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‘(4) The Secretary of State shall, within 12 months of the coming into force of this section, publish an assessment of the implications of the duty imposed by this section on the employment prospects of 16 and 17 year olds.’.
The Committee has become accustomed to me speaking to amendments in the context of the explanatory notes. Indeed, perhaps people are grateful to me because it saves them trawling through their own papers. The explanatory notes state that clause 21
“places a duty on employers not to employ a person unless they have taken reasonable steps to check that the person has made appropriate arrangements to participate in relevant training or education. For example, an employer would check that a potential employee could produce a letter from a learning provider indicating that he or she had enrolled on a course. It provides for an exception to this if the contract is made conditional on the person making arrangements to undertake appropriate education or training, in which case they must have done so before employment commences. This enables an employer to have a role in a young person’s decision about the type of education or training to pursue.”
The amendment suggests that within 12 months of this coming into force, the Secretary of State will
“publish an assessment of the implications of the duty imposed by this section on the employment prospects of 16 and 17 year olds.”.
The reason for the amendment is that there is considerable doubt about two things, which we heard expressed very clearly in the evidence sessions by both the Institute of Directors and by the academics who came to visit, notably Professor Alison Wolf. The first issue is that of the cost to employers of this business, which, in their judgment has been underestimated by the Government, and I shall return to that in a moment. The second problem is the potential effects on the employment of 16 and 17-year-olds. Alison Wolf was outspoken on that subject. She said that she thought that a typical employer would resist employing 16 and 17-year-olds as a result of the legislation, because they would bring with them the additional burden and responsibility of training or education.
The cost of employer checking is much higher in the IOD’s estimation than the Government assume. The IOD says:
“Government figures estimate that the process of employer checking is a single exchange of paper between an employee and employer, which will take ten minutes” and would therefore cost £16.8 million nationally.
“In reality this process will actually require a mixture of discussion, checking, altering of work rotas and/or addressing employees’ needs.”
The IOD projects that it will cost more than double that figure—its top estimate is that it could cost up to £68 million per year. The administrative burden also accounts for what it calculates to be a 32 per cent. hike in the Department’s imposition on business. That is entirely contrary to current Government policy that the Minister has articulated of reducing the administrative burden on business by 25 per cent. The consequential, unintended impact of the clause could be that employers only employ people older than the proposed compulsory age—precisely Alison Wolf’s argument.
That is especially true in the case of small and medium-sized businesses. I suspect that very large organisations, as so often with bureaucratic or administrative burdens, have the capacity to absorb the extra costs in a way that small businesses do not. For example, a small training business that employs a 17-year-old to work in numerous different jobs, will spend less time on tasks such as marketing and business, and more on burdensome administration. Therefore it is important that we review the impact of the clause after 12 months. We must find out whether the Minister is right, and the Government’s estimates are borne out, or whether the IOD and Alison Wolf are more accurate in their estimation of the detrimental effect on the employment of young people, and on the cost of businesses in respect of checking their new obligations. The amendment does just that, and I hope that the Minister will accept it in the spirit in which it is offered.
The hon. Member for South Holland and The Deepings has raided and shortened my speech not only by reading out part of the explanatory notes, but by covering large chunks of the notes from the Institute of Directors on the issue. Therefore, I wish not only to speak on the clause and the amendment but also to seek some guidance from you, Mr. Bercow, as to whether it would be acceptable for me to make all my comments on the clause within this debate—you know that I tabled an amendment to delete the clause—or whether you would rather have two debates on it.
I am grateful to the hon. Gentleman for seeking guidance. We do not want to end up having two clause stand part debates. Although he might be seeking to be helpful by confining his remarks to one speech at this stage, that of itself is not sufficient. Others may wish to speak in a clause stand part debate subsequent to our consideration of the amendment. Therefore, I urge him, despite his good intentions, to stick to matters that are directly relevant to amendment No. 31.
Thank you, Mr. Bercow. In that case, I shall save the bulk of my comments for the debate on clause 21.
I have some sympathy with the amendment tabled by the hon. Member for South Holland and The Deepings. If pressed, I would even vote for it, but my concern is that, while it would provide us with useful information about the consequences of the clause, it would not actually prevent damage. It would look back at the situation from a retrospective position in the future when some of the damage that the hon. Gentleman said the clause could do to the youth labour market and to employer costs would already have been incurred. We have concerns about the Bill, and we are supportive of the amendment, but we believe that it does not go far enough in hampering the Government in their efforts to increase the burden on employers and to risk damaging the youth labour market.
I shall reserve my response to what the hon. Member for South Holland and The Deepings said about the IOD analysis for the stand part debate and simply direct my remarks now to whether there should be an assessment published within 12 months of the measures coming into force. I will pass over my concerns about around publishing or carrying out the survey within 12 months because I accept that the hon. Gentleman is trying to make a point.
We will, of course, continue to assess the implications of our policy in conjunction with other Government Departments once the provisions come into force. My Department already produces a statistical first release each year which provides information on the youth labour market broken down into various dimensions such as employment, unemployment, inactivity numbers and the education and training status of young people. For the past three years, there has also been a more comprehensive review of the youth labour market and its interaction with the education and training market. It is part of cross-Government work with the Department for Work and Pensions and the Department for Business, Enterprise and Regulatory Reform.
