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Apprenticeship Levy

Volume 741: debated on Wednesday 22 November 2023

[Dr Rupa Huq in the Chair]

I beg to move,

That this House has considered the apprenticeship levy.

It is a pleasure to serve under your chairship, Dr Huq, and I am looking forward to this debate on the apprenticeship levy. As a former teacher and the former Minister for School Standards, I cannot state enough how important apprenticeships are for young people. They unlock opportunities for them, allow them to earn while they learn and drive social mobility. As the proud co-chair of the all-party group on apprenticeships and the employer of two apprentices—Mya and Jess, who are based in my constituency office—I know just how effective apprentices can be in the workplace.

There have been significant achievements in places such as Stoke-on-Trent North, Kidsgrove and Talke, where we have had 13,240 apprenticeship starts since May 2020. One of the great standout legacies of the past 13 years of Conservative government is our outstanding record on education. Compared with 2010, over 2 million more pupils are at good and outstanding schools, and our kids are some of the best readers in the western world.

I congratulate my right hon. Friend the Member for Bognor Regis and Littlehampton (Nick Gibb), who served with grace and honour as Minister for School Standards—a role I held briefly, although I basically kept the seat warm for his return—on his hard work in improving literacy and numeracy rates, restoring discipline in the classrooms, empowering a generation of learners and bettering educational attainment. His legacy will live on in this House and across the nation, and we are truly thankful for his service.

I served proudly with the Minister for Skills, Apprenticeships and Higher Education when he chaired the Education Committee, and he understands, as do we all, that further education plays a vital role in providing the skills needed to revive key sectors such as manufacturing and ceramics, so that we can level up the country. We have made great strides since 2019. We introduced T-levels and the lifelong learning entitlement. Government initiatives such as the skills bootcamp scheme, which works with local employers and local authorities to fill skills gaps and vacancies in local areas, should continue to be expanded.

Apprenticeships offer a great opportunity to learn and earn, and they keep talent and skills in our local area, making a vital contribution to the labour market. The huge demand for apprenticeships is waiting to be matched by supply. Almost half of the young people registered on UCAS are interested in apprenticeships, yet only 10% go on to start one. In recent years, there has been a dramatic decline in the number of new apprenticeship starts. Since the apprenticeship levy was introduced in 2017, overall apprenticeship starts have fallen from half a million in 2016-17 to just over a quarter of a million in 2022-23. That urgently needs to be reversed. The situation is exacerbated by the fact that the number of apprenticeship starts for 16 to 18-year-olds has fallen by 41% since 2015-16. For 19 to 24-year-olds, it has fallen by 31%, and for those aged over 25, it has fallen by 26%.

I am grateful to the hon. Gentleman for the points he is making. Last year, more than £3 billion of the levy was not spent, I guess for many of the reasons he is setting out. In my community, many of the businesses that would love to have an apprentice find it too hard to get into the scheme. Would it be wise in an area such as mine, where one in four people work for themselves and many opportunities come through small businesses, to redirect some of the underspend to encourage small businesses to take on apprentices? That would be good news for our economy and for everybody else, for that matter.

I could not agree more: the levy should be much easier to access for small and medium-sized enterprises, and even for big levy payers, such as Lloyds Bank, which I met recently in my constituency at Saint Nathaniel’s Academy in Burslem. It said that it found it incredibly tricky to navigate the system to try to get money to the frontline. In that case, it was for digital apprenticeships and skills for those teachers and support staff, as the school went to a Google Classroom-based learning system. I will set out later how I think the levy can be reformed to make it more accessible and to ensure that more SMEs get more opportunities to take up apprenticeships. It is all well and good talking about skills, but if we do not have enough apprentices in the first place with the opportunity to access them, we will always have to overly rely on cheap foreign labour from abroad to fill vacancies. I suspect the hon. Gentleman and I have slightly different opinions on that, but the Chancellor said in the autumn statement today that he wants to see us skilling up and levelling up the opportunities for young people here.

The fall in the number of apprenticeship starts suggests that apprenticeships in their current form are not benefiting young people and helping them get into the workforce. We require businesses to invest in their existing workforce. Increasing the flexibility of the apprenticeship levy would help businesses with the cost of investment in British talent, further militating against the dependency on mass migration. Although increased collaboration between the Institute for Apprenticeships and Technical Education and the Migration Advisory Committee will not eradicate reliance on immigration for vital skills, it will shift the focus to prioritising British upskilling and offer a long-term solution to the nation’s skills shortages.

As evidenced in “The New Conservatives’ plan to upskill Britain”, which I proudly wrote with my hon. Friend the Member for Great Grimsby (Lia Nici), red wall areas have been hit especially hard by the reduced number of younger apprentices in SMEs. In northern and coastal constituencies, the number of apprenticeships has fallen, while it has grown in places such as Wimbledon and Chelsea. As the New Conservatives’ skills paper suggests, areas such as Stoke-on-Trent North, Kidsgrove and Talke need more home-grown apprentices so that we do not rely on cheap migrant labour to fill the skills gap. That is why it is so vital that we take on recommendations from industry and reform the levy, so that communities can benefit from apprentices.

One way the New Conservatives’ skills plan seeks to do this is by pushing for the Migration Advisory Committee to work much more closely with the Institute for Apprenticeships and Technical Education, by identifying gaps in the market where unspent levy funding can be used to support the training of home-grown talent that will help to close the skills gap. With net migration standing at over 600,000 in the year to June, it is essential that we explore ways to wean the economy off cheap migrant labour, which puts immense pressure on our public services, including our schools, our NHS and our housing supply, with migrants now making up half the demand for new builds. I am confident that reforming the apprenticeship levy to allow underspends to target specific gaps in the job market will help to solve one of the UK’s most challenging long-term problems.

In the New Conservatives’ skills plan, we also raise issues surrounding the levy transfer mechanism and suggest raising the current transfer from 25% to 35%. Since the introduction of the levy five years ago, £4.3 billion has been raised by the levy but kept back by the Treasury. In 2021-22 alone, the revenue raised was £750 million—more than the entire apprenticeship budget—and according to FE Week analysis, His Majesty’s Revenue and Customs pocketed an extra £415 million in the year to September 2023. I know that this is an issue for small and medium-sized businesses in Stoke-on-Trent, and I was shocked to see the Sentinel report in January this year that Stoke-on-Trent City Council was forced to send its £1 million apprenticeship underspend back to HM Treasury.

As co-chair of the APPG on apprenticeships, I have spoken to many businesses that say the system for transferring funds is immensely bureaucratic and requires excessive paperwork, which dissuades businesses from pursuing it. Our skills paper therefore sets out plans to increase the apprenticeship levy transfer to 35%. As the New Conservatives’ report sets out, the current cap at 25% limits employers making the most out of their funding, and it is difficult for businesses to transfer funding to SMEs outside their supply chain. That is why we advocate increasing the ease with which funds can be transferred by including other SMEs local to the region of the levy payer, which would keep investment local and widen access to apprenticeship funding.

The New Conservatives and I want to see a greater amount of the billions of pounds of unspent levy funding—like the £1 million underspend in Stoke-on-Trent—spent on skills locally, which will help the levelling-up agenda and assist young people in finding good career prospects near to home. However, to do that, the Government need to be brave and expand access to apprenticeship funding, as we outline in our report.

We need to allow for training to be more sensitive to labour market demands, so that we can upskill our homegrown talent. We should seize on local areas’ expertise, such as Stoke-on-Trent’s thriving video game industry, to make apprenticeships work for the economy. Alongside using unspent levy funding to support SMEs with grants, we should look to make it flexible enough to support shorter courses. Microsoft has identified that a modular approach to apprenticeships would allow apprentices to fit into the gaps in the labour market much more effectively. It says that this is essential to ensure that people are equipped with the digital skills they need to perform an increasing number of tasks.

