Motion to Take Note
That this House takes note of the Apprenticeship Levy and the case for the effective delivery of workplace opportunities for young people.
My Lords, it gives me great pleasure to move this Motion, focusing on an area in which I have a long and abiding interest, as most people know. I declare my interests, which are twofold: first, as an ex-apprentice, and secondly, as the only apprenticeship ambassador in the House of Lords, I think.
The objective of the apprenticeship levy is agreed by everyone: we want more good-quality apprenticeships. When the Government announced their intention to create 3 million apprenticeships in the parliamentary period up to 2020, a number of us expressed the view that the number of apprenticeships was not the most important thing for the Government to focus on; to paraphrase that old saying, never mind the width—we want to feel the quality of the apprenticeships. We have been proved right. It does not give me pleasure to say that. Most Governments have had a go at forming policies on skills and apprenticeships. We have had some success but some things have not gone so well. When Tony Blair announced that his three priorities were “education, education, education”, and decided that it would be a good idea, given the knowledge economy, for 50% of young people to go to university, that was good in itself; it certainly had an impact on social mobility. If it had a negative impact, it was by somehow implying that if you did not go to university, you were not quite up to the mark. That was not the intention but it shows how difficult it is to get policy right.
On quality, we had the Richards review—an important review that found, perhaps unsurprisingly, that some things that were badged as apprenticeships were only for six months and of poor quality. He rightly recommended a minimum level of 12 months—I would query whether even that is long enough—with 20% off-the-job training.
That is some of the background. When it started, employers viewed the apprenticeship levy with a bit of suspicion. Would it be just a payroll tax, or would it do what we wanted it to do: drive up the level of interest among employers and make them understand the importance of contributing towards training and apprenticeships? If nothing else, it focused their minds. If an employer’s yearly pay bill was £3 million, 0.5% of that was their apprenticeship levy. Soon, the finance department was nudging HR and saying, “What are you doing with it, where is it going?” In that respect, it was good.
However, when it started, it was disappointing inasmuch as the number of starts was much lower than we expected and lower than in previous years before the levy. That has improved and the Government argued, rightly, that would take time to bed in but it still has some worrying aspects, which I will cover later. The Sutton Trust made an interesting comment: never mind looking just at the number of starts—you also need to keep your eye on the number of completions. It is a bit worrying that 32% of apprenticeships were not completed; I think that that was in 2017. We will never drive that up to 100%; I remember that when we in the previous Labour Government started looking at this, the figure was pathetic. Completions were down to about 27% and we drove to that up to about 72% of a much smaller number. I welcome the Minister’s response on what he is doing to ensure quality control. That is question number one, which it will be important for the Minister to address.
I remember commenting on a number of occasions on the key role of training providers in the scheme. I expressed some concern when, at one point, it seemed that anybody could set themselves up as a training provider. I was told, “Don’t worry about that—Ofsted will be around”. I said, “Yes, but have you seen the periodicity of Ofsted inspections? They are every three years”. As a training provider, I could function for three years below the radar while providing poor quality—and some did. Some bigger ones went bankrupt as well. We have a better system now, with a register of training providers, but I cannot stress enough to the Minister the importance of ensuring that those providers are of a high quality. After all, they are the first port of call for employers; if their experience of training providers is that they are of poor quality—I am still getting some feedback—that tends to create a negative approach. Remember that with apprenticeships, when we talk about quality, it is a matter of not only what you deliver but the perception of what is out there. It is about the perception of employers, parents and potential apprentices, whether the younger or the adult ones. The quality of the brand is key if we are serious about improving the long-term role of apprenticeships.
I listened with interest to some of the debate on the Augar report, which I welcome because it stresses the importance of apprenticeships. The report points out that if 50% go to higher education, what about the other 50%? It is not as though there is no crying demand for skills in this country: whole swathes of industry are desperate for more skilled people. That may be in the construction industry or, as I learned recently—much to my surprise and real disappointment —in nursing, which is struggling to meet its target of 1,000 apprenticeships because, it was found, the funding arrangements made it really difficult. I do not necessarily expect the Minister to have the answer on that but, again, I welcome his commitment to look at the situation. We know about the demand for nursing so I cannot help feeling that the response, “That’s okay: we’ll rob other countries overseas, which are desperately in need of those qualified people, and use them”, is wrong. This should be a matter of our own respect: we ought to train and recruit these people ourselves.
The levy expenditure has, needless to say, been a matter of some interest to employers. For the past six months or so, people, myself included, have been going around saying, “If the average employer has claimed back only 15% of what they paid into the levy, there’s a large surplus, so what will happen to it? Will it just go back to the Treasury?” It took until a month or so ago for me to hear definitively from the National Apprenticeship Service that there was no surplus any longer because of the expenditure from the couple of years that preceded the levy on the existing frameworks and standards. If anything, it is likely that we have overspent. In a report to the Public Accounts Committee, the Education and Skills Funding Agency admitted that it would have to go back and renegotiate. From an employer point of view, that is a matter for worry when they were initially assured by the Government, “If you pay into the apprenticeship levy, you’ll be able to draw it out again”. It is quite a complicated formula when you go into it; I will not attempt to do so now.
I want to raise some further points, including on the question of higher and lower skills. In looking at the statistics, we found that the level 2s and level 3s have dropped quite significantly, while there has been a huge increase in the take-up at a higher level. I have nothing against that but when we find out the cost of those higher-level qualifications—some employers are using the levy to fund MBAs and so on—people are beginning to ask themselves, “Where do we want to focus apprenticeship funding?” I certainly think it vital not to neglect the level 2s and level 3s. They are a core area for young people, who will hopefully start their careers. We know that every young person who we can engage in an apprenticeship and remove from the terrible situation of being not in education, employment or training—who is horribly classified as a NEET—is a success story. It gives them a career opportunity that can set them off for life. I welcome the Minister’s views on this important issue.
I said in previous debates that the levy will not work unless we move the dial on SME take-up. If we do not manage to get a significant number of small and medium-sized employers to take up apprenticeships, the levy will have failed; large employers will give you only so many, so it is vital. The Government have tried to address that by saying that large employers can take 20% of their levy funds and help employers in their supply chain. Larger employers are telling me, “That’s all very well but I can’t just throw that money at them. It has to be managed, which takes time, and there is no allowance for that”. Another comment I have had is about functional skills. Employers say to me, “I’ve got young people who are potentially good at apprenticeships but I have to spend time in getting their English, maths and IT skills up to standard so that I know that they will complete an apprenticeship successfully”. Again, I welcome comments from the Minister on that issue.
There was also a bit of a hiccup, if that is the right word, in starting the levy in that it depended on the Institute for Apprenticeships and its trailblazer groups to determine the apprenticeship standards. It got off to a bit of a slow start, but it has improved significantly and the feedback is now better—except that employers say to me, “Over a two to three-year period, those standards will become a bit dated and I’ll need to amend them”. Trying to amend a standard is a difficult process; they are saying that there is not enough flexibility there. One retail employer with a lot of small stores also told me that it could recruit 500 more apprentices but has a problem in its small stores: if it releases an individual for one day a week, it needs to find some way to cover them but does not have that surplus capacity. That is another problem area.
A review of the apprenticeship levy is taking place, which is good. Like all large schemes, it needs reviewing. To say that the review is secret is probably an exaggeration but there is not enough transparency, let me put it that way. I keep hearing, “I am a large employer of apprentices. Why have I not been formally involved in this review?” I make a plea to the Minister, as I welcome his comments on the importance of involving employers in that process. That is important to retain their confidence.
We are asking a lot of employers: we are asking them to participate not only in the apprenticeship levy—do not get me wrong, they ought to do so because they should understand the importance of training the next generation; I am not letting them off the hook—but in T-levels, which are a fundamental change to qualifications where each participant requires 45 days of work experience a year. Some employers say to me, “What am I expected to do? Do you want me to concentrate on apprenticeships or deal with T-levels?” It is not all negative, and I do not want it to be perceived that way, but that is another problem.
I will end on what I said earlier about the importance of perception. I still see schools not giving their pupils the right careers guidance. They do not encourage employers to come in. We know that the Baker amendment made that a compulsion so, again, I welcome the Minister’s response on that. I am grateful for this opportunity to air what I regard as one of the most important subjects and challenges facing us. I beg to move.
My Lords, I congratulate the noble Lord, Lord Young of Norwood Green, on securing this debate. It is especially timely, as it enables me to develop points I made in Tuesday’s debate on the Augar report, when I addressed apprenticeships, and enables my noble friend Lord Younger to say what he had intended to say in that debate, having run out of time just as he was about to comment on apprenticeships.
I declare my interest as an academic and as chair of the Higher Education Commission, which draws together people from business, academia and Parliament. Our most recent report, launched in January, was entitled Degree Apprenticeships: Up to Standard? We took evidence from sector leaders, as well as a wide range of higher-education organisations and employers, including IBM, Boots and BAE Systems. The importance of apprenticeships was reflected in the turnout for the launch of the report—there was standing room only—with our recommendations clearly resonating with those attending. The need for action is also clear from the briefings we have received for today’s debate from the Local Government Association and the Sutton Trust.
As we found, there is widespread recognition of the value of apprenticeships. I quote Sir Chris Husbands, vice-chancellor of Sheffield Hallam University:
“An education system fit for the twenty-first century … must ensure the acquisition of both academic and technical skills… Students need that. The nation needs that”.
In short, the benefit is not confined to those taking apprenticeships. It benefits the economy and enriches society.
The problem, as the noble Lord has said, is with provision. There are difficulties especially, but by no means exclusively, for SMEs and disadvantaged students. The system of delivering apprenticeships is unduly crowded and lacking in flexibility and efficient co-ordination. We heard criticism of the Education and Skills Funding Agency’s procurement process, with many high-quality education institutions, across all levels of apprenticeship, not receiving funding to meet the needs of SMEs. The current funding regime is not fit for purpose. Under that regime we have a patchwork quilt of provision.
Our evidence showed that the artificial separation of levy and non-levy providers, coupled with a botched non-levy procurement process, has resulted in a lack of providers, particularly for SMEs. Among our principal findings was that, of 51 approved degree apprenticeship standards, almost half had no providers that are delivering to SMEs. There are problems also with the length of degree apprenticeships, the absence of stop-off points and the inflexibility of design, as the noble Lord touched on, which may result in a mismatch between provision and future skills needs.
The losers are not just SMEs, but students in areas of educational and economic disadvantage. We identified what we referred to as “apprenticeship cold spots”. We found that an aspiring apprentice from Norfolk, compared to someone from Hammersmith and Fulham, has to travel, on average, 12 times as far for the nearest apprenticeship opportunities. We concluded that what is particularly needed are stable funding arrangements, streamlined administrative procedures for the approval of degree apprenticeships and longer-term policy stability. There is also a need, as the Sutton Trust has noted, for pupils to receive advice on apprenticeships.
Among our recommendations are: creating equal access for SMEs by permitting HE institutions already delivering degree apprenticeships to big businesses to deliver for small businesses; creating a more agile bureaucracy and rationalising what are presently costly and repetitive processes for employers and providers; and speeding up the process for approving standards. We also favour offering additional financial support for prospective degree apprentices from cold spots and disadvantaged backgrounds. As I said in the debate on Tuesday, I very much welcome the Augar committee’s recommendation for a body of work that examines the challenges that are preventing SMEs taking up opportunities for degree apprenticeships. This very much mirrors our recommendation for such a review.
It is possible to make changes to render the system more flexible, integrated and quicker, and to do so without great cost. Indeed, in economic terms, the nation would be a clear beneficiary. Does my noble friend agree with the analysis I have offered, and could he say what the Government are doing to achieve these goals? I had a meeting not so long ago with the Minister for Apprenticeships, Anne Milton, so I know the Government are alert to the issues. It would be helpful to have a progress report on what is being done. The rewards, to students, to business—not least to small businesses—and to the economy are substantial.