In one second.
A range of analyses of the youth labour market and the implementation of the raising of the participation age will be carried out by my Department and other Government Departments as we move toward 2013 and beyond. I therefore do not consider it necessary to set out a requirement in primary legislation, but I reassure the hon. Member for South Holland and The Deepings that it is our intention to carry out reviews such as those he seeks in the amendment. On that basis, I hope that he will withdraw the amendment.
I am glad that the Minister prevented me from intervening, because I would have anticipated his words. He seems to have offered this anyway, but I was going to ask him to ensure that the sentiments expressed in the amendment were reflected in the reviews and reports. I think that he has given assurance that that is likely to be the case. Frankly, if it were not, organisations such as the IOD would do their own survey and publish it anyway, so I suspect that it is in the Government’s interest to do so. On that basis, I am happy to beg to ask leave to withdraw the amendment.
We wish to delete the clause from the Bill because of concerns that have been aired earlier in our debates and that were aired by some of the witnesses in oral evidence. Our concerns is that the proposals in the clause and the other clauses associated with it will add quite a burden to that already placed on the business community, particularly smaller businesses.
As the hon. Member for South Holland and The Deepings acknowledged, this section of the Bill could seriously damage the youth labour market and raise unemployment rates for young people aged 16 and 17. We argued earlier that there are many young people for whom being in employment is extremely valuable and is often a better alternative to being in formal educational or training. Whether what they learn is accredited or not, it will often be of great value—sometimes, arguably, of greater value than the formal accreditation that would be required under the Bill.
The Institute of Directors gave evidence on this issue and indicated that while it was willing to accept the Government’s desire to ensure that young people aged 16 and 17 in employment were undertaking some type of education and training, it wanted the duty to be placed on young people themselves to take up that education and training option. It did not want the burden of checking to be placed on employers. As it is, the Bill describes a double duty: a duty on the young person himself or herself to be in appropriate education and training even if he or she is in employment, and another duty on the employer to check. Although in theory that sounds quite simple——the Government have come up with a low estimate in the regulatory impact assessment of the additional cost on business—the cost could be a great deal higher.
The hon. Member for South Holland and The Deepings has already referred to some of the concerns that Alison Wolf and the IOD aired about the Government’s assumptions and, in particular, their concern that the size of the cohort affected by the proposal may be larger than the Government expect, particularly if we do not make the expected progress on participation between now and 2013 to 2015. The actual process of checking and the amount of time involved could also be longer than the Government assume, and there will be a requirement on employers to understand the guidance here, particularly given that there are penalties which can be used against employers if they do not comply with this section of the Bill.
As a consequence of having to process and understand that guidance, the cost could also rise. The IOD has therefore estimated that the Government’s original figure of £8.4 million for the regulatory burden could increase, because of those three factors, to a much larger figure of around £67 million. In the briefing note they prepared for the Committee and circulated to many Members, it says:
“this amount of administrative regulatory burden would if implemented today account for a 32 per cent. hike in the DCSF's imposition on business. Since the policy implementation will take place beyond the date of the present Government's activities to reduce administrative burdens by 25 per cent. the figure has not been accounted for in the department 's annual Simplification Plan.”
“However, it is worth noting that if IoD projections are correct, all the Government's activities to reduce the burden of regulation on business within the DCSF's arena would be invalidated and indeed reversed by this single policy.”
What is being suggested here does not go as far as I would want to go in removing the duty entirely from the Bill and allowing young people who are in employment not to be in formal accredited education and training. The idea of the proposal to delete clause 21 and that of the IOD is not that young people in employment aged 16 and 17 should not be doing some sort of formal education and training, but that the burden of them doing so and complying with it should be on the individual and not on the business. If that were the case, the regulatory costs for business would be far lower than those estimated by the Government and some of the business organisations. Even more importantly, some of the concerns of the business community about being caught out employing 16 and 17-year-olds who are not in education or training would be significantly ameliorated. Therefore, the potential damage to the global market from the measures in the Bill could be considerably lessened. That seems to me to be the really important prize.
We should not end up inadvertently taking away employment opportunities for young people that may be more valuable for some than the accreditation that they can achieve elsewhere. My real fear about the clause and other clauses associated with it is that employers will say simply that there is too much uncertainty because of the administrative burden: because of the requirement to police the time and ensure that young people are in education and training; because of complexities that could arise when an employee joins at a mid-point through the year; and because of the issues that may arise if a young person finds themselves on a course that folds and has to identify another course to join. All those things make businesses worry about whether they can trust what young people tell them and whether they will essentially carry the can if everything goes wrong.
We would therefore like the clause deleted. I can see that I have not completely persuaded the Minister as yet, but I hope that he will reflect further during the debate. We would like him to keep his education and training obligation in the Bill, if that is what he wants to do. It is not what we want him to do, but he may still do it. However, we want him to take the responsibility off the shoulders of employers and make this a duty on young people. That would help not only employers, but far more importantly, it could help young people whose prospects will be so badly damaged if the employment consequences of these clauses are underestimated, as we think they are.
