Examination of Witness

Deregulation Bill – in a Public Bill Committee at 10:00 am on 25th February 2014.

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Richard Hamer gave evidence.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East 10:30 am, 25th February 2014

Mr Hamer, I invite you to tell the Committee who you are.

Richard Hamer: I am Richard Hamer, education director of BAE Systems, responsible for its apprenticeship and graduate early career programmes.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Welcome, Mr Hamer. Mr Perkins.

Q 67

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

It would help if you could start by taking us through your corporate view on the provisions of clauses 3 and 4. Do you welcome them? Can you identify any particular advantages or disadvantages?

Richard Hamer: In principle, we welcome both clauses. SASE—the specification of apprenticeship standards for England—was probably over-prescriptive and tied down employers and our advanced manufacturing sector in terms of how we run and deliver apprenticeships. We have a heritage of success in delivering those programmes.

The Department for Business, Innovation and Skills has the new trailblazers activity. I do not know if the Committee has seen the papers I forwarded and copied to the secretariat. We have created through trailblazers a new two-page standard. The simplification that the trailblazers activity allows is helpful. It is helpful for us as a sector to reflect at top level what an apprenticeship should look like. It is also helpful for small companies who often do not engage effectively with apprenticeships. Often we in the big companies may help to confuse the marketplace by creating over-complex arrangements for what apprenticeships look like.

Having a two-pager as a starter is a great help. It is also helpful for parents. When a mum or dad is considering apprenticeship versus university for a young person, having a more simplified and attractive proposal of what an apprenticeship looks like is helpful. Universities and colleges give good descriptions of courses. Often you look at an apprenticeship and, certainly with the SEMTA sector skills council, it can often be a bit of a nightmare, with 70 or 80 pages of detail about what the course might look like.

Having much more top-level description is a helpful way forward. We are fully behind that. We chose aircraft manufacturing fitter as an occupation as an example, but we plan as a sector to ripple that through the other occupations in our area. In terms of the first area and simplification, however, we support that.

My only concern, as I said in a note, was that when you do deregulate and take responsibility away from the sector skills councils that control or manage the apprenticeships, they could proliferate and individual employers or associations could create apprenticeship programmes that are not necessarily the best for their industry. There need to be caretaker arrangements for employers to put things in place to ensure that the quality of apprenticeship design is appropriate. At the moment, as I understand it, Ministers are in charge of any such changes. I cannot see the Department for Business, Innovation and Skills being in control of all apprenticeships—there are hundreds of them—and having the time to manage that.

We do need something like SEMTA. I know that we in the engineering sector would probably put support behind SEMTA or another body to manage those arrangements going forward. There does need to be some control around that, or else you could have a bit of anarchy with people doing their own things and quality not being as it should be.

Q 68

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

You wrote to say that the apprenticeship brand is incredibly important.

Richard Hamer: It is.

Q 69

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

My perception is that the BAE apprenticeship would be seen as a brand in itself that people would respect. The Labour party is keen on ensuring that that broader apprenticeship brand is strengthened and protected. How important is it for you as an employer—not just of someone who has taken on an apprenticeship, but perhaps of people in the later stages of their careers who have served an apprenticeship with other organisations—that that apprenticeship brand is preserved? You want to know, if you take on someone who has been through an apprenticeship, that they have a real base from which they have started their career.

Richard Hamer: I think it is vital. That is why we are working through the trailblazer with a range of employers. They are the usual suspects and include the engineering sector and, in particular, aerospace. We are also working with smaller companies, most directly in our supply chain, but also through Group Training Associations England. There are lots of small companies that it works with.

An apprenticeship should be a foundation for a whole career so that, should BAE Systems be getting smaller at certain locations, that individual can get a job elsewhere. The apprenticeship training that they get will serve them not just for aerospace, but for automotive, rail or nuclear and things like that. Equally, if they work for a small company, we want to ensure that the apprenticeship training that they receive will give them an opportunity to work for BAE Systems or Rolls-Royce or Network Rail.