The Motion refers to,
“the case for the effective delivery of workplace opportunities for young people”.
That includes apprenticeships but, in my view, can be taken more broadly. There is value in not seeing the delivery of workplace opportunities as confined to apprenticeships. It is important to recognise that such opportunities benefit students taking courses in HE and FE. In Tuesday’s debate, I referred to the value of experience-based learning. Having the opportunity to do a work experience placement as part of a degree course helps to build confidence as well as develop skills that employers want. Linking study with a placement facilitates understanding, as well as opening up opportunities of which the student may not previously have been aware. It prepares the student for life after graduation. That is all to the good and something we should be encouraging across HE and FE. There is a much greater recognition of its value than before, but we need to press further for recognition of its worth and status. If anything, it should be the norm and not the exception. I would welcome my noble friend’s endorsement of that view and invite him to comment on the work experience opportunities offered within government. How extensive are those opportunities and are there plans to extend them?
Like the noble Lord, Lord Young, I finish by returning to the point about advice. As the Augar review stresses, good information, advice and guidance are crucial for anyone seeking impartial advice about jobs, careers, routes of learning and qualifications. It argues that careers support is still underfunded and that schools should be held to account for their statutory responsibility to provide information, advice and guidance. For prospective students to take up apprenticeships, or degree courses with embedded work experience opportunities, they need to know about them. What plans are there to supplement the careers strategy and enable prospective students—from wherever they are drawn—to make informed choices? Does the Minister agree that failing to invest in providing such guidance is a false economy, the losers being not only the students but the nation, which needs the workforce necessary for a virile economy and a vibrant society?
My Lords, I declare my interest as an officer in the APPG on Apprenticeships. I apologise for my voice today.
In a rhetorical flourish in 2015, David Cameron announced that the Conservative Government had set a target to support 3 million new apprenticeship starts by 2020. As the noble Lord, Lord Young, alluded to, that was building on a process that had already started, not least with the Richard review, which was commissioned by the coalition and set out a strong rationale for increasing the number of quality, well-managed apprenticeships. With that, and with my colleague Vince Cable in BIS, there was a flourishing of support for apprenticeships, with over 2 million new ones created between 2010 and 2015. Under the subsequent Government, the structure for delivering those changed and that is part of what the House is debating today. I congratulate the noble Lord, Lord Young, on securing this debate. It is a pleasure to follow the noble Lord, Lord Norton. Much of what I am going to say—probably with less authority—rings true with the preceding speech.
Many noble Lords will talk about quality, but I will talk about numbers because that 3 million is the rod which the Government have set themselves to be beaten with. I am grateful to the Association of Employment and Learning Providers for its data. I apologise for going into some detail on the figures, but I want to put them on record. If there are any discrepancies, perhaps the Minister can write to noble Lords about them. In short, the overall start numbers are down significantly from the position we were in before the levy started. This is particularly true for non-levy payers and for apprentices aged under 25. This probably relates to the point made by the noble Lord, Lord Norton. In March 2019, intermediate—level 2—apprenticeships were down 2% on March 2018, and down 67% from March 2017, which was before the levy. For advanced—level 3—apprenticeships there was an increase of 7% between 2018 and 2019 but that too was down, by nearly 49% on 2017. Higher-level apprenticeships are up 35% on 2018 but still down on 2017. It is clear that the target of 3 million that the Government set themselves is now unattainable. Will the Minister confirm that the target has been scrapped and that we can concentrate—as the noble Lord, Lord Young, wisely said—on the quality of what we are delivering rather than the quantity?
Interestingly, as has been alluded to, higher-level courses, including MBA degrees, accounted for 12.8% of workplace training starts in the first year. That is more than twice what was going on before the levy started. Management apprenticeships were the most popular, with 28,000 starts in 2017-18. This probably caught the Government by surprise. Was this what the Government were expecting, or has it been a surprise? This matters, because of money. These are expensive apprenticeships and there is a sense that non-levy payers are having the opportunity for apprenticeships drained by these highly expensive schemes which are coming through. It seems that funding for non-levy paying SME employers is running out and has been capped, with no funding to support any future growth between April 2019 and March 2020. Can the Minister fill in the dynamics of this?
As the noble Lord, Lord Young, alluded to, there is an overall lack of published data and transparency around this. Let us not forget that the levy is a contribution by business and industry to the Treasury. Industry deserves a transparent report on how the money is being spent and the plans for spending it in future. Perhaps the Minister can add some transparency to this issue. There have been authoritative reports that the Government have been mulling over an increase in the levy from 0.5% to 1%. Will the Minister use this opportunity to refute that? Given the current state of the scheme, to increase the levy would be adding petrol to a smouldering fire.
The spirit of this debate should be that there is universal good will towards making it work. The Government still have a lot of work to do to get industry to understand what is going on. The British Chambers of Commerce found that 23% of levy-paying firms still had no understanding of how the levy works and how to access funds. The Chartered Management Institute and British Chambers of Commerce called for the levy to be reformed. The House of Commons Education Committee has recommended the implementation of pilots. I will come back to that point. I spoke to people at today’s Make UK reception, where the main theme was that the scheme is too complicated and not flexible enough to be used. When the Government are considering their review, flexibility and simplicity have to be at its heart.
As a good example of flexibility, I was pleased to see today’s announcement of the ScreenSkills pilot. It has been almost impossible for firms that have short-term contracts to run apprenticeships. This pilot is very small, including only 25 people, but it is a good example because the creative and media industry is important to this country but is not currently using anywhere near the amount that it contributes to the scheme because of the nature of its contracts. I welcome that pilot, but we need others and other imaginative ways of adding flexibility and, perhaps, as other noble Lords have hinted, broadening the sorts of things that the levy can be used for. I will come back to that point.
Lifting the tight restrictions and adding flexibility is important for dealing with the issues of cold spots, which has been mentioned, and social inclusion, which is another important area. We need to make sure that we are not just putting the money into places where apprenticeships are already strong, and not just supporting companies in already strong industries. That tends to be the way this levy works.
We want to put vocational education, at whatever age, right at the heart of the political agenda. Every party understands that, with the challenges facing the country, we have to get that right. It should be a cross-party exercise. The economy is evolving and we need new skills. For that reason, the Liberal Democrats would seek to expand the scope of the apprenticeship levy to a wider skills and training levy to add flexibility that works. While keeping the contribution at 0.5%, we would use the cash raised, not just for apprenticeships, but for a wider training programme. However, we would allow companies to do that only if they had an acknowledged and accredited apprenticeship scheme as well, because we would not want all this money to fly out. The starting point would be that a company would have to have an apprenticeship scheme before it could use some other unclaimed money for that process. We would also ensure that 25% of the funds raised would go into a social mobility fund, which we would use to feed into the regions and the cold spots and to make sure that we have diverse apprenticeships.
It is a great shame that the apprenticeship levy has been implemented in a complicated and poor way. We need to make sure, together, that we can get it right. There is a review, but drastic changes need to take place and there is no time to lose.
My Lords, I too am most grateful to the noble Lord, Lord Young, for bringing this very important subject to our attention. Like him and both the noble Lords who have spoken, I do not suppose that anybody would argue against the value of apprenticeships, or the principles that undergird the apprenticeship levy. Indeed, the Church of England is a very strong supporter of both, as well as a significant contributor to the levy. If that is an interest, I am glad to declare it. We are keen to play our part in improving skills and increasing productivity throughout the UK workforce, as well as providing more opportunities for young people to find worthwhile employment.
In the earlier debate today we were reminded of the very significant connection between just such worthwhile employment and mental well-being. However, like the noble Lords who have already spoken, we do not believe that the process is yet as effective as it might be for achieving those laudable ends. I shall briefly mention four issues.
One of the main problems appears to be the speed at which the regulator is able to respond to the development of new standards. Our own church minister apprenticeship standard is one example. The standard itself, which has been in development since 2017, has been approved, but written confirmation of what is known as its endpoint assessment has still to arrive. There are also some outstanding questions about the allocation of its funding band. We understand that the Church of England is not the only so-called trailblazer to have experienced long delays while attempting to introduce new standards. To that end we all welcome a recent speech by the Apprenticeships and Skills Minister, Anne Milton, on exactly this issue.
Closely connected with the problem of speed is that of apprenticeship levy spending. The rules governing access to levy funds have been criticised, not least already this afternoon, as overcomplex and inflexible. Due largely to the sorts of delays I have mentioned, it is estimated that nationally, large employers, including the Church of England, are in effect losing as much as £12 million a month. We welcome the extension of the maximum levy fund payment from 10% to 25% for what are known as organisations and stakeholders in supply chains, which for us in the Church of England translates as parishes and dioceses, but at the same time we would appreciate a rather more realistic approach to the way such payments can be accessed.
A third matter of concern—it was raised by the noble Lord, Lord Young, in his introductory remarks—relates to the need for provision at levels 2 and 3; in particular, for those young people who are just starting out in their careers and trying to find a place on the apprenticeship ladder. We have already heard various statistics, but since the apprenticeship levy was introduced there has been a 42% decline in the number of level 2 apprenticeships. This is not helped the formation of a clear apprenticeship pathway. As the House of Commons Public Accounts Committee has pointed out, it risks leaving behind people with lower skills and those from more disadvantaged communities. What is more, the recently published Augar review, which has been referenced already, called for,
“an efficient distribution of Level 3, 4 and 5 provision within reasonable travel-to-learn areas”.
That has particular resonance for those of us who live, as I do, in the more rural parts of England. I would be grateful to know from the Minister what plans Her Majesty’s Government may have for tackling the provision of lower-end apprenticeships, especially in the more remote and sparsely populated regions of this country.
Finally, as we have already been reminded, especially by the noble Lord, Lord Fox, I am aware that the original target of 3 million new starts by 2020 will not now be reached. I appreciate the new emphasis that has been placed on quality rather than quantity. Of course, quality is tremendously important, but that does not mean that numbers no longer matter. It would be good to know what sort of figure the Minister might regard as a suitable replacement target.
My Lords, I welcome this debate because we are talking about the future of at least half of all our young people. For those who do not go to university, apprenticeship has always been the main route to a skill. It has also been the biggest source of social mobility in our country, but unfortunately in the 1970s and 1980s both our main political parties switched their focus to full-time education and apprenticeship nearly died in this country. Fortunately, things have changed, largely due to the Labour Government’s apprenticeships Act 2009, which followed a landmark report from the Economic Affairs Committee of this House. Apprenticeship is now eminently respectable, but still nothing like as available as it needs to be; nor is it sufficiently coherent.
I start with one of the most shameful facts that I have become aware of in recent years. Some 37% of our 18 year-olds are not in full-time education or workplace learning. It is an unbelievable figure and the background against which we are talking now. I want to talk in a long-term sense about what kind of system we need to build over the next five to 10 years to deal with the problem of the other half of our young people. We obviously have to offer them as clear a route through apprenticeship as we now offer the other half through university. Every young person knows how the university route works: if you qualify at one level you are, de facto, guaranteed a place at the next level up, and there is a unified and relatively simple system of making applications at each stage, including to university.
Consider the contrast with the apprenticeship route, which is as labyrinthine and unclear as could possibly be dreamed up—probably even more so. The opportunities come and go from year to year, with constant changes of funding and no unified application system. We have to create an apprenticeship route by which any young person who qualifies at one level can expect to find a place at the next level up, just as is the case if they go down the university route. There needs to be, as with the university route, a de facto guarantee of a place at the next level up as you go through the system.
I shall talk briefly about what the guarantee would be. First, it would concentrate on the level 3 apprenticeship. I propose a two-part guarantee: there should be a guarantee to any young person who satisfies some conditions of entry to a first level 3 apprenticeship. The conditions would be either five good GCSEs, including maths or English, or another level 2 qualification, or—this is important for universal access—a pre-apprenticeship certificate. The other bit of the guarantee has to be a free place on a pre-apprenticeship course.
