Apprenticeships - Motion to Take Note

Part of the debate – in the House of Lords at 3:20 pm on 4th July 2019.

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Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy) 3:20 pm, 4th July 2019

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?

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.