apprenticeship training and for more employers to offer such opportunities. However, employers need more of an incentive to create them and that is what lies behind the new clause. In our own deliberations we identified a pot of money, rather than a target, to create a number of new apprenticeship places. That would come from the growth in the Train to Gain budget over the next period, which is a little over £500 million. Rather than being left in the Train to Gain provisions, it should be specifically directed to paying the off-the-job training costs of apprentices in order to incentivise employers to offer those opportunities.

Subsection (3) of the new clause, which encourages the setting up of group training associations, is broadly similar to my new clause 13, which also states that the National Apprenticeship Service should encourage the setting up of group training associations. That is a new clause that I know has the enthusiastic support—I am sure this will gladden you, Mr. Chope—of the FSB. I look forward to hearing words of encouragement from the Government.

Christopher Chope (Christchurch, Conservative)

New clause 13, however good the hon. Gentleman thinks it is, has not been selected for debate, so I hope that he is not going to debate it.

Stephen Williams (Bristol West, Liberal Democrat)

I assure you, Mr. Chope, that that was the end of my remarks on my own new clause. It was not selected, mysteriously, for debate, but it is broadly similar. That was the point that I was making to subsection 3 of new clause 8, which has been selected for debate and we are discussing that.

What I was about to say was that I look forward to hearing from the Minister when he replies that the Government certainly will expect the NAS and the chief executive of the Skills Funding Agency to encourage the setting up of group training associations in various parts of the country, so that small businesses and communities where apprenticeships are at a low state, as referred to by the hon. Member for South Holland and The Deepings, are encouraged.

Jim Knight (Minister of State (Schools and Learners), Department for Children, Schools and Families; South Dorset, Labour)

As we have heard, the intention of amendment 107 is to require the chief executive of Skills Funding to take account of employers’ needs in delivering the apprenticeship programme. We agree that employers’ needs are fundamental and that is why we now have 130,000 participating employers. Of course, the apprenticeship scheme is a demand-led programme and, if we do not take account of employers’ needs, they will not participate; there would be no supply and no programme, so their needs are fundamental.

The chief executive of the National Apprenticeship Service will report regularly to the Secretary of State on apprenticeships, and we will want to hold that person to account on employer involvement. Sector skills councils play, and will continue to play, a crucial and vital role in ensuring that employers’ needs are fully reflected in apprenticeship provision. Therefore, the amendment is not necessary and I ask the hon. Member for South Holland and The Deepings to withdraw it.

It is tempting to say that new clause 8 is slightly fanciful, given that the hon. Member for Havant (Mr. Willetts) was unable to provide the assurance, on Second Reading, that he had managed to secure the protections to his budget that the hon. Member for Surrey Heath (Michael Gove) has to his budget. Therefore, all the talk about apprenticeships from the Conservatives is not going to come to anything. However, I will focus on new clause 8.

Subsection (1) of the new clause would require the chief executive of Skills Funding to fund directly employers who take on apprentices, with the funding provided in one lump sum at the beginning of the apprenticeship framework and a further sum paid on completion. Funding for the delivery of an apprenticeship framework is paid to who is actually delivering the training, which may be the employer or an external training provider. A proportion of the apprenticeship funding is paid on enrolment to the apprenticeship framework, with a further payment on successful completion.

Subsection (2) would put a bonus scheme into statute for small and medium-sized businesses to be paid once apprentices have completed a recognised framework. Payment to training providers, at 25 per cent. on completion of an apprenticeship, already acts as such an incentive. However, we think that it is right to direct that to the training provider. While I understand that the intention might be to incentivise employers to take on apprentices, a blanket subsidy of that kind runs the risk of being a dead-weight cost where we would have to fund things that have already been incentivised by the current incentive system. We therefore think that the suggestion is fundamentally flawed.

The intention behind subsection (3) appears to be to guarantee the ongoing role of group training associations in delivering apprenticeship training. I reassure the Committee that the Government are strongly committed to group training associations. The “New Opportunities” White Paper, which was published this year, set out new plans for a fund to establish or expand group training associations and similar consortiums, and we expect the National Apprenticeship Service to announce a prospectus for a £7 million funding stream by the end of next month. Given that we are already committed to group training associations, which have the same standing as any training provider, new clause 8 would not improve their position.