In the 2009 apprenticeships Act, entitlements of this kind were given legal force, but these clauses were repealed by the coalition Government. I am not saying that we should reinstate legal entitlements, but we should have entitlements in our mind as a basis for all future planning of provision. As I argued in our debate on Tuesday, the way to guarantee an entitlement is to provide uncapped per capita funding for all the places needed. All apprentices in training with an approved provider should receive automatic per capita funding, on some tariff basis of course.
However, we cannot be sure that even that would generate enough places, because the employers have to be on board. We also need somebody making a major effort to find enough apprenticeship places. We know that there is currently massive excess demand for apprenticeship places, with many more people trying to find an apprenticeship than the number of apprenticeships that get started. That is why we have a National Apprenticeship Service. It is surely its job to deliver that kind of guarantee and find the places.
Let me say a little about who these are for—the question of age and level. The prime purpose of any apprenticeship system has always been to introduce young non-graduates into the world of work. We must keep our focus on that. It is absolutely incredible that 40% of apprentices now are over 25. This is a complete distortion of the fundamental concept of an apprenticeship system. The priority must be those aged under 25, and it must be, above all, for people not interested in going to university. They should be the priority groups. I suggest that at least 70% not of places but of funding should go to level 2 and 3 apprentices aged under 25: that is, no more than 30% should go to levels 4 and 5, and levels 6 and above should be funded by loans, just like all other degree courses. The Department for Education is in a position to impose these restrictions, and it should do so. I would welcome the Minister’s comments on restoring the apprenticeship system to its original purpose.
I will now move on to the application process. It is very difficult to get an apprenticeship, much more so than to get into a university, because there is no unified application system. We need one; it could be run by UCAS. A would-be apprentice would make a single application which would then get passed on from the centre to the local branch of the National Apprenticeship Service. It would then do a rough matching of a number of applicants to each vacancy and send those potential applicants to the businesses offering those vacancies, which then choose among them using their own further testing and interviews.
If we had a single application process, it would of course deal with the problem, as already discussed, of schools. Schools would have to operate that application system, just like they operate UCAS; they would have to tell people how to apply for an apprenticeship, if that is what they want, just as they have to tell them how to apply to a university. It would also help us in an operational way around the problem of information.
I end with a comment on the economics of the T-level, raised by an earlier speaker. We have been doing some research at the London School of Economics on the earnings gain that young people of a given type receive by going either into an apprenticeship or to a college to get the same level of qualification. The apprentices are earning 20% more than the people who take the full-time route. The apprenticeship route is the gold-standard way of getting a skill, because your learning is directly related to what you are doing at work.
Full-time education with a work placement is completely different. The employer is not so interested and does not have the same incentive to bring you on. That must be the explanation of the huge economic effectiveness of the apprenticeship system. Where there is any conflict, as there might be between supporting T-levels and apprenticeships, my vote is for apprenticeships.
We are discussing one of the weakest aspects of our whole national life. It is interesting to note that at 15 our students do as well in maths, science and literacy as those in France and Germany, but by the ages of 20 to 25 the bottom third or half have dropped right behind. This is the basic weakness in our social and economic system. Once young people have left school, we simply abandon a third or more of them. We have to do better and must do it soon.
My Lords, I too congratulate the noble Lord, Lord Young of Norwood Green, with his notable commitment to apprenticeships, on obtaining this debate and introducing it so comprehensively. It is a timely follow-on from Tuesday’s debate on the Augar review; on both occasions I have had the pleasure of following the noble Lord, Lord Layard.
Thinking about today’s debate, I have been asking myself: what is the apprenticeship levy for, what is it intended to achieve, and for whom? There seemed to be rather a lot of possible answers. It can be a means to promote personal development and social mobility by providing opportunities for individuals, including those from disadvantaged backgrounds, to gain new employment-related skills. That might have been part of the rationale for setting the rather arbitrary target of 3 million apprenticeship starts. However, is it, or should it be, mainly aimed at younger people entering the jobs market for the first time, as the noble Lord, Lord Layard, suggested, or should it be about enabling people of all ages and experience to enhance their skills and move to a new level in their career?
The Government might say that the levy is focused on meeting the skills needs of employers, so they, or the market, should decide what apprenticeships should be available, and how they should be spread between attracting new job market entrants and upskilling existing employees. The Augar report suggests that the levy should help to address national objectives for tackling issues such as productivity and competitiveness, and therefore align with the Government’s industrial strategy. But many employers, including levy-payers in the devolved nations, and others who cannot use their payments to take on apprentices, such as the employers of temporary and contract workers, who are members of the Recruitment & Employment Confederation, may look at the levy just as a sort of hypothecated tax, designed to raise money to help pay for the Government’s skills-related policy initiatives but with no direct benefits for them. The levy does indeed begin to seem like a perfect policy for Boris Johnson, seeking to be all things to all people.
Therefore, my first point—with apologies to noble Lords, including the Minister, who heard me say something similar on Tuesday—is that it is hard to answer questions about how well the levy is working, and how it should be adapted and improved, in the absence of a clear strategic framework setting out what it does and does not seek to achieve, and how its effectiveness should be assessed.
Next, I will outline some issues with how the levy is working, to which I hope the Minister may give some answers, particularly as he has heard many of the same issues raised by many of the speakers in the debate already.
First, there is the question of flexibility, about which so many employers and indeed so many of your Lordships have expressed concern. The uses to which levy funds may be put are tightly defined, as is the amount that can be shared with other businesses in the employer’s supply chain—although the increase from 10% to 25% is welcome. The Augar review suggests that apprenticeships at level 6 and above, including degree apprenticeships, should be available only to apprentices who have not previously undertaken a publicly supported degree. This might help to address concerns that not enough levy funding is going to young people, especially 16 to 19 year-olds. There are suggestions, including from the noble Lord, Lord Fox, that the levy should be redesignated as a skills and training levy, and made eligible to be spent on a wider range of skills development needs, not just apprenticeships. There are also issues about the processes involved in setting up apprenticeships: the lack of transparency in standard-setting; problems with end-point assessments, as the right reverend Prelate mentioned; and the amount of bureaucracy involved, which is off-putting to smaller firms interested in offering apprenticeships.
Other issues relate to funding. Not many levy-paying employers manage to use all their levy funds to provide apprenticeships. However, in trying to do so, they tend to focus on upskilling existing employees, and on higher-level, higher-value apprenticeships. Meanwhile it appears that the funding available for non-levy payers, which comes directly from government funds, supplemented by unspent levy funds, if there are any, shows signs of drying up. How much funding does the Minister anticipate will be available to support apprenticeships offered by non-levy paying employers, and what will happen when that money runs out?
In Tuesday’s debate, I raised the issue of making it easier for SMEs to take on apprentices. Specific mechanisms are needed for this purpose, such as apprenticeship training associations. I also hear that independent training providers, which provide much of the training for SME apprenticeships, are starting to worry about the financial risks involved in that route and are thinking about shifting their focus to larger employers, where their funding is more secure. I hope the Minister will be able to say something today—he ran out of time on Tuesday—about government plans for supporting SME apprenticeships. Perhaps he could tell us how the Government are working with the devolved Administrations and regional bodies to ensure that apprenticeship policies across all four nations are complementary rather than conflicting, and that they all contribute to the skills and workforce resilience needs of the UK as a whole.
Last but not least in my list of issues is the continuing need for awareness raising about apprenticeships, particularly among teachers and parents—a point strongly made in the briefing from the Sutton Trust, along with a recommendation to set up a UCAS-style portal for apprenticeship applications, which I would also support and which the noble Lord, Lord Layard, also spoke about.
I look forward to the Minister’s comments on these issues. I end by mentioning the second part of today’s Motion: the case for the effective delivery of workplace opportunities for young people. The Government’s statutory guidance for schools on careers strategy requires students to have at least seven meaningful employer encounters between years 7 and 13, and at least two workplace experiences by age 18. Students on the new T-level courses, starting next year, will have to spend a minimum of 45 days on an industry placement. This will require substantial commitments of time and resources by employers.
How does the Minister expect this demand to be met? Having had the experience of providing work experience placements in my own small business, and of persuading other employers to do so, I know how challenging this can be for smaller employers, but many will have to be engaged to meet the Government’s targets. Is the Minister aware of organisations such as Speakers for Schools, and the similarly named but completely separate Founders4Schools, which are focused on arranging work experience placements at scale?
Founders4Schools runs a program called Workfinder, which has a particularly impressive and ambitious digitally driven approach, especially with fast-growing small businesses. Being digital makes for much better reporting, with greater transparency and accountability. Will the Minister explore how such initiatives can be incorporated into the Government’s plans for ensuring that the large number of workplace opportunities needed are provided and meet high quality standards? As a final thought, he might even consider whether work experience provision might itself be made eligible for levy funding. Many small businesses seem puzzled by why apprenticeships receive funding but work experience and internships do not. I very much look forward to the Minister’s response.
My Lords, I start by thanking the noble Lord, Lord Young of Norwood Green, for securing this debate. Education is the engine behind social mobility. It provides opportunity and unlocks the potential that often resides unknown within people, particularly the young, across the country and can equip them with the tools to lift them out of poverty.
We are fortunate to live in a country that can boast some of the world’s largest pools of untapped raw potential and underutilised talent. Unfortunately, we have for too long not recognised how we can best draw out the full potential of our young people. I fear that we have moved to a one-size-fits-all approach, channelling generations of schoolchildren through the machinery of our university system, saddling them with debt and often failing to meet the needs that their talents genuinely deserve. I have no desire to disparage our university system, a system that is the envy of much of the world, but I want to illuminate the truth that it is not the best way to meet the needs of many of our young people. I have long advocated an alternative that can run parallel to the university system, offering opportunities to people whose skills and interests are not necessarily suited to university. It is a fact that people learn through different methods, and it is only sensible to reflect this in our education system.
The apprenticeship model is a genuine alternative to the university system, often proving far more suitable to the needs of both young people and business. That is why I welcomed the 2015 announcement by the then Prime Minister David Cameron that the Government would support 3 million new apprentice starts by 2020. This system offers the chance to many young people to learn practical skills and unlock their full potential, giving them the tools they need to improve their lives and the lives of their families. We must show young people that apprenticeships are an equally worthwhile option that will lead to long-term employment. That said, I share the view of the noble Lord, Lord Young, that we need to ensure the quality of the brand.
Businesses have also benefited from the apprenticeship programme. The challenges facing many companies in the UK are complex, but lack of productivity and the skills gap of people leaving university are among them. They have recognised that education and recruitment need modernising to meet those challenges. For those reasons, many companies have embraced the apprenticeship programme. They have found that it has improved the diversity of talent and widened the pool of applicants. This is having a significant impact on both career and social mobility within companies.
Companies have also found that people who would otherwise not have applied for opportunities in their business are using the apprenticeship programme. I am sure that noble Lords will have read the briefing that the insurance company AXA sent. The take-up of apprenticeships there has resulted in a more diverse and creative workforce, which has positively impacted the productivity of its employees.
As a country, we need more highly skilled people. Given the challenges and opportunities that lie ahead after our vote to leave the EU, we need to ensure that young people, who will be the drivers of our economy, are given the best opportunity to succeed in the workplace. Simply put, their success is our country’s success.
I recognise that the Government’s apprenticeship programme is not perfect; relatively few policies translate in practice as the finished article. However, I hope noble Lords will agree—I believe I sense this mood in the Chamber today—that the aim behind the scheme is laudable and deserves to continue. That is why I am glad that steps have been taken to improve the system, with more money invested in the programme in 2017 through the apprenticeship levy. Nevertheless, I would like to see more emphasis on how this programme can be promoted as a real alternative to university and on its potential as a mechanism for social mobility.
