Apprenticeships: SMEs

Alan Brown Excerpts

Thursday 13th February 2020 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Davies. I thank the hon. Member for Slough (Mr Dhesi) for bringing forward the debate. Westminster Hall may not be as busy as he would like; I am sure that is not because it is Thursday and the day the House rises. It is probably because there was a debate earlier in the weak about the apprenticeship levy. Just like buses, we get two debates in one week, following National Apprenticeship Week.

The hon. Member for Slough set out the issues around the apprenticeship levy, and the challenges for small and medium enterprises, very well. I was interested to hear him say that he had his own start-up construction company, so maybe I need to have a chat with him about his experiences at some point. I was concerned to hear the numbers that he gave, including 30,000 to 40,000 current vacancies and the prediction that 75,000 places will disappear, going forward. We need to hear what the UK Government will do to rectify that.

We also heard about what was described as a downward trend in the number of apprentices since the apprenticeship levy came in. That is not replicated in Scotland, where there has been an increase in the number of apprenticeships created year on year for eight years; I will come back to that.

A big concern was raised—again, I want to hear what the Minister says about it—about what is happening with unspent levies, and the fact that there is manipulation of people’s classification within their work environment, so that companies can draw down the levy money without creating the net benefit and additional positive outcomes, which are key when accessing money from the levies. We need to hear more about the governance of that.

I was struck by the opening remarks by the hon. Member for Birmingham, Perry Barr (Mr Mahmood), who said that he did not know what he wanted to do when he left school. I was like that myself at one point. We have taken very different career paths, but I do not know what it says about the calibre of politicians, Mr Davies, when there are two of us here who did not know what we were going to do, but have somehow ended up in this place.

The hon. Gentleman highlighted a good success story with the training offered by EEF. It is fantastic that it has managed to get together, and provide, the capital funding for the college, and that the number of apprentices has increased from 300 to 1,200. That shows what can be done when employers work together and are not seen as being in competition with one another. I hope that that collaborative approach can be replicated elsewhere. The UK Government have not provided the capital funding, which is something the Minister needs to consider. Interestingly, in his closing remarks the hon. Gentleman spoke about the negative effects of globalisation, with the UK suffering by losing skills because they, and machinery, are going elsewhere and the UK market is being flooded.

I am sure we all agree that the principle of apprenticeships is a good thing. From one perspective, in recent years there has been a change in attitude. For a while the prevailing attitude was that young people went either into further education or on to the scrapheap. Clearly, further education is not for everybody. We need to retain our manufacturing base, and in terms of that, and in terms of the construction industry, apprenticeships are clearly a fantastic route into the workplace. They get people trained in the work, provide suitable qualifications and increase productivity, which is the right way to do it.

As the hon. Member for Slough said, apprenticeships should not be used to plug temporary employment gaps. They should only be used when an apprenticeship can lead to a full-time position, and apprenticeships should be matched to skills shortages. That was not always the case in the construction industry. My dad used to work for a plumbing company, so this is not a new thing; at the time it would often happen that somebody would serve their apprenticeship and once that came to an end, they were basically paid off and had to try and find a job elsewhere. Sure, they had a qualification, which was good, but they did not have the relevant work experience, which made finding a job more difficult.

We need to ensure that any apprenticeships that are created and funded lead to positive destinations. I know that the business outlook can change, so there might not be the same opportunity for somebody once they are qualified at the end of the apprenticeship; but, that being the case, no company should be able to continue to replace apprentices if it is not keeping the original ones on in permanent positions.

We have heard that since the introduction of the apprenticeship levy there has been a drop in the number of apprenticeships in England. One third of businesses reportedly view the apprenticeship levy primarily as a tax, without the actual training benefits. If that is the perception out there in the real world, it is not a good one. The British Retail Consortium has said that the levy is failing retailers, and the hospitality trade has voiced similar concerns for its sector.

It appears that the apprenticeship levy is a clumsy tool and is not doing everything that it should, or bringing in the support that was heralded. The Library briefing notes that the Centre for Vocational Education Research report confirms that the drop in apprentices is due to the levy and the funding arrangements. The research identifies the cost, complexity and inflexibility of the levy as the key issues. Indeed, the British Chambers of Commerce has reported that,

“for SMEs in particular, the new rules have added to the barriers, complexity and cost of recruiting and training staff”.

While the UK Government had a laudable target of 3 million new apprenticeships by 2020, in June 2019 they had to admit that they would miss that target. It would be good to hear from the Minister what the UK Government are doing to rectify that situation.

As I mentioned earlier, Scotland is making excellent progress to ensure that our young people have the skills they need to exploit current and future opportunities. That is despite the fact that, in introducing the apprenticeship levy, the UK Government stepped on a devolved responsibility; companies and large organisations in Scotland pay the levy, but the actual training aspect is devolved and falls within the remit of the Scottish Government, who have to work with employers to mitigate that unwelcome tax.

In so doing, the Scottish Government have had discussions with key stakeholders and have established a national retraining partnership, with the aim of helping workers and businesses to prepare for future changes in their markets by enabling the workforce to upskill and retrain where necessary. This ambitious commitment to skills builds on a number of initiatives already in place to boost employment and create positive pathways for young people. That has meant extending the £10 million flexible workforce development fund to continue to support investment in skills and training. Employers are encouraged to link with colleges to learn more about the opportunities available to them. That happens with my local college, Ayrshire College, which tailors its courses to suit the needs of local employers, helping to fill that skills gap and ensuring that people going through college courses achieve the qualification that best suits them so that they can continue successfully in the workforce.

