Westminster Hall

Thursday 13th February 2020 Westminster Hall

Thursday 13 February 2020

[Philip Davies in the Chair]

Apprenticeships: SMEs

Thursday 13th February 2020 Westminster Hall

13:30

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

I beg to move,

That this House has considered apprenticeships in small and medium-sized enterprises.

It is a pleasure to serve under your chairmanship, Mr Davies.

Apprenticeships should be the perfect vehicle for meeting the challenges of social mobility, bridging the skills gap and raising productivity. With the most recent Office for National Statistics data showing that productivity is 30% higher in France and 35% higher in Germany, our widening productivity gap cannot be ignored if we are to compete successfully and obtain the supposedly easy post-Brexit trade deals promised by the Government. Having run my own small start-up construction business in Scotland, I know full well the importance of small and medium-sized enterprises investing in their people. Those that fail to do so stagnate and start to go backwards.

In previous years, employer spending on training in the UK had fallen and was low compared with other advanced economies, so there was a clear need to take action to move more employers towards investing more in the skills of their workforce. It was also vital to improve progression in apprenticeships. Only 4% of our 25-year-olds hold a level 4 or level 5 technical qualification as their highest qualification, compared with 20% in Germany, where apprenticeships are taken up by many more young people and are viewed as a high-status option for school leavers. Sadly, the Government’s rushed implementation of the apprenticeship levy resulted not in an increase in apprenticeships and opportunities for the most disadvantaged, as was hoped and very much needed, but in the exact opposite. That is devastating, especially considering the huge impact that apprenticeships can have on young people’s lives.

Just last week, I met brilliant apprentices working in my constituency. I know that their input is hugely appreciated by the many businesses in Slough. Slough is a huge business hub, with the largest singly owned trading estate in the whole of Europe and more corporate headquarters than Scotland, Wales and Northern Ireland put together, so we know a fair bit about businesses and the importance of apprenticeships. Unfortunately, far from turbo-charging our businesses and helping them further, the levy has left many of them hobbled and unable to fill vacancies, address their skills shortages or meet opportunities for expansion.

Since the introduction of the levy, apprenticeship starts in large employers—those with 250 or more employees —have fallen by 9%, but the impact on small and medium-sized enterprises has been disastrous. Apprenticeship starts have fallen by 34% in small businesses and 42% in medium-sized enterprises. Even in my constituency, despite the excellent Slough Academy, which supports growth in high-demand areas such as social care and planning in the council, overall apprenticeship starts have not reached the level they were at before 2017-18. That reflects the trend across the country. It is estimated that between 30,000 and 40,000 SME apprenticeship vacancies remain unfilled, and 75,000 apprenticeships in SMEs could be lost by the end of the year. That is 75,000 people who will be denied the opportunity to work, train and gain the confidence that comes with successfully completing qualifications.

The failure of the levy for SMEs is compounded by the fact that those “disappeared” apprenticeships were most likely to have been taken up by young people who were starting with much lower qualifications—the very group we might imagine that a revamped apprenticeship scheme should help the most. The latest Government data show that the proportion of apprenticeship starts at level 2 fell from 63% in 2011-12 to a mere 36% in 2018-19, and the proportion of people aged under 19 on an apprenticeship has fallen to a mere 25%. In the context of participation in the apprenticeship system being at its lowest level since 2010-11, with 72,400 fewer people participating in 2018-19 than in 2017-18, those figures further underline the inadequacies of the Government’s implementation of the levy. The largest reductions have been in the north-west and the north-east—areas that are in desperate need of job opportunities and economic growth.

What is behind the decline? Under the levy in England, employers are required to pay 0.5% of their payroll above £3 million per year into a so-called ring-fenced digital account to be spent on apprenticeships. That is topped up by a 10% public contribution. If levy funds are not used within two years, they expire. The system was based on the expectation that many employers would not spend all their levy funds. Those unspent funds were intended to cover most of the costs of apprenticeships for the SMEs that do not pay the levy. At the time, the Government estimated that around 50% would remain unspent and so available to non-levy payers.

Some levy payers found ways—some might say predictably—to increase their spending. Indeed, the Sutton Trust warned in November 2017 that an estimated two thirds of businesses’ apprenticeship schemes merely converted existing employees and certified existing skills, and that the levy may encourage more of that so-called conversion and rebadging as a way for large employers to reclaim their money. That looks to be what has happened.

A recent Ofsted report on employees on an Institute of Leadership and Management course stated:

“Most apprentices and their line managers do not know that they are on an apprenticeship. Too many apprentices do not develop the…knowledge, skills and behaviours needed to progress in their careers…Most apprentices do not develop substantial new knowledge and skills or build on what they already know…They just complete their management qualification.”

That is a testament to what has gone wrong. That case and others led Ofsted chief inspector Amanda Spielman to declare:

“We have seen examples where existing graduate schemes are in essence being rebadged as apprenticeships. This might meet the rules of the levy policy, but it falls well short of its spirit.”

That is why, last year, the National Audit Office expressed its concern that the use of the levy for new high-level apprenticeships was really

“public money…being used to pay for training that already existed in other forms.”

Even where higher-level qualifications are appropriate and well designed, they are expensive, so the money the Government expected to be available for SMEs to fund apprenticeships simply is not there—to the tune of around £1 billion, according to best estimates.

With the introduction of the levy came the development of new apprenticeship standards to replace existing frameworks. Those standards were designed by employer groups and are intended to establish more robustly the skills and competencies that an apprentice is expected to achieve. Again, however, the Government underestimated the cost of implementation, which has simply added to the financial pressures SMEs face in funding their apprenticeships. That has prompted calls for a proper review of what is and what is not an apprenticeship, and how the different kinds of in-work training are best targeted and delivered.

Given the reports by Ofsted, the National Audit Office and others, such a review is certainly required. Many stakeholders make the case for a more flexible approach, such as a skills levy that allows employers to invest in other forms of high-quality training. Such an approach would need extra funding from widening the levy to cover more employers, from raising contribution rates or from Government. However, the burning issue is that there is a crisis in apprenticeships for SMEs that is depriving those who most need either a solid start to their working life or a helping hand to get up and out.

As I said, disadvantaged people of all ages are disproportionately clustered at the lower levels of apprenticeships and are significantly more likely to be studying for level 2 or level 3 than for higher or degree-level apprenticeships. The levy has led not only to a dramatic fall in level 2 and level 3 apprenticeship provision, but to people from deprived communities being squeezed out of higher-level apprenticeships. In 2015-16, before the introduction of the levy, the most deprived 20% of the population accounted for 21.9% of apprenticeship starts at level 4 or higher, but by 2018-19 the figure had dropped to a mere 16.4%. That is why the Social Mobility Commission warned that

“a two-tier system…based on apprentices’ backgrounds”

may be emerging.

Almost one in five young people does not achieve five GCSEs at grades 4 to 9—A* to C in old money—or the equivalent in alternative qualifications. They will naturally face greater challenges moving from level 1 to level 2, but maths and English provision in apprenticeships—functional skills—is funded at only half the rate that would apply to any other learner. Employers want to be able to deliver and provide young people with the opportunity to succeed, but the current funding arrangements make that extremely difficult. The Minister must respond to that funding deficit, and it must be met. The Government need to acknowledge the extra challenges that those young people face, and the extra provision that they need from their employers and training providers, by increasing financial support for level 1 and 2 apprenticeships.