In some cases, labour market demands do not require long courses, so making the levy more flexible will support shorter courses that meet existing needs of the business, rather than fulfilling bureaucratic apprenticeship requirements. This will enable employees to develop much-needed skills and help employers to address specific skills shortages that they face. Microsoft identifies such flexibility as being necessary for businesses to adapt to the rapidly changing requirements of digital roles, noting that the current 18-month waiting period for the digital apprenticeship standard to be approved is too long. Such long approval times stifle growth and leave employers without the skills that they need. Increasing the flexibility of the apprenticeship levy will also help Britons to upskill, improving productivity and reducing the skills gap.

In my role as the co-chair of the APPG on apprenticeships, I have also spoken with many leading businesses in Stoke-on-Trent North, Kidsgrove and Talke as well as across the country, and they have outlined ideas about how to make the levy work. Policy Exchange’s excellent paper, “Reforming the Apprenticeship Levy”, makes the disappointing point that SME involvement in the apprenticeship system has plummeted since the introduction of the levy, and it states that that has wider implications because, historically, SMEs train higher proportions of apprentices, particularly from disadvantaged backgrounds.

As such, Policy Exchange has proposed a number of recommendations to streamline the process and support SME involvement in the training of apprentices, including financial support for off-the-job training. It suggests that SMEs should be supported with £2,500 to fund off-the-job training for apprentices under the age of 25, with an additional £500 on completion.

Given that FE Week reported that HMRC pocketed around £415 million generated by apprenticeship levy receipts last year, I want the Government to explore whether there is scope to use some of that underspend to back SMEs with the £3,000 payment advocated for by Policy Exchange, which believes that such support would cost around £200 million. The policy was backed by the Prime Minister when he was Chancellor during the covid-19 pandemic, so I urge him to consider that to get more people doing apprenticeships once more.

For some businesses, especially SMEs, the hidden costs are often what prevents them from being able to hire an apprentice in the first place. The funding is there to support our SMEs and to support our apprentices with more than just training, and this simple change could be transformative.

Alongside reforms to the levy, I want to use this time to raise the issue of functional skills requirements, which are also a barrier to apprenticeships. For someone to be an apprentice in England, they must prove that they have good qualifications in English and maths. If they cannot do so, the Government pay to enrol them on a course and enter them into exams to prove that. That is wasting tens of millions of pounds of taxpayers’ money, because, in some circumstances, despite an older apprentice holding a degree or other level 4 qualifications, the fact that they cannot find their GCSE or even O-level certificates means that they must retake the exams.

The current focus on functional skills qualifications also poses a challenge to some hoping to complete apprenticeships, disproportionately impacting those from disadvantaged backgrounds and SME employers that are more likely to offer apprenticeships to younger and less well-educated students. I wrote to the Department for Education to raise my concerns about this issue and was disappointed with the response I received this week from the Minister, who said that they are

“currently unable to offer any flexibility here”.

If we were to relax those requirements, there would be a significant public savings benefit, meaning that money could be spent on helping businesses to support their apprentices more effectively. Over the past five years, the Government have spent £379 million on functional skills, with the per-apprentice cost increasing by 64% since 2021-22. If we reduce those costs by being more flexible about functional skills requirements, businesses will benefit.

As the co-chair of the APPG on apprenticeships, I have spoken with businesses who told me that reviewing functional skills requirements, which is also a recommendation in the New Conservatives’ skills paper, will improve retention rates for apprenticeships. That will give businesses confidence that the investment they make in new employees will be worthwhile.

Data supplied to me by Multiverse shows that 60% of apprentices undertaking functional skills exams already have degree certificates, but they do not have their school qualifications to hand, or they were schooled internationally. I do not believe that it is necessary for someone to take on extra training in English and maths if they have a degree-level qualification. A degree should be an indicator of competency in English and maths, and new recruits should be focused on developing skills that are fit for industry and not on functional skills training.

Multiverse argues that this requirement is a significant and unnecessary barrier to work. Its data shows that 74% of apprentices withdrew from their course when they were required to undertake English and maths exams. Given that fewer people have been undertaking apprenticeships since the introduction of the levy, we need innovative and simple ways to improve retention rates, and removing functional skills requirements could help to achieve that.

However, outdated attitudes towards higher education are thankfully ending. Recent polling shows that the British public are more positive about technical and vocational education than they are about university education, with 48% of parents saying that they would prefer their child to get a vocational qualification after leaving school, compared with 37% of parents who would prefer their child to go to university.

More broadly, there is support for prioritising further education and higher education equally, with 31% thinking that vocational education should be prioritised by the Government over university education and only 9% thinking that university education should be prioritised over further education. It is regrettable, therefore, that equal treatment of higher education and further education is not shown through the welfare system. Families should not be penalised if their child opts for an apprenticeship rather than other post-16 education. However, current welfare policy requires child benefit to be removed from families with children aged under 19 in apprenticeships, unlike if their child were studying for A-levels or T-levels.

More needs to be done to ensure that young people from disadvantaged backgrounds benefit from apprenticeships rather than being short-changed by their university experience. For those with low academic attainment or opting for low-return courses, a quality apprenticeship could offer a better option for a variety of reasons. Such a route should not be closed off due to parental financial worries.

In conclusion, the over-expansion of university education by Tony Blair and new Labour has left too many young people in debt, without the skills needed to secure well-paying careers. At the same time, investment in high-skilled trades has dropped, leading to an over-reliance on cheap immigration from abroad to meet our ever-expanding list of job shortages. As the party that values hard work and aspiration, we need to reverse that trend and invest in local talent that matches local labour market demands.

The policy suggestions presented in the New Conservatives’ skills paper aim to shift the balance from Government overspending on low-return higher education and repurpose all money saved for investment in quality technical and vocational education that keeps talent local and high-skilled. That will be achieved only by both disincentivising students from poor-quality university education and incentivising them towards high-quality technical and vocational education.

Such measures also need the support of local businesses. Small and medium-sized businesses need to feel that their investment in local talent is worthwhile and supported by the Government. With renewed prioritisation for apprenticeships and other technical and vocational training and education, our country can upskill its workforce, meet labour demands without reliance on immigration, and ensure good jobs for the present are there for future generations as well.

The central message of the New Conservatives’ skills plan is to increase the parity between further and higher education funding. That means that it is essential for the Government to support all apprenticeships offered by an SME regardless of how much of the levy is used. That will help businesses and individuals get greater access to apprenticeships, which is in line with my vision to make apprenticeships a more viable option and to make clear that degrees are no longer the sole gold standard in education.

This is two days running that I have been called directly after the proposer of the debate. I am in a state of anguish and shock that I should be called so early.

I am pleased to be here. I am also pleased to see my good friend, the hon. Member for Stoke-on-Trent North (Jonathan Gullis) leading today’s debate, and I look forward to other contributions from the shadow spokespersons. We have a Minister in place—I am not saying anything that is not true, because we all subscribe to this—who eats and sleeps education; a Minister who works his butt off to do the best for all pupils. Whenever he is here to answer, we all know we will get the answers we seek, because he has the same passion for the subject matter as we all have. I mean that honestly and with all sincerity, because that is how I feel about him, and I suspect others feel every bit the same.