The foundation part of the apprenticeship—the first year—must have some fairly common elements for the engineering sector. I have been chairing the aerospace trailblazer, and I have been working with Jaguar Land Rover, which chairs the automotive trailblazer. We have been ensuring that the same principles underpin that work across a number of different areas in the vast manufacturing sector. It is collectively in our interests as big employers and in the interests of the supply chain, but we also know that it is in the interests of young people and individuals in a more fluid world where you cannot guarantee employment from one company for a lifetime.

Q 70

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

There are a number of small and medium-sized businesses that I have spoken to that have said that they would like to take on apprenticeships, but they are worried about the bureaucracy and whether what they get when the apprentices are sent to the further education system is relevant to the learning that they need. We want to look at how we can open up apprenticeships to more businesses and how we can encourage more businesses to have them. At the same time, we are strongly of the view that the apprenticeship brand needs to be strengthened. It needs to be absolutely paramount that people know that someone who has done an apprenticeship has a real body of work behind them.

A criticism of this Government has been that they have pushed the numbers of apprenticeships without being careful about quality. In terms of the changes proposed here, what caveats would you offer to the Government to ensure that we do what you and I both think is important, which is protecting the strength of the apprenticeship brand? How do we ensure that the opening up and simplification of the definitions does not weaken or fail to strengthen what an apprenticeship should be about, which is that sound base?

Richard Hamer: You need good governance arrangements that are inclusive and involve a range of different stakeholders: small companies, as well as the big companies. For us in the bigger companies, we can use our muscle with the awarding bodies, organisations and colleges to ensure that the provision provided is not only excellent for BAE Systems or Rolls-Royce, but is excellent for the smaller companies that we work with. By working together, we can provide a stronger apprenticeship offering and brand through the wider sector for young people.

That is one of the things that we are trying to do with the model. We are trying to show what a best practice solution should look like. It should drive up standards in our sector—that is how I think we can do it. There are also arrangements where large companies can over-train and provide training for the supply chain. For example, in Preston, we are providing a small number of apprentices. We are starting by providing 20 opportunities for smaller companies, offering a level of training and support that they would probably would not be able to get from local further education colleges or do themselves.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Mr Hamer, I do not know whether it is the acoustics, but I can only just hear you. Perhaps you could speak a little more loudly and a little more directly into the microphone.

Q 71

Photo of Caroline Nokes Caroline Nokes Conservative, Romsey and Southampton North

The 2012 independent review on apprenticeships by Doug Richard put a big emphasis on the need for Government to improve the quality of apprenticeships and to make them particularly focused on the needs of employers. Do you think that there is any danger that the specific needs of the apprenticeships themselves might be lost in that?

Richard Hamer: I do not think so, because an apprenticeship is fundamentally about an occupation and ensuring that that person can perform in an occupation, in terms of academic knowledge, technical knowledge and the behaviours that enable them to do a job. We as employers are in the best position to design programmes that meet our needs, but that also meet the needs of young people. There has been a tension, when there were FE college-led courses or training company-led courses, because it was a course rather than an actual job. If it is led by large or small employers, it is in our interest to ensure that on completion of an apprenticeship that person is picked to do the job. In our sector, apprenticeship costs are of the order of £90,000, which is a sizeable amount of money in terms of at least three years of training. We want to ensure that at the end of that journey the person is fit to do the role, not just in the short term but in the longer term.

Q 72

Photo of Caroline Nokes Caroline Nokes Conservative, Romsey and Southampton North

I now have a question on a completely different aspect, drawing on an example that I wish I could say was still in my constituency, but sadly is not. The Ford Motor Co. offers very good apprenticeship schemes all over the country, but I was particularly thinking that they could be found in both Dagenham and Wales. Do you think that the differential between the Welsh system and the English system will cause any problems for companies such as Ford, which operate in both England and Wales?