Noble Lords may recall that last week I asked a Question to my noble friend the Minister about how we can improve and widen careers advice in schools. The noble Lord, Lord Young, followed up with a question sharing concerns and has touched on that again today, as have other noble Lords. We are not reaching all schools in talking about apprenticeships as a real possibility to be considered by our young people. We hear that employers still complain about some schools denying access to pupils to talk about apprenticeships and other career opportunities. As the noble Lord, Lord Young, said last week and again today, that is despite the Baker amendment and previous legislation. We must ensure that all schools meet their obligations to provide full career path options to their pupils. I have said in this Chamber before that if we want to create a ladder of opportunity, rather than a missed opportunity, we need to provide better career advice in schools on apprenticeships.
It is for these reasons that I welcome today’s debate and hope that both this House and the other place will continue to strive to improve this vital gateway for social mobility and for our young people to reach their full potential.
My Lords, the House should be indebted to my noble friend Lord Young for giving us the opportunity to take another look at the apprenticeship levy scheme since its inception in 2017 and the pressing need for greater workplace opportunities for our young people.
I declare an interest in this debate: I began my working life as an apprentice in an electrical engineering firm, ironically here in Westminster. I have therefore known at first hand some of the benefits of apprenticeships as a means for young people to gain skills and experience in the workplace. My apprenticeship was coupled with two years’ national service in the Royal Air Force—another invaluable experience. The skills and discipline I acquired in those experiences stood me in good stead for another apprenticeship here in Parliament: being elected to the House of Commons and later ennobled in this place.
It is clear that we need carefully considered government support for apprenticeships to give opportunities to as many young people as possible, and the introduction of the apprenticeship levy by the Government in 2017 was, of course, a welcome start. To be fair to the Government, they have already recognised the need for some adaptions to that legislation. I particularly welcome the reduction in the amount that small firms have to contribute to the scheme, from 10% to 5%, so that smaller businesses are more supported.
But the scheme still needs to address many further issues. I am sure noble Lords, like me, have had expressed to them the concerns of the Recruitment & Employer Confederation that around 1 million temporary workers are locked out of the scheme. This leaves us in a position where large numbers of firms paying in to the levy and employing temporary workers are not able to use any of that money each year—a particular issue for sectors with acute labour shortages, such as our caring sector and others. The decline in the numbers of level 2 apprenticeship starts under the scheme in favour of higher-level managerial apprenticeships is also somewhat concerning, as is the drop in the quality of apprenticeships which we saw highlighted in the Augar review.
In the form that it was introduced, however, the levy has proved problematic in a number of areas, and as outlined by my noble friend Lord Young, after two years of the scheme this is a good time to look afresh at what changes need to be made. Over the past two years, the disappointing numbers of apprenticeship starts under the scheme has only continued, particularly among smaller and medium-sized firms, and the proportion of levy funds accessed by employers has been lower than expected. As even the Education Secretary himself admitted, the Government are subsequently not on track to meet their target of creating 3 million apprenticeships by 2020. The noble Lord, Lord Fox, also commented on that in agreement.
A whole range of employers and organisations, not least the British Chambers of Commerce, pointed to the rules of the levy being too complex and rigid as a key contributing factor to this sorry state of affairs, and it stressed to us both the need for greater flexibility in the use of funds and a greater effort by the Government to increase understanding of the levy itself. It is clear that the Government should take action to prevent the levy being used to simply up-skill existing employees, and to prevent rigid target chasing resulting in increased numbers of low-quality apprenticeships.
I share the concerns of the noble Lord, Lord Aberdare, expressed in the debate on Tuesday that, as a body principally primed to regulate our state education, Ofsted may not be best placed to regulate the quality of employer and industry-driven apprenticeships. As he is the son of my predecessor at the Football Trust, whom I succeeded as chairman, it did not surprise me that the noble Lord speaks so knowledgably on this and other subjects. He and others, such as my noble friends Lord Blunkett and Lady Blackstone, spoke in Tuesday’s debate compellingly of the extent to which the Augar review highlights the great neglect of our further education that we have seen in recent times. I hope that, as such an important aspect of further education, apprenticeships and the further reforms to the levy that are needed will not be neglected by this or subsequent Governments.
I too thank my noble friend Lord Young of Norwood Green for introducing this debate. I declare an interest as a board member of a multi-academy trust in Cambridge and vice-chairman of one of the university technical colleges set up under the auspices of the Baker Dearing Educational Trust. I also have past form: until recently I was chancellor of BPP University, which is a provider to most of the big law firms and accountancy firms of the teaching of degree-level apprenticeships.
I was unable to take part in the debate on Tuesday this week on the Independent Panel Report to the Review of Post 18 Education, but I take this opportunity to congratulate the panel, its chairman Philip Augur and his DfE team on their work. The opening paragraph ought to resonate with us all. For those of us who have forgotten since Tuesday, it states:
“Post-18 [or ‘tertiary’] education in England is a story of both care and neglect, depending on whether students are amongst the 50 per cent of young people who participate in higher education (HE) or the rest”.
The report goes on to say that,
“universities and university students are both cared for and cared about”,
adducing the fact they receive over £8 billion in funding and most of the media comment and attention—and, for that matter, most of the political attention too.
In the debate on the then Higher Education Bill in 2017, 180 Members of your Lordships’ House, many of them chancellors of universities, spoke, whereas in the debate on the then Technical and Further Education Bill, which set up the Institute for Apprenticeships, now IfATE, 18 Members—fully 10% of the number of Members who spoke on universities—spoke on a Bill which sought to increase opportunities for the other 50% of our children. It seems to me that the independent panel was right on the button in its opening comments.
As my noble friends have noticed, apprenticeships historically were how most people gained employment and qualifications and were a prime instrument of social mobility. The huge increase, now up to 50% of our young people, mandated by Governments particularly over the past 10 years, has rendered apprenticeships less important to many of our learners. However, they are key to improving productivity, which has stalled, at least in part because of skill shortages, and they retain their importance for increasing social mobility, which also seems to have stalled.
The big success story in increasing apprenticeships has been degree-level apprenticeships. I have a problem with them. Speaking as an ex-provider, degree-level apprentices are mostly not new employees; they are being used publicly as a substitute for employing graduates. Many big firms prefer to take on apprentices at 18 rather than graduates at 21 because they can train them properly and in a way that is useful to them. These apprenticeships are immensely popular with students and their parents because the apprentices emerge free of debt and with a guaranteed job or a recognised qualification.
One large accountancy firm, for example, writes that it is now tending to reduce the number of graduate trainees in favour of the 18 year-old apprentices so they are now about half and half. However, while these are new apprenticeships, they are not new employees. These are not, in some sense, new opportunities. Mostly, as Augar points out, these degree-level apprenticeships are operated by large firms in service industries—I do not know how much they are substituting for graduate trainees—but there are also employers in manufacturing industry who run successful schemes, Rolls-Royce being the prime example.
It would be easy to conclude that a degree-level apprenticeship conveys automatic advancement to a good skilled job, and that at that level very little care or state intervention is required to ensure that the learners succeed. However, having been chancellor of BPP University, which teaches accountancy and law, principally, for students on degree-level courses, I can say that it is not entirely problem free. The Government have sought to mandate that 20% of these apprentices’ time must be spent in formal learning, but we found that it could be very difficult to extract competent young people who are earning money for their employers—ironically, often on government contracts—to ensure that they get the time off for formal learning. It is difficult for any training provider to insist on a large and profitable client releasing its people for 20% of their time, but it is vital for the learner. I would like to be clear that that would be enforced. In 2017, I urged the Government to mandate it in statute, but they preferred to do it by mandating IfATE. I am sure that it remains necessary that training providers for these degree-level apprenticeships be regulated and considered, even though many university departments, as well as the private sector trainers, are training providers.
I think there is a risk here, as identified by Skills Minister Anne Milton. She was concerned that it would mostly be educated middle-class parents who got their children to take up apprenticeships. I agree with this perception. My experience of parents’ evenings at the university technical college of which I have the honour of being a governor, and which produces both BTEC and STEM A-level pupils, is that it is the middle-class parents who are looking forward to qualifications post A-level, with a view to getting their offspring on to these apprenticeships. I think that growth in this sector will, if not interfered with, take care of itself, but it needs to be looked at with a view to introducing regulation. I am concerned that these are expensive degree-level apprenticeships and they drain the available levy provision.
The problem lies with increasing apprenticeships that convey level 2 to 5 awards. As Augar identified, there is a gap everywhere in level 4 and 5 provision that stands in the way of progression beyond level 3 for many of our young, and that goes also for apprenticeships. There are very few apprenticeships at levels 4 and 5, and they are urgently needed to enable progression beyond level 3 for those who do not for one reason or another go on to university.
Perhaps even more critical is the shortage of level 2 and 3 apprenticeships, although in Cambridgeshire several sixth-form colleges are providing proper skills training in subjects such as healthcare and hairdressing. They take students to level 3 and, indeed, provide a de facto qualification that will get them into a skilled job. However, full apprenticeships have a role to play at this level, particularly for students from low-income homes, where the cash earned by the learner is critical. That is also true of level 2 apprenticeships. The cash is a great help, particularly to low-income families.
During the passage of the Bill, I and colleagues, including four former Secretaries of State for Education, found ourselves wondering whether employers could be expected to pay enough attention to the social need to involve all our young. Back then, we were not confident. We all understood that employers have their own agenda, and several of us, including my noble friend Lord Young, who introduced this debate, were particularly doubtful that levy funds would be used by employers to set up new apprenticeships at the lower level to enable more of our young to progress.
It is clear that we were right to be doubtful. It is clear, too, that many employers decided to recoup any levy funding that they provided by taking the easier route of using the funding to train people they already had up to and including the level 6 qualification—the degree-level apprenticeship. A briefing paper from the Royal Academy of Engineering—received, I imagine, by most of us—makes my point for me. The academy asked for the levy to be made more flexible so that it could be spent on different things. That, to me, is a clear sign that it is not really intending to spend it on exactly what we asked it to be spent on.
That is not to castigate employers, who need to look after their businesses, ensuring that they are profitable and improving productivity. However, they would prefer to do it naturally, rather than enter the difficult field of taking on new apprentices, perhaps in a part of the organisation that does not have them already. Nor do I think that you can make employers responsible for engaging in improving the social process. That, I believe, is a matter for government, requiring government weight and money behind it. We have heard that, disappointingly, much of the levy fund has been drained. The one question that I would like to ask the Minister is whether he is prepared to see an increase in direct funding to enable these apprenticeships to take place.
In short—it had better be short, as I can see that I am running out of time—I welcome the opportunity afforded but I think that it is going to the wrong place. By and large, it is going to existing employers, who are using it to upskill—in a way that is fine; it is not a waste—and to degree-level apprenticeships, which, I agree with Augar, ought to be financed under the normal loan rules.
My Lords, I too thank the noble Lord, Lord Young, for initiating this debate and doing it so comprehensively. I agree with most of the points made so far and agree with all the speakers that this is a very important debate, because it is really about social mobility.
Apprenticeships should not be seen just as filling skills shortages and meeting employer needs; they should also be about training and giving young people skills that will help plug the gaps currently within the system, and equipping individuals to reskill and retrain in a fast-changing economy and labour market. As I said, the issue is social mobility but, as we have already heard, social mobility has become almost stagnant.
The Government’s commitment to 3 million apprenticeships by 2020 is admirable. But if placements do not fulfil business needs, if quantity is preferred over quality, if standards vary and the placements are not achieving their objectives, then we must ask whether apprenticeships are working effectively. Are they fit for purpose to meet changing needs?
The current levy system is undermining the purpose of the entire strategy. Some up-skilling, particularly at lower skill levels, is less expensive to run through the system and may be more attractive in terms of volume. Evidence shows that two-thirds of apprenticeships are estimated to be merely “converting” existing employees and certifying existing skills. If these apprenticeships are not delivering the skills required, the levy is not doing its job either for business or for young people; neither are being best served.