If we truly wish to close the skills gap and raise the floor of our nation’s skills, we must go further. There have been calls from all sides to increase the flexibility of the levy to stimulate more high-quality and accessible apprenticeships. One such change would be to allow employers to spend a portion of their levy funds on pre-apprenticeship programmes and other initiatives such as outreach programmes, with the aim of widening access to apprenticeships in under-represented groups. Further, the entitlement to attain skills at level 3 should be as accessible through the apprenticeship system as it is for young people taking college courses. The Trades Union Congress has suggested introducing a new right to progress for apprentices who have completed a level 2 apprenticeship, which would entitle them to study for a level 3 apprenticeship and trigger the necessary funding.

The lack of proper funding for some apprenticeships is, as I said, having a disastrous effect on entire sectors of our economy, such as the care sector. Many care homes are SMEs. The sector is typically low margin and low wage, and it relies on apprenticeships for the development of new and existing staff. The funding for adult care worker level 2 and level 3 apprenticeships is simply not enough to provide a quality apprenticeship programme and is leading to an over-reliance on untrained staff. It is forcing some providers out of business altogether.

I am led to believe that a monthly online apprenticeship reserve funding system is being trialled for SMEs. It has been likened to someone trying to buy a ticket for a concert, sitting at a computer, hitting refresh and hoping that this time they will get lucky. That is no way to run a programme. On top of that, the name of the apprentice is required before funding is reserved, so if an employer wants to hire an apprentice, they must do so, or at least make an offer, before funding has even been secured. That makes it easier to grant apprenticeships to existing employees instead of hiring in, as we should be looking to do. It is another barrier to those who are seeking a fresh start.

The unanimous view of SMEs is that the levy, as currently constituted, is failing—and that is to put it mildly. It is failing them, and it is failing their current and future employees. It is failing tens of thousands of the people who most need help and, by extension, the communities in which they live. The Government must listen to the broad coalition of voices—including Labour, businesses and training providers—calling for a guarantee of Government funding for SME apprenticeships, independent of the levy, through the provision of a funded pot for SMEs. I very much look forward to hearing the shadow Minister, my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy), further explain the excellent work that she and her team have undertaken in that respect. We need the Government to step up to the plate. The level of funding needs to be guaranteed to give certainty to SMEs and training providers alike, so that both parties can provide the apprenticeships that are needed and plan effectively for the future.

Education can provide equality of opportunity for everyone, at every stage of life, if there is an accessible progression pathway for everyone. It is vital that the opportunity presented by the reform of apprenticeships is used to create such a pathway. The current system prevents young people from starting their career journey, because the system fails to provide the support they need. Such a lack of support is denying SMEs opportunities to recruit the apprentices they require to help to address the productivity gap.

National Apprenticeship Week has just ended. I hope the Minister used it to listen carefully to those in the sector who have been lobbying the likes of my hon. Friend and me, and I hope that the Minister will take that advice on board to improve the system that the Government created. In this post-Brexit world, our country cannot afford to get this wrong.

13:47

[Mr Khalid Mahmood (Birmingham, Perry Barr) (Lab)]

It is always a privilege to serve under your stewardship, Mr Davies. I thank my hon. Friend the Member for Slough (Mr Dhesi) for raising this crucial debate. It is particularly important to me, as a former engineering apprentice who came through this process.

I left school with CSEs, and I walked into the careers office one day and they said, “What do you want to do?” I was not sure whether I wanted to stay on or do something else. My dad worked for BSA in Birmingham, where they made motorcycles and firearms. It was one of the biggest motorcycle manufacturers in the world at the time, but unfortunately only a few are now made, in Meriden—not as many are manufactured in the United Kingdom as we would like. I explained what my dad did as a capstan setter operator—that is probably a foreign language to most people in the Chamber, but he operated a repetitive component-manufacturing machine. They said, “Oh, right. Do you want to go into an engineering apprenticeship scheme?” and I said yes, so they offered a year of off-the-job full-time training at Garretts Green Technical College, a local college that no longer exists. Within six months of starting, we were offered interviews, and I was privileged to be offered an apprenticeship at Delta Metals, Delta Tubes as it was then, which unfortunately no longer exists, either. I made my way through various phases of that and ended up at Birmingham Polytechnic, which also no longer exists in that form and is now Birmingham City University. I learned a huge amount about engineering and afterwards I was able to set up a small manufacturing and engineering company with my friend Mr Olley, who is a great friend to this day. That allowed us to move forward. As my hon. Friend the Member for Slough said, it allowed me to move forward as an individual, perhaps above the position that I had been in, and to grow up, both physically and in terms of my skills. It was a huge opportunity.

I concur with my hon. Friend the Member for Slough about what the Government are doing at the moment with the levy, and about the onerous conditions the levy puts on the employer, as it stands. Employers are under a huge amount of pressure to try to conform to something that they cannot. They find it very difficult to come to terms with some factors, as eloquently explained by my hon. Friend.

If we are going to look at upgrading more people, particularly post Brexit, we need a far greater understanding of the engineering and manufacturing sector. Of course, the services sector is important, but we cannot rely on it alone given the downturns we have had in overall GDP when the financial sector collapsed. Germany does not suffer as much because it has a huge engineering and manufacturing sector, which acts as a boost and a steady hand. Now, with our independent status, we need to have more of that independence ourselves, to be able to move forward.

I will say a couple of things about a success story in my constituency, Mr Davies. The Engineering Employers’ Federation has a training school for engineers that takes on young people, both with and without qualifications, and provides apprenticeships that take them to the highest level. The engineering college was set up almost seven years ago by EEF using a levy from its members, above the apprenticeship levy, to provide the capital costs. I am happy to show the shadow Minister and the Minister around, should they wish to visit; a number of Ministers and others have already done so.

The initiative is a tribute to engineering and manufacturing. It started with about 300 apprentices; there are now four times that number. The majority of the commitment has come from local employers in the sector, who have put in a huge amount of the capital costs. The college still cannot get capital costs from the Government. As one would imagine, training in engineering requires practical lessons so people can operate the different machinery and equipment. Those involved have done a superb job putting the college together. I encourage the Minister to look at how we support engineering and manufacturing to move forward with the right sort of apprenticeships.

Our technical colleges used to do that, but there are now very few of them. There is only one real college, South and City College, Birmingham, that does any real manufacturing, engineering and building construction training at all. We are at a loss to get new engineers to come forward and to develop an understanding of the practices needed for people grow their skills. Two or three people from different disciplines in engineering can set up a company to create something, just as I did with my friend Mike Olley. That makes the growth; it is what makes the country grow.

We have not had that type of training for too long—since the 1980s, when Delta Metals was closed down and bought up by a company for its order book. I am not being parochial about this at all, but all our equipment was bought up. At that time, there were three manufacturers of copper tubes: IMI, Wednesbury Tube and Delta Tubes. We were sold because we were the most advanced. All of our equipment was taken to China and installed there. We were years ahead of Wednesbury Tube, which is now owned by a Swiss company. IMI still just about exists. We lost our capacity, but then there are complaints about being flooded with foreign goods. If we do not train our own people and if we do not have the capacity in engineering and manufacturing, that is what happens. We lose that market.

