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.
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. Being 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.