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Apprenticeships: SMEs — [Philip Davies in the Chair]

Part of the debate – in Westminster Hall at 2:06 pm on 13th February 2020.

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Photo of Emma Hardy Emma Hardy Labour, Kingston upon Hull West and Hessle 2:06 pm, 13th February 2020

My hon. Friend is absolutely correct. I have questioned the whole concept of T-levels before. If they are a solution to a problem, what problem were they trying to solve? I have not quite been able to figure that out yet. They almost seem to be trying to ram themselves into a system where they might not necessarily be needed or, indeed, wanted. He makes an important point: if we take away existing qualifications before establishing the T-level, we will leave a gap. What will happen to the people who want to access those qualifications during the gap? Perhaps we might debate T-levels after recess and dig into the question in a lot more detail.

My hon. Friend the Member for Slough mentioned the fall in SME apprenticeships, which has come about as a direct result of the levy. There has been a fall of 23% overall, with a fall of 171,000 in SME apprenticeships. That is down an estimated 49% since the levy was introduced, and it is a huge fall. Particularly concerning to me, as I mentioned on Tuesday, is the quite shocking 20% fall in 16-to-18 apprenticeships. From the reports I have seen, SMEs receive only half as much apprenticeship funding compared with April 2017, when the levy was introduced. Traditionally, SMEs have been the largest recruiters of young apprentices, and they have generally been the recruiters of apprentices at a starter level. It will impact on our ability to grow our own talent if we cut off opportunities for young people and cut off the lower levels that we need.

On Tuesday, the Minister said:

“The apprenticeship levy is helping businesses large and small to access the high-quality training that they need.”—[Official Report, 11 February 2020;
Vol. 671, c. 258WH.]

I have to say that the Minister may be a little bit mistaken, because I am not sure that the apprenticeship levy is helping small businesses to access the high-quality training that they need. As I just said, I do not think that they can actually access all the funding that they need.

In Tuesday’s debate, Jo Gideon pointed out that 300 potential SME apprenticeships have been lost at Staffordshire University because of the current funding system. Not only are the apprenticeships not helping people at the beginning of their career, at level 2 and 3, but they are not helping those at university and at the other end of their career, at level 6 and above.

As mentioned, the Centre for Vocational Education Research report says that the fall in apprenticeships is because of the introduction of the levy. The report says:

“For smaller enterprises which are less likely to be directly impacted by the Levy, the strong decline in starts may be linked to a combination of adapting to the new funding system, the constraints on the pool of funding actually available for apprenticeship training, and the ongoing switch”.

It is because we do not have the funding needed to actually move them forward.

The Minister also spoke on Tuesday of the award-winning digital service, saying that it would

“support employers to manage their funds and choose the training they need from a register of approved providers”,

and pointed out that that would benefit smaller employers by

“moving away from the previous procured contract system to give SMEs more choice than ever”.—[Official Report, 11 February 2020;
Vol. 671, c. 258-59WH.]

With the greatest respect to the Minister, as my hon. Friend the Member for Slough pointed out, putting SMEs on the digital platform will put them in a similar position to someone who is trying to buy concert tickets, and who has to jump on as early possible and press the buy button before someone else gets there. Even increasing the numbers by 15,000 will not be enough to cover the 49% decrease that we have already seen. Giving people more access to a system that does not have enough money just means that they have greater access to having no money; it does not solve the problem. If the Government are to put them on the digital system, they need to fund the digital system to enable it to work.

The levy money is, indeed, running out. There is not enough money, which is why, as has been confirmed by the Minister with responsibility for skills, the National Audit Office, the permanent secretary at the Department for Education and, more recently, the new CEO of the Institute for Apprenticeships and Technical Education—IFATE; there are too many acronyms in this job—apprenticeships in SMEs will not go back to pre-levy numbers. That is why I keep pushing this. There is a joined-up message from businesses, the Labour party, the Confederation of British Industry, the Federation of Small Businesses—from everybody—that the Government have to put in £1.5 billion in funding for SMEs. The digital solution that has been mentioned will not suffice.

The Minister may have seen a letter in the Financial Times that highlights the point I was making. Surprisingly in education, because it does not always happen, lots of people agree and are saying the same thing:

“The chief executive of the employer-led Institute for Apprenticeships and Technical Education also believes that the apprenticeship levy needs to be topped up with additional Government funding to address the shortage of funds available for apprenticeships offered by smaller businesses. Her comments follow similar concerns expressed by Ofsted’s chief inspector that the levy is not working in a way which would satisfy the Government’s ‘levelling up’
agenda across the UK regions.”

The letter was signed by Mike Cherry of the Federation of Small Businesses; Mark Dawe of the Association of Employment and Learning Providers; David Hughes of the Association of Colleges; Doctor Sue Pember CBE from Holex; and more. These people all say the same thing: the Government need to put money into the SME budget to enable SMEs to offer apprenticeships.

The Minister said on Tuesday that she is

“keeping the apprentice system and levy under constant review to understand how it works for employers of all sizes, and most importantly how it can deliver for our economy and for social mobility.”—[Official Report, 11 February 2020;
Vol. 671, c. 258WH.]

Will she dig into that a little bit more and explain what review has been undertaken, its timescale, who is included in it, when we should start to see its outcomes and whether we should expect it to have occurred before the 11 March Budget? Will we see anything in the Budget to address the ongoing crisis in SMEs?

I point out a good example of local SME support in Manchester, which used a grant of £3,000 for non-levy paying SMEs in the region that have not employed an apprentice in the past two years. Creative solutions are starting to come out, and I hope that the DFE will explore this and find ways to offer such support.

I shall keep my request quite simple. In a nutshell, what we—in business, in the Labour party and in this unity of voice—would like to see is the Government committing to a ring-fenced and guaranteed non-levy budget of at least £1.5 billion and separate, segregated funding approaches between levy and non-levy paying employers. I am not saying that that will solve all the problems overnight, but it will alleviate the most immediate concerns and it will open up access for young people and people wanting to start at lower levels who want to work in SMEs.

This will be the last minute of my speech, because I have been talking for quite a long time. And now for something completely different, as they say. I want to mention the Back a Bid campaign: we are looking for the UK to host the 2027 WorldSkills championships. It is like an Olympics for skills whereby we have Team GB going abroad to compete and show the talents and skills that there are in this country. I hope that the UK will look at being one of the hosts for that. I hope that the Minister will press the new Chancellor of the Exchequer hard to enable the funding for a Government feasibility study to come through, to show how we can stand on the world stage as Global Britain and show off the skills and talents in our country by hosting the championships here in the UK and showing what brilliant, talented people we have. I hope that by 2027 many of those brilliant, talented people with great skills will be coming from SMEs.