My Lords, we continue to monitor apprenticeships’ market performance, including levels of starts and spend. We have made radical reforms to the way we develop, deliver and fund high-quality apprenticeships, and further major changes have the potential to be destabilising. However, we are prepared to make adjustments when and where they are required in order to deliver our ambitions and support quality apprenticeships.
I thank the noble Viscount for that Answer, but I am genuinely at a loss as to why the Government are so resistant to the calls being made by those who are committed to the apprenticeship levy and to quality apprenticeships for changes that would reverse the 26% drop in the last quarter in starting apprenticeships and utilise the underspend so that small and medium-sized companies and associated colleges could undertake the necessary work, perhaps in the future top-slicing sufficient funds to reach out beyond the larger enterprises, thereby helping both individuals and our economy.
I hope that I can reassure the noble Lord that the Government have awarded £490 million to providers across the country to deliver apprenticeship training for smaller businesses from January 2018 to April 2019. Today, we have announced that in April we will be making available an additional £80 million for starts with SMEs which will support up to an extra 40,000 apprenticeships. Also, in terms of flexibility, from April levy-paying employers will be able to transfer up to 10% of the annual value of the funds entering their digital accounts to other employers, including SMEs.
My Lords, the success of SMEs is critical to the UK economy, as is a thriving apprenticeship system. For our SMEs, a central fund enables the Government to fund 90% of the training programme, which the Minister has alluded to, leaving only 10% of the costs to be covered by businesses themselves. Unfortunately, there is still a poor level of understanding of the levy and how it can be spent among employers. Does the Minister agree that, although there has been a drop in apprenticeship starts, calling the new system a failure is not only a huge simplification but writes off the new8 apprenticeship system before it has even had a chance to embed? What apprenticeships need right now is positivity and action.
My noble friend is right to say that we must not lose sight of what we are actually doing here, which is why we have introduced these reforms. It is the largest government reform of apprenticeships that has ever been made. The key point here is that we are putting quality at the heart of our reforms. We need to look at how the system is operating and provide some flexibility in the system, which is the gist of the original Question asked by the noble Lord, Lord Blunkett.
My Lords, a recent report showed that the UK skills shortage is leading to an estimated £7.3 billion annual loss in sales to SMEs, equivalent to approximately 250,000 jobs. The Minister has already mentioned some help to be given to SMEs, but what is the apprenticeship levy doing to help SMEs meet the acute skills shortage?
I have already mentioned the transfer arrangements. Up to 10% can be transferred by employers to SMEs to help them take on apprentices. In addition, we have a marketing programme under way—I highlight the “A” pin on my lapel in support of National Apprenticeship Week which took place last week, and there was a lot going on on the radio also. I think that we will find that the fall we experienced last year will change and that employers will be taking up more apprenticeships.
My Lords, are the Government checking the effectiveness of individual apprenticeships to make sure that they are actually working properly for the benefit of the apprentice?
Absolutely, and I can reassure the noble and learned Baroness that the Institute for Apprenticeships is responsible for quality and standards. It is the institute’s sole job to work closely with employers to ensure that the quality of each apprenticeship is high, which can take some time, and that the apprenticeship itself is what employers want, thus helping to increase skill levels in this country. That is our aim.
My Lords, there has been a 30% year-on-year fall in apprenticeship starts by under-19s. That should be no surprise because, despite this being a great applied qualification, the pipeline is being strangled by the EBacc squeezing out applied learning from the curriculum. STEM is becoming S and M in schools, as technology and engineering are being taken out, leaving only science and maths. When are our schools policy and our skills policy going to align?
I have mentioned to the House before that we have a National Careers Service up and running. It is essential in giving proper careers advice that employers in particular can go into schools and address, and hopefully garner, the interest of pupils. We are trying to address the skills shortages. STEM skills and occupational sectors, including the digital side, are well represented in our move from frameworks to greater standards and to increasing the skills level in our country.
My Lords, does my noble friend know that the Economic Affairs Committee has been looking at this issue for almost the last year? We have had employers openly admit that they are using the levy to fund training that they would have done anyway. Is it appropriate that the apprenticeship levy should be used to fund people doing MBAs at business schools and so on? Surely the resources should be concentrated on level 3, and in particular on young people, to give them the skills that they need in the workforce.
My noble friend is absolutely right. I had not heard about this, and I will certainly follow up on the points that he has raised. The whole point of the apprenticeship scheme is that it is employer driven; it is what employers will need. The standards and quality are set by the Institute for Apprenticeships. We believe it is working well, but I will look into my noble friend’s points.
My Lords, the noble Viscount the Minister should be aware that young people from low-income families are underrepresented in the apprenticeship programme. Some 13% of school children received free school meals last year; only 10% of young people starting apprenticeships had been on free school meals. One reason for that is that the Government still do not classify apprenticeships as approved education or training, with the result that the families of young apprentices lose the right to claim child benefit and tax credits. Last month at Oral Questions, I highlighted this structural barrier to the noble Viscount and asked him to speak to ministerial colleagues in the Department for Work and Pensions to try to make it more attractive for young apprenticeships to start. Has he done that, and if not why not?
I can reassure the noble Lord that I have indeed done that. If he has not received a reply, and I am sure he should have, I will follow up immediately and make sure of that. Yes, it is true that some apprenticeships are on the minimum and I have no doubt that is a bit of a struggle. Having said that, many employers are paying more than the average, which is £6.70 an hour, rather than the £3.50 an hour that is now going up to £3.70.