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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.
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, they 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.