Richard Hamer: It is a challenge to operate across the different parts of the UK, but the large employers at least are used to doing that. We in BAE Systems do not have much of an apprentice presence in Wales—we have a small site at Glascoed with a small number of apprentices. You can work within that. I do not have detailed knowledge of the Welsh apprenticeship system, but I understand that it is slightly more generous in terms of support and what aid is given than the model in England.

Q 73

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

May I bring you back to the issue of quality, proliferation and perhaps transferability? We heard from an earlier witness that he thought that  employers perhaps wanted an apprenticeship for mechanics that was about dealing with cars, then there might be a separate one for dealing with buses or lorries, for instance. How do you stop that proliferation, or is it something that you would welcome? How do you ensure that there is transferability? In other words, employers can see that someone has done an apprenticeship in x, y and z, and understand what it is that has been done and whether it is relevant to their business, which might be slightly different in nature.

Richard Hamer: My instinct is to have as few standards as we can. Just on a purely personal basis, there is the amount of work that is involved in trying to manage a whole range of different standards, so I would prefer smaller numbers. What we do do, as I mentioned earlier, is work with different sectors of engineering—for example, automotives. So in the first part of the apprenticeship programme, the foundation period, we would like there to be the core knowledge required, both practical skills and the academic underpinning, with the mathematical and science skills. The knowledge should be pretty transferable, whether you are a mechanic or an electrician, but also at different levels. In BAE Systems, we take people at 16 or 18, start them on the programme and assess their capabilities. So there could be core craft apprenticeship programmes, technician apprenticeships or hybrid apprenticeship programmes. You want to build in that kind of flexibility. The key ingredient is to ensure that in the first year, the foundation year, you have as much of a standard component as you can, and then in years two and three you can build in more variation.

We have an informal grouping in the engineering sector called the Large Engineering Employer Apprenticeship Consortium, which embraces all the usual suspects, but across a wide range of companies, not only in aerospace and defence—we have got Network Rail and JCB—and we talk about our apprenticeship solutions and how we are doing them. We try to ensure through the programmes that we have as much transferability as we can. It is in our interest. For example, in our Brough site, we had to reduce the number of our staff and we had to look at the future of the apprenticeship programme. Some of the apprentices went to Jaguar Land Rover, so it is in their interests and our interests that the skills the apprentices learned in the first part of the apprenticeship programme would work in the automotive sector, as it would do in the aerospace and defence sector.

Q 74

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

In your experience, how easy has it been to get the different employers to coalesce around the four core programmes? Do you have a reconciliation process, when people have differing views, to get agreement around the core programme?

Richard Hamer: Yes. For the trailblazer process, we have been happy to share what we have been producing and working on with the automotive sector in particular. We also had some discussion with other employers, which have not been engaged in the trailblazer activities. For example, we are working hand in glove with automotive to help ensure that the first part—the foundation part—of the programme has as much of the common elements as possible. It also makes it much easier for the awarding organisations when they are designing qualifications. If we simplify it and, rather than having a multiplicity of  different qualifications, have fewer, higher-standard qualifications, that will be easier for them and us. Big companies have the credibility and presence to influence providers, colleges and awarding organisations, but smaller companies do not. On your point about the governance and quality arrangements, it is helpful for us to work together to support the needs of smaller companies, which do not have the muscle that big companies have.

Q 75

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

May I ask one final question on how the employers should receive the funding for apprenticeships? Options are being considered, such as using the pay-as-you-earn system, or grants and vouchers. Do you, as an employer, have a view about which of those models you would prefer?

Richard Hamer: Based on our understanding of the different proposals, for BAE Systems the direct grant would be the easiest. We have a national arrangement in England to run our apprenticeship programmes, and we have a national contract with the Skills Funding Agency. It would be easier to transfer that across as it stands. The PAYE model, as I understand, would be linked to your PAYE reference points. Unfortunately, as BAE Systems is a complex organisation, we have 37 different PAYE reference points, and that would be complicated to manage. However, a large employer with only one large site may have only one PAYE reference, so it might not be a problem for some other companies. For us, it looks like the direct grant is the best option.