I am aware of the hon. Member for Stoke-on-Trent North’s involvement in the APPG on apprenticeships as co-chair, and I thank him for all his work. I am a bit biased, because he is the guest speaker at my association dinner in Northern Ireland, and I am very pleased that he is coming to speak to us next year. As a true Unionist, he will be able to encourage my association members on the things that matter for us here at Westminster and elsewhere.

As I am sure everyone is aware, there are different rules regarding apprenticeships in the devolved nations, so I come here to give a Northern Ireland perspective, as I do all the time. There are two different systems. The Minister does not have responsibility for Northern Ireland, but I want to sow into the debate the thoughts we have back home. The levy is paid into an apprenticeship service account, and funds in the account must be spent on apprenticeships, training and assessment. Since 2017, there has been a large fall in the number of apprenticeship starts. The hon. Member for Westmorland and Lonsdale (Tim Farron) referred to another methodology for taking advantage of moneys that have not been used, and I support that. In fairness, the hon. Member for Stoke-on-Trent North gave an indication that he, too, would be appreciative of it.

At the end of the 2021-22 financial year, the total value of the levy funds in apprenticeship service accounts was just under £5 billion. Scotland, Wales and Northern Ireland all receive a share of that funding through the Barnett consequentials. Some of the moneys go to us in Northern Ireland, but also to Scotland and Wales, so there is a spin-off, of which we can take advantage. Apprenticeship funding is crucial for society. I believe it is absolutely critical to put people on the path to work, especially young people who have no desire to go to university and who are insistent on learning a skill to better their future. I see the importance of apprenticeships to many young people who have taken up apprenticeship jobs. They ensure opportunity and are really important.

I will give a classic example that I often think of and refer to. I know of a mechanic in my constituency of Strangford who is now 25. He left school when he was 15, and was keen to do something with his hands. He started as an apprentice in a local Ford dealership on £3.67 per hour. My goodness! Apprenticeships are never highly paid. They certainly were not highly paid when he was 15. He has worked his way up the system through his apprenticeship, and qualified as a mechanic, and on the journey, he learned all the necessary skills to become a fully qualified technician for Royal Mail. What a really good example of what apprenticeships can do, and how they can change lives and give people opportunities!

Apprenticeships allow young people to learn high-level professional skills. Skills policy, including responsibility for apprenticeships, how they work, and how apprentices work their way up, is a fully devolved matter, so each Administration across the United Kingdom has developed an apprenticeship policy tailored to the needs of its skill priorities. Regionally, that is done through the Northern Ireland Assembly, and the Department of Enterprise, Trade and Investment. As I have stated many times, Northern Ireland has a large agricultural industry, which is especially evident in my constituency of Strangford. I live on a farm, and there are farm-related opportunities for apprenticeships. To give two examples, Dale Farm and Lakeland Dairies offer apprenticeships for young people.

In addition, City & Guilds offers level 2 and level 3 agriculture apprenticeships through NI Direct. That is a fantastic way to get people involved in the industry, especially in the rural community where I live, where there are not as many opportunities as there could be. Apprenticeships in the rural community are on offer, and our young people can and do take advantage of them, which is good news. I know that the hon. Member for Westmorland and Lonsdale has the same interest, because he lives in a rural community as well, so we understand the role for apprenticeships and how we can move forward.

We did not plan this, but it is really good of the hon. Gentleman to let me intervene. He makes important points. I represent a community in which there are well over 1,000 farms. We have a real issue with succession of farmers, and bringing new people into the farming industry. Less than 60% of the food that we consume in the UK is grown in the country, which is deeply troubling. The answer surely must be to bring more young people into farming. Does he agree that the Minister should look carefully at how we can enhance agricultural and other farming apprenticeships, so that we can make it attractive and financially possible for young people to enter the industry and feed us all?

The hon. Gentleman makes a salient and important point that underlines the issue for us as representatives of predominantly agricultural constituencies. Our role in the rural community is to feed others, and we have the potential to feed even more of our nation, which will reduce the amount of food that we have to import. Hopefully, we can look towards a time when we can be almost self-sufficient; we will never be fully self-sufficient, because we cannot grow some of the stuff that we import, but his point, which I wholeheartedly support, is that we have opportunity. When the Minister sums up, perhaps he can give the two of us—and others in this Chamber—some encouragement on the way forward.

There is no doubt that apprenticeships work and are good for society. There is much pressure on young people to go to university and get a degree. I am not saying that they should not, but not every person is of a mind to do that. Not every person has the capabilities, the functioning or perhaps the focus to make that happen. I have three boys who are now young men, and my neighbours down the road, who are also farmers, had three boys around the same age, and they all went to school together. I knew early on that the oldest of those young boys was never going to get on at school and get all the qualifications that it gives. He only wanted to work on the farm. That is where he wanted to be, and where his love was. Those are the things that we need to focus on. Whenever the hon. Gentleman speaks highly of agriculture and how we can move forward, I endorse that, because I have examples of what he is talking about in my constituency.

When apprenticeship opportunities are successful and are proven to work in the United Kingdom, they deliver opportunities, and lifelong jobs and commitment. If apprenticeships are worse off for the levy, then I urge the Minister to look at other ways in which the moneys could be used. Despite this being a devolved issue, I believe that the Minister has an interest in the situation in Northern Ireland, and a sincere responsibility to ensure that it does not fall behind. I recognise, of course, that this is about Barnett consequentials, and the moneys that come from here to us.

Apprenticeships are about ensuring that underachieving females and males can succeed. It is great that today we can talk about apprenticeships giving opportunities, and jobs for life. In other words, they are about giving not just our children, but our children’s children, a future that we all endorse and would wish for—a future in a stronger United Kingdom of Great Britain and Northern Ireland, where apprenticeships matter and make a difference.

It is a pleasure to see you in the Chair, Dr Huq, and I congratulate my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) on securing this debate, which is well synchronised with the Chancellor’s autumn statement.

If we are to unleash sustained economic growth and enhanced productivity, we need a fully functioning labour market. It requires an entry system that enables people to pursue their chosen career path and opens up opportunities in sectors that are vital to our future economic prosperity, such as low-carbon energy on the East Anglian coast. A vital means of achieving that goal is through the apprenticeship levy, which the Government introduced in 2017 as part of a package of reforms of the apprenticeship system. Those measures were rightly ambitious, and they were based on two principles. First, for apprenticeships to succeed, they must have a long-term, sustainable funding source. Secondly, apprenticeships must be rigorous, so as to gain the confidence of both employers and learners. The apprenticeship levy is designed to deliver the first of those objectives.

Six years on, I think that we can say that the levy is here to stay, but it has had a challenging start, and it has had to go through a great deal, including covid, the consequences of the war in Ukraine, and the cost of living crisis. There have also been outcomes that were neither intended nor foreseen. Now is the time to pause and refine the system.

The Association of Colleges provides the secretariat to the APPG on further education and lifelong learning, which I chair. It has identified the following challenges. There has been a dramatic decline in the number of people undertaking apprenticeships in recent years. It is now down to 60,000 young people starting apprenticeships each year. In the past six years, we have lost 160,000 engineering and manufacturing apprenticeship training places, at a time when those sectors are crying out for more staff.

The levy has been very successful in creating higher-level apprenticeships in larger firms, but there is a need to provide apprenticeship opportunities for younger people and new labour market entrants. Many small businesses are put off by the bureaucracy, as we have heard. Local skills improvement plans provide an appropriate local framework for meeting the needs of local labour markets, but we need a national strategy, so as to address such challenges as the technical skills gaps at levels 4 and 5. There is a worry that the budget allocated is nearly fully committed, though I accept that it is not necessarily all being spent. There is a need to consider how to either increase the levy and maintain growth through existing funding, for example by reforming the transfer mechanism, or look for savings that will not impact on quality.