Following the comments made by my hon. Friend the Member for Slough, I am pleading for us to have that capacity. We want to move our people forward, and for our country to have a strong base in engineering and manufacturing in the economy. That is important because we are now independent and moving forward on our own. The shadow Minister has done some great work in this job; I commend her for the interest she has taken. I am sure she will continue to do that, particularly in engineering and manufacturing, which is a subject close to my heart. I again thank my hon. Friend the Member for Slough for raising this issue and for his great work.

13:55

[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.

14:06

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies. I thank my hon. Friend the Member for Slough (Mr Dhesi) for securing this debate. I must say it is also a pleasure to see the Minister still there in her place opposite me, to continue our discussions from Tuesday.

I will start by commenting on my hon. Friend’s speech. He started with an interesting point about the differences between Germany and England in the status of apprentices and how they are viewed. I saw that when the Education Committee went to Germany, and I was struck by how fantastic the system is there. Of course, there are structural differences that mean we cannot replicate it here in this country, but I think we can all agree that we need to keep selling the idea of apprenticeships, talking them up and explaining what a good thing they are for our country.

My hon. Friend made a very good point about the falling apprenticeship numbers in small businesses. Out of all the figures that he mentioned, the one that struck me was the figure of 34% in small businesses. Small businesses have been hit even harder than medium-sized businesses by the apprenticeship levy. He spoke passionately about apprenticeships in Slough; in fact, I was at the event with him where he talked to some of his fantastic apprentices from Slough, and I was really impressed by their passion and dedication to their training.

My hon. Friend was right to highlight the falling numbers of level 2 and level 3 apprenticeships. Very few people know at 16, or even at 18, what they want to do when they move on in life, so we need to start where people are at. If people are not ready to start at level 3 —if they have not been able to achieve as successfully as we would all like them to in school—they need that level 2 start to enable them to make progress and to fulfil their ambition and achieve social mobility. I am sure that we all agree with that.

My hon. Friend is also right to point out that a question was raised in the debate on Tuesday about the levy for businesses—I am in favour of that levy—and whether the Government expected all businesses to use it. There seem to be conflicting evidence and statements about that, and I would be interested to hear the Minister’s thoughts. Are businesses expected to use all of the levy themselves, or was the intention behind the design that a certain amount of the levy would be kept and used by SMEs? There seems to be a lack of clarity over whether it is a tax that larger businesses contribute to, which can be distributed to small businesses, or whether it is just a system to allow individual businesses to get the money back for themselves.

I am particularly pleased that my hon. Friend raised the question of maths and English and the extra support that is needed. This might not be the right debate in which to talk about that, but I hope that the Department will take it seriously, because we have created a system where the insistence on having people resit their qualification in their first year, even when they are on a two-year course, is causing many people to fail. We have to explore ways to enable everybody to succeed. I would like the Department to go away and think about why it insists that people on a two-year level 2 course should resit at the end of their first year. Why not give them that extra year to practise and develop their skills before they have to sit their exam? Can we not be a little bit more open-minded and creative in coming up with solutions to enable everyone to achieve the maths and English qualifications that we all agree they need?

I really enjoyed the speech of my hon. Friend the Member for Birmingham, Perry Barr (Mr Mahmood)—he has gone, but I will let him know. It was nice to hear him talk about how his father’s interest in engineering got him involved, and how he was not sure what he wanted to do. It was a heart-warming speech. I look forward to visiting his constituency and seeing the examples he gave. He is quite right: we need to invest in engineering and manufacturing skills, and support the making of British goods here in Britain. It has been a source of frustration to me for a long time that we continue to import more and more when we could grow our own, and develop and make things in this country, giving people high-skilled jobs and helping to grow our economy. I hope the Minister will comment on how the apprenticeship levy can do that.

I do not usually comment on the remarks of Scottish National party spokespeople, but I really liked the interesting point that the hon. Member for Kilmarnock and Loudoun (Alan Brown) made about the retention of apprentices, which I had not considered before. If we fund apprenticeships, as a Government or through the levy, should we not expect businesses that have had access to those public funds to retain the apprentices? That is an interesting idea to explore, and I look forward to the Minister’s comments on that.

I think we all agree about the importance of apprenticeships, not only for the productivity of our country but for individuals and social mobility. We all agree that SMEs are really valuable to our economy. In fact, during the debate on Tuesday, one Member pointed out that in Northern Ireland, where their constituency is, there are few large, levy-paying businesses, so it is nearly all SMEs. I have not yet had the chance to crunch the data on this, so it will be interesting to see whether the Department has analysed the areas of the country where there are fewer levy-playing businesses, and looked at whether we have therefore created coldspots and areas in which people lack opportunities to access apprenticeships.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

One industry prevalent in small business is hair and beauty. Routes into hair and beauty and other apprenticeships include the level 3 qualification, which the Government just cut thousands of, and T-levels. T-Levels will be the major route into higher-level apprenticeships, but they are not yet ready, and in the hair and beauty industry they will not be ready for years. The pathway to these apprenticeships needs to be solid, small businesses need to know what is happening and the funding needs to come through. Otherwise, we will see an even further drop in apprenticeships, on top of the challenges of the apprenticeship levy.

[Emma Hardy]

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

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

On Tuesday, the Minister said:

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

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

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

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

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

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

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

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

and pointed out that that would benefit smaller employers by

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

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

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

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

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

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

The Minister said on Tuesday that she is

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

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

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

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

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

14:20

[The Parliamentary Under-Secretary of State for Education (Michelle Donelan)]

I congratulate the hon. Member for Slough (Mr Dhesi) on securing the debate. I warmly welcome his keen interest in apprenticeships and am particularly grateful for his work to celebrate local apprenticeships last week, which, as he pointed out, was National Apprenticeship Week. I believe that he visited a number of his constituents, including those completing apprenticeships in companies such as KFC. As he kindly highlighted, last week was a fantastic opportunity to bring the whole apprenticeship community together and shine a spotlight on how amazing apprenticeships are for social mobility, for our economy and for moving people forward.

It is fantastic that more than 8,000 people in Slough alone have started an apprenticeship since 2010, and that is over a range of areas, ages and sectors within Slough’s community. The hon. Gentleman may also be aware of a Slough-based company called Resource Productions, an SME that does an excellent job working in the film industry, with clients such as Disney and Pixar. Dominique Unsworth is its CEO and also a Government SME apprenticeship ambassador. Her work is vital in order to connect more SMEs with apprenticeships. She has recognised just how important it is to employ apprentices and spread that message. I am pleased to note that, at Ms Unsworth’s request, the National Apprenticeship Service is hosting an event with Slough Aspire on 31 March. If I am still in post, I shall try to come along, and I am sure that the hon. Gentleman will also attend.

As was pointed out, this is the second debate on apprenticeships this week. The first focused on the effectiveness of the apprenticeship levy. We should not forget that the apprenticeship levy funds apprenticeships for employers of all sizes, including SMEs that do not pay the levy. The Government recognise the need to ensure that our programme delivers for employers of all sizes—I know that that point was laboured by the hon. Gentleman and by other hon. Members. For that reason, we are making changes to benefit small employers, so that they can get the most out of apprenticeships. In fact, last month, we began to transition small employers that do not pay the levy on to the digital programme, which was mentioned. I will promise to meet the hon. Member for Slough so that we can look at the portal together to address some of the issues that he raised.