While I understand the aims of much of the new clause, the right funding arrangements to maximise employer participation and engagement are already in place. To accept the new clause would mean a spending commitment that I certainly cannot make—it is interesting  that the hon. Member for South Holland and The Deepings thinks that he can—so it should not be pressed to a Division.

John Hayes (Shadow Minister, Innovation, Universities and Skills; South Holland & The Deepings, Conservative)

When the time comes, we will certainly press for a Division on new clause 8. On the Minister’s response, make no mistake that paying employers up front, with the final payment being made on completion of the full framework so that completion rates are secured, would make a massive difference to employer engagement in apprenticeships. I am absolutely certain that, had the opportunity to obtain an apprenticeship bonus and take on apprentices arisen when I was a small business man in a growing company and industry that was recruiting staff, it would have influenced the company’s recruitment and training policies. I believe that that is true of companies the length and breadth of Britain, so I completely disagree with the Minister about how money should be directed.

I share the view of most representatives of businesses and industry, the Innovation, Universities and Skills Committee and the Economic Affairs Committee, which is that paying employers directly would create a more straightforward system that would be more attractive to employers, more transparent and much easier to market, which matters as much as anything in engaging new companies. It is extraordinary for the Minister to speak of dead-weight cost, given that the dead-weight cost of Train to Gain is so profound. Even the Government had to acknowledge during the pilot stage that it was a significant difficulty, not to mention the brokerage service associated with that appalling policy.

Jim Knight (Minister of State (Schools and Learners), Department for Children, Schools and Families; South Dorset, Labour)

The hon. Gentleman is assiduous in quoting the CBI in support of his arguments. Employer satisfaction with Train to Gain is high: 92 per cent. are happy with the training course content and the provider that delivered it; 30 per cent. of people who completed a Train to Gain course got promoted the following year; and 43 per cent. got a pay rise. Furthermore, the CBI recently stated:

“Train to Gain is exactly the product we need at this time.”

Given that evidence, why does he not support the policy?

John Hayes (Shadow Minister, Innovation, Universities and Skills; South Holland & The Deepings, Conservative)

In the same survey, most employers reported that the benefit that they gained from Train to Gain was much less impressive than the Minister would have us believe; they said that it had little value. In addition, although I accept what he says about the CBI, there have been profound criticisms of Train to Gain from other employer organisations. Indeed, in his evidence to the Committee, John Lucas said:

“It is fair to say that if funding, financial incentives and financial support for employers were equalised across the whole apprenticeship programme, both pre-19 apprenticeships and post-19 adult apprenticeships, employers would be happier.”——[Official Report, Apprenticeships, Skills, Children and Learning Public Bill Committee, 3 March 2009; c. 12, Q25.]

That is the precise position of the Opposition; we should equalise funding between so-called adult and other apprenticeships.

Just as most employers want the money paid direct, most people know that Train to Gain suffers from three things: a dead-weight cost; the confusion between  assessment and real training; and immense cost-ineffectiveness. We could use that money much more wisely if it were redirected to the apprenticeship programme, as advocated in the paper that I mentioned. That would allow us to create 100,000 new apprenticeships. The Government do not support that objective, but it would engender the support of employers and potential learners.

I shall not say more, because the document speaks for itself. I have briefly outlined it, and the whole House knows of our commitment to skills and, in particular, to apprenticeships. However, even if the analysis and recommendations in the document did not exist, frankly we could not support a Bill that puts into place such a structure, even with the best will in the world—and good will seems to be the basis on which Ministers were recommending the Bill to the House. Just last week a Minister said that good will was a fundamental element in the Bill’s genesis and likely delivery. Frankly, good will is something that we try to practise and preach at Christmas, but it is crackers to base legislation on it. Legislation should be based on a proper analysis of what is happening, and on a set of plans that can deliver an improvement in the status quo.

We shall not build an apprenticeship programme around a convoluted, confused structure that is unlikely to be understood by learners, is likely to bemuse employers and will certainly not incentivise small and medium-sized enterprises to get more involved in the apprenticeship programme. For that reason, we shall press new clause 8 to a vote when the time comes, but I beg to ask leave to withdraw the amendment.