As to how to improve the system, there should be a focus on new job starters, and consideration should be given to returning to the recommendations of the 2012 Government review, which stated:

“Apprenticeships should be redefined…clearly targeted at”,

and promoted to,

“those who are new to a job or role that requires sustained and substantial training.”

In addition, the following technical changes to how the apprenticeship levy operates should be given full consideration. First, there is a sense among some in the industry that the two-year expiration on levy funds is inadvertently encouraging the adoption of a “spend it or lose it” mentality, leading to rushed financial decisions, rather than strategic workforce development. A more nuanced, flexible approach is needed. Extending the expiration period could encourage more thoughtful expenditure, in which training initiatives are aligned with long-term business strategies.

Secondly, I am receiving feedback that the apprenticeship minimum duration requirements are too rigid. The 12-month minimum length for an apprenticeship, while suitable for some programmes, does not necessarily align with the operational demands of others. We need a more flexible approach to minimum length requirements that enables better tailoring of apprenticeships to specific job roles and industry needs. Thirdly, poor retention rates in apprenticeships require attention. High drop-out rates appear to be due to a combination of factors, including the apprenticeship wage structure and lack of clear progression pathways. Some have argued that increasing the apprenticeship minimum wage could help, by providing financial stability and demonstrating to apprentices the value of their contribution, thereby enhancing job satisfaction and increasing commitment. That is an option that, among many others, the Government should consider to improve retention rates.

In conclusion, the 2017 apprenticeship reforms, including the introduction of the levy, were good. However, the economic landscape is rapidly changing, both in the UK and globally. There is a need to listen, adapt and refine. The refinement is about more than making minor tweaks; it is about ensuring that our apprenticeship system remains relevant, responsive and effective. If we do that, people, whatever their background, can realise their ambitions and fulfil their potential, and the UK economy will be able to motor forward in fifth gear, not third.

It is a pleasure to speak in this debate. I congratulate my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) on securing it and on the valid points that he made. I have not yet found time to read his New Conservatives’ paper, but I have a bit more time on my hands now, so I will make sure it becomes part of my reading material.

It is also a pleasure to follow my constituency neighbour and hon. Friend the Member for Waveney (Peter Aldous). He knows the work that we have put in. Indeed, some of the new courses have been put on in colleges in his constituency, which serve constituents of mine, and in Ipswich. Together, it is all about providing a pathway for people to access high-skilled, good-quality jobs with good salaries. That is why I commend the apprenticeship levy. I am conscious that there is a different apprenticeship system in the constituency of the hon. Member for Strangford (Jim Shannon), but his belief in apprenticeships is really important.

Last but not least of the Members who will be speaking today—I do not know quite so much about the hon. Gentleman just to my right, the hon. Member for Glasgow East (David Linden)—is the Minister for Skills, Apprenticeships and Higher Education, my right hon. Friend the Member for Harlow (Robert Halfon), who used to wear a ladder badge when he was in the Department before. He also tried to change the symbol of our party to the ladder to represent that aspiration. I must admit that, as an Environment Minister at the time, I was happy we kept the tree, but I think both symbols are good. We grow from seeds—as we know, a little acorn makes a grand oak. That is an important part of what we seek to achieve in supporting apprenticeships.

It is fair to say that the apprenticeship levy is an integral component of modern workforce development. In an era marked by technological advancements and shifting economic landscapes, a skilled and adaptable workforce has never been more critical. The apprenticeship levy, introduced just six years ago in the UK, stands as a testament to a proactive approach to addressing this need.

One of the most compelling aspects of the apprenticeship levy is its role in redefining the traditional route to career progression. By offering an alternative pathway to acquiring skills and qualifications, it presents an attractive option both for employers and for individuals seeking to expand their knowledge base. Apprenticeships provide hands-on training and allow people to earn while they learn, thereby bridging the gap between education and employment.

It should also be recognised that the levy is designed to be a tool that allows employers to be inclusive and diverse in the workforce they recruit. Such recruitment fosters an environment of equal opportunity, which not only benefits individuals seeking to enter the workforce, but enriches companies by bringing in a fresh perspective and innovative ideas that we may not get from people who have just gone down the traditional road.

I must admit that there are many good intentions behind the apprenticeship levy, and it has achieved so much. However—dare I say it, having now left Government —as plenty of Ministers and civil servants will know, in my time as Secretary of State for Work and Pensions in particular I was seeking to make reforms and have that debate in Government. Some progress was made, but I believe a lot more could still be done.

I believe without question that improving the system to make it more agile and adaptable to employers’ needs is critical to addressing the productivity challenge that we face. To give a simple example, as I have already had parts of these discussions with the Minister, I have seen consistently that we need to substantially increase the take-up of level 4 and 5 apprenticeships, which I believe is a good bridge going on from T-levels. Not everybody will necessarily be able to make it to degree-level apprenticeships, nor should they have to in order to recognise that they will still be getting a substantial salary. Meanwhile, they will fill key skill gaps between levels 3 and 6, which many industries are crying out for. We all know that part of the challenge is a combination of the provider and how employers can access some of that funding and structure accordingly.

Let me turn to some of the constraints. I appreciate that every policy gets criticised from a variety of angles, but the lack of flexibility has been a consistent complaint from many employers. I think the national health service had to be given an extra £120 million to boost the take-up of nurse apprenticeships. That was because the apprenticeship levy would not be allowed—is still not allowed, as far as I am aware—to cover back staff for that one day a week that people are off. I do appreciate that there have been some good changes recently. It is about not just the 20%, but the six hours, which, if someone is working full time, can still be less than 20% in terms of out-of-job training.

Employers really do need to be listened to. I recall a visit that I made to Severn Trent as part of kickstart; I went with Boris Johnson. The chief executive, the excellent Liv Garfield, was pleading to see changes, because she believed that she would be able to produce at least 50% more apprenticeships that would help, whereas all the other costs associated with helping people to fulfil that apprenticeship route had been deemed prohibitive.

I am also very conscious that there is a substantial surplus that goes back to the Treasury. I recognise that that money is usually used for other sorts of skills, or indeed to help to access the route for smaller employers, but I think that there is still a gap there. This is not about trying to be easy on big businesses; if anything, we should be challenging them to make more use of the levy through their supply chains, which, again, is a flexibility that was introduced a few years ago. Nevertheless, I believe that it tends to be larger organisations that have the HR in place to address that. Alternatively, more of the levy needs to be used for those sorts of auxiliary services to facilitate this, as opposed to the small employer, who might be taking on one or two people and already has, dare I say it, enough to do.

I encourage the Minister—again, a little bit with my DWP hat on—to consider what has happened to the number of intermediate apprenticeships. I am very conscious that the number of higher apprenticeships has gone up, not just at levels 4 and 5 but at level 6, the degree apprenticeships, and indeed level 7. However, I ask the Minister to really interrogate what is happening, particularly with level 7 qualifications. I have heard stories, although I have not actually got the proof to back it up, that the police superintendents’ course had become a level 7 apprenticeship so that police forces could use their levy. That is not really what it is designed for.

My hon. Friend the Member for Waveney spoke about how apprenticeships should really be for new jobs and so on. I do not agree; I think that there should be an opportunity to change career within a company, or indeed to progress. One thing I hope has happened, given that there are far fewer intermediate apprenticeships, is that those people who have completed level 2 have gone on to advanced and higher apprenticeships. I hope that that has happened, but I am concerned that that might not be the case. I encourage the Minister to get the analysis for that.