There is also great difficulty for employers in using the system, especially if staff do not fit the compulsory apprentice profile. The system is overly complex, and staff such as agency or temporary workers who do not fit the apprentice template are unable to avail themselves of apprenticeship opportunities. Often, agency workers are filling a gap in the workforce and are unlikely to be in a position long enough to undertake training alongside the job itself. Reports have shown that there is underclaiming among employers who pay into the fund, with only 9% having claimed in the year 2017-18. Perhaps this mismatch between employers who pay in and the lack of staff who fit the profile are part of the reason; it would be helpful to know.
Standards were brought in by the coalition Government in 2013, but as of 2018 only 360 of a potential 600 have been approved. This leaves a marked lack of variation in apprenticeships. If we are to improve this aspect of apprenticeships, we need to know what is going on with the approval system and when approvals are likely to be completed.
Then there is the question of low take-up by minorities, which is around 10%. We need to know why the numbers are so low and what can be done about it.
Access to good-quality, appropriate apprenticeships should be a priority. But too many are failing to provide sufficient training or access to skilled work to enable progression; the focus is on numbers rather than hard, sustained work to improve quality. Numbers, targets and the apprenticeship levy have too often encouraged the creation of apprenticeships that are simply a rebadging of lower-level training, with companies accrediting the existing skills of their current staff. Students from lower socioeconomic backgrounds are less likely to go to university and more likely to drop out. To increase their career opportunities, there is a real need for quality apprenticeships.
As well as a lack of quality, there is a lack of awareness. According to the Sutton Trust, two-thirds of young people say that they would be interested in doing an apprenticeship, yet 40% say they have never had a discussion about apprenticeships with a teacher. There is a need for better awareness and careers advice and to dispel the perception that apprenticeships are a less attractive alternative to university. The Sutton Trust recommends that the Institute for Apprenticeships and the levy should have a widening access function to ensure access to advanced and higher apprenticeships for those from less advantaged backgrounds, and that there should be adequate funding for apprenticeships in non-levy-paying employers. It also recommends a UCAS-style portal for admissions, which could be a step change for the further and higher education sector. Can the Minister tell the House whether the Government will give positive consideration to these recommendations, which are about widening access?
Finally, apprenticeships should be seen not just as something designed for skills for work but as a new type of qualification training, as part of the broader education and training landscape, equipping individuals for the changing nature of work and increasing the capacity of employers to adapt and improve skills and productivity at the pace the country needs. The time has come not just to improve the operation of apprenticeships but to make them less complex and more accessible and to see them as part of a broader further and higher education landscape, taking into account the changing landscape of employment. While any review should rightly look at the detailed operation of apprenticeships, looking at the approach, and making them more agile and dynamic, will be very important to meet the new needs of the country.
My Lords, I add my congratulations to my noble friend Lord Young on this initiative and securing this important debate on apprenticeships. I also welcome the generally positive, constructive tone on apprenticeships and the role they play in our society, which I think all speakers have demonstrated in their contributions. There has been plenty of critical support, and plenty of criticism, but overall this has been given in the context of supporting more being done and improved systems being developed for delivering apprenticeships.
As my noble friend Lord Layard said, vocational training has not been a British success story for some time. Institutions have come and gone. In my working life, I have been associated with: the industrial training boards; the Manpower Services Commission, which was a bit of a favourite of mine until it got swamped by high unemployment, which it had to concentrate on; and, in England, the Learning and Skills Council, which flared briefly before it was put to sleep. They all started brightly and enthusiastically, with good people driving them, but all have ended up in the Whitehall graveyard, having been regarded as institutional failures, with a lot of bewilderment out there about what vocational training and education really is and what institutions are around to deliver it. As several noble Lords have said, the contrast with higher education is absolutely glaring.
As we consider the current review of the apprenticeship levy, it is important to remember that we have a record of failures. It is important to ensure that we learn from those and that the current initiative does not end up in some gloomy Whitehall graveyard. It does not deserve to do so, despite some clear problems which have been referred to. The levy was a bold idea and an ambitious intervention in the British labour market in an era when there were not many interventions, except against trade unions. It needs buttressing and some determined, enthusiastic support in this review to establish the objective of an apprenticeship culture and a clear system in our society and our country. I am not surprised that there have been problems, but I hope they do not weaken government or industry support for developing and pushing forward the apprenticeship route.
I know of some of these problems from the TUC, with which I am associated. One problem that has not been mentioned so far is the fact that some employers are frankly exploiting some apprentices. According to the Government’s own survey of apprentices’ pay, one in five are not receiving the legal minimum of £3.50 per hour. In some sectors the picture is far worse, with particular black spots being hairdressing, childcare, construction, health and social care and, perhaps surprisingly, sport.
In addition to these wage problems, there are other financial barriers. Many young people from lower-income families face pressure not to participate in an apprenticeship because eligibility for child benefit ends when they take one up, which is not the case if the young person continues in school or college. I certainly do not want to convey the impression that apprentices are being widely abused—they are not—but breaches of the rules are widespread enough to damage the attractiveness of apprenticeships in the eyes of some young people and their parents. Marketing people would say that the brand is being damaged if the backsliders are not brought into line.
Another area of concern, which others have touched on, is the quality of the training provided on some schemes. Astonishingly, the Government’s own survey found that 30% of apprentices were not even aware that they were apprentices and that they were on a course. I found that absolutely astounding. Many in this category are in the poorer-quality schemes, or sometimes are existing employees recruited into an apprenticeship to upgrade their skills. The Government’s move to regulate that apprenticeships must last at least 12 months has been a very welcome step and eliminated the very short apprenticeships that were developing rather quickly. It has undoubtedly reduced the quantity of apprentices, but I would choose quality over quantity in this respect every time. The average duration is now 17 months—still much less than the average in high-quality European neighbouring countries such as Germany, Austria and Switzerland.
It was a few years ago now, but when I visited a motor mechanics’ training centre in Vienna, supported by all the major car manufacturers with their dealerships in that city and region of Austria they had wonderful facilities. What really surprised me was that most of the teaching was done in English, to level 2 and level 3 young people. They were working in English because the drawings, handbooks and so on were in that language. We should be aiming at raising our standards to these levels. That is the central task.
In addition, I would like to see widening access so that women, black and ethnic minorities and the disabled get a chance to access high-quality schemes, not just the ones at the lower end. Currently, only 4% of engineering apprentice starts are women, and women and girls are disproportionately found in the lower-paid sectors, such as hairdressing and social care. This problem needs urgent attention.
I hope the Government will bear the many constructive points made in the debate in mind as they conduct this review. They must not throw the baby out with the bathwater, though, and instead concentrate their efforts on raising the status, and increasing the attractiveness, of apprenticeships. This means tackling abuses and low standards and developing a clear route so that teachers, parents and young people understand the way to go. It means working closely with unions and educational bodies and, of course, with better employers, who are crucial to raising the standards of the various offers. It also means being flexible and responsive to the points raised by employers about the administration of the scheme, for example by relaxing the time limits of when employers have to spend their levy payments, perhaps beyond the current 24-month limit.
Getting the balance right between flexibility and good administration is not easy and there is always a risk of abuse by the unscrupulous, but our basic message should be to rally round the great cause of promoting effective apprenticeships. Do not consign the concept to that Whitehall graveyard of failed institutions on vocational learning. It will take time to develop a culture in which an apprenticeship is the natural way for many people to go and equal to the best the academic world can provide, but let us apply ourselves with patience and skill to bringing about this much-needed change.
My Lords, I thank my noble friend Lord Young for initiating the debate and displaying, once again, his long-standing commitment to the cause of apprenticeships. It is a little daunting to follow my noble friend Lord Monks, who has a wealth of experience in this field, but he and everyone else taking part in the debate share a commitment to apprenticeships, which help people of all ages to realise their full potential. I declare an interest as a trustee of the Young Women’s Trust, a charity that supports young women aged 18 to 30—especially those struggling on low or no pay—in getting into work that is right for them. I will concentrate mainly on how apprenticeships can provide workplace opportunities for young women, but also on some of the difficulties that they face.
Last year, the Young Women’s Trust commissioned research that found some optimism but discovered significant challenges and showed that apprenticeships are not working as well for young women as they are for young men. In the YWT ComRes poll, more than three-quarters said that they were struggling financially and had considered, or were, dropping out because they could not afford to continue and were in debt. That is because, as my noble friend Lord Monks said, the level of the apprenticeship minimum wage is a considerable hurdle for many young people taking up an apprenticeship. Among others, the Federation of Small Businesses has called for the apprenticeship minimum wage to be increased—albeit potentially in a phased way—to boost the attractiveness of apprenticeships as a career option for young people, including convincing their parents, who play an important role in young people’s decision-making.
I hope that the Minister will say something in his speech about how apprenticeships are assessed on completion because there seems to be a concentration on the number of starts, but not on the end result or why people have given up. Apprentices with children, the majority being women, face almost insurmountable problems due to childcare costs. There are also cases of maternity discrimination, where apprentices are forced to leave by their employer when they become pregnant. Part-time apprenticeships could ease that problem; there is an appetite for them among employers. In a survey of human resource decision-makers, carried out by YouGov, more than half the employers polled said that they would be willing to offer part-time apprenticeships. That figure rose to 65% in the public sector. What are the Government doing to promote the idea of part-time and flexible apprenticeships, which would go a long way to enabling parents to access apprenticeships?
It was disappointing to see from the poll that some employers continue to treat apprentices as second-class citizens, as my noble friend mentioned, with three in five apprentices saying that they were paid less than non-apprenticeship colleagues for doing the same work. If receipt of training is the justification for lower wages, that training needs to be of a high quality. For example, a 20 year-old level 2 customer service apprentice who talked to the YWT said that when there were staff shortages at Christmas, the extra hours were put on to the apprentices because they were cheaper. However, despite the extra hours worked, when the Christmas pot was shared out, the non-apprentice staff got the greater portion. She left that apprenticeship because she felt that she was being treated as cheap labour. She then got a national minimum wage job; it doubled her pay but she gets no training.
Many of the young women spoken to had no option but to live with their parents due to low pay, but that had a knock-on negative effect on the benefits that the family received. The Education Select Committee recommended that the Social Mobility Commission conducts a study into how the benefits system could address this issue. I would be grateful if the Minister could say whether the Government will act on that recommendation.
Another challenge was the cost of travel to work, especially in rural areas. The Education Select Committee’s report also highlighted this and called for travel support, as did the 2017 Conservative Party manifesto. What progress has been made in meeting that manifesto pledge to introduce significantly discounted bus and train travel for apprentices? Some employers offer loans to apprentices to help cover rental deposits or annual travel passes. Will the Government consider building on that good practice by setting up bursary funds? Where employers are unable to meet those costs, the bursary would go some way to improving access for poorer apprentices.
Progression is also uncertain, as my noble friend Lord Layard mentioned. Two in five of the young women who completed an apprenticeship in the past two years are now unemployed or working in a sector not connected to their apprenticeship. If they finish their apprenticeship, women continue to earn less than men for years afterwards. For example, a man on a level 3 apprenticeship will earn a median wage of £26,200 compared to £16,600 for a woman—a 50% difference in the man’s favour. This goes back to what does or does not happen in schools. Careers advice must deal with the current gender segregation, where young women are directed into sectors with low pay and young men into higher-paid sectors with better training. While the numbers of male and female apprenticeship starts are almost equal, only 9% of female apprentices are in engineering and manufacturing, compared with 80% in health, public services and care. It would surely make a difference if there were more taster courses and work experience for young people, so that young women could visit male-dominated workplaces to see that there was no reason not to consider those occupations. For instance, the UK tech sector is growing 2.5 times faster than the overall UK economy, and will continue to grow, but only 19% of the people working in that industry are women.