I have just a word on the stand part debate. I think that the point made by the hon. Member for Yeovil is worth amplifying. It is entirely possible that a perverse, unintended consequence of the legislation will be to see more young people in training, but fewer in employment. That is not the Government’s intention and is certainly not the wish of any member of the Committee, but it could happen. There is no comfort in moving from being a NEET to being a NIJIT—not in a job, in training—and we could see the birth of NIJITs as a result of the Bill.
The Government need to give this matter much more consideration. I would like the Minister to consider modelling it more carefully. There certainly needs to be a better dialogue with industry, given what we know the representatives of the small businesses, through the Federation of Small Businesses, and the larger companies, through the IOD and the CBI, are already saying. That cannot be dismissed entirely. I do not necessarily buy Alison Wolf’s argument, but I think that it is worth listening to and that it should be taken into account.
In your wisdom, Mr. Bercow, you did not call amendment No. 32, which was tabled by me and my hon. Friends. That is your privilege. However, in our judgment, the Bill places too little emphasis on in-house training that leads to accreditation on the part of business. The clause is relevant in that regard. These two things are not unrelated. It is more likely that a small or medium-sized business will take on a very young person if it is already training people in-house in an entirely wholesome and rigorous way, leading to accepted, industry-recognised qualifications. That is less likely if it feels that it has to take on a burden with which it is unfamiliar. Again, will the Minister reflect in respect of the clause on placing greater emphasis on high quality, in-house training and partnerships between business and the FE sector in delivering a mechanism to ensure greater skilling of young people that is attractive to small and medium-sized enterprises, in particular? It is high time in this House that we made a case for our small and medium-sized businesses just as it is high time that we made a case for British manufacturers who do so much. I met some last night, and I promised them that I would raise their case here today. I agree with their argument that we should shout for them more often and more loudly, which is why I am doing just that. There is a lot to be said for British manufacturers and British SMEs. We should celebrate their work and, by reflecting on the clause, perhaps the Minister can illustrate that he supports me in that endeavour.
Labour Members will continue to shout for British manufacturing in the same way that we shouted for it throughout the 1980s when so much damage was done by the Government of the day. In the spirit of invest to save, I look to save on this occasion by not repeating my arguments when rebutting Alison Wolf’s comments with which I entertained the Committee in some form or another on the afternoon of 5 February. They should be taken as read. I hope that it helps the hon. Member for South Holland and The Deepings if I say that in-house training that is accredited will certainly count in respect of fulfilling duties.
We have said that we want duties on employers to have as light a touch as possible, and that the primary responsibility for participating will be with the young person. However, employers do have an important role in supporting young people to fulfil their responsibility, which is why if employers want to take on a young person for more than 20 hours a week in a situation when they are not providing their own accredited training, the young person will need to provide evidence that they have made arrangements to attend training or education before they can start employment. The employer will simply need to check that before allowing the employment to begin. If he does not, he will be failing to meet his duty. Employers will not be required to do anything further, such as calling the college to check that the young person was enrolled there nor would they have an ongoing duty to check that they were attending the course. As we have discussed, employers would not have to check the number of hours.
The Institute of Directors states that, in its view, fulfilling the duty to check would in each case take 20 minutes rather than the modest average time of 10 minutes for which we have allowed. As someone who has previously run a small business, that is not credible. All we are asking employers to do is look at the proof the young person provides, probably in the form of a letter that accepts them on a course in which they have made arrangements to participate. That need not be a process that is separate from the other checks that take place on commencement of employment such as eligibility for work, provision of a national insurance number, perhaps a P45, bank details and all the usual things that we go through when we commence employment.
Will the Minister explain why it is important that employers should play a policing role? He said that he wants employers to support young people. They are not arguing against that, but against taking on a policing role. Why is that role necessary?
The extremely modest policing that involves simply making a check lasting a few minutes at the commencement of employment about whether the person is enrolled on an appropriate course is just a way to ensure that those who are in jobs without training move into training in employment. It is another lever that is at our disposal as we design the system.
The Institute of Directors estimates that a further 20 minutes would be required each time a new young person is employed to read the guidance that we shall issue to employers. Bizarrely, it seems to think that employers would need to read the guidance each time that they take on a young person. That is not credible. When developing guidance, we shall want to consult organisations such as the Institute of Directors. No doubt, it will take issue with guidance even of the admirable brevity of some of our policy booklets or even this speech, but we shall certainly aspire to keep something brief and to the point. I reassure the Committee that we took the time needed to read and assimilate guidance when we made our assessment of an average of 10 minutes needed to carry out the check.
I do not accept that the duty to check is a significant burden. It is a necessary duty to place on employers. Without it, employers could—either knowingly or unknowingly—employ young people who are not participating, and thereby collude inadvertently in a young person’s failure to fulfil his or her duty. With the duty to check, there is an incentive for young people to make arrangements to participate before looking for a job, because they know that they will need to provide proof before they can start work. Not having duties on employers would seriously disrupt the balance of roles and responsibilities which is fundamental to raising the participation age successfully.