Yes, the number of starts has fallen. Some of that will be linked to the costs of the different levels of courses that people are taking up; doing a level 5 or 6 will inevitably require substantially more funding than a level 2. Nevertheless, it is worth looking in detail at the analysis of whether we are really getting the transformation that this apprenticeship levy is meant to have.

My hon. Friends the Members for Waveney and for Stoke-on-Trent North have spoken about drop-out rates. It really is a worry that so many people are dropping out, although there may be very good reasons for that. I think a significant reason is that they go and get a job elsewhere, either because they have finished what they needed to do or because they want more money—let us be candid about that. Employers who do not offer just the bare minimum wage are much more enlightened, because they are more likely to keep their apprentices if they pay them a regular rate or at least something closer to it. On retention, there are too many complaints along the lines of “Oh, well—they finished it and they have gone elsewhere for more pay.” However, I appreciate that it is about more than that, and I am sure that my right hon. Friend will have a good answer.

I agree with the suggested reforms involving a shorter course to accelerate the transition where appropriate. We cannot get away from the issues that have been raised. When I went to visit Andy Street, we went to one of the HGV academies. Basically, Eddie Stobart said that it would guarantee a job to anybody who passes the sorts of course that are available through an apprenticeship; I think this one was a CPC. No more interviews—they just had to pass the course and get the job. There was a big take-up. I know that the Mayor would be keen for more options for providing that sort of apprenticeship or other aspects of professional qualification for skills that are highly in demand and are in short supply.

I encourage the Minister to see about the range of courses that are available. I think I am right in saying that the HGV course is available as an apprenticeship, but that the course to drive the smaller size of vans, which still require an additional driving qualification, is not. That is despite my best efforts to persuade the Department for Transport to take a Brexit bonus. Somebody who got their driving licence before ’97, as I did, can drive a C1 and a D1 without any further qualifications, whereas nowadays it costs about £2,500 or £3,000 to qualify. I appreciate that that is a slightly different debate.

Coming back on topic, I encourage the Minister to think about the really good flexibility that we have seen in the freelance industry and in the media sector. That is really welcome, and we could see what more could be done on aspects of the supply chain.

I turn to agriculture. I represent a rural constituency. The Minister and I have had a separate discussion about the provision available through T-levels for certain sectors. I commend Suffolk New College, which has established Suffolk Rural College to try to keep the pipeline of agricultural workers open. There are definitely challenges around the funding levels given for different elements.

I know that the Department has been generous in giving capital grants. If we want to train people to be welders, there need to be colleges that have that sort of equipment readily available. Let us think about the rural college that needs to keep a herd of 30 cattle going in order to provide the equipment for people to work with.

We need diversity. Let us not just think about IT, admin and, dare I say it, traditional manufacturing. Let us think about wider elements, access to the levy and new routes that can help that to happen. The reasons why those courses is no longer being provided or offered really need to be investigated.

I know that the Minister is passionate about the issue. With the kickstart scheme that I worked on and helped to design, I feel that there was definitely a lot more flexibility. It was able to use Government grants in order to provide for people to have that ladder. Frankly, kickstart was a lifeline. I ask him to think about things we have done that worked surprisingly well, and to bear it in mind that although I fully support the fact that we are trying to get quality apprenticeships, we must make it easier for people to start and finish. This could be a further supply-side reform that would really help to unlock the growth that we need. I know that business would welcome it if he looked at these issues again.

The apprenticeship levy was critical in providing a pathway for individuals to realise their potential and for businesses to thrive in that ever-evolving landscape. The regulation and the design of the scheme needs to evolve to keep at pace. This is a commitment. It is not just a financial levy; it is a recognised commitment to invest in the future and in people of all ages. The Minister will know that the number of older people taking up apprenticeships has increased significantly. A future in which skills, talent and opportunity intersect to create a stronger and more resilient workforce is what UK plc needs.

It is a pleasure to serve under your chairmanship, Dr Huq, and to follow the right hon. Member for Suffolk Coastal (Dr Coffey). I shadowed her when she was Secretary of State for Work and Pensions, but I have to say that I much more enjoy the unchained version of her, offering criticisms of what has happened in Government. As a serious point—and the same might be true of the right hon. Member for Maidenhead (Mrs May)—there is value in having former Ministers remain in the Commons to offer constructive criticisms of policy, to dwell on their time and to reflect on what they might do differently. It helps to inform the decisions that Ministers take.

I thank the hon. Member for Woke-on-Trent North—not “Stoke-on-Trent”, for the purposes of Hansard, but Woke-on-Trent. I am sure he will love that. He is genuinely a good friend of mine, despite the fact that we have nothing in common. I commend him for securing the debate.

As a former modern apprentice, I must confess to having a very strong interest in the subject. I have long been of the view that in recent years we have perhaps not got the balance right in terms of what we churn out into the labour market. The reality is that if I have a leaking pipe at home, I need a plumber, not an accountant or a lawyer. In this place in particular, I think that there are far too many lawyers and not enough apprentices, but that is a separate story. We have to make that balance a bit better. I certainly did my bit by completing my apprenticeship back in 2008.

We in the SNP hold the belief that an investment in apprenticeships is, in turn, an investment in our young people. That is particularly true for young people in Scotland. I stand here as someone who left the gates of Bannerman High School in Baillieston and went on to carry out an apprenticeship at Glasgow City Council. That has stood me in good stead and has very much helped me to navigate life in my role as a Member of Parliament. According to Skills Development Scotland, as of 30 December last year there were 3,626 modern apprentices in training in Glasgow. The modern apprenticeship achievement rate in Glasgow was last reported as sitting at around 68.6%. However, we are currently in an area where the apprenticeship levy is both reserved and devolved. That presents several challenges to Scottish businesses. I want to reflect on just a couple.

Just over two weeks ago, I was lucky enough to visit a local KFC branch in my constituency of Glasgow East, where, coincidentally, we discussed the impact of the apprenticeship levy on businesses. KFC’s corporate team told me how, like many businesses, they struggle to spend their levy pot because of the many barriers in meeting the UK Government’s definition of an apprenticeship. Those barriers are due to the rigidity of the specified qualifications for completing an apprenticeship: they are too narrow, they are too long or they require too much off-the-job training. I was told that this year alone, KFC has lost a six-figure sum of its levy fund to the Treasury. I would hope that that is not the case for everyone who is subject to the levy, but it certainly paints a picture of what many businesses face. I should add that in the east end of Glasgow, we have four young people employed in KFC’s Glasgow Forge and Glasgow London Road restaurants as a result of its pre-employability programme Hatch, which I commend to the Minister.

Scotland’s share of the annual levy pot is calculated and assigned by the Westminster Government, but Scotland has adopted a slightly different approach—a more relaxed approach, I would argue, whereby Scottish employers can spend the levy on other types of training that they judge to be right for them. As the hon. Member for Stoke-on-Trent North (Jonathan Gullis) has rightly highlighted, the rigidity of the UK Government’s apprenticeship levy can somewhat hinder employees as a result of the specifications of how levy funds can be spent.

I reiterate to Members across the House that the apprenticeship levy was imposed on Scottish businesses without consultation with the Scottish Government, despite skills and apprenticeships being a devolved matter. Nevertheless, the Government in Edinburgh have tried to use the funds from the levy in ways that I would argue have been more effective in increasing the skills of the workforce in Scotland. That is mostly thanks to the flexible approach that they have adopted after consulting and engaging with Scottish employers, at every step of the process, on how best to use the funds that have been made available from the levy.