Careers advice does not always sing the praises of the benefits of apprenticeships as a route to work and educational progression. The Sutton Trust report says that 40% of young people have never had a discussion with a teacher about apprenticeships, while the IPPR found that two-thirds of schools still flout the Baker clause. The Sutton Trust also recommends a UCAS-style portal for apprenticeship admissions, which would change the situation if the information is currently scattered and inconsistent. It would allow young people to make informed choices about the opportunities available to them and allow progression between the different levels. That UCAS-style portal is not only supported by Members of this House who have spoken this afternoon; it was another Conservative Party manifesto commitment. When the Minister talks about the other commitment, perhaps he can update us on this one too.
However, as my noble friend Lord Monks said, we should be more positive and be reminded of what a difference an apprenticeship can make if it goes as it should. I want to share the story of the Young Women’s Trust apprentice of the year, 20 year-old Georgie Yates. After her A-levels, she started as an apprentice on the BBC’s legal scheme. Initially, she lived at home and commuted for two-and-a-half hours to Manchester every day. She joined the BBC’s next generation committee, which gave her an opportunity to give a presentation to the director-general about life as a BBC apprentice. She took that opportunity to tell him how hard it was to manage on an apprenticeship wage. He said that he would take up the issue and, from that meeting, all apprentices across the BBC received a 14% pay rise—you can see why she was the apprentice of the year.
Georgie is about to start her level 7 solicitor apprenticeship and will fully qualify as a solicitor in 2025. She says:
“It’s genuinely not an overstatement to say that this apprenticeship has altered the trajectory of my life. I have learnt so much and being at work has given me a sense of stability, safety and value”.
That sense of stability, safety and value is what we want for all young people starting apprenticeships at all levels. We must invest in the workforce of tomorrow if we are to close the productivity gap and boost our competitiveness. We need more stories like that of Georgie Yates.
My Lords, it is a great pleasure and privilege to participate in this important debate secured by my noble friend Lord Young of Norwood Green. Once upon a time in Haringey we had Tottenham Technical College, where our young people did apprenticeships as car mechanics, bricklayers, hairdressers, dressmakers, plumbers and carpenters. They were on day release and so on. The discipline and skills they acquired helped not only their own careers and families but everyone on and around the Broadwater Farm estate, especially when the council put forward a plan to pull down their homes amid tensions on the estate.
They organised professionally and persuaded the council to work with them to keep the estate open. They took leadership positions in the residents’ association and set up a youth association to tackle anti-social behaviour. They reopened closed shops and set up an enterprise workshop, a co-op store, a nursery and a mothers’ project. Help and recognition came from all over, including from our councillors, the late Bernie Grant, Jeremy Corbyn, who is now my leader, and a government Minister for Inner Cities, Sir George Young—now the noble Lord, Lord Young of Cookham. They recognised that the youth and the work they were doing needed encouragement. I organise alongside these dynamic young people, so I know the importance of employer-led training, both to improve life chances and to meet our growing skills gaps. For these reasons, it is imperative that Labour continues to support the apprenticeship levy.
That said, we are all aware that the current government apprenticeship programme has attracted significant criticism, including from the National Audit Office, for its ongoing failure to attract applicants—numbers have declined by 120,000—and to provide social progression and diversity. This is despite the Department for Education meeting its targets to widen participation among underrepresented groups, such as black, Asian and minority ethnic apprentices, as well as those with learning difficulties, disabilities or health problems. The reason for the criticism is that the targets set by the DfE lack ambition and are not sufficiently stretching. For example, the target for starts by BAME apprentices, at 11.9%, is lower than the working-age BAME proportion of England’s population, at 14.9%, and much lower than the proportion of BAME pupils at the end of key stage 4, which is 20.7%.
The Public Accounts Committee has also called on the Government to prevent the apprenticeship levy system being misused by businesses to upskill existing employees. I would be grateful if the Minister could please explain: first, what steps are the Government taking to set and meet more challenging targets to increase the number of apprenticeships started by underrepresented groups; and secondly, what work is being undertaken to understand the barriers to entry for each different segment of these underrepresented groups?
A second reason why criticism has been levelled at apprenticeships is that there has been a marked shift from intermediate and advanced-level apprenticeships to higher-level, more academic apprenticeships, which take the place of HE undergraduate degrees or simply upskill young people already in work. The proportion of starts at advanced level or higher has steadily been increasing, from 37% in 2011-12 to 57% in 2017-18. Given that a range of voices—trade unions, the Federation of Small Businesses, the Sutton Trust and so on—are calling for the Government to make changes, please could the Minister explain: first, what are the Government doing to tackle the significant decline in level 2 and 3 apprenticeship starts; and secondly, how do they plan to address the recommendations made by the Federation of Small Businesses, which, in its recent Fit for the Future report, said that the Government need to reduce the administrative burden to address a sharp decline in apprenticeships being offered by small and local businesses?
The unions have always argued that the Government’s apprenticeship scheme is profoundly unfair because it excludes young people without five GCSEs at grades A to C. This immediately presents an advantage to people from privileged family backgrounds over those in poverty. In view of the findings of the Government’s recent race disparity audit, can the Minister outline what the Government are doing to break down systemic and structural barriers to entry into apprenticeships? In particular, will the Minister confirm whether he has explored a personalised budget approach to apprenticeships, in which every young person has access to a fixed amount of funding to obtain whatever level of apprenticeship experience they need?
The unions have also run a national campaign arguing for apprentices to be paid fairly, so that young people from low-income households are not priced out of the scheme. Given that businesses such as Ikea already pay their apprentices the real living wage—£9 per hour with a London-weighted uplift of £1.55—will the Minister confirm when the Government plan to adopt the real living wage across the apprenticeship scheme?
My Lords, I too thank the noble Lord, Lord Young, for introducing this debate and all those who have sent us informative and helpful briefings. There are too many to acknowledge but all have been read. The noble Lord is, of course, a real-life apprentice—as is the noble Lord, Lord Pendry—and is an enthusiastic supporter of apprenticeships. I go to any number of apprentice events and he is always there; I suspect he goes to others where I am not. I share his enthusiasm and can only wish that schools had more incentive to encourage their students into apprenticeships instead of their remorseless academic imperatives of GCSE, A-level and university. I agree with the noble Baroness, Lady Pidding: what are the Government doing to give schools reasons to promote apprenticeships and work-based skills and, indeed, the information and guidance about them which most teachers will not have? I share the concerns of the noble Baroness, Lady Cohen, about the Higher Education Act and the Technical and Further Education Act. I was leading for the Lib Dems on both and there was a notable disparity of interest between them. I also share the concerns of the noble Lord, Lord Monks, about the graveyard of previous initiatives; we know that so well.
One of the features of winding up in a debate such as this is that all the brilliant things that I was going to say have been said far more brilliantly by other speakers. I shall try not to repeat, but to add my weight to some of the issues which other noble Lords have raised. The levy has not met with undiluted enthusiasm. We hear that it is too complex, too restrictive and, as the noble Lord, Lord Norton, said, “not fit for purpose”. The Recruitment & Employment Confederation tells us that its members pay over £110 million into the apprenticeship levy every year but, because of the restrictive funding rules, it is a struggle to use this funding to train workers on flexible and temporary contracts. It estimates that, two years on, over £104 million is left unspent. As both the noble Lord, Lord Pendry, and the noble Baroness, Lady Prashar, set out, the vast majority of temporary and contract workers are automatically cut off from training opportunities through the apprenticeship levy. They cannot access training opportunities, while recruitment agencies are unable to use their funds beyond supporting the recruitment industry. Yet these people could benefit most from training opportunities. Why is the levy not designed to encourage agency workers to progress?
As the noble Lord, Lord Aberdare, and other noble Lords have said, there are strong calls for the remit to extend to other skills and training, rather than just apprenticeships. What is the Government’s thinking on this? If workplace opportunities are to be increased for young people, there needs to be much more flexibility regarding the support available. As the right reverend Prelate set out, with reference to the previous debate on mental health, we need to encourage disadvantaged young people. I support the noble Baroness, Lady Prashar, in her remarks on social mobility and the noble Baroness, Lady Nye, on support for women and drawing attention to gender disparities. The noble Baroness, Lady Osamor, reminded the House of the right range of apprenticeships and spoke of the BAME disparities.
We are getting mixed messages. On the one hand, the levy fees are apparently underspent. In 2017-18, levy-paying employers accessed only 9% of the available funds, which expire after 24 months. These funds should surely be available for other forms of training and skills development. On the other hand, I was told that a senior Minister recently declared that the apprenticeship money would run out in a few months. Concerns were expressed by the National Audit Office and others earlier in the year that the levy would not be able to meet employer demand and the pot is now indeed running dry. What is the position on this? Is it partly because the higher level 6 and 7 apprenticeships are costlier than levels 2 and 3, which were the original focus of the scheme?
In the Middle Ages, apprentices were young people who spent five to seven years learning their trade or craft. They then became journeymen and in due course, hopefully, masters of their trade or craft. This was, of course, before technicians were invented, although I have to say that some of the crafts were extremely technical. One of the great strengths of this was that they had a job to go to. These days we seem to have abandoned the idea of youthful learning and use the term “apprenticeship” to apply to much more advanced studies. I share the concern of the noble Lord, Lord Layard, about the number of 18 year-old NEETs, and that of the noble Lord, Lord Young, about the drop between starts and completions. Apprentices of yore got qualifications as they studied. Now, there is not necessarily a mandatory qualification for an apprenticeship standard. We are told that an employer can use one voluntarily, including degrees, which may bear little relevance to apprenticeships.
“In apprenticeship standards, the apprenticeship itself serves as the qualification that accredits occupational competence, as measured by a robust, independent end-point-assessment”.
However, there will still be a need for formative assessment, measuring and reviewing progress towards achieving competence. One of the simplest ways of doing this is through qualifications, which have the great benefit of giving people a sense of achievement and the incentive to carry on. Endpoint assessment is not suitable for all skill areas. Continuous assessment, validated through a qualification, is often a much better way of measuring. What is the Government’s thinking on endpoint assessment? Is it still the preferred choice, despite evidence to the contrary in a number of occupations?
I support what my noble friend Lord Fox said about the creative industries. These are a real jewel in the crown of British industry, but they are unable to use a large part of the £75 million they contribute in the levy each year, in part because the 12-month employment does not fit the project and freelance work that is more common for them. Why cannot apprentices build credits towards their apprenticeship, as the OU allows for its degrees? Would that be worth exploring? Will the Minister also take account of the pilot project my noble friend mentioned in the creative industries?
The levy seems to have encouraged employers to brand adults embarking on MBAs and similar programmes as apprentices. Surely, that was never the intention. Others have referred to the fictional figure of 3 million apprentices, which we now know was based on back-of-a-fag-packet calculations. This focus on a meaningless number led to the chasing of quantity over quality and has not been helpful to the Government’s avowed aim of having only high-quality programmes admitted as apprenticeships.
Earlier this week we debated the Augar review, with its many recommendations for further education and work-based achievement—the Minister has been working overtime recently. We warmly welcome this focus on an essential part of education, which has, as we have heard all around the Chamber today, been neglected and undervalued for far too long. The apprenticeship levy may have been a neat idea, but it does not seem to be encouraging large employers to support small ones in recruiting apprentices. We hope that the review will lead to a drive to simplify, mindful that the country really does need young people to acquire the employment skills that will be ever more necessary for the economy if we do end up leaving the EU. Apprenticeships are not just good for the economy; they are good for individuals and the community too. We owe it to our future workforce to ensure that there are opportunities for rewarding, satisfying work.
To address funding constraints there is a recommendation for a standalone non-levy apprenticeship budget of a minimum of £1 billion, to ensure that the 98% of employers not paying the apprenticeship levy have access to high-quality apprenticeships to help them drive their productivity. People need to be given the tools and skills to help them build their career. Despite significant levels of investment, our skills system has failed to have a decisive impact on the varying socioeconomic challenges and opportunities in local areas, or to make a major impact on outcomes. Part of the problem has been the churn in Skills Ministers, of whom we have had far too many over the years. Each time, they come in with a new brilliant idea which they never have time to implement, so the ideas go into the graveyard referred to by the noble Lord, Lord Monks.