We are providing additional funding that will allow up to 15,000 more starts in the first three months of this year with smaller employers. That marks the start of the transition of smaller employers to using the apprenticeship service, allowing us time to listen to their feedback and time for smaller employers to become more familiar with our approach. We have already seen them take advantage of that in relation to early years education, pharmacy work and so on. The change will give employers a real choice of high-quality training provision and the opportunity to become more engaged in the process, as not having that has been one of the criticisms to date. Smaller employers will have access to a larger pool of training providers to deliver training that meets their needs and supports growth in their sector. To ensure that the transition is as simple and easy as possible for employers, we have worked with SMEs to test the service and have engaged with a range of employers and providers, acting on their feedback and instigating improvements.

We recognise that SMEs provide many people with their first step on to the career ladder, and we want to ensure that neither younger people nor smaller employers are denied the opportunity to participate in apprenticeship schemes. That is precisely why we provide £1,000 to both employers and training providers if they take on somebody aged 16 to 18. We know that younger people can face additional challenges in starting and applying for apprenticeship schemes. Social mobility is something that I am particularly focused on ensuring that we do better on, as is driving up the number of young apprentices on schemes, which the hon. Gentleman mentioned. We also pay 100% of the cost of training for the smallest employers—those with fewer than 50 employees—for that age group. Last month, we extended the use of levy transfers to cover the full cost of training for 16 to 18-year-olds and for receiving employers with fewer than 50 employees, helping more small employers to support apprenticeship starts.

We are proud to have launched, in January, the third phase of our Fire It Up campaign, which is aimed at changing the way people think about apprenticeships by demonstrating that they are an aspirational choice for anyone with passion and energy, and that they can enable them to go so very far.

We are ensuring that the message of apprenticeships is being heard in schools. That was touched on in the debate earlier this week. The National Apprenticeship Service has developed Amazing Apprenticeships—a website and resource portal for schools and teachers. Meanwhile, our Apprenticeship Support and Knowledge project is ensuring that teachers can promote apprenticeships to their students and have information available.

Just like the hon. Gentleman, we want more people to be able to benefit from the positive changes that we have made to apprenticeships, and across sectors—a point raised by the hon. Member for Birmingham, Perry Barr (Mr Mahmood). I want to let him know that 200 of the 510 standards are for construction, engineering and manufacturing, and they have been designed in conjunction with businesses. That pool is growing all the time.

[Mr Khalid Mahmood]

I appreciate what the Minister has said, but the central question is this. When these apprenticeship training schools or colleges are set up, the capital support that they need for the equipment is more important. Will she look at that?

[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.

14:31

[Mr Dhesi]

It has been a pleasure to serve under your chairmanship, Mr Davies, and to engage in this important debate. I am particularly thankful to my hon. Friend the Member for Birmingham, Perry Barr (Mr Mahmood). My experience running an SME pales into insignificance compared with his considerable experience, not only as an apprentice, but in the engineering industry. Therefore, the Minister and the Department should listen to his points, which he made with great passion, to inform effective changes accordingly.

I also thank the Scottish National party spokesman. He passionately explained the long-term future for apprentices and highlighted the problem of a competitive gap appearing, not only between us and our European and global partners, but between England and Scotland, because of the different routes we have taken.

I thank the shadow Minister. I know she is passionate about this subject and has been since long before she came to this place, given her background in education. She spoke about the need to ring-fence the sizeable £1.5 billion budget and the request to host the WorldSkills championship. The Minister did not respond to that last point, but I hope we can give the shadow Minister some good news soon.

I thank the Minister for her kind words and compliments about not only my Slough constituency, but the work of Resource Productions and my good friend Dominique Unsworth, whom I know is an excellent ambassador. The Minister also highlighted the plethora of apprentices in Slough. As I explained earlier, the explanation is that Slough is a huge business hub. It is the most productive town or city per capita in the entire country. I could wax lyrical about my constituency all day, but I can see you are yawning, Mr Davies, so I shall move swiftly on. I look forward to joining the Minister on 31 March. I thank her for her interest. I also look forward to meeting her, as she kindly suggested, and I hope the shadow Minister will accompany me to that meeting, so that we may look further into improving the current digital offer for apprentices and SMEs.

Overall, I am disappointed that, despite the disastrous figures we face, the Government are not looking to make a sea change in their approach to apprenticeships. I hope the Minister, with due consultation with others, will remove those restrictions infringing upon SMEs’ operations and introduce the necessary flexibility and funding. If we do not do that, we shall fail to address not only social mobility, but the huge productivity gap, and we shall let down that broad coalition of voices from industry, business, apprentices and political parties. It is important for the Minister to consider that; not to do so would be to let down not only those businesses but, more importantly, those young people, and thereby our country.

I thank you, again, Mr Davies, for chairing this debate, and I thank all hon. Members for their incredible contributions.

Question put and agreed to.

Resolved,

That this House has considered apprenticeships in small and medium-sized enterprises.

14:36

Sitting suspended.

Office Block Conversions: Essex

Thursday 13th February 2020 Westminster Hall

14:37

[Robert Halfon (Harlow) (Con)]

I beg to move,

That this House has considered permitted development rights for office block conversions in Essex.

It is a pleasure to serve under your chairmanship, Sir Graham. I wish to talk about a pressing and ongoing issue in my constituency of Harlow that can be described only as ghetto building, human warehousing and social cleansing, under the expanded permitted development rights legislation.

Let me be clear: I believe in more housing. We face a crisis in this country, with 1.2 million people on the waiting list for social housing, and more than 682,000 people living in overcrowded accommodation. Yet studies by the University of Sheffield show that 94% of land in the UK is not built on. Housing consultant Colin Wiles even suggested that English golf courses occupy more land than homes.

I am pleased that the Government are accelerating our house building programme, with 1.3 million homes delivered since 2010. My constituency of Harlow is set to benefit from 16,500 new homes by 2033 from the Harlow and Gilston garden town alone. I agree in principle with the motivation behind expanded permitted development rights legislation, to make it easier for new housing to be built, and when the legislation came to the House of Commons, no party opposed it. I have even seen how permitted development rights can be a success. Edinburgh House, formerly home to Pearson publishers, has been converted by Land Charter Homes into quality apartments that are close to the station, with good transport links.

However, as the BBC “Panorama” documentary detailed last week, permitted development rights have been an unmitigated disaster for our town. The reasons for that are threefold. First, Harlow has become a prime location for such developments, with 12 former office block conversions, including Terminus House, Templefields and Redstone House. Harlow’s proximity to London and comparatively lower property prices make it a preferred location for developers; but, of course, the legislation does not require the builds to comply with local planning regulations. As such, around 1,100 units have been created in Harlow—a town of around 40,000 homes—none of which has been tested against the requirements of the local plan.