In this case, the Scottish Government have been very clear that the share of the levy that Scotland receives through the Barnett consequentials largely replaces money that was already made available to the Scottish Government. That is why the UK Government policies in this area have not achieved what they ought to have achieved in terms of providing new streams of funding to the Scottish Government. As a result, their policies have delivered a reduction in spending on devolved public services by imposing the levy on public sector employers.

That point takes us back to the need for a bit more flexibility. In comparison with England, the Scottish Government have adopted a more flexible approach to how levy funds are used. The options available for using funds include modern apprenticeships, college training, support for skills development and employment-focused training for young people. The Scottish Government’s approach has provided Scottish employers with a greater sense of agency and freedom as to what they can spend the funding on. That begins at the point of consultation, engaging Scottish businesses in that very discussion, whereas the apprenticeship levy in England has failed to increase the number of apprenticeships: there were 145,700 fewer apprenticeship starts in 2021-22 than in 2016-17.

North of the border, our more flexible approach has resulted in the number of apprentices in training in Scotland reaching its highest level ever and surpassing the Scottish Government’s ambitions for modern apprenticeships this year. However, I say to my colleagues in Edinburgh that they can and should go still further; I go back to my point questioning whether we have got the balance right in churning everybody out through university, when in my constituency we cannot get a bricklayer, for example. That makes more of a case for some of the trades.

All of this reiterates the need for the devolution of employment law. Ultimately, in my view—this will come as no surprise to this Chamber or to the hon. Member for Strangford (Jim Shannon)—it makes the case for the full powers of independence, to allow us to introduce a comprehensive strategy that develops the skills and productivity of the Scottish workforce. The successful use of funds in Scotland, compared perhaps with other parts of the UK, only highlights the benefit of Holyrood having control over skills and apprenticeships.

With control over the ability to set levies, the Scottish Government could and would work to reduce the burden that the apprenticeship levy places on businesses, to which many other Members have referred, and ensure that it works to increase the funds available to businesses to train their workforce in the way that we all know they are asking for. However, while we remain a part of the Union, we will continue to consult the industry to ensure that the funds raised from the levy are used in the best interests of Scottish businesses and Scottish employers, in the exact way that KFC outlined to me just two weeks ago.

I pay tribute to the hon. Member for Stoke-on-Trent North (Jonathan Gullis) for securing this debate. I know he cares deeply about the issue; his experience and expertise certainly came through in his speech.

I also acknowledge the contributions from other Members, particularly the hon. Members for Strangford (Jim Shannon) and for Waveney (Peter Aldous) and the right hon. Member for Suffolk Coastal (Dr Coffey). It is interesting that there almost seems to be a consensus that there is a need for some reform and refinement of the system. The issues raised have included access for people who may be from more disadvantaged backgrounds or who may not have the standard qualifications; access for SMEs; the need for flexibility; the potential for shorter courses; the retention of apprentices after their apprenticeship starts; making sure that people are able to complete their apprenticeship; and recognising that this is a mode of work and study that seems to be catching on with the older generation, as the right hon. Member for Suffolk Coastal commented. The oldest apprentice I have heard about was 73 years old.

I also recognise the work of the Association of Colleges and the all-party parliamentary group on further education and lifelong learning, which the hon. Member for Waveney leads. He made a very important point about the need to respond to changes in the economic landscape. I hope that I will be able to address a number of those issues in my remarks.

Labour believes that apprenticeships are a gold standard in skills development, incorporating both on and off-the-job training. Apprenticeships are transformative for social justice, career progression and business growth. Of course, the greatest advocates for apprenticeships are apprentices themselves. UCAS recently reported that 63% of apprentices were likely to recommend the training route to others. Research by the apprenticeship provider Multiverse found that 78% of businesses that hire an apprentice say that it has a positive impact on their organisation.

As shadow skills and further education Minister, and before, I have appreciated meeting and hearing from apprentices in different sectors around the country and learning from their experiences. That includes those in my constituency, those working at Heathrow, those on nursing apprenticeships at Hugh Baird College in Liverpool, and those at the Newcastle Aviation Academy, which I visited last week. They have told me how life-changing apprenticeships are and how they allow people to earn while they learn, give them specialist skills and empower working people, their regions and the country’s economy at the same time as teaching valuable employability skills and giving important workplace experience. At the same time, they support the employer’s development of the workforce, closely aligning training with skills needs.

The Labour party knows that apprenticeships are one of the most valuable tools we have to break down barriers to opportunity and shatter the class ceiling. Right now, the way the apprenticeship levy works is letting down working people, our businesses and our economy. The Conservatives have overseen a decade of decline in skills and training opportunities. Businesses are unable to fill job vacancies, and are held back by a lack of people with the skills they need. The Tories’ failure on skills is holding back our economic growth.

Apprenticeship starts have plummeted, with 200,000 fewer people starting these training opportunities. Since the introduction of the levy, intermediate apprenticeship starts have been slashed by 69%. Seven in 10 students miss out on professional careers advice, making it even more difficult for young people to discover pathways with good prospects, such as apprenticeships. At the same time, employers have surrendered more than £3 billion to the UK Treasury since 2019 in apprenticeship levy cash that they were unable to spend. According to the Government’s own findings, more than one in 10 employers report at least one skills gap.

Research by City & Guilds and the charity the 5% Club early this year found that a staggering 96% of businesses wanted to see a change to the levy, with just 4% of employers spending their full apprenticeship levy funding. SMEs have been hit hard, with apprenticeship starts in small businesses down 35% since the introduction of the levy. New data also shows that less than one in 50 apprenticeship starts in the past academic year were funded through transfer from levy-paying organisations to smaller businesses.

Today, the Government announced £50 million more investment for apprenticeships, in a pilot with Make UK and others. Investment in apprenticeships is always welcome, but I await more details. Perhaps the Minister will have some. We do know that £50 million does not scratch the surface of the £3 billion handed back to the Treasury. It is important to understand what these new pilots will address.

Just this week, there were announcements of levy reform at a time when we have the botched reform and defunding of the level 2 and level 3 qualifications, as well as a decline in apprenticeship starts. That is an issue, because our number one priority as a nation must be to grow our economy and to achieve the higher living standards and better public services that our constituents deserve. That requires investment in skills.

We have a proud record on boosting skills and training opportunities. We removed the age cap of 25 on apprenticeships, and ensured that work experience was compulsory for every student. Boosting Britain’s skills will similarly be a national priority for the next Labour Government, led by a new national skills body, Skills England, bringing together our regions, businesses, training providers and unions to drive the ambitions and skills of our industrial strategy and green prosperity plan. That is why we will also transform the apprenticeship levy into a growth and skills levy. Under our proposed system, companies will have the freedom to use up to 50% of their total levy contributions on non-apprenticeship training, with at least 50%—or 100%, if they wished—reserved for apprenticeships. SMEs that do not pay the apprenticeship levy would continue to receive 95% co-payments. We believe that that would give businesses the flexibility that they are asking for and would allow them to train their workforce, deliver growth, create modular skills in priority areas such as green skills, digital skills, social care and childcare and create functional skills and pre-apprenticeship training. It would tackle key skills gaps that hold back individuals and organisations.

The Minister will be well aware of the calls across business and education for greater flexibility in the levy, but let me remind him of some of them. The Manufacturing 5 have called for more flexibility. During National Apprenticeship Week, the British Retail Consortium, techUK and others called for more flexibility. Calls came from the Co-operative Group and City & Guilds in February, the British Chambers of Commerce and Superdrug in August, and the Chartered Institute of Personnel and Development in October. Despite the Government’s best efforts in recent days to resist reform through a couple of half-hearted calculations about our policy, the chief executive of the Learning and Work Institute said that the Government’s analysis was

“pretty simplistic and we need a bit more of a nuanced analysis.”

