The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)
I congratulate my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) on securing the debate. The hour is late and we are deep into apprenticeships week, so it is right that we debate the importance of skills in his constituency. As he started with Samuel Pepys, so I shall start with Chaucer, who first mentioned apprenticeships more than 650 years ago. Although this is a novel and innovative project, it has a rich history.
I was in Lowestoft earlier this month looking at the links between the skills system and the offshore industry developing all along the East Anglian coast. It is critical that, as new industries develop, we provide the necessary skills, but in the past our skills system has perhaps not been good at responding to the needs of new industries as they emerge. I am delighted that, like other parts of the country, my hon. Friend’s constituency is benefiting from the reinvigoration of apprenticeships. There was an 18% rise in the number of apprenticeships in his constituency last year and 740 starts.
We must do more to make the system more rigorous and responsive to the needs of employers, however, and the employer ownership pilot is a critical part of that. It is about a shift towards delivering skills through the needs of employers and seeing employers as customers of vocational skills. That is the big picture for the employer ownership pilot, for which my hon. Friend has set out a crucial and innovative bid.
In total, in round 1, which I announced within the first week of being in this position, the bid comprised £80 million of training activity over two years. The AJ Woods proposal, “Energising Harwich”, is an important part of that, bringing together local employers, working together, and the Colchester Institute, as my hon. Friend said. Bringing together different players in the consortium also ensures that the whole supply chain gets the chance to participate in the skills enhancements that are supported.
Regional employers in the project will contribute some £3 million over two years, which will be supported by more than £850,000 in public sector funding. The first thing he asked about was the need for flexibility in the paper trail and the audit. This is a pilot scheme, the purpose of which is to investigate new ways of delivering skills that employers need, in exactly the way he described, in order to support wider regeneration efforts. It is therefore crucial that we keep under constant review the audit needs and the bureaucracy surrounding the bids. With public sector money it is critical to have appropriate audit. However, we have to ensure that that does not get in the way of delivering the project. I will therefore take that point away and very much keep my eye on it, as the project develops, and try to ensure that the burden is minimal, considering the necessity for good audit, given that we are putting public sector money into the project.
My hon. Friend’s second point was about match funding of 50%. Co-funding of skills provision is an important principle. The beneficiaries are the wider economy and the employer, as well as the individuals who do the training. In this case the 50% match funding was agreed locally as part of the bidding process. It was not a ratio set by the Department for Business, Innovation and Skills, although we require some co-funding. Of course I recognise the challenge for some companies, especially smaller ones, in contributing their own cash and time, and it is appropriate that the model was developed locally.
Mr Jenkin
I am listening carefully to my hon. Friend. The first two concerns might be related, because the permanent secretary in his Department, as the chief accounting officer, will need to be satisfied that match funding has been delivered. However, given the way in which time and benefits in kind are costed in a small business, we all know that it is rather unlikely that some hard and fast, actuarially justifiable figure for match funding will be available. I therefore suggest that a little flexibility or generosity of understanding of what has been committed to meet the match funding will be required, and it is the accounting officer in my hon. Friend’s Department who will have to be satisfied.
Matthew Hancock
That is an important point. In a way, it answers the question about the need for flexibility in the audit requirements and the need for the accounting officer in the Department to be content that this is an efficient and effective use of public money, as well as being confident about surviving the ferocity of the Public Accounts Committee, should any hearing take place—not that there needs to be one on this subject.
Mr Jenkin
Forgive me, but my other point was that the businesses that are providing the 50% matched funding will account for it from their own resources. Some of these small businesses have their accounts audited, but they probably do not have the sort of comprehensive audit that one would expect of a bank or a major manufacturing business. There will have to be some leeway on that and, not so much a flexibility, but a recognition that everything is being done in good faith, rather than as a means of defrauding the taxpayer and getting away with committing less than 50%.
Matthew Hancock
Yes, I recognise that that is a strong argument. We are running this pilot precisely to work out those kinds of issues, especially with respect to small businesses, with which the Government are, frankly, not particularly well equipped to deal. We do not have a good history of engaging with them, and skills is an area in which the Government as a whole need to improve.
That links to my hon. Friend’s third point, which was funding for legislative accreditations, or accreditations that are near-legislative. The skills system has a general rule that legislative accreditations should be paid for by the employer, so as not to crowd out private sector funding with public sector funding, except in the case of unemployed people who need accreditations in order to get a job and who have no employer to take on the burden.
There is a link to co-funding. We recognise that funding for accreditations can in some cases be expensive. In many cases it is necessary, and it also forms part of the co-funding of the project. The two can therefore be linked. A limited amount of resources go into skills funding, and we try to focus it on skills that are transferable and that would not otherwise be paid for by an employer. After all, there is a £40 billion to £50 billion economy in skills provision across the whole economy, and the Government budget for adult skills is £4 billion, so it is important that we do not end up trying to pay for the entirety of training across the whole economy. We simply would not be able to afford that.
Those are my responses to my hon. Friend’s specific points, but I want to give him a broader, more generic, response as well. We are going into round 2 of the employer ownership pilot. The bids for round 1 of the pilot are important, in that we can learn from them how the system can work better and in different and innovative ways. This is an innovative example of companies large and small coming together to provide for a specific need, so it is important for the Government to learn from what works and what does not, and to change what needs to be changed to make the pilot deliver.
This is called the employer ownership pilot for a reason. Each of the projects is, in itself, a pilot, and I give my hon. Friend the undertaking that I shall take a personal interest in his project. I shall ensure that the necessary understanding of the context of running a small business and the costs relating to time that he mentioned are taken into account. I will ensure that I watch his project very closely, because it has the potential to unlock a new industry in an area that, for too long, has not had the vibrancy of a new industry. It has the potential to do a lot, not only for the town but all the way up the East Anglian coast. I will take away the points that he has raised and look into them in more detail.
I congratulate AJ Woods on the work that it has done, but I also urge the company to work closely with others to bring the project to fruition. As my hon. Friend said, the area has higher unemployment than elsewhere in the region, as well as skills shortages. That tells me that, for too long, the skills system has not been working properly. Where we have unemployment alongside skills shortages, there has been a problem. It is my job to try to fix that, and the employer ownership pilot is an important element of finding the solution. I want to work hard to make it happen and to learn what the Government need to do to deliver better and innovative skills, and I shall be happy to work with my hon. Friend on that.
Question put and agreed to.