Secondly, and perhaps most importantly, the creation en masse of new, relatively inexpensive accommodation in Harlow has made such properties an attractive option for councils outside Harlow looking to house individuals who have presented as homeless in their area. That has allowed predominantly London councils to socially cleanse their boroughs and to place vulnerable individuals, often with additional needs, into those converted properties as temporary accommodation. A freedom of information request that I made in July 2019 found that 32 Labour councils have made out-of-area placements.

In Harlow, we have had an influx, receiving placements from Barking and Dagenham, Enfield and Harrow, to name just a few. The placing authority does not have to notify Harlow Council, or offer any additional funding to cope with the increased demand on local services. The situation has been exacerbated by the fact that Harlow Council did not take up the full capacity of Terminus House when it was initially offered by Caridon Property to house Harlow residents in need of accommodation. We might well ask whether Harlow Council, had it accepted that offer, could have worked with landlords to ensure that the housing was of good quality. However, Caridon offered the remaining units to other authorities for rental, causing that increase in placements of individuals from other areas.

Thirdly, the impact of the influx on Harlow has been catastrophic. The rabbit-hutch housing developments have been a hive of criminal activity and drug abuse, placing huge pressures on our local police, A&E and social services. The “Panorama” investigation found that Essex police have been called to one site—Templefields—nearly 600 times in three years, and of course Harlow taxpayers bear the brunt of all such problems.

Our local schools are under immense pressure. One primary school, Tany’s Dell, looks after pupils from 20 families currently living in nearby temporary accommodation at Templefields House. The teachers have described issues relating to safeguarding, poor attendance, anxiety and even exhaustion from the 30-minute walk to school, undertaken by children some of whom are as young as just three years old. There are no buses or any proper public transport links around that building.

I believe passionately that it is my duty in Parliament to address social injustice. I am not blaming the individuals and families, who are taken away from their usual support networks of friends and family.

[Sir John Hayes (South Holland and The Deepings) (Con)]

My right hon. Friend has always been a champion of social justice and, not for the first time, does this House a great service in bringing to our attention matters that are of both local import and national consequence. Does he agree that the report recently published by the commission that the Government tasked with looking at building beautiful places is highly pertinent to the debate? If we build homes in which people want to live, in places that they can feel proud of, social solidarity will be the result. I hope that the Government will shortly respond to those recommendations.

[Robert Halfon]

I thank my right hon. Friend. He is right: beauty is everything in building. When I initially saw the legislation on converting office blocks, I thought that it would be a good idea. I never imagined that loopholes in the legislation would allow the building of literal ghettos—of tiny rooms, as I will describe later—without any thought to beauty, aesthetics or the local environment for the poor residents who have to live in such places.

Often such properties are developed in areas never intended for residential dwelling. They are placed in isolated employment areas of the town with poor public transport routes, as I have just highlighted, making it difficult for residents to integrate socially and economically into the community. That is why it is so important that councils play at least some role in determining where such conversions take place. Individuals arrive, unfamiliar with social and counselling services and schools, and can feel unsupported in the new area. I am not against those vulnerable families—we have a duty to help every vulnerable family—but I have a duty to my constituents, and when families who have nothing to do with Harlow are brought to the town, they are separated from their own networks and support.

If families are not deemed vulnerable at the time of placement, it is easy for their new difficult living situation to affect that. Regularly in my constituency surgeries, and when I am out and about across our town of Harlow, I meet families living in such ghettos and hear moving stories. One lady, a recovering drug addict, was placed on a corridor where other residents were taking drugs right in front of her. That lady was sent from another borough. She had no links to Harlow, and was trying to get her life back on track, doing everything possible to get off drugs. She was a single parent, living in a room hardly bigger than the table behind me, and was now surrounded by drug dealers and people taking crack and other kinds of drugs. I ask the Minister how we can expect that lady, and so many others like her, to get their lives back on track living in such an unhealthy, unpalatable and unacceptable environment.

Ongoing support following placement is necessary if families are to thrive in their new area. Does the Minister not agree that in order to provide support, councils must first be notified of their placement and be given the funding to provide the care that vulnerable families need through local services? Permitted development rights were never meant to be about building ghettos. Nor were they about living space, and letting councils ship people off like cattle to the east of England and to Harlow.

I made this clear at the beginning of my speech: I know we need more housing, and I recognise that permitted development rights have made an important contribution in some parts of the country, but there have to be rules, particularly about quality, and councils must have some say in how the office blocks are converted. As one resident told me, the buildings were built for paper, not people, which sums it up exactly. If we truly want to help people, homes must be quality, safe spaces, not tiny box rooms where a single parent and a little baby live in a space where one can barely put one’s arms out without touching the walls and where the so-called kitchen is a yard away from the bed. They should not be housed in the same corridor as drug users and violent individuals.

In January, the Secretary of State confirmed to me in the Chamber that the review into permitted development rights

“will be taking forward any reforms necessary”.

He recognised that,

“All properties built in this country need to be safe.”—[Official Report, 20 January 2020; Vol. 670, c. 34.]

BBC’s “Panorama” documented cases where councils house individuals, couples and families in single rooms. Kitchens and toilets are metres apart. That is not a proper living environment. Shelter estimates that poor housing costs the NHS £1.4 billion a year. I ask the Minister again: in the Department’s review into permitted development rights, will he look beyond the numbers and consider the quality of housing being built? Will he work with colleagues to reform the legislation and make it a requirement in law that all properties, for temporary accommodation or not, meet minimum national space standards?

According to the House of Commons Library, local authorities have had powers to restrict permitted development rights under an article 4 direction at least since the Town and Country Planning (General Permitted Development) Order 1995. Changes made in 2010 mean it is now for local planning authorities

“to confirm all Article 4 directions”,

making it easier for councils to invoke restrictions on permitted development rights. In Harlow, the council should have acted earlier. Only in March last year did it seek an article 4 direction in certain areas of the town.

The issue has been ongoing for years, but there is another factor. The Library confirmed to me that,

“residential premises created from office conversions under permitted development which add to an authority’s council tax base... count for the purpose of the New Homes Bonus payments”

received by local councils. So is there therefore very little financial incentive to take action to restrict the developments? That is particularly the case in Harlow, where the new homes bonus created a grant back to the council worth more than £1 million in 2018-19. With more than half of the new properties last year being office conversions, Harlow Council should do more to use the money to help individuals and provide security around the town.

Furthermore, sections 76 to 93 of the Anti-social Behaviour, Crime and Policing Act 2014 grant powers to the council to seek a closure order for a property on the grounds of either disorderly, offensive or criminal behaviour; serious nuisance to the public; or disorder near the premises. To be fair, the order is not a permanent solution. It lasts only six months, and other local authority closure powers are substantially limited in their scope, for example, to deal with environmental concerns.

Councils need stronger powers to take meaningful action against permitted development right conversions where they create issues for our town. Having said that, councils should do more to use the powers that are available to them. I believe ghettos such as Terminus House and Templefields should be closed down once and for all. Will the Minister ensure that the review provides stronger solutions to allow councils to deal with the issues that permitted development rights have created and that exist now?

The current state of permitted development rights raises numerous issues. First, councils take advantage of cheap converted office blocks to ship people off to the east, where they believe there is living space. Individuals with additional needs, who require support from their local authority, are being dumped in shoddy, rabbit-hutch housing, with the receiving authority having to pick up the pieces. There is no sense of a duty of care for the individuals. There is no notification and no extra funding granted to the receiving authority to provide resources, and certain parts of the country are disproportionately affected. In areas such as Harlow, the pressure on the taxpayer, local services and schools is enormous.