Opportunity for all, skills for business, and growth for our regions and our country—that is what lies at the heart of our reforms. What a contrast they would be with this Government. We plan and will build growth from ordinary people, for ordinary people. We will back young people by expanding opportunities and boost Britain’s skills to meet the economy’s needs over the next decade. That is how we will get Britain’s future back.

It is an honour to serve under you in the Chair today, Dr Huq. I congratulate my hon. Friend from Woke-on-Trent North; I beg your pardon, my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis)—slip of the tongue. He is a passionate advocate of apprenticeships and skills, and he made a very thoughtful speech, as did all my colleagues and everyone here today. I will try to respond to some of the points that hon. Members have raised, but where I do not I will write to them.

I have made it my political life’s mission to champion apprenticeships and skills. My hon. Friend said he employed apprentices, which is a wonderful thing. I was the first MP to employ apprentices in Parliament. I have had many, and one of them has gone on to be the leader of my local council—I think the youngest ever leader in history. That shows the power of apprenticeships.

Let me focus on a few of the things that my hon. Friend said. It is worth noting the increase in starts between 2021 and 2022. In 2022, there were 349,000 starts, which is 8.6% higher than in 2021. I am not saying that we do not have challenges when it comes to the number of starts—Members have spoken about starts—but we have to focus on quality, not just quantity. That has been a problem in the past, especially if I may say so with the party of the shadow spokesman, hon. Member for Feltham and Heston (Seema Malhotra), although I greatly respect her. Her party had an obsession with 50% of people going to university. That was about quantity rather than quality, and we are trying to give people a choice between university and apprenticeships.

It is also worth knowing that 70% of apprenticeships are at levels 2 and 3, and more than 50% are done by young people. Both my right hon. Friend the Member for Suffolk Coastal (Dr Coffey)—who was a brilliant Secretary of State, who did a lot to protect the environment and who I massively respect—and my hon. Friend the Member for Stoke-on-Trent North talked about modular apprenticeships. I am firm in the belief that we want quality apprenticeships. We want to move away from the pre-2010 past, when many apprenticeships were not seen as high quality. That is why we moved from frameworks to standards. I believe that apprenticeships should be for a minimum of a year, but of course many are over a year—two to three years. They have to be about quality. They are designed by employers. We now have over 680 apprenticeship standards, which are designed by employers with the Institute for Apprenticeships and Technical Education. However, there are career starter apprenticeships and short skills courses—bootcamps. My right hon. Friend the Member for Suffolk Coastal spoke about HGVs, and there are HGV bootcamps. Our multimillion-pound package on bootcamps has been a great success. They are 16 weeks, so people can do them and go on to an apprenticeship or get a job. Many people on bootcamps get good outcomes. They have been a huge success and are an example of the Government investing in skills.

I want to make a point about the levy budget. We have spent 98% of the apprenticeship budget given to us by the Treasury and we give hundreds of millions under the Barnett consequential formula. The hon. Member for Strangford (Jim Shannon)—I am going to call him my hon. Friend because he is a very kind friend—rightly mentioned Barnett consequentials, as did the SNP spokesperson, the hon. Member for Glasgow East (David Linden). We give hundreds of millions from the levy, but I recognise the points made about the devolved authorities. They decide their apprenticeship policies, but I am happy to work with officials to ensure that we work with Scotland, Northern Ireland and Wales to support them in every possible way to make those policies a success.

My hon. Friend the Member for Waveney (Peter Aldous) —the great FE champion in the House of Commons—asked about the minimum wage. This is really good news, and he is absolutely right. Last year, we increased it by 9%. I am pleased about today’s announcement that we will increase the apprenticeship minimum wage not by 9%, 10%, 11% or 15%, but by 21%, which will benefit an estimated 40,000 apprentices.

My hon. Friend the Member for Waveney talked about levels 4 and 5, as did my right hon. Friend the Member for Suffolk Coastal. It is worth remembering that we have introduced 106 higher technical qualifications at levels 4 and 5 with 140 providers. We are spending £300 million on 21 institutes of technology all over the country. We have a national strategy on apprenticeships and skills. We have the Unit for Future Skills for data. We have the local skills improvement plan, which identifies skills needs in local areas. Only a week or so ago, we announced £165 million to benefit 38 areas in the country. There were over 66,000 starts at levels 4 and 5, which is about 20% of total starts, and 151 standards approved for delivery at levels 4 and 5.

I am excited that we have introduced not only nursing apprenticeships but doctor apprenticeships. The workforce plan puts apprenticeships and skills at the heart of the NHS workforce strategy, with 22% of all training for clinical staff to be delivered through apprenticeship routes by 2031, up from 7% today. We expect that 20% of registered nurses will qualify through the apprenticeship routes by 2028-29 compared with 9% now.

I have been to see policing degree apprenticeships in Manchester and they are second to none, but I will look into what my right hon. Friend the Member for Suffolk Coastal said. I visited Staffordshire University, where many constituents of my hon. Friend the Member for Stoke-on-Trent North go. It does a brilliant degree apprenticeship policing programme. I know that the quality is second to none, but I will look into the question raised by my right hon. Friend and write to her.

The shadow spokesperson, the hon. Member for Feltham and Heston, was incredibly kind to mention the extra £50 million that we announced today for a two-year pilot to boost high-value apprenticeships in priority growth sectors. The Chancellor mentioned engineering today, but we will set out further details. It is worth noting that we will spend more than £2.7 billion on apprenticeships by 2025. That is a huge whack of money, especially in the current difficult economic climate.

The other point I will make is very important. My right hon. and hon. Friends and Opposition Members talked about businesses not using their levy. When that happens, the levy is used to fund 95% of the training costs for small businesses, which is what my hon. Friend the Member for Stoke-on-Trent North wants. We fund 95% of the training costs, and if a business has less than 50 employees and employs somebody aged 16 to 18, we fund all the training costs. That is where the money goes. When big business does not use its levy, we use it to fund training costs.

Given some of the things that have been raised today, it is also worth noting that we give £1,000 to every provider. We give £1,000 to every business that employs an apprentice to help them along the way, and we are trying to slash regulation. I have a phrase that I use in the Department: I call it Operation Machete. I do not like regulation, and there is too much of it. We are doing a huge amount of work in this area. We have significantly reduced regulation for small businesses when they start to employ apprentices. We have also removed the cap on the number of apprentices they can employ. There used to be a cap, which we have changed. I am absolutely determined to do everything we can, but it is important to remember that when big business does not use the levy, the money is used to fund smaller businesses’ training costs.

I do not necessarily expect the Minister to answer this, but perhaps he could undertake to write to me. Those of us on the Work and Pension Committee are interested in things such as auto-enrolment. I ask the Minister to go away and have a look at why auto-enrolment does not kick in at age 16, when a lot of people are doing apprenticeships. That might be one of the areas where we could look at retention and how we help young people. It is not the Minister’s brief, but I would appreciate it if he could write to me about that.

I would be very happy to write to the hon. Gentleman, and I respect the thoughtful way he set out his remarks today.

The hon. Member for Feltham and Heston quoted organisations that do not like the levy. I have a whole list of businesses that do like the levy and use it brilliantly. Virgin Atlantic has used the levy extensively.

That is a fair point. I just want to point out that many businesses not only support the levy and have used it effectively, but recognise the flexibilities that we have introduced. For example, Virgin has created an apprenticeship programme that attracted 500 engineering apprenticeships alone. I think the apprenticeship levy is like the Ronseal advert, which is one of my favourites: it does what it says on the tin. As I said, 98% of the apprenticeship budget was spent in the last two years. It is clear that employers understand this message well.