Currently, national policy does not allow levy contributions to be fully pooled locally. Funds unspent within 24 months must be returned to the Treasury, rather than being retained locally, and this hampers efforts to have a more joined-up and strategic approach to apprenticeship spending in local communities. The apprenticeship programme should be an exciting way to support people, young and old, into productive, skilled employment. I hope that the levy and the different programmes will be reviewed to ensure that this aim is delivered, to the benefit of all.
My Lords, as a newbie just completing my first year in your Lordships’ House, this feels a little like my apprenticeship, especially under the watchful eye of my noble friend Lord Stevenson and the departmental lead, my noble friend Lord Watson.
Apprenticeships can be a fantastic route into secure and meaningful work, and I am pleased that there seems to be a consensus on this across the House. As the noble Baroness, Lady Pidding, said, the aim of the scheme is laudable. However, there are simply not enough apprenticeships available, and many of those which are available are simply not of a high enough standard.
Too many apprenticeships are secured by older people rather than school leavers, as my noble friend Lord Layard mentioned earlier. The gender balance is not being achieved, and the shape of the curriculum, particularly at degree level, is obscured, as touched on by the noble Lord, Lord Norton. Also, concerns have been raised that particularly few apprenticeships have been taken up by those with disabilities, as well as by care leavers, LGBT people and those with a BME background, as noted earlier by the noble Baroness, Lady Prashar, and my noble friend Lady Osamor. Can the Minister say whether the Government have any plans to set targets to increase apprenticeships for people from often disadvantaged groups?
The wider issue of numbers is disappointing, particularly as many feel that the Government’s apprenticeship policy has focused too heavily on quantity without ensuring that those who engage in the apprenticeship scheme emerge with qualifications that not only benefit them but are recognised by employers. With the Government missing the mark on numbers of apprentices, it seems that they have little concern for apprenticeship completion or outcomes for learners, as was touched on by many noble Lords.
We must also remember that apprentices deserve a strong standard of on-the-job training, and that apprenticeships should not be used by employers simply as a way of paying workers less than the ordinary minimum wage. I am sure that many in the House will be aware of stories in the press about substandard schemes and the inquiry by the Commons Education Select Committee late last year, which found that many apprentices are not getting the high-quality training they deserve.
The Minister may be aware of the Labour shadow Education Secretary’s proposal that the Institute for Apprenticeships and Technical Education report on an annual basis to the Secretary of State on the quality outcomes of completed apprenticeships to ensure that they deliver skilled workers for employers and real jobs for apprentices at the end of their training. Have the Government made any assessment of this proposal?
I turn to the apprenticeship levy. On this side of the House, as noble Lords have heard, we support the levy and understand the value it can bring to creating more apprenticeships. However, as many noble Lords have touched upon, we have a number of concerns about the implementation of the scheme. From a business perspective, it would be welcome if the Government allowed employers more flexibility in how the levy is deployed, including allowing it to be used for pre-apprenticeship programmes. For example, the creative industries play a crucial role in creating wealth for the country, but, as they have been saying for several years, the sector is predominantly freelance and cannot offer traditional apprenticeships. Can the Minister confirm that the Government will look into this? Recognising the role of small and medium-sized employers, which do not pay the levy, I would be grateful for confirmation that the £440 million funding for apprenticeships in this regard will be protected.
Remaining on the issue of education and training, it is disappointing that, despite claiming to be committed to delivering high-quality training, the Government have cut funding for further education colleges, our main providers of adult and vocational education, while reducing entitlement for adult learners. The result, inevitably, has been diminishing numbers of courses and students. Ultimately, we need free, lifelong education in further education colleges, enabling everyone to upskill or retrain at any point in life, and also providing alternative routes into higher education—a system found in many other advanced economies but not the UK.
Our skills and training sectors have also been held back by repeated reorganisation, as my noble friend Lord Monks touched on earlier, which deprives providers, learners and employers of the consistency they need to assess quality and to deliver further and better outcomes. The Government need to stop trying to reinvent the wheel and focus on the funding issues around this. A number of noble Lords and noble friends mentioned the Augar report. Will the Minister confirm that the recommendations of the report are being considered?
Moving on to the broader issue of workplace opportunities and conditions, I suggest that noble friends across the House consider the recent Stuck at the Start report by the TUC, which identified five issues that young workers face in getting ahead at work. The report notes that they are disproportionately affected by wage stagnation, in low-paying jobs, lacking access to skills development, vulnerable to insecure work, and in need of a voice at work. Apprenticeships can be a solution to many of these problems, but there needs to be more of them, and they need to be of a high enough quality.
I will touch briefly on workers’ rights. According to the Living Wage Foundation, more than 1 million young adults lack adequate working hours and pay to make ends meet, with millions of workers facing cancelled shifts. Trade union membership can and should be promoted to offer a collective voice for young workers to overcome these issues. In unionised workplaces the worst excesses and exploitations just do not exist. This is to the benefit of everyone: management, the workforce, and trade unions. The UK could begin by guaranteeing trade union representation in the governance structures of the Institute for Apprenticeships, and look at working with the National Union of Students, which campaigns on issues relating to the education which apprentices receive.
I will conclude with the opening arguments of my noble friend Lord Young of Norwood Green. If Her Majesty’s Government can ensure that apprenticeships are well delivered, of a high enough educational standard, and run for the benefit of both the employer and apprentice, they will, as the 2012 Richard review stated, bring many benefits: to the economy, to employers and, most importantly, to individual apprentices, by providing a ladder into meaningful employment. On that I am sure the whole House can agree.
My Lords, I am very pleased to be the Minister responding to this debate and I congratulate the noble Lord, Lord Young of Norwood Green, on initiating it. He is not only well informed on the subject, he has devoted much time over many years to improving opportunities for young people. We are all grateful for his work as an apprenticeship ambassador. I notice that he is not wearing the T-shirt today, but he certainly wears the badge. I should have one on too. At the Communication Workers Union and in this Chamber, he has been tenacious in ensuring that the Government’s commitments on vocational education are not lost in the mail.
I applaud the endurance of the noble Lords, Lord Aberdare and Lord Layard, the noble Baroness, Lady Garden, and my noble friend Lord Norton of Louth, who, perhaps gluttons for punishment, are sitting for a second substantial debate in three days, having spoken on the order on Tuesday. Happily, this debate allows me to address today the issues on apprenticeships raised by them to which I was then unable to respond, although I have a lot of questions to cover. Talking of Augar and relevant to apprenticeships, it is important for the Government to reflect on the lessons of his review of post-18 education and funding. I reassure the noble Lord, Lord McNicol, that they are very much being considered.
Apprenticeships have a long and illustrious history, dating back to the craft guilds of the Middle Ages and underpinning Britain’s status as the powerhouse of the Industrial Revolution. The guilds survive to this day, and their members do great work supporting charities up and down the country. Two apprentice stonemasons are currently working on the restoration of the Elizabeth Tower high above us, and others are no doubt working on our great cathedrals. How good to hear the positive feedback of Georgie Yates from the noble Baroness, Lady Nye. Apprentices are keeping our ancient skills alive with the help of our modernising apprenticeship programme.
For too long, however, young people and those changing careers have not had access to a choice of vocational education options; nor could they always be confident in the quality of training that they received. This Government’s reforms are changing all that, and it is good to have acknowledgement from noble Lords, including the noble Baronesses, Lady Nye and Lady Osamor, that the Government are revitalising apprenticeships to raise productivity, to give employers the skills they need and to create fresh opportunities. We are creating a programme fit for the future, but all transformative change comes with challenges. We know that we need to maintain our focus on bringing new apprenticeship standards on stream, reflecting the needs of employers as the world of work evolves. As the noble Baroness, Lady Osamor, and the noble Lord, Lord McNicol, said, people from underrepresented groups need to be encouraged and supported to start apprenticeships to share in the benefits they offer. I will say more about that later.
As the noble Lord, Lord Layard, and others said, young people need good careers advice from a young age so that they are aware that apprenticeships are a genuine alternative to university. The noble Baronesses, Lady Nye and Lady Osamor, and particularly the noble Lord, Lord Monks, made the point that apprentices should not be treated as second-class citizens. They must be paid properly. I should like to hear from noble Lords of any examples where they are not. In answer to the noble Lord, Lord Monks, on whether we could confirm that there are plans to update the scheme so that it is in line with the real living wage, the current apprentice national minimum wage rate rose by 5.4% in April 2019 and is now at a record high in nominal and real terms. The apprentice national minimum wage is set at a rate that acknowledges the particular costs for employers and benefits for young people involved in the provision of apprenticeships. However, we know that most apprentices receive more than that—it is the legal minimum pay per hour—but no doubt it will be kept under review.
We must continue to spread the message among parents, teachers and employers of young people that our new high-quality apprenticeships can offer life-changing opportunities—a point made by the noble Lord, Lord Aberdare, and my noble friend Lady Pidding. In addressing the challenges, we are learning from the best international systems and listening to feedback from employers large and small.
There are successes. More than 450 apprenticeship standards are now available from levels 2 to 7 and covering occupations in all sectors. The standards approved this month underline that diversity and include broadcast and media systems engineer at level 3, to mention the creative arts, and ecologist at level 7. Apprenticeship starts were up by 10% in the first half of 2018-19 compared to the same period a year before, and high-quality standards now account for almost 60% of those starts. Over the course of next year, we will be giving all employers, not just the larger companies, control over how they pay for their apprenticeship training and assess and recruit their apprentices.
The noble Lord, Lord Young, asked about training providers. Employers will also have access to a larger pool of training providers to deliver relevant training for them. Crucially, the apprenticeship levy supports businesses large and small to access the training they need. Alongside employers’ levy funds, we will spend over £2.5 billion this year—double what was spent in 2010.
The noble Lord, Lord Layard, asked if the Government will reassess their approach to funding, providing 70% to levels 2 and 3 and 30% to levels 4 and 5, with the level band above that self-funded. Co-investment is a central principle of our apprenticeship performance, and we continue to monitor the impact of our recent changes to funding policy to reduce the burden on smaller employers. We continue to make this co-investment available for apprenticeships at all levels to give employers a choice of apprenticeships to meet their particular skills needs.
The noble Lord, Lord Young, asked whether I will comment on the struggle to meet targets for nursing apprenticeships—an important subject that I know was raised on Tuesday. Nursing apprenticeships offer a high-quality work-based route into the profession, giving more choice for career changes or for those who want to earn while they learn. Importantly, we are working closely with Health Education England to support the NHS to recruit the apprentices it needs to deliver high-quality care.
Almost half of apprenticeship starts were directly supported by levy funds in employers’ apprenticeship service accounts last year. Smaller employers benefit from a generous co-investment from government of 95% of the costs of training. The rollout of the apprenticeship service will give these employers access to new online tools to manage their funds and make informed decisions for the long-term needs of their business.
In response to a question asked by the noble Lord, Lord Young, to support this, we have extended non-levy contracts with providers. This means providing £225 million to support new starts and £395 million to fund existing apprentices at non-levy employers. We have already made additional flexibilities available for levy-paying employers; flexibilities were quite a theme during this debate. This year, we increased the cap on transfers of their funds to other businesses, charities or apprenticeship training agencies to 25% of the value of funds entering their account each year—the noble Lord, Lord Young, mentioned 20%, but it is actually 25%—enabling them to support apprenticeship starts in their supply chain or to meet local skills needs. This is investment on an unprecedented scale, and the levy is central to it. While we recognise that the move towards longer, higher-level apprenticeships presents financial challenges, we are determined to ensure the future sustainability of the programme.