Vulnerable individuals are housed together in isolated areas, away from their support networks, creating a breeding ground for criminal and antisocial behaviour. Those trying to get their lives back on track must do battle with an unhealthy living environment every day. I urge the Minister and the Secretary of State to spend 30 minutes watching the BBC’s “Panorama” programme, which makes an unanswerable case for the need for affordable and more quality housing.

The permitted development rights legislation has been disastrous in certain circumstances. The people of Harlow have been let down by councils and by flaws in the legislation that seems to support quantity over quality housing. They have been let down by the planning guidelines, which should give more powers to stop unsuitable accommodation in certain areas, and they have been let down by the fact that when the vulnerable families come through, there is no extra support or funding. I urge the Government and the Minister to take urgent action. In the 21st century—in 2020—we must put a stop to London boroughs’ social cleansing and the building of ghettos. We must put a stop to it all. We must give local authorities stronger powers to shut down human warehouses and ensure our councils have a real say on office block conversions.

15:17

[Rachel Hopkins (Luton South) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Graham. I congratulate the right hon. Member for Harlow (Robert Halfon) on securing such an important debate. As in his constituency, permitted development rights have allowed the creation of poor quality homes in my constituency of Luton South in Bedfordshire—it is also, technically, in the east.

We have a severe housing crisis. Millions of people live in unaffordable, insecure or unsuitable homes. We have young people struggling to get on the housing ladder, renters stuck in unfit flats and families stuck on council house waiting lists. The Government are failing to get to grips with the symptoms of the crisis. They have not built enough council homes or homes that are actually affordable for local people. In the past decade in Luton, the council house waiting list has grown by 106%, but the overall number of council houses has reduced by 6% as a result of right to buy.

Some might see the converting of redundant office buildings to residential buildings as an attractive way to begin addressing the demand for housing. In some cases, it might make sense to regenerate vacant office space. However, the Government have completely misjudged the situation by incentivising the conversions through permitted development rights. Doing so has removed local authority oversight and simply provided developers with the opportunity to bypass thorough planning processes.

As PDR schemes are not bound by section 106 obligations, they are not required to meet quality guidelines, contribute to the provision of education or community benefits, or convert a certain percentage of flats into affordable homes. The Local Government Association estimates that in the past three years more than 10,000 affordable homes have been lost as a result of the rules. Research by the Royal Institution of Chartered Surveyors shows that although the quality of office-to-residential schemes ranged from high to extremely poor, overall PDR schemes were “significantly worse” than homes that had been through the full planning process. Only 30% of homes built under the rules meet minimum space standards.

PDR schemes are amplifying the housing crisis and undermining the processes that ensure that people live in safe and suitable homes. Many local authorities are struggling to find temporary accommodation to meet their housing obligations and so are pushed into using converted office blocks to house vulnerable people and families with children. That is the only option that many authorities have, but the Government must recognise that it is an unsafe practice, because many who are living in temporary accommodation come from a variety of sensitive circumstances. To be frank, vulnerable people with a variety of complex needs are being homed in tiny flats that do not meet quality regulations and lack the necessary amenities. That is a recipe for disaster; it damages mental wellbeing and is conducive to antisocial behaviour. The right hon. Member for Harlow put that point so well.

It seems to me that the Government have been asleep at the wheel. They stressed the importance of the

“right homes in the right places”

in their 2017 housing White Paper, but in Luton the wrong homes are being created in the wrong places. For example, a number of PDR converted office buildings, such as Unity House, house families with children and are within an air quality management area along our four-lane inner ring road. That is allowed to happen only because PDR schemes bypass planning permission air quality regulations.

Another unwanted side effect of PDR is the harm that converted buildings do in relation to the regeneration and re-planning of town centres. Often the buildings that are converted are historic post-war developments with limited townscape and visual appeal that would have been strategic sites for redevelopment. In Luton we face that challenge in managing the town centre properly, given the spate of conversions in key locations, so when the Government proudly profess that 42,000 homes have been built as a result of the schemes, we have to question whether they understand that they are allowing the creation of poor provision.

Our constituents should not have to live like this. Local authorities are only working within the parameters set by the Government, and they have limited powers to act—usually once issues have arisen. Luton Council has had to implement an article 4 direction to remove the rights in certain areas. However, unfortunately for many of my constituents, the terrible housing has already been created.

We can never allow the desperate need for housing to be met at the expense of the quality of housing. We all deserve a home that supports our health and wellbeing, where we have enough space to live and where we feel safe. The Government must end the housing crisis by building homes that are safe, affordable and fuel-efficient and, crucially, that meet building regulations. I invite the Minister, again, to Luton South to see for himself.

[Sir Graham Brady (in the Chair)]

I have been quite generous about the scope of the debate, given that there is plenty of time available. Before I call the shadow Minister to respond, I ask her to try to relate her remarks to Essex in particular—and the Minister likewise.

15:22

[Sarah Jones (Croydon Central) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Graham. I will stick to the subject. I congratulate the right hon. Member for Harlow (Robert Halfon) on securing the debate. It is timely, given the “Panorama” programme that we saw a couple of weeks ago. I hope that if he has not already done so, the Minister will watch it. It was very powerful. I also congratulate my hon. Friend the Member for Luton South (Rachel Hopkins) on her contribution pointing out some of the problems with permitted development, not least of which is air quality. That had not yet been discussed, and it was interesting.

Permitted development is a symptom of the way the housing system has broken. The principle, as the right hon. Member for Harlow said, of making it easier to build housing, is clear, but the consequences since its introduction are obvious. It has not increased affordable housing, which is what we would hope for. The ad hoc nature of the development can be seen in Harlow, Luton and Croydon, and in Croydon it has meant overdevelopment of office space. There is now a gap, because businesses that want to come into the area cannot, as everything has been converted through permitted development. Also, a lot of quite unsavoury people are making quite a lot of money. That was obvious in the “Panorama” programme about permitted development in Harlow.

I think that permitted development was introduced to allow developers to bypass the normal planning process. It gets people off the hook in spatial terms, and with respect to the need for windows in flats, and it makes it possible for unsanitary, unsafe and unpleasant conditions to develop. Plenty of people have written about the issues and brought them to our attention, and many of the examples used are from the right hon. Gentleman’s constituency. Vicky Spratt has done a lot of work on the matter in the i newspaper, and has raised cases, including one in my constituency, where leaseholders have bought such properties through Help to Buy. So it is not only the planning situation that has made what we are talking about possible; the Government are also funding it through Help to Buy.

The Shelter report that came out of the “Panorama” programme was helpful and showed the scale of the problem. Inside Housing has been good at highlighting the issue, and has talked about the warehousing of poverty by the housing system—something that the right hon. Gentleman referred to. A good piece of work was done by Tom Copley in City Hall in London showing that only 0.4% of the new homes built under permitted development in London are affordable. More than half of the permitted development homes in London are smaller than the minimum space standard that one would hope to see.