All that work is paying dividends: the Scottish Government have now exceeded their apprenticeship target every year for eight years in a row; there are clear lessons there for the UK Government. Skills Development Scotland statistics show that the Government’s commitment to increasing apprenticeships to 30,000 by 2020 is on course to be met as well. In Scotland, apprenticeships currently on offer include 900 graduate opportunities, up from 270 in the previous year, and that figure will rise to 1,300.

Some 93% of Scotland’s young people now go on to positive destinations—the highest percentage of anywhere in the UK. That is the most important thing: access to apprenticeships, training or whatever else is about a positive end destination. We must ensure that small and medium-sized enterprises are able to gain access to that and provide those positive destinations.

We also need to consider how Government procurement should be used to enhance the development of apprenticeships. Companies building new schools in my local authority area are providing new apprenticeships through the contractual arrangements. That is a good thing: we are getting new schools, which will enhance the education of young people, while some of our local young people are getting the necessary apprenticeships out of it, which will hopefully lead to lifelong careers in the construction industry.

The UK Government also need to look at that idea when it comes to the contracts for difference auctions in the energy market. I have long argued that the bid process should have a quality assessment aspect that incentivises the use of local supply chains, which obviously includes the use of small and medium-sized enterprises. That quality assessment could go further and incentivise local supply chain and job creation, namely apprenticeships, in these smaller companies.

That is a process that is doable. Sometimes the Government argue that it cannot be done, because of the European procurement rules, but that is nonsense. As long as there is a transparent system for quality assessment, it falls within European procurement rules—and of course we are going to hear about the Brexit dividend, so maybe that is something that UK Government could do quite quickly, now that they say Brexit is done.

We, as energy bill payers, are funding the CfD mechanism; while price is important, it seems ridiculous that at the moment the decision is down to price alone when, with a very small increase in what we pay, we could create apprenticeships, create a sustainable local supply chain and grow skills. We heard earlier about a skills drain; if we did that, we would attract and grow those skills and be able to export them worldwide. I call on the Minister to take cognisance of that and have discussions with other members of our Government. I look forward to hearing what the shadow Minister and Minister have to say.

--- Later in debate ---

[Michelle Donelan]

I thank the hon. Gentleman for his comment. IfATE does evaluate the cost of putting on each apprenticeship scheme, and I regularly meet its representatives. In fact, I met them this week. I know that it is their priority for this year to look at the budgets that they set per standard.

The hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) mentioned the question of money, and whether we had originally anticipated that all businesses would use all of the fund. We do not and did not anticipate that all businesses that paid the levy would need or want to use all the money; but we have put them in the driving seat to ensure that it works for them and their individual business model. We have been pleased to see the number of businesses that have transferred some of their unspent money to support smaller businesses within their supply chain.

The apprenticeship levy means that more money is available than ever—a big point to labour. This year we have increased available investment in apprenticeships to more than £2.5 billion—double what was spent in 2010-11 in cash terms. Our reforms mean that apprentices starting apprenticeships today benefit from apprenticeships that are of higher quality. Apprentices now receive substantial and sustained training, with their apprenticeships lasting a minimum of 12 months and featuring 20% off-the-job training and an assessment at the end.

We are pleased that the new apprenticeship standards across all levels are being designed and driven with industry, because they have to work for the employers. In fact, starts on standards represented more than 63% of all starts reported in 2018-19, showing that employers are already making the switch.

Quality is key. Today we have talked a lot about quantity and access, but we did not labour the point about quality. That is a priority of the Government, and has to be a priority for the businesses that the apprentices feed.

[Alan Brown]

On quality, will the Minister address the point about ensuring that when companies take on apprentices, there is a long-term future for them? What are the Government doing to ensure that there is not a continual churn of apprentices, as companies may use them to fill short-term labour gaps?

[Michelle Donelan]

Of course, an apprenticeship is a job. We want to ensure it stands out on any CV as a gold standard, lasting that apprentice throughout their career, whichever employer they go to in the future. Longevity within companies is important. I am happy to meet the hon. Gentleman to discuss how we can better foster the retention of apprentices. Our data to date is extremely promising.

To ensure that apprentices receive a high-quality training, we have strengthened the register of apprenticeship training providers. Any provider that receives an inadequate Ofsted assessment for apprenticeships will be removed altogether from the register. We realise that we must go further to ensure that these opportunities are accessible to people from all backgrounds, whether they are starting a job or progressing in their career.

Small and medium-sized enterprises, most of which do not pay the apprenticeship levy, are integral to our economy, as was mentioned. The hon. Member for Kilmarnock and Loudoun (Alan Brown) mentioned Government procurement. That is an essential issue. In the December 2019 Conservative party manifesto, we committed to a significant number of apprenticeships in every big infrastructure project that this Government undertake. In the next year, thousands of smaller employers will transition to the apprenticeship service, giving them more control over their apprenticeship needs.

We are listening to the concerns of businesses, including SMEs, about the apprenticeship levy, and we are committed to ensuring that the apprenticeship programme continues to provide opportunities for people of all backgrounds, fulfil the needs of employers of all sizes and deliver for the economy more broadly. I thank the hon. Member for Slough for highlighting apprenticeships in this debate and encouraging further focus on SMEs as we continue to improve the apprenticeship system. I assure him that we will continue to listen to all stakeholders, including SMEs, to ensure that the apprenticeship system works for everyone.