I know the value of apprenticeships to young people and under-25s. As I say, they continue to make up over 50% of starts, and just under 70% of starts are at levels 2 and 3. It is important to mention that we are spending billions of pounds not just on the apprenticeship offering and the 680 apprenticeship standards, but on skills bootcamps, T-levels and higher technical qualifications—all Government investment in skills.

The hon. Member for Feltham and Heston spoke about careers. We have introduced the Baker clause to ensure that schools encourage students to do apprenticeships. The awareness of apprenticeships in schools has now rocketed up, although there is lots more work to do. We have the apprenticeship support and knowledge, or ASK, network, reaching 2,300 schools and something like 625,000 pupils, ensuring that they know about apprenticeships. I visited the Oasis Academy to see that. We have also worked with UCAS to introduce the UCAS apprenticeship scheme, which will bring a dramatic transformation in the take-up of apprenticeships, because people will be able to access them when they decide to go to university.

Hon. Members have also spoken about apprenticeship achievement volumes, which are substantially higher than they were the previous year—in 2022-23, they are up by 20%—so we are doing a lot to drive up the achievement rate, which I know my right hon. Friend the Member for Suffolk Coastal cares about. We also have £7.5 million of investment in professional development to support the workforce.

My hon. Friend the Member for Stoke-on-Trent North talked about English and maths skills. He rightly challenged me, and if he does not mind I would like to challenge him back. I absolutely believe that people need basic English and maths if they are to do an apprenticeship. He wants that to happen in schools, and with the advanced British standard people will be learning English and maths till the age of 18, so we should have the same for apprenticeships. We should not say that one group of people does not have to do English and maths because it is too much of a burden, but that it should happen in schools, which my hon. Friend cares about. He will be pleased to know that we are increasing the English and maths funding rate for apprentices by 54% to match the adult education budget. That will kick in from January 2024.

I have talked about removing the regulation on small businesses. We have an expert provider pilot to allow the best providers to offer more support to SMEs. We have a transformation in degree apprenticeships. We created degree apprenticeships—those are my two favourite words in the English language. There have been 200,000 starts at levels 6 and 7 since 2014, and starts are almost 9% higher than last year. We are investing an additional £40 million to support more people to access degree apprenticeships.

The hon. Member for Feltham and Heston spoke about social justice, which is why I am such a passionate supporter of apprenticeships—it is what motivates me. We increased the apprenticeship care leavers bursary to £3,000 this August and, as I said, we give £1,000 to employers and providers who take up apprenticeships; that is very welcome.

I really hope the hon. Lady moves away from the policy that the Labour party announced on skills. As I said, you had a target of 50% of people going to university because Labour believed it to be the only route to success. That led to the growth of poor-quality university courses, although of course most of our universities provide excellent courses. That was all about quantity over quality. The DFE analysis has found that your apprenticeship policy would slash the number of apprenticeship starts.

Order. I am sure the Minister did this inadvertently, but we are always told to be very tough on people who keep saying “you”, as that is technically me. So just de-you it.

I beg your pardon, Dr Huq. I was talking about the Labour party, but I understand. I will follow your ruling.

DFE analysis has shown that the policy the hon. Member for Feltham and Heston is suggesting would reduce the number of apprenticeship starts by 140,000 per year, cutting them in half. The reality is that the moment the apprenticeship levy is diluted, there will be gaming of the system and much less spending on apprenticeships. The policy would undermine the apprenticeship starts that the hon. Lady says she is so keen to increase.

I return to the quote I shared from the CEO of the Learning and Work Institute, who said that the Government’s analysis of our policy was pretty simplistic and that we need a bit more of a nuanced analysis. There is a long way to go before that analysis challenges our policy and the outcome it would achieve. We should remember that it is up to 50%. For those who spend their full apprenticeship levy, it does not say that they have to spend it any other way.

The reality is that if the levy is diluted and people are allowed to spend it on skills, there will be thousands and thousands fewer apprentices. As I say, I want the apprenticeship levy to do what it says on the tin: it should be a levy that supports the take-up of apprenticeships. I want to build an apprenticeship nation.

Order. Before we get into too much of a ding-dong, the Clerk is reminding me that the normal time has been exceeded. I know we are not up to the hour, but the Minister would usually be doing his conclusion by now.

The good news is that I will conclude.

I mentioned the advanced British standard, which will provide young people with knowledge and skills. That includes £600 million in investment over the next two years, much of which will go to support colleges.

In conclusion, these are exciting times for apprenticeships. Yes, we always have to look at our reforms and make sure things work, and I have listened to everything hon. Members have said in the Chamber today. However, it is vital that we give employers and providers the time and stability to deliver gold-standard apprenticeships across even more apprenticeships and that we offer a ladder of opportunity to every young person and to those who want to train and retrain throughout their lives.

I wanted to leave time for Jonathan Gullis—I will not repeat that joke for the third time—to conclude.

Thank you, Dr Huq. I thank everyone who took part in the debate, and it was great to see broad consensus across the House. As Members have said, the levy is here to stay; no one doubts that, and no one, I think, wants to see it go. Indeed, how can it, now that we have seen it in action for some time? It has been looked at, reflected on and made to work in the interests of both the apprentice and the employer, who work hand in hand and get the maximum value for the taxpayer, who pays into the system.

I commend the hon. Member for Glasgow East (David Linden) for being brave enough to admit publicly that we are friends, and I, too, put that on the public record. I certainly hope it will not cost him at the next election in Glasgow East when he has to admit that he has befriended a rabid Brexiteer and Unionist, as the hon. Member for Strangford (Jim Shannon) correctly pointed out. I hope that it does not cost him.

It was bewildering suddenly to see my right hon. Friend the Member for Suffolk Coastal (Dr Coffey)—someone I have watched on the Front Bench for so long—by my side in the debate. She has experience of the Department for Work and Pensions and the Department for Environment, Food and Rural Affairs. She not only did great work, but she has first-hand experience of making the levy work in the interests of getting more people into employment. That will greatly benefit the wider debate as we go forward, and I hope the Minister will engage regularly and persistently, as he always does, with my right hon. Friend to make sure we get answers to our questions.

I also have huge respect for my hon. Friend the Member for Waveney (Peter Aldous), who I always enjoy listening to, particularly on these matters. He has spent a lot of time digging into the detail and making sure he understands it, which is very commendable.

Of course, I also thank the Minister himself. I love the fact that he has challenged me, and we will have that back-and-forth. Although I agree with him, and I want to see better quality English and maths coming out, nothing should be a barrier to people getting into education, particularly those who might have learning difficulties or needs that were not supported or identified when they were previously in education. There are also households where people may not have that academic attainment—in Stoke, 12% of my workforce have no formal qualification at all. I do not want generational poverty or educational disadvantage to be passed on, so we must make sure that young people can get level 3. As was pointed out, level 4 and 5 qualifications are important as well, and we must make sure we deliver on them.

I totally accept that we need to see educational attainment kept at a high standard, and I would never want a degree to be seen as a lesser qualification because of the removal—which I personally hope will happen—of this functional skill requirement. However, I understand the danger in removing it and how that could be left open to interpretation, so I look forward to going back and forth with the Minister and seeing how we can go forward.

Finally, Dr Huq, thank you for chairing the debate so well and for being so patient. I welcome any feedback from Members as we leave.

Question put and agreed to.


That this House has considered the apprenticeship levy.