Last year 12,000 homes were created under permitted development, and there were 5,000 in London. There were more than 600 in my borough of Croydon, but I will not talk too much about that. The Grenfell Tower fire showed how flawed the building regime system is. Permitted development is one part of the system that has created the problems described so well by the right hon. Member for Harlow. In total, 54,000 new housing units have been created by conversion from offices since 2016. However, in research by the Local Government Association it is estimated that more than 10,000 affordable homes would have been created under the normal planning process, but have been lost, because they were not created under permitted development. That is why Labour has committed to scrapping permitted development—not because we do not think offices should ever be converted to residential use, or because we do not want more homes to be built, but because we see the consequences of permitted development, which are grave.

The Royal Institution of Chartered Surveyors found that permitted development has

“allowed extremely poor-quality housing to be developed”,

with only 30% of homes built through permitted development meeting national space standards. As the right hon. Member for Harlow pointed out, in recent weeks Shelter and “Panorama” have exposed the impact of a kind of slum housing on vulnerable people who are placed in his constituency and elsewhere. The investigation revealed how different elements of the housing crisis are layered together to create a truly awful situation. Councils that already suffer the impact of record low investment in social housing under the present Government simply do not have the supply of genuinely affordable council housing. There are more than 1 million people on council waiting lists, and multiple failures in the private rented sector—whether it is the growing number of no-fault evictions, spiralling rents or poor quality accommodation —mean that more and more people are left with nowhere to go but temporary accommodation. Councils are left to try to find somewhere to house them.

Shelter’s investigation revealed that 90% of the £1.1 billion spent by councils on temporary accommodation went to private landlords and letting agents. The research revealed how investors were purchasing office blocks, which they would then convert to temporary accommodation without local authority planning permission, before charging them out back to councils at huge expense, despite the sub-par standards. In one case that was highlighted by Shelter, a temporary accommodation provider bought a permitted development block for £8 million and leased it to the council for £1 million a year for three years, before selling it to the same council for £13 million, making a 50% profit, plus millions in rent.

I will not talk in much detail about Croydon, because we are mostly discussing Essex, but it is the epicentre: it has more permitted development units than any other part of the country. I have dealt with many cases of substandard accommodation, including Delta Point, Canterbury House and Green Dragon House. Those have been converted, and there have been all kinds of issues. One instance speaks to the point made by the right hon. Gentleman about the buildings being built for paper, not people: we had a block with a boiler system that was intended for people using the office space in the day. It was nowhere near good enough for the hundreds of people living in the block, so it failed and people went weeks without water and heating. We had to step in to try to solve that problem.

Those of us here today—we are quality, rather than quantity—are saying that the system is flawed. The Secretary of State has accepted that it is flawed. The Royal Institute of British Architects has called for an end to the scandal of families living in homes that are smaller than budget hotel rooms. I hope the Secretary of State is having some second thoughts. The consultation was originally introduced to look at expanding permitted development, but he has made remarks in the Chamber and elsewhere that suggest he understands that there are problems that need to be fixed. The nature of retail and office space is changing, and traditional high streets are changing, but converting everything into residential at great speed with no quality is not the way to help our high streets.

From our perspective, permitted development as it stands is better off scrapped, but if we are not going to go that far, I have some questions for the Minister. Does he accept that this is a significant problem, which is affecting a lot of people? If so, what does he propose to do about it? When can we expect the result of the consultation, and how does he see permitted development fitting into the solution to the huge problems of the housing crisis, examples of which we have heard about today from Harlow, Luton and Croydon?

15:31

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Luke Hall)]

It is a pleasure to serve under your chairmanship, Sir Graham. I thank my right hon. Friend the Member for Harlow (Robert Halfon) for calling this debate. It is an issue that he is extremely passionate about; he has raised it in the House many times. He is a champion on this issue, regularly lobbying Ministers to ensure that he gets his point across. He has done so again, extremely powerfully, today. I thank him for his contribution.

The hon. Member for Luton South (Rachel Hopkins) made a powerful speech. She has invited me to come to her constituency twice in the last week. I spent part of my youth growing up there, and it would be a pleasure to come back to speak to her and to see the issues at first hand.

I take on board some of the points raised by the shadow spokesperson, the hon. Member for Croydon Central (Sarah Jones). The homelessness advice and support team have not heard some of the specific issues that she has raised about developments in her constituency, so I will ensure that that information is taken away, and that the team gets in touch with her local authority following the debate.

Nobody here today is in any doubt that the root of the issue is the need for new homes. We want housing for all those who aspire to have a home, whether a home of their own or a home to rent. A key part of achieving our ambition is to reduce homelessness, end rough sleeping and give people the homes that they need. Building the homes that this country needs, closing the opportunity gap and helping millions of young people into homes is something we want to focus on.

Together, we have delivered more than 1.5 million new homes since 2010. Of those, more than 465,000 are affordable homes, which includes 325,000 homes for affordable rent and 140,000 for social rent. We delivered 240,000 additional homes in the past year, which was the highest number in any year but one in more than 30 years. To build on that success, we have committed to deliver 300,000 new homes every year by the mid-2020s, which we will do by committing at least £44 billion of funding over five years.

We are reviewing the affordable homes programme, providing more than £9 billion up to March 2022, which will deliver a quarter of a million new affordable homes of a wide range of tenures, including shared ownership and social rent. The Government are also lifting the housing borrowing cap for councils, so that local authorities can deliver a new generation of council housing. In addition, to help people to buy homes where they already live, last week we launched a consultation on First Homes. These are discounted homes for local people and key workers, and the policy has the potential to save them tens of thousands of pounds and help them take their first steps on the property ladder.

To support the delivery of new housing, there is a duty on local planning authorities to have in place local plans, which need to allocate sufficient land in our towns and villages for new homes, and to have policies that encourage appropriate development. Some 302 local planning authorities have an adopted local plan— 89% of all local authorities—and 145 have plans adopted within the past five years. In the coming months, we shall set out an ambitious planning White Paper, which will continue the simplification of the planning system for the public and for small builders and make more land available for housing.

This debate links to the issue of homelessness, including in Harlow. Some important points have been made about homeless households and the impact that poor housing quality has on families, individuals and the community. We need to address that, whether in Harlow or any other town in our country. In 2020, it is unacceptable that anybody should have to sleep rough, especially at a time when we are enduring sub-zero temperatures. That is why we have brought forward our manifesto commitment to end rough sleeping by the end of this Parliament, rather than 2027. We want people to feel safe and secure in their own home.

On temporary accommodation, we always want to see homeless individuals and families moved into settled accommodation as soon as possible and on a permanent basis. The action that we are taking to increase the delivery of housing supports that. However, we do of course recognise the important role that temporary accommodation can play in the meantime, in ensuring that no family is without a roof over their head. We understand that there has been an increase in the number of households in TA in recent years. Although the overall numbers have been rising, the number of households with children has remained relatively stable since the introduction of the Homelessness Reduction Act 2017—a groundbreaking piece of legislation. The increase in TA numbers since the Act took effect has been almost entirely driven by single households receiving help that was previously unavailable to them.

For the first time, the Act requires local authorities and public servants and the third sector to work together to actively prevent and relieve homelessness for people who are at risk, irrespective of whether they are a family or a single person. That means that more single people, who might otherwise have been on the streets, are getting the help that they need.