The noble Lords, Lord Young and Lord Pendry, the right reverend Prelate the Bishop of Carlisle and the noble Baronesses, Lady Cohen and Lady Osamor, asked important questions about the need to promote level 2 and 3 apprenticeships, but it is important to remember that apprenticeships are jobs first and foremost. We have empowered employers to choose the apprenticeships that best suit their needs. Starts at levels 2 and 3 still make up the vast majority of the programme—82% of starts in the first half of 2018-19, which is quite interesting—creating the opportunities for progression to higher-level training.
The completion rate was another theme. The noble Lord, Lord Young, and the noble Baroness, Lady Nye, raised the Sutton Trust report showing that 32% of apprenticeships were not completed. It is important to recognise that the move to higher-quality apprenticeship standards is making apprenticeships longer. Current completion data reflects the fact that we are moving rapidly from frameworks to standards. It is a transitional phase, and we expect to see this picture improve as our reforms continue to bed in.
Several noble Lords raised important points about productivity. I turn to the reasons behind our reform programme: why are apprenticeships important and who are they for? This was asked by the noble Lord, Lord Aberdare. The labour market will change beyond recognition in the coming decades, not least with more automation—a point I raised on Tuesday. We need to meet that challenge by delivering high-quality vocational education for today’s and tomorrow’s workforce—and, yes, to satisfy employer demand—but apprenticeships are not only for young people but for people at different stages of their career.
The Government agree with Sir Philip Augar’s finding that apprenticeships have a vital contribution to make to delivering our industrial strategy priorities helping young people to develop the skills that they need for progression to the high-skilled jobs of the future. We know from other leading apprenticeship systems worldwide that high-quality training drives productivity and increases earnings. We know that a young person completing a level 3 apprenticeship in England can expect a 16% earnings boost, and a joint AAT and CEBR study found that an apprenticeship at level 5 or above can be worth an additional £150,000 over a working life. So clearly it boosts the economy and the well-being of the individual as well.
While we are focused on driving forward our reforms and increasing starts to bring about these benefits, we will not sacrifice quality for quantity—a point made strongly by the noble Lord, Lord Young of Norwood Green. Apprenticeship standards are at the centre of our drive for high-quality training. Another theme raised in this debate was the question of quality versus quantity. The noble Lord, Lord Fox, asked if we agreed that we should scrap the 3 million start target and focus on quality. We are focusing on quality. The right reverend Prelate the Bishop of Carlisle focused on the importance of quality. We remain committed to reaching 3 million apprenticeship starts, but are not worried that it may take some time to get there. What is more important is that we maintain our focus on quality to ensure that we meet the skills needs of employers and create the opportunities for young people to progress in their careers.
Before we began our apprenticeship reforms, employers told us that the quality of training was often inconsistent. We listened to their concerns and acted by putting the independent Institute for Apprenticeships and Technical Education at the service of employers to help them develop the standards they need and to act as a guarantor for the quality of training. We recognise that there have been some teething problems. Such problems were raised by the noble Lord, Lord Young, and the right reverend Prelate the Bishop of Carlisle, but I hope that I can reassure the House because we have overseen a significant acceleration in the process for the approval of standards, particularly using our so-called Faster and Better programme. As I have already mentioned, more than 450 standards are now available for employers to choose from, with more in the pipeline; they cover traditional skills, the professions and emerging industries.
We are proud of what these changes have achieved—two-thirds of apprentices were receiving good or outstanding training provision in 2017-18—but we know there is more to do. The noble Lords, Lord Aberdare and Lord Pendry, asked about Ofsted, saying that it is perhaps not best placed to regulate apprenticeships. We take Ofsted’s judgments on the quality of the training and teaching offered by apprenticeship providers seriously and we have raised the bar for entry to the register of apprenticeship training providers. We now require all providers, new and existing, to demonstrate that they have a satisfactory inspection record. We are acting in cases where training providers fall below the high standards that employers expect, and recently announced a new framework to monitor the quality of provision at higher levels, to be led by the Office for Students.
The right reverend Prelate the Bishop of Carlisle said he had heard that some standards still did not have an endpoint assessment in place, which was another theme. ESFA recently confirmed that we will require an endpoint assessment organisation to be in place for all standards. That will give employers and apprentices the confidence that endpoint assessments are ready when they need them and of the quality that is required.
Off-the-job training is also vital for apprentices to develop the knowledge, skills and behaviours they need to succeed at work, which was a point raised by my noble friend Lord Norton and the noble Lord, Lord Young. We understand that some employers find meeting the 20% minimum off-the-job training requirement challenging. We have listened to their concerns. But as a perspective, the requirement in the UK has a smaller impact on employers compared with other OECD countries; for example, in Germany around a third of an apprentice’s time is spent in off-the-job training. We recently launched new guidance to make these flexibilities clear and transparent for employers, and many are already using block release, successfully balancing their apprentices’ training with business needs.
The noble Lords, Lord Aberdare and Lord McNicol, asked whether we would introduce further flexibilities to meet employer needs. I reassure the House that we continue to keep all aspects of apprenticeship funding policy under review to make sure that we continue to deliver high-quality apprenticeship starts. Spending on apprenticeships is demand-led. We do not anticipate that all levy payers will use all the funds in their accounts. Income from the levy is also used to fund apprenticeship training in non levy-paying employers.
The enormous potential of apprenticeships to address this country’s productivity challenge cannot be realised if young people are not aware of all the options available to them. Our careers provision recognises that parity of esteem between academic and vocational routes also means giving those considering their options the best advice we can. We are working with schools and FE colleges through our apprenticeships support and knowledge programme, giving teachers the training to allow them to promote apprenticeships to their students.
My noble friends Lady Pidding and Lord Norton asked about numbers in terms of promoting apprenticeships. During National Apprenticeship Week in March there were more than 1,200 visits and events, including more than 300 events taking place to promote apprenticeships in schools. National Apprenticeship Week generated more than 25,000 visits, so it was an important push. That is an important point to make.
Our apprenticeships support and knowledge programme also provides access to a network of inspiring young apprenticeship ambassadors and apprenticeship live broadcasts to let young people speak directly to employers about the latest vacancies. The programme has reached more than three-quarters of a million young people since its launch in 2016. In addition, we have expanded the role of the Careers & Enterprise Company to give all young people access to inspiring encounters with the world of work.
I noted the comments made by the noble Lords, Lord Aberdare and Lord Monks, and my noble friend Lady Pidding. It is very important that the evidence for getting into schools has to be there. It is clear that sustained and varied contacts with mentors, coaches, employer networks, FE colleges and training providers can motivate pupils to consider a broader and more ambitious range of future education and career options.
The noble Lord, Lord Aberdare, asked what we are planning to do to meet the demand resulting from the careers strategy and the planned introduction of T-levels. A key element of T-levels is a high-quality, structured industry placement of 45 days. There is an extensive programme of support in place for their delivery, including a capacity and delivery fund for providers and the investment of £5 million in the National Apprenticeship Service.
The noble Lord, Lord Aberdare, also asked whether the Government should make funding available for work placements as they do for apprenticeships. Under the Government’s careers strategy we have targeted a £2.5 million investment fund to support employer encounters. This is in addition to the £5 million investment already mentioned.
Last year, we acted to introduce a legal requirement for schools and colleges to allow technical education and apprenticeship providers into their schools to talk to pupils about their offer, commonly known as the Baker clause. I notice that my noble friend is no longer in his place. This important matter was raised by the noble Lords, Lord Young and Lord Aberdare, the noble Baroness, Lady Nye, and my noble friends Lord Norton and Lady Pidding. This is important because we expect all schools to comply with its requirements and are intervening directly to enforce this where necessary. I have here a letter that I have written to reassure my noble friend Lord Baker that the department is doing a great deal to increase the level of compliance among schools with their duty under the Baker clause. Certain direct intervention measures have been taken; for example, Minister Milton wrote to the five largest multi-academy trusts which were found not to be complying with the duty. Local authorities, regional schools commissioners and MPs have also been written to, to remind them of the important role that they play in encouraging schools to comply with the Baker clause. The department has also delivered key messages on the aims of the Baker clause and its enforcement over the past year, including delivering a webinar for 500 schools during National Careers Week. I assure noble Lords that we will remain on the case.
As the noble Lord, Lord Monks, said, changing the perceptions of parents and employers is just as important if we are to embed a culture of apprenticeships in this country. We are taking on the outdated perception that university is the only desirable option for ambitious, motivated young people. This message is at the centre of our new marketing campaign, Fire It Up, demonstrating that apprenticeships are an aspirational choice for anyone with passion and energy. We have also launched Opportunities Through Apprenticeships, a pilot project working with four local authorities to raise the value of apprenticeships in the most disadvantaged areas.
We are committed to ensuring that no young person’s background stands in the way of starting an apprenticeship. To reassure the noble Baroness, Lady Osamor, in the first half of 2018-19, 11.1% of starts—that is, 23,700—were by people of black, Asian or minority-ethnic backgrounds. In the first half of 2018-19, 11.9% of starts were by those with a learning difficulty or disability. She raised an important point.
Various questions have arisen but I am running slightly out of time. If I am allowed, I shall spend—
I hesitate to intervene because the Minister has given a very comprehensive response. However, one important question is whether the levy funds have run out. It was raised by one or two speakers and there is quite a bit of confusion out there. If he could clarify that now, it would be appreciated. If not, there is the other route.
Yes, that is absolutely right. I reassure the noble Lord and the House that the levy funds have not run out, although they are now being spent at a higher rate. I also reassure the House that this is certainly being looked at in the context of the spending review. I can give no guarantees whatever but an eye is being kept on it, given the importance of the apprenticeship programme.
The noble Lords, Lord Layard and Lord Aberdare, who deserve answers to all the questions they raised on Tuesday, asked whether the Government would consider broadening the levy so that it funded not only apprenticeships. The levy was introduced to support the apprenticeships that we expect employers to generate, and it is important that we maintain our focus on funding high-quality training.
The noble Lords, Lord Young and Lord Fox, said that there seemed to be no transparency in the levy review and that it was perhaps rather secretive—a point also made by others. The levy review is not a formal published consultation, but the evidence that we garner from employers will help the Government to understand the issues facing employers and build our evidence base as we make decisions on the spending review.
I conclude by saying that the most recent OBR analysis suggests that the picture for productivity growth, which has been an important theme today, is increasingly positive, and apprenticeships will have a vital role to play as this trend continues. There will still be challenges along the way, but we are determined to continue our work with employers, respond to their concerns and build a programme ready for the challenges ahead.
My Lords, first, I congratulate the Minister on giving a comprehensive reply. He might not have completely covered the waterfront but I am sure that he will respond with written answers where he has not.
I take this opportunity to thank everybody who has participated in the debate. The contributions were fascinating. They were eclectic and constructively critical, and a lot of good ideas were put forward. I am conscious that I am the only thing stopping the House adjourning, so I will not attempt to cover every aspect of every contribution, but they certainly gave me food for thought in a number of ways that I had not considered concerning our approach to apprenticeships and how the levy should be used.
I do not want us to have an either/or debate on whether it is vocational training, an apprenticeship or the university route. When I talk to young people as part of the Lords outreach programme—to 16 and 17 year-olds and sometimes younger—I say, “Look, it’s not an either/or choice”. Some will start on apprenticeships and then go on to take a degree. I stress that they are making a pretty key choice and that they should choose wisely. If they are going down the university route, it is quite an expensive one. As other noble Lords have said, a benefit of apprenticeships is that apprentices can earn while they learn; for some young people, this is crucial.
I will pick out one issue that was raised a number of times, by the right reverend Prelate and others. I am not sure that the Minister covered it, and I come across it again and again: travel costs. As I looked in my pocket, I was just thinking, “I have this thing called a Freedom Pass. It is a nice little perk that I do not really need—I can afford to travel—but young people should have the benefit of one while travelling for an apprenticeship”. If you go into further education colleges and speak to students about the issues they face, travel costs come almost top of the agenda. I do not want to end on this point, but it was not quite addressed.
Once again, I thank everybody for their contributions and the way they made them. They have given the Minister a lot to think about.
House adjourned at 5.35 pm.