We are in discussions with the UK Commission for Employment and Skills and BIS about that. As I mentioned in my note, by coincidence we agreed to set up a session with our tax manager, our payroll manager and UKCES on Thursday. You could use us as a case study to understand how large companies with disparate businesses operate, from a tax and payroll perspective.

Q 76

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee

May I ask you about the implementation? By way of context, I thank you for all the work you are doing. In Southend, which I represent, there is a college in which 600 apprentices are being trained. There is also London Southend airport, which, specifically on the aviation side, has well over 100 apprenticeships, and is fantastic.

I am concerned, because from our perspective this is a carry-over Bill, which technically means that it will take quite a while to become law. It may become law quite close to the general election, depending on how the Government timetable it, and I am conscious that you have term times. In my mind, it looks like these things will be implemented in September 2016. Is that the timeline, or can anything be done to bring forward some of the work so we can see the benefits earlier?

Richard Hamer: As a sector, for the first trailblazer and aircraft manufacturing fitters we are thinking of working to a timetable of having a pilot arrangement by September 2015. We would not roll it out nationally, because that would be risky from the point of view of colleges, employers and whatever. However, if the aircraft manufacturing fitters for a number of the larger employers—those that have engaged with the trailblazer—have existing relationships with local colleges, we can do that for September 2015, with a view that by September 2016 there will be a national roll-out.

I have been talking to some colleagues in the UK Commission for Employment and Skills. I have a colleague there, Judith Compton, with whom we worked on the skills, and she said that in the old days the Qualifications and Curriculum Authority often used to do pilots before the full roll-out so they had the benefit of feedback about how things had gone. Therefore, we will roll out on a more systemic basis in England from September 2016.

Q 77

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

Just to go back to the issue of how employers should receive funding, do you see that there is any greater risk of fraud attached to any of the options that are being considered? For example, if the Government go down the route of having a direct grant, what sort of checks, balances and controls would there have to be to ensure that the employer is actually using it?

Richard Hamer: We currently have direct grants, and we have audit arrangements with the Skills Funding Agency. We have quarterly meetings with it, and it gets all our data on the numbers of learners that we have and their achievement results. They work locally with the colleges, and there are inspections by Ofsted. There are a number of different layers of inspection that the Government can have. We have our own internal audit arrangements. I know the employer ownership of skills, where there also was a direct grant, also required independently audited accounts, so we had to get independent accountants to look at our books to make sure we are transparent with all the figures we have. There are pros and cons with all different approaches, in terms of the grant. The grant has been the standard arrangement, certainly for the 10 or so years that I have had this kind of role with BAE Systems. That has worked effectively with us, as a large employer.

Q 78

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

So you do not think any of the options that are being considered are more at risk of fraud than any of the others.

Richard Hamer: I do not think so, no, as long as controls are in place with each of those arrangements. With the provider method, where the money goes direct to the college, again there is a lot of audit around how the college spends its resources and things like that, so that is there. With PAYE, clearly you have all the overlay of Her Majesty’s Revenue and Customs inspection and whatever. I know we had a consultation session with one of the HMRC officials, warning us of the big stick—“If you took this, you have to be aware of the way HMRC operates. If you were acting in a way that was construed to be fraudulent, we could obviously penalise you or send you to prison, or all those sorts of things.”

At times, Government can be overly intrusive, maybe with too much activity. One of the things about simplification is standing back a bit and allowing a bit more trust and whatever. Clearly, as you see on programmes on TV, there are rogue people out there with apprenticeships, but I genuinely believe that they are in the minority rather than the generality. Be it companies or FE colleges and providers, the bulk of them are there to do a job, and that is about delivering an apprenticeship of a high quality. Although the new standards have just been talked about, if we work together, there is less scope to be running things in a way that is less than professional.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

If there are no further questions from Members, we will move on to the next panel of witnesses. I thank you for your evidence, Mr Hamer.