To help local authorities deliver their new duties under the HRA, we have created a specialist team of homelessness advice and support team advisers with expertise in the sector, to challenge and support local authorities in tackling the issue in their area. At the same time as supporting councils to deliver a transformation in their local homelessness services, the team has helped local authorities to deliver a 39% reduction in the number of families housed in B&B accommodation for longer than six weeks.

I absolutely acknowledge that my right hon. Friend the Member for Harlow has raised particular developments in his constituency. However, we recognise the importance of providing self-contained homes for families in need, and permitted development rights can play a role in enabling that. It is easy to dismiss the value of a person having a house and home to call their own—I know my right hon. Friend is not doing so—and we think that permitted development rights play an important role in the system.

My right hon. Friend raised the issue of people being moved by councils from other local authority areas, in his case from London, and placed in his constituency. We are clear that, as far as possible, local authorities should avoid placing households outside their borough. However, in some areas where there is a limited supply of suitable accommodation, it has been necessary to place households outside their local area. It should always be a last resort—I absolutely agree with my right hon. Friend on that point. Where it does happen, the council should place the household as near as possible to their home local authority. The local authority also has a legal duty to notify the receiving local authority of any households that are placed in its area.

It is important to stress that households have the right to appeal against the decision made by the local authority, if they feel that the TA that they have been placed in is not suitable. Collaboration between local authorities is paramount, which is why we welcome the initiative taken by the Local Government Association to bring together local authorities from London and around the country to try to address concerns about unsuitable out-of-area placements, including the use of blocks converted under permitted development rights. That will also help to deal with the concern that councils may be unaware of placements that are taking place in their area.

We completely recognise the particular challenges that London boroughs face in securing suitable temporary accommodation. To tackle those challenges, we have invested £37.8 million into a partnership of local authorities across London, which has set up Capital Letters, a not-for-profit company limited by guarantee that enables councils to pool their procurement activity in order to access an improved supply of good-quality accommodation to prevent and relieve homelessness. Capital Letters will reduce the use of expensive nightly paid temporary accommodation and ensure that properties are allocated more locally than they currently are.

[Robert Halfon]

I realise that the Minister has stepped in because the previous Housing Minister, to whom I pay tribute for her championing of blue-collar Conservatism, has sadly left her post. However, I say to the Minister that this is not a last resort for the councils around London that are dumping their people in my constituency. It is a first resort; it is the easy option. It means they do not have to pay for those people, and there are no strictures that say they must notify Harlow Council. The Minister may not be able to answer this question today, but I want to know what specifically is going to be done in my constituency to stop these things happening, and to ensure that permitted development rights are only allowed for five-star-quality accommodation, not for the kinds of things that I have described in my speech, and which the hon. Members for Luton South (Rachel Hopkins) and for Croydon Central (Sarah Jones) have reported to be happening in their constituencies.

[Luke Hall]

My right hon. Friend is completely right to raise the challenges that his local authority faces, and I know that the Secretary of State has visited that local authority to discuss the significant impact that it has been dealing with. The best thing may be for the new Housing Minister, upon appointment, to write to my right hon. Friend to update him about the Government’s plans and the work we are doing. If he wants to meet me to discuss this issue further, I am happy to meet him, but I am sure that the new Housing Minister will be able to give him some satisfaction.

National permitted development rights for the change of use to residential continue to play an important part in the planning system and make an important contribution to housing delivery. Those rights are delivering additional, much-needed homes that may not have been delivered otherwise, and have attracted new developers into the market. As has been mentioned, in the four years to March 2019, some 54,000 homes to buy or rent have been delivered through those rights, which allow a change of use from office to residential. We are clear that permitted development rights are a worthwhile way of making better use of existing buildings and preventing them from lying dormant and unused, which helps reduce the need to build on greenfield sites. Those rights also provide flexibility for property owners and offer a simplified approach to securing planning agreements. Where there are local issues that residents feel strongly about, planning authorities can of course consult with the community about whether to remove a permitted development right.

My right hon. Friend the Member for Harlow mentioned good-quality homes being created through permitted development rights in his constituency, and I am glad that he did so. We do not want local authorities to be in a hurry to remove rights; they should take the time to ensure that they are getting those decisions right. Harlow has already removed the permitted development right for the change of use from office to residential in parts of that borough, and rights have been removed from buildings in the area around the developments described by my right hon. Friend. The Government expect that all homes should be of good quality, including those used for TA, and should meet building regulations —of course, the majority of developers ensure that they do so.

[Robert Halfon]

I realise that my hon. Friend stepped in at the last minute, and I do not want to make things difficult, given that he did not know that he would be responding to today’s debate. However, in my view, these places need to be closed down immediately, and as I highlighted in my remarks, there are some powers to do so. Could not the Government work with the local council to bring in special powers to close down these unsuitable buildings, which are causing misery for the people in them and the people of Harlow? We need action on this issue. I realise that my hon. Friend may not be able to properly answer me today, but could someone—whether he or the Housing Minister— contact me to say whether it would be possible to take emergency action?

[Luke Hall]

I am absolutely happy to ensure that that is one of the issues that the new Minister contacts my right hon. Friend about. Of course we recognise the issues that have been highlighted, which is why, last year, we announced that we would undertake a review of the quality standards of homes delivered through permitted development rights. Further announcements on that will be made in due course, and I shall ensure that my right hon. Friend is alerted and aware as soon as we are able to provide him with some certainty. However, I will be explicit about Government policy: an ongoing supply of new homes delivered through permitted development is important if we are to hit our ambitious housing targets while driving down rents and offering affordable homes to help people on to the property ladder.

These debates are vital. Some concerning cases have been raised by my right hon. Friend, which is why the Government are taking the action that we are. He has been a passionate advocate for change in this area; his points have been made loud and clear, and I will ensure that the Secretary of State is aware of the issues he has raised. I thank all right hon. and hon. Members who have contributed to this afternoon’s important debate, including my right hon. Friend, and look forward to visiting the constituency of the hon. Member for Luton South.

15:45

[Robert Halfon]

I thank the Labour Members present, the hon. Members for Luton South (Rachel Hopkins) and for Croydon Central (Sarah Jones). There is a lot of unity on this issue across all parties in the House, and the Minister has done a very good job of standing in at the last minute to respond to this debate. However, I urge him to make sure that the Department does everything possible to deal with this problem, because it is ruining towns and places for the people and families who live in them, including the people of Harlow.

The crucial point is about planning and the quality of housing that is allowed to be built, because these landlords would not be able to do what they are doing if there were strict rules about the size of the housing. Permitted development rights were not meant to be about temporary accommodation; they were meant to be about affordable housing, which is why I supported them. Although there was no vote in the House of Commons at the time—those rights were backed by all parties—I never would have supported them if I had known then what has happened over the past few years. We need the review of quality standards to have real teeth and substance, so that this situation is changed forthwith, and the existing buildings in Harlow need to be closed down, because they should not be allowed in this day and age. The Government, working with local councils, should take action to close those buildings down and make sure the residents in them have other accommodation to go to. We need to stop this once and for all.

Question put and agreed to.

Resolved,

That this House has considered permitted development rights for office block conversions in Essex.

15:47

Sitting adjourned.